<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
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(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, 1995
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
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(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
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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 (redeemed on 1/1/96)
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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. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 14, 1996 was
$528,598,374 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, 1996, was 17,546,834.
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, 1995, 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 23, 1996, used in connection with its
Annual Meeting of Shareholders to be held on April
2, 1996, is incorporated by reference in Part III
hereof.
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TABLE OF CONTENTS
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Page
Table of Contents
PART I
Item 1 BUSINESS 1
Generally 1
Electric Sales to IBM 2
Construction Program and Financing 2
Rates 3
Generally 3
Rate Proceedings - Electric and Gas 3
Cost Adjustment Clauses 4
Take-or-Pay Gas Liability 4
Fuel Supply and Cost 4
Residual Oil 5
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 11
Regulation 12
Generally 12
Energy Policy Act of 1992 12
Alternative Electric Power Generation 13
Energy Efficiency Programs 13
(i)
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TABLE OF CONTENTS (Cont'd)
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Page
Item 1 BUSINESS (Cont'd)
Other Matters 13
Competition 13
Municipal Utilities 14
PASNY Economic
Development Power 14
Company Electric Economic
Development Rate 15
Marketing 15
Labor Relations 15
EMF 15
Affiliates 16
Executive Officers of the Company 16
Item 2 PROPERTIES 19
Electric 19
General 19
Load and Capacity 21
Roseton Plant 23
Nine Mile 2 Plant 24
Gas 24
General 24
Current Gas Supply 24
Sufficiency of Supply and
Future Gas Supply 24
Other 25
Other Matters 25
(ii)
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TABLE OF CONTENTS (Cont'd)
Page
Item 3 LEGAL PROCEEDINGS 26
Asbestos Litigation 26
Environmental Litigation 27
Environmental Claims - Newburgh
Manufactured Gas Site 27
Catskill Incident 27
Wappingers Falls Incident 28
Income Tax Assessments 29
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 30
PART II
Item 5 MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 30
Item 6 SELECTED FINANCIAL DATA 31
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 31
(a) Financial Statements and Report of
Independent Accountants 31
(b) Supplementary Financial Information 32
(c) Other Financial Statements and Schedule 32
Item 9 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE 32
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY 33
Item 11 EXECUTIVE COMPENSATION 33
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 33
Item 13 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 33
(iii)
<PAGE>
TABLE OF CONTENTS (Cont'd)
Page
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 34
(a) Documents filed as part of this Report:
1. Financial Statements 34
2. Financial Statement Schedule 34
3. Exhibits 34
(b) Reports on Form 8-K 36
(c) Exhibits Required by Item 601 of
Regulation S-K 36
(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, 1995 36
SIGNATURES 37
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
1995, 1994 AND 1993
SCHEDULE II - RESERVES F-3 - F-5
EXHIBIT INDEX E-1 - E-36
EXHIBITS
(iv)
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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 623,000.
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, 1995 was 1,288.
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
1995 80% 20% 90% 10%
1994 80% 20% 89% 11%
1993 82% 18% 89% 11%
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,
smaller customers may have the same options as larger customers.
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For further information on factors affecting the
industry see below subcaptions "Other Matters - Competition" and
"Regulation - Energy Policy Act of 1992" and the caption
"Competition" in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" (hereinafter
"MD&A"), which the MD&A, together with the Company's Consolidated
Financial Statements for the fiscal year ended December 31, 1995,
including the notes thereto, are hereinafter collectively called
"Company's 1995 Financial Statements", and are hereinafter
incorporated as Exhibit 13 hereto ("Exhibit 13").
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
appearing on pages 74 through 75 of the Company's 1995 Financial
Statements, which Note 9 is incorporated herein by reference.
Electric Sales to IBM: Reference is made to the
caption "Other Developments - Electric Sales to IBM" on page 17
of the MD&A which caption is incorporated herein by reference,
for a discussion of the impact on the Company as a result of
sales to its largest customer, International Business Machines
Corporation ("IBM").
CONSTRUCTION PROGRAM AND FINANCING
The Company is engaged in a construction program which
is presently estimated to involve total cash expenditures during
the period 1996 through 2000 of approximately $293.0 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 1996-2000, see the subcaptions "Construction Program" and
"Financing Program" under the caption "Capital Resources and
Liquidity" of the MD&A appearing on pages 12 through 14 and pages
15 and 16, respectively, of Exhibit 13 hereto, which subcaptions
are 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 1995 Financial Statements, and
the subcaptions "Capital Structure," "Financing Program" and
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"Short-term Debt" under the caption "Capital Resources and
Liquidity" of the MD&A appearing, in the case of said Notes, on
pages 54 through 60 of Exhibit 13 hereof and, in the case of said
subcaptions, on pages 14 through 16 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 the above referenced 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.
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").
The Company's present retail rate structure consists of
various rate and service classifications covering residential,
commercial and industrial customers. During 1995, the average
price of electricity to such customers was 8.61 cents per kWh,
representing an increase of approximately 1.8% over the 8.46
cents average price during 1994. The increase in the 1995
average price was due primarily to the elimination, during 1995,
of the 1994 refunds of Unit No. 2 of the Nine Mile Point Nuclear
Station ("Nile Mile 2 Plant") litigation credits.
Rate Proceedings - Electric and Gas: For information
regarding the Company's most recent electric and gas cases filed
with the PSC, see caption "Rate Proceedings" in the MD&A on pages
16 and 17 of Exhibit 13 hereto, which subcaption is incorporated
herein by reference.
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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. One combination utility in
New York State has voluntarily agreed with the PSC to eliminate
its electric fuel cost adjustment clause and its gas cost
adjustment clause. There is a generic proceeding before the PSC
which addresses, among other things, the operation of electric
fuel adjustment clauses. The Company can make no prediction as
to what effect this proceeding will have on the operation of its
electric fuel adjustment clause. 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 "Rate Proceedings -
Electric" and the caption "Sharing Arrangements" in the MD&A, on
page 16 and pages 23 through 24, respectively, of Exhibit 13
hereto and the caption "Rates, Revenues and Regulatory Matters"
and the subcaptions "Deferred Electric Fuel Costs" and "Deferred
Gas Costs" in Note 1 to the Company's 1995 Financial Statements
appearing on pages 47 and 48 of Exhibit 13 hereto, which captions
and subcaptions are incorporated herein by reference.
Take-or-Pay Gas Liability: For discussion of the
Company's settlement under 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 caption "Take-or-Pay Gas Costs" in Note 8 to
the Company's 1995 Financial Statements appearing on pages 68 and
69 of Exhibit 13 hereto, which caption 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
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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. Commencing
in 1994, Units 1 and 2 of the Danskammer Plant, which are
equipped to burn residual oil or natural gas, have only operated
when the demand for power was high or purchased power and energy
exchange contracts were 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, 1995, the sources
and related costs of electric generation for the Company were as
follows:
Aggregate
Sources of Percentage of Costs in 1995
Generation Energy Generated ($000)
Purchased Power 37.5% $ 52,427
Coal 31.7 33,902
Gas 13.7 17,196
Nuclear 11.8 3,512
Oil 3.1 4,346
Hydroelectric 2.2 388
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100.0%
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Fuel Handling Costs 1,493
Deferred Fuel Cost (1)
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$113,263
========
Residual Oil: The Company had 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, 1995.
The Roseton Plant had 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, 1995, there were
480,788 barrels of fuel oil in inventory for use in these Plants,
which amount represents an average daily supply of 32 days. The
oil storage contractual arrangements with Hess for the Danskammer
and Roseton Plants have been terminated as of January 31, 1996
due to the reduced operations of the Danskammer and Roseton
Plants. The oil storage capacity as of January 31, 1996 for the
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Danskammer and Roseton Plants is 16,251 and 1,079,000 barrels,
respectively. The Company's share of the Roseton Plant's oil
storage capacity is 377,650 barrels.
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 1995, 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, 1996 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, 1996.
Thereafter, coal will be supplied by supply contracts(s) to be
put in place, effective January 1, 1997. 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
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 used as boiler fuel during 1995 was 15.0 billion cubic feet.
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Nuclear: See the subcaption "Electric - Nine Mile 2
Plant" in Item 2 below for a discussion of fuel reloading at the
Nine Mile 2 Plant and the caption "Nuclear Operations" in the
MD&A on page 23 of Exhibit 13 hereto, such caption being
incorporated herein by reference.
RESEARCH AND DEVELOPMENT
The Company is engaged in the conduct and support of
research and development ("R&D") activities that are focused on
providing enhanced customer services at lower cost. Individual
projects aim to improve existing energy technologies and to
develop new technologies related to the production, distribution
and conservation of energy. The PSC encourages electric and gas
utilities to maintain viable R&D programs and to dedicate
sufficient resources to assure that promising, innovative
technologies are fully explored and tested. In addition, 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 Company also leverages its R&D expenditures by contributing
to and seeking funding for electric and gas research, development
and demonstration projects sponsored by various state and
national research consortia and also for those sponsored by the
Company.
The Company's expenditures, net of revenues from
royalties, for electric and gas research and development projects
amounted to $3.5 million in 1994 and $4.1 million in 1995. The
Company projects that its 1996 expenditures for research and
development will total approximately $3.6 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:
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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 coal having a maximum sulfur
content of 0.7%, fuel oil having a maximum sulfur content of 1%
and natural gas. 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. Natural gas fuel is also
burned at Roseton.
Reference is made to the caption, "Environmental
Matters - Clean Air Act Amendments" in Note 8 of the Company's
1995 Financial Statements on pages 69 and 70 of Exhibit 13
hereto, which caption is herein incorporated by reference, for a
discussion of the impact of such Amendments on the Company's
efforts to attain and maintain national ambient air quality
standards for emissions from its fossil-fueled electric power
plants.
The "acid rain" control program under the Clean Air Act
Amendments ("CAA Amendments") for sulfur dioxide and nitrogen
oxides reduction from power plants do not affect the Company's
generating plants until January 1, 2000; however, the program
required the Company to install continuous emission monitors on
its power plants by January 1, 1995. The Company has complied
with this requirement at a cost of approximately $1.4 million.
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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 were 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 installed
combustion controls required to meet the RACT standards for its
generating facilities at a cost of approximately $8.4 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 understanding ("MOU")
concerning future, additional nitrogen oxide reductions which the
OTC believes are necessary to achieve the NAAQS for ozone in the
Northeastern United States for non-attainment areas in which the
Company's facilities are located. The MOU-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 MOU. The Company's current assessment
of the MOU 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
fails to materialize. Such controls may require the use of
selective, non-catalytic reduction, the cost of which is
estimated to be $5 million.
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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. Such SPDES permits may be renewed in 1997,
but the Company 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
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.
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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.
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 preliminary site assessment, at an
estimated cost of $120,000. On January 31, 1996, a draft final
report on this preliminary site assessment study ("draft report")
prepared by the Company's consultant was submitted to the NYSDEC
for its review, evaluation and comment. The draft report
indicated that a limited amount of subsurface soil contamination
was detected near one corner of the site and that contaminants
were also detected in the ground water beneath the site.
Operations conducted on the site by the Company since it
purchased the property in 1978 are not believed to have
contributed to either the soil or the ground water contamination.
The Company can make no (i) prediction regarding what action the
NYSDEC may take with regard to the draft report, (ii) reasonable
estimate of the cost of remediation, if any, for which it may be
responsible or (iii) prediction as to the outcome of recovery
attempts against third parties.
Other: The Company estimates that expenditures
attributable, in whole or in substantial part, to environmental
considerations totaled $11 million in 1995, of which about $3.2
million related to capital projects and $7.8 million were charged
to expense. It is estimated that in 1996 the total of such
expenditures will be approximately $11.6 million.
- 11 -
<PAGE>
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 captions
"Environmental Litigation" and "Environmental Claims - Newburgh
Manufactured Gas Site", and as described above under the
subcaption "Environmental Quality - Toxic Substances and Hazard-
ous 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.
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: Under the Energy Policy Act
of 1992 ("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.
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<PAGE>
Alternative Electric Power Generation: Pursuant to the
provisions of the federal Public Utility Regulatory Policies Act
of 1978 ("PURPA"), and the New York Public Service Law, the
Company is required to enter into long-term contracts to purchase
electric power generated by small hydro, alternative energy and
cogeneration facilities which meet qualification standards
established by such statutes and the regulatory programs
promulgated thereunder. With respect to facilities qualified
under PURPA, the Company must pay its avoided cost (i.e., the
cost the Company would otherwise incur to generate the increment
of power purchased) for electric power purchased from qualified
facilities, which, under the New York Public Service Law, is "at
rates just and reasonable to electric [...] corporation
ratepayers." As of December 31, 1995, the Company's avoided cost
at the 115 KV transmission level was approximately 3.0 cents per
kWh.
As of December 31, 1995, 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, 1995, no significant customer has indicated to
the Company the intention to pursue such alternative.
Energy Efficiency Programs: In December 1994, the
Company and the PSC Staff reached an agreement which called for
the Company to increase substantially the energy savings goals of
its 1995 Energy Efficiency Program and provided that the PSC
Staff not recommend any cost disallowance or penalty against the
Company. 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 issued its Order
in regard to this matter on June 26, 1995. In response to the
PSC's directives, the Company filed with the PSC the Company's
Energy Efficiency Program for 1996 on November 13, 1995, which
projects a reduction of 1 MW in the Company's 1996 summer peak
load demand. The PSC has not issued an Order with respect to the
Company's 1996 Energy Efficiency Plan.
OTHER MATTERS
Competition: For a discussion with respect to
competition as it generally affects the Company, with respect to
electric and natural gas service, the Company's response to such
- 13 -
<PAGE>
competition and the PSC Competitive Opportunities Proceeding
currently underway, see the caption "Competition" in the MD&A on
pages 6 through 11 of Exhibit 13 hereto, which caption is
incorporated herein by reference.
Sithe Energies, Inc., a large independent power
producer in the service territory of Niagara Mohawk Power
Corporation ("Niagara Mohawk"), filed with the PSC, on or about
December 8, 1995, a petition requesting the PSC to commence a new
proceeding to adopt a program that would encourage the merger of
New York's investor-owned electric utilities into two companies
and the establishment of a "blue-ribbon" panel to consider the
closure of some or all of their nuclear generating facilities.
The Company disagrees with such petition, but can make no
prediction as to what action, if any, the PSC will take with
respect to this matter.
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.
The current and projected excess supply of electricity
in the Northeastern United States and in Canada has significantly
depressed wholesale prices, and the increased level of
competition in the electric utility industry could cause
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
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 February 16, 1996, the Company is not aware of
any of its electric customers having applied for such EDP.
- 14 -
<PAGE>
Company Electric Economic Development Rate: In October
1994, the PSC approved the Company's proposed tariff amendments
to provide 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 pay lower electric prices for the increased load, with
savings on current rates for ten years. Customers must apply for
the discount by October 1, 1999.
As a result of the Company's economic development
electric discount rate described above, MiCRUS, a joint venture
project located in the Company's franchise territory of Cirrus
Logic, Inc. and IBM, elected to take electric service from the
Company under such rate and began its semi-conductor
manufacturing operations on January 1, 1995.
Marketing: The Company 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, area and
flood lighting. 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 need for and/or the magnitude of future
rate increases.
Labor Relations: The Company has agreements with the
International Brotherhood of Electrical Workers for its 899
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
- 15 -
<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 produced litigation
against a number of utilities across the country involving claims
of personal injury and property damage.
Affiliates:
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.
CH Resources, Inc., Phoenix Development
Company, Inc., and Greene Point Development Corporation: These
corporations, each a wholly-owned subsidiary of the Company, were
established to either hold real property for the future use of
the Company or to participate in energy-related ventures.
Currently, such subsidiaries either do not hold assets or hold
assets of little market value.
It is proposed to merge Central Hudson Cogeneration,
Inc. into Central Hudson Enterprises Corporation. A petition is
pending before the PSC seeking approval of such merger. The
Company cannot presently predict what action the PSC will take
with respect to such petition.
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, 1995) are as follows:
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<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
- ------------------- ------------------------------ ---
Officers of the Board
---------------------
John E. Mack, III, Present positions 61
Chairman of the Board
and Chief Executive
Officer; Chairman of
the Executive and
Retirement Committees
Jack Effron, Present position since April 1994; 62
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
Heinz K. Fridrich Present position since April 1995; 62
Chairman of Committee Courtesy Professor, University of
on Audit Florida at Gainesville, since 1994;
Vice President - Manufacturing
International Business Machines
Corporation, 1991 - September 1993;
Board of Trustees; Mount St. Mary
College, 1991 - 1993
Howard C. St. John, Present positions; Chairman of the 72
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.
Executive Officers of the Company
---------------------------------
Paul J. Ganci, Present position 57
President and Chief
Operating Officer
- 17 -
<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)
-----------------------------------------------
John F. Drain Vice President - Finance and 63
(Retired July Controller April 1993 to
1, 1995) Retirement July 1, 1995; Vice
President - Controller and
Treasurer, 1991 - April 1993;
Carl E. Meyer, Present position since November 48
Vice President - 1992; Vice President - Engineering
Customer Services and Production, 1991 - November
1992
Allan R. Page, Present position since November 48
Vice President - 1992; Vice President - Customer
Corporate Services Services, 1991 - November 1992
Joseph J. DeVirgilio, Present position 44
Jr., Vice President -
Human Resources and
Administration
Ronald P. Brand, Present position since November 57
Vice President - 1992; Assistant Vice President -
Engineering and Engineering, 1991 - November 1992
Environmental Affairs
Benon Budziak, Present position since February 63
Vice President - 1994; Assistant Vice President -
Fossil Production Fossil Production, November 1992 -
February 1994; Manager - Fossil
Production, 1991 - November 1992
Ellen Ahearn, Present position since April 1994; 41
Secretary Assistant Secretary and Internal
Auditing Manager, August 1992 -
April 1994; Internal Auditing Manager
1991 - August 1992
Steven V. Lant, Present positions since April 1993; 38
Treasurer and Assistant Treasurer and Assistant
Assistant Secretary Secretary, December 1991 - April
1993; Assistant Treasurer, until
1991
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<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)
-----------------------------------------------
Donna S. Doyle Present position since April 1995; 47
Controller Assistant Controller April 1994 -
April 1995; Manager of Taxes, Budgets
and Customer Accounting, April 1993 -
April 1995; Manager of Plant and
Depreciation and General Accounting,
1991 - April 1993
Arthur R. Upright, Present position since February 52
Assistant Vice 1994; Manager Cost and Rate
President - Cost and Financial Planning, 1991 -
and Rate and February 1994
Financial Planning
Gladys L. Cooper Present position since September 44
Assistant Vice 1995; leave of absence for
President - educational purposes August 1992 -
Governmental September 1995; Secretary, 1991 -
Relations April 1994
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, 1995, the net output of each
plant for the year ended December 31, 1995, and the year each
plant was placed in service or rehabilitated are as set forth
below:
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<PAGE>
<TABLE>
<CAPTION> (MW)*
Electric Net Capability 1995 Unit
Generating Year Placed (95-96) Net Output
Plant Type of Fuel In Service Summer Winter (MWh)
<S> <C> <C> <C> <C> <C>
Danskammer Residual Oil, Natural 1951-1967 478 487 2,113,927
Plant Gas and Coal
Roseton Plant Residual Oil 1974 420 418 550,870
(35% share)** and Natural Gas
Neversink Water 1953 22 22 55,188
Hydro Station
Dashville Water 1920 5 5 9,967
Hydro Station
Sturgeon Pool Water 1924 16 16 49,399
Hydro Station
High Falls Water 1986 3 3 4,226
Hydro Station
Coxsackie Kerosene or 1969 22 26 1,797
Gas Turbine Natural Gas
So. Cairo Kerosene 1970 20 24 428
Gas Turbine
Nine Mile 2 Nuclear 1988 101 101 650,893
Plant (9% share) ------ ------ ---------
Total 1,087 1,102 3,436,695
* Reflects Company ownership of generation resources and, therefore, does not include
firm purchases or sales.
** Since August 1, 1994, the Roseton Plant units have been scheduled to operate
alternately on a six-month cycle.
- 20 -
</TABLE>
<PAGE>
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 elected to terminate this contract effective April
30, 1995.
See Item 1 above, under the subcaption "Regulation -
Alternative Electric Power Generation," with respect to
alternative electric power generation interconnected with the
Company's system.
The Company owns 84 substations having an aggregate
transformer capacity of 4.4 million KVA. The transmission system
consists of 584 pole miles of line and the distribution system of
7,258 pole miles of overhead lines and 808 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,
1995, occurred on August 2, 1995 and amounted to 902 MW. The
Company's maximum one-hour demand within its own territory, for
that part of the 1995-1996 winter capability period through
February 16, 1996 occurred on January 7, 1996 and amounted to
812 MW.
Based on current projections of peak one-hour demands
for the three-year period comprising the 1996 summer capability
period through the winter capability period of 1998-1999 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:
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<PAGE>
<TABLE>
<CAPTION> 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
<S> <C> <C> <C> <C> <C> <C>
1996 Summer 900 1,062 1,177 115 10.8
1996-97 Winter 835 1,062* 1,159 97 9.1
1997 Summer 930 1,097 1,177 80 7.3
1997-98 Winter 855 1,097* 1,159 62 5.7
1998 Summer 950 1,121 1,177 56 5.0
1998-99 Winter 870 1,121* 1,159 38 3.4
* Summer period peak plus reserve requirements carry over to the following winter
period.
The foregoing table reflects the 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".
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</TABLE>
<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, Consolidated Edison Company of New York ("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 caption "Roseton Plant" in Note 8 to the Company's 1995
Financial Statements appearing on pages 65 and 66 of Exhibit 13
hereto, which caption 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.
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.
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<PAGE>
Nine Mile 2 Plant: Reference is made to the caption
"Nuclear Operations" in the MD&A, on page 23 of Exhibit 13 hereto
and Note 2 to the Company's 1995 Financial Statements, on pages
49 through 51 of Exhibit 13 hereto, which caption and Note are
incorporated herein by reference, for a discussion of the
Company's ownership interest in, costs for, and certain operating
matters relating to the Nine Mile 2 Plant. A scheduled refueling
outage for the Nine Mile 2 Plant was completed in June 1995. The
next refueling outage is scheduled to commence in September 1996,
with a targeted 37-day duration.
GAS
General: The Company's gas system consists of 159
miles of transmission pipelines and 949 miles of distribution
pipelines.
Current Gas Supply: During 1995, natural gas was
available to firm gas customers at a price competitive with that
of alternative fuels. As compared to 1994, in 1995, firm retail
gas sales, normalized for weather, increased by 3.2% and the
average number of firm gas customers increased by 0.7% or 417.
Sales to interruptible customers increased 70% in 1995 as
compared to 1994.
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 1995 Financial Statements appearing on pages
67 and 68 of Exhibit 13 hereto, which caption is incorporated
herein by reference.
For the year ended December 31, 1995, the total amount
of gas purchased from all sources was 32,842,937 Mcf., which
includes 1,019,441 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, 1995 occurred on February 6, 1995 and
amounted to 105,952 Mcf. The Company's peak-day gas capability
in 1995 was 116,865 Mcf. The peak daily demand for natural gas
by the Company's customers for that part of the 1995-1996 heating
season through February 16, 1996, occurred on December 11, 1995
and amounted to 93,461 Mcf.
- 24 -
<PAGE>
Other: FERC 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. The
PSC has authorized New York State distribution gas utilities to
transport customer-owned gas through its facilities upon request
of a customer. Currently, interstate pipeline transmission
companies are located in certain areas where the Company provides
retail gas service (the Towns of Carmel, Pleasant Valley,
Coxsackie, and LaGrange).
For a discussion of the PSC proceeding relating to
issues associated with the restructuring of the natural gas
market, see also the subcaption "Competition - New York - Natural
Gas" in the MD&A, on pages 9 through 10 of Exhibit 13 hereto, and
the caption "Natural Gas Supply" in Note 8 to the Company's 1995
Financial Statements appearing on pages 67 and 68 of Exhibit 13
hereto, which subcaption and caption are incorporated herein by
reference.
OTHER MATTERS
The Danskammer Plant and the Roseton Plant and all of
the other principal generating plants and important property
units of the Company are held by it in fee simple, except (1)
certain rights-of-way, and (2) a portion of the property used in
connection with the hydroelectric plants of the Company
consisting of flowage or other riparian rights. The Company's
present interests in the Roseton Plant and the Nine Mile 2 Plant
are owned as undivided interests as a tenant-in-common with the
other utility owners thereof. Certain of the properties of the
Company are subject to rights-of-way and easements which do not
interfere with the Company's operations. In the case of certain
distribution lines, the Company owns only a part interest in the
poles upon which its wires are installed, the remaining interest
being owned by telephone companies. Certain electric
transmission facilities owned by others are used by the Company
pursuant to long-term contractual arrangements.
All of the physical properties of the Company (other
than property, such as material and supplies, excluded in the
Company's Mortgage) and its franchises are subject to the lien of
- 25 -
<PAGE>
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, 1995,
the Company made gross property additions of $168.3 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 $34.6 million, resulting in a net increase (including
Construction Work in Progress) in utility plant of $133.7
million, or 10.1%.
Item 3 - LEGAL PROCEEDINGS
ASBESTOS LITIGATION
For a discussion of suits against the Company involving
asbestos, see the caption "Asbestos Litigation" in Note 8 to the
Company's 1995 Financial Statements appearing on pages 71 and 72
of Exhibit 13 hereto, which caption is incorporated herein by
reference.
Since 1987, the Company has been involved as a
defendant in the "mass tort" asbestos litigation in the United
States District Court for the Southern District of New York and
the New York State Supreme Court, County of New York. This
litigation involves thousands of plaintiffs who seek large
amounts of compensatory and punitive damages from numerous
defendants for deaths and injuries allegedly caused by exposure
to asbestos. The Company has been a defendant in approximately
740 such individual lawsuits. Many of these lawsuits have been
disposed of without any payment by the Company, or for immaterial
amounts. While the amounts demanded in all the remaining
lawsuits total several billion dollars, it is the Company's
opinion, based on its experience in such litigation and on
information and relevant circumstances known to it at this time,
that 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.
- 26 -
<PAGE>
ENVIRONMENTAL LITIGATION
The Company is operating the Roseton Plant pursuant to
a Consent Order approved by the Supreme Court of the State of New
York, Albany County, on March 23, 1992, based on an action
brought in 1991 by the Natural Resources Defense Council, Inc.,
the Hudson River Fisherman's Association and Scenic Hudson, Inc.
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 extended by agreement of the parties until
February 1, 1997 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
Reference is made to the subcaption "Environmental
Matters - Former Manufactured Gas Plant Facilities" on pages 70
and 71 of Note 8 to the Company's 1995 Financial Statements,
which subcaption is herein incorporated by reference, for a
discussion of litigation filed against the Company by the City of
Newburgh, New York, May 26, 1995 in the United States District
Court, Southern District of New York, and the Company's response
thereto.
CATSKILL INCIDENT
Reference is made to the caption "Other Matters" in
Note 8 of the Company's 1995 Financial Statements, on pages 72
and 73 of Exhibit 13 hereto, which caption is herein incorporated
by reference, for a description of an explosion in a dwelling in
the Company's gas service territory in Catskill, New York in
November 1992 which resulted in personal injuries, the death of
an occupant and property damage.
Lawsuits have been commenced against the Company
arising out of such incident including the following:
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
- 27 -
<PAGE>
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
Reference is made to the caption "Other Matters" in
Note 8 to the Company's 1995 Financial Statements, on pages 72
and 73 of Exhibit 13 hereto, which caption is herein incorporated
by reference, for a description of two consecutive fires and
explosions which occurred on February 12, 1994, destroying a
residence and commercial establishment in the Village of
Wappingers Falls, New York, in the Company's service territory.
Lawsuits have been commenced against the Company
arising out of such incident, including the following:
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
- 28 -
<PAGE>
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
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
plaintiffs 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 1995 Financial
Statements, on page 72 of Exhibit 13 hereto, which subcaption is
- 29 -
<PAGE>
incorporated herein by reference, for a discussion of the
examination by the Internal Revenue Service ("IRS") of the
Company's federal income tax returns for 1987 and 1988. 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 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 had the option of (i)
responding within 60 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 caption "Common
Stock Dividends and Price Ranges" in the MD&A, on page 29 of
Exhibit 13 hereto, is incorporated herein by reference.
Pursuant to applicable statutes and its Certificate of
Incorporation, the Company may pay dividends on shares of
Preferred and Common Stock only out of surplus.
The Company has an Automatic Dividend Reinvestment and
Stock Purchase Plan which permits holders of the Company's Common
Stock who elect to participate in such Plan to reinvest dividends
and also permits participants to make additional cash investments
in the Company's Common Stock. Shares can be acquired directly
from the Company or on the open market at the election of the
Company. For a complete description of said Plan, reference is
made to the Prospectus, dated January 5, 1993, which is part of
- 30 -
<PAGE>
the Company's Registration Statement on Form S-3 (Registration
No. 33-56760), relating to 3,550,000 shares of Common Stock
registered under the Securities Act of 1933 ("1933 Act") for
issuance under said Plan.
The Company's Customer Stock Purchase Plan provides the
Company's residential customers and members of their families
residing with them who are residents of New York State with a
method of purchasing shares of the Company's Common Stock
directly from the Company. Shares can be acquired directly from
the Company or on the open market at the election of the Company.
For a complete description of said Plan, reference is made to the
Prospectus, dated January 5, 1993, which is part of the Company's
Registration Statement on Form S-3 (Registration No. 33-55764),
relating to 780,000 shares of Common Stock registered under the
1933 Act for issuance under said Plan.
The Company also maintains for its employees an
Employee Stock Purchase Plan, which provides for the purchase of
the Company's Common Stock on the open market.
Item 6 - SELECTED FINANCIAL DATA
The information required hereunder is incorporated
herein by reference to the material on pages 4 and 5 of Exhibit
13 hereto.
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required hereunder is incorporated
herein by reference to the material appearing on pages 6 through
27 of Exhibit 13 hereto.
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements and Report of Independent
Accountants
The Company's 1995 Financial Statements, together with
the report thereon of Price Waterhouse LLP, dated January 26,
1996, appearing on pages 30 through 77 of Exhibit 13 hereto, are
incorporated by reference in this Annual Report on Form 10-K.
The Financial Statement Schedule incorporated by reference as
part of this Annual Report on Form 10-K should be read in
conjunction with the Company's 1995 Financial Statements.
Financial Statement Schedules not included with this Form 10-K
- 31 -
<PAGE>
Annual Report have been omitted because they are not applicable
or the required information is shown in the Company's 1995
Financial Statements.
The Company's 1995 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 37 and 38 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 1995 1994 1993
the Company's
short-term debt - 6.69% -
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 1995
Financial Statements on page 78 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.
- 32 -
<PAGE>
PART III
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY
The information with respect to the Directors of the
Company required hereunder is incorporated by reference to the
caption "Election of Directors" in the Company's definitive proxy
statement, dated February 23, 1996, to be used in connection with
its Annual Meeting of Shareholders to be held on April 2, 1996,
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 23, 1996, to
be used in connection with its Annual Meeting of Shareholders to
be held on April 2, 1996.
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 23, 1996, to be used
in connection with its Annual Meeting of Shareholders to be held
on April 2, 1996.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
There were no relationships or transactions of the type
required to be described by this Item.
- 33 -
<PAGE>
PART IV
Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements
See subpart 1 of Index to Financial Statements on
page F-1 of this Report.
2. Financial Statement Schedule
See subpart 2 of Index to Financial Statements on
page F-1 of this Report.
3. Exhibits
- 34 -
<PAGE>
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, together with Amendment thereto
dated April 4, 1995. (Exhibits (10)(iii)17 and 21)
Stock Plan for Outside Directors of the Company, dated
November 17, 1995 (Exhibit (10)(iii)22)
Management Incentive Program of the Company, effective April
1, 1994 (Exhibit (10)(iii)23)
- 35 -
<PAGE>
(b) Reports on Form 8-K
During the period to the date hereof, the following
Reports on Form 8-K were filed by the Company:
None
(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, 1995
Incorporated herein by reference to subpart 2 of Index
to Financial Statements on page F-1 of this Report.
- 36 -
<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: February 23, 1996
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 February 23, 1996
(b) Principal Accounting
Officer:
_______________________
(Donna S. Doyle) Controller February 23, 1996
(c) Principal Financial
Officer:
_______________________
(Steven V. Lant) Treasurer and
Assistant
Secretary February 23, 1996
- 37 -
<PAGE>
SIGNATURES - (Continued)
------------------------
Signature Title Date
--------- ----- ----
(d) Directors:
_____________________________
(L. Wallace Cross) Director February 23, 1996
_____________________________
(Jack Effron) Director February 23, 1996
_____________________________
(Richard H. Eyman) Director February 23, 1996
_____________________________
(Frances D. Fergusson) Director February 23, 1996
_____________________________
(Heinz K. Fridrich) Director February 23, 1996
_____________________________
(Edward F. X. Gallagher) Director February 23, 1996
_____________________________
(Paul J. Ganci) Director February 23, 1996
_____________________________
(Charles LaForge) Director February 23, 1996
_____________________________
(John E. Mack, III) Director February 23, 1996
_____________________________
(Howard C. St. John) Director February 23, 1996
_____________________________
(Edward P. Swyer) Director February 23, 1996
- 38 -
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Page(s) in
Exhibit 13
of this Report*
1. Financial Statements
Report of Independent Accountants 30
Consolidated Balance Sheet at
December 31, 1995 and 1994 33-36
Consolidated Statement of Income for
the three years ended December 31, 1995 37-38
Consolidated Statement of Retained
Earnings for the three years
ended December 31, 1995 39
Consolidated Statement of Cash Flows for
the three years ended December 31, 1995 40-41
Notes to Consolidated Financial Statements 42-77
Selected Quarterly Financial Data (Unaudited) 78
Page(s) in
Form 10-K
Report of Independent Accountants on
Financial Statement Schedule F-2
Consent of Independent Accountants F-2
2. The Financial Statement Schedule
for the Years 1995, 1994 and 1993 F-3 - F-5
Schedule II - Reserves
*Incorporated by reference to the indicated pages of Exhibit
13 to this Report.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
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 26, 1996 appearing on page 30 of
Exhibit 13 of this Annual Report on Form 10-K, (which report and
consolidated financial statements are incorporated by reference
in this Annual Report on Form 10-K) also included an audit of the
Financial Statement 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 26, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in (i) the
Prospectus constituting part of the Registration Statement, on
Form S-3 (Registration No. 33-56760), relating to Central Hudson
Gas & Electric Corporation's Automatic Dividend Reinvestment and
Stock Purchase Plan, (ii) the Prospectus constituting part of the
Registration Statement, on Form S-3 (Registration No. 33-55764),
relating to Central Hudson Gas & Electric Corporation's Customer
Stock Purchase Plan, and (iii) the Prospectus constituting part
of the Amendment No. 1 to the Registration Statement, on Form S-3
(Registration No. 33-56349), relating to certain debt and equity
securities of the Company's of our report dated January 26, 1996
appearing on page 30 of Exhibit 13 to this Annual Report on Form
10-K. We also consent to the incorporation by reference therein
of our report on the Financial Statement Schedule, which appears
above.
PRICE WATERHOUSE LLP
New York, New York
February 23, 1996
F-2
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 2
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-4
</TABLE>
<PAGE>
<TABLE> CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 1
YEAR ENDED DECEMBER 31, 1995
<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 $1,770,126 $ 907,300 $ 79,200 (a) $ 181,562 $2,575,064
Workers compensation
deductible 1,077,391 - 1,454,000 (b) 344,886 2,186,505
Pensions and benefits
carrying charge reserve 465,338 - (465,338)(c) - -
Storm Reserve 500,000 - - - 500,000
Nine Mile 2 Plant
miscellaneous reserves 1,850,552 2,137,029 23,526 (d) 3,248,575 762,532
Total Operating Reserves $5,663,407 $3,044,329 $1,091,388 $3,775,023 $6,024,101
Reserve for Uncollectible
Accounts $2,000,000 $3,220,608 $ - $2,720,608 $2,500,000
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) The pensions and benefits carrying charge reserve has been reclassified as a regulatory liability.
(d) Charged to regulatory asset account representing future recovery from ratepayers.
F-3
</TABLE>
<PAGE>
<TABLE> CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 3
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-5
</TABLE>
</PAGE>
<PAGE> EXHIBIT (99)
EXHIBIT INDEX
Following is the list of Exhibits, as required by Item
601 of Regulation S-K, filed as a part of this Annual Report on
Form 10-K, including Exhibits incorporated herein by reference
(1):
Exhibit No.
(Regulation S-K
Item 601
Designation) Exhibits
________________ ________
(3) Articles of Incorporation and Bylaws:
(i) 1-- Restated Certificate of Incorporation of
the Registrant under Section 807 of the
Business Corporation Law, filed August
14, 1989. ((1); Exhibit (3)1)
(i) 2-- Certificate of Amendment to the
Certificate of Incorporation of the
Registrant under Section 805 of the
Business Corporation Law, filed April 5,
1990. ((1); Exhibit (3)2)
(i) 3-- Certificate of Amendment to the
Certificate of Incorporation of the
Registrant under Section 805 of the
Business Corporation Law, filed October
19, 1993 ((1); Exhibit (3)3)
(ii) 1-- Bylaws in effect on the date of this
Report.
(4) Instruments defining the rights of security holders,
including indentures (see also Exhibit (3) above):
____________________
(1) Exhibits which are incorporated by reference to
other filings are followed by information contained in
parentheses, as follows: The first reference in the parenthesis
is a numeral, corresponding to a numeral set forth in the Notes
which follow this Exhibit list, which identifies the prior filing
in which the Exhibit was physically filed; and the second
reference in the parenthesis is to the specific document in that
prior filing in which the Exhibit appears.
E-1
<PAGE>
*(ii) 1-- Indenture dated January 1, 1927 between
the Registrant and American Exchange
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)1)
*(ii) 2-- Supplemental Indenture dated March 1,
1935 between the Registrant and Irving
Trust Company, as Trustee. ((2);
Exhibit (4)(ii)2)
*(ii) 3-- Second Supplemental Indenture dated June
1, 1937 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)3)
*(ii) 4-- Third Supplemental Indenture dated April
1, 1940 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)4)
*(ii) 5-- Fourth Supplemental Indenture dated
March 1, 1941 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)5)
*(ii) 6-- Fifth Supplemental Indenture dated
December 1, 1950 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)6)
*(ii) 7-- Sixth Supplemental Indenture dated
December 1, 1952 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)7)
*(ii) 8-- Seventh Supplemental Indenture dated
October 1, 1954 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)8)
*(ii) 9-- Eighth Supplemental Indenture dated May
15, 1958 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)9)
(ii) 10-- Ninth Supplemental Indenture dated
December 1, 1967 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)10)
E-2
<PAGE>
(ii) 11-- Tenth Supplemental Indenture dated as of
January 15, 1969 between the Registrant
and Irving Trust Company, as Trustee.
((3); Exhibit 2.12)
(ii) 12-- Eleventh Supplemental Indenture dated as
of June 1, 1970 between the Registrant
and Irving Trust Company, as Trustee.
((4); Exhibit 1.13)
(ii) 13-- Twelfth Supplemental Indenture dated as
of February 1, 1972 between the
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)13)
(ii) 14-- Thirteenth Supplemental Indenture dated
as of April 15, 1974 between the
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)14)
(ii) 15-- Fourteenth Supplemental Indenture dated
as of November 1, 1975 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)15)
(ii) 16-- Fifteenth Supplemental Indenture dated
as of June 1, 1977 between Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)16)
(ii) 17-- Sixteenth Supplemental Indenture dated
as of September 15, 1979 between
Registrant and Irving Trust Company, as
Trustee. ((4); Exhibit 1.18)
(ii) 18-- Seventeenth Supplemental Indenture dated
as of May 15, 1980 between Registrant
and Irving Trust Company, as Trustee.
((5); Exhibit (4)(a)18)
(ii) 19-- Eighteenth Supplemental Indenture dated
as of November 15, 1980 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)19)
(ii) 20-- Nineteenth Supplemental Indenture dated
as of August 15, 1981 between Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)20)
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<PAGE>
(ii) 21-- Twentieth Supplemental Indenture dated
as of September 1, 1982 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)21)
(ii) 22-- Twenty-First Supplemental Indenture
dated as of November 22, 1982 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)22)
(ii) 23-- Twenty-Second Supplemental Indenture
dated as of May 24, 1984 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)23)
(ii) 24-- Twenty-Third Supplemental Indenture
dated as of June 15, 1985 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)24)
(ii) 25-- Twenty-Fourth Supplemental Indenture
dated as of September 1, 1986 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)25)
(ii) 26-- Twenty-Fifth Supplemental Indenture
dated as of December 1, 1988 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)26)
(ii) 27-- Twenty-Sixth Supplemental Indenture
dated as of May 1, 1991 between
Registrant and The Bank of New York, as
Trustee. ((2); Exhibit (4)(ii)27)
(ii) 28-- Twenty-Seventh Supplemental Indenture
dated as of May 15, 1992 between
Registrant and The Bank of New York, as
Trustee. ((2); Exhibit (4)(ii)28); and
Prospectus Supplement Dated May 28, 1992
(To Prospectus Dated April 13, 1992)
relating to $125,000,000 principal
amount of First Mortgage Bonds,
designated Secured Medium-Term Notes,
Series A, and the Prospectus Dated April
13, 1992, relating to $125,000,000
principal amount of Registrant's debt
securities attached thereto, as filed
pursuant to Rule 424(b) in connection
E-4
<PAGE>
with Registration Statement No. 33-
46624. ((6)(a)), and, as applicable to
a tranche of such Secured Medium-Term
Notes, one of the following:
(a) Pricing Supplement No. 1, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(b))
(b) Pricing Supplement No. 2, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(c))
(c) Pricing Supplement No. 3, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(d))
(d) Pricing Supplement No. 4, Dated
August 20, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(e))
(e) Pricing Supplement No. 5, Dated
August 20, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(f))
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<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-- Twenty-Eighth Supplemental Indenture
dated as of May 1, 1995 between
Registrant and The Bank of New York, as
Trustee. ((35); Exhibit (4)(ii)33)
Prospectus Supplement Dated May 15, 1995
(To Prospectus Dated April 4, 1995)
relating to $80,000,000 principal amount
of First Mortgage Bonds, designated
Secured Medium-Term Notes, Series B, and
the Prospectus Dated April 4, 1995,
relating to (i) $80,000,000 of
Registrant's Debt Securities and Common
Stock, $5.00 par value, but not in
excess of $40 million aggregate initial
offering price of such Common Stock and
(ii) 250,000 shares of Registrant's
Cumulative Preferred Stock, par value
$100 per share, which may be issued as
1,000,000 shares of Depositary Preferred
Shares each representing 1/4 of a share
of such Cumulative Preferred Stock
attached thereto, as filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-56349).
(9)
(ii) 30-- 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
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<PAGE>
Prospectus Supplement Dated May 28, 1992
(To Prospectus Dated April 13, 1992)
relating to $125,000,000 principal
amount of Medium-Term Notes, Series A,
and the Prospectus Dated April 13, 1992,
relating to $125,000,000 principal
amount of Registrant's debt securities
attached thereto, as filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-46624.
((8)(a)), and, as applicable to a
tranche of such Medium-Term Notes, one
of the following:
(a) Pricing Supplement No. 1, Dated
June 26, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((8)(b))
(b) Pricing Supplement No. 2, Dated
October 6, 1993 (To Prospectus
Dated April 13, 1992, as
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))
Prospectus Supplement Dated May 15, 1995
(To Prospectus Dated April 4, 1995)
related to $80,000,000 principal amount
of Medium-Term Notes, Series B, and the
Prospectus Dated April 4, 1995, relating
to (i) $80,000,000 of Registrant's Debt
Securities and Common Stock, $5.00 par
value, but not in excess of $40 million
aggregate initial offering price of such
Common Stock and (ii) 250,000 shares of
Registrant's Cumulative Preferred Stock,
par value $100 per share, which may be
issued as 1,000,000 shares of Depositary
Preferred Shares each representing 1/4
of a share of such Cumulative Preferred
Stock attached thereto, as filed
pursuant to Rule 424(b) in connection
with Registration Statement No. 33-
56349). (10)
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<PAGE>
(ii) 31-- Form of the Registrant's 4.85%
Promissory Notes. ((9); Exhibit 1.9)
(ii) 32-- 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) 33-- 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.
E-8
<PAGE>
(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. ((12); Exhibit
5.5)
(i) 3-- Agreement dated as of April 4, 1977
between Registrant, Consolidated Edison
Company of New York, Inc., Long Island
Lighting Company, New York State
Electric & Gas Corporation, Niagara
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. ((13); Exhibit
5.19)
(i) 5-- Agreement dated July 28, 1975 between
Registrant and the Power Authority of
the State of New York. ((14); 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. ((14); Exhibit
5.21)
(i) 7-- Agreement dated November 23, 1976
between Registrant and Consolidated
Edison Company of New York, Inc. ((15);
Exhibit 5.29)
E-9
<PAGE>
(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. ((16); Exhibit
(10)(i)18)
(i) 9-- Assignment and Assumption dated as of
October 24, 1975 between Registrant and
New York State Electric & Gas
Corporation. ((14); 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. ((17); Exhibit 5.34)
(i) 12-- Agreement, dated May 8, 1980, by and
between Registrant and Jersey Central
Power & Light Company. ((18); 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. ((18); Exhibit (10)(i)22)
(i) 14-- Purchase Agreement, dated as of June 16,
1980, by and between Registrant and
Philadelphia Electric Company. ((18);
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.
((18); Exhibit (10)(i)24)
(i) 16-- Purchase Agreement, dated as of July 1,
1980, by and between Registrant and
Connecticut Light and Power Company.
((18); Exhibit (10)(i)25)
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<PAGE>
(i) 17-- Letter Amendment Agreement, dated
December 16, 1980, by and between
Registrant and Niagara Mohawk Power
Corporation. ((18); 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. ((18); 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)
(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. ((19);
Exhibit (10)(i)33)
E-11
<PAGE>
(i) 24-- Agreement, dated December 7, 1983,
between Registrant and the Power
Authority of the State of New York.
((2); Exhibit (10)(i)34)
(i) 25-- Specification of Terms and Conditions of
Settlement in State of New York Public
Service Commission Proceeding - Case
29124, dated September 3, 1985. ((2);
Exhibit (10)(i)35)
(i) 26-- Reimbursement Agreement, dated as of
November 1, 1985, between Registrant and
the Bank named therein. ((2); Exhibit
(10)(i)36)
(i) 27-- General Joint Use Pole Agreement between
Registrant and the New York Telephone
Company effective January 1, 1986 (not
including the Administrative and
Operating Practices provisions thereof).
((2); Exhibit (10)(i)37)
(i) 28-- Agreement, dated June 3, 1985, between
Registrant, Consolidated Edison Company
of New York, Inc. and the Power
Authority of the State of New York
relating to Marcy South Real Estate -
East Fishkill, New York. ((2); Exhibit
(10)(i)38)
(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)
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<PAGE>
(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. ((16);
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). ((20);
Exhibit (19)(10)(i)76)
(i) 34-- Agreement dated as of November 20, 1987
between Registrant and Consolidated Rail
Corporation to transport coal to
Danskammer Generating Station. [Certain
portions of said Agreement setting forth
or relating to pricing provisions are
omitted and filed separately with the
Securities and Exchange Commission
pursuant to a request for confidential
treatment under the rules of said
Commission.] ((20); Exhibit
(19)(10)(i)83)
(i) 35-- Reimbursement Agreement, dated as of
July 1, 1987, between Registrant and the
Bank named therein. ((20); 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.
((20); Exhibit (19)(10)(i)93)
E-13
<PAGE>
(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.
((20); 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.] ((20);
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. ((20); Exhibit
(19)(10)(i)98)
(i) 40-- Agreement for the Sale and Purchase of
Coal, dated as of January 1, 1987, among
Registrant, Kentucky Carbon Corporation
and The Carbon Fuel Sales Company.
[Certain portions of said agreement
setting forth or relating to pricing
provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((21);
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
E-14
<PAGE>
Agreement, dated as of November 25,
1987, between such parties providing for
the sale of Registrant's accounts
receivables. ((21); 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. ((22); 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. ((18); 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. ((23);
Exhibit (19)(10)(i)71)
(i) 45-- Second Amendment, dated as of July 1,
1990, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Registrant and the Bank named therein.
((23); 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.
((23); Exhibit (19)(10)(i)73)
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<PAGE>
(i) 47-- Credit Agreement, dated as of December
17, 1990, among Registrant and the Banks
named therein. ((23); Exhibit
(19)(10)(i)74)
(i) 48-- Agreement, effective as of November 1,
1989, between Columbia Gas Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)75)
(i) 49-- Agreement, dated as of November 1, 1989,
between Columbia Gas Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)77)
(i) 50-- Agreement, dated as of November 1, 1989,
between Columbia Gas Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)78)
(i) 51-- Agreement, dated as of November 1, 1989,
between Columbia Gulf Transmission
Company and Registrant. ((23); Exhibit
(19)(10)(i)79)
(i) 52-- Agreement, dated October 9, 1990,
between Texas Eastern Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)80)
(i) 53-- Agreement, dated July 2, 1990, between
Texas Eastern Transmission Corporation
and Registrant. ((23); Exhibit
(19)(10)(i)81)
(i) 54-- Agreement, dated December 28, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)82)
(i) 55-- Agreement, dated December 28, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)83)
(i) 56-- Agreement, dated November 3, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)84)
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<PAGE>
(i) 57-- Gas Sales Contract, dated as of January
1, 1989, between Tennessee Gas Pipeline
Company and Registrant. ((23); Exhibit
(19)(10)(i)86)
(i) 58-- Agreement, effective December 15, 1989,
between Algonquin Gas Transmission
Company and Registrant. ((23); Exhibit
(19)(10)(i)87)
(i) 59-- Storage Service Agreement, dated July 1,
1989, between CNG Transmission
Corporation and Registrant. ((23);
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. ((23); 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.
((23); 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. ((23); Exhibit
(19)(10)(i)94)
(i) 63-- Agreement No. 2 dated as of February 7,
1991 between Registrant and Alberta
Northeast Gas, Limited for the purchase
of Canadian natural gas from TransCanada
Pipelines Limited under Precedent
Agreement No. 2 to be delivered on the
Iroquois Gas Transmission System.
((23); Exhibit (19)(10)(i)95)
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<PAGE>
(i) 64-- Agreement No. 1 dated as of February 7,
1991 between Registrant and Alberta
Northeast Gas, Limited for the purchase
of Canadian natural gas from TransCanada
Pipelines Limited under Precedent
Agreement No. 1 to be delivered on the
Iroquois Gas Transmission System.
((23); 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. ((23); 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. ((24); 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. ((24); 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. ((24); Exhibit
(19)(10)(i)100)
(i) 69-- Utility Services Contract, effective
October 1, 1991, between Registrant and
the U.S. Department of the Army, for the
provision of natural gas service to the
U.S. Military Academy at West Point and
Stewart Army Subpost, together with an
Amendment thereto, effective October 10,
1991. ((24); Exhibit (19)(10)(i)101)
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<PAGE>
(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.] ((24);
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. ((24); 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. ((24); 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. ((24); 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.
((24); Exhibit (19)(10)(i)106)
(i) 75-- Amendment Nos. 1-4, dated February 21,
1989, May 31, 1990, January 8, 1991 and
November 20, 1991, respectively, by and
between Registrant and Norfolk Southern
Railway, to Contract, dated October 5,
1987, between Registrant and Norfolk and
Western Railway Company, providing for
transportation of coal to the Danskammer
E-19
<PAGE>
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.] ((24);
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.] ((24);
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.] ((24);
Exhibit (19)(10)(i)109)
(i) 78-- Agreement of Assignment, Assumption,
Consent and Release entered into as of
February 29, 1992 by and among Kentucky
Carbon Corporation, The Carbon Fuel
Sales Company, Massey Coal Sales Company
and Registrant. ((24); Exhibit
(19)(10)(i)111)
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<PAGE>
(i) 79-- Agreement dated as of July 1, 1992
between Registrant and Tennessee Gas
Pipeline Company for storage of natural
gas. ((25); Exhibit (10)(i)114)
(i) 80-- Agreement dated as of July 1, 1992
between Registrant and Tennessee Gas
Pipeline Company for firm transportation
periods. ((25); 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.] ((19);
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.
((19); Exhibit (19)(10)(i)100)
(i) 83-- Agreement, dated December 1, 1991,
between Registrant and Iroquois Gas
Transmission System for interruptible
gas transportation service. ((19);
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. ((19); Exhibit (19)(10)(i)102)
E-21
<PAGE>
(i) 85-- Tennessee Gas Pipeline Purchase and
Sales Agreement, dated November 1, 1992
between Registrant and Tenngasco
Corporation. ((19); 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.
((19); 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. ((19);
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
E-22
<PAGE>
of New York, Inc. and Niagara Mohawk
Power Corporation for the Roseton
Electric Generating Station. ((1);
Exhibit (19)(10)(i)109)
(i) 92-- Second Amendment, dated as of November
1, 1993, to the Agreement for the Sale
and Purchase of Coal, dated as of
January 1, 1987, among Registrant,
Kentucky Carbon Corporation and The
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.] ((29); Exhibit (10)(i)92)
(i) 93-- Agreement, dated as of May 20, 1993,
between Registrant and New York State
Electric & Gas Corporation. ((29);
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. ((29);
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. ((29); 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. ((29); Exhibit (10)(i)96)
E-23
<PAGE>
(i) 97-- Amendment No. 2 to Irrevocable Letter of
Credit No. A95056-S, dated August 17,
1993, relating to the Reimbursement
Agreement, dated as of November 1, 1985,
as amended, between Registrant and the
Bank named therein. ((29); 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. ((29); 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.
((31); 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.] ((32);
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
E-24
<PAGE>
Company of New York, Inc., and Niagara
Mohawk Power Corporation for the Roseton
Electric Generating Station, relating to
a Fuel Supply Contract, effective
September 1, 1992 (Exhibit (10)(i)81),
as amended. ((32); 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.] ((33); Exhibit (10)(i)102)
(i) 103-- Amendment No. 5, dated February 28,
1995, 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.] ((34); Exhibit (10)(i)103)
(i) 104-- Fuel Oil Supply Contract, effective as
of September 1, 1995, between Montello
Oil Corporation and Central Hudson Gas &
Electric Corporation, Consolidated
Edison Company of New York, Inc. and
Niagara Mohawk Power Corporation for the
Roseton Electric Generating Plant.
[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.] ((36);
Exhibit (10)(i)104)
E-25
<PAGE>
(i) 105-- Fourth Amendment, dated as of November
1, 1995, 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 (Exhibit
(10)(i)40 to Registrant's 10-K Report.
[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.] ((36);
Exhibit (10)(i)105)
(iii) 1-- Directors' Deferred Compensation Plan,
effective October 1, 1980. ((18);
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. ((23); 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. ((18); Exhibit
(19)(10)(iii)3)
(iii) 5-- Amendment, dated December 31, 1990, to
Savings Incentive Plan of Registrant, as
amended. ((23); Exhibit (19)(10)(i)98)
(iii) 6-- Amendment, dated January 14, 1991, to
Savings Incentive Plan of Registrant, as
amended. ((26); Exhibit (19)(10)(iii)4)
E-26
<PAGE>
(iii) 7-- Amendment, dated October 25, 1991, to
Savings Incentive Plan of Registrant, as
amended. ((26); Exhibit (19)(10)(iii)5)
(iii) 8-- Executive Deferred Compensation Plan of
Registrant, effective March 1, 1992.
((24); 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.
((27); Exhibit (10)(iii)10)
(iii) 11-- Amendment, dated July 23, 1993, to
Retirement Benefit Restoration Plan of
Registrant. ((27); Exhibit (10)(iii)11)
(iii) 12-- Amendment, dated July 23, 1993, to the
Savings Incentive Plan of Registrant.
((27); Exhibit (10)(iii)12)
(iii) 13-- Amendment, dated September 24, 1993, to
the Savings Incentive Plan of
Registrant, as amended. ((29); Exhibit
(10)(iii)13)
(iii) 14-- Amendment, dated December 17, 1993, to
the Savings Incentive Plan of
Registrant, as amended. ((29); Exhibit
(10)(iii)14)
(iii) 15-- First Amendment, dated December 17,
1993, to the Registrant's Executive
Deferred Compensation Plan. ((29);
Exhibit (10)(iii)15)
(iii) 16-- Amendment, dated March 3, 1994, to the
Savings Incentive Plan of Registrant, as
amended. ((29); Exhibit (10)(iii)16)
(iii) 17-- Executive Incentive Compensation Plan of
Registrant, effective January 1, 1993.
((29); Exhibit (10)(iii)17)
(iii) 18-- Agreement, made March 14, 1994, by and
between Registrant and Mellon Bank,
E-27
<PAGE>
N.A., amending and restating, effective
April 1, 1994, Registrant's Savings
Incentive Plan and related Trust
Agreement with The Bank of New York.
((31); 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. ((33); Exhibit (10)(iii)19)
(iii) 20-- Amendment 2, dated December 16, 1994
(effective January 1, 1995) to the
Amended and Restated Savings Incentive
Plan of Registrant, as amended. ((33);
Exhibit (10)(iii)20)
(iii) 21-- Amendment, dated April 4, 1995, to the
Executive Incentive Compensation Plan of
Registrant.
(iii) 22-- Stock Plan for Outside Directors of
Registrant, dated November 17, 1995.
(iii) 23-- Management Incentive Program of
Registrant, effective April 1, 1994.
(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, 1995, and the
report thereon of Price Waterhouse LLP,
independent accountant, including the Notes to
Consolidated Financial Statements, which form a
part thereof (pages 30 through 77); Management's
Discussion and Analysis of Financial Condition and
Results of Operations (pages 6 through 27); Five-
Year Summary of Consolidated Operations and
Selected Financial Data (pages 4 and 5); Selected
Quarterly Financial Data (Unaudited) (page 78);
and Financial Highlights (pages 1 through 3),
included in Registrant's annual report to
shareholders for the fiscal year ended December
31, 1995. [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-28
<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 LLP 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-29
<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. ((28); 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. ((23); Exhibit (19)(28)(i)4)
(i) 5 -- Order on Consent signed on behalf of the New
York State Department of Environmental
Conservation and Registrant relating to
Registrant's former manufactured gas site
located in Newburgh, New York. ((36);
Exhibit (99)(i)5)
____________________
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
E-30<PAGE>
(6) (a) Incorporated herein by reference to
Prospectus Supplement Dated May 28, 1992 (To
Prospectus Dated April 13, 1992) relating to
$125,000,000 principal amount of First
Mortgage Bonds, designated Secured Medium-
Term Notes, Series A, and to the Prospectus
Dated April 13, 1992 relating to $125,000,000
principal amount of Registrant's debt
securities attached thereto, as filed with
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
E-31
<PAGE>
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(f) Incorporated herein by reference to Pricing
Supplement No. 5, Dated August 20, 1992 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
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
E-32
<PAGE>
the Securities and Exchange Commission
pursuant to Rule 424(b)(5) under the
Securities Act of 1933, in connection with
Registration Statement No. 33-46624.
(b) Incorporated herein by reference to Pricing
Supplement No. 1, Dated June 26, 1992 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(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
Prospectus Supplement Dated May 15, 1995 (To
Prospectus Dated April 4, 1995) relating to
$80,000,000 principal amount of First
Mortgage Bonds, designated Secured Medium-
Term Notes, Series B, and the Prospectus
Dated April 4, 1995, relating to (i)
$80,000,000 of Registrant's Debt Securities
and Common Stock, $5.00 par value, but not in
excess of $40 million aggregate initial
offering price of such Common Stock and (ii)
250,000 shares of Registrant's Cumulative
Preferred Stock, par value $100 per share,
which may be issued as 1,000,000 shares of
Depositary Preferred Shares each representing
1/4 of a share of such Cumulative Preferred
Stock attached thereto, as filed pursuant to
Rule 424(b) in connection with Registration
Statement No. 33-56349.
(10) Incorporated herein by reference to
Prospectus Supplement Dated May 15, 1995 (To
Prospectus Dated April 4, 1995) relating to
$80,000,000 principal amount of Medium-Term
E-33
<PAGE>
Notes, Series B, and the Prospectus Dated
April 4, 1995, relating to (i) $80,000,000 of
Registrant's Debt Securities and Common
Stock, $5.00 par value, but not in excess of
$40 million aggregate initial offering price
of such Common Stock and (ii) 250,000 shares
of Registrant's Cumulative Preferred Stock,
par value $100 per share, which may be issued
as 1,000,000 shares of Depositary Preferred
Shares each representing 1/4 of a share of
such Cumulative Preferred Stock attached
thereto, as filed pursuant to Rule 424(b) in
connection with Registration Statement No.
33-56349.
(11) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
66511.
(12) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
36680.
(13) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
50276.
(14) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
54690.
(15) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
58500.
(16) 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).
(17) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
60496.
(18) 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-34
<PAGE>
(19) 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).
(20) 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).
(21) 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).
(22) 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).
(23) 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).
(24) 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).
(25) 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).
(26) 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).
(27) 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).
(28) Incorporated herein by reference to
Registrant's Current Report on Form 8-K,
dated May 15, 1987 (File No. 1-3268).
E-35
<PAGE>
(29) 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).
(30) 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).
(31) 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).
(32) 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).
(33) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (File
No. 1-3268).
(34) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1995
(File No. 1-3268).
(35) Incorporated herein by reference to
Registrant's Current Report on Form 8-K,
dated May 15, 1995 (File No. 1-3268).
(36) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1995 (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-36
</PAGE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FOR 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-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $937,094
<OTHER-PROPERTY-AND-INVEST> $11,332
<TOTAL-CURRENT-ASSETS> $120,743
<TOTAL-DEFERRED-CHARGES> $180,923
<OTHER-ASSETS> $0
<TOTAL-ASSETS> $1,250,092
<COMMON> $87,480
<CAPITAL-SURPLUS-PAID-IN> $276,284
<RETAINED-EARNINGS> $90,475
<TOTAL-COMMON-STOCKHOLDERS-EQ> $454,239
$35,000
$21,030
<LONG-TERM-DEBT-NET> $389,245
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $1,577
$13,000
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $336,001
<TOT-CAPITALIZATION-AND-LIAB> $1,250,092
<GROSS-OPERATING-REVENUE> $512,215
<INCOME-TAX-EXPENSE> $29,040
<OTHER-OPERATING-EXPENSES> $412,281
<TOTAL-OPERATING-EXPENSES> $441,321
<OPERATING-INCOME-LOSS> $70,894
<OTHER-INCOME-NET> $10,225
<INCOME-BEFORE-INTEREST-EXPEN> $81,119
<TOTAL-INTEREST-EXPENSE> $28,397
<NET-INCOME> $52,722
$4,903
<EARNINGS-AVAILABLE-FOR-COMM> $47,650
<COMMON-STOCK-DIVIDENDS> $36,459
<TOTAL-INTEREST-ON-BONDS> $16,862
<CASH-FLOW-OPERATIONS> $110,751
<EPS-PRIMARY> $2.74
<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> 1995 1994 1993 1992 1991
Earnings: <C> <C> <C> <C> <C>
A. Net Income $ 52,722 $ 50,929 $ 50,390 $ 47,688 $ 42,941
B. Federal Income Tax 28,687 26,806 27,158 24,363 21,361
C. Earnings before Income Taxes $ 81,409 $ 77,735 $ 77,548 $ 72,051 $ 64,302
D. Total Fixed Charges <F1> 30,433 32,679 33,820 34,888 37,737
E. Total Earnings $111,842 $110,414 $111,368 $106,939 $102,039
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 4,903 $ 5,127 $ 5,562 $ 5,544 $ 5,659
G. Less Allowable Dividend Deduction 528 528 528 544 544
H. Net Subject to Gross-up 4,375 4,599 5,034 5,000 5,115
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.544 1.526 1.539 1.511 1.497
J. Pref. Dividend (Pre-tax) (HxI) 6,755 7,018 7,747 7,555 7,657
K. Plus Allowable Dividend Deduction 528 528 528 544 544
L. Preferred Dividend Factor 7,283 7,546 8,275 8,099 8,201
M. Fixed Charges (D) 30,433 32,679 33,820 34,888 37,737
N. Total Fixed Charges
and Preferred Dividends $ 37,716 $ 40,225 $ 42,095 $ 42,987 $ 45,938
O. Ratio of Earnings to Fixed
Charges (E/D) 3.68 3.38 3.29 3.07 2.70
P. Ratio of Earnings to Fixed Charges
and Preferred Dividends (E/N) 2.97 2.74 2.65 2.49 2.22
<FN>
<F1> Includes a portion of rent expense deemed to be representative of the interest factor.
</FN>
</TABLE>
<PAGE> EXHIBIT 13
FINANCIAL HIGHLIGHTS
Earnings Per Share: (Page 18)
Earnings per share of common stock were $2.74 in 1995
compared to $2.68 in 1994. This $.06 or 2% increase in earnings
per share resulted primarily from decreased operation and
maintenance costs, decreased interest expense and a gain from the
sale of long-term stock investments. Partially offsetting these
increases in earnings in 1995 were decreases in electric and gas
net operating revenues due to decreased sales attributable
largely to the warmer winter weather experienced in the first
quarter of 1995 and decreased sales to IBM.
Dividends Per Share: (Page 29)
The quarterly dividend rate was increased to $.525 per
share, effective June 23, 1995. This represented an increase of
1% over the previous quarterly rate of $.52 per share. Dividends
paid to shareholders in 1995 were $2.09 per share as compared to
$2.07 per share in 1994. No portion of the 1995 dividend
constitutes a return of capital.
Economy:
The past year proved to be a period of growth and recovery
for the Company's service area. The Company's economic
development efforts coupled with State and local government
efforts helped to attract over 4,300 value-added jobs throughout
the region since the spring of 1993. Included in these value-
added jobs are 900 positions brought to the area in the last two
years by a semi-conductor manufacturing company.
Electric Sales: (Page 21)
Sales of electricity within the Company's service territory
decreased 2% in 1995. Sales of electricity to residential
customers decreased 2% due to a decrease in usage per customer.
Commercial sales increased 1% resulting from the net effect of a
2% increase in the number of customers and a 1% decrease in usage
per customer. Electric sales to industrial customers decreased
6% due primarily to an 18% decline in usage by IBM.
- 1 -
<PAGE>
Gas Sales: (Page 21)
Firm sales of natural gas decreased 5% in 1995. Sales of
gas to residential customers decreased 10% due to a decrease in
usage per customer. Commercial sales decreased 1% due largely to
a decrease in usage per customer. Firm gas sales to industrial
customers remained stable when compared to 1994. When normalized
for effects of weather, firm gas sales increased 3% in 1995.
Interruptible gas sales increased 70% due to a significant
increase in the boiler gas usage at the Company's fossil-fueled
generating plants.
Rate Proceeding - Electric: (Page 16)
The Company has no pending electric rate case filed with the
Public Service Commission (PSC) and cannot predict with certainty
the date of its next filing.
The last rate increase was issued and effective February 11,
1994 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, and an 8.58% return on total invested capital.
Rate Proceeding - Gas: (Page 17)
The Company filed a request with the PSC on November 10,
1995 to increase its base rates for firm natural gas. The
request, if accepted by the PSC, would effectively produce a net
increase in firm gas revenues of $2.422 million, an 11.50% return
on common equity and a 9.22% return on total invested capital.
The Company can make no prediction as to what further action the
PSC will take on this gas rate increase request.
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 by 257,587 shares to a
total of 17,496,051 as of December 31, 1995. At the end of 1995,
a share of common stock was selling at $30.875 while the book
value per share was $25.96.
Financing Program: (Notes 5 & 6)
On October 1, 1995, the Company optionally redeemed all of
its outstanding 7.44% Cumulative Preferred Stock at a price of
$101.22 per share. The associated cash requirements were
financed from internal funds and from net proceeds of $7.0
million realized from the issuance of 257,587 shares of common
- 2 -
<PAGE>
stock in 1995 through the Company's Automatic Dividend
Reinvestment and Stock Purchase Plan and its Customer Stock
Purchase Plan.
Taxes: (Page 26)
In 1995, the Company incurred $95.7 million for operating
taxes levied by federal, state and local governments,
representing 19 cents of every dollar of revenues.
- 3 -
<PAGE>
<TABLE>
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA*
(Thousands of Dollars)
<CAPTION> <S> 1995 1994 1993 1992 1991
Operating Revenues <C> <C> <C> <C> <C>
Electric................................. $ 409,445 $ 411,082 $ 422,925 $ 427,436 $ 424,121
Gas...................................... 102,770 104,586 94,448 96,121 70,615
Total.................................. 512,215 515,668 517,373 523,557 494,736
Operating Expenses
Operations............................... 274,665 274,497 274,477 283,787 267,339
Maintenance.............................. 29,440 32,716 34,486 34,226 31,504
Depreciation and amortization............ 41,467 40,380 39,682 39,596 37,230
Taxes, other than income tax............. 66,709 66,899 65,564 66,339 60,554
Federal income tax....................... 29,040 28,043 28,603 25,111 22,613
Total.................................. 441,321 442,535 442,812 449,059 419,240
Operating Income........................... 70,894 73,133 74,561 74,498 75,496
Other Income and Deductions
Allowance for equity funds
used during construction................ 986 866 934 596 921
Federal income tax....................... 353 1,237 1,445 748 1,252
Other - net.............................. 8,886 6,296 5,167 4,427 854
Total.................................. 10,225 8,399 7,546 5,771 3,027
Income before Interest Charges............. 81,119 81,532 82,107 80,269 78,523
Interest Charges........................... 28,397 30,603 31,717 32,581 35,582
Net Income................................. 52,722 50,929 50,390 47,688 42,941
Premium on Preferred Stock Redemption-Net.. 169 - - - -
Dividends Declared on
Cumulative Preferred Stock................ 4,903 5,127 5,562 5,544 5,659
Income Available for Common Stock.......... 47,650 45,802 44,828 42,144 37,282
Dividends Declared on Common Stock......... 36,459 35,541 34,497 31,545 29,800
Amount Retained in the Business............ 11,191 10,261 10,331 10,599 7,482
Retained Earnings - beginning of year...... 79,284 69,023 58,692 48,093 40,611
Retained Earnings - end of year............ $ 90,475 $ 79,284 $ 69,023 $ 58,692 $ 48,093
</TABLE> - 4 -
<PAGE>
<TABLE>
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA* (CON'T)
(Thousands of Dollars)
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Common Stock
Average shares outstanding (000s)........ 17,380 17,102 16,725 15,901 15,530
Earnings per share on
average shares outstanding.............. $2.74 $2.68 $2.68 $2.65 $2.40
Dividends declared per share............. $2.095 $2.075 $2.045 $1.98 $1.90
Book value per share (at year-end)....... $25.96 $25.34 $24.65 $23.60 $22.84
Total Assets............................... $1,250,092 $1,250,781 $1,264,240 $1,167,124 $1,141,128
Long-term Debt............................. 389,245 389,364 391,810 441,096 416,030
Cumulative Preferred Stock................. 56,030 81,030 81,030 81,030 81,030
Common Equity.............................. 454,239 436,731 417,846 378,214 360,203
* This summary should be read in conjunction with the Consolidated Financial Statements and Notes
thereto included in the "Financial Section" of this Annual Report.
- 5 -
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPETITION
General
The Company is subject to regulation by the Public Service
Commission of the State of New York (PSC) and by the Federal
Energy Regulatory Commission (FERC). As a result, the Company is
substantially free from direct competition at the retail level,
at this time. The enactment of the Energy Policy Act of 1992 and
the FERC's rules providing open-access to interstate gas
pipelines, as well as federal and state proposals to introduce
competition to the utility market, will expose the electric and
gas industry to additional risks and uncertainties. The
introduction of increased competition and related regulatory and
legislative requirements may unfavorably impact the position of a
utility as a franchised monopoly. The Company cannot predict the
scope, timing and consequences of these changes; however, such
changes could result in a write-off of utility assets. See the
following subcaption entitled "Continuing Applicability of SFAS
No. 71."
Recent Developments
FERC Notice of Proposed Rulemaking (NOPR): On
March 29, 1995, FERC issued a NOPR on generic requirements for
electric transmission tariffs. FERC proposes to require all
jurisdictional utilities (including the Company) to offer
comparable service, open-access transmission tariffs for network
and point-to-point service. Such utilities would also be
required to take transmission service under the same tariffs and
each ancillary service they offer in their rates and to effect
functional unbundling of their transmission operations. Included
with the open-access NOPR is a supplementary NOPR on stranded
costs, in which FERC endorses the principle of stranded cost
recovery. Stranded costs are prudently incurred utility costs
which would be recoverable under the current system of
regulation, but which might not be recoverable in a more
competitive electric industry environment.
New York - Electric
Competitive Opportunities Proceeding: In 1993, the PSC
initiated a proceeding to address numerous issues related to
competition in the electric energy markets in New York State.
Two phases of this proceeding have been established to address
the issues to be considered.
- 6 -
<PAGE>
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.
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. Issues related to both
wholesale and retail competition also are being examined in Phase
II of this proceeding.
By Opinion and Order, issued and effective June 7, 1995, the
PSC adopted principles to guide the transition to competition
which included a reasonable opportunity to recover stranded
investments and called for further investigation of whether
vertically integrated utility corporate structures would impede
or obstruct development of effective wholesale or retail
competition. The PSC next directed a review of certain
alternative models for competition within New York State's
electric industry. The parties to such proceeding filed their
comments with the PSC, including the following:
The Energy Association of New York State (Energy
Association), which is a group comprised of the eight major
investor-owned gas and electric utilities serving New York State
(including the Company), recommended a wholesale poolco model.
The key elements of this model include, among others, the
following which assumes full recovery of stranded costs:
(i) setting up an unregulated market for
competitively selling wholesale bulk power into a
pool, regardless of whether that power is provided
by investor-owned utilities, non-utility
generators, power marketers, cooperatives or on-
site generators and
(ii) creating an Independent System Operator to
direct the operation of the State's transmission
system so that bulk power will be delivered safely
and reliably.
The New York State Power Authority (NYPA) recommended a
retail bilateral contract model under which all customers would
have the choice to select their electricity suppliers according
to individually negotiated arrangements. The bilateral model
supported by NYPA Staff would incorporate a power exchange that
would accommodate the development of a spot market and a single
- 7 -
<PAGE>
transmission system operator that would have the ultimate
responsibility for the reliable operation of the system. NYPA
recommended that it assume the role of the single owner and
operator of the bulk power transmission system in New York State.
The Staff of the PSC filed a recommendation for a flexible
poolco model of competition that provides a full range of
competitive alternatives, including retail and wholesale
competition, market-clearing spot prices for electricity
purchases and physical bilateral contracts. The PSC Staff model
includes divestiture of utility generation assets through sale or
spin-off. The PSC Staff proposed that shareholders absorb a
portion of stranded costs. The Staff's plan calls for testing
the new market structure in the wholesale market in late 1997 and
beginning the transition to a competitive retail market by early
1998.
On December 21, 1995, the Administrative Law Judge and the
Deputy Director, Energy and Water Division of the Department of
Public Service issued a recommended decision in Phase II. In
summary, this decision recommended that the PSC adopt a
transitional plan leading to a flexible retail poolco model. The
first stage would be a wholesale poolco model with an independent
system operator and market mechanisms to allow an orderly
movement to full retail access. Under their recommended
decision, reliability of the bulk power system is recognized to
be critical and should not be compromised to achieve lower prices
from retail access. Stranded costs would be recovered by non-
bypassable access charges or wire charges, and must be determined
to be prudent, verifiable and non-mitigable. A utility would be
entitled to present a case as to why it would be reasonable to
allow recovery of its stranded costs, subject to allowing
consumers a reasonable opportunity to realize savings and receive
reasonable prices; thus, a careful balance of interest and
expectations is required and may vary utility by utility.
Utilities would be required to individually file for PSC
approval, within six months of the PSC's order, a long-term
proposal addressing, among other things, (i) recoverable stranded
costs, (ii) the separation of generation from transmission and
distribution, either functionally, structurally or by
divestiture, (iii) phasing in retail access for all customers,
and (iv) the utility's proposed relationship with an independent
system operator.
The Company is considering the impact the recommended
decision would have on its business and can make no prediction as
to what action the PSC will take with respect to Phase II, except
that if the PSC were to adopt the stranded cost recommendations
in such decision, the Company's ability to recover its plant
costs and regulatory assets in rates would be at risk. Action by
the PSC is expected by July 1, 1996.
- 8 -
<PAGE>
Niagara Mohawk Proposal: On October 6, 1995, as
publicly reported by Niagara Mohawk Power Corporation (Niagara
Mohawk), Niagara Mohawk filed a proposal with the PSC which
provides for a corporate restructuring designed to create an
open, competitive retail electricity market, deregulate
electricity generation in Niagara Mohawk's service area, allow
its customers, by year 2000, to choose their electricity supplier
and freeze or reduce electricity prices over the next five years.
The restructuring would place Niagara Mohawk's power plants
(which would include Niagara Mohawk's interest in the Nine Mile 2
Plant and Niagara Mohawk's interest in the Roseton Plant) and
unregulated generator contracts in a separate generating company,
with the remaining business being separated into a holding
company with regulated subsidiaries that would transmit and
distribute electricity and natural gas and supply energy services
to core customers. This holding company would also have
unregulated subsidiaries that would engage in marketing,
brokering and service activities. In addition, Niagara Mohawk
also put forth in its proposal a request for "relief from
overpriced unregulated generator contracts that were mandated by
public policy." In its proposal, Niagara Mohawk indicated that
if it were unable to negotiate new contracts with unregulated
generators, Niagara Mohawk would propose to take possession of
the unregulated generator projects and compensate their owners
through Niagara Mohawk's power of eminent domain. Niagara Mohawk
would then resell the projects, allowing the projects to sell
electricity into the competitive pool at market prices. Niagara
Mohawk has indicated that its proposals are offered as an
integrated package, and not piecemeal.
Niagara Mohawk has stated that if it appears that such a
proposal were unachieveable, Niagara Mohawk could not rule out
the possibility of a restructuring under Chapter 11 of the United
States Bankruptcy Code.
The Company has intervened in the proceeding but cannot
predict whether Niagara Mohawk's proposal will be effected or, if
effected, what impact, if any, Niagara Mohawk's proposal would
have on the gas and electric utility business in New York State,
including the Company's franchise area, or what effect Niagara
Mohawk's proposal and/or a restructuring under Chapter 11 of the
United States Bankruptcy Code would have on the Company's
interest in the Nine Mile 2 Plant or the Company's interest in
the Roseton Plant.
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 FERC, which requires pipeline gas
- 9 -
<PAGE>
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. In
compliance with such Order, the Company and other LDCs filed
proposed open-access compliance tariffs with the PSC on
November 9, 1995. At this time, the Company can make no
prediction as to whether or when the PSC will take action on
these filings.
Mergers in the Electric Industry
In response to the increasingly competitive environment,
utilities across the country have been reorganizing to better
position themselves financially and territorially for the future.
Thus, mergers and possible mergers have been reported in business
publications throughout the past year. The Company cannot
predict at this time what effect these mergers or future mergers
will have on the utility industry in New York State.
Continuing Applicability of SFAS No. 71
The Company's electric and gas rates, currently subject to
approval by the PSC, are designed to recover the Company's costs
of providing electric and gas services to its customers. A
primary difference between a rate regulated entity and an
unregulated entity is the timing of recognizing certain assets
and expenses for financial reporting purposes. The Statement of
Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation" (SFAS No. 71), prescribes
the method to be used to record the financial transactions of a
regulated entity. If the Company were to determine that its
business fails to meet the criteria of SFAS No. 71, it would have
to eliminate from its financial statements all transactions
prescribed by the regulators that would not have been recognized
if it had been a non-regulated company which could result in a
write-down or write-off of utility assets. Currently, such
transactions are included in the Company's consolidated financial
- 10 -
<PAGE>
statements as regulatory assets and liabilities, as described in
Note 1 of the Notes to the Company's Consolidated Financial
Statements for the year ended December 31, 1995 (Notes). An
unfavorable impact on the financial results of the Company would
occur if the Company determined that it could no longer apply
SFAS No. 71. The Company believes, however, that it meets the
criteria for operating as a rate regulated entity, as prescribed
by SFAS No. 71, at this time, but cannot predict whether it will
continue to meet such criteria, in whole or in part, in the
future.
Company's Response
Currently, the Company is the lowest cost electric provider
in New York State and, through strategies and cost-reduction
measures such as those described below, will strive to remain in
that position.
The Company's goal is to be the energy supplier of
competitive choice to its customers. In order to achieve this
goal, the Company has implemented, and will continue to implement
appropriate cost-reduction measures. Measures which have been
put into place to improve the Company's position in a competitive
marketplace include: 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"; satisfying a
portion of its power requirements with purchased power from
energy providers outside the Company's service territory at a
lower cost than if such power were generated by the Company;
reduction of contractor costs by redeploying its own workforce;
redeeming or refinancing debt or preferred stock at lower
interest rates; and a continued reduction of its workforce
through attrition.
Due to the rapid change in the utility industry, the Company
has considered and will continue to consider various strategies
designed to enhance its competitive position and to adapt to
anticipated changes in its business. In November of 1995, the
Company entered into a five-year agreement with the Boston Edison
Company to transport natural gas to one of the electric
generating plants of the Massachusetts-based utility for a demand
charge. The demand charge being received for this service will
result in an estimated 4% savings to our natural gas customers.
Another strategy implemented to prepare the Company for future
changes in the industry is capacity brokering. LDCs, such as the
Company, are permitted to offer their unutilized firm
transportation service to others for a fee. This program, which
was used at various times in 1995 and 1994, gives the Company an
opportunity to defray some or all of the monthly fixed charges
when its firm gas transportation capacity is not fully utilized
and, as a result, reduces the costs billed to the Company's firm
gas customers.
- 11 -
<PAGE>
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 $49.3 million in 1995, a $7.9 million decrease from
the $57.2 million expended in 1994. As shown in the table below,
cash construction expenditures for 1996 are estimated to be $61.3
million, an increase of $12.0 million compared to 1995
expenditures. Internal sources funded 100% of the 1995 cash
construction expenditures and are presently estimated to fund
100% of the forecasted cash construction expenditures for 1996.
In 1996, the Company expects to fund any external funding
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.
- 12 -
<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 1996-2000 are set forth by year in the following
table:
<CAPTION> Total
1996 1997 1998 1999 2000 1996-2000
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Construction Expenditures*:
Electric............................ $39,200 $36,400 $42,900 $36,500 $39,100 $194,100
Gas................................. 7,300 7,700 7,900 8,200 8,500 39,600
Common.............................. 9,500 8,200 8,400 8,600 7,600 42,300
Nuclear fuel........................ 5,300 - 5,800 - 5,900 17,000
Total........................... 61,300 52,300 65,000 53,300 61,100 293,000
Internal Funds Available: 64,900 55,600 56,600 59,800 62,100 299,000
Excess of Construction
Expenditures over Internal Funds..... (3,600) (3,300) 8,400 (6,500) (1,000) (6,000)
Mandatory Redemption of Long-term
Securities:
Long-term debt....................... - 100 100 20,100 35,100 55,400
Optional Redemption of Long-term
Securities:
Long-term debt....................... 30,000 - - - - 30,000
Preferred stock...................... 13,000 - - - - 13,000
Working Capital Requirements.......... (2,900) 3,000 3,000 3,000 3,000 9,100
Total Cash Requirements............... $36,500 $ (200) $11,500 $16,600 $37,100 $101,500
* Excluding the equity portion of Allowance for Funds Used During Construction (AFDC), a noncash item.
- 13 -
</TABLE>
<PAGE>
Estimates of construction expenditures are subject to
continuous review and adjustment, and actual expenditures may
vary from such estimates. These construction expenditures
include capitalized overheads, nuclear fuel and the debt portion
of AFDC.
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 $6.1 million. A discussion of the Clean Air Act
Amendments is included in Note 8 of the Notes under the caption
entitled "Environmental Matters - Clean Air Act Amendments."
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
1996-2000. During this same five-year period, total external
financing requirements are projected to amount to $101.5 million,
of which $55.4 million is related to the mandatory redemption of
long-term securities and $43.0 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,
issuances of its common stock under its Automatic Dividend
Reinvestment and Stock Purchase Plan and its Customer Stock
Purchase Plan and redemption of debt and preferred stock. 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 a portion 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 since 1991. The
Company's bond ratings, which were recently reaffirmed during
1995, 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. Standard & Poor's
Corporation has revised its outlook on the Company from "stable"
to "positive" in August 1995, citing the Company's "expectation
of sustainable and modest financial improvement based on gradual
economic growth and lower capital spending requirements." The
Company's long-term goal is to achieve and maintain bond ratings
at the "A" level.
- 14 -
<PAGE>
Set forth below is certain information with respect to the
Company's capital structure at the end of 1995, 1994 and 1993:
Year-end Capital Structure
1995 1994 1993
Long-term debt .......... 42.8% 43.0% 47.0%
Short-term debt ......... - .3 -
Preferred stock ......... 7.5 8.9 8.6
Common equity ........... 49.7 47.8 44.4
100.0% 100.0% 100.0%
FINANCING PROGRAM
On December 1, 1995, the Company paid in full at maturity
its 4.85% Promissory Notes. The $2.6 million principal amount
was funded through internal sources.
The Company redeemed all of its outstanding shares of 7.44%
Cumulative Preferred Stock (par value $100 per share) on
October 1, 1995 at a redemption price of $101.22 per share. The
$12.1 million total redemption price paid and associated costs
were funded through internal sources and from the issuance of
257,587 additional shares of common stock during 1995 through the
Company's Automatic Dividend Reinvestment and Stock Purchase Plan
and its Customer Stock Purchase Plan.
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.
The Company optionally redeemed on January 1, 1996 all of
its outstanding shares of 7.72% Cumulative Preferred Stock (par
value $100 per share) at a redemption price of $101.00 per share.
The $13.1 million redemption price paid and associated costs were
funded through internal sources. Financial markets will continue
to be monitored throughout 1996 by the Company for opportunities
to refinance debt or preferred stock at lower cost.
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
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<PAGE>
combination of Medium Term Notes and up to $40 million of Common
Stock. For more information with respect to such Order and the
Company's financing program in general, see Notes 5 and 6 of the
Notes.
SHORT-TERM DEBT
As more fully discussed in Note 4 of the Notes, the Company
has a revolving credit agreement with four commercial banks for
borrowing up to $50.0 million through December 14, 1997. In
addition, the Company continues to maintain confirmed lines of
credit totaling $1.5 million with two regional banks. Also, the
Company has short-term credit agreements with four commercial
banks totaling $130.0 million in the aggregate. Such agreements
give the Company competitive options to minimize its cost of
short-term debt borrowing. 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.
RATE PROCEEDINGS
ELECTRIC: The Company has no pending electric rate
case filed with the PSC and cannot predict with certainty the
date of its next filing. The Company's most recent electric rate
case was filed November 12, 1992 and, by Order Determining
Revenue Requirement and Rate Design 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, and an 8.58%
return on total invested capital.
The Company's electric fuel cost adjustment clause also
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. In addition, the Company credits to customers
the net revenue (gross revenue less incremental costs,
principally fuel) from sales of electricity to other utilities
after adjusting for an 80%/20% sharing between customers and the
Company, respectively, of any variations from forecasted amounts
which have been approved by the PSC for a specific twelve-month
period. See subcaption "Deferred Electric Fuel Costs" of Note 1
of the Notes.
- 16 -
<PAGE>
GAS: On November 10, 1995, the Company filed a request
with the PSC to increase its base rates for firm natural gas
service to produce a net increase in firm gas revenues of $2.422
million based on projected operations during the rate year
comprised of the period November 1, 1996 through
October 31, 1997. This would represent an overall increase in
firm gas revenues of 3%.
The higher rates have been requested to cover increases in
capital and operating costs that are projected for the rate year
that are not adequately provided for in present rates and will
not be provided for by increased sales.
In its filing, the Company requested an 11.50% return on
common equity and a 9.22% return on total invested capital. It
is not expected that any new gas rates, which may result from
this filing, will become effective before October 1, 1996.
Based on the Company's proposed allocation between firm
customer classes, the proposed increase would be approximately
4.9% for residential customers and 1.0% for commercial/industrial
customers. By Order issued and effective December 4, 1995, the
PSC suspended the rate increase through April 7, 1996.
The Company can make no prediction as to what further action
the PSC will take on its request, including the amount of any gas
rate increase which may be authorized by the PSC.
OTHER DEVELOPMENTS
Electric Sales to IBM: The Company's largest customer is
International Business Machines Corporation (IBM), which
accounted for approximately 10%, 12% and 14% of the Company's
total electric revenues for the years ended December 31, 1995,
1994 and 1993, respectively. Published reports indicate that IBM
reduced its employment in the Company's service territory by
approximately 400 employees in 1995, 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 10,100, as compared to the
peak level of IBM employment in excess of 30,000 in 1985. In
1995, IBM closed its facility in Kingston, New York and relocated
1,500 of its workers to its facility 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 also in the
Company's service territory. This downsizing of IBM is the main
contributor to a decline in 1995 of 18% in industrial electric
sales. This is in addition to the 1994 and 1993 declines in
electric sales to IBM of 17% and 20%, respectively.
New Accounting Standards: The Company is currently reviewing
the accounting implications of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be
Disposed Of," which is effective for its 1996 financial
- 17 -
<PAGE>
statements. As discussed in more detail in Note 1 of the Notes,
the Company does not expect that the adoption of this standard
will have a material impact on the Company.
Environmental Issues: On an ongoing basis, the Company
assesses environmental issues which could impact the Company and
its ratepayers. Notes 1, 2 and 8 of the Notes, discuss current
environmental issues affecting the Company, including (i) the
recent decommissioning study of the Nine Mile 2 Plant, (ii) the
Clean Water Act and Clean Air Act Amendments of 1990, which
require control of emissions from fossil-fueled electric
generating units, (iii) asbestos litigation cases, and (iv) a
legal action filed in 1995 against the Company by the City of
Newburgh, New York after that City discovered allegedly hazardous
coal-tar material on its property, in 1994, allegedly migrating
from a former manufactured gas plant facility of the Company
located in Newburgh, New York.
RESULTS OF OPERATIONS
The following discussion and analysis includes an
explanation of the significant changes in revenues and expenses
when comparing 1995 to 1994 and 1994 to 1993. 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:
1995 1994 1993
Average shares outstanding (000s).. 17,380 17,102 16,725
Earnings per share................. $ 2.74 $ 2.68 $ 2.68
Return earned on common equity
per books*........................ 10.5% 10.7% 11.1%
* Return on equity for regulatory purposes differs from these
figures.
Earnings per share in 1995 increased $.06 per share over
1994 results primarily because of a decrease in maintenance costs
of the Company's electric generating plants and gas distribution
and transmission system in 1995. A decrease in the operation and
maintenance costs associated with the Nine Mile 2 Plant
contributed to the total decrease in operation and maintenance
costs as well. Also contributing to the increase in 1995
earnings was reduced interest expense in 1995 resulting primarily
from the 1994 retirement at maturity of $50 million 8 1/8% Series
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<PAGE>
First Mortgage Bonds, increased earnings related to PSC incentive
programs related to fuel costs and energy efficiency, and an $.08
per share gain from the sale of long-term stock investments in
June and December 1995.
Partially offsetting these increases to earnings were
significant decreases in electric and gas net operating revenues
attributable primarily to decreased sales from the warmer winter
weather experienced in the first quarter of 1995, as compared to
the same period of 1994, as well as decreased sales to a large
industrial customer (IBM) in 1995. The earnings per share in
1995 were also unfavorably impacted by increased depreciation
expense on the Company's plant and equipment, increased property
taxes and an increase in the number of shares of common stock
outstanding.
In 1994, earnings per share remained unchanged from 1993,
although earnings from normal operations increased $.03 per
share. Earnings in 1993 included a $.03 per share gain from the
sale of long-term stock investments. The $.03 per share increase
in earnings from normal operations in 1994 was due primarily to
lower interest charges on the Company's outstanding debt,
resulting in large part from retirement at maturity on
September 1, 1994 of $50 million principal amount of 8 1/8%
Series First Mortgage Bonds, the refinancing of high interest
rate debt and preferred stock in 1993, and increased gas net
operating revenues.
These 1994 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, an increase in the number of shares
of common stock outstanding, and decreased earnings of non-
regulated subsidiary companies.
- 19 -
<PAGE>
<TABLE>
OPERATING REVENUES
Total operating revenues decreased $3.5 million (.7%) in 1995, as compared to 1994,
and $1.7 million (.3%) in 1994, as compared to 1993.
See the table below for details of the variations:
<CAPTION>
Increase or (Decrease) from Prior Year
1995 1994
Electric Gas Total Electric Gas Total
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Customer sales............. $(7,711) $ 4,779 $(2,932) $ (6,105) $ 4,555 $(1,550)
Sales to other utilities... 2,017 - 2,017 (831) - (831)
Increase in base rates..... - - - 4,704 - 4,704
Fuel cost adjustment....... 3,346 (6,564) (3,218) (7,534) 6,234 (1,300)
Deferred revenues.......... 1,374 21 1,395 (3,405) (881) (4,286)
Miscellaneous.............. (663) (52) (715) 1,328 230 1,558
Total............... $(1,637) $(1,816) $(3,453) $(11,843) $10,138 $(1,705)
- 20 -
</TABLE>
<PAGE>
SALES
Sales of electricity within the Company's service territory
decreased 2% and 3% in 1995 and 1994, respectively. The decline
in sales experienced in 1995 was primarily the result of unusual
warm winter weather experienced in the first quarter of 1995 when
compared to the same period in 1994. This 1995 sales decrease
was also impacted by the continued declining usage by IBM. The
decrease in 1994 sales largely occurred due to a decline in usage
by IBM, as described under the above caption entitled "Other
Developments."
Firm sales of natural gas decreased 5% in 1995 largely
because of a decrease in usage by residential and commercial
customers. In 1994, firm sales of natural gas increased 4%
primarily due to an increase in the usage by residential and
commercial customers. Changes in sales by major customer
classification are set forth below:
% Increase (Decrease)
from Prior Year
Electric
1995 1994
Residential......................... ( 2) 1
Commercial.......................... 1 3
Industrial.......................... ( 6) (13)
Gas
1995 1994
Residential......................... (10) 3
Commercial.......................... ( 1) 7
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 (Decrease)
from Prior Year
1995 1994
Growth in number of customers............ - -
Change in average usage
per customer............................ (2) 1
The decreased customer usage in 1995 was primarily due to
the warmer winter weather experienced in the Company's service
territory in the first quarter of 1995. Heating degree days were
22% lower in this quarter of 1995 than in the same quarter in
1994. For the twelve months of 1995, heating degree days
decreased 12% when compared to the results for the year 1994.
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<PAGE>
In 1994, the increased usage per customer was largely
attributable to hotter summer weather as cooling degree days
increased 10% over 1993.
Commercial Electric Sales: The components of the changes
in commercial electric sales are set forth in the table below:
% Increase (Decrease)
from Prior Year
1995 1994
Growth in number of customers.............. 2 1
Change in average usage
per customer.............................. (1) 2
Industrial Electric Sales: In 1995, as compared to 1994,
and 1994, as compared to 1993, industrial electric sales
decreased 6% and 13%, respectively, due primarily to a decline in
usage by a large industrial customer (IBM) of 18% in 1995 and 16%
in 1994.
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
1995 1994
Growth in number of customers........... - -
Change in average usage per
customer............................... (10) 3
Commercial Sales
1995 1994
Growth in number of customers........... 3 2
Change in average usage per
customer............................... ( 7) 5
Degree Days
1995 1994
Bimonthly billing cycle................. (12) (1)
Calendar year........................... ( 4) (3)
Firm gas sales to industrial customers for 1995 remained
stable when compared to the prior year. In 1994, firm gas sales
to industrial customers decreased 4% primarily due to the shift
of two large industrial customers from firm service to gas
transportation service.
- 22 -
<PAGE>
Gas Sales - Interruptible: Interruptible gas sales
increased 70% in 1995, as compared to 1994, and 33% in 1994, as
compared to 1993. The 1995 and 1994 increases were due primarily
to the sale of natural gas to the other cotenant owners of the
Roseton Plant for use as a boiler fuel.
NUCLEAR OPERATIONS
The Company owns a 9% interest as one of the five tenants-
in-common of the Nine Mile 2 Plant, which is discussed in Note 2
of the Notes under the caption entitled "Nine Mile 2 Plant." The
operations of this Plant have continued to improve. The actual
capacity factor of 76.5% for 1995 exceeded the targeted capacity
factor of 73.2% included in the Company's electric fuel
adjustment clause. The actual cost of operation for 1995 was
less than the amounts provided in the Company's rates. Both of
these factors contributed to a favorable impact on earnings. In
1994, the actual cost of operation approximated the amount
provided for in the rate-making process.
The Company has continued to participate actively on the
management, operations and accounting committees for the Nine
Mile 2 Plant and expects to continue to do so in the future.
The Nine Mile 2 Plant is scheduled to commence its fifth
refueling outage in September 1996, with a targeted 37-day
duration.
Decommissioning of nuclear plants such as the Nine Mile 2
Plant was an important part of the Energy Policy Act of 1992.
Through this act, the Uranium Enrichment Decontamination and
Decommissioning Fund was established. For further information on
this enactment, refer to Note 2 of the Notes. With respect to
its interest in the Nine Mile 2 Plant, the Company based its 1995
decommissioning cost estimates on the decommissioning study
completed in 1989. As more fully discussed in Note 2 of the
Notes, a recent decommissioning study was completed in December
1995. The Company believes that decommissioning costs, if higher
than currently estimated, will ultimately be recovered in the
rate-making process, although no such assurance can be given.
SHARING ARRANGEMENTS
Pursuant to certain incentive formulas approved by the PSC,
the Company shares, with its customers, certain revenues and/or
cost savings exceeding defined predetermined levels. These
incentive formulas, in some cases, include penalty provisions for
shortfalls from the targeted levels as well.
Incentive formulas are in place for fuel cost variations,
sales of electricity to other utilities and interruptible gas
sales.
- 23 -
<PAGE>
The net effect of these incentive formulas was to increase
pretax earnings by $4.0, $2.1 and $2.0 million during 1995, 1994
and 1993, respectively.
OPERATING EXPENSES
As a result of the Company's continuing efforts to reduce
costs of operation, the Company experienced a significant
reduction in its operating expenses, especially in the operation
and maintenance costs of its generating and nuclear plants, when
comparing 1995 to 1994 results. Changes from the prior year in
the components of the Company's operating expenses are listed
below:
Increase or (Decrease)
from Prior Year
1995 1994
Amount % Amount %
(Dollars in Thousands)
Operating Expenses:
Fuel and purchased
electricity............... $ 1,279 1 $(10,266) (8)
Purchased natural gas...... 1,751 3 6,688 12
Other expenses of
operation................. (2,354) ( 3) 3,436 4
Maintenance................ (2,905) (10) (2,381) (8)
Nine Mile 2 Plant operation
and maintenance........... (879) ( 6) 773 5
Depreciation and
amortization.............. 1,087 3 698 2
Taxes, other than
income tax................ (190) - 1,335 2
Federal income tax......... 997 4 (560) (2)
Total................. $(1,214) - $ (277) -
The most significant elements of operating expenses are fuel
and purchased electricity in the Company's electric department
and purchased natural gas in the Company's gas department.
Approximately 28% in 1995 and 27% in 1994 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 61% and 58%,
respectively.
In 1995, the combined cost of fuel used in electric
generation and purchased electricity increased $1.3 million (1%)
primarily due to a 1% increase in total system sales which
- 24 -
<PAGE>
included sales to other utilities. In 1994, the combined cost of
fuel used in electric generation and purchased electricity
decreased $10.3 million (8%) 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.
Purchased natural gas increased $1.8 million (3%) in 1995
largely because of higher interruptible gas sales including gas
used as a boiler fuel at the Roseton Plant. The 1994 $6.7
million (12%) 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. 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 1996 after the 1995-1996 winter heating season and
are expected to be replaced with competitively bid contracts with
third-party gas suppliers.
Other expenses of operation decreased $2.4 million (3%) in
1995 primarily because of decreased costs of the Company's
electric distribution and transmission system. The 1994 increase
of $3.4 million (4%) in other expenses of operation was primarily
due to higher employee wages and associated fringe benefits.
Maintenance expenses decreased $2.9 million (10%) in 1995
due largely to a $3.5 million decrease in costs associated with
the Company's electric generating plants and a $1.6 million
decrease in leak repair costs on the Company's gas distribution
and transmission system. These decreases were partially offset
by a $2.0 million increase in the Company's electric distribution
and transmission system costs largely resulting from increases to
storm costs and tree trimming expenses in 1995. The 1994
decrease of $2.4 million (8%) in maintenance expenses was 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.
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 1995, the
Company's portion of the costs of the Nine Mile 2 Plant decreased
$879,000 (6%) due primarily to a decrease in the nuclear plant's
operation and maintenance costs. The Company's portion of the
1994 costs of the Nine Mile 2 Plant increased $773,000 (5%) due
to the inclusion of approximately $1.7 million of non-recurring
- 25 -
<PAGE>
expenses largely attributable to Niagara Mohawk's corporate
restructuring efforts at the Nine Mile 2 Plant.
The Company's composite rate for depreciation amounted to
3.14% in 1995, 3.15% in 1994 and 3.17% in 1993 of the original
cost of average depreciable property. The ratio of the amount of
accumulated depreciation to the cost of depreciable property at
December 31 was 35.3% in 1995, 34.5% in 1994 and 32.8% in 1993.
Property taxes, including school taxes, increased $1.2
million and $1.5 million in 1995 and 1994, respectively.
State and local taxes levied on gross revenues decreased
$1.2 million and $406,000 in 1995 and 1994, respectively. The
1995 decrease in revenue taxes was largely due to a change in New
York State tax law, reducing the surcharge tax rate for utility
service from 12.5% to 7.5% effective June 1, 1995. 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.
With the enactment in August 1993 of the Omnibus Budget
Reconciliation Act of 1993 (OBRA), the corporate federal income
tax rate increased from 34% to 35%, effective January 1, 1993.
The PSC authorized deferral of the resultant increase in the
corporate federal income tax rate in 1993 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
Other income (excluding AFDC) increased $1.7 million (23%)
in 1995 and $921,000 (14%) in 1994. The increase was
substantially due to the gain on the sale of long-term stock
investments in June and December 1995 which is more fully
discussed in Note 10 of the Notes. Other income increased in
1994 primarily because of an increase in the amount of Mirror
CWIP which flowed through the income statement as a rate
moderator, prescribed by the Order of the PSC issued and
effective February 11, 1994, as referred to above under the
caption entitled "Rate Proceedings - Electric."
- 26 -
<PAGE>
Total interest charges (excluding AFDC) decreased $2.2
million (7%) in 1995 and $1.2 million (4%) in 1994. The
following table sets forth some of the pertinent data on the
Company's outstanding debt:
1995 1994 1993
(Thousands of Dollars)
Long-term debt:
New debt issued............. $ - $ - $ 40,000
Debt retired................ 2,562 50,000 40,000
Outstanding at year-end*:
Amount (including current
portion).................. 391,715 393,853 443,897
Effective rate............ 7.00% 6.71% 6.75%
Short-term debt:
Average daily amount
outstanding ............... $ 103 $ 16 $ 330
Weighted average
interest rate ............ 6.16% 6.69% 3.94%
*Including debt of subsidiaries of $5.3 million in 1995 and $4.8
million in 1994 and 1993.
See Notes 4 and 6 of the Notes for additional information on
short-term and long-term debt of the Company.
- 27 -
<PAGE>
<TABLE>
FINANCIAL INDICES
<CAPTION<
Selected financial indices for the last five years are set forth in the following
table:
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Pretax coverage of
total interest charges:
Including AFDC..................................... 3.68x 3.38x 3.29x 3.07x 2.70x
Excluding AFDC..................................... 3.43x 3.15x 3.15x 2.95x 2.62x
Pretax coverage of total interest
charges and preferred stock dividends.................. 2.97x 2.74x 2.65x 2.49x 2.22x
Percent of construction expenditures
financed from internal funds........................... 100% 100% 100% 100% 88%
AFDC and Mirror CWIP* as a percentage
of income available for common stock................... 16% 16% 11% 10% 8%
Effective tax rate...................................... 35% 35% 35% 34% 33%
* Refer to Note 1 of the Notes entitled "Summary of Significant Accounting Policies" under
subcaptions "Rates, Revenues and Regulatory Matters" and "Deferred Finance Charges -
Nine Mile 2 Plant" for a definition of Mirror CWIP.
- 28 -
</TABLE>
<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:
1995 1994
High Low Dividend High Low Dividend
1st Quarter $27 5/8 $26 $.52 $30 1/8 $27 7/8 $.515
2nd Quarter 27 1/2 25 1/2 .52 29 3/4 25 3/4 .515
3rd Quarter 30 1/2 26 1/4 .525 27 5/8 23 .52
4th Quarter 31 7/8 29 7/8 .525 26 1/2 22 7/8 .52
On June 25, 1993, the Company increased the quarterly
dividend rate on its common stock to $.515 per share and on
June 24, 1994 increased such quarterly dividend rate to $.52 per
share. On June 23, 1995, the Company further increased such
quarterly dividend rate to $.525 per share. The Company
presently intends to increase future common stock 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 declarations, and the amounts and dates of such
dividends, will depend on the circumstances at the time of
consideration of such declaration.
The number of registered holders of common stock as of
December 31, 1995 was 25,422. Of these, 24,725 were accounts in
the names of individuals with total holdings of 6,225,354
shares, or an average of 252 shares per account. The 697 other
accounts, in the names of institutional or other non-individual
holders, for the most part, hold shares of common stock for the
benefit of individuals.
The Company's 4.85% Promissory Notes became due and were
retired on December 1, 1995. Therefore, the limitations
contained in these notes, upon the right of the Company to
declare or pay any dividend or make any other distribution on or
acquire, for a consideration, any shares of its common stock, no
longer apply. Thus, at December 31, 1995 the amount of retained
earnings available for dividends on the Company's common stock is
100% of the amount reported in the Consolidated Balance Sheet.
- 29 -
<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, 1995 and 1994,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, 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.
PRICE WATERHOUSE LLP
New York, New York
January 26, 1996
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<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 adequate systems of internal control 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 systems of internal control are 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, 1995.
Independent accountants were engaged to audit the consolidated
financial statements of the Company and issue their report
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.
- 31 -
<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 DONNA S. DOYLE
Chairman of the Board and Controller
Chief Executive Officer
January 26, 1996
- 32 -
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<CAPTION> December 31,
ASSETS 1995 1994
<S> <C> <C>
Utility Plant
Electric..................................................... $1,149,233 $1,114,574
Gas.......................................................... 140,341 131,830
Common....................................................... 83,220 80,652
Nuclear fuel................................................. 32,541 31,525
1,405,335 1,358,581
Less: Accumulated depreciation............................... 490,576 462,105
Nuclear fuel amortization.............................. 26,435 23,655
888,324 872,821
Construction work in progress................................ 48,770 58,252
Net Utility Plant.......................................... 937,094 931,073
Other Property and Investments................................. 11,332 10,948
The Notes to Consolidated Financial Statements are an integral part hereof.
- 33 -
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars)
<CAPTION> December 31,
ASSETS 1995 1994
<S> <C> <C>
Current Assets
Cash and cash equivalents...................................... 15,478 5,792
Accounts receivable from customers - net of allowance for
doubtful accounts; $2.5 million in 1995 and $2.0 million
in 1994...................................................... 44,536 43,908
Accrued unbilled utility revenues.............................. 15,806 15,076
Other receivables.............................................. 4,674 5,953
Materials and supplies, at average cost:
Fuel......................................................... 13,319 19,293
Construction and operating................................... 14,271 14,096
Special deposits and prepayments............................... 12,659 12,092
Total Current Assets......................................... 120,743 116,210
Deferred Charges
Regulatory assets (Note 1).................................... 159,907 169,808
Unamortized debt expense...................................... 6,080 6,527
Other......................................................... 14,936 16,215
Total Deferred Charges...................................... 180,923 192,550
Total Assets $1,250,092 $1,250,781
The Notes to Consolidated Financial Statements are an integral part hereof.
- 34 -
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars) December 31,
CAPITALIZATION AND LIABILITIES 1995 1994
<CAPTION>
Capitalization
<S> <C> <C>
Common Stock Equity
Common stock, $5 par value (Note 5)......................... $ 87,480 $ 86,192
Paid-in capital (Note 5).................................... 282,942 277,205
Retained earnings........................................... 90,475 79,284
Capital stock expense....................................... (6,658) (6,773)
Unrealized gain on investment (Note 10)..................... - 823
Total Common Stock Equity................................. 454,239 436,731
Cumulative Preferred Stock (Note 5)
Not subject to mandatory redemption......................... 21,030 46,030
Subject to mandatory redemption............................. 35,000 35,000
Total Cumulative Preferred Stock.......................... 56,030 81,030
Long-term Debt (Note 6)....................................... 389,245 389,364
Total Capitalization...................................... 899,514 907,125
Current Liabilities
Current redemption of preferred stock......................... 13,000 -
Current maturities of long-term debt.......................... 1,577 3,525
Notes payable................................................. - 3,000
Accounts payable.............................................. 24,433 29,441
Dividends payable............................................. 10,244 10,246
Accrued taxes and interest.................................... 7,824 6,829
Accrued vacation (Note 1)..................................... 4,157 4,081
Customer deposits............................................. 4,021 3,763
Other......................................................... 6,166 5,556
Total Current Liabilities................................. 71,422 66,441
The Notes to Consolidated Financial Statements are an integral part hereof.
- 35 -
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars) December 31,
<CAPTION> CAPITALIZATION AND LIABILITIES 1995 1994
<S> <C> <C>
Deferred Credits and Other Liabilities
Regulatory liabilities (Note 1)............................... 74,132 72,134
Operating reserves............................................ 6,024 5,663
Other......................................................... 9,659 19,463
Total Deferred Credits and Other Liabilities.............. 89,815 97,260
Accumulated Deferred Income Tax (Note 3)........................ 189,341 179,955
Commitments and Contingencies (Notes 2 and 8)...................
Total Capitalization and Liabilities $1,250,092 $1,250,781
The Notes to Consolidated Financial Statements are an integral part hereof.
- 36 -
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(Thousands of Dollars)
<CAPTION>
Year ended December 31,
<S> 1995 1994 1993
Operating Revenues <C> <C> <C>
Electric................................... $396,673 $400,327 $411,339
Gas........................................ 102,770 104,586 94,448
Total - own territory.................... 499,443 504,913 505,787
Electric sales to other utilities.......... 12,772 10,755 11,586
Total Operating Revenues................. 512,215 515,668 517,373
Operating Expenses
Operation:
Fuel used in electric generation......... 60,940 67,899 72,291
Purchased electricity.................... 52,323 44,085 49,959
Purchased natural gas.................... 62,339 60,588 53,900
Other expenses of operation.............. 99,063 101,925 98,327
Maintenance................................ 29,440 32,716 34,486
Depreciation and amortization (Note 1)..... 41,467 40,380 39,682
Taxes, other than income tax............... 66,709 66,899 65,564
Federal income tax (Note 3)................ 29,040 28,043 28,603
Total Operating Expenses................. 441,321 442,535 442,812
Operating Income............................. 70,894 73,133 74,561
Other Income and Deductions
Allowance for equity funds used during
construction (Note 1)..................... 986 866 934
Federal income tax (Note 3)................ 353 1,237 1,445
Other - net................................ 8,886 6,296 5,167
Total Other Income and Deduction......... 10,225 8,399 7,546
Income before Interest Charges............... 81,119 81,532 82,107
The Notes to Consolidated Financial Statements are an integral part hereof.
- 37 -
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (CON'T)
(Thousands of Dollars)
<CAPTION> Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Interest Charges
Interest on long-term debt................. 25,925 27,541 28,877
Other interest............................. 1,917 1,784 1,204
Allowance for borrowed funds used
during construction (Note 1).............. (514) (515) (611)
Amortization of expense on debt............ 1,069 1,793 2,247
Total Interest Charges................... 28,397 30,603 31,717
Net Income................................... 52,722 50,929 50,390
Premium on Preferred Stock Redemption-Net.... 169 - -
Dividends Declared on Cumulative
Preferred Stock............................. 4,903 5,127 5,562
Income Available for Common Stock............ $ 47,650 $ 45,802 $ 44,828
Common Stock:
Average shares outstanding (000s).......... 17,380 17,102 16,725
Earnings per share on
average shares outstanding................ $2.74 $2.68 $2.68
The Notes to Consolidated Financial Statements are an integral part hereof.
- 38 -
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION> Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year................. $ 79,284 $ 69,023 $ 58,692
Net Income................................... 52,722 50,929 50,390
132,006 119,952 109,082
Premium on Preferred Stock Redemption-Net.... 169 _ _
Dividends declared:
On cumulative preferred stock.............. 4,903 5,127 5,562
On common stock ($2.095 per share 1995;
$2.075 per share 1994; $2.045 per share
1993)..................................... 36,459 35,541 34,497
41,362 40,668 40,059
Balance at end of year....................... $ 90,475 $ 79,284 $ 69,023
The Notes to Consolidated Financial Statements are an integral part hereof.
- 39 -
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Year ended December 31,
<S> 1995 1994 1993
Operating Activities <C> <C> <C>
Net Income.......................................... $ 52,722 $ 50,929 $ 50,390
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization including nuclear
fuel amortization............................... 45,388 44,616 43,887
Deferred income taxes, net....................... 14,146 12,970 15,593
Allowance for equity funds used during
construction.................................... (986) (866) (934)
Nine Mile 2 Plant deferred finance charges, net.. (4,855) (4,855) (7,987)
Provisions for uncollectibles.................... 3,220 3,306 3,431
Accrued pension costs............................ (10,627) (2,028) (2,562)
Gain on sale of long-term investment............. (2,104) - (670)
Deferred gas costs............................... 5,302 3,256 (2,974)
Deferred gas refunds............................. (1,784) 2,616 416
Other - net...................................... 11,466 4,376 3,807
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled utility
revenues..................................... (3,300) (2,604) (3,701)
Materials and supplies........................ 5,799 2,028 2,623
Special deposits and prepayments.............. (567) (724) 444
Accounts payable.............................. (5,008) 887 668
Accrued taxes and interest.................... 995 219 (4,561)
Other current liabilities..................... 944 1,396 7
Net cash provided by operating activities........... 110,751 115,522 97,877
The Notes to Consolidated Financial Statements are an integral part hereof.
- 40 -
</TABLE>
<PAGE>
<TABLE> <CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS (CON'T)
(Thousands of Dollars) 1995 1994 1993
Investing Activities <S> <C> <C> <C>
Additions to plant.................................. (50,269) (58,045) (54,037)
Allowance for equity funds used during construction. 986 866 934
Net additions to plant.............................. (49,283) (57,179) (53,103)
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........ (1,895) (895) (942)
Proceeds from sale of long-term investments......... 2,879 - 2,212
Other - net......................................... (1,161) (2,648) (215)
Net cash used in investing activities............... (49,460) (57,204) (55,566)
Financing Activities
Proceeds from issuance of:
Long-term debt.................................... 1,000 230 41,722
Common stock...................................... 7,064 7,783 30,122
Cumulative preferred stock........................ - - 35,000
Net borrowings (repayments) of short-term debt...... (3,000) 3,000 (15,000)
Retirement and redemption of long-term debt......... (3,139) (50,273) (41,443)
Retirement and redemption of cumulative preferred
stock.............................................. (12,000) - (35,000)
Premium on preferred stock redemption............... (146) - -
Dividends paid on cumulative preferred and common
stock.............................................. (41,364) (40,328) (39,527)
Issuance and redemption costs....................... (20) (110) (2,271)
Net cash used in financing activities............... (51,605) (79,698) (26,397)
Net Change in Cash and Cash Equivalents............... 9,686 (21,380) 15,914
Cash and Cash Equivalents at Beginning of Year........ 5,792 27,172 11,258
Cash and Cash Equivalents at End of Year.............. $ 15,478 $ 5,792 $ 27,172
Supplemental Disclosure of Cash Flow Information
Interest paid (net of amounts capitalized)........ $ 26,738 $ 28,681 $ 30,287
Federal income taxes paid......................... 14,100 12,100 13,000
The Notes to Consolidated Financial Statements are an integral part hereof.
- 41 -
/TABLE
<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 1995
presentation. Preparation of the financial statements includes
the use of estimates.
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.
Utility Plant:
The costs of additions to utility plant and replacements of
retired units of property are capitalized at original cost. The
Company's 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 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.
- 42 -
<PAGE>
Jointly Owned Facilities:
The Company has a 9%, or 102.9 MW, undivided interest in the
1,143 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 shares of the investments in the Nine
Mile 2 Plant and the Roseton Plant, as included in its
Consolidated Balance Sheet at December 31, 1995 and 1994, were:
1995 1994
(Thousands of Dollars)
Nine Mile 2 Plant
Plant in service $ 315,423 $309,893
Construction work in progress 594 3,941
Accumulated depreciation (55,319) (48,248)
Roseton Plant
Plant in service $ 133,741 $130,310
Construction work in progress 1,872 3,740
Accumulated depreciation (71,880) (70,525)
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 1995, 8.50% in 1994
and 8.75% in 1993.
Depreciation and Amortization:
For financial statement purposes, the Company's depreciation
provisions are computed on the straight-line method using rates
based on studies of the estimated useful lives and estimated net
salvage of properties, with the exception of the Nine Mile 2
Plant which is depreciated on a remaining life amortization
method. 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
- 43 -
<PAGE>
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 expense 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.
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.
Federal Income Tax:
The Company and its wholly owned subsidiaries file a
consolidated federal income tax return. Federal income taxes are
allocated to operating expenses and other income and deductions
in the Consolidated Statement of Income. Federal income taxes
are deferred under the liability method in accordance with
Financial Accounting Standard No. 109 "Accounting for Income
Taxes." Under the liability method, deferred income taxes are
provided for all differences between financial statement and tax
basis of assets and liabilities. Additional deferred income
taxes and offsetting regulatory assets or liabilities are
recorded to recognize that income taxes will be recoverable or
refundable through future revenues.
- 44 -
<PAGE>
Rates, Revenues and Regulatory Matters:
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.
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.
Regulatory Assets and Liabilities: Certain utility expenses
and credits normally reflected currently in income are deferred
on the balance sheet as regulatory assets and liabilities and are
recognized in income as the related amounts are included in
service rates and recovered from or refunded to customers in
utility revenues.
The following table sets forth the Company's regulatory
assets and liabilities:
At December 31, 1995 1994
Regulatory Assets (Debits): (In thousands)
Deferred finance charges -
Nine Mile 2 Plant..................... $ 70,760 $ 71,904
Income taxes recoverable
through future rates.................. 65,723 69,331
Deferred energy efficiency cost......... 11,046 9,583
Other................................... 12,378 18,990
Total Regulatory Assets............... $159,907 $169,808
Regulatory Liabilities (Credits):
Deferred finance charges -
Nine Mile 2 Plant..................... $ 28,431 $ 34,431
Income taxes refundable................. 29,093 28,383
Deferred unbilled gas revenues.......... 4,030 3,754
Deferred OPEB costs over collection..... 3,600 -
Other................................... 8,978 5,566
Total Regulatory Liabilities.......... $ 74,132 $ 72,134
- 45 -
<PAGE>
Deferred Finance Charges - Nine Mile 2 Plant: 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 portions of the deferred credit to
other income or by the elimination through writing off other
deferred balances as directed by the PSC. 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. 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'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 1995, 1994 and 1993, the Company amortized $6.0 million, $6.0
million and $3.3 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.
- 46 -
<PAGE>
Deferred Energy Efficiency Costs: 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 1995 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 as discussed below.
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
regulatory asset representing the future recoverability of the
difference between costs incurred and costs recovered in the
rate-making process.
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.
- 47 -
<PAGE>
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.
New Accounting Standards:
Impairment: In March 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121).
SFAS 121 requires companies, including utilities, to assess the
need to recognize a loss whenever events or circumstances occur
which indicate that the carrying amount of an asset may not be
fully recoverable. SFAS 121 also amends SFAS 71, "Accounting for
the Effects of Certain Types of Regulation," to require the
write-off of a regulatory asset if it is no longer probable that
future revenues will recover the cost of the asset. SFAS 121,
which is applicable to the Company starting in 1996, may have
consequences for a number of utilities, especially those which
have relatively high-cost nuclear generating assets, including
the Company, which are facing growing competitive pressures that
may erode prices for future utility services. The Company does
not expect that the adoption of SFAS 121 will have a material
impact on the financial position or results of operations of the
Company in 1996 based on the current regulatory treatment of its
long-lived and regulatory assets. However, future developments
in the utility industry including the effects of deregulation and
increasing competition could change this conclusion.
Plant Decommissioning: Because diverse accounting practices
have developed for recognizing the cost of closure and removal of
long-lived assets in the financial statements, including the cost
of decommissioning utility generating plants, the FASB has agreed
to review the accounting for this topic. The FASB is considering
when a liability for plant decommissioning or other asset
retirement should be recognized, how any such liability should be
measured, and whether a corresponding asset is created. In a
preballot draft SFAS, issued December 1995, FASB has tentatively
concluded that a liability should be recognized for legal or
unavoidable constructive obligations for closure and removal of
facilities such as the Nine Mile 2 Plant as the obligation is
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incurred. The liability recognized for those closure and removal
obligations shall reflect the present value of estimated future
cash outflows currently expected to be required to satisfy those
obligations. Initial recognition of a liability for closure and
removal obligations increases the cost of the related asset
because incurrence of the obligation is integral to or a
prerequisite for operating the asset. Further, if securities or
other assets have been dedicated for future settlement of closure
and removal obligations, the liability for those obligations
shall, generally, not be offset by those dedicated assets. The
proposed statement, when issued, may be effective as early as the
1997 financial statements of the Company. The Company does not
believe that such changes, if required, would have an adverse
effect on results of operations due to its current belief that
decommissioning costs will continue to be recovered in rates.
NOTE 2 - NINE MILE 2 PLANT
General:
The Nine Mile 2 Plant is located in Oswego County, New York,
and is operated by Niagara Mohawk. The Nine Mile 2 Plant is
owned as tenants in common by the Company (9% interest), Niagara
Mohawk (41% interest), New York State Electric & Gas Corporation
(18% interest), Long Island Lighting Company (18% interest) and
Rochester Gas and Electric Corporation (14% interest). The
output of the Nine Mile 2 Plant, which has a rated net capability
of 1,143 MW, (as reported by Niagara Mohawk) 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 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. The Operating Agreement remains in effect
subject to termination on six months' notice.
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
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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
repository operating 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 has forecasted the
start of operations of its high-level radioactive waste
repository to be 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 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.
Nuclear Plant Decommissioning Costs:
The Company's 9% share of costs to decommission the Nine
Mile 2 Plant, is estimated to be approximately $209.6 million
($72.6 million in 1995 dollars) and assumes that decommissioning
will begin in the year 2028. This estimate is based upon a site
specific study completed in December 1995.
The annual decommissioning allowance reflected in ratemaking
is based upon a 1989 study as filed with the Nuclear Regulatory
Commission (NRC). The 1989 study included amounts for
radioactive and non-radioactive dismantlement costs and is
charged to operations through depreciation recovery. The 1989
study estimated the Company's 9% share of costs of
decommissioning to be $118.5 million ($26.4 million in 1995
dollars). 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, 1995 amounted to $1.4 million. The external
decommissioning trust fund at December 31, 1995 and 1994 amounted
to $6.4 million and $4.5 million, respectively. The net earnings
from inception through December 31, 1995 amounted to $1.6
million. 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 $7.9
million and $5.7 million at December 31, 1995 and 1994,
respectively. NRC regulations require the direct funding of
eventual decommissioning costs of nuclear facilities. The
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Company, in 1990, established a master trust in order to comply
with these NRC requirements. The Company has estimated that its
share of the minimum funding requirements will be approximately
$38.8 million in 1995 dollars.
There is no assurance that the decommissioning allowance
recovered in rates will ultimately aggregate a sufficient amount
to decommission the unit.
Reference is made to the caption "New Accounting Standards -
Plant Decommissioning" in Note 1 above for details of the
proposed changes in accounting for nuclear decommissioning costs.
The Company believes that if decommissioning costs are
higher than currently estimated, such higher costs would 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, 1995 and 1994 of approximately
$630,000 and $664,000, 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 the Nine Mile 2 Plant.
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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:
1995 1994 1993
(Thousands of Dollars)
Charged to operating expense:
Federal income tax.......... $19,245 $18,190 $14,502
Deferred income tax......... 9,795 9,853 14,101
Income tax charged to
operating expense....... 29,040 28,043 28,603
Charged (credited) to other
income and deductions:
Federal income tax.......... (4,704) (4,354) (2,937)
Deferred income tax......... 4,351 3,117 1,492
Income tax charged
(credited) to other
income and deductions... (353) (1,237) (1,445)
Total federal income tax.. $28,687 $26,806 $27,158
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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:
1995 1994 1993
(Thousands of Dollars)
Net income.................... $52,722 $50,929 $50,390
Federal income tax............ 14,541 13,836 11,565
Deferred income tax........... 14,146 12,970 15,593
Income before taxes......... $81,409 $77,735 $77,548
Computed tax @ 35%
statutory rate............... $28,493 $27,207 $27,142
Increase (decrease) to computed
tax due to:
Tax depreciation............ (10,096) (9,597) (10,796)
Deferred finance charges -
Nine Mile 2 Plant.......... (1,701) (1,700) (862)
Deferred gas costs.......... 2,286 1,149 (844)
Deferred OPEB expense....... (223) 713 (1,617)
Pension expense............. (1,738) (1,471) (893)
Alternative minimum tax..... (2,958) (1,544) (59)
Other....................... 478 (921) (506)
Federal income tax............ 14,541 13,836 11,565
Deferred income tax........... 14,146 12,970 15,593
Total federal income tax.... $28,687 $26,806 $27,158
Effective tax rate........... 35.2% 34.5% 35.0%
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The following is a summary of the components of accumulated
deferred income taxes at December 31, 1995 and 1994, as reported
in the Consolidated Balance Sheet:
1995 1994
(Thousands of Dollars)
Accumulated Deferred Income
Tax Assets:
Future tax benefits on
investment tax credit basis
difference..................... $ 16,073 $ 16,829
Alternative minimum tax.......... 10,530 12,989
Tax depreciation - Nine Mile 2
Plant disallowed investment.... 3,077 6,155
Unbilled revenues................ 5,434 5,045
Other............................ 22,444 17,611
Accumulated Deferred Income Tax
Assets........................... $ 57,558 $ 58,629
Accumulated Deferred Income
Tax Liabilities:
Tax depreciation................. $172,033 $162,734
Accumulated deferred investment
tax credit..................... 29,850 31,254
Future revenues - recovery of
plant basis differences........ 22,971 24,269
Other............................ 22,045 20,327
Accumulated Deferred Income Tax
Liabilities...................... $246,899 $238,584
Net Accumulated Deferred Income
Tax Liability.................... $189,341 $179,955
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 $1.5
million with two regional banks. There were no outstanding loans
under these Agreements at December 31, 1995 or 1994. In order to
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diversify its sources of short-term financing, during 1994 the
Company entered into short-term credit facilities agreements with
four commercial banks totaling $130.0 million in the aggregate.
There was no outstanding short-term debt at December 31, 1995.
There was $3.0 million outstanding at December 31, 1994 related
to these credit facilities with a weighted average interest rate
of 6.69%.
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, 1993 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
Issued under dividend
reinvestment plan......... 218,610 1,093 4,897
Issued under customer stock
purchase plan............. 38,977 195 879
Redemption of preferred
stock..................... - - (39)
December 31, 1995 17,496,051 $ 87,480 $282,942
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Cumulative Preferred Stock, $100 par value; 1,200,000 shares
authorized:
Final Redemption Shares Outstanding
Redemption Price December 31,
Series Date 12/31/95 1995 1994
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% (a) 101.00 130,000 130,000
7.44% - 120,000
340,300 460,300
Subject to
Mandatory
Redemption:
6.20% 10/1/08 (b) 200,000 200,000
6.80% 10/1/27 (b) 150,000 150,000
350,000 350,000
Total 690,300 810,300
(a) Redeemed January 1, 1996 at a redemption price of $101.00 per
share.
(b) 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.
The Company optionally redeemed all of its outstanding 7.44%
Cumulative Preferred Stock, at the $101.22 redemption price on
October 1, 1995. Costs associated with this redemption were
charged directly to retained earnings.
The Company optionally redeemed all of its outstanding 7.72%
Cumulative Preferred Stock at the $101.00 redemption price on
January 1, 1996. Costs associated with this redemption will be
charged directly to retained earnings in 1996.
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
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by the PSC, certain issuance and redemption costs and unamortized
expenses associated with certain issues of preferred stock that
were redeemed 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, a
registration statement became effective in April, 1995 under
which the Company registered with the Securities and Exchange
Commission (SEC) the following securities: (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
public offering price of such Common Stock and (ii) Cumulative
Preferred Stock, not in excess of $25.0 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.
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NOTE 6 - CAPITALIZATION - LONG-TERM DEBT
Details of long-term debt are shown below:
December 31,
1995 1994
(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%(b) 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%(b) December 1, 2028 16,700 16,700
202,200 202,200
Promissory Notes:
1984 Series A (7 3/8%)(c) Oct. 1, 2014 16,700 16,700
1984 Series B (7 3/8%)(c) Oct. 1, 2014 16,700 16,700
1985 Series A (Var. rate)(c) Nov. 1, 2020 36,250 36,250
1985 Series B (Var. rate)(c) Nov. 1, 2020 36,000 36,000
1987 Series A (Var. rate)(c) June 1, 2027 33,700 33,700
1987 Series B (Var. rate)(c) June 1, 2027 9,900 9,900
5.38% (a) Jan. 15, 1999 20,000 20,000
7.85% (a) July 2, 2004 15,000 15,000
184,250 184,250
Secured Notes Payable of Subsidiary 3,688 3,878
Unamortized Discount on Debt (893) (964)
Total long-term debt $389,245 $389,364
(a) Issued under the Company's Medium Term Note Program.
(b) First Mortgage Bonds issued in connection with the sale by
the New York State Energy Research and Development Authority
(NYSERDA) of tax-exempt pollution control revenue bonds.
(c) Promissory Notes issued in connection with the sale by
NYSERDA of tax-exempt pollution control revenue bonds.
Medium Term Notes: 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
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to issue and sell not later than December 31, 1996, 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 presently outstanding.
NYSERDA: The NYSERDA Pollution Control Revenue Bonds issued
in 1985 (Series A and B) and 1987 (Series A and B) (collectively,
the "1985 and 1987 NYSERDA Bonds") 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 Bonds, to convert the Bonds of each
such series to a fixed rate for the remainder of their term. 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 1985 and 1987 NYSERDA Bonds. Deferred accounting has been
granted by the PSC for any variation between actual interest
rates and those interest rates allowed for rate-making purposes.
The deferred balance under such accounting at December 31, 1995
was a regulatory asset of $1.3 million and the deferred balance
under such accounting at December 31, 1994 was a regulatory
liability of $488,000. Such deferred balances are to be disposed
of in future rate cases.
Interest Rate Cap: In 1995, the Company entered into a
three-year interest rate cap agreement with a bank to manage
exposure to upward changes in interest rates on the 1985 and 1987
NYSERDA Bonds. Under this agreement, in the event a nationally
recognized tax-exempt bond interest rate index exceeds 8%, the
Company will receive a payment from such bank equal to the amount
by which the actual interest costs on such bonds exceeds 8% per
annum. This agreement has the effect of limiting the interest
rate the Company must pay on such bonds (on a $115.9 million
notional amount) to the lesser of their actual rate or 8% per
annum. In the event such bank failed to make any required
payment under such interest rate cap agreement, the Company's
exposure would be limited to a maximum interest rate of 15% per
annum under the terms of such bonds.
Letters of Credit: The Company has in place irrevocable
letters of credit which support certain payments required to be
made on the 1985 and 1987 NYSERDA Bonds. Such letters of credit
expire on various dates. The Company anticipates being able to
extend such letters of credit if the interest rate on the related
series of such bonds is not converted to a fixed interest rate.
If the Company were unable to extend the letter of credit that is
related to a particular series of such bonds, that series would
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have to be redeemed unless a fixed rate of interest became
effective. Payments made under the letters of credit in
connection with purchases of tendered 1985 and 1987 NYSERDA 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, 1998, and the
letter of credit expiration date for the letters of credit
supporting the 1987 NYSERDA Bonds is September 16, 1998. The
cost of these letters of credit is $584,400 for 1995.
Debt Expense: 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.
Debt Covenants: Certain debt agreements require the
maintenance by the Company of certain financial ratios and
contain other restrictive covenants.
Subsidiary Debt: 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.
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Net periodic pension costs were allocated 73%, 73% and 71%
to expense for the years 1995, 1994 and 1993, respectively, with
remaining costs allocated to capital projects. The allocation of
net periodic pension costs between capital and expense follows
the payroll distribution.
Net periodic pension (income) costs for 1995, 1994 and 1993
include the following components:
1995 1994 1993
(Thousands of Dollars)
Service cost - benefits earned
during the period........... $ 3,877 $ 5,876 $ 4,518
Interest cost on projected
benefit obligation.......... 14,449 13,256 13,148
Actual return on Retirement
Plan assets................. (38,849) (6,947) (34,022)
Net amortization and deferral 9,896 (14,213) 13,794
Net periodic pension
(income) costs........... $(10,627) $ (2,028) $ (2,562)
The net periodic pension income for 1995 and 1994 was
determined using a weighted average discount rate of 8.5% and
6.25%, respectively, and a rate of increase in future
compensation levels of 5.5% for 1995 and 1994. The expected
long-term rate of return on Retirement Plan assets used in
determining the net periodic pension (income) costs was 10.5% for
1995 and 8.5% for 1994.
The following table sets forth the Retirement Plan's funded
status at October 1, 1995 and 1994 and amounts recognized in the
Company's Consolidated Balance Sheet at December 31, 1995 and
1994:
1995 1994
(Thousands of Dollars)
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits
of $170,039 and $146,779............. $173,281 $148,854
Projected benefit obligation for
service rendered to date.............. $196,038 $171,713
Retirement Plan assets at market value. 250,246 223,376
Excess of Retirement Plan assets over
projected benefit obligation.......... 54,208 51,663
Unrecognized net gain.................. (52,846) (60,551)
Prior service cost not yet recognized
in net periodic pension cost.......... 3,531 3,789
Unrecognized net asset being amortized
over 15 years......................... (3,971) (4,606)
Pension asset (liability) recognized
in the Consolidated Balance Sheet..... $ 922 $ (9,705)
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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 1995 or 1994.
The actuarial present value of projected benefit obligations
for October 1, 1995 and 1994 was determined using a weighted
average discount rate of 7.5% and 8.5%, respectively, and an
assumed rate of increase in compensation of 4.5% and 5.5% for
1995 and 1994, respectively.
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 began amortizing each year's experienced gain or
loss over ten years.
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.
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Other Postretirement Benefits:
The Company provides certain health care and life insurance
benefits for retired employees through its postretirement benefit
plan (Benefit Plan). 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. 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.
Net periodic postretirement benefit cost for 1995 and 1994
includes the following components:
1995 1994
(Thousands of Dollars)
Service cost - benefits
attributed to the period....... $ 1,384 $ 2,392
Interest cost on accumulated
postretirement benefit
obligation..................... 4,613 4,654
Actual return on Benefit Plan
assets......................... (875) (426)
Amortization of Transition
Obligation..................... 3,114 3,114
Net amortization and deferral... (1,837) 928
Net periodic postretirement
benefit cost................... $ 6,399 $ 10,662
The Company is amortizing the unfunded accumulated
postretirement benefit obligation (Transition Obligation) at
January 1, 1993 over a 20-year period.
The net periodic postretirement benefit cost of the Benefit
Plan for 1995 and 1994 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
6.7% for 1995 and 6.6% for 1994.
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The Benefit Plan's funded status reconciled with the
Company's Consolidated Balance Sheet is as follows:
December 31,
1995 1994
(Thousands of Dollars)
Accumulated postretirement
benefit obligation:
Retirees...................... $(31,899) $(27,526)
Fully eligible employees...... (4,706) (4,537)
Other employees............... (31,495) (25,532)
(68,100) (57,595)
Benefit Plan assets at fair
value.......................... 22,899 14,051
Excess of accumulated post-
retirement benefit obligation
over Benefit Plan assets....... (45,201) (43,544)
Unrecognized net (gain) loss.... (8,922) (14,489)
Prior service cost not yet
recognized in net periodic
postretirement benefit cost.... (160) -
Unrecognized Transition
Obligation..................... 52,921 56,035
Postretirement benefit liability
recognized in the
Consolidated Balance Sheet..... $ (1,362) $ (1,998)
The accumulated postretirement benefit obligation under the
Benefit Plan at December 31, 1995 and 1994 was determined using a
weighted average discount rate of 7.5% and 8.5%, respectively and
a rate of increase in future compensation levels of 4.5% and 5.5%
for 1995 and 1994, respectively. The expected long-term rate of
return of Benefit Plan assets used in determining the net
periodic postretirement benefit cost was 6.7% for 1995 and 6.6%
for 1994.
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, 1995 and 1994 of $8.921 and $7.545
million, respectively and an increase in the aggregate service
and interest cost of the net periodic postretirement benefit cost
of $873,000 and $1.076 million for 1995 and 1994, respectively.
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
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<PAGE>
qualified Voluntary Employee Beneficiary Association (VEBA)
trusts. The Company funded the VEBA trusts in 1995 and 1994 with
tax-deductible contributions totaling $7.2 million and $8.3
million, respectively.
Pursuant to the 1993 Rate Order, an estimated annual level
of OPEB costs is included in the Company's electric and gas
rates, effective November 22, 1993. In the Pension and OPEB
Order, deferred accounting has been granted by the PSC for any
variation between actual OPEB costs and those allowed for rate-
making purposes. Such amounts are included in "Regulatory
liabilities" on the Consolidated Balance Sheet.
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 1996-2000.
Roseton Plant:
The Company is acting as agent for the cotenant owners with
respect to operation of the Roseton Plant. Generally, the owners
share the costs and expenses of the operation of the Roseton
Plant in accordance with their respective ownership interests.
The Company's share of direct operating expense for the Roseton
Plant is included in the appropriate expense classification in
the accompanying Consolidated Statement of Income.
The Company, under a 1968 Agreement (Basic Agreement), has
the option to purchase the interests of Niagara Mohawk (25%) and
of Consolidated Edison Company of New York, Inc. (Con Edison)
(40%) in the Roseton Plant in December 2004. The exercise of
this option is subject to PSC approval.
On March 30, 1994, Niagara Mohawk and the Company 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
period 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.
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<PAGE>
(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 bid competitively 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.
Entering into the agreements contemplated by the 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
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 $6.8
million (subject to adjustment for inflation) and the Company
could be assessed $339,800 (subject to adjustment for inflation)
in respect to an additional surcharge, but would be limited to a
maximum assessment of $900,000 in any year with respect to any
nuclear incident. The public liability insurance coverage of
$200 million required under the Price-Anderson Act for the Nine
Mile 2 Plant is provided through Niagara Mohawk.
The Company also carries insurance to cover the additional
costs of replacement power (under a Business Interruption and/or
Extra Expense Insurance Policy) incurred by the Company in the
event of a prolonged accidental outage of the Nine Mile 2 Plant.
This insurance arrangement provides for payments of up to
$233,200 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%
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<PAGE>
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.
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 10,497,708 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. With the exception of 20,000 Mcf. per
day of gas purchased from Canadian sources under contracts which
expire in January 2012, or approximately 30% of total gas
purchases, all of the above gas supply contracts will terminate
in 1996 after the 1995-1996 winter heating season and will be
replaced before the next winter heating season.
The Company has in aggregate, gas storage capability of
39,604 Mcf. per day, under long-term contracts. The Company has
a firm gas peaking service, under contract, for the supply of
9,804 Mcf. per day for 15 days during the period November 1-
March 31. This contract became effective November 1, 1995 and
will remain in effect through March 31, 1998.
In addition to the above, 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, 1996. 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 will require
the Company to pay a share of certain transition costs incurred
by the Pipelines as a result of Order 636.
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<PAGE>
The Company has been billed $3.4 million of transition costs
through December 31, 1995 by the Pipelines. Transition costs are
currently being recovered by the Company through its gas cost
adjustment clause. The aggregate amount that the Company will
ultimately be billed will depend on the outcome of FERC
proceedings, the outcome of which the Company is not able to
predict. Depending on the outcome of such proceedings, the
Company projects the aggregate amount of such transition costs
could range between $4.0 million and $6.0 million over the next
several years. The Company expects to continue to recover such
costs through its gas cost adjustment clause.
The Company received $2.765 million in gas supplier refunds
during 1995, 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.
In October 1988, the PSC 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.
On September 15, 1995, the Company submitted to the PSC a
Motion for Approval of a settlement agreement entered into
between the Company and PSC Staff which would allow for the
Company to recover through its rates approximately $3.0 million
of deferred take-or-pay costs, which amount will be reduced by an
associated $1.7 million including $200,000 of interest on take-
or-pay refunds received from various gas transmission companies
in 1994.
Such settlement agreement allows the Company to amortize and
recover in rates the supplier take-or-pay charges deferred as of
June 30, 1995 (an amount estimated to be, including interest,
$3.0 million as of December 31, 1995 ), together with interest
accrued on such deferral up to the dates rates reflecting such
amortization are made effective January 1996. Amortization
periods and specific rate recovery methods will vary, depending
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<PAGE>
on the type of customer. As of January 1996, the Company will
terminate the accrual of interest on the balances of deferred
costs to be amortized and shall not be entitled to accrue
additional interest on such deferred costs during the
amortization period. The settlement agreement also provides for
the recovery of take-or-pay charges incurred after July 1, 1995
on a current basis until the total of such charges (excluding
interest) equals $5.5 million. The settlement requires that only
65% of the costs above this amount be collected on a current
basis. The remaining 35% will be spread out and recovered over a
48-month period.
The PSC approved the Company's settlement agreement in
November 1995. The Company began to recover these take-or-pay
charges in January 1996.
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 Phase II "acid rain" emissions reduction requirements do
not apply to the Company's generating plants until January 1,
2000; however, the Company has elected to have the Roseton Plant
covered under the Phase I acid rain regulation 40 CFR Part 72
which went into effect in 1995. More specifically, the Roseton
Plant has been conditionally identified as a substitute for a
Phase I plant. Such a substitution, if implemented, results in
the Environmental Protection Agency (EPA) providing emissions
allowances to the Roseton Plant. Emission allowances that are
not needed for current year emissions may be held for use in
future years or sold. A decision by the Company to implement a
substitution plan must be made each year by December 1.
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<PAGE>
The Company's emissions of nitrogen oxides were subject to
additional controls effective May 31, 1995 under Title I of the
CAA Amendments. To comply with these requirements, the Company
installed nitrogen oxides emissions controls at a cost of $4.7
million for the Danskammer Plant and $3.7 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 reductions
required at the Company's facilities have 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: In May 1995, the
City of Newburgh, New York (City) filed suit against the Company
in the United States District Court for the Southern District of
New York. The City alleges that the Company has released certain
allegedly hazardous substances without a permit from the site of
the Company's former coal gasification plant (Central Hudson
Site) in Newburgh, New York into the ground at the Central Hudson
Site and into adjacent and nearby property of the city, in
violation of the federal Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), the federal Resource
Conservation and Recovery Act (RCRA) and the federal Emergency
Planning and Community Right to Know Act (EPCRA). The City also
alleges a number of nuisance, trespass, damage and
indemnification claims pursuant to New York State law.
The City seeks injunctive relief against such alleged
disposal, storage or release of hazardous substances at the
Central Hudson Site, remediation and abatement of the conditions
alleged to lead to endangerment of the City's property, payment
of restitution of clean-up costs and money damages of at least
$70 million, assessment of certain civil penalties under RCRA,
CERCLA and EPCRA, and recovery of the City's costs and attorneys'
fees in such action.
In its answer to the City's complaint, the Company denied
liability and asserted affirmative defenses and counterclaims
against the City. The Company also filed a third-party complaint
against "John Doe" defendants whose identities are presently
unknown but who may be responsible for some or all of the
contamination that is alleged to exist on the City's property.
In October 1995, the Company and the New York State
Department of Environmental Conservation (NYSDEC) entered into an
Order on Consent regarding the development and implementation of
an investigation and remediation program for the Central Hudson
Site and the City's adjacent and nearby property.
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<PAGE>
In November 1995, the Company and the City reached an
agreement in a Memorandum of Understanding to postpone until
August 1, 1996 any further action under the City's lawsuit
pending the results of the studies required under said Order on
Consent. The agreement also provides for the resumption of
settlement negotiations between the Company and the City. The
District Court has approved a schedule of proceedings consistent
with such Memorandum.
At this time, the Company can make no prediction as to the
outcome of this matter, nor can it make reasonable estimates of
the cost of the activities required under the Order on Consent.
However, the Company has put its insurance carriers on notice and
intends to pursue reimbursement from them. The Company cannot
predict the extent of reimbursement that will be available from
its carriers at this time.
By letter dated September 22, 1995, the Company has
petitioned the PSC for authorization to defer all costs including
legal defense costs, but excluding the Company's labor, related
to environmental site investigation and remediation actions that
were incurred by the Company in 1995 and thereafter in connection
with this matter. These expenses are not reasonably known or
estimable by the Company at this time, nor can the Company
predict at this time what action the PSC will take on such letter
petition. Such costs for 1995 amounted to $719,700 and were
included in "Deferred Charges-Other" on the Consolidated Balance
Sheet.
Asbestos Litigation:
Since 1987, the Company, along with many other parties, has
been joined as a defendant or third-party defendant in
approximately 740 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 155 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, 1996, the Company was a defendant in approximately 480
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
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<PAGE>
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
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 the 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. The Appeals Office of the IRS has not
yet rendered a decision on such Protest. 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.
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.
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 or results of operations.
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<PAGE>
Included in such proceedings are two lawsuits against the
Company arising from a November 1992 explosion in a dwelling in
Catskill, New York involving personal injuries, including the
death of an occupant, and property damage. 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.
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 $1.0
million in 1995 and $500,000 in 1994 toward the costs of such
training centers and replacement program. No shareholder
contribution will be required in 1996, however, under such
Agreement the Company's shareholders may be required to
contribute 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. The Company
believes these tasks will be completed by the specified dates
and, therefore, the Company's shareholders would have no further
contribution obligations under such Agreement.
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. Three lawsuits have arisen from the
Wappingers Falls incident. One of the lawsuits seeks recovery
from the Company of compensatory and punitive damages in the sum
of $1.0 million, one seeks recovery of $250,000 in compensatory
damages, and 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.
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<PAGE>
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
1995 80% 20% 90% 10%
1994 80% 20% 89% 11%
1993 82% 18% 89% 11%
For the year ended December 31, 1995, the Company served an
average of 261,876 electric and 59,895 gas customers. Of the
Company's total electric revenues during that period,
approximately 43% was derived from residential customers, 32%
from commercial customers, 18% from industrial customers and 7%
from other utilities and miscellaneous sources. Of the Company's
total gas revenues during that period, approximately 39% was
derived from residential customers, 29% from commercial
customers, 4% from industrial customers, 24% from interruptible
customers and 4% 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 10%
of the Company's total electric revenues and approximately 6% of
its total gas revenues for the year ended December 31, 1995.
Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for further
information regarding IBM.
Certain additional information regarding these segments is
set forth in the following table. General corporate expenses,
property common to both segments and depreciation of such common
property have been allocated to the segments in accordance with
practice established for regulatory purposes.
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<PAGE>
Electric
1995 1994 1993
(Thousands of Dollars)
Operating Revenues................ $409,445 $411,082 $422,925
Operating Expenses:
Fuel and purchased electricity... 113,263 111,984 122,250
Depreciation and amortization.... 37,503 36,597 35,625
Other, excluding income tax...... 168,313 172,057 173,167
Total......................... 319,079 320,638 331,042
Operating Income before Income Tax 90,366 90,444 91,883
Federal income tax, including
deferred income tax - net........ 26,632 25,334 25,642
Operating Income.................. $ 63,734 $ 65,110 $ 66,241
Construction Expenditures......... $ 41,195 $ 49,316 $ 43,097
Identifiable Assets at December 31*
Net utility plant................ $784,345 $776,169 $777,044
Construction work in progress.... 38,978 46,879 35,424
Total utility plant............ 823,323 823,048 812,468
Materials and supplies........... 23,167 27,080 28,063
Total.......................... $846,490 $850,128 $840,531
Gas
1995 1994 1993
(Thousands of Dollars)
Operating Revenues................ $102,770 $104,586 $ 94,448
Operating Expenses:
Purchased natural gas............ 62,339 60,588 53,900
Depreciation and amortization.... 3,964 3,783 4,057
Other, excluding income tax...... 26,899 29,483 25,210
Total......................... 93,202 93,854 83,167
Operating Income before Income Tax 9,568 10,732 11,281
Federal income tax, including
deferred income tax - net........ 2,408 2,709 2,961
Operating Income.................. $ 7,160 $ 8,023 $ 8,320
Construction Expenditures......... $ 9,074 $ 8,729 $ 10,940
Identifiable Assets at December 31*
Net utility plant................ $103,979 $ 96,652 $ 95,074
Construction work in progress.... 9,792 11,373 7,317
Total utility plant............ 113,771 108,025 102,391
Materials and supplies........... 4,423 6,309 7,354
Total.......................... $118,194 $114,334 $109,745
*Identifiable assets not included herein are considered to be
corporate assets and have not been allocated between the
electric and gas segments.
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<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.
The estimated fair values of the Company's financial
instruments are as follows:
December 31, 1995
Carrying Fair
Amount Value
(Thousands of Dollars)
Cash and temporary cash investments... $ 15,478 $ 15,478
Cumulative preferred stock subject
to mandatory redemption............. (35,000) (34,875)
Long-term debt (including
current maturities)................. (390,822) (411,299)
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)
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<PAGE>
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. During 1995, the Company
sold all of its investment in the stock of an insurance company
which the Company held as an "available-for-sale" investment.
The Company recognized net proceeds of $2.9 million on the stock
sold, which cost $775,000. This sale resulted in a gross
realized gain of $2.1 million which is recorded in the
Consolidated Statement of Income.
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.
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<PAGE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial data for each quarterly period within 1995 and 1994 are presented
below:
<CAPTION>
Earnings Per
Income Average
Available Share of
for Common
Operating Operating Common Stock
Revenues Income Stock Outstanding
(Thousands of Dollars) (Dollars)
Quarter Ended:
<S> <C> <C> <C> <C>
1995
March 31............ $144,686 $24,204 $18,273 $1.06
June 30............. 118,618 14,731 9,574 .55
September 30........ 127,547 18,817 12,260 .70
December 31......... 121,364 13,142 7,543 .43
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
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</TABLE>
</PAGE>
<PAGE>
EXHIBIT (3)(ii)
B Y - L A W S
OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
<PAGE>
TABLE OF CONTENTS
BY-LAWS OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Page
ARTICLE I. MEETING OF SHAREHOLDERS 1
Section 1. Place of Meeting 1
Section 2. Annual Meeting 1
Section 3. Special Meeting 1
Section 4. Notice of Meetings 1
Section 5. Quorum 2
Section 6. Inspectors 2
Section 7. Adjournment of Meetings 2
Section 8. Voting 3
Section 9. Record Date 3
ARTICLE II. BOARD OF DIRECTORS 3
Section 1. Number and Qualifications 3
Section 2. Election of Directors 3
Section 3. Term of Office 4
Section 4. Resignation and Removal 4
Section 5. Newly Created Directorships and
Vacancies 4
Section 6. Election of Directors by Holders
of Preferred Stock 4
Section 7. Regular Meetings 6
Section 8. Special Meetings 6
Section 9. Notice and Place of Meetings 6
Section 10. Business Transacted at Meetings 6
Section 11. Quorum and Manner of Acting 6
Section 12. Compensation 7
Section 13. Indemnification of Officers and
Directors 7
Section 14. Committees of the Board 7
ARTICLE III. EXECUTIVE COMMITTEE 8
Section 1. How Constituted and Powers 8
Section 2. Removal and Resignation 8
Section 3. Filling of Vacancies 8
Section 4. Quorum 8
Section 5. Record of Proceedings, etc. 8
Section 6. Organization, Meetings, etc. 9
Section 7. Compensation of Members 9
<PAGE>
Page
ARTICLE IV. OFFICERS 9
Section 1. Election 9
Section 2. Removal 9
Section 3. Resignation of Officers 9
Section 4. Filling of Vacancies 10
Section 5. Compensation 10
Section 6. Chairman of the Board of Directors
and Chief Executive Officer 10
Section 7. Vice Chairman of the Board of
Directors 10
Section 8. President and Chief Operating
Officer 10
Section 9. The Vice Presidents 10
Section 10. The Treasurer 11
Section 11. Controller 11
Section 12. The Secretary 11
Section 13. Other Officers 12
ARTICLE V. CONTRACTS, LOANS, BANK ACCOUNTS, ETC. 12
Section 1. Contracts, etc., How Executed 12
Section 2. Loans 13
Section 3. Checks, Drafts, etc. 13
Section 4. Deposits 13
Section 5. General and Special Bank Accounts 13
ARTICLE VI. CAPITAL STOCK 14
Section 1. Issue of Certificates of Stock 14
Section 2. Transfer of Stock 14
Section 3. Lost, Destroyed and Mutilated
Certificates 14
ARTICLE VII. DIVIDENDS, SURPLUS, ETC. 15
Section 1. General Discretion of Directors 15
ARTICLE VIII. MISCELLANEOUS PROVISIONS 15
Section 1. Fiscal Year 15
Section 2. Waiver of Notice 15
Section 3. Notices 16
Section 4. Examination of Books 16
Section 5. Gender 16
ARTICLE IX. AMENDMENTS 16
Section 1. Amendment by Directors 16
Section 2. Amendment by Shareholders 16
<PAGE>
B Y - L A W S
OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
___________________
ARTICLE I.
MEETINGS OF SHAREHOLDERS
SECTION 1. Place of Meeting. All meetings of the
shareholders shall be held at the principal office of the
Corporation in the City of Poughkeepsie, County of Dutchess,
State of New York, or at such other place or places in the State
of New York as may from time to time be fixed by the Board of
Directors.
SECTION 2. Annual Meeting. The Annual Meeting of the
shareholders, for the election of directors and the transaction
of such other business as may be brought before the meeting,
shall be held each year on the first Tuesday in April (or if said
day be a legal holiday, then on the next succeeding business
day), at such time of day as the directors may determine.
SECTION 3. Special Meetings. Special meetings of the
shareholders may be called by the Board of Directors or by the
Chairman of the Board of Directors or by the President, or by
shareholders together holding at least one third of the capital
stock of the Corporation entitled to vote or act with respect
thereto upon the business to be brought before such meeting.
SECTION 4. Notice of Meetings. Notice of any annual or
special meeting of the shareholders shall be in writing and shall
be signed by the Chairman of the Board of Directors or the
President or the Secretary or an Assistant Secretary. Such
notice shall state the purpose or purposes for which the meeting
is called and shall state the place, date and hour of the meeting
and, unless it is the annual meeting, indicate that it is being
issued by or at the direction of the person or persons calling
the meeting. A copy of the notice of any meeting shall be given,
personally or by first-class mail, not fewer than ten nor more
than fifty days before the date of the meeting, provided,
however, that a copy of such notice may be given by third-class
mail not fewer than twenty-four nor more than fifty days before
the date of the meeting, to each shareholder entitled to vote at
such meeting. If mailed, such notice is given when deposited in
the United States mail, with postage thereon prepaid, directed to
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the shareholder at his address as it appears on the record of
shareholders, or, if he shall have filed with the Secretary of
the Corporation a written request that notices to him be mailed
to some other address, then directed to him at such other
address. An affidavit of the Secretary of the Corporation or
other person giving the notice or of a transfer agent of the
Corporation that the notice required by this section has been
given shall be supplied at the meeting to which it relates.
SECTION 5. Quorum. Except as otherwise provided by
statute, the holders of a majority of the shares entitled to vote
thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a
specified item of business is required to be voted on by a class
or series, voting as a class, the holders of a majority of the
shares of such class or series shall constitute a quorum for the
transaction of such specified item of business.
SECTION 6. Inspectors. The person presiding at a
shareholders' meeting may, and on the request of any shareholder
entitled to vote thereat shall, appoint one or more inspectors.
Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according
to the best of his ability. The inspectors shall determine the
number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine questions arising in connection
with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all shareholders.
The inspectors shall make a report in writing of any matter
determined by them and execute a certificate of any fact found by
them.
SECTION 7. Adjournment of Meetings. Any meeting of
shareholders may be adjourned by a majority vote of the
shareholders present or represented by proxy despite the absence
of a quorum. When a meeting of shareholders is adjourned to
another time or place, it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which
the meeting is adjourned are announced at the meeting at which
the adjournment is taken, and at the adjourned meeting at which a
quorum shall be present, any business may be transacted, and any
corporate action may be taken, which might have been transacted
or taken if the meeting had been held as originally called.
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SECTION 8. Voting. Every shareholder of record shall be
entitled at every meeting of the shareholders to one vote for
every share of stock standing in his name on the record of
shareholders of the Corporation unless otherwise provided in the
Certificate of Incorporation and amendments thereto and except as
provided in Section 9 of this Article I. Every shareholder
entitled to vote at a meeting of shareholders may authorize
another person or persons to act for him by proxy. No proxy
shall be valid after the expiration of eleven months from the
date thereof unless otherwise provided in the proxy. A list of
shareholders as of the record date certified by the officer
responsible for its preparation or by a transfer agent shall be
available at every meeting of shareholders and shall be produced
upon the request of any shareholder, and all persons who appear
from such list to be shareholders entitled to vote thereat may
vote at such meeting.
SECTION 9. Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to
or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment
of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in
advance, a date as the record date for any such determination of
shareholders. Such date shall not be more than fifty nor less
than ten days before the day of such meeting, nor more than fifty
days prior to any other action.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 1. Number and Qualifications. The number of
directors constituting the entire Board shall be eleven. The
number of directors may be increased, or decreased to not less
than three nor more than 25, by amendment of the by-laws adopted
by vote of a majority of the entire Board of Directors.
Each director shall be at least 18 years of age. No person
who has reached age 70 shall stand for election as a director.
SECTION 2. Election of Directors. Except as otherwise
required by law or by the Certificate of Incorporation as
amended, and except as hereinafter otherwise provided by Sections
5 and 6 of this Article II, directors shall be elected by a
plurality of the votes cast at the annual meeting of shareholders
by the holders of shares entitled to vote at the election and
shall hold office until the next annual meeting of shareholders.
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SECTION 3. Term of Office. Each director shall, except as
hereinafter provided in Section 4 and in Section 6 of this
Article II, hold office until the expiration of the term for
which he is elected and until his successor has been elected and
qualified.
SECTION 4. Resignation and Removal. Any director may
resign at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Chairman of
the Board of Directors or the Secretary. The acceptance of a
resignation shall not be necessary to make it effective unless so
specified therein. Any director may at any time, with or without
cause, be removed by vote of the shareholders at a special
meeting called for that purpose. When, however, pursuant to the
provisions of the Certificate of Incorporation as amended, the
holders of the shares of any class or series, voting as a class,
have the right to elect one or more directors, such director or
directors so elected may be removed only by the applicable vote
of the holders of the shares of that class or series, voting as a
class.
SECTION 5. Newly Created Directorships and Vacancies.
Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board for any
reason, except the removal of directors without cause, and except
as provided for in Section 6 of this Article II, may be filled by
vote of a majority of the directors then in office, although less
than a quorum exists. A vacancy occurring in the Board by reason
of the removal of a director without cause, may be filled only by
vote of the shareholders, subject to the provisions of said
Section 6. A director elected to fill a vacancy shall be elected
to hold office for the unexpired term of his predecessor, and
until his successor is elected and qualified.
SECTION 6. Election of Directors by Holders of Preferred
Stock. Anything in the by-laws to the contrary notwithstanding:
In case dividends on any series of the serial preferred stock of
the Corporation at the rate or rates prescribed for such series
shall not have been paid in full for periods aggregating one year
or more, than, and until full cumulative dividends thereon shall
have been paid, the holders of each such series shall have the
right, together with holders of all other serial preferred stock
in respect to which the same right shall be conferred, to elect a
majority of the members of the Board of Directors of the
corporation. Whenever the holders of any series of serial
preferred stock shall become so entitled, either separately or
together with the holders of other serial preferred stock as
aforesaid, to elect a majority of the members of the Board of
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Directors, and upon the written request of the holders of record
of at least five percent of the total number of shares of serial
preferred stock then outstanding and entitled to such right of
election, addressed to the Secretary of the Corporation, a
special meeting of the holders of serial preferred stock entitled
to such right of election and the holders of Common Stock shall
be called for the purpose of electing directors. At such meeting
the holders of serial preferred stock and the holders of Common
Stock shall vote separately, and the holders of serial preferred
stock present in person or by proxy at such meeting shall be
entitled to elect, by a plurality of votes cast by them, a
majority of the members of a new Board of Directors of the
corporation, and the holders of Common Stock present in person or
by proxy shall be entitled to elect, by a plurality of votes cast
by them, the remainder of the new Board of Directors. The
persons so elected as directors shall thereupon constitute the
Board of Directors of the Corporation, and the terms of office of
the previous directors of the Corporation shall thereupon
terminate. The term "a majority of the members of Board of
Directors" as herein used shall mean one more than one half of
the total number of directors provided for by the by-laws,
regardless of the number then in office, and in case one half of
such number shall not be a whole number, such one half shall be
the next smaller whole number. In the event of any vacancy in
the Board of Directors among the directors elected by the holders
of serial preferred stock, such vacancy may be filled by the
other directors elected by them, and if not so filled may be
filled by the holders of serial preferred stock entitled to the
right of election as aforesaid at a special meeting of the
holders of said stock called for that purpose, and such a meeting
shall be called upon the written request of at least five percent
of the total number of shares of serial preferred stock then
outstanding and entitled to such right of election. If and when,
however, full cumulative dividends upon any series of the serial
preferred stock shall at any subsequent time be paid, then and
thereupon such power of the holders of such series of serial
preferred stock to vote in the election of a majority of the
members of the Board of Directors shall cease; subject, however,
to being again revived at any subsequent time if there shall
again be default in payment of dividends upon such series of
serial preferred stock for periods aggregating one year or more
as aforesaid. Whenever such power of the holders of all series
of serial preferred stock to vote shall cease, the proper officer
of the Corporation may and upon the written request of the
holders of record of five percent of the total number of shares
of Common Stock then outstanding shall call a special meeting of
the holders of Common Stock for the purpose of electing
directors. At any meeting so called, the holders of a majority
of the Common Stock then outstanding, present in person or by
proxy, shall be entitled to elect, by a plurality of votes, a new
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Board of Directors of the Corporation. The persons so elected as
directors shall thereupon constitute the Board of Directors of
the Corporation, and the terms of office of the previous
directors of the Corporation shall thereupon terminate.
SECTION 7. Regular Meetings. The directors shall hold a
regular annual meeting for the election of officers as soon as
practicable after the adjournment of the Annual Meeting of the
shareholders, and, in addition, regular meetings of the directors
shall be held at such times as the Board of Directors may by
resolution determine. No notice of the Annual Meeting shall be
required if held immediately after the Annual Meeting of the
shareholders and if a quorum is present.
SECTION 8. Special Meetings. Special meetings of the
directors may be called by the Chairman of the Board of Directors
or by the President or by any two directors at any time and must
be called by the Secretary on the written request of any two
directors.
SECTION 9. Notice and Place of Meetings. Regular meetings
shall be held at such place or places either within or without
the State of New York as the Board of Directors may from time to
time determine. Special meetings shall be held at such place or
places either within or without the State of New York as may be
specified in the respective notices of the meetings. Except as
provided in Section 7 of this Article II, notice of any regular
or special meeting of the directors shall be mailed to each
director addressed to him at his residence or usual place of
business at least two days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegraph,
or be delivered personally or by telephone, not later than the
day before the day on which the meeting is to be held.
SECTION 10. Business Transacted at Meetings. Any business
may be transacted and any corporate action taken at any regular
or special meeting of the directors whether stated in the notice
of the meeting or not.
SECTION 11. Quorum and Manner of Acting. Any five of the
directors in office at the time of any meeting of the Board shall
constitute a quorum and, except as by law otherwise provided, the
act of a majority of the directors present at any such meeting,
at which a quorum is present, shall be the act of the Board of
Directors. In the event it is necessary to obtain a quorum, and
only in such event, at the discretion of the presiding Board
member, any one or more members of the Board may be present and
participate in a meeting of the Board by means of a conference
telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the
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same time. Participation by such means shall constitute presence
in person at such meeting. In the absence of a quorum, the
directors present may adjourn the meeting from time to time until
a quorum be had. Notice of any adjourned meeting need not be
given other than by announcement at the meeting. The directors
shall act only as a Board and the individual directors shall have
no power as such.
SECTION 12. Compensation. The compensation of the
directors, other than employees of the Corporation, for services
as directors and as members of committees of the Board shall be
as fixed by the Board from time to time. Such directors shall
also be reimbursed for expenses incurred in attending meetings of
the Board and/or committees thereof.
SECTION 13. Indemnification of Officers and Directors. Any
person made, or threatened to be made a party to any action or
proceedings, whether civil or criminal, by reason of the fact
that he, his testator or intestate, is or was a director or
officer of the Board of Directors, or officer or employee of the
Corporation or serves or served any other corporation in any
capacity at the request of the Corporation, shall be indemnified
by the Corporation, and the Corporation may advance his related
expenses, to the full extent authorized or permitted by law. The
Corporation may enter into indemnification agreements with such
directors and officers, as the Chairman of the Board and/or
President shall authorize, to the full extent authorized or
permitted by law.
SECTION 14. Committees of the Board. The Board, by
resolution adopted by a majority of the entire Board, may
designate from among its members, in addition to the Executive
Committee provided for in Article III of these By-Laws,
committees of the Board, each consisting of three or more
directors, and each of which shall have the powers and duties
prescribed in the resolution designating such committees.
Anything in these By-Laws or in the resolution designating such
committees to the contrary notwithstanding, in the event it is
necessary to obtain a quorum, and only in such event, at the
discretion of the presiding committee member, any one or more
members of any committee of the Board of Directors may
participate in any meeting of such committee by means of a
conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at such meeting.
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ARTICLE III.
EXECUTIVE COMMITTEE
SECTION 1. How Constituted and Powers. The Board of
Directors, by resolution adopted by a majority of the entire
Board, may designate two or more of the directors, together with
the Chairman of the Board of Directors, and the President, to
constitute an Executive Committee, to serve at the pleasure of
the Board, which Committee shall during the intervals between
meetings of the Board of Directors, unless limited by the
resolution appointing such Committee, have authority to exercise
all or any of the powers of the Board of Directors in the
management of the affairs of the Corporation, insofar as such
powers may lawfully be delegated. The Board may designate one or
more directors as alternate members of such Committee, who may
replace any absent member or members at any meeting of such
Committee.
SECTION 2. Removal and Resignation. Any member of the
Executive Committee, except a member ex officio, may be removed
at any time with or without cause, by resolution adopted by a
majority of the entire Board. Any member of the Executive
Committee may resign at any time. Such resignation shall be in
writing and shall take effect at the time specified therein, or,
if no time be specified, at the time of its receipt by the
Chairman of the Board of Directors or the President or Secretary.
The acceptance of a resignation shall not be necessary to make it
effective unless so specified therein. Any person ceasing to be
a director shall ipso facto cease to be a member of the Executive
Committee.
SECTION 3. Filling of Vacancies. Any vacancy among the
members of the Executive Committee occurring from any cause
whatsoever may be filled from among the directors by a majority
of the entire Board of Directors.
SECTION 4. Quorum. A majority of the members of the
Executive Committee shall constitute a quorum. The act of a
majority of the members of the Executive Committee present at any
meeting at which a quorum is present shall be the act of the
Executive Committee. The members of the Executive Committee
shall act only as a committee and the individual members thereof
shall have no powers as such.
SECTION 5. Record of Proceedings, etc. The Executive
Committee shall keep a record of its acts and proceedings and
shall report the same to the Board of Directors when and as
required.
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SECTION 6. Organization, Meetings, etc. The Executive
Committee shall make such rules as it may deem expedient for the
regulation and carrying on of its meetings and proceedings.
SECTION 7. Compensation of Members. The members of the
Executive Committee shall be entitled to such compensation as may
be allowed them by resolution of the Board of Directors.
ARTICLE IV.
OFFICERS
SECTION 1. Election. The Board of Directors, at its
regular annual meeting, shall elect or appoint from their number
a Chairman of the Board of Directors and the Chairmen of
Committees of the Board and may elect or appoint a vice chairman
of the Board of Directors and vice chairmen of Committees of the
Board, which officers shall be officers of the Board; and it
shall elect or appoint a President, one or more Vice Presidents,
a Secretary, a Treasurer, and a Controller which officers shall
be officers of the Corporation. Each of said officers, subject
to the provisions of Sections 2 and 3 of this Article, shall hold
office, if elected, until the meeting of the Board following the
next Annual Meeting of shareholders and until his successor has
been elected and qualified, or, if appointed, for the term
specified in the resolution appointing him and until his
successor has been elected or appointed. Any two or more offices
may be held by the same person, except the offices of President
and Secretary. Should any of the officers of the Board or the
President cease to be a director, he shall ipso facto cease to be
such officer.
SECTION 2. Removal. Any officer may be removed summarily
with or without cause at any time by resolution of the Board of
Directors, or, except in the case of any officer elected by the
Board of Directors, by any committee or officer upon whom such
power of removal may be conferred by the Board of Directors,
without prejudice, however, to any rights which any such person
may have by contract.
SECTION 3. Resignation of Officers. Any officer may resign
at any time by giving written notice of such resignation to the
Board of Directors, its Chairman, the President or Secretary of
the Corporation. Such resignation shall take effect at the time
specified therein, or, if no time be specified, at the time of
its receipt by the Board of Directors or one of the above-named
officers of the Corporation. The acceptance of a resignation
shall not be necessary to make it effective unless so specified
therein.
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SECTION 4. Filling of Vacancies. A vacancy in any office,
from whatever cause arising, shall be filled for the unexpired
portion of the
term in the manner provided in these by-laws for the regular
election or appointment of such officer.
SECTION 5. Compensation. The compensation of the officers
shall be fixed by the Board of Directors or by any committee or
superior officer upon whom power in that regard may be conferred
by the Board of Directors.
SECTION 6. Chairman of the Board of Directors and Chief
Executive Officer. The Chairman of the Board of Directors shall,
when present, preside at all meetings of the shareholders and the
Board of Directors. He shall be Chairman of the Executive
Committee. He shall be responsible for direction of the policy
of the Board of Directors and shall have the power and perform
the duties necessary to implement such responsibility. He shall
be the Chief Executive Officer of the Corporation and shall have
the power and perform the duties usually appertaining to the
chief executive of a corporation.
SECTION 7. Vice Chairman of the Board of Directors. In the
absence of the Chairman of the Board of Directors, the Vice
Chairman shall, when present, preside at all meetings of the
shareholders and the Board of Directors. He shall have such
powers and perform such duties as the Chairman of the Board of
Directors shall delegate to him.
SECTION 8. President and Chief Operating Officer. The
President shall, subject to the authority of the Chairman of the
Board of Directors, have the power and perform the duties usually
appertaining to the president of a corporation, and such power
and duties as the Chairman of the Board of Directors shall assign
to him. He shall be a member of the Board of Directors and of
the Executive Committee. He shall be the Chief Operating Officer
of the Corporation and shall have the power and perform the
duties usually appertaining to the chief operating officer of a
corporation.
SECTION 9. The Vice Presidents. The Vice Presidents shall
have such duties as may from time to time be assigned to them by
the Board of Directors or the President, or by the Chairman of
the Board in the President's absence. When performing the duties
of the President, they shall have all the powers of, and be
subject to all the restrictions upon, the President.
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SECTION 10. The Treasurer. The Treasurer shall:
(a) Except as otherwise ordered by the Board, have charge
and custody of, and be responsible for all funds, securities,
receipts and disbursements of the Corporation and shall deposit,
or cause to be deposited, all money and other valuable effects in
its name in such banks, trust companies or other depositaries as
shall be selected in accordance with these by-laws;
(b) Receive and give receipts for payments made to the
Corporation and take and preserve proper receipts for all monies
disbursed by it;
(c) In general, perform such duties as are incident to the
office of Treasurer, or as may be from time to time assigned to
him by the Board of Directors, the Chairman of the Board or the
President, or as may be prescribed by law or by these by-laws.
The Treasurer shall give to the Corporation a bond if, and
in such sum as, required by the Board of Directors, conditioned
for the faithful performance of the duties of his office and the
restoration to the Corporation at the expiration of his term of
office, or in case of his death, resignation or removal from
office, of all books, papers, vouchers, money or other property
of whatever kind, in his possession belonging to the Corporation.
SECTION 11. Controller. The Controller shall:
(a) Keep at the office of the Corporation correct books of
account of all its business and transactions, subject to the
supervision and control of the President and Treasurer;
(b) Exhibit at all reasonable times his books of accounts
and records to any of the directors upon application during
business hours at the office of the Corporation where such books
and records are kept;
(c) Render a full statement of the financial condition of
the Corporation whenever requested so to do by the Board of
Directors, the Chairman of the Board or the President; and
(d) In general, perform such duties as may be from time to
time assigned to him by the Board of Directors, the Chairman of
the Board or the President.
SECTION 12. The Secretary. The Secretary shall:
(a) Keep the minutes of the meetings of the shareholders,
Board of Directors and Executive Committee in books provided for
the purpose;
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(b) See that all notices are duly given in accordance with
the provisions of these by-laws or as required by law;
(c) Be custodian of the seal of the Corporation and see that
it or a facsimile thereof is affixed to all stock certificates
prior to their issue, and that it is affixed to all documents the
execution of which under the seal of the Corporation is duly
authorized or which require that the seal be affixed thereto;
(d) Have charge of the stock certificate books of the
Corporation and keep, or cause to be kept, at the office of the
Corporation or at the office of its transfer agent or registrar,
a record of shareholders of the Corporation, containing the names
and addresses of all shareholders, the number and class of shares
held by each and the dates when they respectively became the
owners of record thereof; and
(e) In general, perform such duties as are incident to the
office of Secretary, or as may be from time to time assigned to
him by the Board of Directors, the Chairman of the Board or the
President, or as are prescribed by law or by these by-laws.
SECTION 13. Other Officers. Other officers, including one
or more additional Vice Presidents, may from time to time be
appointed by the Board of Directors or by any officer or
committee upon whom a power of appointment may be conferred by
the Board of Directors, which other officers shall have such
powers and perform such duties as may be assigned to them by the
Board of Directors, the Chairman of the Board or the President
and shall hold office for such terms as may be designated by the
Board of Directors or the officer or committee appointing them.
ARTICLE V.
CONTRACTS, LOANS, BANK ACCOUNTS, ETC.
SECTION 1. Contracts, etc., How Executed. The Board of
Directors, except as in these by-laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into
any contract or execute and deliver any instrument in the name of
and on behalf of the Corporation, and such authority may be
general or confined to specific instances, and, unless so
authorized by the Board of Directors, no officer or agent or
employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its
credits or to render it liable pecuniarily for any purpose or to
any amount.
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SECTION 2. Loans. No loans shall be contracted on behalf
of the Corporation and no negotiable paper shall be issued in its
name, unless authorized by the vote of the Board of Directors.
When so authorized, any officer or agent of the Corporation may
effect loans and advances for the Corporation from any bank,
trust company or other institution, or from any firm, corporation
or individual and for such loans and advances may make, execute
and deliver promissory notes, bonds or other evidences of
indebtedness of the corporation. When so authorized any officer
or agent of the Corporation, as security for the payment of any
and all loans, advances, indebtedness and liabilities of the
Corporation, may pledge, hypothecate or transfer any and all
stocks, securities and other personal property at any time held
by the Corporation, and to that end endorse, assign and deliver
the same. Such authority may be general or confined to specific
instances. The Board of Directors may authorize any mortgage or
pledge of, or the creation of a security interest in, all or any
part of the corporate property, or any interest therein, wherever
situated.
SECTION 3. Checks, Drafts, etc. All checks, drafts or
other orders for the payment of money, notes or other evidence of
indebtedness issued in the name of the Corporation shall be
signed by the Treasurer or such other officer
or officers, agent or agents of the Corporation and in such
manner as shall from time to time be determined by resolution of
the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation shall be
deposited from time to time to its credit in such banks, trust
companies or other depositaries as the Board of Directors may
select, or as may be selected by an officer or officers, agent or
agents of the Corporation to whom such power, from time to time,
may be delegated by the Board of Directors and, for the purpose
of such deposit, checks, drafts and other orders for the payment
of money which are payable to the order of the Corporation may be
endorsed, assigned and delivered by the President or a Vice
President, or the Treasurer or the Secretary, or by any officer,
agent or employee of the Corporation to whom any of said
officers, or the Board of Directors, by resolution, shall have
delegated such power.
SECTION 5. General and Special Bank Accounts. The Board of
Directors may from time to time authorize the opening and keeping
of general and special bank accounts with such banks, trust
companies or other depositaries as the Board may select and may
make such special rules and regulations with respect thereto, as
it may deem expedient.
13
<PAGE>
ARTICLE VI.
CAPITAL STOCK
SECTION 1. Issue of Certificates of Stock. Certificates
for shares of the capital stock of the Corporation shall be in
such form as shall be approved by the Board of Directors. They
shall be numbered, as nearly as may be, in the order of their
issue and shall be signed by the Chairman of the Board of
Directors or by the President or a Vice President, and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and sealed with the seal of the Corporation
or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles if the certificate is countersigned
by a transfer agent or registered by a registrar other than the
Corporation itself or its employee.
SECTION 2. Transfer of Stock. Shares of the capital stock
of the Corporation shall be transferable by the holder thereof in
person or by duly authorized attorney upon surrender of the
certificate or certificates for such shares properly endorsed.
Every certificate of stock exchanged or returned to the
Corporation shall be appropriately cancelled. A person in whose
name shares of stock stand on the books of the Corporation shall
be deemed the owner thereof as regards the Corporation. The
Board of Directors may make such other and further rules and
regulations as they may deem necessary or proper concerning the
issue, transfer and registration of stock certificates.
SECTION 3. Lost, Destroyed and Mutilated Certificates. The
holder of any stock of the Corporation shall immediately notify
the corporation of any loss, destruction or mutilation of the
certificates therefor. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore
issued by it alleged to have been lost or destroyed, and the
Board of Directors may, in its discretion, require the owner of
the lost or destroyed certificate or his legal representatives to
give the Corporation a bond in such sum and with such surety or
sureties, as they may require to indemnify the Corporation, and
any registrar or transfer agent of its stock, against any claim
that may be made against it by reason of the issue of such new
certificate and against all other liability in the premises.
14
<PAGE>
ARTICLE VII.
DIVIDENDS, SURPLUS, ETC.
SECTION 1. General Discretion of Directors. The Board of
Directors shall have the power from time to time to fix and
determine and to vary the amount of working capital of the
Corporation, to determine whether any and, if any, what dividends
shall be declared and paid to the shareholders, to fix the date
or dates for the payment of dividends, and to fix a time, not
exceeding 50 days preceding the date fixed for the payment of any
dividend, as a date for the determination of shareholders
entitled to receive payment of such dividend. When any dividend
is paid or any other distribution is made, in whole or in part,
from sources other than earned surplus, it shall be accompanied
by a written notice (1) disclosing the amounts by which such
dividend or distribution affects stated capital, surplus and
earned surplus, or (2) if such amounts are not determinable at
the time of such notice, disclosing the approximate effect of
such dividend or distribution as aforesaid and stating that such
amounts are not yet determinable.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the Corporation
shall be the calendar year.
SECTION 2. Waiver of Notice. Notice of meeting need not be
given to any shareholder who submits a signed waiver of notice,
in person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of
notice by him. Notice of a meeting need not be given to any
director who submits a signed waiver of notice whether before or
after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to him.
Whenever the Corporation or the Board of Directors or any
committee thereof is authorized to take any action after notice
to any person or persons or after the lapse of a prescribed
period of time, such action may be taken without notice and
without the lapse of such period of time, if at any time before
or after such action is completed the person or persons entitled
to such notice or entitled to participate in the action to be
taken or, in the case of a shareholder, by his attorney-in-fact,
submit a signed waiver of notice of such requirements.
15
<PAGE>
SECTION 3. Notices. Whenever by the by-laws any written
notice is required to be given to any shareholder, director or
officer, the same may be given, unless otherwise required by law
and except as hereinbefore otherwise expressly provided, by
delivering it personally to him or by mailing or telegraphing it
to him at his last known post office address. Where a notice is
mailed or telegraphed, it shall be deemed to have been given at
the time it is mailed or telegraphed.
SECTION 4. Examination of Books. The Board of Directors
shall, subject to the laws of the State of New York have power to
determine from time to time, whether, to what extent, and under
what conditions and regulations the accounts and books of the
Corporation or any of them shall be open to the inspection of the
shareholders, and no shareholder shall have any right to inspect
any account book or document of the Corporation except as
conferred by the laws of the State of New York unless and until
authorized so to do by resolution of the Board of Directors or
shareholders of the Corporation.
SECTION 5. Gender. Words used in these by-laws importing
the male gender shall be construed to include the female gender,
wherever appropriate.
ARTICLE IX.
AMENDMENTS
SECTION 1. Amendment by Directors. The Board of Directors
shall have the power without the assent or vote of the
shareholders to adopt by-laws, and except as hereinafter provided
in Section 2 of this Article, and subject to such limitations as
may be imposed by law, to rescind, alter, amend or repeal by a
vote of a majority of the whole Board any of the by-laws, whether
adopted by the Board or by the shareholders.
SECTION 2. Amendment by Shareholders. The shareholders
shall have power to rescind, alter, amend or repeal any by-laws
and to adopt by-laws which, if so expressed, may not be
rescinded, altered, amended or repealed by the Board of
Directors.
16
<PAGE>
I, Ellen Ahearn, Secretary of Central Hudson Gas & Electric
Corporation, do hereby certify that the foregoing is a full, true
and correct copy of the by-laws of said Corporation as in effect
at the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand as Secretary
of said Corporation and hereunto affixed its corporate seal this
17th day of November, 1995.
Ellen Ahearn
Secretary
11/17/95
</PAGE>
<PAGE> EXHIBIT (10)(iii) 21
AMENDED AND RESTATED
EXECUTIVE INCENTIVE COMPENSATION PLAN
OF THE
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
WHEREAS, Central Hudson Gas & Electric Corporation
("Company") established, effective January 1, 1993, an Executive
Incentive Compensation Plan ("Plan");
WHEREAS, such Plan is applicable only to the Chairman
of the Board and Chief Executive Officer;
WHEREAS, the Board of Directors also proposes to make
the Plan applicable to the President and Chief Operating Officer;
WHEREAS, the Board of Directors proposes to make
certain other technical amendments to the Plan;
NOW, THEREFORE, the Plan is hereby amended and
restated, effective January 1, 1995, and, as amended is hereby
restated in its entirety as set forth in the attached Exhibit A.
IN WITNESS WHEREOF, the undersigned Chairman of the
Board and Chief Executive Officer of Central Hudson Gas &
Electric Corporation has signed this instrument this day of
April, 1995 as duly authorized by resolution of the Board of
Directors.
JOHN E. MACK, III
Chairman of the Board and
Chief Executive Officer
<PAGE>
AMENDED AND RESTATED
EXECUTIVE INCENTIVE COMPENSATION PLAN
OF THE
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
ARTICLE I. DEFINITIONS
1.01 "Company" shall mean Central Hudson Gas &
Electric Corporation.
1.02 "Plan" shall mean the Central Hudson Gas &
Electric Corporation Executive Incentive Compensation Plan,
originally effective January 1, 1993, and as last amended
effective January 1, 1995.
1.03 "Participant" shall mean the Chairman of the
Board and Chief Executive Officer and/or the President and Chief
Operating Officer of the Central Hudson Gas & Electric
Corporation.
1.04 "Compensation" shall mean the annual base rate
of renumeration in effect for the Participant, including any
deferrals under any Company plan or arrangement with the Company
which defers recognition of income under the Internal Revenue
Code of 1986, as amended. The amount of such Compensation
generally will be determined at the Annual Meeting of the Board
of Directors and will be effective as of April 1 of the year of
such meeting.
1.05 "Measurement period" shall mean each calendar
year.
1.06 "Incentive compensation" shall mean the amount
of renumeration earned by the Participant and shall be based on
the percentage earned in each category described and multiplied
by the Participant's Compensation in effect at the time of the
determination of the incentive compensation.
ARTICLE II. APPLICABILITY
2.01 This Plan shall be applicable to the Chairman of
the Board and Chief Executive Officer and benefits under the Plan
for such Participant shall be determined pursuant to the
provisions of Article III of the Plan.
2.02 This Plan shall be applicable to the President and
Chief Operating Officer and benefits under the Plan for such
Participant shall be determined pursuant to the provisions of
Article IV of the Plan.
ARTICLE III. BENEFITS - CHARIMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
3.01 Benefits to Participant. The Participant will be
entitled to earn up to an additional 10% of the Participant's
Compensation, for each calendar year completed, provided that the
Company achieves certain results in the categories as specified
below:
I. Shareholder Value
The Participant shall earn up to 4% of
Compensation if the Company's total shareholder
return on its Common Stock outperforms the
Company-selected peer comparison Index ("Index"),
as shown in the Company's annual Proxy Statement.
The following table sets forth the incentive that
can be earned by such outperformance, as a
percentage of Compensation:
Minimum Amount By Which
Incentive Company Must Outperform
Earned the Index
4% 10.0%
3% 7.5%
2% 5.0%
1% 2.5%
II. Customer Electric and Gas Prices
The Participant shall earn up to 3% of
Compensation as follows:
1) Up to 2.7% of Compensation shall be earned if
the Company's residential electric price per
kilowatt hour ("kwh"), including fuel and
taxes, is lower than the average of the price
per kwh of the six other New York State
electric and gas utilities as of the first
day of the year subsequent to the measurement
period.
2) .3% of Compensation shall be earned if the
Company's typical residential gas prices as
of the first day of the year subsequent to
the measurement period are lower than the
average of Regional No. 2 fuel oil prices
during the measurement period.
The following table sets forth the amount of
incentive that can be earned with regard to
residential electric prices, as a percentage of
Compensation:
Level of the Company's
Typical Residential Electric
Prices Below New York
Amount of Incentive State Average
2.7% 7.5%
1.8% 5.0%
0.9% 2.5%
III. Employee Safety
The Participant shall earn 2% of Compensation if
the Company has achieved a severity rate during
the measurement period which is less than the
Company's average of such rates during the
previous five years. The severity rate is an
index of employee lost-time days for work-related
employee injuries and illnesses.
IV. Community Involvement
The Participant shall earn 1% of Compensation if,
based solely upon the judgment of the outside
members of the Board of Directors, the Company has
performed satisfactorily, during the measurement
period, its leadership role in the community
through a dedication to community activities.
The Company's involvement in such community
activities during the measurement period will be
described in a report prepared by the Corporate
Secretary.
<PAGE>
ARTICLE IV. BENEFITS - PRESIDENT AND CHIEF
OPERATING OFFICER
4.01 Benefits to Participant. The Participant will be
entitled to earn up to an additional 10% of the Participant's
Compensation, for each calendar year completed, provided that the
Company achieves certain results in the categories as specified
below:
I. Shareholder Value
The Participant shall earn up to 2% of
Compensation if the Company's total shareholder
return on its Common Stock outperforms the
Company-selected peer comparison index ("Index"),
as shown in the Company's annual Proxy Statement.
The following table sets forth the incentive that
can be earned by such outperformance, as a
percentage of Compensation:
Minimum Amount By Which
Incentive Company Must Outperform
Earned the Index
2.0% 10.0%
1.5% 7.5%
1.0% 5.0%
0.5% 2.5%
II. Customer Electric and Gas Prices and Reliability
The Participant shall earn up to 4% of
Compensation as follows:
A. Customer Electric and Gas Prices:
The Participant shall earn up to 2% of
Compensation as follows:
1) Up to 1.8% of Compensation shall be
earned if the Company's residential
electric price per kilowatt hour
("kwh"), including fuel and taxes, is
lower than the average of the price per
kwh of the six other New York State
electric and gas utilities as of the
first day of the year subsequent to the
measurement period.
2) .2% of Compensation shall be earned if
the Company's typical residential gas
prices as of the first day of the year
subsequent to the measurement period are
lower than the average of Regional No. 2
fuel oil prices during the measurement
period.
The following table sets forth the amount of
incentive that can be earned with regard to
residential electric prices, as a percentage
of Compensation:
Level of the Company's
Typical Residential Electric
Prices Below New York
Amount of Incentive State Average
1.8% 7.5%
1.2% 5.0%
0.6% 2.5%
B. Reliability
The Participant shall earn up to 2% of
Compensation if the Company has achieved
equivalent customer minutes which are less
than the Company's average of such minutes
during the previous five years. The
equivalent customer minutes is a measure of
the average time that each of the Company's
customers is without electric service, and
for the purposes of this Plan, shall be
calculated without consideration of the
impact of weather-related storms.
III. Employee Safety
The Participant shall earn 3% of Compensation as
follows:
A. Severity
The Participant shall earn 1% of Compensation
if the Company has achieved a severity rate
during the measurement period which is less
than the Company's average of such rates
during the previous five years. The severity
rate is an index of employee lost-time days
for work-related employee injuries and
illnesses.
B. Frequency
The Participant shall earn 2% of Compensation
if the Company has achieved a recorded
frequency rate during the measurement period
which is less than the Company's average of
such rate during the previous five years.
The recorded frequency rate is an index of
the number of recordable cases of work-
related employee injuries and illnesses.
IV. Community Involvement
The Participant shall earn 1% of Compensation if,
based solely upon the judgment of the outside
members of the Board of Directors, the Company has
performed satisfactorily, during the measurement
period, its leadership role in the community
through a dedication to community activities.
The Company's involvement in such community
activities during the measurement period will be
described in a report prepared by the Corporate
Secretary.
ARTICLE V. BENEFIT PAYMENTS
5.01 Determination of Incentive Award. A
determination as to whether the Participant has earned an
incentive compensation award will be made by the outside members
of the Board of Directors within 90 days after the completion of
the measurement period.
5.02 Audit of Incentive Award. Prior to the payment
of such incentive award, the Company's Internal Auditing Division
shall audit the calculation of such incentive award and shall
attest to the accuracy of such incentive award.
5.03 Payment of Incentive Award. Payment of such
incentive award, in the form of a lump sum cash payment, will be
made within 30 days of the determination of the award.
</PAGE>
<PAGE> EXHIBIT (10)(iii) 22
STOCK PLAN
FOR OUTSIDE DIRECTORS OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Central Hudson Gas & Electric Corporation
("Corporation") has established a stock plan for eligible members
of its Board of Directors in recognition of their past and future
services. The loyalty and dedicated service of "outside"
directors is essential to the growth and progress of any
publicly-held company. Therefore, such plan is intended to
better enable the Corporation to attract and retain qualified
outside directors until they reach the mandatory retirement age
of 70 for all directors. The following shall constitute the
terms and conditions of the Corporation's Stock Plan for Outside
Directors:
SECTION 1. DEFINITIONS
1.1 "Account" means the account referred to in Section
4.1 hereof.
1.2 "Plan" means the Central Hudson Gas & Electric
Corporation Stock Plan for Outside Directors as described in this
instrument, and as it from time to time may be amended, which is
intended to be unfunded for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974.
1.3 "Committee" means the Committee referred to in
Section 7.1.
1.4 "Corporation" means Central Hudson Gas & Electric
Corporation (or any successor corporation).
1.5 "Director" means a person duly elected and serving
as a member of the Corporation's Board of Directors who is also
not an employee of the Corporation or any of its affiliates.
1.6 "Fiscal Year" means the fiscal year of the
Corporation as established from time to time.
1.7 "Participant" means each Director who participates
in the Plan in accordance with the terms and conditions of the
Plan.
1.8 "Share Equivalent" means a unit of participation
in the Plan, equivalent to one share of Common Stock, credited to
a Participant pursuant to Section 3.1.
1.9 "Common Stock" shall mean the common stock of the
Corporation, $5.00 par value.
<PAGE>
SECTION 2. ELIGIBILITY AND PARTICIPATION
2.1 Each Director is a Participant.
SECTION 3. CREDITED SHARE EQUIVALENTS
3.1 (a) As additional compensation for services
rendered, each Participant shall be credited with 25 Share
Equivalents for each full quarterly period of a Fiscal Year
during which such Participant served as a Director. Such credits
shall be made as of the end of each quarterly period (commencing
with the first quarterly period ending in March 1996) during
which the Participant served as a Director of the Corporation.
(b) As additional compensation for services
rendered, each Participant upon ceasing to serve as a member of
the Corporation's Board of Directors (except for any such member
whose service is terminated for cause) shall also be entitled to
receive 25 Share Equivalents for each full quarterly period of a
Fiscal Year (but not for more than 40 quarters) during which such
Participant served as an Outside Director, including periods
prior to January 1, 1996. Such entitlement shall be implemented
by crediting such Participant's Account with 25 Share Equivalents
as of the end of each full quarterly period of a Fiscal Year
commencing with the first such period after such Participant's
cessation. Such entitlement shall be personal to such
Participant and shall not survive such Participant's death,
except for Share Equivalents credited to such participant's
Account prior to death.
(c) Such credited Share Equivalents shall be
treated as deferred compensation to be distributed as provided in
Section 5.
SECTION 4. DEFERRED COMPENSATION ACCOUNT
4.1 A deferred compensation account (herein referred
to as the "Account") shall be established for each Participant,
consisting of Share Equivalents credited pursuant to Section 3.1.
4.2 Upon the occurrence of any event affecting the
outstanding Common Stock, including any stock dividend,
extraordinary non-cash dividend, forward or reverse stock split,
recapitalization, reclassification of shares of Common Stock,
merger, consolidation or sale by the Corporation of all or a
substantial portion of its assets, tender offer for its
securities, or other event which could distort the implementation
of the Plan or the realization of its objectives, the Committee
shall make such appropriate adjustments in the number and kind of
securities which Share Equivalents will represent or which may be
paid out under the Plan. All such adjustments shall be made so
<PAGE>
as to prevent dilution or enlargement of the rights of
Participants.
SECTION 5. DISTRIBUTION
5.1 The Participant's Account shall be valued as of
the end of each such quarterly period and distributions shall be
made therefrom as follows: Distribution of an Account shall be
in Common Stock, on the basis of one share of such Stock for each
Share Equivalent credited to the Account. Distribution of Common
Stock shall be made in one lump sum within 60 days following the
end of each such quarterly period subject to compliance with all
applicable administrative and legal requirements.
5.2 Any Common Stock, which becomes distributable
after the death of a Participant, shall be distributed to such
person or persons or the survivors thereof, including
corporations, unincorporated associations or trusts, as shall be
provided by written agreement between the Corporation and the
Participant and in the absence of such an agreement such Common
Stock shall be distributed to the Participant's estate.
5.3 The Corporation shall deduct from the amount of
all distributions under the Plan any taxes required to be
withheld by the Federal or any state or local governments.
5.4 At the time of distribution or as soon thereafter
as practicable, the Corporation shall deliver to a Participant or
to his/her Beneficiary a certificate for the shares of Common
Stock to which he or she is entitled. Such certificates shall be
registered in the name of the Participant or his/her Beneficiary.
Notwithstanding the foregoing, if the registration of ownership
of Common Stock is then being maintained by the Corporation or
its transfer agent in book-entry form, the delivery of shares of
Common Stock to the Participant or his/her Beneficiary may be
evidenced by book entry, unless the Participant or Beneficiary
requests otherwise in writing.
The Corporation shall not be required to issue or
deliver any certificates for, or make a book-entry reflecting,
shares of Common Stock prior to (a) the listing of such shares on
any stock exchange or quotation system on which the Common Stock
may then be listed or quoted and (b) the completion of any
registration, qualification, approval or authorization of such
shares under any federal or state law, or any ruling or
regulation or approval or authorization of any governmental body
which the Corporation shall, in its sole discretion, determine to
be necessary or advisable.
<PAGE>
All certificates for shares of Common Stock
delivered under the Plan, and book entries reflecting such
shares, shall be subject to such restrictions as the Committee
may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock
exchange upon which the Common Stock is then listed and any
applicable federal or state securities laws.
SECTION 6. RIGHTS OF PARTICIPANTS
6.1 Nothing contained in this Plan shall be construed
as giving any Participant the right to be retained as a Director
of the Corporation. Nothing contained in this Plan shall be
construed as limiting, in any way, any right that any party or
parties may have to remove a Participant as a Director of the
Corporation or to appoint or to elect another individual to
replace a Participant as a Director of the Corporation. Nothing
contained in this Plan shall be construed as giving any
Participant the right to receive any benefit not specifically
provided by the Plan. Any other provision of the Plan
notwithstanding, a Participant shall not have any interest in the
amounts credited to his/her Account until such Account is
distributed in accordance with the provisions of Section 5,
which, among other things, means that the Participant has no
voting rights with respect to the Common Stock represented by
Share Equivalents. With respect to amounts credited to a
Participant's Account, the rights of the Participant, the
Beneficiary of the Participant or any other person claiming
through the Participant under this Plan shall be solely those of
unsecured general creditors of the Corporation, and the
obligations of the Corporation hereunder shall be purely
contractual. Such benefits shall be paid from the general assets
of the Corporation. As contemplated by Revenue Procedure 92-65,
I.R.B. 1992-33, 16, Participants shall have the status of general
unsecured creditors of the Corporation and the Plan.
6.2 The rights of a Participant to the payment of
shares of Common Stock as provided in this Plan and with respect
to Share Equivalents credited to his or her Account are not
transferable by a Participant other than by will or the laws of
descent and distribution and shall not be assigned, transferred,
pledged or encumbered or be subject in any manner to alienation
or anticipation. No Participant may borrow against his or her
Account. No Account shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind,
whether voluntary or involuntary, including, but not limited to,
any liability which is for alimony or other payments for the
support of a spouse or former spouse, or for any other relative
of a Participant. Neither a Participant's Account nor a
<PAGE>
Participant's rights to benefits hereunder may be assigned to any
other party by means of a judgment, decree or order (including
approval of a property settlement agreement) relating to the
provision of child support, alimony payments, or marital property
rights of a spouse, former spouse, child or other dependent of
the Participant.
This Plan shall not in any manner be liable for or
subject to the debts, contracts, liabilities, engagements or
torts of any person entitled to benefits hereunder.
In addition, a Participant or Beneficiary shall
have no rights against or security interest in the assets of the
Plan, Corporation or any trust which may be established with
respect to the Plan, and shall have only the Corporation's
unsecured promise to pay benefits. All assets of the Plan, if
any, shall remain subject to the claims of the Corporation's
general creditors.
SECTION 7. ADMINISTRATION OF THE PLAN
7.1 The Plan shall be administered by the Committee on
Compensation and Succession of the Corporation's Board of
Directors (herein called the "Committee").
7.2 The Committee shall from time to time establish
rules for the administration of the Plan that are not
inconsistent with the provisions of the Plan.
7.3 The determination of the Committee as to any
disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and
conclusive upon all persons.
7.4 Neither the Committee nor a member of the Board of
Directors of the Corporation and no employee of the Corporation,
shall be liable for any act or action hereunder, whether of
omission or commission, except in circumstances involving bad
faith, or for any act of any other member or employee or of any
agent to whom duties in connection with the administration of the
Plan have been delegated.
SECTION 8. AMENDMENTS, ETC.
8.1 The Board of Directors of the Corporation may in
its absolute discretion, without notice, at any time and from
time to time, modify or amend, in whole or in part, any or all of
the provisions of the Plan or suspend or terminate it entirely.
Any such modification, amendment, suspension or termination,
<PAGE>
however, may not, without the Participant's consent, apply to or
affect the payment or distribution to any Participant relating to
any Share Equivalent for any quarterly period ended prior to the
effective date of such modification, amendment, suspension or
termination; provided, however, any such action may be taken to
comply with the applicable law and governmental rules and
regulations issued thereunder notwithstanding the effect thereof
on a Participant's account hereunder.
SECTION 9. EFFECTIVE DATE, CONTROLLING LAW
9.1 This Plan shall be effective as of January 1,
1996.
This Plan shall be construed under the laws of the
State of New York, to the extent Federal law is inapplicable.
IN WITNESS WHEREOF, the undersigned Chairman of
the Board and Chief Executive Officer of Central Hudson Gas &
Electric Corporation has signed this instrument this 17th day of
November 1995 as duly authorized by resolutions of this Board of
Directors.
JOHN E. MACK, III
Chairman of the Board and
Chief Executive Officer
</PAGE>
<PAGE> EXHIBIT (10)(iii) 23
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
MANAGEMENT INCENTIVE PROGRAM
WHEREAS, effective with the fiscal year beginning
January 1, 1991, the Company established a Management Incentive
Program ("MIP") as part of the Company's Savings Incentive Plan
("SIP"); and
WHEREAS, effective April 1, 1994, the SIP was amended
and restated and the MIP was continued as a separate program; and
WHEREAS, the Company proposes to amend and restate the
MIP by this instrument;
NOW, THEREFORE, the Company hereby amends the MIP,
effective as of April 1, 1994, to read as amended as follows:
I. General
The MIP shall be a cash bonus program ("Incentive
Award") based on meeting an "Incentive Goal" (as described
below). The MIP's purpose is to provide an added incentive to
management employees for meeting or exceeding the Company's
commitments to its customers, shareholders and employees.
II. Eligibility
All management employees are eligible to receive an
Incentive Award except (i) the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer and
any other officer(s) which the Chairman shall determine from time
to time, (ii) temporary employees and (iii) those employees whose
employment is terminated in a year in which an Incentive Award is
made unless such termination is a retirement.
III. Incentive Goal
The Incentive Goal will be established during the first
quarter of each year by the Board of Directors and thereafter
announced to the Company's management employees. The Incentive
Goal currently in effect shall be attached hereto as Exhibit A.
IV. Incentive Award
After the audited financial results of the Company for
a fiscal year ("Fiscal Year") have been made public, the Board of
Directors of the Company shall determine whether or not the
Incentive Goal has been met for the Fiscal Year, which
determination shall be final. The method for determining the
amount of the Incentive Award currently in effect shall be set
forth in Exhibit A.
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If the Incentive Goal for the Fiscal Year has been met,
the Incentive Award shall be paid (subject to applicable payroll
taxes) to those management employees determined to be eligible
pursuant to Paragraph II hereof as soon as practicable after such
determination by the Board of Directors. The aggregate of the
Incentive Award will be allocated among and be paid to each such
eligible management employee in the same proportion that each
such employee's base compensation for the Fiscal Year bears to
base compensation paid to all such eligible management employees
for that Fiscal Year. Each employee's base compensation up to a
maximum of $150,000 shall be considered in the determination of
an Incentive Award.
IN WITNESS WHEREOF, the undersigned Chairman of the
Board and Chief Executive Officer of Central Hudson Gas &
Electric Corporation has signed this instrument this 15th day of
March, 1995 as duly authorized by resolution of the Board of
Directors.
JOHN E. MACK, III
Chairman of the Board and
Chief Executive Officer
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EXHIBIT A - Incentive Goal and Award Currently in Effect
I. Incentive Goal
The Company must have exceeded the rate of return on
the Company's Common Equity then authorized by the New York
Public Service Commission with respect to the Company's electric
and gas departments for the fiscal year in question. If the rate
of return is different for said departments, a weighted average
of such returns shall be used. In the event a new rate of return
becomes effective during (but not at the beginning of) a fiscal
year, a rate of return shall be developed for the Incentive Goal
for that (but only that) fiscal year using a weighted average of
the prior and new rates of return, and after such fiscal year the
new rate of return shall be the Incentive Goal until changed by a
subsequent authorized rate of return.
II. Incentive Award
The Incentive Award shall be determined as follows:
$15,000 for each .01% by which the Incentive
Goal is exceeded, provided that the excess is
equal to or greater than 0.1%.
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