UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 1997
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission Exact name of registrant as State of I.R.S. Employer
File Number specified in its charter Incorporation ID. Number
and principal office address
and telephone number
1-4514 Consolidated Edison, Inc. New York 13-3965100
4 Irving Place, New York,
New York 10003
(212) 460-3900
1-1217 Consolidated Edison Company New York 13-5009340
of New York, Inc.
4 Irving Place, New York,
New York 10003
(212) 460-4600
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Consolidated Edison, Inc.,
Common Shares ($ .10 par value) New York Stock Exchange
Consolidated Edison Company of New York, Inc.,
7 3/4% Quarterly Income Capital Securities (Series A New York Stock Exchange
Subordinated Deferrable Interest Debentures)
$5 Cumulative Preferred Stock, without par value New York Stock Exchange
Cumulative Preferred Stock,4.65% Series C($100 par value)New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
Title of each class
Consolidated Edison Company of New York, Inc.,
Cumulative Preferred Stock, 4.65% Series D ($100 par value)
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 [ ]
<PAGE>
- 2 -
Indicate by check mark if the 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 the definitive proxy statement
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 of Consolidated Edison,
Inc. ("CEI") held by non-affiliates of CEI , as of January 31, 1998, was $ 9.7
billion. Not reflected in this amount are the 62,915 CEI Common Shares ($.10 par
value) held by CEI's Directors who are the only stockholders of CEI, known to
CEI, who might be deemed "affiliates" of CEI. As of February 28, 1998, CEI had
outstanding 235,489,650 Common Shares ($.10 par value).
The aggregate market value of the voting stock of Consolidated Edison
Company of New York, Inc. ("Con Edison") held by non-affiliates of Con Edison,
as of January 31, 1998, was $153.7 million. Not reflected in this amount are the
235,489,650 issued and outstanding shares of Con Edison Common Stock ($2.50 par
value), all of which are held by CEI.
Documents Incorporated By Reference
Portions of the joint CEI and Con Edison Proxy Statement for their joint
1998 Annual Meetings of Stockholders, to be filed with the Commission pursuant
to Regulation 14A not later than 120 days after December 31, 1997, are
incorporated in Part III of this report.
<PAGE>
- 3 -
TABLE OF CONTENTS
Page
FILING FORMAT 4
FORWARD-LOOKING STATEMENTS 4
PART I
ITEM 1. Business 4
ITEM 2. Properties 17
ITEM 3. Legal Proceedings 19
ITEM 4. Submission of Matters to a Vote of Security Holders 26
Executive Officers of the Registrant 27
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 31
ITEM 6. Selected Financial Data 31
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 32
ITEM 7A . Quantitative and Qualitative Disclosure About Market Risk 42
ITEM 8. Financial Statements and Supplementary Data 42
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure None
PART III
ITEM 10. Directors and Executive Officers of the Registrant *
ITEM 11. Executive Compensation *
ITEM 12. Security Ownership of Certain Beneficial Owners and Management *
ITEM 13. Certain Relationships and Related Transactions *
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 64
SIGNATURES 72
- -------------------
*Incorporated by reference from the definitive joint proxy statement for CEI and
Con Edison's Annual Meetings of Stockholders to be held on May 18, 1998.
<PAGE>
- 4 -
FILING FORMAT
This Annual Report on Form 10-K is a combined report being filed
separately by two different registrants: Consolidated Edison, Inc. ("CEI")
and Consolidated Edison Company of New York, Inc. ("Con Edison"). See
"Corporate Structure" in Item 1. References in this report to the "Company"
are to CEI and Con Edison, collectively. Con Edison makes no representation
as to the information contained in this report relating to CEI and the
subsidiaries of CEI other than Con Edison.
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements, which are statements of
future expectations and not facts. Words such as "expects," "anticipates,"
"plans" and similar expressions identify forward-looking statements. Actual
results or developments might differ materially from those included in the
forward-looking statements because of factors such as those discussed in
"Liquidity and Capital Resources - Forward-Looking Statements" in Item 7.
PART I
ITEM 1. BUSINESS
Contents of Item 1 Page
CORPORATE STRUCTURE 4
INDUSTRY SEGMENTS 5
ELECTRIC OPERATIONS 5
GAS OPERATIONS 8
STEAM OPERATIONS 9
COMPETITIVE BUSINESSES AND COMPETITION 9
CAPITAL REQUIREMENTS AND FINANCING 10
FUEL SUPPLY 10
REGULATION AND RATES 12
ENVIRONMENTAL MATTERS AND RELATED LEGAL PROCEEDINGS 13
GENERAL 14
EMPLOYEES 14
RESEARCH AND DEVELOPMENT 14
OPERATING STATISTICS 15
CORPORATE STRUCTURE
CEI, incorporated in New York State in 1997, became the holding company
for Con Edison on January 1, 1998. See Item 4. CEI has other subsidiaries.
See "Competitive Businesses and Competition," below.
Con Edison, incorporated in New York State in 1884, provides electric
service in all of New York City (except part of Queens) and most of Westchester
County, an approximately 660 square mile service area with a population of more
than 8 million. It also provides gas service in Manhattan, The Bronx and parts
of Queens and Westchester, and steam service in part of Manhattan. The New York
Power Authority ("NYPA") supplies electricity to state and municipal customers
within Con Edison's service area through Con Edison's facilities. By not later
than December 31, 2001 all of Con Edison's electric customers will be eligible
to purchase electricity from suppliers other than Con Edison. Since 1996, all of
Con Edison's gas customers have been eligible, either individually or by
aggregating their demand with other customers, to purchase gas from suppliers
other than Con Edison. See "Liquidity and Capital Resources - Competition and
Industry Restructuring and PSC Settlement Agreement " in Item 7 and "Challenges
to Settlement Agreement" in Item 3.
<PAGE>
- 5 -
INDUSTRY SEGMENTS
In 1997, electric, gas and steam operating revenues were 79.1 percent,
15.4 percent and 5.5 percent, respectively, of Con Edison's operating revenues.
For information on operating revenues, expenses and income for the years ended
December 31, 1997, 1996 and 1995, and assets at those dates, relating to Con
Edison's electric, gas and steam operations, see Note J to the financial
statements in Item 8. For information about changes to the Company's business,
see "Liquidity and Capital Resources - Competition and Industry Restructuring
and PSC Settlement Agreement" in Item 7, "Challenges to Settlement
Agreement" in Item 3 and "Competitive Businesses and Competition," below.
ELECTRIC OPERATIONS
ELECTRIC SALES. Electric operating revenues were $5.6 billion in 1997 or
79.1 percent of Con Edison's operating revenues. The percentages were 79.6 and
82.5, respectively, in the two preceding years. Electricity sales in Con
Edison's service area in 1997, including usage by customers served by NYPA and
the New York City and Westchester County municipal electric agencies, but
excluding off-system sales, increased 1.1 percent from 1996, after increasing
0.8 percent and 0.7 percent, respectively, in the two preceding years. After
adjusting for variations, principally weather and billing days, electricity
sales volume increased 1.8 percent in 1997, 0.9 percent in 1996 and 1.2 percent
in 1995. Weather-adjusted sales represent Con Edison's estimate of the sales
that would have been made if historical average weather conditions had occurred.
In 1997, 79.6 percent of the electricity delivered in Con Edison's service
area was sold by Con Edison to its customers, and the balance was delivered to
customers of NYPA and municipal electric agencies. Of Con Edison's sales, 29.3
percent was to residential customers, 66.9 percent was to commercial customers,
2.1 percent was to industrial customers and the balance was to railroads and
public authorities.
For further information about amounts of electric energy sold, see
"Operating Statistics," below.
For information about changes to Con Edison's electric operations, see
"Changes," below.
ELECTRIC SUPPLY. Con Edison either generates the electric energy it sells,
purchases the energy from other utilities or non-utility generators ("NUGs",
sometimes referred to as independent power producers or "IPPs") pursuant to
long-term firm power contracts or purchases non-firm economy energy.
The sources of electric energy generated and purchased during the years
1993-1997 are shown below:
1993 1994 1995 1996 1997
Generated:
Fossil-Fueled* 35.5% 30.9% 30.1% 22.7% 29.6%
Nuclear (Indian Point 2) 14.8% 18.4% 10.8% 17.7% 7.3%
Total Generated 50.3% 49.3% 40.9% 40.4% 36.9%
Firm Purchases:
NYPA 6.0% 1.3% 1.3% 2.0% 2.1%
Hydro-Quebec 4.3% 4.8% 5.8% 6.0% 2.4%
Non-Utility Generators 11.9% 12.9% 29.9% 29.5% 35.9%
Other Purchases* 27.5% 31.7% 22.1% 22.1% 22.7%
Total Purchased 49.7% 50.7% 59.1% 59.6% 63.1%
Generated & Purchased 100% 100% 100% 100% 100%
- -----
* For 1995 - 1997, includes electricity generated for others. See "Gas
Conversions" and "Operating Statistics", below.
<PAGE>
- 6 -
For further information about amounts of electric energy generated and
purchased, see "Operating Statistics," below. For information about Con Edison's
purchases of electric energy, see "NYPA," "Hydro-Quebec," "Non-Utility
Generators," "New York Power Pool" and "Gas Conversions," below.
For information about changes to Con Edison's electric operations, see
"Changes," below.
ELECTRIC PEAK LOAD AND CAPACITY. The electric peak load in Con Edison's
service area occurs during the summer air conditioning season. On July 15, 1997,
the one-hour peak load was 11,013 thousand kilowatts (MW) which is the record
peak load for the service area. The 1997 peak load included an estimated 9,350
MW for Con Edison's customers and 1,663 for NYPA's customers and municipal
electric agency customers. The 1997 peak, if adjusted to historical design
weather conditions, would have been 11,200 MW, 250 MW higher than the peak in
1996 when similarly adjusted. Con Edison estimates that, under design weather
conditions, the 1998 service peak load would be 11,375 MW, including 9,610 MW
for Con Edison's customers. "Design weather" for the electric system is a
standard to which the actual peak load is adjusted for evaluation.
The capacity resources available to Con Edison's service area at the time
of the system peak in the summer of 1997 totaled (before outages) 13,967 MW, of
which 10,234 MW represented net available generating capacity (including the
capacity of NYPA's Poletti and Indian Point 3 units) and 3,733 MW represented
net firm purchases by Con Edison and NYPA. Con Edison expects to have sufficient
electric capacity available to meet the requirements of its customers in 1998.
For information about Con Edison's capacity reserve margin, see "New York Power
Pool," below.
For information about Con Edison's generating, transmission and
distribution facilities, see "Electric Facilities" in Item 2.
For information about to changes to Con Edison's electric operations, see
"Changes," below.
CHANGES. For information about changes to Con Edison's electric operations
resulting from a transition to a competitive electric market, see "Liquidity and
Capital Resources - Competition and Industry Restructuring and PSC Settlement
Agreement" in Item 7, "Electric Facilities - Generating Facilities" in Item 2
and "Challenges to Settlement Agreement" in Item 3.
Pursuant to a September 1997 settlement agreement (the "Settlement
Agreement") in the "Competitive Opportunities" proceeding of the New York State
Public Service Commission ("PSC"), all of Con Edison's customers will be
eligible to purchase electricity from other suppliers, including subsidiaries of
CEI other than Con Edison, by December 31, 2001. Con Edison remains obligated to
serve as the "provider of last resort" for customers that, for whatever reason,
do not have another supplier of electricity. In a plan to divest electric
generating capacity submitted to the PSC in March 1998 (see "Electric Facilities
- - Generating Facilities" in Item 2), Con Edison proposed to meet its continuing
obligations to supply electricity following divestiture through purchases of
electricity in a competitive wholesale market. To assure adequate supply
resources prior to the development of that market, Con Edison proposed, through
2002, to make short-term capacity purchases and to obtain commitments from
purchasers of Con Edison's divested capacity to make capacity available.
NYPA. NYPA supplies its customers in Con Edison's service area with
electricity from its Poletti fossil-fueled unit in Queens, New York, its Indian
Point 3 nuclear unit in Westchester County and other NYPA sources. Electricity
is delivered to these NYPA customers through Con Edison's transmission and
distribution facilities, and NYPA pays a delivery charge to Con Edison.
Con Edison purchases portions of the output of Poletti and Indian Point 3
on a firm basis. Con Edison also purchases firm capacity from NYPA's
Blenheim-Gilboa pumped-storage generating facility in upstate New York. Con
Edison and NYPA also sell to each other energy on a non-firm basis.
<PAGE>
- 7 -
HYDRO-QUEBEC. Con Edison has an agreement with NYPA to purchase, through a
contract between NYPA and Hydro-Quebec (a government-owned Canadian electric
utility), 780 MW of firm power and energy during the months of April 1998
through October 1998 (the "Diversity Contract"). The amount and price of a
"basic amount" of energy Con Edison is entitled to purchase is subject to
negotiation with Hydro-Quebec and approval by the National Energy Board of
Canada (a Canadian regulatory agency). In accordance with the Diversity
Contract, Con Edison can also purchase additional energy which it would be
obligated to return to Hydro-Quebec by April 1999. Hydro-Quebec and Con Edison
have agreed to extend the Diversity Contract on substantially the same terms for
400 MW of firm power and energy during the April-through-October periods of 1999
through 2003.
NON-UTILITY GENERATORS. Federal and state regulations encourage
competition in the market for generation of electric power. These laws generally
require electric utilities to purchase electric power from and sell electric
power to qualifying NUGs. The Federal Energy Regulatory Commission has issued
rules requiring utilities to purchase electricity from qualifying facilities at
a price equal to the purchasing utility's "avoided cost." For information about
Con Edison's contracts with NUGs, see "Liquidity and Capital Resources -
Competition and Industry Restructuring and PSC Settlement Agreement - Recovery
of Prior Investments and Commitments " in Item 7 and Note G to the financial
statements in Item 8.
NEW YORK POWER POOL. Con Edison and the other major electric utilities in
New York State, including NYPA, are currently members of the New York Power
Pool. The primary purpose of the Power Pool is to coordinate planning and
operations so as to better assure the reliability of the State's interconnected
electric systems. As a member of the Power Pool, Con Edison is required to
maintain its capacity resources (net generating capacity and net firm purchases)
at a minimum reserve margin of 18% above its peak load, and to pay penalties if
it fails to maintain the required level. Con Edison met the reserve requirement
in 1997 and expects to meet it in 1998. For information about a plan to
restructure the wholesale electric market in New York State, see "Liquidity and
Capital Resources - Competition and Industry Restructuring" in Item 7.
MUNICIPAL ELECTRIC AGENCIES. Westchester County and New York City maintain
municipal electric agencies to purchase electric energy, including hydroelectric
energy from NYPA. Con Edison has entered into agreements with the County and
City agencies whereby Con Edison is delivering interruptible hydroelectric
energy from NYPA's Niagara and St. Lawrence projects to electric customers
designated by the agencies. These agreements may be terminated by either party
upon either one year's prior notice or, in certain circumstances, upon 10 days'
notice. A similar agreement, covering energy from NYPA's Fitzpatrick nuclear
plant, provides for termination in 2010. For information on the amount of energy
delivered, see "Operating Statistics," below.
GAS CONVERSIONS. Con Edison has, for a fee, generated electric energy for
others using as boiler fuel the gas that they provided. The amounts so generated
represented 2.3 percent, 3.8 percent and 7.0 percent, respectively, of the
electric energy generated and purchased by Con Edison in 1997, 1996 and 1995.
Con Edison has purchased a substantial portion of this energy for sale to its
customers. See "Operating Statistics," below.
<PAGE>
- 8 -
GAS OPERATIONS
GAS SALES. Gas operating revenues in 1997 were $1.1 billion or 15.4
percent of Con Edison's operating revenues. The percentages were 14.6 and 12.4,
respectively, in the two preceding years.
All of Con Edison's gas customers, either individually (at least 3,500
dekatherms per annum) or by aggregating their demand with other customers (at
least 5,000 dekatherms per annum), became eligible in 1996 to purchase gas
directly from suppliers other than Con Edison. Regardless of whether Con Edison
or another supplier sells the gas to customers in Con Edison's service area, the
gas is distributed to the customers through Con Edison's system of distribution
mains and service lines. The customers pay Con Edison a fee (reflecting Con
Edison's costs and a rate of return on its investment in the gas system) for
distributing the gas. Con Edison sells gas to its firm gas customers at Con
Edison's cost. Con Edison shares with its firm gas customers net revenues
(operating revenues less the cost of gas purchased for resale) from
interruptible gas sales, off-system sales and other "non-core" transactions.
Gas sales volume to firm customers decreased 6.2 percent in 1997 from the
1996 level. After adjusting for variations, principally weather, firm gas sales
volume to these customers decreased 0.8 percent. Including sales to
interruptible and off-system customers, actual sales volume increased 0.1
percent in 1997. Transportation of customer-owned gas (other than for NYPA),
which comprised approximately 5.4 percent of the gas Con Edison sold to or
transported for customers in 1997, increased 68.9 percent in 1997. Net revenues
from off-system sales transactions (such as releases of pipeline capacity and
bundled sales of gas and ancillary services) were $15.2 million in 1997,
compared to $14.4 million in 1996.
In September 1997, the PSC issued for comment a PSC staff report
recommending that all New York State gas utilities terminate their gas supply or
"merchant" functions within five years. The PSC is expected to issue an order in
1998 addressing the PSC staff's recommendation and the stranded cost,
reliability and provider of last resort issues that it raises.
For information about Con Edison's current gas rate agreement, see
"Liquidity and Capital Resources - Gas and Steam Rate Agreements" in Item 7. For
Information about Con Edison's gas facilities, see "Gas Facilities" in Item 2.
For information on the quantities of gas sold, transported for others and used
by Con Edison as boiler fuel to generate electricity and steam, see "Operating
Statistics" and "Fuel Supply," below.
GAS REQUIREMENTS. Firm demand for gas in Con Edison 's service area peaks
during the winter heating season. The design criteria for Con Edison's gas
system assume severe weather conditions that have not occurred in the service
area since 1934. Under these criteria, Con Edison estimates that the
requirements to supply its firm gas customers, together with the minimum amount
essential for its electric and steam systems, would amount to 71,100 thousand
dekatherms (mdth) of gas during the 1997/98 winter heating season and that gas
available to Con Edison would amount to 92,400 mdth. For the 1998/99 winter, Con
Edison estimates that the requirements would amount to approximately 70,911 mdth
and that the gas available to Con Edison would amount to approximately 92,400
mdth. As of March 15, 1998, the 1997/98 winter peak day sendout to Con Edison 's
customers was 665 mdth, which occurred on March 12, 1998. Con Edison estimates
that, under the design criteria, the peak day requirements for firm customers
during the 1998/99 winter season would amount to approximately 858 mdth and
expects that it would have sufficient gas available to meet these requirements.
GAS SUPPLY. Con Edison has contracts for the purchase of firm
transportation and storage services with seven interstate pipeline companies.
Con Edison also has contracts with seventeen pipeline and non-pipeline suppliers
for the firm purchase of natural gas. Con Edison also has interruptible gas
purchase contracts with numerous suppliers and interruptible gas transportation
contracts with interstate pipelines. Con Edison expects to have sufficient gas
supply to meet the requirements of its customers in 1998.
<PAGE>
- 9 -
STEAM OPERATIONS
STEAM SALES. Con Edison sells steam in Manhattan south of 96th Street,
mostly to large office buildings, apartment houses and hospitals. In 1997, steam
operating revenues were $391.8 million or 5.5 percent of Con Edison's operating
revenues. The percentages were 5.8 and 5.1, respectively, in the two preceding
years. Steam sales volume decreased 8.6 percent in 1997 from the 1996 level.
After adjusting for variations, principally weather, steam sales decreased 1.0
percent. For information about Con Edison's current steam rate agreement, see
"Liquidity and Capital Resources - Gas and Steam Rate Agreements" in Item 7.
STEAM SUPPLY. 38.8 percent of the steam sold by Con Edison in 1997 was
produced in Con Edison's electric generating stations, where it is first used
to generate electricity. 16.0 percent of the steam sold by Con Edison in 1997
was purchased from a NUG. The remainder was produced in Con Edison's steam-only
generating units. For information about Con Edison 's steam facilities, see
"Steam Facilities" in Item 2.
STEAM PEAK LOAD AND CAPABILITY. Demand for steam in Con Edison 's service
area peaks during the winter heating season. The one-hour peak load during the
winter of 1997/98 (through March 15, 1998) occurred on March 12, 1998 when the
load reached 8.5 million pounds. Con Edison estimates that for the winter of
1998/99 the peak demand of its steam customers would be approximately 12.3
million pounds per hour under design criteria, which assume severe weather.
On December 31, 1997, the steam system had the capability of delivering
about 13.2 million pounds of steam per hour. This figure does not reflect the
unavailability or reduced capacity of generating facilities resulting from
repair or maintenance. Con Edison estimates that, on a comparable basis, the
system will have the capability to deliver approximately 13.2 million pounds of
steam per hour in the 1998/99 winter.
COMPETITIVE BUSINESSES AND COMPETITION
CEI has subsidiaries other than Con Edison. These other subsidiaries
engage in competitive businesses and may encounter different, and perhaps
greater, risks than those involved in the utility business of Con Edison.
Consolidated Edison Solutions, Inc. ("Con Edison Solutions"), formerly ProMark
Energy, Inc., is a full-service energy company providing wholesale and retail
electricity and natural gas sales, as well as energy-related products and
services. Consolidated Edison Development, Inc. ("Con Edison Development"),
formerly Gramercy Development, Inc., invests in energy infrastructure
development projects and markets technical services worldwide. CEI's investment
in Con Edison Development and Con Edison Solutions was approximately $92.1
million as of December 31, 1997. Start-up and business development expenses
resulted in a net after-tax loss of approximately $9.6 million for these
subsidiaries in 1997. Consolidated Edison Energy, Inc. ("Con Edison Energy") and
Consolidated Edison Communications, Inc. ("Con Edison Communications") recently
commenced operations. Con Edison Energy is expected to invest in, operate and
market the output of , electric energy supply facilities in the United States
and provide specialized wholesale energy services in the electric power and
natural gas markets. Con Edison Communications is expected to own, lease,
operate or invest in facilities used for telecommunications or otherwise compete
in the telecommunications industry. CEI may establish other subsidiaries from
time to time. CEI expects to invest $300 million in 1998 and 1999 in its
subsidiaries other than Con Edison.
See "Liquidity and Capital Resources - Competition and Industry
Restructuring" in Item 7.
<PAGE>
- 10 -
CAPITAL REQUIREMENTS AND FINANCING
For information about the Company's capital requirements and financing,
the refunding of certain securities and Con Edison's securities ratings, see
"Liquidity and Capital Resources" in Item 7. In March 1998, the PSC approved the
$1 billion repurchase of CEI Common Shares ($.10 par value) discussed in
"Liquidity and Capital Resources - Stock Repurchase" in Item 7.
Securities ratings assigned by rating organizations are expressions of
opinion and are not recommendations to buy, sell or hold securities. A
securities rating is subject to revision or withdrawal at any time by the
assigning rating organization. Each rating should be evaluated independently of
any other rating.
FUEL SUPPLY
GENERAL. In 1997, 22.7 percent of the electricity supplied to Con Edison's
customers was obtained through economy purchases of energy produced from a
variety of fuels. Of the remaining 77.3 percent, which was either obtained
through firm purchases of energy or generated by Con Edison, oil was used to
generate 7.6 percent of the electricity, natural gas 57.9 percent, nuclear power
8.5 percent, hydroelectric power 2.4 percent, and refuse 0.9 percent. In 1997,
Con Edison used oil to produce 44.0 percent, and gas to produce 40.0 percent, of
the steam supplied to Con Edison's customers. The remaining 16.0 percent was
purchased by Con Edison from a NUG. For information about changes to Con
Edison's electric operations, see "Electric Operations - Changes," above.
A comparison of the cost, in cents per million Btu, of fuel used by Con
Edison to generate electricity and steam (excluding electricity generated for
others as described under "Gas Conversions," above) during the years 1993-1997
is shown below:
1993 1994 1995 1996 1997
Residual Oil 352 316 316 441 416
Distillate Oil 499 467 399 465 490
Natural Gas 288 255 253 324 307
Nuclear 37 42 51 50 51
Weighted Average 243 206 223 255 292
Con Edison is prohibited from using fuels that do not conform to the
requirements of the New York State air pollution control code and, in the case
of its in-City plants, the New York City air pollution control code. In the
City, Con Edison is not permitted to burn coal or to burn residual fuel oil
having a sulfur content of more than 0.3 percent.
RESIDUAL OIL. Based on anticipated consumption rates, Con Edison has an
adequate supply of residual fuel oil for its generating stations and Con
Edison's shares of generating capacity at the Roseton and Bowline Point stations
jointly-owned by Con Edison and other utilities. See "Electric Facilities" in
Item 2. Oil consumption rates vary widely from month to month. The oil burned at
Con Edison facilities in 1997, including Con Edison's shares of generating
capacity at Roseton and Bowline Point, totaled 8.2 million barrels. Con Edison
has contracts for oil supply and has options for additional oil supply
sufficient to cover all of its expected requirements for residual oil through
September 1998. Con Edison anticipates covering the balance of its 1998
requirements through new contracts, exercise of existing contract options and
purchases on the spot market.
NATURAL GAS. During 1997, Con Edison burned approximately 122,000 mdth of
gas for the production of electricity and steam, including 12,400 mdth
attributable to Con Edison's share of generating capacity at the Roseton and
Bowline Point stations and 9,700 mdth of gas provided by others. See "Electric
Operations - Gas Conversions," above. Con Edison expects to continue to have
substantial amounts of gas available in 1998 for the production of electricity
and steam for its customers.
<PAGE>
- 11 -
DISTILLATE OIL. Con Edison's estimated 1998 requirements for distillate
oil for gas turbine fuel are about 500,000 barrels. Con Edison expects to be
able to satisfy these requirements through purchases on the spot market.
COAL. Con Edison does not burn coal. In 1983, the New York State
Department of Environmental Conservation (DEC) ruled on an application by Con
Edison for permission to convert three electric generating units, Ravenswood 3
in Queens and Arthur Kill 2 and 3 on Staten Island, to coal-burning. The DEC
ruled that Con Edison would be permitted to burn coal at each location only if
flue gas desulfurization (FGD) systems were installed. Con Edison's studies
showed that it would not be economical to pursue coal conversion with FGD
systems.
NUCLEAR FUEL. The nuclear fuel cycle for power plants like Indian Point 2
consists of (1) mining and milling of uranium ore, (2) chemically converting the
uranium in preparation for enrichment, (3) enriching the uranium, (4)
fabricating the enriched uranium into fuel assemblies, (5) using the fuel
assemblies in the generating station and (6) storing the spent fuel.
Con Edison has contracts covering all of its expected requirements for
uranium for the planned 1999 and 2001 refuelings of Indian Point 2. Con Edison
has contracts covering most of its expected requirements for conversion for the
2001 refueling. Arrangements are expected to be completed in 1998 for the
additional conversion required for the expected 2001 refueling. Con Edison has
contracts covering most of its expected requirements for uranium enrichment
services and all of its expected requirements for fuel fabrication services
through the expiration of Indian Point 2's operating license in 2013.
For additional information about Indian Point 2, see "Electric Facilities -
Generating Facilities" in Item 2, "Liquidity and Capital Resources - Nuclear
Generation" in Item 7 and "Nuclear Decommissioning" and "Nuclear Fuel" in
Note A to the financial statements in Item 8.
The United States Department of Energy ("DOE") has defaulted on its
obligations under statute and contracts with Con Edison and other utilities that
required the DOE to start disposing of the utilities' spent nuclear fuel no
later than January 1998. The utilities are continuing to seek judicial
enforcement of DOE's statutory and contractual obligations. Con Edison estimates
that it has adequate on-site capacity until 2005 for interim storage of its
spent nuclear fuel and that, absent regulatory or technological developments,
additional storage facilities will then be needed. If the additional storage
facilities were not available, Con Edison would be required to curtail the
operation of Indian Point 2.
Con Edison, along with other utilities, is currently participating in a
private spent fuel storage initiative, which seeks to license and build an
interim, commercial, spent nuclear fuel storage facility by 2002. The proposed
site is on the Skull Valley Goshute Indian Reservation in Utah. Each participant
contributed approximately $1 million for engineering, licensing and legal
studies for the preparation of a license application submitted to the Nuclear
Regulatory Commission in 1997.
Con Edison disposes of low-level radioactive wastes ("LLRW") generated at
Indian Point at the licensed disposal facility located in Barnwell, South
Carolina. Under the 1985 Federal Low Level Radioactive Waste Amendments Act, New
York State was required by January 1996 to provide for permanent disposal of all
LLRW generated in the state. New York State has not provided for such disposal.
Con Edison expects that it will be able to provide for such storage of LLRW as
may be required until New York State establishes a storage or disposal facility
or adopts some other LLRW management method.
<PAGE>
- 12 -
REGULATION AND RATES
GENERAL. CEI is a "public utility holding company" under the Public
Utility Holding Company Act of 1935 (the "1935 Act"). The staff of the
Securities and Exchange Commission ("SEC"), which administers the 1935 Act, has
recommended, and several bills have been introduced in Congress that would
accomplish, the repeal of the 1935 Act. CEI is exempt from all provisions of the
1935 Act, except Section 9(a)(2) (which requires SEC approval for a direct or
indirect acquisition of 5 percent or more of the voting securities of any other
electric or gas utility company) on the basis that CEI and Con Edison are each
organized and carry on their utility businesses substantially in the State of
New York and that neither derives any material part of its income from a public
utility company organized outside of the State of New York. This exemption is
available even though CEI subsidiaries that are neither an "electric utility
company" nor a "gas utility company" under the 1935 Act will engage in
interstate activities. To maintain this exemption, CEI must file an exemption
statement with the SEC each year prior to March 1. The exemption may be revoked
by the SEC if a substantial question of law or fact exists as to whether CEI is
within the parameters of the exemption, or if it appears that the exemption may
be detrimental to the public interest or the interest of investors or consumers.
The New York State Public Service Commission ("PSC") regulates, among
other things, Con Edison's electric, gas and steam rates, the siting of its
transmission lines and the issuance of its securities. Certain activities of Con
Edison are subject to the jurisdiction of the Federal Energy Regulatory
Commission. The Nuclear Regulatory Commission regulates Con Edison's Indian
Point 2 and its retired Indian Point 1 nuclear units. In addition, various
matters relating to the construction and operation of Con Edison's facilities
are subject to regulation by other governmental agencies. For information about
changes in regulation affecting the Company, see "Liquidity and Capital
Resources - Competition and Industry Restructuring and PSC Settlement Agreement
" in Item 7 and "Challenges to Settlement Agreement" in Item 3.
CEI is not subject to regulation by the PSC, the Federal Energy Regulatory
Commission or the Nuclear Regulatory Commission, except to the extent that the
rules or orders of these agencies impose restrictions on CEI's relationships
with Con Edison or Con Edison's relationships with CEI's other subsidiaries. See
"Liquidity and Capital Resources - PSC Settlement Agreement - Corporate
Structure" in Item 7.
ELECTRIC, GAS and STEAM RATES. Con Edison's electric, gas and steam rates
are among the highest in the country. For information about Con Edison's rates,
see "Liquidity and Capital Resources - PSC Settlement Agreement and Gas and
Steam Rate Agreements" in Item 7 and "Challenges to Settlement Agreement" in
Item 3.
STATE ENERGY PLAN. In October 1994, the New York State Energy Planning
Board, released its most recent State Energy Plan. The plan is designed to
provide "an intelligent framework for evaluating the proper course for energy
policy, environmental protection and economic development . . . to assure that
New Yorkers will have a safe, affordable and reliable supply of energy that will
promote future economic growth and protect our environment." Under New York
State law, any energy-related decisions of State agencies must be reasonably
consistent with the plan. Although the Energy Planning Board had announced that
a new plan would be issued during 1997, the new plan has not yet been issued.
<PAGE>
- 13 -
ENVIRONMENTAL MATTERS AND RELATED LEGAL PROCEEDINGS
GENERAL. During 1997, Con Edison's's capital expenditures for
environmental protection facilities and related studies were approximately $43
million. The Company estimates that such expenditures will amount to
approximately $49 million in 1998 and $35 million in 1999. These amounts include
capital expenditures in 1998 and 1999 required to comply with the Federal Clean
Air Act amendments of 1990 and a 1994 consent decree with the New York State
Department of Environmental Conservation. See "Liquidity and Capital Resources -
Air Quality" in Item 7 and "Environmental Matters - DEC Settlement" in Note F to
the financial statements in Item 8.
INDIAN POINT. The Company believes that a serious accident at its Indian
Point 2 nuclear unit is extremely unlikely, but despite substantial insurance
coverage, the losses to the Company in the event of a serious accident could
materially adversely affect the Company's financial position and results of
operations. For information about Indian Point 2 and Con Edison's retired Indian
Point 1 nuclear unit, see "Electric Operations" and "Fuel Supply - Nuclear Fuel"
above, "Water Quality" below, "Electric Facilities - Generating Facilities" in
Item 2, "Liquidity and Capital Resources - Capital Requirements and Nuclear
Generation " in Item 7 and Notes A and F to the financial statements in Item 8.
SUPERFUND. The Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (Superfund) by its terms imposes joint and several
strict liability, regardless of fault, upon generators of hazardous substances
for resulting removal and remedial costs and environmental damages. In the
course of Con Edison's operations, materials are generated that are deemed to be
hazardous substances under Superfund. These materials include asbestos and
dielectric fluids containing polychlorinated biphenyls (PCBs). Other hazardous
substances are generated in Con Edison's operations or may be present at Con
Edison locations. Also, hazardous substances were generated at the manufactured
gas plants which Con Edison and its predecessor companies used to operate. For
additional information about Superfund, see "Superfund" in Item 3 and
"Environmental Matters - Superfund Claims" in Note F to the financial statements
in Item 8.
ASBESTOS. Asbestos is present in numerous Con Edison facilities. For
information about asbestos, see "Environmental Matters - Asbestos Claims" in
Note F to the financial statements in Item 8 and "Gramercy Park" and "Asbestos
Litigation" in Item 3.
TOXIC SUBSTANCES CONTROL ACT. Virtually all electric utilities, including
Con Edison, own equipment containing PCBs. PCBs are regulated under the Federal
Toxic Substances Control Act of 1976. Con Edison has reduced substantially the
amount of PCBs in electrical equipment it uses, including transformers located
in or near public buildings.
AIR QUALITY. For information about the Federal Clean Air Act amendments of
1990 and ambient air quality standards for ozone and particulate matter, see
"Liquidity and Capital Resources - Air Quality" in Item 7. For information about
divestiture of Con Edison's in-City generating capacity, see "Liquidity and
Capital Resources - PSC Settlement Agreement" in Item 7 and "Electric Facilities
- - Generating Facilities" in Item 2.
The New York City air pollution control code contains limitations on the
allowable sulfur content of fuels and on emissions of sulfur dioxide,
particulate matter, oxides of nitrogen and various trace elements. Certain
provisions of the code, specifically those pertaining to standards for emissions
of nitrogen oxides, may be impracticable to meet at some of Con Edison's
generating stations located in New York City unless variances or other relief
from such provisions are granted. Revision of the code is not expected. These
code provisions, which have existed since the early 1970's, have not had, and
are not expected to have, a material adverse effect on Con Edison's operations.
<PAGE>
- 14 -
WATER QUALITY. The Federal Clean Water Act provides for effluent
limitations, to be implemented by a permit system, to regulate the discharge of
pollutants, including heat, into United States waters. In 1981, Con Edison
entered into a settlement with the United States Environmental Protection Agency
("EPA") and others that relieved Con Edison for at least 10 years from a
proposed regulatory agency requirement that, in effect, would have required that
cooling towers be installed at the Bowline Point, Roseton and Indian Point
units. In return Con Edison agreed to certain plant modifications, operating
restrictions and other measures and surrendered its operating license for a
proposed pumped-storage facility that would have used Hudson River water.
In September 1991, after the expiration of the 1981 settlement, three
environmental interest groups commenced litigation challenging the permit status
of the units pending renewal of their discharge permits, which expired in
October 1992. Under a consent order settling this litigation, certain
restrictions on the units' usage of Hudson River water have been imposed on an
interim basis. Permit renewal applications were filed in April 1992, after which
the New York State Department of Environmental Conservation ("DEC") determined
that Con Edison must submit a draft environmental impact statement ("DEIS") to
provide a basis for determining new permit conditions. The preliminary DEIS,
submitted in July 1993, includes an evaluation of the costs and environmental
benefits of potential mitigation alternatives, one of which is the installation
of cooling towers . Con Edison has been participating with the DEC and several
environmental groups in reviewing the preliminary DEIS. A revised and updated
DEIS will be prepared for public comment. Pending issuance of final renewal
permits, the terms and conditions of the expired permits continue in effect.
Certain governmental authorities are investigating contamination in the
Hudson River and the New York Harbor. These waters are along the shoreline of
Con Edison's service area. Governmental authorities could require entities that
generated hazardous substances that contaminated these waters to bear the costs
of investigation and remediation.
ELECTRIC AND MAGNETIC FIELDS. Electric and magnetic fields (EMF) are found
wherever electricity is used. Several scientific studies have raised concerns
that EMF surrounding electric equipment and wires, including power lines, may
present health risks. In October 1996, the National Academy of Science issued a
report concluding that "the current body of evidence does not show that exposure
to [EMF] presents a human health hazard." In July 1997, the National Cancer
Institute Childhood Cancer study indicated that the results of their study
"provide little support for the hypothesis that living in homes with high
time-weighted average magnetic-field levels or in homes close to electrical
transmission or distribution lines is related to the risk of childhood
[leukemia]." For additional information about EMF, see "Environmental Matters -
EMF" in Note F to the financial statements in Item 8.
GENERAL
STATE ANTITAKEOVER LAW. New York State law provides that a "resident
domestic corporation," such as CEI or Con Edison, may not consummate a merger,
consolidation or similar transaction with the beneficial owner of a 20 percent
or greater voting stock interest in the corporation, or with an affiliate of the
owner, for five years after the acquisition of the voting stock interest, unless
the transaction or the acquisition of the voting stock interest was approved by
the corporation's board of directors prior to the acquisition of the voting
stock interest. After the expiration of the five-year period, the transaction
may be consummated only pursuant to a stringent "fair price" formula or with the
approval of a majority of the disinterested stockholders.
EMPLOYEES
The Company had 15,029 employees on December 31, 1997. A collective
bargaining agreement with the union representing about two-thirds of Con
Edison's employees expires in June 2000.
RESEARCH AND DEVELOPMENT
For information about the Company's research and development costs, see
Note A to the financial statements in Item 8.
<PAGE>
<TABLE>
- 15 -
OPERATING STATISTICS
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended December 31 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
ELECTRIC Energy (MWhrs)
Generated (a) 15,877,467 17,823,778 18,436,798 20,419,828 20,079,995
Purchased from Others (a) 27,105,143 26,178,042 26,700,594 21,036,437 19,813,654
Total Generated and Purchased 42,982,610 44,001,820 45,137,392 41,456,265 39,893,649
Less: Supplied without direct charge 71 71 71 73 74
Used by Company (b) 155,934 164,206 165,934 134,940 183,903
Distribution losses and
other variances 2,799,039 2,716,235 2,977,547 2,762,315 2,863,828
Net Generated and Purchased 40,027,566 41,121,308 41,993,840 38,558,937 36,845,844
Electric Energy Sold:
Residential 11,002,745 10,867,085 10,848,648 10,660,148 10,512,496
Commercial and Industrial 25,911,199 25,725,502 25,492,489 25,511,974 25,118,125
Railroads and Railways 75,392 47,004 47,482 47,289 49,542
Public Authorities 538,643 564,363 569,749 554,753 560,836
Total Sales to Con Edison Customers 37,527,979 37,203,954 36,958,368 36,774,164 36,240,999
Off-System Sales (a) (c) 2,499,587 3,917,354 5,035,472 1,784,773 604,845
Total Electric Energy Sold 40,027,566 41,121,308 41,993,840 38,558,937 36,845,844
Total Sales to Con Edison Customers 37,527,979 37,203,954 36,958,368 36,774,164 36,240,999
Delivery Service to NYPA
Customers and Others 8,793,378 8,816,873 8,855,790 8,773,155 8,441,624
Service for Municipal Agencies 845,895 617,293 456,728 413,893 361,854
Total Sales in Franchise Area 47,167,252 46,638,120 46,270,886 45,961,212 45,044,477
Average Annual kWhr Use Per
Residential Customer (d) 4,225 4,184 4,188 4,136 4,104
Average Revenue Per kWhr Sold (cents):
Residential (d) 16.6 16.5 16.1 15.8 16.0
Commercial and Industrial (d) 13.0 12.9 12.5 12.2 12.6
(a) For 1997, 1996 and 1995, amounts generated include 973,483, 1,672,603 and
3,159,047 MWhrs, respectively, generated for others, which is also included
in off-system sales. For 1997, 1996 and 1995, amounts purchased include
929,483, 1,553,764 and 2,666,837 MWhrs, respectively, of such electric
energy that was subsequently purchased by Con Edison. See "Electric
Operations - Gas Conversions," above.
(b) For 1995 and 1993, electric energy used by Con Edison includes 436 and
29,233 MWhrs, respectively, supplied to NYPA. For 1997, 1996 and 1994,
electric energy used by Con Edison includes 4,805, 544 and 21,275 MWhrs,
respectively, received from NYPA.
(c) For 1997, 1995, 1994 and 1993, off-system sales include 54, 2,825, 350, and
2,142 MWhrs, respectively, which were sold to NYPA and are also included in
the Delivery Service to NYPA. There were no such sales to NYPA in 1996.
(d) Includes Municipal Agency sales.
<PAGE>
- 16 -
OPERATING STATISTICS
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended December 31 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
GAS (Dth) (a)
Purchased (b) 242,296,610 219,439,813 217,268,986 208,328,267 214,719,241
Storage - net change (1,630,463) (4,032,224) 9,469,767 (4,410,363) 222,559
Used as boiler fuel at Electric
and Steam Stations (b) (109,508,555) (84,849,049)(110,761,124) (92,680,221)(108,153,436)
Gas Purchased for Resale 131,157,592 130,558,540 115,977,629 111,237,683 106,788,364
Less: Gas used by Company 239,359 272,040 237,688 221,715 203,793
Off-System Sales & NYPA (c) 14,216,403 11,023,023 4,887,971 -- --
Distribution losses
and other variances 104,5 176,930 4,654,832 2,443,486 3,998,234
Total Sales to Con Edison Customers 116,597,299 119,086,547 106,197,138 108,572,482 102,586,337
Gas Sold (a)
Firm Sales:
Residential 53,217,428 56,590,018 51,702,329 53,981,416 52,624,331
General 39,468,337 42,190,091 39,021,997 39,365,003 37,214,994
Total Firm Sales 92,685,765 98,780,109 90,724,326 93,346,419 89,839,325
Interruptible Sales 23,911,534 20,306,438 15,472,812 15,226,063 12,747,012
Total Sales to Con Edison Customers 116,597,299 119,086,547 106,197,138 108,572,482 102,586,337
Transportation of Customer-Owned Gas:
NYPA 17,041,695 4,966,983 24,972,796 14,546,325 15,965,084
Other 8,464,900 5,011,124 5,388,393 3,823,176 4,926,565
Off-System Sales 13,958,984 11,293,425 3,376,375 -- --
Total Sales and Transportation 156,062,878 140,358,079 139,934,702 126,941,983 123,477,986
Average Revenue Per Dth Sold (a):
Residential $11.22 $10.00 $ 9.43 $ 9.85 $9.27
General $ 8.14 $ 7.15 $ 6.38 $ 7.05 $6.71
STEAM Sold (Mlbs): 27,422,561 29,995,762 29,425,780 30,685,155 29,394,335
Average Revenue per Mlbs Sold $14.23 $13.34 $11.35 $11.10 $11.06
CUSTOMERS - Average for Year
Electric 3,010,139 3,001,870 2,994,447 2,980,026 2,964,716
Gas 1,036,098 1,035,528 1,034,784 1,031,675 1,028,048
Steam 1,920 1,932 1,945 1,964 1,973
(a) Does not include amounts for Con Edison Solutions. See "Competitive
Businesses and Competition," above.
(b) For 1997, 1996 and 1995, gas used as boiler fuel includes 9,636,239,
16,739,188 and 31,706,551 Dth, respectively, provided by others. See
"Electric Operations - Gas Conversions," above.
(c) For 1997, 1996 and 1995, includes 259,220, 173,388 and 1,305,730 Dth,
respectively, for balancing transactions with NYPA.
</TABLE>
<PAGE>
- 17 -
ITEM 2. PROPERTIES
At December 31, 1997, the capitalized cost of Con Edison's utility plant,
net of accumulated depreciation, (and excluding $102.3 million of nuclear fuel
assemblies) was as follows:
Net Capitalized Cost Percentage of
Classification (millions of dollars) Net Utility Plant
In Service:
Electric:
Generation $ 1,624.7 14%
Transmission 1,127.6 10%
Distribution 5,445.7 49%
Gas 1,348.7 12%
Steam 477.4 4%
Common 843.6 8%
Held For Future Use 4.9 --
Construction Work in Progress 292.2 3%
Net Utility Plant $11,164.8 100%
ELECTRIC FACILITIES
GENERATING FACILITIES. As shown in the following table, at December 31,
1997, Con Edison's net maximum generating capacity (on a summer rating basis)
was 8,291 MW, without reduction to reflect the unavailability or reduced
capacity at any given time of particular units because of maintenance or repair
or their use to produce steam for sale.
Generating Net Generating Capacity Percentage of Electric
Stations at December 31, 1997 Energy Generated and
(Megawatts-Summer Rating) Purchased in 1997*
Fossil-Fueled:
Ravenswood (3 Units) 1,742 9.9%
Astoria (3 Units) 1,075 8.4%
Arthur Kill (2 Units) 826 2.7%
East River (2 Units) 300 1.1%
Bowline Point (2 Units)
- two-thirds interest 808 2.4%
Roseton (2 Units)
- 40% interest 482 2.9%
Other (4 Units) 187 1.3%
Subtotal 5,420 28.7%
Nuclear - Indian Point 931 7.3%
Gas Turbines (39 Units) 1,940 0.9%
Total 8,291 36.9%
- ----------------
* For information about the electric energy purchased by Con Edison, see
"Electric Operations" in Item 1.
Con Edison's generating stations are located in New York City with the
exception of the Indian Point nuclear station in Westchester County, New York;
the Bowline Point station in Rockland County, New York; and the Roseton station
in Orange County, New York.
Con Edison's fossil-fueled plants burn natural gas or residual oil. Most
of the gas turbines burn distillate oil. Certain units have the capability to
burn either natural gas or oil. See "Fuel Supply" in Item 1.
<PAGE>
- 18 -
In March 1998, pursuant to the Settlement Agreement, Con Edison submitted
a detailed plan to the PSC for the divestiture to unaffiliated third parties or
transfer to an unregulated affiliate of Con Edison of all of Con Edison's New
York City fossil-fueled electric generating capacity. Under the plan, Con
Edison's approximately 5,500 MW of in-City capacity is divided into three
separate groups, or "asset bundles." Each asset bundle includes a major
generating station - Ravenswood, Astoria or Arthur Kill - and gas turbine
generating facilities. Pursuant to the plan, Con Edison will offer for sale by
auction two of the asset bundles and transfer the third asset bundle to its
unregulated affiliate. Con Edison has not yet identified which of the asset
bundles will be offered for sale and which will be transferred. Con Edison has
requested the PSC to rule expeditiously on the plan so that it may commence the
auctioning of the generating assets to be divested as rapidly as possible. For
additional information, see "Liquidity and Capital Resources - PSC Settlement
Agreement- Divestiture Commitment and Recovery of Prior Costs and Commitments"
in Item 7 and "Challenges to Settlement Agreement" in Item 3.
Con Edison is currently exploring with Orange and Rockland Utilities, Inc.
("O&R") alternatives with respect to the future disposition of the Bowline Point
station. O&R has a one-third interest and Con Edison has a two-thirds interest
as tenants in common in the Bowline Point station, which is operated by O&R. Con
Edison and O&R have reciprocal rights of first refusal on any sale of the
other's interest in Bowline point. Under a settlement agreement with the PSC,
O&R has agreed to divest all of its generating assets, including its share of
Bowline Point.
Con Edison is currently evaluating with Central Hudson Gas & Electric
Corporation ("Central Hudson") and Niagara Mohawk Power Corporation ("Niagara
Mohawk") several options regarding the future disposition of the Roseton
station. Central Hudson has a 35 percent interest, Niagara Mohawk a 25 percent
interest and Con Edison a 40 percent interest as tenants in common in the
Roseton station (which is operated by Central Hudson). Con Edison, Central
Hudson and Niagra Mohawk have reciprocal rights of first refusal on any sale of
the others' interest in Roseton. In addition, Central Hudson has the option,
exercisable in 1999, to acquire Con Edison's interest in 2004.
For information about Con Edison's Indian Point 2 nuclear unit, see
"Electric Operations," "Fuel Supply - Nuclear Fuel", "Environmental Matters and
Related Legal Proceedings - Indian Point and Water Quality" in Item 1,
"Liquidity and Capital Resources - Capital Requirements and Nuclear Generation"
in Item 7 and Notes A and F to the financial statements in Item 8.
In March 1998, the PSC instituted a proceeding to examine issues relating
to nuclear generation in a competitive market. The PSC adopted "as a rebuttable
presumption the premise that nuclear power should be priced on a market-basis to
the same degree as power from other sources, and parties challenging that
premise bear a substantial burden of proof." The PSC indicated that "divestiture
[of nuclear plants], even if ultimately required, would not be mandated before
the end of the transition period ['roughly 2002']."
In March 1998, Con Edison received a Confirmatory Action Letter in which
the NRC concurred with Con Edison's restart plan to resume power operation of
Indian Point 2 following completion of certain plant improvement activities
currently in progress. The unit has been out of service since mid-October 1997.
Con Edison has informed the NRC of its intent to conduct an independent safety
assessment and meet with the NRC to discuss the findings of the assessment.
TRANSMISSION FACILITIES. Con Edison has transmission interconnections with
Niagara Mohawk, Central Hudson, O&R, New York State Electric and Gas
Corporation, Connecticut Light and Power Company, Long Island Lighting Company,
NYPA and Public Service Electric and Gas Company. Con Edison's transmission
facilities are located in New York City and Westchester, Orange, Rockland,
Putnam and Dutchess counties in New York State.
At December 31, 1997, Con Edison's transmission system had approximately
432 miles of overhead circuits operating at 138, 230, 345 and 500 kilovolts and
approximately 378 miles of underground circuits operating at 138 and 345
kilovolts. There are approximately 267 miles of radial subtransmission circuits
operating at 138 kilovolts. Con Edison's 14 transmission substations, supplied
by circuits operated at 69 kilovolts and above, have a total transformer
capacity of 15,731 megavolt amperes.
At December 31, 1997, the transmission capacity to receive power from
outside New York City to supply in-City load during the summer peak period was
4,915 MW. The 1997 one-hour peak load in Con Edison's service area was 11,013
MW, of which 9,643 MW was for use within the City. See "Electric Operations -
Electric Peak Load and Capacity" in Item 1. In-City load in excess of
transmission capacity must be supplied by in-City generating stations. See
"Generating Facilities," above.
<PAGE>
- 19 -
DISTRIBUTION FACILITIES. Con Edison owns various distribution substations
and facilities located throughout New York City and Westchester County. At
December 31, 1997, Con Edison's distribution system had 293 distribution
substations, with a transformer capacity of 20,168 megavolt amperes, 32,368
miles of overhead distribution lines and 87,455 miles of underground
distribution lines.
GAS FACILITIES
Natural gas is delivered by pipeline to Con Edison at various points in
its service territory and is distributed to customers by Con Edison through
approximately 4,200 miles of mains and 362,300 service lines. Con Edison owns a
natural gas liquefaction facility and storage tank at its Astoria property in
Queens, New York. The plant can store approximately 1,000 mdth of which a
maximum of about 250 mdth can be withdrawn per day. Con Edison has about 1,230
mdth of additional natural gas storage capacity at a field in upstate New York,
owned and operated by Honeoye Storage Corporation, a corporation 28.8 percent
owned by Con Edison.
STEAM FACILITIES
Con Edison generates steam for distribution at three electric generating
stations and five steam-only generating stations and distributes steam to
customers through approximately 86 miles of mains and 18 miles of service lines.
In April 1998, Con Edison expects to submit to the PSC a long-range plan for the
steam system. See "Electric Facilities- Generating Facilities," above.
OTHER FACILITIES
Con Edison also owns or leases various pipelines, fuel storage facilities,
office equipment, a thermal outfall structure at Indian Point, and other
properties located primarily in New York City and Westchester, Orange, Rockland,
Putnam and Dutchess counties in New York State.
ITEM 3. LEGAL PROCEEDINGS
SUPERFUND
The following is a discussion of significant proceedings pending under
Superfund or similar statutes involving sites for which Con Edison has been
asserted to have a liability. The list is not exhaustive and additional
proceedings may arise in the future. For a further discussion of claims and
possible claims against Con Edison under the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (Superfund) and the estimated
liability accrued for certain Superfund claims, see "Environmental Matters and
Related Legal Proceedings - Superfund" in Item 1, and "Environmental Matters -
Superfund" in Note F to the financial statements in Item 8.
MAXEY FLATS NUCLEAR DISPOSAL SITE. The EPA advised Con Edison by letter,
dated November 26, 1986, that it was a potentially responsible party (PRP) under
Superfund for the investigation and cleanup of the Maxey Flats Nuclear Disposal
Site in Morehead, Kentucky. The site is owned by the State of Kentucky and was
operated as a disposal facility for low level radioactive waste from 1963
through 1977 by the Nuclear Engineering Corporation (now known as U.S. Ecology
Corporation). The EPA's letter alleges that various radionuclides and organic
chemicals have been released from the site into the environment. In September
1991, the EPA issued its Record of Decision for the site cleanup program. Phase
one of the program requires, among other things, the removal, treatment and
on-site disposal of the contaminated leachate that has accumulated in the site's
waste burial trenches, the installation of an impervious cover over the waste
burial trench area of the site, and the construction of a trench/leachate
groundwater monitoring system, erosion controls and storm water drainage systems
in that area. Phase two requires a 100-year stabilization period, with periodic
monitoring and maintenance of the cover, followed by installation of a permanent
cap.
<PAGE>
- 20 -
In March 1995, the EPA, de minimis PRPs, large private party PRPs
(including Con Edison), large federal agency PRPs and Kentucky entered into
consent decrees with respect to the funding and implementation of the cleanup
program. Under the consent decrees, which in April 1996 were approved by the
United States District Court for the Eastern District of Kentucky, the large
private party PRPs will implement phase one of the program and any corrective
actions required during the first 10 years following completion of phase one to
meet the performance standards established in the Record of Decision, and share
the costs of those activities with the large federal agency PRPs. Also, if
during this ten-year period the EPA determines that horizontal flow barriers are
required, the large private party PRPs will construct the barriers and share the
cost of that work with the large federal agency PRPs and Kentucky. The large
private party PRPs are not responsible for any costs after the ten-year period
expires. Kentucky will implement and fund the phase two program. Con Edison's
share of the cleanup costs is estimated to be about $500,000. In addition, if
horizontal flow barriers are required during the ten-year period following
completion of the phase one program, Con Edison would be obligated to pay an
estimated $10,000 to $100,000 depending on the size and the number of the
barriers required by the EPA.
CURCIO SCRAP METAL SITE. The EPA advised Con Edison, in a letter received
on August 11, 1987, that it had documented the release of hazardous substances
into the environment at the site of Curcio Scrap Metal, Inc. in Saddle Brook,
New Jersey, and that the EPA had information indicating that Con Edison sent
hazardous substances (PCBs) to the site. Con Edison provided the EPA with
records that indicated that Con Edison sold scrap electric transformers to a
metal broker who in turn sold them to the owner of the site. On September 30,
1991, the EPA issued a Unilateral Administrative Order which required Con Edison
and three other PRPs to commence a soil and sediment cleanup at and around the
site pursuant to the EPA's Record of Decision, dated June 28, 1991. This cleanup
work has been completed. On September 30, 1997, the EPA issued a Record of
Decision which concludes that the soil and sediment cleanup had successfully
remediated the principal threats associated with the site and requires periodic
groundwater monitoring for five years. The EPA estimates that the required
groundwater monitoring will cost approximately $200,000. Depending on the
results of the monitoring, the EPA could extend the monitoring program for an
additional five years or require remedial measures such as groundwater treatment
or cleanup work.
METAL BANK OF AMERICA SITES. The EPA advised Con Edison by letter dated
October 26, 1987 that it had reason to believe that Con Edison was a supplier of
scrap transformers to Metal Bank of America Inc.'s recycling sites in
Philadelphia during the late 1960s and thereafter. One of the sites was placed
on the EPA's national priority list under Superfund in 1983 as a result of a
suspected leak in a storage tank containing PCBs. The EPA alleged that PCBs had
been found in the soil and groundwater at the site and in the sediment from
areas of a tidal mudflat and the Delaware River along the site's shoreline. Con
Edison provided the EPA with documents which indicate that Con Edison sold
approximately 80 scrap transformers to a broker who, in turn, delivered them to
the site and that Con Edison sold an additional 46 scrap transformers to Metal
Bank (which may have salvaged them at the site). In December 1997, EPA issued a
Record of Decision which calls for, among other things, the removal and disposal
of PCBs and polynuclear aromatic hydrocarbon-contaminated sediments in the areas
of the tidal mudflat and the Delaware River along the site's shoreline, the
construction of a sheet pile wall along the site's shoreline, the removal and
off-site disposal of soil in the southern portion of the site that contains 25
parts per million (ppm) or more of PCBs, and the removal and off-site disposal
of soil that contains more than 10 ppm of PCBs in the northern portion of the
site. Although EPA estimated the cost of these measures at about $17.2 million,
the PRP steering committee for the site believes that they could cost as much as
$31.7 million to implement. Con Edison does not expect that its share of the
cost of the site cleanup program selected by the EPA will exceed 1.48 percent.
<PAGE>
- 21 -
NARROWSBURG SITE. In 1987, the New York State Attorney General notified
Con Edison that he had evidence that Con Edison is a PRP under Superfund for
hazardous substances that have been released at the Cortese landfill in
Narrowsburg, Sullivan County, New York. The Cortese landfill is listed on the
EPA's Superfund National Priorities List. Con Edison records indicate that drums
containing waste oil were shipped from its Indian Point nuclear station to the
Cortese landfill for disposal. Before notifying Con Edison, the Attorney General
commenced an action under Superfund in the United States District Court for the
Southern District of New York against the Cortese site owner and operator and
SCA Services ("SCA"), an alleged transporter of hazardous substances to the
site. On January 17, 1989, SCA commenced a third-party action for contribution
against Con Edison and five other parties whose chemical waste was allegedly
disposed of at the site. In 1990, SCA served a second amended third-party
complaint in which it sued the Con Edison and 27 other third-party defendants
for contribution. Con Edison and SCA have reached a settlement of the
third-party action under which Con Edison paid $114,485 toward the cost of the
site environmental studies conducted by SCA and agreed to pay 6 percent of the
first $25 million of remedial costs at the site. SCA has agreed to indemnify Con
Edison for any other remedial costs and natural resource damages that it has to
pay. The EPA has selected a cleanup program for the site that is estimated to
cost $12 million. SCA, Con Edison and various other third-party defendants with
which SCA settled entered into a consent decree under which they agree to
implement the cleanup program, to pay the EPA's oversight costs for the site and
to pay approximately $220,000 for natural resource damages. The consent decree
has been approved by the United States District Court for the Southern District
of New York. Cleanup work at the site is now in progress.
CARLSTADT SITE. On August 20, 1990, Con Edison was served with a
third-party complaint in a Superfund cost contribution action for a former waste
solvent and oil recycling facility located in Carlstadt, New Jersey. The
complaint, which is pending before the United States District Court for the
District of New Jersey, alleges that Con Edison shipped 120,000 gallons of waste
oil to this site and that Con Edison is one of several hundred parties who are
responsible under Superfund for the study and cleanup of the facility. The
plaintiffs in the action, which include a group of former customers of the
facility, have completed a $3 million remedial investigation and feasibility
study for the site. Plaintiffs estimate that 7 to 15 million gallons of waste
solvents and oil were recycled at the site and based on this estimate, Con
Edison's share of the cleanup costs would be about 0.8 to 1.7 percent. The costs
of the cleanup alternatives that were evaluated in the remedial investigation
and feasibility study range from $8 million to $321 million. In 1990, the EPA
selected an interim remedy to control releases from the site while the EPA
evaluates and develops a final cleanup remedy. The interim remedy called for,
among other things, the construction of a slurry wall around the site and an
infiltration barrier over the site. EPA estimated that the interim remedy would
cost about $3 million to implement. Plaintiffs claim that the interim remedy,
which has been completed, cost $10 million.
HELEN KRAMER LANDFILL SITE. In September 1991, Orange and Rockland
Utilities, Inc. (O&R) was served with a third-party complaint in a Superfund
cost recovery contribution action for the Helen Kramer Landfill Site in Mantau,
New Jersey. The third-party plaintiffs are site PRPs that were sued for site
cleanup costs by the State of New Jersey. The complaint, which is pending before
the United States District Court for the District of New Jersey, alleges that,
in 1974, Marvin Jonas, Inc. transported hazardous substances for O&R and
disposed of those substances in the Helen Kramer Landfill. Preliminary
investigation by O&R indicates that waste materials generated during the
construction of the Bowline Point generating station were hauled and disposed of
by Marvin Jonas, Inc. in 1974. Con Edison owns a two-thirds interest in Bowline
Point. O&R, which operates Bowline Point, owns the remaining one-third interest.
Bowline Point liabilities are shared by Con Edison and O&R in accordance with
their respective ownership interests. The EPA has commenced cleanup of this site
and the total site cleanup cost is estimated at $150 million. The third-party
plaintiffs have offered to settle with O&R and other third-party defendants. If
the settlement is approved by the district court, O&R would pay $15,000 to a
site trust fund and the third-party plaintiffs would dismiss their action
against O&R and indemnify O&R from claims for site cleanup costs by other
parties.
<PAGE>
- 22 -
GLOBAL LANDFILL SITE. Con Edison has been designated a PRP under Superfund
and the New Jersey Spill Compensation and Control Act (Spill Act) for the study
and cleanup of the Global Landfill Site in Old Bridge, New Jersey. This 57.5
acre municipal and industrial waste landfill is included on the Superfund
National Priorities List and is being administered by the New Jersey Department
of Environmental Protection and Energy ("NJDEPE") pursuant to an agreement
between the EPA and the State of New Jersey.
Con Edison provided EPA with records indicating that it had disposed of
approximately ten cubic yards of waste asbestos at the site in February 1984. In
August 1989, the NJDEPE served Con Edison with a Spill Act directive that
required Con Edison and 40 other designated site PRPs to fund a $1.5 million
remedial investigation and feasibility study for the site. Con Edison joined the
PRP Group formed for the site and the Group entered into a settlement agreement
and an administrative consent order with NJDEPE that, among other things,
required the PRP Group's members to contribute $500,000 towards the cost of the
study. Con Edison's share of the PRP Group's payment to the NJDEPE was $5,000.
In February 1991, the EPA and the NJDEPE proposed a $30 million interim
remedy for the site. This remedy calls for the installation of gas and leachate
collection and treatment systems at the landfill and the construction of an
impervious cover over the landfill (Phase I). It also calls for further studies
to determine the alternatives for addressing groundwater and wetlands
contamination in the vicinity of the landfill (Phase II). In March 1991, the
NJDEPE served Con Edison with a second Spill Act Directive that required Con
Edison and the other site PRPs to pay for the implementation of the Phase I
remedy for the site. The PRP Group entered into a consent decree with the NJDEPE
under which they agreed to implement the Phase I remedy with partial funding to
be provided by the NJDEPE. Con Edison's share of the cost of the Phase I remedy
is estimated at $150,000.
CHEMSOL SITE. By letter dated December 20, 1991, the EPA advised Con
Edison that it had documented the release of hazardous substances at the Chemsol
Site in Piscataway, New Jersey and that it had reason to believe that Con Edison
sent waste materials to the site during the 1960 to 1965 period. In response to
the EPA's demand for records, including any relating to Cenco Instruments Corp.,
Con Edison submitted to the EPA records of payments to Central Scientific
Company, a Division of Cenco Instruments Corp. during the 1960-1965 period. Con
Edison is unable at this time to determine either the purpose of the payments to
Central Scientific Company or the connection of that company to the site. The
EPA has not designated Con Edison as a PRP and has not yet selected a final
cleanup program for the site. However, the EPA has selected an interim remedy,
expected to cost about $8 million, for the site groundwater contamination and
has ordered several designated PRPs to implement that remedy.
ECHO AVENUE SITE. In December 1987, the DEC classified Con Edison's former
Echo Avenue substation site in New Rochelle, New York as an "Inactive Hazardous
Waste Disposal Site." The basis for this classification was the presence of PCBs
in the soil and in the buildings on the site. Although Con Edison has cleaned up
the PCBs on the site, the DEC requires a thorough site survey before it will
remove the site from the Inactive Hazardous Waste Disposal Site list. Under a
consent order with the DEC, a new site survey was done and remedial action
taken. The cost to Con Edison of this additional work was $213,000. Con Edison
demolished its building on this site, and expects to incur approximately $1
million in additional cleanup expenses
In January 1992, the owners of Echo Bay Marina filed suit in Federal court
alleging that PCBs were being discharged from Con Edison's former Echo Avenue
Substation Site in New Rochelle, New York into the Long Island Sound. Plaintiffs
sought $24 million for personal injuries and property damages, a declaration
that Con Edison is in violation of the Clean Water Act, civil penalties of
$25,000 per day for each violation, remediation costs, an injunction against
further discharges and legal fees. In December 1994, the court dismissed
plaintiffs claims for property damage, including loss of business. Pretrial
discovery on the remaining claims is continuing. Con Edison expects at an
appropriate time to file a motion for summary judgment on the personal injury
claims. Trial on the remaining claims is set for November 1998.
<PAGE>
- 23 -
PCB TREATMENT, INC. SITES. On September 30, 1994, Con Edison received a
letter from the EPA indicating that it had been identified as a PRP for the PCB
Treatment, Inc. (PTI) Sites in Kansas City, Kansas and Kansas City, Missouri.
The sites -- a vacant, five-story building and a partially-occupied, seven-story
building -- were used by PTI from 1982 until 1987 for the storage, processing,
and treatment of PCB-containing electric equipment, dielectric oils, and
materials. According to the EPA, the buildings' floor slabs and ceilings and the
soil areas outside the buildings' loading docks are contaminated with PCBs. The
EPA has indicated that more than 25 million pounds of PCB-contaminated oil,
equipment and materials were shipped to the sites by over 1,500 parties. Con
Edison has informed the EPA that it shipped approximately 2.9 million pounds of
PCB-contaminated oil and equipment to the sites.
In September 1996, Con Edison joined a PRP steering committee that has
agreed to conduct studies at the sites under an EPA consent order and is
negotiating a cost sharing agreement with federal agency PRPs. Based on
preliminary information, Con Edison currently believes that its share of the
study and remediation costs could exceed $5 million.
PELHAM MANOR SITE. Prior to 1968, Con Edison and its predecessor companies
operated a manufactured gas plant on a site located in Pelham Manor, Westchester
County, which is now used for a shopping center. Soil and groundwater tests by
the current owners and lessees indicate the presence of hazardous substances
which are associated with the manufactured gas process. Con Edison has agreed to
participate with the site owners and lessees in further site studies to develop
and implement a cleanup plan that will be acceptable to the DEC. The site
studies are now being conducted under a stipulation agreement with the DEC, with
funding by Con Edison.
ASTORIA SITE. The Federal Resource Conservation and Recovery Act delegates
to the states licensing authority for PCB storage. As a condition to renewal by
the DEC of Con Edison's permit to store PCBs at Con Edison's Astoria generating
station in Queens, New York, Con Edison is required to conduct a site
investigation and, where necessary, a remediation program. The site
investigation commenced in April 1994 and is scheduled to be completed in 1998.
The cost of the investigation is estimated at approximately $5 million. A
portion of the investigation has been completed and reports thereon, indicating
PCB-contamination of portions of the site, have been submitted to the DEC and
the New York State Department of Health for the determination of the remediation
action that may be required. Depending on the remediation required, the costs of
remediation could be material.
HUNTS POINT SITE. In September 1994, the City of New York notified Con
Edison that it had discovered various contaminants on the site of a former Con
Edison manufactured gas plant in the Hunts Point section of The Bronx. Con
Edison had manufactured gas at that location prior to its sale of the site to
the City in the 1960s. Con Edison has agreed to conduct a site study and to
develop and implement a remediation program. However, Con Edison has not agreed
to pay costs for contamination that is unrelated to Con Edison's use of the
site. Con Edison is unable at this time to estimate its exposure to liability
with respect to this site.
ANCHOR MOTOR SITE. In November 1995, Anchor Motor Freight, Inc. notified
Con Edison that it had discovered coal tar on its site in Westchester County.
Anchor requested that Con Edison remediate the site. A predecessor of Con Edison
had operated a manufactured gas plant at that location prior to the 1940's. Con
Edison has conducted preliminary sampling at the site and found coal tar beneath
the areas formerly occupied by the manufactured gas plant. Coal tar at the site
has also been found in the Hudson River along the bulkhead of an asphalt plant
located between the site and the river and beneath portions of the asphalt plant
property. Con Edison has assumed responsibility for maintaining a boom in the
river around the area of bulkhead and will develop a cleanup program for the
coal tar contamination under an agreement with the DEC. The cost of the cleanup
program could exceed $8 million if the DEC requires Con Edison to excavate all
of the coal tar.
<PAGE>
- 24 -
BORNE CHEMICAL SITE. In May 1997, Con Edison was named as an additional
third-party defendant in a private cost recovery action in the New Jersey
Superior Court (Union County) under the New Jersey Spill Compensation and Spill
Act for the Borne Chemical site in Elizabeth, New Jersey. Borne Chemical used
the site for the processing and blending of various types of petroleum, dyes and
chemical products from approximately 1917 until 1985 when it became bankrupt and
abandoned the site. Between 1971 and 1981, a portion of the site was occupied by
a waste transporter and oil spill cleanup contractor that did work for Con
Edison at various times (the "Contractor").
The third-party plaintiffs in the lawsuit were ordered by the NJDEPE to
conduct emergency removal actions for the oil and chemical drums, tanks and
underground piping systems at the site and to complete studies to determine the
extent to which the site's soil and groundwater is contaminated. The third-party
plaintiffs are seeking contribution for the more than $10 million that they
expect to incur to comply with the NJDEPE order and for the cost of any cleanup
program that the NJDEPE may require in the future for the site's soil and
groundwater.
Con Edison shipped between 12,000 and 13,000 gallons of used turbine oil
to the site for treatment in 1976. It also shipped almost 1,200 empty drums that
may have contained oil and chemical residue to the site. The Contractor
conducted numerous oil spill cleanups for Con Edison during the late 1970's and
early 1980's. It is not known whether the Contractor used the site for storage
or handling of any contaminated materials from work the Contractor did for Con
Edison.
CAPASSO SITE. In December 1997, Con Edison was served with a complaint by
DMJ Associates ("DMJ") seeking to compel Con Edison and 16 other defendants to
clean up contamination at the Capasso property located in Long Island City, New
York. DMJ holds a note to which the Capasso property is security. The complaint,
which is pending before the United States District Court for the Eastern
District of New York, alleges that Con Edison sent waste to the Quanta Resources
facility (Quanta) and that contamination, including PCB contamination, has
migrated from Quanta to the Capasso property and is contributing to the
contamination on or about the Capasso property. Con Edison is investigating
whether it sent any waste to Quanta. Con Edison is defending this action
pursuant to a joint defense agreement with the other generator defendants.
TOXIC SUBSTANCES CONTROL ACT
In November 1994, BCF Oil Refining, Inc., a processor and refiner of used
oil products and waste containing oil, brought suit in the United States
District Court for the Southern District of New York against Con Edison and four
transporters of waste oil products alleging that the defendants (primarily Con
Edison) caused PCB contaminated waste to be shipped to BCF thereby contaminating
its facilities. In addition to the remediation of BCF's facilities under the
Federal Toxic Substances Control Act, the suit sought compensatory damages of
not less than $12.5 million from all the defendants and additional punitive
damages of not less than $12.5 million from Con Edison. In February 1997, the
court dismissed 24 of BCF's 25 claims and Con Edison filed a motion asking the
court to dismiss the remaining claim. In December 1997, a jury returned a
verdict in favor of Con Edison on the remaining claim. This proceeding was
entitled BCF Oil Refining, Inc. v. Consolidated Edison Company of New York,
Inc., et. al.
GRAMERCY PARK
On August 19, 1989, a Company steam main exploded in the Gramercy Park
area of Manhattan, releasing debris containing asbestos into that area. Con
Edison took responsibility for the asbestos cleanup and most of the cost of that
cleanup was covered by Con Edison's insurance. In April 1995, Con Edison was
sentenced to a fine of $500,000 on each of four counts and to three years
probation for criminal acts relating to the reporting of the release of asbestos
from the steam main explosion. During the probation period, Con Edison's
compliance with environmental laws is being monitored by a court-appointed
monitor.
DEC PROCEEDINGS
Reference is made to "Environmental Matters - DEC Settlement" in Note F to
the financial statements in Item 8 and "Results of Operations - Other Operations
and Maintenance Expenses" in Item 7.
<PAGE>
- 25 -
In September 1997, Con Edison agreed to a consent order settling a civil
administrative proceeding instituted by the DEC alleging opacity violations by
Con Edison. Pursuant to this consent order, the essential elements of Con
Edison's existing Opacity Reduction Program were established as enforceable
conditions of the operating permits that the DEC issues for Con Edison's
facilities. The September 1997 consent order also assessed a civil penalty of
$25,000, which was suspended provided that Con Edison complies with the order.
In October 1997, Con Edison agreed to a DEC consent order with respect to oil
and hazardous waste incidents occurring since November 1994. Under this consent
order, Con Edison will survey a number of its facilities and test the integrity
of underground fuel oil pipelines at Con Edison's major oil storage facilities.
Con Edison also will retire several of its underground fuel oil pipelines that
had been operated within New York City. In addition, Con Edison paid a $385,000
penalty, $58,000 for damages and $345,000 to programs designed to benefit the
environment. Con Edison does not expect the September and October 1997 consent
orders to have a material adverse effect on Con Edison's financial position or
results of operations.
ASBESTOS LITIGATION
For a discussion of asbestos and suits against Con Edison involving
asbestos, see "Environmental Matters and Related Legal Proceedings - Asbestos"
in Item 1, and "Environmental Matters - Asbestos Claims" in Note F to the
financial statements in Item 8. The following is a discussion of the significant
suits involving asbestos in which Con Edison has been named a defendant. The
listing is not exhaustive and additional suits may arise in the future.
MASS TORT CASES. Numerous suits have been brought in New York State and
Federal courts against Con Edison and many other defendants for death and
injuries allegedly caused by exposure to asbestos at various Con Edison
premises. Many of these suits have been disposed of without any payment by Con
Edison, or for immaterial amounts. The amounts specified in the remaining suits,
including the Moran v. Vacarro suit discussed below, total billions of dollars,
but Con Edison believes that these amounts are greatly exaggerated, as were the
claims already disposed of.
MORAN, ET AL. V. VACARRO, ET AL. On May 9, 1988, Con Edison was served
with a complaint in an action in the New York State Supreme Court, New York
County, in which approximately 184 Con Edison employees and their union alleged
that the employees were exposed to dangerous levels of asbestos as a result of
alleged intentional conduct of supervisory employees. Each of the employee
plaintiffs seeks $1 million in punitive damages, unspecified additional
compensatory damages, and to enjoin Con Edison from violating EPA regulations
and exposing employees to asbestos without first taking certain safety measures.
On May 16, 1988, the complaint was amended to add a claim by each employee
plaintiff for $1 million in damages for mental distress. In November 1988, the
complaint was amended to add four additional employee plaintiffs. On July 9,
1990, the complaint was amended to add the spouses of 131 plaintiffs as
additional plaintiffs and to remove the union as a plaintiff. Each spouse seeks
medical monitoring, $1 million for emotional distress and $1 million for
punitive damages. On January 19, 1995, the court dismissed the claims of the
employee plaintiffs, leaving employee spouses as the only plaintiffs.
RATE PROCEEDINGS
New York State law requires electric and gas utilities to make available
to religious organizations rates that do not exceed those charged to residential
customers. In December 1994, Con Edison and the New York Attorney General
executed a settlement under which Con Edison admitted no wrongdoing but agreed
to provide refunds to religious organizations that had been served under
generally higher commercial rates and transfer affected customers to the
appropriate rates. In August 1997, the United States District Court for the
Southern District of New York dismissed a suit against Con Edison, entitled
Brownsville Baptist Church, et. al. v. Consolidated Edison Company of New York,
Inc., in which plaintiffs sought $500 million for purported class members that
operated as religious organizations and were charged commercial rates for
electric service. Plaintiffs have appealed the dismissal. In January 1998, these
plaintiffs sued Con Edison in New York State Supreme Court, County of Kings
claiming violations of the New York Public Service Law and the New York General
Business Law, fraud, unjust enrichment and negligent misrepresentation. Con
Edison's motion to dismiss the January 1998 lawsuit is pending.
<PAGE>
-26 -
CHALLENGES TO SETTLEMENT AGREEMENT
In February 1998, the Public Utility Law Project of New York, Inc.
("PULP") commenced a lawsuit against the PSC and Con Edison challenging certain
provisions of the Settlement Agreement, including the PSC's authority to
institute retail access for residential consumers. PULP has pending a similar
lawsuit against the PSC with respect to the PSC's May 1996 generic order in the
PSC's "Competitive Opportunities" proceeding. Also, in March 1998 Travelers
Group Inc. and Smith Barney Inc. instituted a lawsuit against the PSC
challenging a provision of the Settlement Agreement that exempts certain NYPA
governmental customers, but not NYPA's economic development customers
("EDDS"),from the stranded cost recovery provisions of the Settlement Agreement
and the unavailability of Industrial Employment Growth Credits to NYPA EDDS
customers. The lawsuits are pending in the Supreme Court of the State of New
York, County of Albany. Con Edison does not expect the lawsuits to result in a
material adverse effect on its financial condition, results of operation or
liquidity. For information about the Settlement Agreement, see "Liquidity and
Capital Resources - PSC Settlement Agreement" in Item 7.
EMPLOYEES' CLASS ACTION
In January 1998, seven current employees and one former employee of Con
Edison sought class certification in a proceeding pending in the United States
District Court for the Eastern District of New York. In January 1994, plaintiffs
initiated the action, entitled Sheppard, et al. v. Con Edison, in a lawsuit
alleging that employees have been denied promotions or transfer because of their
race. Two years earlier the same plaintiffs filed similar claims against Con
Edison with the New York City Commission on Human Rights. Before the Commission
concluded its investigation, plaintiffs withdrew their claims.
NUCLEAR FUEL DISPOSAL
Reference is made to the information under the caption "Liquidity and
Capital Resources - Nuclear Generation - Fuel Disposal" in Item 7 for
information concerning proceedings brought by Con Edison and a number of other
utilities against the United States Department of Energy. The proceedings are
entitled Northern States Power Co., et al. v. Department of Energy, et al. See
also, "Fuel Supply - Nuclear Fuel" in Item 1.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) At a Special Meeting of Stockholders of Con Edison held on December
12, 1997, the stockholders of Con Edison approved the Holding Company Proposal
and the Con Edison Board Proposal. The "Holding Company Proposal" was to adopt a
holding company structure for Con Edison in which, pursuant to an Agreement and
Plan of Exchange, Con Edison would become a subsidiary of CEI and the
outstanding shares of Con Edison's Common Stock ($2.50 par value) would be
exchanged automatically on a share-for-share basis for CEI Common Shares ($.10
par value). The "Con Edison Board Proposal" was to authorize an amendment to Con
Edison's Certificate of Incorporation to change the authorized number of
Trustees to "not more than 16" from "not less than 13 nor more than 20."
Additional information about the Holding Company Proposal and the Con Edison
Board Proposal is contained in the Proxy Statement and Prospectus of CEI and Con
Edison included in CEI's Registration Statement on Form S-4 (No. 333-39164).
(b) The results of the vote on the Holding Company Proposal were as
follows: 169,727,448 shares were voted for this proposal; 2,494,146 shares were
voted against the proposal; 2,286,314 shares were abstentions; and 23,983,761
shares were broker nonvotes.
(c) The results of the vote on the Con Edison Board Proposal were as
follows: 193,108,137 shares were voted for this proposal; 2,931,776 shares were
voted against the proposal; and 2,451,756 shares were abstentions.
<PAGE>
- 27 -
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information about the executive officers
of CEI and Con Edison, as of March 1, 1998. Unless otherwise indicated, all
positions and offices listed are at Con Edison. The term of office of each
officer is until the next election of directors (trustees) of their company and
until his or her successor is chosen and qualifies. Officers are subject to
removal at any time by the board of directors (trustees) of their company.
Name Age Offices and Positions During Past Five
Years
- -----------------------------------------------------------------------------
Eugene R. McGrath 56 10/97 to present - Chairman, President,
Chief Executive Officer and Director of
CEI
3/98 to present - Chairman, Chief
Executive Officer and Trustee of Con
Edison
9/90 to 2/98 - Chairman, President,
Chief Executive Officer and Trustee of
Con Edison
J. Michael Evans 52 3/98 to present, President and Chief
Operating Officer
7/95 to 2/98 - Executive Vice President
- Customer Service
4/95 to 6/95 - Executive Vice President
9/91 to 3/95 - Executive Vice President
- Central Operations
Joan S. Freilich 56 3/98 to present - Executive Vice
President, Chief Financial Officer and
Director (Trustee) of CEI and Con Edison
10/97 to 2/98 - Senior Vice President,
Chief Financial Officer and Director of
CEI
7/96 to 2/98 - Senior Vice President and
Chief Financial Officer
9/94 to 7/96 - Vice President,
Controller and Chief Accounting Officer
7/92 to 8/94 - Vice President and
Controller
Charles F. Soutar 61 7/95 to present - Executive Vice
President - Central Services
2/89 to 6/95 - Executive Vice President
- Customer Service
Stephen B. Bram 55 4/95 to present - Senior Vice President
- Central Operations
12/94 to 3/95 - Senior Vice President
9/94 to 11/94 - Vice President
12/87 to 8/94 - Vice President - Nuclear
Power
Kevin Burke 47 3/98 to present - Senior Vice President
- Corporate Planning
3/93 to 2/98 - Vice President -
Corporate Planning
Mary Jane McCartney 49 10/93 to present - Senior Vice President
- Gas
2/93 - 10/93 - Vice President - Gas
Operations
Peter J. O'Shea, Jr. 60 10/97 to present - Senior Vice President
and General Counsel of CEI
1/96 to present - Senior Vice President
and General Counsel
4/87 to 12/95 - Vice President and
Associate General Counsel, ITT
Corporation
<PAGE>
- 28 -
Name Age Offices and Positions During Past Five
Years
- -----------------------------------------------------------------------------
Horace S. Webb 57 9/92 to present - Senior Vice President
- Public Affairs
Archie M. Bankston 60 12/97 to present - Secretary of CEI
6/89 to present - Secretary and
Associate General Counsel
James P. O'Brien 50 1/98 to present - General Auditor
3/94 to 12/97 - Vice President -
Information Resources
6/89 to 3/94 - Assistant Vice President
- Employee Relations
Robert A. Bell 64 6/81 to present - Vice President - Research
& Development
Marilyn Caselli 43 10/97 to present - Vice President -
Staten Island Customer Service
5/96 to 9/97 - General Manager - Queens
- Gas Operations
3/96 to 4/96 - General Manager - Gas
Operations - Corrosion Control
2/93 to 2/96 - General Manager -
Brooklyn Administration
V. Richard Conforti 59 8/96 to present - Vice President -
Transportation & Stores
7/92 to 7/96 - Assistant Vice President
- Gas Operations
Richard P. Cowie 51 3/94 to present - Vice President -
Employee Relations
2/91 to 2/94 - Director - Central
Customer Service
Robert F. Crane 61 1/97 to present - Vice President - Gas
Operations
3/94 to 12/96 - Vice President - Fuel
Supply
10/93 to 3/94 - Vice President - Gas
Supply
2/93 to 10/93 - Vice President - Gas
Business Development
Vincent J. D'Amelio 56 10/97 to present - Vice President -
Bronx & Westchester Customer Service
2/97 to 9/97 - Vice President - Staten
Island Customer Service
4/88 to 1/97 - Director - Customer
Service, Sprint Communications Company
Robert W. Donohue, Jr. 55 1/98 to present - Vice President -
Brooklyn & Queens Customer Service
2/94 to 12/97 - Vice President - Queens
Customer Service
3/90 to 2/94 - Vice President -
Construction
Charles J. Durkin, Jr. 54 10/97 to present - Vice President -
Generation Engineering
12/93 to 9/97 - Vice President - Fossil
Power
<PAGE>
- 29 -
Name Age Offices and Positions During Past Five
Years
- -----------------------------------------------------------------------------
Jacob Feinstein 55 3/98 to present - Vice President
4/91 to 2/98 - Vice President - System &
Transmission Operations
David F. Gedris 49 10/97 to present - Vice President -
Fossil Power
2/96 to 9/97 - Vice President -
Westchester Customer Service
2/94 to 1/96 - Vice President -
Maintenance and Construction
7/92 to 1/94 - Assistant Vice President
- Power Generation Maintenance
Garrett W. Groscup 57 1/98 to present - Vice President -
Customer Operations
6/95 to 12/97 - Vice President -
Brooklyn Customer Service
2/94 to 5/95 - Vice President - Energy
Services
4/91 to 2/94 - Vice President -
Manhattan Customer Service
William A. Harkins 52 2/97 to present - Vice President -
Energy Management
2/89 to 2/97 - Vice President - Planning
and Inter-Utility Affairs
Paul H. Kinkel 53 1/98 to present - Vice President -
Nuclear Power
2/96 to 12/97 - Vice President -
Maintenance and Construction
12/93 to 2/96 - Vice President -
Engineering
M. Peter Lanahan, Jr. 54 8/96 to present - Vice President -
Environment, Health and Safety
5/95 to 8/96 - Vice President -
Environmental Affairs
1/91 to 4/95 - Manager , General
Electric Company
Richard J. Morgan 62 12/96 to present - Vice President -
Steam Operations
7/92 to 11/96 - Assistant Vice President
- Steam Operations
John A. Nutant 62 2/94 to present - Vice President -
Manhattan Customer Service
7/92 to 1/94 - Vice President - Queens
Customer Service
Stephen E. Quinn 51 1/98 to present - Vice President -
Maintenance and Construction
9/94 to 12/97 - Vice President - Nuclear
Power
8/88 to 8/94 - General Manager - Nuclear
Power Generation
<PAGE>
- 30 -
Name Age Offices and Positions During Past Five
Years
Louis Rana 49 3/98 to present - Vice President -
System & Transmission Operations
10/97 to 2/98 - General Manager - System
Operation
8/97 to 9/97 - General Manager -
Manhattan Electric Operations
1/94 to 7/97 - Chief Distribution
Engineer
1/93 to 12/93 - General Manager - Queens
Electric Operations
Hyman Schoenblum 49 12/97 to present - Vice President and
Controller of CEI
10/97 to present - Vice President and
Controller
3/97 to 9/97 - Vice President and
Treasurer
6/96 to 2/97 - Director - Financial
Restructuring
11/93 to 5/96 - Director - Corporate
Planning
7/88 to 10/93 - Assistant Controller
Edwin W. Scott 59 6/89 to present - Vice President and
Deputy General Counsel
Wanda Skalba 48 1/98 to present- Vice President -
Information Resources
4/96 to 12/97 - Director - Information
Resources
4/93 to 4/96 - Director - Application
Services
Minto L. Soares 61 1/98 to present - Vice President -
Substation Operations
6/91 to 12/97 - Vice President - Bronx
Customer Service
Robert P. Stelben 55 12/97 to present - Vice President and
Treasurer of CEI
10/97 to present - Vice President and
Treasurer
8/97 to 9/97 - Vice President - Finance
11/95 to 8/97 - Vice President and
Treasurer, Johnson & Higgins
8/94 to 11/95 - Vice President and
Treasurer, BTR Americas
9/85 to 6/94 - Vice President and
Treasurer, Marsh & McLennan
Alfred R. Wassler 53 8/96 to present - Vice President -
Purchasing
3/94 to 8/96 - Vice President -
Purchasing, Transportation and Stores
7/92 to 2/94 - Vice President -
Purchasing
<PAGE>
- 31 -
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
CEI's Common Shares ($.10 par value), the only class of common equity of
CEI, are traded on the New York Stock Exchange. As of January 31, 1998 there
were 134,168 holders of record of CEI's Common Shares. For information about a
$1 billion repurchase of CEI Common Shares, see " Capital Requirements and
Financing" in Item 1. The outstanding shares of Con Edison's Common Stock ($2.50
par value), the only class of common equity of Con Edison, are held by CEI and
are not traded.
MARKET PRICE RANGE IN CONSOLIDATED REPORTING SYSTEM AND DIVIDENDS PAID ON
COMMON STOCK
The following table shows the market price range of, and dividends paid
on, Con Edison's Common Stock during the periods indicated. CEI became the
holding company for Con Edison on January 1, 1998 when the Holding Company
Proposal was implemented. See Item 4.
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------------------------------------------
Dividends Dividends
High Low Paid High Low Paid
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $32-1/8 $28-1/2 $ .525 $34-3/4 $30-7/8 $ .52
2nd Quarter 30-3/4 27 .525 32-3/8 27-3/8 .52
3rd Quarter 34-9/16 29-5/16 .525 29-5/8 25-7/8 .52
4th Quarter 41-1/2 32-1/4 .525 30-5/8 27-1/2 .52
As of January 31, 1998 there were 134,168 holders of record of common stock.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
On January 27, 1998, CEI's Board of Directors declared a quarterly
dividend of 53 cents per Common Share which was paid on March 15, 1998 to
holders of record on February 18, 1998. For additional information about the
payment of dividends by CEI and Con Edison, see "Dividends" in Note B to the
financial statements in Item 8.
ITEM 6. SELECTED FINANCIAL DATA
The following table shows selected financial data for Con Edison. CEI
became the holding company for Con Edison on January 1, 1998 when the Holding
Company Proposal was implemented. See Item 4.
<TABLE>
<CAPTION>
Year Ended December 31 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 7,121.3 $ 6,959.7 $ 6,536.9 $ 6,373.1 $ 6,265.4
Purchased power 1,349.4 1,272.9 1,107.2 787.5 812.6
Fuel 596.8 573.3 504.1 567.8 605.2
Gas purchased for resale 479.2 418.3 259.8 341.2 289.7
Operating income 1,045.4 1,013.6 1,041.4 1,036.2 951.1
Net income for common stock 694.5 688.2 688.3 698.7 622.9
Total assets 14,722.5 14,057.2 13,949.9 13,728.4 13,257.4
Long-term debt 4,188.9 4,238.6 3,917.2 4,030.5 3,643.9
Preferred stock subject to mandatory redemption 84.6 84.6 100.0 100.0 100.0
Common shareholders' equity 5,930.1 5,727.6 5,522.7 5,313.0 5,068.5
- ---------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per common share $ 2.95 $ 2.93 $ 2.93 $ 2.98 $ 2.66
Cash dividends per common share $ 2.10 $ 2.08 $ 2.04 $ 2.00 $ 1.94
- ---------------------------------------------------------------------------------------------------------------------
Average common shares outstanding (millions) 235.1 235.0 234.9 234.8 234.0
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- 32 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Consolidated Edison, Inc. (CEI) was established as the holding company for
Consolidated Edison Company of New York, Inc. (Con Edison) on January 1, 1998.
The following discussion and analysis relates to the accompanying consolidated
financial statements and the notes thereto and should be read in conjunction
with the financial statements and notes. The financial statements include the
accounts of Con Edison and all wholly-owned subsidiaries and, therefore, also
represent the consolidated financial statements of CEI.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF LIQUIDITY
Cash and temporary cash investments were $183.5 million at December 31, 1997
compared with $106.9 million at December 31, 1996. These balances reflect, among
other things, the timing and amounts of external financing. In addition, at
December 31, 1997 Con Edison had set aside $328.9 million for the retirement of
three long-term debt issues.
CEI expects to finance its operations, capital requirements and the payment of
dividends to its shareholders primarily from dividends and other distributions
it receives from Con Edison, and may also from time to time use external
borrowings. For information about restrictions on the payment of dividends by
Con Edison, see Note B to the financial statements.
Con Edison expects to finance its operations and capital requirements from
internally-generated funds and external debt financings, and may also from time
to time make short-term borrowings. Con Edison's cash requirements are subject
to substantial fluctuations during the year due to seasonal variations in cash
flow and generally peak in January and July of each year when the semi-annual
payments of New York City property taxes are due. To increase its financial
flexibility, Con Edison initiated a $500 million commercial paper program in
January 1998. Moody's Investor Service (Moody's), Standard and Poor's Rating
Group (S&P) and Fitch IBCA (Fitch) rated Con Edison's commercial paper P-1, A-1
and F-1, respectively. See Note C to the financial statements.
Con Edison's customer accounts receivable, less allowance for uncollectible
accounts, amounted to $581.2 million and $544.0 million at December 31, 1997 and
1996, respectively. The increase at year-end 1997 compared with year-end 1996 is
primarily attributable to one less cash collection day in 1997 compared with
1996. In terms of equivalent days of revenue outstanding, these amounts
represented 28.2 and 28.6 days, respectively.
Regulatory accounts receivable amounted to a net credit to be refunded to
customers of $1.7 million at December 31, 1997 compared with a receivable
recoverable from customers at December 31, 1996 of $45.4 million. The decrease
at year-end 1997 compared with year-end 1996 is due primarily to the elimination
in 1997 of electric and gas regulatory incentive mechanisms. See Note A to the
financial statements.
Deferred charges for Enlightened Energy (demand-side management) program costs
amounted to $117.8 million and $133.7 million at December 31, 1997 and 1996,
respectively. These costs are recoverable from customers under the Settlement
Agreement approved by the Public Service Commission (PSC) as discussed below.
Con Edison's net cash flows from operating activities for years 1995 through
1997 were as follows:
(Millions of Dollars) 1997 1996 1995
- ------------------------------------------------------------------------------
Net cash flows from operating activities $ 1,239 $ 1,107 $ 1,276
Less: Dividends on common and
preferred stock 512 511 515
- ------------------------------------------------------------------------------
Net after dividends $ 727 $ 596 $ 761
- ------------------------------------------------------------------------------
Net cash flows in 1997 were higher than in 1996 due principally to reduced
operations and maintenance expenses. Net cash flows in 1996 were lower than in
1995 due principally to lower incentive billings and higher costs for
recoverable fuel and gas in storage.
FINANCIAL RATIOS Con Edison's common equity ratio and interest coverage ratio
continue to be high compared with the electric utility industry generally, an
indication of Con Edison's continued financial strength. Con Edison's common
equity ratio was 56.8 percent and 55.7 percent at year-end 1997 and 1996,
respectively. Con Edison's interest coverage was 4.09 and 4.18 times for 1997
and 1996, respectively. See "Stock Repurchase," below.
DEBT FINANCINGS Con Edison issued a total of $300 million of five-year floating
rate debentures, the interest rate on which is reset quarterly: $150 million in
June 1997 and $150 million in December 1996. In July 1995 Con Edison issued $100
million of 10-year 6-5/8% debentures.
<PAGE>
-33-
Con Edison's senior unsecured debt securities (debentures and tax-exempt debt)
are rated A1, A+ and AA- by Moody's, S&P and Fitch, respectively. Con Edison's
subordinated debentures (QUICS) are rated A2 by Moody's, A by S&P and A+ by
Fitch.
REFUNDINGS The PSC has authorized Con Edison to issue securities for the
refunding of its outstanding debt and preferred stock from time to time prior to
the year 2003. Refundings may be effected by means of any one or a combination
of redemption calls, tender offers, exchange offers, negotiated transactions or
open market purchases.
In February 1998 Con Edison issued $180 million of 10-year 6-1/4% debentures and
$105 million of 30-year 7.10% debentures, to refund in March 1998 its 7-1/8%
tax-exempt debt issued through the New York State Energy Research and
Development Authority (NYSERDA), 7-3/8% debentures and 8.05% debentures. In
December 1997 Con Edison issued $330 million of 10-year 6.45% debentures to
refund in January 1998 three series of tax-exempt debt issued through NYSERDA.
In March 1996 Con Edison refunded $317 million of certain series of its
preferred stock with the proceeds from the issuance of $275 million of 35-year
7-3/4% subordinated deferrable interest debentures (interest payments on which
are tax deductible, unlike preferred stock dividends) and $25 million of cash
balances. In May 1996 Con Edison issued $100 million of 30-year 7-3/4%
debentures, the proceeds of which were used to redeem, in advance of maturity,
its 9-3/8% debentures. In August 1995 Con Edison issued $128.3 million of
25-year 6.10% tax-exempt debt through NYSERDA, the proceeds of which were used
to redeem the outstanding 9% tax-exempt debt.
Con Edison used cash balances to redeem its outstanding 9.70% debentures in
December 1995 and its outstanding convertible preference stock in December 1997.
STOCK REPURCHASE To realign its capital structure with its evolving business
risk, CEI announced its intent to repurchase up to $1 billion of its common
shares, subject to PSC approval and market conditions. The repurchase is
expected to be funded by Con Edison from internally-generated funds, debt
financings and, depending on the timing, the net proceeds of generating plant
sales. The PSC is expected to act on the stock repurchase in March 1998.*
CAPITAL REQUIREMENTS The following table compares Con Edison's capital
requirements for the years 1995 through 1997 and estimated amounts for 1998 and
1999:
(Millions of Dollars) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Construction expenditures $611 $622 $654 $675 $693
Nuclear decommissioning
trust 21 21 21 21 19
Nuclear fuel 35 22 15 49 13
- ------------------------------------------------------------------------------
Subtotal 667 665 690 745 725
Retirement of long-term debt
and preferred stock (a) 225 200 106 184 11
- ------------------------------------------------------------------------------
Total $892 $865 $796 $929 $736
- ------------------------------------------------------------------------------
(a) Does not include stock repurchases or debt refundings. See "Refundings" and
"Stock Repurchase," above. For details of securities maturing after 1999,
see Note B to the financial statements.
CEI expects to invest $300 million in 1998 and 1999 in its subsidiaries other
than Con Edison, including Consolidated Edison Solutions, Inc., formerly Promark
Energy, Inc., and Consolidated Edison Development, Inc., formerly Gramercy
Development, Inc.
ELECTRIC CAPACITY RESOURCES
Electric peak load in Con Edison's service area, adjusted for historical design
weather conditions, grew by 250 megawatts (MW) (2.3 percent) in 1997. This
growth reflects primarily the robust local economy. Con Edison's current
resource plans indicate that its service area could require additional
generation resources within the next five years. However, Con Edison does not
anticipate adding long-term capacity resources to its electric system. In a
competitive electric market, unregulated entities, possibly including a
subsidiary of CEI, are expected to provide needed capacity resources as dictated
by market conditions.
____________
* The PSC approved the stock repurchase in March 1998.
<PAGE>
-34-
COMPETITION AND INDUSTRY RESTRUCTURING
In recent years federal and New York State initiatives have promoted the
development of competition in the sale of electricity and gas. In general these
initiatives "unbundle," or separate, the integrated supply and delivery services
that electric and gas utilities have traditionally provided, and enable
customers to purchase electricity and gas directly from suppliers other than
their local utility. Under these initiatives Con Edison will continue to
transport and deliver energy to customers in its service area, including energy
from other suppliers, over its electric and gas systems. The rates for such
delivery services are expected to remain regulated on a cost-of-service basis.
The electric and gas transportation and delivery systems, along with Con
Edison's steam system, which will also remain rate-regulated, comprised more
than 70 percent of Con Edison's net utility plant at December 31, 1997. These
initiatives have also fostered new unregulated energy supply and services
businesses in which the subsidiaries of CEI other than Con Edison may
participate. These new businesses will be subject to competition and different
investment risks than those involved in Con Edison's utility business.
In April 1996 the Federal Energy Regulatory Commission (FERC) issued its Order
888 requiring electric utilities to file non-discriminatory open access
transmission tariffs that would be available to wholesale sellers and buyers of
electric energy and allowing utilities to recover related legitimate and
verifiable stranded costs subject to FERC's jurisdiction. Con Edison's open
access tariff took effect in July 1996. The company has billed approximately
$450,000 under the tariff, subject to refund pending the outcome of a September
1997 hearing on the tariff before FERC. FERCis expected to act on the tariff in
1998. In addition, Con Edison and Con Edison Solutions have been authorized by
FERC to make wholesale sales of electricity at market-based rates.
In January 1997 Con Edison, along with the other New York electric utilities,
submitted a filing to FERC for approval of a restructuring of the wholesale
electric market in New York State, including the establishment of an independent
system operator (ISO) that would control and operate most electric transmission
facilities in New York as an integrated system, a New York State Reliability
Council, which would promulgate reliability rules, and a "power exchange" that
would establish visible spot market prices for wholesale energy. In December
1997 Con Edison and the other New York utilities supplemented this filing with
additional details regarding the proposed new market structure and a new ISO
governance structure based upon an unaffiliated ISO board of directors.
In May 1996 the PSC issued an order in its Competitive Opportunities proceeding
endorsing a fundamental restructuring of the electric utility industry in New
York State, based on competition in the generation and energy services sectors
of the industry. In September 1997 the PSC approved a settlement agreement
between Con Edison, the PSC staff and certain other parties (the Settlement
Agreement). See "PSC Settlement Agreement," below.
All of Con Edison's gas customers, either individually or by aggregating their
demand with other customers, became eligible in 1996 to purchase gas directly
from suppliers other than Con Edison.
PSC SETTLEMENT AGREEMENT
The Settlement Agreement in the Competitive Opportunities proceeding provides
for a transition to a competitive electric market through the development of a
"retail access" plan, a rate plan for the period ending March 31, 2002 (the
Transition), a reasonable opportunity for recovery of "strandable costs" and the
divestiture by Con Edison to unaffiliated third parties of at least 50 percent
of its New York City fossil-fueled electric generating capacity.
RETAIL ACCESS Con Edison will implement an energy and capacity retail access
program that will permit its customers to choose alternative energy suppliers.
The delivery of electricity to customers will continue to be through Con
Edison's transmission and distribution systems. The program will begin in June
1998 with up to 500 MW of customer load. The program will be expanded in
increments and Con Edison will target the phase-in of retail access to make it
available to all of its customers by the earlier of 18 months after the New York
ISO becomes fully operational or December 31, 2001. This schedule is subject to
adjustment as circumstances warrant. In general, Con Edison's delivery rates for
retail access customers during the Transition will equal the rates applicable to
other comparable Con Edison customers, less a rate representing the market value
of the energy and capacity.
RATE PLAN In January 1998 Con Edison implemented an annualized rate reduction of
$107.5 million pursuant to the rate plan provisions of the Settlement Agreement.
Additional rate decreases will be implemented during the Transition. The rate
plan reduces the total generation-related revenues that Con Edison would have
received over the five-year Transition period had rate levels in effect on March
31, 1997 remained in effect by approximately $1 billion, exclusive of additional
revenue reductions from lower gross receipts taxes. Financing savings from any
securitization of strandable costs, in excess of the amount of the savings that
may be allocated by the PSC for SBC Programs (defined below), and any further
reductions in New York State gross receipts taxes, will be utilized for
additional rate reductions. In general, base electric rates will not otherwise
be changed during the Transition except in the event of changes in costs above
anticipated annual levels resulting from legal or regulatory requirements
(including a requirement or interpretation
<PAGE>
-35-
resulting in Con Edison's refunding its tax-exempt debt), inflation in excess of
a four percent annual rate, property tax increases and environmental costs above
pre-determined levels, or in the event Con Edison's rate of return becomes
unreasonable for the provision of safe and adequate service.
The Settlement Agreement also provides, among other things, for a non-bypassable
system benefits charge to recover, to the extent not otherwise recovered, the
costs of required research and development, energy efficiency programs, programs
to assist low-income customers and environmental protection programs
(collectively, "SBC Programs"). In addition, the Settlement Agreement includes a
penalty mechanism (estimated maximum, $26 million per year) for failure to
maintain certain service quality and reliability standards.
For any rate year during the Transition, 50 percent of any earnings in excess of
a rate of return of 12.9 percent on electric common equity will be retained for
shareholders and 50 percent will be applied for customer benefit, with one-half
of the amount to be applied to a reduction of rates or as otherwise determined
by the PSC and the balance to be deferred and applied to reduce Con Edison's
generating plant balances through additional depreciation expense. The rate of
return calculation will exclude any incentive earnings and reflect any amounts
by which the rate of return for earlier Transition rate years fell below 11.9
percent. This earnings sharing will cease beginning in the year in which Con
Edison fulfills its divestiture commitment or in which 15 percent of the service
area peak load (excluding the existing load served by the New York Power
Authority) is supplied by entities other than by Con Edison.
DIVESTITURE COMMITMENT Con Edison has agreed to divest to unaffiliated third
parties at least 50 percent of its New York City fossil-fueled electric
generating capacity no later than December 2002, and Con Edison may divest
additional generating capacity. It may be determined that divestiture should be
advanced or delayed (to maximize sales price or address other developments) or
that the 50 percent divestiture commitment is not sufficient to mitigate market
power. Con Edison's fossil-fueled electric generating units not divested to
unaffiliated third parties will be transferred to an unregulated affiliate of
Con Edison by December 2002.
Con Edison will submit a detailed divestiture plan to the PSC in March 1998. Con
Edison has agreed to initiate the divestiture process with respect to at least
30 percent of its New York City fossil-fueled generating capacity within 90 days
after PSC approval of the divestiture plan unless otherwise justified in the
divestiture plan. The PSC could approve the divestiture plan as submitted or
modify it to address market power or other concerns.
Con Edison will retain for its shareholders the first $50 million of any net
after-tax gains from the divestiture of generating capacity. Any additional net
gains or net losses from the divestiture, or from the transfer to an affiliate
of Con Edison, of generating capacity during the Transition will be deferred for
disposition by the PSC. After the Transition the difference between the
remaining book value of generating plant and the net market values defined by
divestiture will be reflected in the strandable costs to be recovered following
the Transition.
RECOVERY OF PRIOR INVESTMENTS AND COMMITMENTS Potential strandable costs for Con
Edison include its fossil-fueled generating plants, Indian Point 2 nuclear
generating unit, decommissioning of the Indian Point plant and contracts with
non-utility generators (NUGs).
Under the Settlement Agreement, Con Edison will continue to recover its
potential electric strandable costs during the Transition in the rates it
charges all customers. In addition, Con Edison will provide for $75 million of
additional depreciation for its fossil-fueled electric generating units that
also supply the steam system. Also, as indicated above, certain "excess"
earnings, if achieved, will be applied as an offset to strandable costs.
The Settlement Agreement provides that Con Edison will be given a reasonable
opportunity following the Transition to recover remaining electric strandable
costs, as adjusted for net gains in excess of $50 million or net losses from
divestiture or transfer of Con Edison generating capacity, including a
reasonable return on investments, through a non-bypassable charge to customers.
For remaining fossil-related strandable costs, the recovery period will be ten
years and for the Indian Point 2 nuclear unit, the recovery period will be the
remaining operating license term of the unit. With respect to its NUG contracts,
Con Edison will be permitted to recover at least 90 percent of the amount by
which the actual costs of its purchases under the contracts exceed market value
after the Transition. Any potential disallowance after the Transition will be
limited to the lower of (i) 10 percent of the above market costs or (ii) $300
million (in 2002 dollars). The potential disallowance will be offset by NUG
contract mitigation achieved by Con Edison after April 1, 1997 and 10 percent of
the gross proceeds of generating unit sales to third parties. Con Edison will be
permitted a reasonable opportunity to recover any costs subject to disallowance
that are not offset by these two factors if it makes good faith efforts in
implementing provisions of the Settlement Agreement leading to the development
of a competitive electric market in its service territory and the development of
an ISO.
<PAGE>
-36-
In October 1997 Con Edison, pursuant to the Settlement Agreement, requested the
PSC to defer certain costs related to agreements to terminate contracts with
NUGs for 42.5 MW of capacity. Including these agreements, Con Edison has, since
1993, entered into agreements to terminate NUG contracts for approximately 768
MW at a cost of $281 million (exclusive of interest), $200 million of which has
already been recovered from customers. Currently, Con Edison purchases capacity
under NUG contracts for plants with 2,059 MW of capacity. See Note G to the
financial statements.
CORPORATE STRUCTURE The Settlement Agreement establishes guidelines governing
transactions among affiliates. Without PSC approval, Con Edison is prohibited
from making loans to, or guaranteeing the obligations of, CEI or any of its
other subsidiaries, or pledging its assets as security for the indebtedness of
CEI or any of its affiliates. (See also Note B to the financial statements.) Con
Edison and the other subsidiaries must operate as separate entities, and
transfers of assets, services and information between Con Edison and its
affiliates are subject to certain restrictions. Con Edison and the other
subsidiaries must have separate operating employees, and non-administrative
operating officers of Con Edison may not be operating officers of any of the
other subsidiaries. Transfers of employees from Con Edison to the other
subsidiaries are also restricted.
ACCOUNTING EFFECT As a result of the Settlement Agreement, there have been
changes to certain of Con Edison's accounting policies. These changes, however,
did not have a material effect on Con Edison's financial position or results of
operations. See Note A to the financial statements.
1995 ELECTRIC RATE AGREEMENT
In April 1995 the PSC approved a three-year electric rate agreement effective
April 1, 1995. However, the Settlement Agreement supersedes the provisions of
the 1995 electric rate agreement that prescribe overall electric revenue levels
for the 12 months ending March 31, 1998. The Settlement Agreement also
eliminated, effective April 1, 1997, the provisions of the 1995 electric rate
agreement for incentives or penalties related to the Enlightened Energy program
and customer service performance, the modified Electric Revenue Adjustment
Mechanism (ERAM) and earnings sharing.
The principal features of the 1995 electric rate agreement were as follows:
LIMITED CHANGES IN BASE REVENUES There was no increase in base electric revenues
for the first rate year (the 12 months ended March 31, 1996) and rates were
reduced by approximately $19 million (0.3 percent) for the second rate year (the
12 months ended March 31, 1997).
EARNINGS SHARING The allowed rates of return on common equity in the first two
rate years were 11.1 percent and 10.31 percent, respectively, based on an
assumed 52 percent common equity ratio. Primarily as a result of increased
productivity, Con Edison's actual rates of return for the first two rate years
exceeded a threshold level established for sharing earnings with customers. As a
result, Con Edison recorded provisions, before federal income tax, for the
future benefit of electric customers of $10.2 million for the first rate year
(primarily in the fourth quarter of 1995) and $25.7 million for the second rate
year ($18.0 million in 1996 and $7.7 million in 1997).
INCENTIVE PROVISIONS Con Edison was permitted to earn additional incentive
amounts, not subject to the earnings sharing provisions, by attaining certain
objectives for its Enlightened Energy program and for customer service. There
were also penalties for failing to achieve minimum objectives, and there was a
penalty-only incentive mechanism designed to encourage Con Edison to maintain
its high level of service reliability. Con Edison accrued benefits for these
incentives of $38.4 million in 1995 (including $17.1 million related to the
prior year), $30.3 million in 1996 and $0.5 million in 1997.
PARTIAL PASS-THROUGH FUEL ADJUSTMENT CLAUSE (PPFAC) The 1995 electric rate
agreement also provided for a fuel and purchased power cost-savings incentive,
which has been continued under the Settlement Agreement. See Note A to the
financial statements. Con Edison's earnings, before federal income tax, under
the PPFAC were increased by $19.2 million in 1995 ($6.5 million of which was
earned in the first calendar quarter under similar provisions of a 1992 electric
rate agreement) and $24.9 million in 1996. For 1997, primarily as a result of
unscheduled outages at its Indian Point 2 nuclear unit, Con Edison incurred a
net penalty of $1.8 million, before federal income tax, under the PPFAC.
MODIFIED ERAM The 1995 agreement continued, in modified form, the ERAM
rate-making concept that was established in the 1992 agreement. See Note A to
the financial statements. For 1995 Con Edison set aside $35.3 million to be
refunded to customers for revenue overcollections under the ERAM provisions. Con
Edison accrued $10.1 million for 1996 and $18.0 million for 1997 for revenue
undercollections under the ERAM provisions.
<PAGE>
-37-
GAS AND STEAM RATE AGREEMENTS
In January 1997 the PSC approved a four-year gas rate settlement agreement with
the following major provisions: base rates will, with limited exceptions, remain
at September 30, 1996 levels through September 30, 2000; Con Edison will share
in net revenue from interruptible gas sales (previously used only to reduce firm
customer gas costs) by retaining in each rate year the first $7.0 million of net
revenue above 8.5 million dekatherms and 50 percent of additional net revenues;
and 86 percent of any increase in property taxes above levels implicit in rates
will be recovered by offsetting amounts, if any, that would otherwise be
returned to customers. Con Edison will share with customers 50 percent of
earnings above a 13 percent rate of return on gas common equity.
In September 1997 the PSC approved a steam rate agreement between Con Edison and
the PSC staff. The three-year agreement provides for a $16 million base rate
increase, effective October 1, 1997. Base rates for the remainder of the term of
the agreement will not be increased or decreased except in certain limited
circumstances. In its order approving the steam rate agreement, the PSC modified
the agreement to require Con Edison to submit a long-range plan for the steam
system in time to be considered contemporaneously with the company's divestiture
plan for fossil-fueled generating capacity. See "PSC Settlement Agreement
Divestiture Commitment," above.
In October 1994 the PSC approved three-year rate agreements for gas and steam
services. Pursuant to the gas agreement, rates were increased $7.7 million (0.9
percent) for the first rate year and $20.9 million (2.5 percent) for the second
rate year. Con Edison accrued $7.4 million and $9.2 million in 1995 and 1996,
respectively, for earnings under the incentive provisions of the agreement. The
1997 gas rate agreement superseded the third rate year of the 1994 agreement and
discontinued the incentive provisions effective October 1997. Pursuant to the
steam agreement, rates were increased $9.9 million (3.0 percent), $4.6 million
(1.3 percent) and $12.1 million (3.44 percent), respectively, for the three rate
years.
FINANCIAL MARKET RISKS
CEI's primary market risks associated with activities in derivative financial
instruments, other financial instruments and derivative commodity instruments,
are interest rate risk and commodity price risk.
The interest rate risk relates primarily to new debt financing needed to fund
capital requirements, including maturing debt securities, and to variable rate
debt. In general, Con Edison's electric, gas and steam rates are not subject to
change for fluctuations in the cost of capital during the respective terms of
the current rate agreements. Con Edison manages its interest rate risk through
the issuance of mostly fixed-rate debt with varying maturities and through
opportunistic refundings of debt through optional redemptions and tender offers.
In addition, Con Edison, from time to time, enters into derivative financial
instruments to hedge interest rate risk. There were no derivative financial
instruments outstanding at December 31, 1997.
The commodity price risk relates primarily to Con Edison's use of derivative
commodity instruments to hedge its gas in storage. In addition, Con Edison
Solutions uses derivatives to hedge its gas purchases. Con Edison does not
generally use derivatives to hedge its purchases of electricity, fuel (to
produce electricity and steam) and gas, because the related commodity price
risks are mitigated by the fuel adjustment provisions of its current rate
agreements. At December 31, 1997 neither the fair value of the derivatives
outstanding nor potential, near-term derivative losses from reasonably possible
near-term changes in market prices were material to the financial position,
results of operations or liquidity of CEI or Con Edison. See Note A to the
financial statements for additional information about the fuel cost provisions
of the rate agreements and gas hedging.
YEAR 2000 EXPOSURE
Many information systems have been designed to function based on years that
begin with 19. CEI expects that by the Year 2000 it will have adapted its
systems, to the extent it considers necessary, to process years that begin with
20, and does not expect that the costs of doing so will be material. However,
the company cannot predict the effect on it of any Year 2000 problems of other
entities such as suppliers, customers and service providers.
<PAGE>
-38-
AIR QUALITY
The Clean Air Act amendments of 1990 impose limits on sulfur dioxide and
nitrogen dioxide emissions from electric generating units. Under the "Reasonably
Available Control Technology"provisions of the Clean Air Act, New York and ten
other member states of the Northeast Ozone Transport Commission have entered
into a Memorandum of Understanding that calls for the states to adopt more
stringent nitrogen oxide standards. Con Edison does not expect that compliance
with the sulfur dioxide and nitrogen oxide standards will have a material
adverse effect on its financial condition, results of operations or liquidity.
In July 1997 the United States Environmental Protection Agency adopted new
ambient air quality standards for ozone and particulate matter. Con Edison does
not expect that compliance with the ozone standard will have a material adverse
effect on its financial condition, results of operations or liquidity. If
ambient air quality monitoring identifies New York City as a non-attainment area
for the particulate matter standard, the New York State Department of
Environmental Conservation (DEC) will be required to adopt regulations to
achieve compliance with the standard. Depending on the regulations, compliance
with the standard may require increased operating costs and capital
expenditures.
NUCLEAR GENERATION
INDIAN POINT STATION Con Edison has operated its approximately 1,000 MW Indian
Point 2 nuclear generating unit since it was first placed into service in 1973.
At December 31, 1997 Indian Point 2 had a net book value of approximately $479
million. See Note A to the financial statements for a discussion of costs of
decommissioning Indian Point 2 and the retired Indian Point 1 unit.
RATE RECOVERY The Settlement Agreement provides that, following the Transition,
Con Edison will have a reasonable opportunity to recover, through a
non-bypassable charge, its investment in Indian Point 2 and the costs of
decommissioning its nuclear operations. See "PSC Settlement Agreement - Recovery
of Prior Investments and Commitments," above.
The Settlement Agreement does not contemplate the divestiture or transfer of Con
Edison's Indian Point 2 nuclear generating unit. The PSC is expected to
institute a collaborative process to further consider issues raised by an August
1997 PSC staff report on nuclear generating facilities.*
OPERATION Under normal operating conditions, scheduled refueling and maintenance
outages, such as the outage completed in July 1997, are generally required for
Indian Point 2 after each cycle of approximately 22 months of operation. The
unit was out of service from January 25, 1997 to March 15, 1997 and has been out
of service since October 15, 1997 for unscheduled maintenance.*
FUEL DISPOSAL The United States Department of Energy (DOE) has defaulted on its
obligation under a contract with Con Edison pursuant to which DOE was to begin
to take title to Con Edison's spent nuclear fuel (SNF) generated at Indian Point
2 as DOE transports the fuel to a federal repository for permanent disposal. In
July 1996 the United States Court of Appeals for the District of Columbia held
that the DOE has an obligation "reciprocal to the utilities' obligation to pay
fees, to start disposing of the spent nuclear fuel no later than January 31,
1998." In January 1997 Con Edison and a number of other utilities petitioned the
court for an order directing the DOE to begin acceptance of SNF, authorizing
payment into escrow accounts of fees that would otherwise be payable to DOE
pursuant to SNF disposal contracts, and instituting enhanced judicial oversight
of DOE's performance under the contracts. In November 1997 the court ruled that
the petition was premature pending a determination of whether provisions of the
contracts would afford an adequate remedy.
________
* In March 1998, the PSC instituted a proceeding on nuclear generation and
the NRC issued a Confirmatory Action Letter regarding Indian Point 2. See
"Electric Facilities - Generating Facilities" in Item 2.
<PAGE>
-39-
Con Edison estimates that it has adequate on-site capacity for interim storage
of its spent fuel until 2005. Absent regulatory or technological developments by
2005, Con Edison expects that it will require additional on-site or other spent
fuel storage facilities. Such additional facilities would require regulatory
approvals. In the event that it is unable to make appropriate arrangements for
the storage of its spent fuel, Con Edison would be required to curtail the
operation of Indian Point 2.
SUPERFUND AND ASBESTOS CLAIMS AND OTHER CONTINGENCIES
Reference is made to Note F to the financial statements for information
concerning potential liabilities of Con Edison arising from the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund), from claims relating to alleged exposure to asbestos, and from
certain other contingencies to which Con Edison is subject.
IMPACT OF INFLATION
CEI is affected by the decline in the purchasing power of the dollar caused by
inflation. Regulation permits Con Edison to recover through depreciation only
the historical cost of its plant assets even though in an inflationary economy
the cost to replace the assets upon their retirement will substantially exceed
historical costs. This is, however, partially offset by the repayment of Con
Edison's long-term debt in dollars of lesser value than the dollars originally
borrowed.
FORWARD-LOOKING STATEMENTS
This discussion and analysis includes forward-looking statements, which are
statements of future expectation and not facts. Words such as "estimates,"
"expects," "anticipates," "intends," "plans" and similar expressions identify
forward-looking statements. Actual results or developments might differ
materially from those included in the forward-looking statements because of
factors such as competition and industry restructuring, changes in economic
conditions, changes in historical weather patterns, changes in laws, regulations
or regulatory policies, developments in legal or public policy doctrines,
technological developments and other presently unknown or unforeseen factors.
<PAGE>
-40-
RESULTS OF OPERATIONS
Basic and diluted earnings per share were $2.95 in 1997 and $2.93 in 1996 and
1995. The average numbers of common shares outstanding for 1997, 1996 and 1995
were 235.1 million, 235.0 million and 234.9 million, respectively.
The increase in earnings for the year 1997 was primarily the result of lower
operations and maintenance expenses, reflecting ongoing productivity
improvements, partially offset by the impact of weather on net revenues and
reduced incentive earnings under agreements covering electric rates.
Earnings for 1997, 1996 and 1995 reflect the electric, gas and steam rate
increases and decreases and other provisions of the related rate agreements
discussed above.
OPERATING REVENUES AND FUEL COSTS
Operating revenues in 1997 and 1996 increased from the prior year by $161.5
million and $422.8 million, respectively. The principal increases and decreases
in revenue were:
Increase (Decrease)
- ------------------------------------------------------------------------------
1997 1996
(Millions of Dollars) over 1996 over 1995
- ------------------------------------------------------------------------------
Electric, gas and steam rate changes $(24.7) $ 0.8
Fuel rider billings* 145.0 319.7
Sales volume changes
Electric** 45.0 2.9
Gas (8.1) 124.2
Steam (28.9) 8.1
Gas weather normalization 17.2 (18.5)
Electric:
ERAM/Modified ERAM accruals 7.9 45.4
Recoveries (refunds) of prior rate year ERAM accruals (18.8) (25.9)
Rate refund provisions 10.5 (8.2)
Off-system sales (11.6) (4.8)
Other 28.0 (20.9)
- ------------------------------------------------------------------------------
Total $161.5 $422.8
- ------------------------------------------------------------------------------
* Excludes costs of fuel, purchased power and gas purchased for resale
reflected in base rates.
** Includes Con Edison direct customers and delivery service for NYPA and
municipal agencies.
The increases in fuel billings in 1997 and 1996 reflect increases in the unit
costs of purchased power, fuel used to produce electricity and steam, and gas
purchased for resale. Electric fuel costs increased $52.0 million in 1997,
primarily because of the increased unit cost of fuel, partially offset by lower
generation. Electric purchased power costs increased by $50.4 million in 1997
over the 1996 period due to increased purchases. The increases in electric fuel
and purchased power costs in 1997 are also attributable to decreased
availability of nuclear generation from Indian Point 2. Electric fuel costs
increased $23.3 million in 1996, reflecting a higher unit cost of fuel,
partially offset by lower generation. Electric purchased power costs increased
by $161.9 million in 1996 over the 1995 period, reflecting a higher unit cost of
power purchased under NUG contracts. The increases in electric fuel and
purchased power costs in 1996 were mitigated by the greater availability in 1996
of nuclear generation from Indian Point 2.
The cost of gas purchased for resale increased $60.9 million and $158.5 million
in 1997 and 1996, respectively, reflecting higher unit costs of purchased gas
and higher sendout. The unit cost of gas was 14 percent higher in 1997 and 43
percent higher in 1996. Steam fuel costs decreased $28.4 million in 1997 due to
decreased generation of steam by Con Edison, partially offset by the higher unit
cost of fuel. Steam purchased power costs increased $26.2 million in 1997 due to
increased purchases and higher unit costs. Steam fuel and purchased power costs
increased $49.7 million in 1996 due to the higher unit cost of fuel.
Electricity sales volume in Con Edison's service territory increased 1.1 percent
in 1997 and 0.8 percent in 1996. Gas sales volume to firm customers decreased
6.2 percent in 1997 and increased 8.9 percent in 1996. Transportation of
customer-owned gas (other than for the New York Power Authority), which
comprised approximately 5.4 percent of the gas sold or transported for customers
in 1997, increased 68.9 percent in 1997 reflecting increased purchases of gas
from third party suppliers by Con Edison customers. Steam sales volume decreased
8.6 percent in 1997 and increased 1.9 percent in 1996.
Con Edison's electricity, gas and steam sales vary seasonally in response to
weather. Electric peak load occurs in the summer, while gas and steam sales peak
in the winter. After adjusting for variations, principally weather and billing
days, in each period, electricity sales volume increased 1.8 percent in 1997 and
0.9 percent in 1996. Similarly adjusted, gas sales volume to firm customers
decreased 0.8 percent in 1997 and increased 1.9 percent in 1996, and steam sales
volume decreased 1.0 percent in 1997 and 0.1 percent in 1996. Weather-adjusted
sales represent Con Edison's estimate of the sales that would have been made if
historical average weather conditions had prevailed.
<PAGE>
-41-
OTHER OPERATIONS AND MAINTENANCE EXPENSES
Other operations and maintenance expenses decreased 2.4 percent in 1997 and 1.8
percent in 1996. For 1997 the decrease reflects lower costs for pensions and
retiree benefits, a 4.9 percent reduction in the workforce and reductions in the
Enlightened Energy program, partially offset by expenses for Indian Point 2
outages. For 1996 the decrease reflects lower production expenses, principally
because there was an Indian Point 2 refueling and maintenance outage in 1995,
but no outage in 1996. The decrease was offset in part by higher costs for
pensions and retiree benefits due to changes in actuarial assumptions.
In 1997 and 1996 Con Edison accrued $3 million and $10 million, respectively,
for environmental liabilities related to various Superfund sites. During 1995
Con Edison accrued $10 million for environmental remediation costs relating to
Con Edison facilities, pursuant to a 1994 settlement of a DEC civil
administrative proceeding against the company, and $5 million for two Superfund
sites. See Note F to the financial statements for additional information about
the settlement.
TAXES, OTHER THAN FEDERAL INCOME TAX
At $1.2 billion, taxes other than federal income tax remain one of Con Edison's
largest operating expenses. The principal components of and variations in
operating taxes were:
Increase (Decrease)
- -----------------------------------------------------------------------------
1997 1997 1996
(Millions of Dollars) Amount over 1996 over 1995
- -----------------------------------------------------------------------------
Property taxes $ 590.7 $ 19.1 $ 37.6
State and local taxes on revenues 474.8 0.9 13.6
Payroll taxes 59.3 (1.5) 2.6
Other taxes 56.3 (3.6) (7.8)
- -----------------------------------------------------------------------------
Total $1,181.1* $ 14.9 $ 46.0
- -----------------------------------------------------------------------------
* Including sales taxes on customers' bills, total taxes, other than federal
income taxes, billed to customers in 1997 were $1,500.6 million.
The increase in property taxes in 1997 reflects an increase in tax rates and the
increase in 1996 reflects higher assessed valuations.
OTHER INCOME
Other income decreased $3.5 million in 1997 due principally to the start-up and
business development expenses of Con Edison Solutions and Con Edison
Development, partially offset by increased investment income. Other income
decreased $7.5 million in 1996, reflecting primarily lower investment income.
NET INTEREST CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS
Interest on long-term debt increased $10.3 million in 1997 and $5.9 million in
1996 principally as a result of new debt issues. The increase in 1996 relates to
the preferred stock refunding discussed above, which substantially reduced Con
Edison's preferred stock dividend requirements. Other interest expense decreased
$11.6 million in 1996, principally as a result of lower interest costs
associated with certain tax settlements and customer overpayments.
FEDERAL INCOME TAX
Federal income tax decreased $16.5 million in 1997 and $1.4 million in 1996,
reflecting the changes each year in income before tax and in tax credits. See
Note I to the financial statements.
February 24, 1998
<PAGE>
- 42 -
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information about the Company's primary market risks associated with
activities in derivative financial instruments, other financial instruments and
derivative commodity instruments, see "Liquidity and Capital Resources -
Financial Market Risks" in Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
A. Financial Statements
Page
Index to Financial Statements Number
Report of Independent Accountants 44
Consolidated Balance Sheet at December 31, 1997
and 1996 45-46
Consolidated Income Statement for the years ended
December 31, 1997, 1996 and 1995 47
Consolidated Statement of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 48
Consolidated Statement of Capitalization at
December 31, 1997 and 1996 49-50
Consolidated Statement of Retained Earnings for the
years ended December 31, 1997, 1996 and 1995 51
Notes to Consolidated Financial Statements 51-62
The following Schedule is filed as a "Financial
Statement Schedule" pursuant to Item 14 of this report:
Schedule VIII - Valuation and Qualifying Accounts 63
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
<PAGE>
- 43 -
B. Supplementary Financial Information
Selected Quarterly Financial Data for the years ended December 31, 1997
and 1996 (Unaudited)
The following table shows selected quarterly financial data for Con
Edison. CEI became the holding company for Con Edison on January 1, 1998 when
the Holding Company Proposal was implemented. See Item 4.
<TABLE>
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 1,886.2 $ 1,504.0 $ 2,011.0 $ 1,720.1
Operating income 247.5 130.0 437.9 230.0
Net income 166.6 47.6 355.0 143.6
Net income for common stock 162.0 43.0 350.4 139.1
Basic and diluted earnings per common share $ .69 $ .18 $ 1.49 $ .59
- ---------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------
Operating revenues $ 1,867.4 $ 1,539.7 $ 1,920.3 $ 1,632.3
Operating income 252.7 152.3 409.4 199.2
Net income 174.5 71.4 328.0 120.2
Net income for common stock 182.5 66.8 323.4 115.5
Basic and diluted earnings per common share $ .78 $ .28 $ 1.38 $ .49
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
In the opinion of the Company these quarterly amounts include all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation.
<PAGE>
- 44 -
Report of Independent Accountants
To the Stockholders and Boards of Directors (Trustees) of
Consolidated Edison, Inc. and Consolidated Edison Company of New York, Inc.
In our opinion, the consolidated financial statements listed under Item 8.A in
the index appearing on page 42 present fairly, in all material respects, the
financial position of Consolidated Edison, Inc. and its subsidiaries and of
Consolidated Edison Company of New York, Inc. and its subsidiaries
(collectively, the "Company") at December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 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 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
1177 Avenue of the Americas
New York, N.Y. 10036
February 24, 1998
<PAGE>
-45-
CONSOLIDATED BALANCE SHEET CONSOLIDATED EDISON, INC.
<TABLE>
<CAPTION>
ASSETS
At December 31 (Thousands of Dollars) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Utility plant, at original cost (Note A)
Electric $11,743,745 $11,588,344
Gas 1,741,562 1,642,231
Steam 576,206 536,672
General 1,203,427 1,152,001
- ---------------------------------------------------------------------------------------------------
Total 15,264,940 14,919,248
Less: Accumulated depreciation 4,392,377 4,285,732
- ---------------------------------------------------------------------------------------------------
Net 10,872,563 10,633,516
Construction work in progress 292,218 332,333
Nuclear fuel assemblies and components, less accumulated amortization 102,321 101,461
- ---------------------------------------------------------------------------------------------------
Net utility plant 11,267,102 11,067,310
- ---------------------------------------------------------------------------------------------------
Current assets
Cash and temporary cash investments (Note A) 183,458 106,882
Funds held for refunding of debt 328,874 -
Accounts receivable - customer, less allowance for uncollectible
accounts of $21,600 in 1997 and 1996 581,163 544,004
Other receivables 60,759 42,056
Regulatory accounts receivable (Note A) (1,682) 45,397
Fuel, at average cost 53,697 64,709
Gas in storage, at average cost 37,209 44,979
Materials and supplies, at average cost 191,759 204,801
Prepayments 75,516 64,492
Other current assets 16,457 15,167
- ---------------------------------------------------------------------------------------------------
Total current assets 1,527,210 1,132,487
- ---------------------------------------------------------------------------------------------------
Investments and nonutility property (Note A) 292,397 177,224
- ---------------------------------------------------------------------------------------------------
Deferred charges (Note A)
Enlightened Energy program costs 117,807 133,718
Unamortized debt expense 126,085 130,786
Recoverable fuel costs (Note A) 98,301 101,462
Power contract termination costs 80,978 58,835
Other deferred charges 239,559 271,081
- ---------------------------------------------------------------------------------------------------
Total deferred charges 662,730 695,882
- ---------------------------------------------------------------------------------------------------
Regulatory asset - future federal income taxes (Notes A and I) 973,079 984,282
- ---------------------------------------------------------------------------------------------------
Total $14,722,518 $14,057,185
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-46-
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At December 31 (Thousands of Dollars) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Capitalization (see Consolidated Statement of Capitalization)
Common shareholders' equity $5,930,079 $5,727,568
Preferred stock subject to mandatory redemption (Note B) 84,550 84,550
Other preferred stock (Note B) 233,468 238,098
Long-term debt 4,188,906 4,238,622
- ---------------------------------------------------------------------------------------------------
Total capitalization 10,437,003 10,288,838
- ---------------------------------------------------------------------------------------------------
Noncurrent liabilities
Obligations under capital leases 39,879 42,661
Other noncurrent liabilities 106,137 80,499
- ---------------------------------------------------------------------------------------------------
Total noncurrent liabilities 146,016 123,160
- ---------------------------------------------------------------------------------------------------
Current liabilities
Long-term debt due within one year (Note B) 529,385 106,256
Accounts payable 440,114 431,115
Customer deposits 161,731 159,616
Accrued taxes 65,736 27,342
Accrued interest 85,613 83,090
Accrued wages 82,556 80,225
Other current liabilities 183,122 147,968
- ---------------------------------------------------------------------------------------------------
Total current liabilities 1,548,257 1,035,612
- ---------------------------------------------------------------------------------------------------
Provisions related to future federal income taxes and other deferred
credits
(Notes A and I)
Accumulated deferred federal income tax 2,307,835 2,289,092
Accumulated deferred investment tax credits 163,680 172,510
Other deferred credits 119,727 147,973
- ---------------------------------------------------------------------------------------------------
Total deferred credits 2,591,242 2,609,575
- ---------------------------------------------------------------------------------------------------
Contingencies (Note F)
- ---------------------------------------------------------------------------------------------------
Total $14,722,518 $14,057,185
- ---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-47-
CONSOLIDATED INCOME STATEMENT CONSOLIDATED EDISON, INC.
<TABLE>
<CAPTION>
Year Ended December 31 (Thousands of Dollars) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues (Note A)
Electric $ 5,635,575 $ 5,541,117 $ 5,389,408
Gas 1,093,880 1,015,070 813,356
Steam 391,799 403,549 334,133
- ------------------------------------------------------------------------------------------------------------------
Total operating revenues 7,121,254 6,959,736 6,536,897
- ------------------------------------------------------------------------------------------------------------------
Operating expenses
Purchased power 1,349,421 1,272,854 1,107,223
Fuel 596,824 573,275 504,104
Gas purchased for resale 479,218 418,271 259,789
Other operations 1,108,845 1,163,159 1,139,732
Maintenance 474,788 458,815 512,102
Depreciation and amortization (Note A) 502,779 496,412 455,776
Taxes, other than federal income tax 1,181,081 1,166,199 1,120,232
Federal income tax (Notes A and I) 382,910 397,160 396,560
- ------------------------------------------------------------------------------------------------------------------
Total operating expenses 6,075,866 5,946,145 5,495,518
- ------------------------------------------------------------------------------------------------------------------
Operating income 1,045,388 1,013,591 1,041,379
- ------------------------------------------------------------------------------------------------------------------
Other income (deductions)
Investment income (Note A) 11,554 8,327 16,966
Allowance for equity funds used during construction (Note A) 4,448 3,468 3,763
Other income less miscellaneous deductions (18,696) (8,749) (8,149)
Federal income tax (Notes A and I) 3,190 970 (1,060)
- ------------------------------------------------------------------------------------------------------------------
Total other income 496 4,016 11,520
- ------------------------------------------------------------------------------------------------------------------
Income before interest charges 1,045,884 1,017,607 1,052,899
- ------------------------------------------------------------------------------------------------------------------
Interest on long-term debt 318,158 307,820 301,917
Other interest 17,083 17,331 28,954
Allowance for borrowed funds used during construction (Note A) (2,180) (1,629) (1,822)
- ------------------------------------------------------------------------------------------------------------------
Net interest charges 333,061 323,522 329,049
- ------------------------------------------------------------------------------------------------------------------
Net income 712,823 694,085 723,850
Preferred stock dividend requirements (18,344) (19,859) (35,565)
Gain on refunding of preferred stock (Note B) - 13,943 -
- ------------------------------------------------------------------------------------------------------------------
Net income for common stock $ 694,479 $ 688,169 $ 688,285
- ------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per common share $ 2.95 $ 2.93 $ 2.93
Average number of shares outstanding during each year
(235,082,063; 234,976,697 and 234,930,301)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-48-
CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED EDISON, INC.
<TABLE>
<CAPTION>
Year Ended December 31 (Thousands of Dollars) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 712,823 $ 694,085 $ 723,850
Principal non-cash charges (credits) to income
Depreciation and amortization 502,779 496,412 455,776
Deferred recoverable fuel costs 3,161 (42,008) (61,937)
Federal income tax deferred 22,620 40,600 69,020
Common equity component of allowance for funds used during construction (4,321) (3,274) (3,546)
Other non-cash charges 17,268 9,602 14,382
Changes in assets and liabilities
Accounts receivable - customer, less allowance for uncollectibles (37,159) (46,789) (56,719)
Regulatory accounts receivable 47,079 (51,878) 32,827
Materials and supplies, including fuel and gas in storage 31,824 (26,505) 43,341
Prepayments, other receivables and other current assets (31,017) 5,117 4,566
Enlightened Energy program costs 15,911 10,564 25,919
Power contract termination costs 11,551 30,827 55,387
Accounts payable 8,999 10,263 46,383
Other - net (62,978) (19,679) (72,785)
- ------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 1,238,540 1,107,337 1,276,464
- ------------------------------------------------------------------------------------------------------------------
Investing activities including construction
Construction expenditures (654,221) (675,233) (692,803)
Nuclear fuel expenditures (14,579) (48,705) (12,840)
Contributions to nuclear decommissioning trust (21,301) (21,301) (18,893)
Common equity component of allowance for funds used during construction 4,321 3,274 3,546
- ------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities including construction (685,780) (741,965) (720,990)
- ------------------------------------------------------------------------------------------------------------------
Financing activities including dividends
Issuance of long-term debt 480,000 525,000 228,285
Retirement of long-term debt (106,256) (183,524) (10,889)
Advance refunding of preferred stock and long-term debt - (412,311) (155,699)
Issuance and refunding costs (8,930) (18,480) (5,269)
Funds held for refunding of debt (328,874) - -
Common stock dividends (493,711) (488,756) (479,262)
Preferred stock dividends (18,413) (22,711) (35,569)
- ------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities including dividends (476,184) (600,782) (458,403)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 76,576 (235,410) 97,071
- ------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at January 1 106,882 342,292 245,221
- ------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at December 31 $ 183,458 $ 106,882 $ 342,292
- ------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information Cash paid during the period
for:
Interest $ 310,310 $ 309,279 $ 309,953
Income taxes 335,631 346,755 344,754
- ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
-49-
CONSOLIDATED STATEMENT OF CAPITALIZATION CONSOLIDATED EDISON, INC.
<TABLE>
<CAPTION>
At December 31 (Thousands of Dollars) 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding
--------------------------
December 31, December 31,
1997 1996
--------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity (Note B)
Common stock, $ .10 par value,
authorized 500,000,000 shares 235,489,650 234,993,596 $ 1,482,351 $ 1,478,536
Retained earnings 4,484,703 4,283,935
Capital stock expense (36,975) (34,903)
- --------------------------------------------------------------------------------------------------------------------------------
Total common shareholders' equity 5,930,079 5,727,568
- --------------------------------------------------------------------------------------------------------------------------------
Preferred stock (Note B)
Subject to mandatory redemption
Cumulative Preferred, $100 par value,
7.20% Series I 475,000 475,000 47,500 47,500
6-1/8% Series J 370,500 370,500 37,050 37,050
- --------------------------------------------------------------------------------------------------------------------------------
Total subject to mandatory redemption 84,550 84,550
- --------------------------------------------------------------------------------------------------------------------------------
Other preferred stock
$5 Cumulative Preferred, without par value, authorized 1,915,319 shares 1,915,319 1,915,319 175,000 175,000
Cumulative Preferred, $100 par value, authorized 6,000,000 shares*
5-3/4% Series A 70,612 70,612 7,061 7,061
5-1/4% Series B 138,438 138,438 13,844 13,844
4.65% Series C 153,296 153,296 15,330 15,330
4.65% Series D 222,330 222,330 22,233 22,233
Cumulative Preference, $100 par value, authorized 2,250,000 shares
6% Convertible Series B - 46,305 - 4,630
- --------------------------------------------------------------------------------------------------------------------------------
Total other preferred stock 233,468 238,098
- --------------------------------------------------------------------------------------------------------------------------------
Total preferred stock $ 318,018 $ 322,648
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Represents total authorized shares of cumulative preferred stock, $100 par
value, including preferred stock subject to mandatory redemption.
<PAGE>
-50-
<TABLE>
<CAPTION>
At December 31 (Thousands of Dollars) 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
Long-term debt (Note B)
Maturity Interest Rate Series
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debentures:
1997 5.30 % 1993 E $ - $ 100,000
1998 6-1/4 1993 A 100,000 100,000
1998 5.70 1993 F 100,000 100,000
1999 6-1/2 1992 D 75,000 75,000
1999 * 1994 B 150,000 150,000
2000 7-3/8 1992 A 150,000 150,000
2000 7.60 1992 C 125,000 125,000
2001 6-1/2 1993 B 150,000 150,000
2001 * 1996 B 150,000 150,000
2002 6-5/8 1993 C 150,000 150,000
2002 * 1997 A 150,000 -
2003 6-3/8 1993 D 150,000 150,000
2004 7-5/8 1992 B 150,000 150,000
2005 7-3/8 1992 E 75,000 75,000
2005 6-5/8 1995 A 100,000 100,000
2007 6.45 1997 B 330,000 -
2023 7-1/2 1993 G 380,000 380,000
2026 7-3/4 1996 A 100,000 100,000
2027 8.05 1992 F 100,000 100,000
2029 7-1/8 1994 A 150,000 150,000
- --------------------------------------------------------------------------------------------------------------------------------
Total debentures 2,835,000 2,455,000
- --------------------------------------------------------------------------------------------------------------------------------
Tax-exempt debt - notes issued to New York State Energy Research and Development Authority for Facilities Revenue Bonds:
2020 6.10 % 1995 A 128,285 128,285
2020 5-1/4 1993 B 127,715 127,715
2021 7-1/2 1986 A 150,000 150,000
2022 7-1/8 1987 A 100,855 100,855
2022 9-1/4 1987 B 29,385 29,385
2022 5-3/8 1993 C 19,760 19,760
2024 7-3/4 1989 A 150,000 150,000
2024 7-3/8 1989 B 100,000 100,000
2024 7-1/4 1989 C 150,000 150,000
2025 7-1/2 1990 A 150,000 150,000
2026 7-1/2 1991 A 128,150 128,150
2027 6-3/4 1992 A 100,000 100,000
2027 6-3/8 1992 B 100,000 100,000
2028 6 1993 A 101,000 101,000
2029 7-1/8 1994 A 100,000 100,000
- --------------------------------------------------------------------------------------------------------------------------------
Total tax-exempt debt 1,635,150 1,635,150
- --------------------------------------------------------------------------------------------------------------------------------
Subordinated deferrable interest debentures:
2031 7-3/4 % 1996 A 275,000 275,000
- --------------------------------------------------------------------------------------------------------------------------------
Other long-term debt 1,722 8,848
Unamortized debt discount (28,581) (29,120)
- --------------------------------------------------------------------------------------------------------------------------------
Total 4,718,291 4,344,878
Less: Long-term debt due within one year 529,385 106,256
- --------------------------------------------------------------------------------------------------------------------------------
Total long-term debt 4,188,906 4,238,622
- --------------------------------------------------------------------------------------------------------------------------------
Total capitalization $ 10,437,003 $ 10,288,838
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Rate reset quarterly. At December 31, 1997 the rates for Series 1994 B,
Series 1996 B and Series 1997 A were 5.96484%, 6.0375% and 5.9975%,
respectively.
The accompanying notes are an integral part of these financial statements.
<PAGE>
-51-
CONSOLIDATED STATEMENT OF RETAINED EARNINGS CONSOLIDATED EDISON, INC.
<TABLE>
<CAPTION>
Year Ended December 31 (Thousands of Dollars) 1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $4,283,935 $4,097,035 $3,888,010
Net income for the year 712,823 694,085 723,850
- -------------------------------------------------------------------------------------
Total 4,996,758 4,791,120 4,611,860
- -------------------------------------------------------------------------------------
Dividends declared on capital stock
Cumulative Preferred, at required annual rates 18,146 18,145 35,259
Cumulative Preference, 6% Convertible Series B 198 284 304
Common, $2.10, $2.08 and $2.04 per share 493,711 488,756 479,262
- -------------------------------------------------------------------------------------
Total dividends declared 512,055 507,185 514,825
- -------------------------------------------------------------------------------------
Balance, December 31 $4,484,703 $4,283,935 $4,097,035
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CORPORATE RESTRUCTURING
On January 1, 1998 Consolidated Edison Company of New York, Inc. (Con Edison),
the regulated utility, became a subsidiary of its new parent holding company,
Consolidated Edison, Inc. (CEI), when the outstanding shares of common stock,
$2.50 par value, of Con Edison were exchanged on a share-for-share basis for
shares of common stock, $.10 par value, of CEI. Con Edison's debt securities and
preferred stock remained securities of Con Edison.
OPERATIONS
CEI, through its subsidiaries, provides a wide range of energy-related products
and services to its customers. The principal subsidiaries, in addition to Con
Edison, are Con Edison Solutions and Con Edison Development. Con Edison supplies
electric service in all of New York City (except part of Queens) and most of
Westchester County, a service area with a population of more than eight million.
It also supplies gas in Manhattan, The Bronx and parts of Queens and
Westchester, and steam in part of Manhattan. Con Edison Solutions is a
full-service energy company offering wholesale and retail electricity and
natural gas sales, as well as energy-related products and services, primarily in
the Northeast. Con Edison Development invests in energy infrastructure projects
and markets technical services worldwide.
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements
include the accounts of Con Edison and its wholly-owned subsidiaries and,
therefore, also represent the consolidated financial statements of CEI and its
wholly-owned subsidiaries. Intercompany transactions have been eliminated.
PSC SETTLEMENT AGREEMENT The New York State Public Service Commission (PSC), by
order issued and effective May 20, 1996 in its Competitive Opportunities
proceeding, endorsed a fundamental restructuring of the electric utility
industry in New York State, based on competition in the generation and energy
services sectors of the industry. The PSC, by order issued and effective
September 23, 1997, approved a settlement agreement between Con Edison, the PSC
staff and certain other parties (the Settlement Agreement).
The Settlement Agreement provides for a transition to a competitive electric
market through the development of a "retail access" plan, a rate plan for the
period ending March 31, 2002 (the Transition), a reasonable opportunity for
recovery of "strandable costs" and the divestiture by Con Edison to unaffiliated
third parties of at least 50 percent of its New York City fossil-fueled electric
generating capacity.
The "retail access" plan will eventually permit all of Con Edison's electric
customers to buy electricity from other suppliers. The delivery of electricity
to customers will continue to be through Con Edison's transmission and
distribution systems. Con Edison's electric fossil-fueled generating capacity
not divested to third parties will be transferred by December 31, 2002 to an
unregulated subsidiary of CEI. Con Edison's contracts with non-utility
<PAGE>
-52-
generators (NUGs), absent renegotiation of these contracts, will remain
contractual obligations of Con Edison, which could resell electricity provided
under the contracts in the competitive energy supply market. The Settlement
Agreement does not contemplate the divestiture or transfer of Con Edison's
Indian Point 2 nuclear generating unit. In August 1997 the PSC solicited
comments as to the future treatment of nuclear generating facilities in New
York.
Con Edison's potential electric "strandable costs" are those prior utility
investments and commitments that may not be recoverable in a competitive energy
supply market, including the unrecovered cost of Con Edison's electric
generating plants, the future cost of decommissioning the Indian Point nuclear
generating station and charges under contracts with NUGs. During the Transition
Con Edison will continue to recover its potential electric strandable costs in
the rates it charges all customers, including those customers purchasing
electricity from others. Following the Transition Con Edison will be given a
reasonable opportunity to recover, through a non-bypassable charge to customers,
remaining strandable costs, including a reasonable return on investments. For
remaining fossil-related strandable costs, the recovery period will be 10 years.
For remaining nuclear-related strandable costs, the recovery period will be the
then-remaining life of Con Edison's Indian Point 2 nuclear unit (the operating
license for which extends to 2013). With respect to its NUG contracts, Con
Edison will be permitted to recover at least 90 percent of the amount, if any,
by which the actual costs of its purchases under the contracts exceed market
value after the Transition. potential NUG contract disallowance after the
Transition will be limited to the lower of (i) 10 percent of the above-market
costs or (ii) $300 million (net present value in 2002). The potential
disallowance will be offset by the amount of NUG contract mitigation achieved by
Con Edison after April 1, 1997 and 10 percent of the gross proceeds of
generating unit sales to third parties. Con Edison will be permitted a
reasonable opportunity to recover any costs subject to disallowance that are not
offset by these two factors if it makes good faith efforts in implementing
provisions of the Settlement Agreement leading to the development of a
competitive electric market in its service territory and the development of an
independent system operator (which is expected to administer the wholesale
electric market in New York State).
ACCOUNTING POLICIES The accounting policies of CEI and its subsidiaries conform
to generally accepted accounting principles. For regulated public utilities,
generally accepted accounting principles include Statement of Financial
Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types
of Regulation," and, in accordance with SFAS No. 71, the accounting requirements
and rate-making practices of the Federal Energy Regulatory Commission (FERC) and
the PSC.
In September 1997 Con Edison applied the standards in SFAS No. 101, "Regulated
Enterprises - Accounting for the Discontinuation of Application of the Financial
Accounting Standards Board (FASB) Statement No. 71," to the non-nuclear electric
supply portion of its business that is being deregulated as a result of the
Settlement Agreement (the Deregulated Business). The Deregulated Business
includes all of Con Edison's fossil electric generating assets, which had a net
book value of approximately $1.4 billion at December 31, 1997, including
approximately $196 million relating to Con Edison's share of the Bowline Point
and Roseton stations (which are located outside New York City and operated by
other utilities). The application of SFAS No. 101 to the Deregulated Business
had no material adverse effect on Con Edison's financial position or results of
operations.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," requires certain assets to be reviewed for
impairment if the carrying amount of the assets may not be recoverable, requires
that assets to be disposed of be carried at the lower of net book value or fair
value, and amends SFAS No. 71 to require that regulatory assets be charged to
earnings if such assets are no longer considered probable of recovery. Con
Edison has not recognized an impairment of its fossil generating assets because
the estimated cash flows from the operation and/or sale of the assets, together
with the cash flows from the strandable cost recovery provisions of the
Settlement Agreement, will not be less than the net carrying amount of the
generating assets.
Certain deferred charges (regulatory assets) principally relating to future
federal income taxes and certain deferred credits (regulatory liabilities) have
resulted from transactions relating or allocated to the Deregulated Business. At
December 31, 1997 regulatory assets net of regulatory liabilities amounted to
approximately $1.4 billion, of which approximately $300 million is attributable
to the Deregulated Business. Con Edison has not written-off against earnings any
net regulatory assets because recovery of the assets is probable under the
Settlement Agreement.
SFAS No. 5, "Accounting for Contingencies," requires accrual of a loss if it is
probable that a liability has been incurred and the amount of loss can be
reasonably estimated. Con Edison has not accrued a loss for its contracts with
NUGs because it is not probable that the charges by NUGs under the contracts
will exceed the cash flows from the sale by Con Edison of the electricity
provided by the NUGs, together with the cash flows provided pursuant to the
Settlement Agreement.
UTILITY PLANT AND DEPRECIATION The capitalized cost of additions to utility
plant includes indirect costs such as engineering, supervision, payroll taxes,
pensions, other benefits and an allowance for funds used during construction
(AFDC). The original cost of property, together with removal cost, less salvage,
is charged to accumulated depreciation as property is retired.
<PAGE>
-53-
The cost of repairs and maintenance is charged to expense, and the cost of
betterments is capitalized.
Rates used for AFDC include the cost of borrowed funds and a reasonable rate on
Con Edison's own funds when so used, determined in accordance with PSC and FERC
regulations. The AFDC rate was 9.1 percent in 1997, 9.0 percent in 1996 and 9.1
percent in 1995. The rate was compounded semiannually, and the amounts
applicable to borrowed funds were treated as a reduction of interest charges.
The annual charge for depreciation is computed on the straight-line method for
financial statement purposes using rates based on average lives and net salvage
factors, with the exception of the Indian Point 2 nuclear unit, Con Edison's
share of the Roseton generating station, certain leaseholds and certain general
equipment, which are depreciated on a remaining life amortization method.
Depreciation rates averaged approximately 3.4 percent in 1997 and 1996 and 3.3
percent in 1995. In 1996 an additional provision for depreciation of $13.9
million was accrued in connection with a preferred stock refunding. See Note B.
Con Edison is a joint owner of two 1,200-megawatt (MW) electric generating
stations: (1) Bowline Point, operated by Orange and Rockland Utilities, Inc.,
with Con Edison owning a two-thirds interest, and (2) Roseton, operated by
Central Hudson Gas & Electric Corp., with Con Edison owning a 40 percent
interest. Central Hudson has the option to acquire Con Edison's interest in the
Roseton station in 2004. Con Edison's share of the investment in these stations
at original cost and as included in its balance sheet at December 31, 1997 and
1996 was:
(Thousands of Dollars) 1997 1996
- --------------------------------------------------------------------------------
Bowline Point: Plant in service $206,128 $204,484
Construction work in progress 1,796 2,788
Roseton: Plant in service 146,066 146,623
Construction work in progress 652 846
- --------------------------------------------------------------------------------
Con Edison's share of accumulated depreciation for the Roseton station at
December 31, 1997 and 1996 was $75.3 million and $70.3 million, respectively. A
separate depreciation account is not maintained for Con Edison's share of the
Bowline Point station. Con Edison's share of operating expenses for these
stations is included in its income statement. Both Orange and Rockland and
Central Hudson have agreed to divest generation as part of their Competitive
Opportunities settlements with the PSC.
NUCLEAR DECOMMISSIONING Depreciation charges include a provision for
decommissioning both the Indian Point 2 and the retired Indian Point 1 nuclear
units. Decommissioning costs are being accrued ratably over the Indian Point 2
license period, which extends to the year 2013. Con Edison has been accruing for
the costs of decommissioning within the internal accumulated depreciation
reserve since 1975. In 1989 the PSC permitted Con Edison to establish an
external trust fund for the costs of decommissioning the nuclear portions of the
plants, pursuant to Nuclear Regulatory Commission (NRC) regulations.
Accordingly, beginning in 1989, Con Edison has made contributions to such a
trust. The external trust fund is discussed below under "Investments" in this
Note A.
Accumulated decommissioning provisions at December 31, 1997 and 1996, which
include earnings on funds externally invested, were as follows:
Amounts Included in
Accumulated Depreciation
- --------------------------------------------------------------------------------
(Millions of Dollars) 1997 1996
- --------------------------------------------------------------------------------
Nuclear $ 211.7 $ 164.7
Non-Nuclear 58.2 57.0
- --------------------------------------------------------------------------------
Total $ 269.9 $ 221.7
- --------------------------------------------------------------------------------
In 1994 a site-specific decommissioning study was prepared for both the Indian
Point 2 and the retired Indian Point 1 nuclear units. Based upon this study, the
estimated decommissioning cost in 1993 dollars is approximately $657 million, of
which $252 million is for extended on-site storage of spent nuclear fuel. Using
a 3.25 percent annual escalation factor, the estimated cost in 2016, the assumed
midpoint for decommissioning expenditures, is approximately $1,372 million.
Under a 1995 electric rate agreement, effective April 1995, the PSC approved an
annual decommissioning expense allowance for the nuclear and non-nuclear
portions of the plants of $21.3 million and $1.8 million, respectively, to fund
the future estimated costs of decommissioning. The annual expense allowance
assumes a 6 percent after-tax annual return on fund assets.
The FASB is currently reviewing the utility industry's accounting treatment of
nuclear and certain other plant decommissioning costs. In an exposure draft
issued in February 1996, the FASB concluded that decommissioning costs should be
accounted for as a liability at present value, with a corresponding asset in
utility plant, rather than as a component of depreciation. Discussions of issues
addressed in the exposure draft are ongoing.
<PAGE>
-54-
NUCLEAR FUEL Nuclear fuel assemblies and components are amortized to operating
expenses based on the quantity of heat produced in the generation of
electricity. Fuel costs also include provisions for payments to the U.S.
Department of Energy (DOE) for future off-site storage of the spent fuel and for
a portion of the costs to decontaminate and decommission the DOE facilities used
to enrich uranium purchased by Con Edison. Such payments amounted to $7.4
million in 1997. Nuclear fuel costs are recovered in revenues through base rates
or through the fuel adjustment clause.
LEASES In accordance with SFAS No. 71, those leases that meet the criteria for
capitalization are capitalized for accounting purposes. For rate-making
purposes, all leases have been treated as operating leases.
REVENUES Revenues for electric, gas and steam service are recognized on a
monthly billing cycle basis. Pursuant to the 1992 and 1995 electric rate
agreements, actual electric net revenues (operating revenues less fuel and
purchased power costs and revenue taxes) were adjusted by accrual to target
levels established under the agreements in accordance with an electric revenue
adjustment mechanism (ERAM). Revenues were also increased (or decreased) each
month to reflect rewards (or penalties) earned under incentive mechanisms for
the Enlightened Energy (demand-side management) program and for customer service
activities. The agreements provided that the net regulatory asset (or liability)
thus accrued in each rate year would be reflected in customers' bills in the
following rate year. Effective April 1, 1997 the Settlement Agreement eliminated
the ERAM and the Enlightened Energy and electric customer service incentives.
The Settlement Agreement includes a penalty mechanism (estimated maximum, $26
million per year) for failure to maintain certain customer service standards.
The 1994 gas rate agreement provided for revenues to be increased (or decreased)
each month to reflect rewards (or penalties) earned under incentive mechanisms
related to gas customer service and system improvement targets. The 1997 gas
rate agreement discontinued the incentive mechanisms effective October 1, 1997,
after which Con Edison is subject to a penalty (maximum, $1.7 million per year)
if it fails to maintain targeted levels of customer service.
RECOVERABLE FUEL COSTS Fuel and purchased power costs that are above the levels
included in base rates are recoverable under electric, gas and steam fuel
adjustment clauses. If costs fall below these levels, the difference is credited
to customers. For electric and steam, such costs are deferred until the period
in which they are billed or credited to customers (40 days for electric, 30 days
for steam). For gas, the excess or deficiency is accumulated for refund or
surcharge to customers on an annual basis.
Effective April 1992 a partial pass-through electric fuel adjustment clause
(PPFAC) was implemented with monthly targets for electric fuel and purchased
power costs. Con Edison retains for stockholders 30 percent of any savings in
actual costs below the target amount, but must bear 30 percent of any excess of
actual costs over the target. For each rate year there is a $35 million cap on
the maximum incentive or penalty, with a limit (within the $35 million) of $10
million for costs associated with generation at Con Edison's Indian Point 2
nuclear unit.
REGULATORY ACCOUNTS RECEIVABLE Regulatory accounts receivable at December 31,
1997 amounted to a credit due customers of $1.7 million, reflecting an accrual
for the PPFAC. The amounts accrued under the PPFAC are billed or credited to
customers on a monthly basis through the electric fuel adjustment clause.
Effective April 1, 1997 the Settlement Agreement eliminated the modified ERAM
and the Enlightened Energy and electric customer service incentives; at that
time, the regulatory accounts receivable recorded for the modified ERAM and
these incentives were, along with certain other debit and credit balances in Con
Edison's financial statements, eliminated. The elimination of these balances had
no material adverse effect on Con Edison's financial position or results of
operations.
ENLIGHTENED ENERGY PROGRAM COSTS In accordance with PSC directives, Con Edison
deferred the costs of its Enlightened Energy program for future recovery from
ratepayers. Such deferrals amounted to $117.8 million at December 31, 1997 and
$133.7 million at December 31, 1996. In accordance with the 1992 and 1995
electric rate agreements, deferred charges for the Enlightened Energy program
are generally recoverable over a five-year period.
TEMPORARY CASH INVESTMENTS Temporary cash investments are short-term, highly
liquid investments which generally have maturities of three months or less. They
are stated at cost which approximates market. CEI and Con Edison consider
temporary cash investments to be cash equivalents.
INVESTMENTS For 1997 investments consisted primarily of the nuclear
decommissioning trust fund ($211.7 million at December 31, 1997) and investments
of Con Edison Solutions and Con Edison Development ($66.0 million at December
31, 1997). For 1996 investments consisted primarily of the nuclear
decommissioning trust fund ($164.7 million at December 31, 1996). The nuclear
decommissioning trust fund is stated at market; investments of Con Edison
Solutions and Con Edison Development are stated at cost. Earnings on the nuclear
decommissioning trust fund are not recognized in income but are included in the
accumulated depreciation reserve. See Nuclear Decommissioning in this Note A.
GAS HEDGING Con Edison purchases put options and sells futures contracts under
its gas hedging program in order to protect its gas inventory against adverse
market price fluctuations. Con Edison defers the related hedging gains and
losses until the underlying gas commodity is withdrawn from storage and then
adjusts the cost of its gas in storage accordingly.
<PAGE>
-55-
All hedging gains or losses are credited or charged to customers through Con
Edison's gas fuel adjustment clause. Con Edison Solutions uses futures contracts
to hedge natural gas transactions in order to minimize the risk of unfavorable
market price fluctuations. Gains or losses on these futures contracts are
deferred until gas is purchased, at which time gas expense is adjusted
accordingly. At December 31, 1997 deferred gains or losses on open positions
were not material.
Neither CEI nor any of its consolidated subsidiaries, including Con Edison,
enters into derivative transactions that do not meet the criteria for hedges and
that do not qualify for deferred accounting treatment. If for any reason a
derivative transaction were no longer classified as a hedge, inventory or gas
expense, as appropriate, would be adjusted for unrealized gains and losses
relating to the transaction.
FEDERAL INCOME TAX In accordance with SFAS No. 109, "Accounting for Income
Taxes," Con Edison has recorded an accumulated deferred federal income tax
liability for substantially all temporary differences between the book and tax
bases of assets and liabilities at current tax rates. In accordance with rate
agreements, Con Edison has recovered amounts from customers for a portion of the
tax expense it will pay in the future as a result of the reversal or
"turn-around" of these temporary differences. As to the remaining temporary
differences, in accordance with SFAS No. 71, Con Edison has established a
regulatory asset for the net revenue requirements to be recovered from customers
for the related future tax expense. In 1993 the PSC issued an Interim Policy
Statement proposing accounting procedures consistent with SFAS No. 109 and
providing assurances that these future increases in taxes will be recoverable in
rates. The final policy statement is not expected to differ materially from the
interim policy statement. See Note I.
Accumulated deferred investment tax credits are amortized ratably over the lives
of the related properties and applied as a reduction in future federal income
tax expense.
Con Edison and its subsidiaries file, and CEI expects that it and its
subsidiaries will file, a consolidated federal income tax return. Income taxes
are allocated to each company based on its taxable income.
RESEARCH AND DEVELOPMENT COSTS Research and development costs relating to
specific construction projects are capitalized. All other such costs are charged
to operating expenses as incurred. Research and development costs in 1997, 1996
and 1995, amounting to $25.9 million, $32.3 million and $45.0 million,
respectively, were charged to operating expenses. No research and development
costs were capitalized in these years.
NEW FINANCIAL ACCOUNTING STANDARDS The FASB has issued the following two
standards effective for fiscal years beginning after December 15, 1997: SFAS No.
130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The application of these
standards will not have a material effect on CEI's financial position or results
of operations or materially change its current disclosure practices.
RECLASSIFICATION Certain prior year amounts have been reclassified to conform
with current year presentation.
ESTIMATES The accompanying consolidated financial statements reflect judgments
and estimates made in the application of the above accounting policies.
NOTE B CAPITALIZATION
COMMON STOCK AND PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION In December
1997 Con Edison redeemed its Series B preference stock. Each share of Series B
preference stock was convertible into 13 shares of common stock at a conversion
price of $7.69 per share. During 1997, 1996 and 1995, 38,158 shares, 2,869
shares and 3,928 shares of Series B preference stock were converted into 496,054
shares, 37,297 shares and 51,064 shares of common stock, respectively.
The prices at which Con Edison has the option to redeem its preferred stock
other than Series I and Series J (in each case, plus accrued dividends) are as
follows:
- --------------------------------------------------------------------------------
$5 Cumulative Preferred Stock $ 105.00
- --------------------------------------------------------------------------------
Cumulative Preferred Stock:
Series A $ 102.00
Series B 102.00
Series C 101.00
Series D 101.00
- --------------------------------------------------------------------------------
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION Con Edison is required to redeem
25,000 of the Series I shares on May 1 of each year in the five-year period
commencing with the year 2002 and to redeem the remaining Series I shares on May
1, 2007. Con Edison is required to redeem the Series J shares on August 1, 2002.
In each case the redemption price is $100 per share plus accrued and unpaid
dividends to the redemption date. In addition, Con Edison may redeem Series I
shares at a redemption price of $103.60 per share, plus accrued dividends, if
redeemed prior to May 1, 1998 (and thereafter at prices declining annually to
$100 per share, plus accrued dividends, after April 30, 2002). Neither Series I
nor Series J shares may be called for redemption while dividends are in arrears
on outstanding shares of $5 cumulative preferred stock or cumulative preferred
stock.
<PAGE>
-56-
PREFERRED STOCK REFUNDING In March 1996 Con Edison canceled approximately $227
million of its preferred stock purchased pursuant to a tender offer and redeemed
an additional $90 million of its preferred stock. In accordance with the PSC
order approving the issuance of subordinated deferrable interest debentures to
refund the preferred stock, Con Edison offset the net gain of $13.9 million by
accruing an additional provision for depreciation equal to the net gain.
DIVIDENDS Beginning in 1998, dividends on CEI's common shares will depend
primarily on the dividends and other distributions that Con Edison and the other
subsidiaries will pay to CEI and the capital requirements of CEI and its
subsidiaries. The PSC Settlement Agreement limits the dividends that Con Edison
may pay to not more than 100 percent of Con Edison's income available for
dividends, calculated on a two-year rolling average basis. Excluded from the
calculation of "income available for dividends" are non-cash charges to income
resulting from accounting changes or charges to income resulting from
significant unanticipated events. The restriction also does not apply to
dividends necessary to transfer to CEI proceeds from major transactions, such as
asset sales, or to dividends reducing Con Edison's equity ratio to a level
appropriate to Con Edison's business risk.
Payment of Con Edison common stock dividends to CEI is subject to certain
additional restrictions. No dividends may be paid, or funds set apart for
payment, on Con Edison's common stock until all dividends accrued on the $5
cumulative preferred stock and cumulative preferred stock have been paid, or
declared and set apart for payment, and unless Con Edison is not in arrears on
its mandatory redemption obligation for the Series I and Series J cumulative
preferred stock. No dividends may be paid on any of Con Edison's capital stock
during any period in which Con Edison has deferred payment of interest on its
subordinated deferrable interest debentures.
LONG-TERM DEBT In December 1997 Con Edison issued $330 million of 10-year 6.45%
Series 1997 B debentures to refund in January 1998 three series of tax-exempt
debt that Con Edison issued through the New York State Energy Research and
Development Authority: 7-1/2% Series 1986 A, 9-1/4% Series 1987 B and 7-3/4%
Series 1989 A.
Long-term debt maturing in the period 1998-2002 is as follows:
- --------------------------------------------------------------------------------
1998 $200,000,000
1999 225,000,000
2000 275,000,000
2001 300,000,000
2002 300,000,000
- --------------------------------------------------------------------------------
Con Edison's long-term debt is stated at cost which, as of December 31, 1997,
approximates fair value. The fair value of the company's long-term debt is
estimated based on current rates for debt of the same remaining maturities.
NOTE C SHORT-TERM BORROWING
Con Edison has been authorized by FERC to issue short-term debt of up to $500
million outstanding at any one time. At December 31, 1997 Con Edison had no
short-term debt outstanding. In January 1998 Con Edison initiated a $500 million
commercial paper program, supported by revolving credit agreements with banks.
Bank commitments under the revolving credit agreements may terminate upon a
change in control of CEI and borrowings under the agreements are subject to
certain conditions, including that Con Edison's ratio (calculated in accordance
with the agreements) of debt to total capital not at any time exceed 0.65 to 1.
At December 31, 1997 this ratio was 0.43 to 1. Borrowings under the commercial
paper program or the revolving credit facilities are expected to be at
prevailing market rates.
NOTE D PENSION BENEFITS
Con Edison has pension plans that cover substantially all of its employees and
certain employees of other CEI subsidiaries. The plans are designed to comply
with the Employee Retirement Income Security Act of 1974 (ERISA). Contributions
are made solely by Con Edison and the other subsidiaries based on an actuarial
valuation, and are not less than the minimum amount required by ERISA. Con
Edison's policy is to fund the actuarially computed net pension cost as such
cost accrues subject to statutory maximum (and minimum) limits. Benefits are
generally based on a final five-year average pay formula.
In accordance with SFAS No. 87, "Employers' Accounting for Pensions," Con Edison
uses the projected unit credit method for determining pension cost. Pension
costs for 1997, 1996 and 1995 amounted to $11.8 million, $73.2 million and $11.4
million, respectively, of which $9.3 million for 1997, $57.8 million for 1996
and $8.9 million for 1995 was charged to operating expenses. Pension costs
reflect the amortization of a regulatory asset established pursuant to SFAS No.
71 to offset the $33.3 million increase in pension obligations from a special
retirement program Con Edison offered in 1993, which provided special
termination benefits as described in SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits." Pension cost for 1995 also includes an actuarially
determined credit of $7.3 million representing a prepayment on one of the plans.
This credit reduced pension funding in 1996.
Con Edison recognizes investment gains and losses over five years and amortizes
unrecognized actuarial gains and losses over ten years.
<PAGE>
-57-
The components of net periodic pension cost for 1997, 1996 and 1995 were as
follows:
(Millions of Dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Service cost - benefits earned
during the period $ 111.4 $120.2 $ 98.2
Interest cost on projected
benefit obligation 334.3 320.1 296.7
Actual return on plan assets (878.6) (593.6) (865.8)
Unrecognized investment
gain (loss) deferred 471.3 217.6 521.6
Net amortization (28.8) 6.7 (41.5)
- --------------------------------------------------------------------------------
Net periodic pension cost 9.6 71.0 9.2*
- --------------------------------------------------------------------------------
Amortization of regulatory asset 2.2 2.2 2.2
- --------------------------------------------------------------------------------
Total pension cost $ 11.8 $ 73.2 $ 11.4
- --------------------------------------------------------------------------------
* Includes a prepayment credit of $7.3 million.
The funded status of the pension plans as of December 31, 1997, 1996 and 1995
was as follows:
(Millions of Dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Vested $ 3,800.7 $ 3,525.9 $ 3,319.2
Nonvested 175.9 190.5 267.9
- --------------------------------------------------------------------------------
Accumulated to date 3,976.6 3,716.4 3,587.1
Effect of projected future
compensation levels 964.0 986.6 1,070.3
- --------------------------------------------------------------------------------
Total projected benefit obligation 4,940.6 4,703.0 4,657.4
Plan assets at fair value 5,988.7 5,269.3 4,775.8
- --------------------------------------------------------------------------------
Plan assets less projected
benefit obligation 1,048.1 566.3 118.4
Unrecognized net gain (1,157.4) (703.8) (240.3)
Unrecognized prior service cost* 90.4 100.1 85.3
Unrecognized net transition liability
at January 1, 1987* 11.3 14.3 17.2
- --------------------------------------------------------------------------------
Accrued pension cost** $ (7.6) $ (23.1) $ (19.4)
- --------------------------------------------------------------------------------
* Being amortized over approximately 15 years.
** Accrued liability primarily for special retirement program, reduced in 1997
by a prepayment credit.
To determine the present value of the projected benefit obligation, the discount
rates assumed were 7.25 percent for 1997 and 1996 and 7 percent for 1995. A
weighted average rate of increase in future compensation levels of 5.8 percent
and long-term rate of return on plan assets of 8.5 percent were assumed for all
years.
The pension plan assets consist primarily of corporate common stocks and bonds,
group annuity contracts and debt of the United States government and its
agencies.
NOTE E POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (OPEB)
Con Edison has a contributory comprehensive hospital, medical and prescription
drug program for all retirees, their dependents and surviving spouses. Con
Edison also provides life insurance benefits for approximately 6,400 retired
employees. All of Con Edison's employees become eligible for these benefits upon
retirement, except that the amount of life insurance is limited and is available
only to management employees and to those bargaining unit employees who
participated in the optional program prior to retirement. Con Edison has
reserved the right to amend or terminate these programs.
Con Edison's policy is to fund in external trusts the actuarially determined
annual costs for retiree health and life insurance subject to statutory maximum
limits.
Con Edison recognizes investment gains and losses over five years and amortizes
unrecognized actuarial gains and losses over ten years.
The cost to Con Edison for retiree health benefits for 1997, 1996 and 1995
amounted to $76.7 million, $89.2 million and $65.5 million, respectively, of
which $61.0 million for 1997, $70.5 million for 1996 and $51.6 million for 1995
was charged to operating expenses. The cost of the retiree life insurance plan
for 1997, 1996 and 1995 amounted to $20.8 million, $22.8 million and $18.0
million, respectively, of which $16.5 million for 1997, $18.0 million for 1996
and $14.2 million for 1995 was charged to operating expenses.
<PAGE>
-58-
The components of postretirement benefit (health and life insurance) costs for
1997, 1996 and 1995 were as follows:
(Millions of Dollars) 1997 1996 1995
- -------------------------------------------------------------------------------
Service cost - benefits earned during
the period $ 15.7 $ 17.4 $ 10.7
Interest cost on accumulated
postretirement benefit obligation 71.0 68.9 61.2
Actual return on plan assets (100.3) (51.3) (60.8)
Unrecognized investment gain
(loss) deferred 63.8 23.5 40.4
Amortization of transition obligation
and unrecognized net loss 47.3 53.5 32.0
- -------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 97.5 $ 112.0 $ 83.5
- -------------------------------------------------------------------------------
The following table sets forth the program's funded status at December 31, 1997,
1996 and 1995:
(Millions of Dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 470.6 $ 471.1 $ 447.7
Employees eligible to retire 240.1 248.8 250.7
Employees not eligible to retire 253.4 279.2 305.6
- --------------------------------------------------------------------------------
Total projected benefit obligation 964.1 999.1 1,004.0
Plan assets at fair value 574.1 444.2 322.2
- --------------------------------------------------------------------------------
Plan assets less accumulated
postretirement benefit obligation (390.0) (554.9) (681.8)
Unrecognized net loss 41.3 139.9 240.8
Unrecognized net transition liability
at January 1, 1993* 322.6 415.0 441.0
- --------------------------------------------------------------------------------
Accrued postretirement benefit cost $ (26.1) $ 0 $ 0
- --------------------------------------------------------------------------------
* Being amortized over a period of 20 years.
To determine the accumulated postretirement benefit obligation, the discount
rates assumed were 7.25 percent for 1997 and 1996 and 7 percent for 1995. The
assumed long-term rate of return on plan assets was 8.5 percent for these years.
The health care cost trend rate assumed for 1997 was 8.5 percent, for 1998, 8
percent, and then declining one-half percent per year to 5 percent for 2004 and
thereafter. If the assumed health care cost trend rate were to be increased by
one percentage point each year, the accumulated postretirement benefit
obligation would increase by approximately $114.8 million and the service cost
and interest component of the net periodic postretirement benefit cost would
increase by $12.6 million.
Postretirement plan assets consist of corporate common stocks and bonds, group
annuity contracts, debt of the United States government and its agencies and
short-term securities.
NOTE F CONTINGENCIES
INDIAN POINT Nuclear generating units similar in design to Con Edison's Indian
Point 2 unit have experienced problems that have required steam generator
replacement. Inspections of the Indian Point 2 steam generators since 1976 have
revealed various problems, some of which appear to have been arrested, but the
remaining service life of the steam generators is uncertain. The projected
service life of the steam generators is reassessed periodically in the light of
the inspections made during scheduled outages of the unit. Based on the latest
available data and current NRC criteria, Con Edison estimates that steam
generator replacement will not be required before 2001. Con Edison has
replacement steam generators, which are stored at the site. Replacement of the
steam generators would require estimated additional expenditures of
approximately $108 million (1997 dollars, exclusive of replacement power costs)
and an outage of approximately four months. However, securing necessary permits
and approvals or other factors could require a substantially longer outage if
steam generator replacement is required on short notice.
NUCLEAR INSURANCE The insurance policies covering Con Edison's nuclear
facilities for property damage, excess property damage, and outage costs permit
assessments under certain conditions to cover insurers' losses. As of December
31, 1997, the highest amount that could be assessed for losses during the
current policy year under all of the policies was $24 million. While assessments
may also be made for losses in certain prior years, Con Edison is not aware of
any losses in such years that it believes are likely to result in an assessment.
Under certain circumstances, in the event of nuclear incidents at facilities
covered by the federal government's third-party liability indemnification
program, Con Edison could be assessed up to $79.3 million per incident, of which
not more than $10 million may be assessed in any one year. The per-incident
limit is to be adjusted for inflation not later than 1998 and not less than once
every five years thereafter.
Con Edison participates in an insurance program covering liabilities for
injuries to certain workers in the nuclear power industry. In the event of such
injuries, Con Edison is subject to assessment up to an estimated maximum of
approximately $3.1 million.
<PAGE>
-59-
ENVIRONMENTAL MATTERS The normal course of Con Edison's operations necessarily
involves activities and substances that expose it to potential liabilities under
federal, state and local laws protecting the environment. Such liabilities can
be material and in some instances may be imposed without regard to fault, or may
be imposed for past acts, even though such past acts may have been lawful at the
time they occurred. Sources of such potential liabilities include (but are not
limited to) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (Superfund), a 1994 settlement with the New York State
Department of Environmental Conservation (DEC), asbestos, and electric and
magnetic fields (EMF).
SUPERFUND By its terms Superfund imposes joint and several strict liability,
regardless of fault, upon generators of hazardous substances for resulting
removal and remedial costs and environmental damages. Con Edison has received
process or notice concerning possible claims under Superfund or similar state
statutes relating to a number of sites at which it is alleged that hazardous
substances generated by Con Edison (and, in most instances, a large number of
other potentially responsible parties) were deposited. Estimates of the
investigative, removal, remedial and environmental damage costs (if any) that
Con Edison will be obligated to pay with respect to each of these sites range
from extremely preliminary to highly refined. Based on these estimates Con
Edison had accrued at December 31, 1997 a liability of approximately $25.4
million. There will be additional costs with respect to these and possibly other
sites, the materiality of which is not presently determinable.
DEC SETTLEMENT In 1994 Con Edison agreed to a consent order settling a civil
administrative proceeding instituted by the DEC alleging environmental
violations by the company. Pursuant to the consent order, Con Edison has
conducted an environmental management systems evaluation and an environmental
compliance audit. Con Edison also must implement "best management practices"
plans for certain facilities and undertake a remediation program at certain
sites. At December 31, 1997 Con Edison had an accrued liability of $16.9 million
for these sites. Expenditures for environmental-related capital projects in the
five years 1998-2002, including expenditures to comply with the consent order,
are estimated at $148 million. These estimated expenditures do not reflect
divestiture by Con Edison of generating plants pursuant to the Settlement
Agreement (see Note A) or otherwise.
ASBESTOS CLAIMS Suits have been brought in New York State and federal courts
against Con Edison and many other defendants, wherein several hundred plaintiffs
sought large amounts of compensatory and punitive damages for deaths and
injuries allegedly caused by exposure to asbestos at various premises of Con
Edison. Many of these suits have been disposed of without any payment by Con
Edison, or for immaterial amounts. The amounts specified in all the remaining
suits total billions of dollars but Con Edison believes that these amounts are
greatly exaggerated, as were the claims already disposed of. Based on the
information and relevant circumstances known to Con Edison at this time, it is
the opinion of Con Edison that these suits will not have a material adverse
effect on the company's financial position, results of operations or liquidity.
EMF Electric and magnetic fields are found wherever electricity is used. Con
Edison is the defendant in several suits claiming property damage resulting from
EMF. The aggregate amount sought in these suits is not material. In the event,
however, that a causal relationship between EMF and adverse health effects is
established, or independently of any such causal determination, in the event of
adverse developments in related legal or public policy doctrines, there could be
a material adverse effect on the electric utility industry, including Con
Edison.
NOTE G NON-UTILITY GENERATORS (NUGS)
Con Edison has contracts with NUGs for 2,059 MW of electric generating capacity.
Payments by Con Edison under the contracts are reflected in rates. Assuming
performance by the NUGs, Con Edison is obligated over the terms of these
contracts (which extend for various periods, up to 2036) to make capacity and
other fixed payments.
For the years 1998 - 2002, capacity and other fixed payments are estimated to be
$510 million, $508 million, $478 million, $485 million and $494 million. Such
payments gradually increase to approximately $600 million in 2013, and
thereafter decline significantly.
For energy delivered under these contracts, Con Edison is obligated to pay
variable prices that are estimated to be approximately at market levels.
NOTE H STOCK-BASED COMPENSATION
Under CEI's Stock Option Plan, options may be granted to officers and key
employees for up to 10,000,000 shares of CEI's common stock. Generally, options
become exercisable three years after the grant date and remain exercisable until
ten years from the grant date.
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," CEI has
elected to follow Accounting Principles Board Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of CEI's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
<PAGE>
-60-
Disclosure of pro-forma information regarding net income and earnings per share
is required by SFAS No. 123. This information has been determined as if CEI had
accounted for its employee stock options under the fair value method of that
statement. The fair values of 1997 and 1996 options are $2.84 and $2.49 per
share, respectively. They were estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996, respectively: risk-free interest
rates of 6.46 percent and 6.74 percent; expected lives of eight years for 1997
and 1996; expected volatility of 14.08 percent and 16.28 percent; and dividend
yields of 6.67 percent and 7.46 percent.
Had CEI used SFAS No. 123, basic and diluted earnings per share for 1997 and
1996 would be unaffected and pro-forma net income for common stock would be
$693,680,000 or $799,000 less than the amount reported for 1997, and
$687,938,000 or $231,000 less than the amount reported for 1996.
A summary of the status of the Plan as of December 31, 1997 and 1996 and changes
during those years is as follows:
1997 1996
--------------------- -------------------
Exercise Exercise
Options Price Options Price
- --------------------------------------------------------------------------------
Outstanding at
beginning of year 697,200 $27.875 0 $ --
Granted 834,600 31.50 704,200 27.875
Exercised 0 0
Forfeited (14,100) 29.62 (7,000) 27.875
- --------------------------------------------------------------------------------
Outstanding at end
of year 1,517,700 $ 29.85 697,200 $27.875
- --------------------------------------------------------------------------------
Options exercisable at
end of year 0 0
Fair value of options
granted during the year $ 2.84 $ 2.49
- --------------------------------------------------------------------------------
The following summarizes the Plan's stock options outstanding at December 31,
1997 and 1996:
Options
Plan Exercise Outstanding Remaining
Year Price at 12/31/97 Contractual Life
- --------------------------------------------------------------------------------
1997 $ 31.50 827,800 9 years
1996 $27.875 689,900 8 years
- --------------------------------------------------------------------------------
NOTE I FEDERAL INCOME TAX
The net revenue requirements for the future federal income tax component of
accumulated deferred federal income taxes (see Note A) at December 31, 1997 and
1996 are shown on the following table:
(Millions of Dollars) 1997 1996
- --------------------------------------------------------------------------------
Future federal income tax liability
Temporary differences between the book and
tax bases of assets and liabilities:
Property related $5,791.0 $5,595.0
Reserve for injuries and damages (57.4) (55.7)
Other (112.9) 16.7
- --------------------------------------------------------------------------------
Total 5,620.7 5,556.0
- --------------------------------------------------------------------------------
Future federal income tax computed at
statutory rate - 35% 1,967.2 1,944.6
Less: Accumulated deferred federal income
taxes previously recovered 1,334.7 1,304.8
- --------------------------------------------------------------------------------
Net future federal income tax expense
to be recovered 632.5 639.8
- --------------------------------------------------------------------------------
Net revenue requirements for above
(Regulatory asset - future federal income taxes)* 973.1 984.3
Add: Accumulated deferred federal income taxes
previously recovered
Depreciation 1,188.7 1,115.5
Unbilled revenues (98.3) (94.6)
Advance refunding of long-term debt 30.1 32.7
Other 214.2 251.2
- --------------------------------------------------------------------------------
Subtotal 1,334.7 1,304.8
- --------------------------------------------------------------------------------
Total accumulated deferred federal income tax $2,307.8 $2,289.1
- --------------------------------------------------------------------------------
* Net revenue requirements will be offset by the amortization to federal income
tax expense of accumulated deferred investment tax credits, the tax benefits
of which Con Edison has already realized. Including the full effect therefrom,
the net revenue requirements related to future federal income taxes at
December 31, 1997 and 1996 are $809.4 million and $811.8 million,
respectively.
<PAGE>
-61-
NOTE I FEDERAL INCOME TAX, continued
<TABLE>
<CAPTION>
Year Ended December 31 (Thousands of Dollars) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charged to: Operations $ 382,910 $ 397,160 $ 396,560
Other income (3,190) (970) 1,060
- -------------------------------------------------------------------------------------------------------
Total federal income tax 379,720 396,190 397,620
- -------------------------------------------------------------------------------------------------------
Reconciliation of reported net income with taxable income
Federal income tax - current 357,100 355,590 328,600
Federal income tax - deferred 31,450 49,510 78,330
Investment tax credits deferred (8,830) (8,910) (9,310)
- -------------------------------------------------------------------------------------------------------
Total federal income tax 379,720 396,190 397,620
Net income 712,823 694,085 723,850
- -------------------------------------------------------------------------------------------------------
Income before federal income tax 1,092,543 1,090,275 1,121,470
- -------------------------------------------------------------------------------------------------------
Effective federal income tax rate 34.8% 36.3% 35.5%
- -------------------------------------------------------------------------------------------------------
Adjustments decreasing (increasing) taxable income Tax depreciation in excess of
book depreciation:
Amounts subject to normalization 215,370 201,760 202,230
Other (64,502) (99,576) (85,538)
Deferred recoverable fuel costs (3,161) 42,008 61,937
Regulatory accounts receivable (47,079) 51,878 (32,827)
Excess research and development 14,980 (13,025) (2,969)
Pension and other postretirement benefits (6,820) (34,136) 38,102
Power contract termination costs (40,657) (38,759) (56,397)
Other - net (9,200) (45,729) 25,356
- -------------------------------------------------------------------------------------------------------
Total 58,931 64,421 149,894
- -------------------------------------------------------------------------------------------------------
Taxable income 1,033,612 1,025,854 971,576
- -------------------------------------------------------------------------------------------------------
Federal income tax - current
Amount computed at statutory rate - 35% 361,764 359,049 340,052
Tax credits (4,664) (3,459) (11,452)
- -------------------------------------------------------------------------------------------------------
Total 357,100 355,590 328,600
- -------------------------------------------------------------------------------------------------------
Charged to: Operations 359,300 357,000 328,200
Other income (2,200) (1,410) 400
- -------------------------------------------------------------------------------------------------------
Total 357,100 355,590 328,600
- -------------------------------------------------------------------------------------------------------
Federal income tax - deferred
Charged to: Operations 32,440 49,070 77,670
Other income (990) 440 660
- -------------------------------------------------------------------------------------------------------
Total $ 31,450 $ 49,510 $ 78,330
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-62-
NOTE J FINANCIAL INFORMATION BY BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
Electric Steam
--------------------------------------- ---------------------------------------
(Thousands of Dollars) 1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues* $ 5,646,916 $ 5,552,247 $ 5,401,524 $ 393,418 $ 405,040 $ 335,694
- --------------------------------------------------------------------------- ---------------------------------------
Operating expenses
Purchased power 1,319,472 1,269,092 1,107,223 29,949 3,762 --
Fuel 429,324 377,351 354,086 167,500 195,924 150,018
Other operations and maintenance* 1,311,983 1,331,801 1,372,715 82,100 83,837 79,929
Depreciation and amortization 429,407 425,397 393,382 16,239 15,900 13,064
Taxes, other than federal income 989,791 980,309 951,095 53,108 51,361 45,788
Federal income tax 311,878 330,103 339,863 8,442 14,131 12,598
- --------------------------------------------------------------------------- ---------------------------------------
Total operating expenses* 4,791,855 4,714,053 4,518,364 357,338 364,915 301,397
- --------------------------------------------------------------------------- ---------------------------------------
Operating income 855,061 838,194 883,160 36,080 40,125 34,297
- --------------------------------------------------------------------------- ---------------------------------------
Construction expenditures 504,644 515,006 538,454 29,905 38,290 27,559
- --------------------------------------------------------------------------- ---------------------------------------
Net utility plant** 9,251,149 9,150,261 9,027,031 489,091 458,019 399,028
Fuel 51,629 64,231 40,444 2,068 478 62
Other identifiable assets 1,669,957 1,703,906 1,724,005 66,448 42,817 51,969
- --------------------------------------------------------------------------- ---------------------------------------
* Intersegment rentals included in segments' income but eliminated for total:
Operating revenues $ 11,341 $ 11,130 $ 12,116 $ 1,619 $ 1,491 $ 1,561
Operating expenses 2,605 2,472 2,513 12,519 12,190 13,102
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Gas Total
--------------------------------------- ---------------------------------------
1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------- ---------------------------------------
Operating revenues* $ 1,096,057 $ 1,017,124 $ 815,307 $ 7,121,254 $ 6,959,736 $ 6,536,897
- --------------------------------------------------------------------------- ---------------------------------------
Operating expenses
Purchased power -- -- -- 1,349,421 1,272,854 1,107,223
Fuel -- -- -- 596,824 573,275 504,104
Gas purchased for resale 479,218 418,271 259,789 479,218 418,271 259,789
Other operations and maintenance* 204,687 221,011 214,818 1,583,633 1,621,974 1,651,834
Depreciation and amortization 57,133 55,115 49,330 502,779 496,412 455,776
Taxes, other than federal income 138,182 134,529 123,349 1,181,081 1,166,199 1,120,232
Federal income tax 62,590 52,926 44,099 382,910 397,160 396,560
- --------------------------------------------------------------------------- ---------------------------------------
Total operating expenses* 941,810 881,852 691,385 6,075,866 5,946,145 5,495,518
- --------------------------------------------------------------------------- ---------------------------------------
Operating income 154,247 135,272 123,922 1,045,388 1,013,591 1,041,379
- --------------------------------------------------------------------------- ---------------------------------------
Construction expenditures 119,672 121,937 126,790 654,221 675,233 692,803
- --------------------------------------------------------------------------- ---------------------------------------
Net utility plant** 1,526,862 1,459,030 1,388,344 11,267,102 11,067,310 10,814,403
Fuel and gas in storage 37,209 44,979 26,452 90,906 109,688 66,958
Other identifiable assets 165,977 197,033 177,374 1,902,382 1,943,756 1,953,348
Other corporate assets 1,462,128 936,431 1,115,181
- --------------------------------------------------------------------------- ---------------------------------------
Total assets $14,722,518 $14,057,185 $13,949,890
- --------------------------------------------------------------------------- ---------------------------------------
* Intersegment rentals included in segments' income but eliminated for total:
Operating revenues $ 2,177 $ 2,054 $ 1,951 $ 15,137 $ 14,675 $ 15,628
Operating expenses 13 13 13 15,137 14,675 15,628
</TABLE>
** General Utility Plant was allocated to Electric and Gas on the basis of
the departmental use of such plant. Pursuant to PSC requirements the Steam
department is charged an interdepartmental rent for general plant used in
Steam operations, which is credited to the Electric and Gas departments.
- --------------------------------------------------------------------------------
(a) Con Edison supplies electric service in all of New York City (except part
of Queens) and most of Westchester County. It also supplies gas in
Manhattan, The Bronx and parts of Queens and Westchester, and steam in
part of Manhattan.
<PAGE>
- 63 -
SCHEDULE VIII
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995
(Thousands of Dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other At End
Description of Period Expenses Accounts Deductions of Period
Valuation Accounts
deducted in the balance
sheet from the assets to
which they apply:
Accumulated Provision
for uncollectible
accounts receivable Electric,
Gas and
Steam Customers:
1997 $ 21,600 $ 30,936 - $ 30,936* $ 21,600
1996 $ 21,600 $ 30,771 - $ 30,771* $ 21,600
1995 $ 21,600 $ 32,589 - $ 32,589* $ 21,600
*Accounts written off less cash collections, miscellaneous adjustments and
amounts reinstated as receivables previously written off.
<PAGE>
- 64 -
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Part III is incorporated by reference from the
joint CEI's and Con Edison's definitive joint proxy statement for their Annual
Meetings of Stockholders to be held on May 18, 1998. The joint proxy statement
is to be filed pursuant to Regulation 14A not later than 120 days after December
31, 1997, the close of the fiscal year covered by this report.
In accordance with General Instruction G(3) to Form 10-K, other
information regarding CEI and Con Edison's Executive Officers may be found in
Part I of this report under the caption "Executive Officers of the Registrant."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. List of Financial Statements
Consolidated Balance Sheet at December 31, 1997 and 1996
Consolidated Income Statement for the years ended December 31,
1997, 1996 and 1995
Consolidated Statement of Cash Flows for the years ended December 31, 1997,
1996 and 1995
Consolidated Statement of Capitalization at December 31, 1997 and 1996
Consolidated Statement of Retained Earnings for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
2. List of Financial Statement Schedules
Valuation and Qualifying Accounts (Schedule VIII)
<PAGE>
- 65 -
3. List of Exhibits
3.1.1 Restated Certificate of Incorporation of
Consolidated Edison, Inc. ("CEI")(Designated in the
Registration Statement on Form S-4 of CEI (No. 333-
39164) as Exhibit 3.1.)
3.1.2.1 Restated Certificate of Incorporation of Consolidated
Edison Company of New York, Inc.("Con Edison") filed with the
Department of State of the State of New York on December 31,
1984. (Designated in the Annual Report on Form 10-K of Con
Edison for the year ended December 31, 1989 (File No. 1-1217)
as Exhibit 3(a).)
3.1.2.2 The following certificates of amendment of Restated
Certificate of Incorporation of Con Edison filed with the
Department of State of the State of New York, which are
designated as follows:
Securities Exchange Act
Date Filed With File No. 1-1217
Department of State Form Date Exhibit
5/16/88 10-K 12/31/89 3(b)
6/2/89 10-K 12/31/89 3(c)
4/28/92 8-K 4/24/92 4(d)
8/21/92 8-K 8/20/92 4(e)
*3.1.2.3 Certificate of Amendment of Restated Certificate
of Incorporation of Con Edison filed with the Department
of State of the State of New York on February 18, 1998.
3.2.1 By-laws of CEI. (Designated in the Registration Statement on
Form S-4 of CEI (No. 333-39164) as Exhibit 3.2.)
3.2.2 By-laws of Con Edison, effective as of January 1, 1997.
(Designated in Con Edison's Annual Report on Form 10-K for the
year ended December 31, 1996 (File No. 1-1217) as Exhibit 3.2.)
4.1 Participation Agreement, dated as of August 15, 1985, between
New York State Energy Research and Development Authority
(NYSERDA) and Con Edison. (Designated in Con Edison's
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1990 (File No. 1-1217) as Exhibit 4(a)(1).)
<PAGE>
- 66 -
4.2 The following Supplemental Participation Agreements
supplementing the Participation Agreement, dated as of
August 15, 1985, between NYSERDA and Con Edison, which are
designated as follows:
Supplemental Securities Exchange Act
Participation Agreement File No. 1-1217
Number Date Form Date Exhibit
1. Fifth 7/1/89 10-Q 6/30/90 4(a)(6)
2. Sixth 11/1/89 10-Q 6/30/90 4(a)(7)
3. Seventh 7/1/90 10-Q 6/30/90 4(a)(8)
4. Eighth 1/1/91 10-K 12/31/90 4(e)(8)
5. Ninth 1/15/92 10-K 12/31/91 4(e)(9)
4.3 Participation Agreement, dated as of December 1, 1992,
between NYSERDA and Con Edison. (Designated in Con Edison's Annual
Report on Form 10-K for the year ended December 31, 1992 (File No.
1-1217) as Exhibit 4(f).)
4.4 The following Supplemental Participation Agreements
supplementing the Participation Agreement, dated as of December 1,
1992, between NYSERDA and Con Edison, which are designated as
follows:
Supplemental Securities Exchange Act
Participation Agreement File No. 1-1217
Number Date Form Date Exhibit
1. First 3/15/93 10-Q 6/30/93 4.1
2. Second 10/1/93 10-Q 9/30/93 4.3
3. Third 12/1/94 10-K 12/31/94 4.7.3
4. Fourth 7/1/95 10-Q 6/30/95 4.2
4.5 Indenture of Trust, dated as of August 15, 1985, between NYSERDA
and Morgan Guaranty Trust Company of New York, as Trustee (Morgan
Guaranty). (Designated in Con Edison's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1990 (File No. 1-1217) as
Exhibit 4(b)(1).)
4.6 The following Supplemental Indentures of Trust supplementing the
Indenture of Trust, dated as of August 15, 1985, between NYSERDA and
Morgan Guaranty.
Supplemental Securities Exchange Act
Indenture of Trust File No.1-1217
Number Date Form Date Exhibit
1. Fifth 7/1/89 10-Q 6/30/90 4(b)(6)
2. Sixth 11/1/89 10-Q 6/30/90 4(b)(7)
3. Seventh 7/1/90 10-Q 6/30/90 4(b)(8)
4. Eighth 1/1/91 10-K 12/31/90 4(g)(8)
5. Ninth 1/15/92 10-K 12/31/91 4(g)(9)
4.7 Indenture of Trust, dated as of December 1, 1992, between
NYSERDA and Morgan Guaranty. (Designated in Con Edison's Annual
Report on Form 10-K for the year ended December 31, 1992 (File No.
1-1217) as Exhibit 4(i).)
<PAGE>
- 67 -
4.8 The following Supplemental Indentures of Trust supplementing the
Indenture of Trust, dated as of December 1, 1992, between NYSERDA
and Morgan Guaranty.
Supplemental Securities Exchange Act
Indenture of Trust File No. 1-1217
Number Date Form Date Exhibit
1. First 3/15/93 10-Q 6/30/93 4.2
2. Second 10/1/93 10-Q 9/30/93 4.4
3. Third 12/1/94 10-K 12/31/94 4.11.3
4. Fourth 7/1/95 10-Q 6/30/95 4.3
4.9 Indenture, dated as of December 1, 1990, between Con Edison and
The Chase Manhattan Bank (National Association), as Trustee (the
"Debenture Indenture"). (Designated in Con Edison's Annual Report on
Form 10-K for the year ended December 31, 1990 (File No. 1-1217) as
Exhibit 4(h).)
4.10 First Supplemental Indenture (to the Debenture Indenture),
dated as of March 6, 1996, between Con Edison and The Chase
Manhattan Bank (National Association), as Trustee. (Designated in
Con Edison's Annual Report on Form 10-K for the year ended December
31, 1995 (File No. 1-1217) as Exhibit 4.13.)
4.11 The following forms of Con Edison's Debentures:
Securities Exchange Act
File No. 1-1217
Debenture Form Date Exhibit
7 3/8%, Series 1992 A 8-K 2/5/92 4(a)
7 5/8%, Series 1992 B 8-K 2/5/92 4(b)
7.60%, Series 1992 C 8-K 2/25/92 4
6 1/2%, Series 1992 D 8-K 8/26/92 4(a)
6 1/4%, Series 1993 A 8-K 1/13/93 4
6 1/2%, Series 1993 B 8-K 2/4/93 4(a)
6 5/8%, Series 1993 C 8-K 2/4/93 4(b)
6 3/8%, Series 1993 D 8-K 4/7/93 4
5.70%, Series 1993 F 8-K 5/19/93 4(b)
7 1/2%, Series 1993 G 8-K 6/7/93 4
7 1/8%, Series 1994 A 8-K 2/8/94 4
Floating Rate Series 1994 B 8-K 6/29/94 4
6 5/8%, Series 1995 A 8-K 6/21/95 4
7 3/4%, Series 1996 A 8-K 4/24/96 4
Floating Rate Series 1996 B 8-K 11/25/96 4
Floating Rate Series 1997 A 8-K 6/17/97 4
6.45%, Series 1997 B 8-K 11/24/97 4
61/4%, Series 1998 A 8-K 1/29/98 4.1
7.10%, Series 1998 B 8-K 1/29/98 4.2
4.12 Form of Con Edison's 7 3/4% Quarterly Income Capital Securities
(Series A Subordinated Deferrable Interest Debentures). (Designated
in Con Edison's Current Report on Form 8-K, dated February 29, 1996,
(File No. 1-1217) as Exhibit 4.)
10.1 Amended and Restated Agreement and Settlement, dated September 19,
1997, between Con Edison and the Staff of the New York State Public
Service Commission (without Appendices). (Designated in Con Edison's
Current Report on Form 8-K, dated September 23, 1997, (File No.
1-1217) as Exhibit 10.)
<PAGE>
- 68 -
10.2.1 Agreement dated as of October 31, 1968 among
Central Hudson Gas & Electric Corporation, Con Edison
and Niagara Mohawk Power Corporation. (Designated in
Registration Statement No. 2-31884 as Exhibit 7.)
10.2.2 Amendment dated November 23, 1976 to Agreement dated as of
October 31, 1968 among Central Hudson Gas & Electric Corporation,
Con Edison and Niagara Mohawk Power Corporation and Additional
Agreement dated as of November 23, 1976 between Central Hudson and
Con Edison. (Designated in Con Edison's Annual Report on Form 10-K
for the year ended December 31, 1991 (File No. 1-1217) as Exhibit
10(b).)
10.3.1 General Agreement between Orange and
Rockland Utilities, Inc. and Con Edison dated October
10, 1969. (Designated in Registration Statement No.
2-35734 as Exhibit 7-1.)
10.3.2 Letters, dated November 18, 1970 and November 23, 1970,
between Orange and Rockland Utilities, Inc. and Con Edison pursuant
to Article 14(a) of the aforesaid General Agreement. (Designated in
Registration Statement No. 2-38807 as Exhibit 5-3.)
10.4.1 Planning and Supply Agreement, dated March 10, 1989, between
Con Edison and the Power Authority of the State of New York.
(Designated in Con Edison's Annual Report on Form 10-K for the year
ended December 31, 1992 (File No. 1-1217) as Exhibit 10(gg).)
10.4.2 Delivery Service Agreement, dated March 10, 1989, between Con
Edison and the Power Authority of the State of New York. (Designated
in Con Edison's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 1-1217) as Exhibit 10(hh).)
10.5.1 Employment contract, dated August 24, 1982, between Con
Edison and Arthur Hauspurg, as amended. (Designated in Con Edison's
Annual Report on Form 10-K for the year ended December 31, 1991(File
No. 1-1217) as Exhibit 10(i).)
10.5.2 Agreement, dated January 24, 1991, between Con Edison and
Arthur Hauspurg. (Designated in Con Edison's Annual Report on Form
10-K for the year ended December 31, 1990 (File No. 1-1217) as
Exhibit 10(l).)
10.6.1 Employment Contract, dated May 22, 1990, between Con Edison
and Eugene R. McGrath. (Designated in Con Edison's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1990 (File No.
1-1217) as Exhibit 10.)
10.6.2 The following amendments to Employment Contract, dated May
22, 1990, between Con Edison and Eugene R. McGrath:
Securities Exchange Act
Amendment File No. 1-1217
Date Form Date Exhibit
8/27/91 10-Q 9/30/91 19
8/25/92 10-Q 9/30/92 19
2/18/93 10-K 12/31/92 10(o)
8/24/93 10-Q 9/30/93 10.1
8/24/94 10-Q 9/30/94 10.1
8/22/95 10-Q 9/30/95 10.3
7/23/96 10-Q 6/30-96 10.2
7/22/97 10-Q 6/30/97 10
<PAGE>
- 69 -
10.7.1 Employment Agreement, dated June 25, 1991, between Con Edison and
J. Michael Evans. (Designated in Con Edison's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1991
(File No. 1-1217) as Exhibit 19.)
10.7.2 Amendment, dated March 29, 1993, to Employment Agreement,
dated June 25, 1991, between Con Edison and J. Michael Evans.
(Designated in Con Edison's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1993 (File No. 1-1217) as Exhibit
10.)
10.7.3 Amendment, dated November 8, 1993, to Employment Agreement, dated
June 25, 1991, between Con Edison and J. Michael Evans. (Designated
in Con Edison's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1993 (File No. 1-1217) as Exhibit 10.2.)
10.8.1 Employment Agreement, dated November 28, 1995, between Con
Edison and Peter J. O'Shea, Jr. (Designated in Con Edison's Annual
Report on Form 10-K for the year ended December 31, 1995 (File No.
1-1217) as Exhibit 10.46.)
*10.8.2 Amendment, dated November 4, 1997 to Employment Agreement, dated
November 28, 1995, between Con Edison and Peter J. O'Shea, Jr.
10.9 Agreement and Plan of Exchange, entered into on October 28, 1997,
between CEI and Con Edison. (Designated in the Registration
Statement on Form S-4 of CEI (No. 333-39164) as Exhibit 2.)
10.10 Amendment and Restatement, dated January 29, 1992 and
effective as of December 1, 1991, of The Consolidated Edison Company
of New York, Inc. Executive Incentive Plan. (Designated in Con
Edison's Annual Report on Form 10-K for the year ended December 31,
1991 (File No. 1-1217) as Exhibit 10(s).)
10.11.1 The Consolidated Edison Retirement Plan for Management
Employees, as amended and restated. (Designated in Con Edison's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995 (File No. 1-1217) as Exhibit 10.1.)
10.11.2 The following amendments to the Consolidated Edison Retirement Plan
for Management Employees.
Securities Exchange Act
Amendment File No. 1-1217
Date Form Date Exhibit
12/29/95 10-K 12/31/95 10.29
7/1/96 10-K 12/31/96 10.22
*10.11.3 Amendment No. 3, dated as of June 1, 1997, to the Consolidated
Edison Retirement Plan for Management Employees.
*10.11.4 Amendment No. 4, dated November 14, 1997, to the Consolidated
Edison Retirement Plan for Management Employees.
10.12.1 Con Edison Supplemental Retirement Income Plan, adopted July
22, 1987, effective January 1, 1987. (Designated in Con Edison's
Annual Report on Form 10-K for the year ended December 31, 1992
(File No. 1-1217) as Exhibit 10(cc).)
<PAGE>
- 70 -
10.12.2 Amendment No. 1, dated March 21,1997, to the
Con Edison Supplemental Retirement Income Plan.
(Designated in Con Edison's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 1-1217)
as Exhibit 10.24.)
10.13.1 Consolidated Edison Company of New York, Inc. Retirement
Plan for Trustees, effective as of July 1, 1988. (Designated in Con
Edison's Annual Report on Form 10-K for the year ended December 31,
1992 (File No.
1-1217) as Exhibit 10(ee).)
10.13.2 Amendment No. 1, dated September 28, 1990, to the
Consolidated Edison Company of New York, Inc. Retirement Plan for
Trustees. (Designated in Con Edison's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1990 (File No. 1-1217)
as Exhibit 19(c).)
10.14 The Con Edison Thrift Savings Plan for Management Employees
and Tax Reduction Act Stock Ownership Plan, as amended and restated.
(Designated in Con Edison's Annual Report on Form 10-K for the year
ended December 31, 1996 (File No. 1-1217) as Exhibit 10.5.)
10.15 Deferred Compensation Plan for the Benefit of Trustees of Con
Edison, dated February 27, 1979, and amendments thereto, dated
September 19, 1979 (effective February 27, 1979), February 26, 1980,
and November 24, 1992 (effective January 1, 1993). (Designated in
Con Edison's Annual Report on Form 10-K for the year ended December
31, 1991 (File No. 1-1217) as Exhibit 10(i).)
10.16 Supplemental Medical Plan for the Benefit of Con Edison's
officers. (Designated in Con Edison's Annual Report on Form 10-K for
the year ended December 31, 1991 (File No. 1-1217) as Exhibit
10(aa).)
10.17.1 The Con Edison Discount Stock Purchase Plan. (Designated in
Con Edison's Annual Report on Form 10-K for the year ended December
31, 1991 (File No.
1-1217) as Exhibit 10(bb).)
10.17.2 Amendment, dated December 29, 1995, to the Con Edison
Discount Stock Purchase Plan. (Designated in Con Edison's Annual
Report on Form 10-K for the year ended December 31, 1995 (File No.
1-1217) as Exhibit 10.38.)
10.18.1 The Consolidated Edison Retiree Health Program for
Management Employees, effective as of January 1, 1993. (Designated
in Con Edison's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 1-1217) as Exhibit 10(ll).)
10.18.2 The following amendments to the Consolidated Edison Retiree Health
Program for Management Employees.
Securities Exchange Act
Amendment File No. 1-1217
Date Form Date Exhibit
10/31/94 10-Q 9/30/94 10.3
12/28/94 10-K 12/31/95 10.44
12/29/95 10-K 12/31/95 10.45
7/1/96 10-K 12/31/96 10.39
*10.18.3 Amendment No. 5, dated November 14, 1997, to the
Consolidated Edison Retiree Health Program for Management
Employees.
<PAGE>
- 71 -
10.19 The Con Edison Severance Pay Plan for Management Employees.
(Designated in Con Edison's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1997 (File No. 1-1217)
as Exhibit 10.)
*10.20 CEI 1996 Stock Option Plan, as amended and restated
effective February 24, 1998.
12 Statement of computation of ratio of earnings to fixed charges
for the years ended December 31, 1997, 1996, 1995, 1994 and 1993.
(Designated in the Registration Statement on Form S-3 of CEI (No.
333-39603) as Exhibit 12.)
21 Subsidiaries of CEI and Con Edison. (Incorporated by reference
from Form U-3A-2 of CEI, dated February 26, 1998 -
File No: 069-00425.)
*23 Consent of Price Waterhouse LLP.
*24 Powers of Attorney of each of the persons signing
this report by attorney-in-fact.
*27 Financial Data Schedule. (To the extent provided in Rule 402 of
Regulation S-T, this exhibit shall not be deemed "filed", or
otherwise subject to liabilities, or be deemed part of a
registration statement.)
Exhibits listed above which have been filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 and the Securities Exchange
Act of 1934, and which were designated as noted above, are hereby incorporated
by reference and made a part of this report with the same effect as if filed
with the report.
- --------------------
* Filed herewith
(b) Reports on Form 8-K:
Con Edison filed Current Reports on Form 8-K, dated November 24, 1997 and
January 29, 1998, reporting (under Item 5) the sale of debentures and refunding
of certain series of outstanding debt securities. CEI and Con Edison each filed
a Current Report on Form 8-K, dated December 12, 1997, reporting the approval
and implementation of the Holding Company Proposal discussed in Item 4 and the
stock repurchase discussed In "Liquidity and Capital Resources - Stock
Repurchase" in Item 7.
<PAGE>
- 72 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, each Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED EDISON, INC. CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.
By JOAN S. FREILICH By JOAN S. FREILICH
Joan S. Freilich Joan S. Freilich
Executive Vice President Executive Vice President
and Chief Financial Officer and Chief Financial Officer
Date: March 26, 1998 Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of each
Registrant and in the capacities and on the dates indicated.
Date Signature Title (CEI and Con Edison,
unless otherwise noted)
March 26, 1998 Eugene R. McGrath* Chairman of the Board,
President, Chief Executive
Officer and Director of CEI;
Chairman of the Board,
Chief Executive Officer
and Trustee of Con Edison
(Principal Executive Officer)
March 26, 1998 Joan S. Freilich* Executive Vice President,
Chief Financial Officer
and Director (Trustee)
(Principal Financial Officer)
March 26, 1998 Hyman Schoenblum* Vice President, Controller
and Chief Accounting Officer
(Principal Accounting Officer)
E. Virgil Conway* Director (Trustee)
Gordon J. Davis* Director (Trustee)
Ruth M. Davis* Director (Trustee)
Ellen V. Futter* Director (Trustee)
Arthur Hauspurg* Director (Trustee)
Sally Hernandez-Pinero* Director (Trustee)
Peter W. Likins* Director (Trustee)
Donald K. Ross* Director (Trustee)
Robert G. Schwartz* Director (Trustee)
Richard A. Voell* Director (Trustee)
March 26, 1998 *By JOAN S. FREILICH Attorney-in-Fact
Joan S. Freilich
CERTIFICATE OF ADMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CONSOLIDATED EDISON COMPANY OF
NEW YORK, INC.
Under Section 805 of the Business Corporation Law
--------------------
We, JOAN S. FREILICH and ARCHIE M. BANKSTON, being respectively a Senior
Vice President and the Secretary of Consolidated Edison Company of New York,
Inc., a corporation formed under the laws of the State of New York (hereinafter
sometimes called the "Company"), DO HEREBY CERTIFY as follows:
1. The name of the Company is CONSOLIDATED EDISON COMPANY OF NEW YORK,
INC. It was originally incorporated under the name of Consolidated Gas Company
of New York.
2. The Certificate of Incorporation of the Company (being the
Consolidation Agreement dated September 29, 1884, pursuant to which it was
organized) was filed in the Office of the Secretary of State of the State of New
York on November 10, 1884. The Restated Certificate of Incorporation of the
Company was filed by the Department of State of the State of New York on
December 31, 1984.
3. The Certificate of Incorporation of the Company, as amended, is hereby
further amended to change the authorized number of Trustees.
4. To effect the foregoing:
Article Eighth, is hereby amended, in the following form:
"EIGHTH: The number of Trustees shall be not more than 16."
5. This amendment of the Certificate of Incorporation was duly authorized
and approved by the unanimous vote of the Trustees present at a meeting of the
Board of Trustees of the Company duly called and held on December 12, 1997, at
which meeting a quorum was present and acting throughout and by the vote of the
holders of more than a majority of the outstanding shares of $5 Cumulative
Preferred Stock and Common Stock of the Company, voting together as a single
class, at a meeting thereof duly called and held on December 12, 1997, at which
meeting a quorum was present and acting throughout.
<PAGE>
- 2 -
IN WITNESS WHEREOF, we have made and subscribed this certificate, and
affirm the same as true under the penalties of perjury, this 17th day of
February, 1998.
----------------------------
Joan S. Freilich
Senior Vice President
----------------------------
Archie M. Bankston
Secretary
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT, dated this 4th day of November, 1997, between CONSOLIDATED
EDISON COMPANY OF NEW YORK, INC., a New York corporation (the "Company"), and
PETER J. O'SHEA, JR. (the "Executive") (hereinafter called the "Amendment") to
the Employment Agreement, dated November 28, 1995, between the Company and the
Executive (hereinafter called the "Employment Agreement").
WHEREAS, the Company and the Executive desire to amend the terms and
conditions of the Executive's employment by the Company;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and the Executive agree as follows:
A. The Employment Agreement shall remain in full force and effect, except
as expressly modified herein.
B. The term of employment specified in paragraph 2 of the Employment
Agreement shall terminate on March 31, 1998. On March 31, 1998 or, if the
Company terminates the Executive's employment prior to March 31, 1998, on such
earlier termination, the Executive shall become entitled to the following:
1. payment of his salary to March 31, 1998, at the annual rate
then in effect, to the extent not theretofore paid by the Company;
2. the mandatory deferred portion of his award under the Company's
Executive Incentive Plan (the "EIP") for 1996;
3. an EIP award for 1997, the entire amount of which shall be paid
to the Executive in February 1998;
4. in lieu of an EIP award for the three month period from January 1
to March 31, 1998, a payment of $24,000, which shall be made on March 31,
1998;
5. a supplemental pension, described in paragraph C 1 below, and
6. a retainer agreement for legal services, the terms of which are
outlined in paragraph D below.
C. The provisions of this paragraph C amend and are in full substitution
of paragraph 4(a) of the Employment Agreement. Upon termination of the
Executive's employment under paragraph B above or by reason of his death or
disability:
1. The Company shall provide the Executive with a supplemental
pension for his life in the amount of $30,000 per annum and his Surviving
Spouse (as determined in accordance with the marriage requirements for
surviving spouse benefits under The Consolidated Edison Retirement Plan
for Management Employees (the "Retirement Plan") ) shall be paid a 100%
survivor's spouse benefit of the same amount for her life. The benefit
shall be paid at the same time as, and shall be increased by the same cost
of living adjustment provisions applicable to, benefits paid under the
Retirement Plan. The supplemental pension benefit shall be paid to the
Executive commencing in January 1999 or, if the Executive should die prior
to that month, to the Executive's Surviving Spouse commencing in the month
immediately following the Executive's death.
2. The Executive shall be deemed to be retired for purposes of
determining his entitlement to employee benefits available to retired
officers of the Company, including but not limited to the retired officers
supplemental medical plan, The Consolidated Edison Retiree Health Program,
and the non-contributory and contributory retiree life insurance plan.
3. The Executive's termination of employment with the Company shall
be deemed to be with the Company's consent under the Consolidated Edison
Company of New York, Inc. 1996 Stock Option Plan (the "SOP") and any
options awarded under the SOP to the Executive that are unexercised at his
termination of employment shall be extended to the earlier of three years
after such termination or the tenth anniversary of the grant date.
D. 1. The retainer agreement referred to in paragraph B 6 above shall be
for legal services to be performed personally by the Executive as a
non-employee for the period commencing on his termination of employment to
December 31, 1998. The retainer shall be in the amount of $255,000,
payable by the Company in three equal installments on the first day of
April, July and October, 1998. Payment shall be made to the Executive or
to a law firm that the Executive designates. The Executive's legal
services shall be charged at the rate of $450 an hour; disbursements shall
be charged separately and shall not be part of the retainer. The Company
shall be entitled to receive 567 hours of services from the Executive
under the retainer. If the number of hours of service performed by the
Executive for the Company under the retainer is less than or equal to 567,
no part of the retainer shall be returned to the Company. To the extent
that such number of hours of service performed by the Executive exceeds
567 but is less than the sum of 567 and the number of hours of service
owed by the Executive to the Company under paragraph D 2 below, such
excess number of hours of services shall be charged at the rate of $0 an
hour. To the extent that the number of hours of service performed by the
Executive exceeds the sum of 567 and the number of hours of service owed
by the Executive to the Company under paragraph D 2 below, such excess
number of hours of service shall be charged at the rate of $450 an hour.
2. During the period from January 1, 1998 through March 31, 1998,
the Executive may perform legal services for third parties who are
independent from and not affiliated with the Company. The Company consents
to the Executive's performing such services, provided that such services
do not exceed 20% of the time the Executive would otherwise devote to the
Company and such services do not interfere with the performance of the
Executive's obligations to the Company. The Executive shall account to the
Company for the time spent on such matters for third parties and shall
reimburse the Company by performing an equal number of hours of service
for the Company without charge under the retainer referred to in paragraph
D 1 above.
E. This Amendment has been authorized by the Board of Trustees of the
Company.
IN WITNESS WHEREOF, the parties have executed this Amendment on the day
and year first above written.
Consolidated Edison Company
of New York, Inc.
By_________________________
Richard P.Cowie
Vice President-Employee Relations
By_________________________
Peter J. O'Shea, Jr.
Amendment No. 3
To
The Consolidated Edison
Retirement Plan for
Management Employees
______________________________________
Dated as of June 1, 1997
<PAGE>
Pursuant to resolutions adopted by the Board of Trustees of
Consolidated Edison Company of New York, Inc. at a meeting duly called and
held on July 23, 1996, the undersigned hereby approves the amendments set
forth below to The Consolidated Edison Retirement Plan for Management
Employees, as heretofore amended by Amendments Nos 1 and 2 thereto:
1. Effective January 1, 1997, Paragraph 2 A is amended by the addition of
the following new definitions at the end thereof:
"The following definitions shall be effective January 1, 1997:
"Adjusted Section 417(e)-Interest Rate-The rate of interest used in
conjunction with the Section 417(e) Interest Rate in the calculation of
the present value of benefits, to take account of prospective Cost of
Living Adjustments, pursuant to Paragraph 24 C. It shall be determined by:
(i) dividing the Section 417(e) Interest Rate, as determined for a
Participant's Annuity Starting Date, by 100;
(ii) adding 1.0000 to the amount determined in clause(i);
(iii) dividing the amount determined in clause(ii) by the lesser of:
(A) the sum of:
(I) 0.9694, plus
(II) the product of 0.7194 and the amount determined in
clause(i), or
(B) 1.0300;
(iv) subtracting 1.0000 from the amount determined in clause(iii); and
(v) multiplying the amount determined in clause(iv) by 100;
1
<PAGE>
provided, however, that in no event shall the Adjusted Section 417(e)
Interest Rate exceed the Section 417(e) Interest Rate, as of any date
of determination.
"Consolidated RPA 94 Lump Sum Conversion Factors-The table of actuarial
factors used to convert an immediate or deferred annuity into an
actuarially equivalent lump sum. Such factors shall be based on the
Section 417(e) Mortality Table and shall take into account the
Section 417(e) Interest Rate for the period prior to a Participant's
Normal Retirement Date and the Adjusted Section 417(e) Interest Rate
for the period subsequent to the Participant's Normal Retirement Date.
The enrolled actuary shall provide to the Plan Administrator tables of
the Consolidated RPA 94 Lump Sum Conversion Factors determined on the
basis of the Section 417(e) Interest Rate in effect in each Lookback
Month."
"Section 417(e) Interest Rate-The annual rate of interest on 30-year
Treasury securities for the third month prior to the month that
includes a Participant's Annuity Starting Date. For the purposes of
regulations promulgated under Section 417(e) of the Code, the calendar
month shall be deemed the "Stability Period" and the third month prior
to the month that includes a Participant's Annuity Starting Date shall
be deemed the "Lookback Month."
"Section 417(e) Mortality Table-The mortality table prescribed by the
Secretary of the Treasury, pursuant to Section 417(e)(3)(A)(ii)(I) of
the Code, as in effect for the Stability Period that includes a
Participant's Annuity Starting Date."
2
<PAGE>
2. Effective December 1, 1996, Paragraph 6 is amended by deleting from the
caption thereof the phrase "OPTIONAL TEN YEAR CERTAIN PENSION" and by
inserting in lieu thereof the new phrase "OPTIONAL TWELVE YEAR CERTAIN
PENSION AND LEVEL INCOME PENSION".
3. Effective December 1, 1996, Paragraph 6 A is amended by deleting from the
second sentence the phrase "Optional Ten Year Certain Pension provided
below" and by inserting in lieu thereof the new phrase "Optional Twelve
Year Certain Pension provided under Paragraph 6 E or Paragraph 6 F, or the
Optional Joint and 100% Surviving Spouse Annuity under Paragraph 6 G".
4. Effective December 1, 1996, Paragraphs 6 D, 6 E, and 6 F are amended (i)
by deleting from the caption of each such paragraph the phrase "Optional
Ten Year Certain Pension" and inserting in lieu thereof the new phrase
"Optional Twelve Year Certain Pension"; (ii) by deleting the phrase "ten
year certain" in each place that it appears and inserting in lieu thereof
the new phrase "twelve year certain"; (iii) by deleting the phrase "one
hundred twenty" in each place that it appears and inserting in lieu
thereof the new phrase "one hundred forty-four"; (iv) by deleting the
number "120" in each place that it appears and inserting in lieu thereof
the new number "144"; and (v) by deleting the phrase "ten years" in each
place that it appears and inserting in lieu thereof the new phrase "twelve
years".
5. Effective December 1, 1996, Paragraph 6 is amended by adding at the end
thereof the following new Paragraphs 6 G and 6 H.
3
<PAGE>
"G. Optional Joint and 100% Surviving Spouse Annuity
"(i) A Participant who is married may elect to receive his
Pension in the form of a Joint and 100% Spouse Annuity
and may further elect that the Joint and 100% Surviving
Spouse Annuity include a Pop-Up Feature. Such election
must be made not less than 30 days nor more than 90 days
prior to the Participant's Annuity Starting Date and
must be in writing on a form furnished by and filed with
the Plan Administrator.
"(ii) If a Participant elects the Joint and 100% Surviving
Spouse Annuity, but does not elect the Pop-Up Feature,
then the amount payable for the life of the Participant
shall be equal to the Pension otherwise payable to the
Participant, in the absence of an election under this
paragraph, reduced by the appropriate factor in Table G,
and the Participant's surviving spouse shall receive for
life a surviving spouse annuity equal to the amount
payable to the Participant.
"(iii)If a Participant elects the Joint and 100%
Surviving Spouse Annuity and further elects the
inclusion of the Pop-Up Feature, then the amount payable
to the Participant during the period that the
Participant and his spouse are both alive shall be the
Pension otherwise payable to the Participant, in the
absence of an election under this paragraph, reduced by
the appropriate factor in Table H; the amount payable to
the Participant during any period subsequent to the
death of his spouse
4
<PAGE>
shall be equal to the Pension
otherwise payable to the Participant in the absence of
an election under this paragraph; and the Participant's
surviving spouse shall receive for life a surviving
spouse annuity equal to the amount payable to the
Participant during the period that the Participant and
his spouse were both alive."
"H. Level Income Option
"(i) A Participant who is eligible to commence receipt of a
pension and whose Annuity Starting Date precedes his
attainment of the age at which he is eligible to receive
unreduced Social Security benefits may elect to receive
his Pension under the Level Income Option and may
further elect as a Leveling Month, for purposes of
subparagraph (ii), either the month following the month
in which he attains age 62 or the earliest month for
which he is eligible to receive unreduced Social
Security benefits. The election of the Level Income
Option may be made in addition to an election under
Paragraph 6 D, 6 E, 6 F, or 6 G. Such election must be
made not less than 30 days nor more than 90 days prior
to the Participant's Annuity Starting Date and must be
in writing on a form furnished by and filed with the
Plan Administrator.
"(ii) If a Participant elects the Level Income Option, the
amount payable to the Participant during the period
commencing with his Annuity Starting Date and ending
with the month prior to the Leveling Month shall be
5
<PAGE>
increased and the amount payable during the period
commencing with the Leveling Month and ending in the
month of the Participant's death shall be decreased from
the Pension otherwise payable to the Participant, based
on factors specified in Table I. The present value of
the benefits payable under the Level Income Option shall
be equal to the present value of the Pension otherwise
payable to the Participant, determined on the actuarial
bases specified in Table I.
"(iii) The amounts payable under the Level Income Option
shall be determined on the basis of an estimate of the
Social Security benefit that the Participant would be
eligible to commence to receive in the Leveling Month so
that the amount payable for the month next preceding the
Leveling Month shall be approximately equal to the sum
of the amount payable for the Leveling Month plus the
estimated Social Security benefit commencing in the
Leveling Month, without taking into account any
prospective Cost of Living Adjustment pursuant to
Paragraph 24 C.
"(iv) The amount payable to the Participant under the Level
Income Option shall not be adjusted after the
Participant's Annuity Starting Date, and prior to the
Leveling Month, regardless of any difference between the
estimate taken into account in the determination thereof
and the Social Security benefits actually paid to or
payable to the Participant and regardless of whether the
Participant elects to commence to receive
6
<PAGE>
Social Security benefits in any month other than the
Leveling Month.Commencing in the Leveling Month, the amount
payable to a Participant shall be reduced by an amount
equal to the product of (1) the estimated Social
Security benefit taken into account for purposes of
Paragraph 6 H(ii) and (2) a fraction, the numerator of
which shall be the amount payable to the Participant in
the month next preceding the Leveling Month, taking into
account any Cost of Living Adjustments pursuant to
Paragraph 24 C, and the denominator of which shall be
the amount determined to be payable as of the
Participant's Annuity Starting Date, in accordance with
Paragraph 6 H(ii).
"(v) In the event that a Participant who elects to receive
his Pension under the Level Income Option has also made
an election under Paragraph 6 D, 6 E, 6 F, or 6 G, then
the amount of Pension taken into account in the
determination under Paragraph 6 H(ii) shall be the
amount payable to the Participant after giving effect to
his election under Paragraph 6 D, 6 E, 6 F, or 6 G, as
applicable. In such event, the Participant's election
to receive his Pension under the Level Income Option
shall have no effect on the amount payable to his
surviving spouse or beneficiary under any other election
he has made. In the event that the amount payable to a
Participant who has elected to receive his Pension under
the Level Income Option and also made an election under
Paragraph 6 G(iii) is increased on account of the death
of his spouse,
7
<PAGE>
the amount of such increase shall be
disregarded for purposes of Paragraph 6 H(iv)."
6. Effective July 1, 1996, Paragraph 8 D(ii) is amended by deleting from the
first sentence the comma (,) and all that follows the phrase "Management
Plan", by inserting in lieu thereof a period (.), and by inserting
immediately after the first sentence, as so amended, the following new
sentence:
"No portion of such period shall constitute Service for accrual or
computation of benefits under the Management Plan, except that with
respect to leaves for maternity or paternity reasons granted after July 1,
1996 the first six (6) months of absence from work shall constitute
Service for accrual and computation of benefits; provided that the
Participant returns to active employment for a period equal to the lesser
of the leave or six (6) months."
7. Effective January 1, 1997, Paragraph 10 B is amended by deleting the
second sentence and by inserting in lieu thereof the following two new
sentences:
"In the event that a pension, deferred pension, or annuity shall have a
present value of $3,500 or less, such present value shall be paid in a
single lump sum to the Participant or surviving spouse, in lieu of the
pension, deferred pension, or annuity otherwise payable. Effective
January 1, 1997, the calculation of the present value of a pension,
deferred pension, or annuity, for the purpose of the foregoing sentence,
shall be made on the basis of the Consolidated RPA 94 Lump Sum Conversion
Factor for the Participant"s age, as in effect for the month in which
payment is to be made; provided, however, that the resulting amount shall
not be less than the present value of the annual pension determined in
accordance with
8
<PAGE>
Paragraph 10 A, taking into account only the Participant's
employment and Annual Basic Straight-Time Compensation prior to January 1,
1997, calculated on the basis of the lump sum factors set forth in Table B
and the Participant"s age as of the date of determination."
8. Effective January 1, 1997, Paragraph 10 B(5)(ii) is amended in its
entirety to read as follows:
"(ii) Effective January 1, 1997, a surviving spouse entitled under
Paragraph 6 B(ii) to receive a preretirement survivor benefit shall
receive an immediate lump sum payment equal to fifty percent (50%) of the
Cash-Out, determined in accordance with Paragraph 10 B(9)(a), that the
deceased would have received, if he had terminated employment and elected
a Cash-Out on the date of his death. If the lump sum amount determined in
accordance with the foregoing sentence exceeds $3,500, it shall not be
paid unless the surviving spouse consents to such payment in writing, on a
form provided by the Plan Administrator. If the consent of the surviving
spouse is required for the payment of a lump sum amount and the surviving
spouse does not consent to such payment, then he or she shall receive an
annuity. Unless the surviving spouse elects otherwise, such annuity shall
commence on the first day of the month following the Participant's death
and the amount thereof shall determined by dividing the lump sum amount
payable to the surviving spouse, in accordance with the first sentence of
this subparagraph, by an annuity conversion factor determined on the basis
of the Section 417(e) Mortality Table, the Adjusted Section 417(e)
Interest Rate and the surviving spouse's age as of the month of
determination. If the surviving spouse elects to defer the commencement
of such annuity, the amount thereof shall be increased so that the
deferred annuity commencing on the date elected by the surviving spouse is
of equivalent actuarial value to the immediate
9
<PAGE>
annuity otherwise payable, on the basis of the Section 417(e) Mortality
Table and the Section 417(e) Interest Rate."
9. Effective January 1, 1997, Paragraph 10 B(9) is amended in its entirety
to read as follows:
"(a) The Cash-Out is a lump sum payment representing the present
value of the deferred pension payable to the Participant at
Normal Retirement Date. Effective January 1, 1997, the
amount of a Cash-Out will be the greater of (i) the product
of the deferred pension amount determined in accordance
with Paragraph 10 B(7) and the Consolidated RPA 94 Lump Sum
Conversion Factor, as in effect for the Participant's
Annuity Starting Date, for the Participant s age in such
month, or (ii) the product of the deferred pension amount
determined in accordance with Paragraph 10 B(7), taking
into account only the Participant's employment and Annual
Basic Straight-Time Compensation prior to January 1, 1997,
and the factor in Table B for the Participant's age as of
his Annuity Starting Date. For the purpose of the
foregoing sentence, a Participant's age in any month shall
be his age on the birthday nearer in time to the first of
such month."
" (b) In lieu of the Cash-Out, the Participant may receive an
immediate annuity, commencing in the month in which the
Cash-Out would otherwise have been payable. The amount of
such immediate annuity shall be the greater of (i) the
amount determined by dividing the Cash-Out, computed in
accordance with Paragraph 10 B(9)(a)(i), by an annuity
conversion factor
10
<PAGE>
determined on the basis of the
Section 417(e) Mortality Table, the Adjusted Section 417(e)
Interest Rate, and the Participant's age as of the month of
determination; or (ii) the product of the deferred pension
amount determined for the purpose of
Paragraph 10 B(9)(a)(ii) and a reduction factor for early
commencement based on the same mortality and interest
assumptions used for Table B and the Participant's age as
of the month of determination."
10.Effective December 1, 1996, the caption "Ten Year Certain Optional
Pension" for Paragraph 10 B(10) is deleted and in lieu thereof the caption
"Optional Twelve Year Certain Pension and Level Income Pension" is
inserted and Paragraph 10 B(10) is amended in its entirety to read as
follows:
"(i) The Pension payable to a Participant who elects an optional
form of Pension pursuant to Paragraph 6 D, 6 E, 6 F, or 6 G
shall be the Pension determined by the appropriate subsection
of Paragraph 10 B above, multiplied by the appropriate factor
in Table C, D, G, or H, as applicable. In the case of Table
C, the factor shall correspond to the Participant's age at his
Annuity Starting Date. In the case of Tables D, G, and H, the
factor shall correspond to the ages of the Participant and the
Participant's spouse as of the Participant's Annuity Starting
Date.
"(ii) The Pension payable to a Participant who has elected
the Level Income Option pursuant to Paragraph 6 H shall be the
Pension determined by the appropriate
11
<PAGE>
subsection of Paragraph
10 B above, then adjusted in accordance with Paragraph 10
B(10)(i), if applicable, and then further adjusted as follows:
(A) For the period commencing with the Participant's Annuity
Starting Date and ending with the month prior to the Leveling
Month, by adding an amount equal to the product of:
(I) the Participant's estimated Social Security benefit, and
(II) a fraction, the numerator of which is the factor in Table I
corresponding to the Participant's age at his
Annuity Starting Date and the denominator of which is the
factor in Table I corresponding to the Participant's age in
the Leveling Month,
provided, however, that if the product of item (I) and
item (II) is less than the excess, if any, of the
Participant's estimated Social Security benefit over his
Pension as determined prior to any adjustment under this
clause (A), then there shall be substituted for such product
an amount equal to the product of:
(III) the Pension payable to the Participant at his Annuity
Starting Date prior to any adjustment under this clause (A),
and
(IV) a fraction, the numerator of which is the factor in
Table I corresponding to the Participant's age at his Annuity
Starting Date and the denominator of which is the excess of
(x) the factor in Table I corresponding to the Participant's
age in the Leveling Month over (y) the factor in Table I
corresponding to the Participant's age at his Annuity Starting
Date.
12
<PAGE>
(B) For the period commencing with the Leveling Month, by
subtracting from the Pension amount, as adjusted in accordance
with clause (A), the amount of the Participant's estimated
Social Security benefit, provided, however, that the resulting
amount shall not be less than zero.
For the purpose of this subparagraph, the term "estimated
Social Security benefit" shall refer to the Social
Security benefit expected to be payable to the
Participant, commencing in the Leveling Month, determined on
the basis of the Social Security Act as in effect on the
Participant's Annuity Starting Date, taking into account the
Participant's actual earnings during his period of employment
with the Company, estimating his earnings for years prior to
his employment with the Company by discounting his earnings in
his first year of employment with the Company by the national
average earnings factors developed by the Social Security
Administration, and assuming that he will have no earnings
subsequent to his Annuity Starting Date. The term Leveling
Month shall refer to the month elected by the Participant in
accordance with Paragraph 6 H(i)."
11.Effective January 1, 1997, Paragraph 11 A is amended by deleting the
paragraph that begins with the phrase "Actuarial equivalent ..." and by
inserting in lieu thereof the following new paragraph:
"Effective January 1, 1997, for the purpose of this Paragraph, actuarial
equivalence shall be determined on the basis of the Section 417(e)
Mortality Table and an interest rate of 5%, except that the actuarial
equivalent of a benefit payable in the form of a lump sum shall be
13
<PAGE>
determined on the basis of the Section 417(e) Mortality Table and the
Section 417(e) Interest Rate."
12.Effective December 1, 1996, Paragraph 12 A(1) is amended by deleting
the period (.) at the end of the third paragraph and by inserting in lieu
thereof the new phrase ", or in accordance with the provisions of
Paragraph 6 H, as applicable to a Participant who has elected the Level
Income Option."
13. Effective January 1, 1997, Paragraph 24 G is deleted in its entirety.
14.Effective December 1, 1996, Table C and Table D are amended by deleting
from the caption of each such table the phrase "10 Year Certain" and by
inserting in lieu thereof the new phrase "12 Year Certain ".
15.Effective December 1, 1996, the Plan is amended by appending at the end
thereof new Tables G, H, and I, as attached hereto.
IN WITNESS WHEREOF, the undersigned has subscribed his name to this
instrument this ____ day of _______, 1997.
____________________________
Richard P. Cowie
Vice President-Employee Relations
Consolidated Edison Company
of New York, Inc.
14
Amendment No. 4
To
The Consolidated Edison
Retirement Plan for
Management Employees
---------------------------------------
Dated November 14, 1997
165957
<PAGE>
Pursuant to resolutions adopted by the Board of Trustees of Consolidated
Edison Company of New York, Inc. at meetings duly called and held on November
24, 1992 and January 27, 1997 and to provisions in The Consolidated Edison
Retirement Plan for Management Employees authorizing changes to the retiree
health benefits, the undersigned hereby approves the amendments set forth below
to The Consolidated Edison Retirement Plan for Management Employees, as
heretofore amended by Amendments Nos. 1, 2 and 3 thereto:
1. Effective February 1, 1997, the following paragraph shall be added at the end
of Paragraph 1: "Effective February 1, 1997, the Management Plan is amended to
provide that Management Employees of the Company who are transferred to and
become employees of an Affiliate of the Company shall continue to participate in
and accrue pension benefits under the Management Plan and shall be eligible for
retiree health benefits provided under the Management Plan. The period of
employment and the base compensation of such Employees with the Affiliate shall
be counted for purposes of determining Service, Accredited Service, Hours of
Service, Annual Basic Straight-Time Compensation and eligibility for benefits
under Paragraph 23-Retiree Health Program under the Management Plan. The cost of
such Employees' pension and retiree health benefits shall be allocated between
the Company and the Affiliate."
2. Effective February 1, 1997, Paragraph 2 A is amended by adding the following
definitions at the end thereof: "Affiliate means (a) any corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company, (b) any other trade or business
(whether or not incorporated) which is under common control with the Company
within the meaning of Section 414(c) of the Code, and (c) any organization which
(along with the Company) is a member of an affiliated service group (within the
meaning of Section 414(m) of the Code); provided that, for purposes of Paragraph
11 A of the Management Plan, in determining common control under Sections 414(b)
and (c) of the Code, the phrase "more than 50 percent" shall be substituted for
the phrase "at least 80 percent" each place the latter appears in Section 1563
of the Code (and regulations thereunder) and in regulations under Section 414(c)
of the Code.
"Company means Consolidated Edison Company of New York, Inc., provided that for
any person who is an Employee by reason of having transferred from employment by
Consolidated Edison Company of New York, Inc. to employment by an Affiliate, any
reference to `Company' shall include the Affiliate for purposes of determining
Annual Basic Straight-Time Compensation, Accredited Service, Service, Hours of
Service and eligibility for benefits under Paragraph 23-Retiree Health Program."
3. Effective February 1, 1997, the definition of the following terms in
Paragraph 2 A is amended to read as follows: "Employee means (a) any person
employed by the Company and (b) any person employed by the Company who is
transferred to the employment of an Affiliate.
"Management Employee means (a) an Employee on the Company's management payroll
and (b) an Employee who is transferred from the Company's management payroll to
an Affiliate's payroll."
4. Effective April 1, 1997, in Appendix I, Part A-Benefits, I. Hospital/Medical
Benefits (a) in the paragraph entitled Annual Deductibles-MEDICAL, the
individual annual deductible increases from $200 to $250, and the annual
deductible for families with four or more members increases from $600 to $750,
and (b) the paragraph entitled Medical Expense Copayments is changed to read as
follows: "After the individual annual deductible is met, 20% for expenses to
$7,500 per person per year. None for expenses over $7,500 per person per year."
5. Effective April 1, 1997, under the paragraph entitled Required Deductible and
Copayment for Prescription Drugs in Appendix I, Part B-Costs, the family annual
deductible increases from $25 to $50.
6. Effective January 1, 1998, immediately following the paragraph entitled
Required Monthly Contribution for Medical/Hospital Benefits in Appendix I, Part
B-Costs, a new paragraph entitled Required Monthly Contribution for Prescription
Drug Benefits is added to read as follows: "Effective January 1, 1998, a
contribution in the amount of $10 shall be deducted each month from the Pension
or Annuity payments to a retiree or surviving spouse who enrolls or has
prescription drug coverage. The monthly contribution will cover the retiree or
surviving spouse and any family members covered for prescription drug benefits."
7. Effective January 1, 1998, the second paragraph under Paragraph 23 C is
amended in its entirety to read as follows: "Effective January 1, 1998,
participants shall make a monthly contribution toward the cost of prescription
drug benefits and shall be required to pay an annual deductible and copayment
for each prescription or refill as set forth in Appendix I, Part B."
8. Effective January 1, 1998, the following sentences shall be added at the end
of subdivision (d) of Paragraph 23 E: "Each retiree or surviving spouse who
first becomes eligible for prescription drug benefits on or after January 1,
1998 shall be required to enroll in the Retiree Health Program to obtain such
benefits. The enrollment procedure shall be similar to the enrollment procedure
for medical/hospital benefits set forth in subdivision (c) above. For those
retirees and spouses of retirees who have other continuous group coverage for
prescription drug benefits, enrollment may be deferred on terms similar to those
set forth in subdivision (b) above relating to medical/hospital benefits."
9. Effective January 1, 1998, in paragraph I. under the heading Benefits
Hospital in Appendix I, Part A, I. Hospital/Medical Benefits, relating to the
inpatient treatment of alcoholism and substance abuse, delete the words ", but
not more than 60 days in a lifetime" in the two places the words appear. The
lifetime maximum of 60 days for the treatment of alcoholism or drug abuse shall
no longer apply.
10. Effective January 1, 1998, in paragraph B under the heading Benefits
Medical, in Appendix I, Part A, I. Hospital/Medical Benefits, delete the
following words: "Outpatient treatment of mental, psychoneurotic and personality
disorders (effective January 1, 1993, subject to a $1,500 annual maximum per
person provided, however, that a minimum reimbursement of $30 a visit will
apply)", and add a new paragraph E to read as follows: "Effective January 1,
1998, payment of 80% of reasonable and customary charges, subject to deductible,
of up to $70 for each outpatient visit in a calendar year for treatment of
mental, psychoneurotic or personality disorders, and payment, subject to
deductible, of $60 per visit for three crisis intervention visits in a calendar
year."
IN WITNESS WHEREOF, the undersigned has executed this instrument this ____
day of November, 1997.
----------------------------
Richard P. Cowie
Vice President-Employee Relations
Consolidated Edison Company
of New York, Inc.
Amendment No. 5
To
The Consolidated Edison
Retiree Health Program
For Management Employees
-------------------------
Dated: November 14, 1997
166214
<PAGE>
Pursuant to resolutions adopted by the Board of Trustees of Consolidated
Edison Company of New York, Inc. at meetings duly called and held on November
24, 1992 and January 27, 1997 and to provisions in The Consolidated Edison
Retiree Health Program for Management Employees authorizing changes to the
retiree health benefits, the undersigned hereby approves the amendments set
forth below to The Consolidated Edison Retiree Health Program for Management
Employees, as heretofore amended by Amendments Nos. 1, 2, 3 and 4 thereto:
1. Effective February 1, 1997, a new Section 1.03 shall be added to read
as follows:
"Section 1.03 Transfers to Affiliates. Effective February 1, 1997, The
Program is amended to provide that Employees of the Company who are transferred
to and become employees of an Affiliate of the Company shall continue to be
eligible for retiree health benefits provided under the Program. The cost of
such Employees' retiree health benefits shall be allocated between the Company
and the Affiliate."
2. Effective February 1, 1997, Section 2.01 is amended by adding the following
definition at the end thereof:
"Affiliate means (a) any corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Company, (b) any other trade or business (whether or not
incorporated) which is under common control with the Company within the meaning
of Section 414(c) of the Code, and (c) any organization which (along with the
Company) is a member of an affiliated service group (within the meaning of
Section 414(m) of the Code)."
3. Effective February 1, 1997, the definition of the following terms in Section
2.01 is amended to read as follows:
"Company means Consolidated Edison Company of New York, Inc., provided
that for any individual who is an Employee by reason of having transferred from
employment by Consolidated Edison Company of New York, Inc. to employment by an
Affiliate, any reference to `Company' shall include the Affiliate for purposes
of determining eligibility for benefits under the Management Plan.
"Employee means (a) any individual employed on the management payroll of
the Company and (b) any individual employed on the management payroll of the
Company who is transferred to the employment of an Affiliate."
4. Effective April 1, 1997, in Appendix I, Benefits, I. Hospital/Medical
Benefits (a) in the paragraph entitled Annual Deductibles-MEDICAL, the
individual annual deductible increases from $200 to $250, and the annual
deductible for families with four or more
2
<PAGE>
members increases from $600 to $750, and (b) the paragraph entitled Medical
Expense Copayments is changed to read as follows:
"After the individual annual deductible is met, 20% for expenses to $7,500
per person per year. None for expenses over $7,500 per person per year."
5. Effective April 1, 1997, as set forth in Section 5.01(b), the family annual
deductible increases from $25 to $50.
6. Effective January 1, 1998, the following sentences shall be added at the end
of Section 3.02(b):
"Each retired Employee or Surviving Spouse who first becomes eligible for
prescription drug benefits on or after January 1, 1998 shall be required to
enroll in the Retiree Health Program to obtain such benefits. The enrollment
procedure shall be similar to the enrollment procedure for medical/hospital
benefits set forth in Section 3.02(a) above. For those retired Employees and
Spouses who have other continuous group coverage for prescription drug benefits,
enrollment may be deferred on terms similar to those set forth in Section
3.01(b) above relating to medical/hospital benefits."
7. Effective January 1, 1998, Section 5.01(b) is amended to read as follows:
"Effective January 1, 1998, a contribution in the amount of $10 shall be
deducted each month from the pension or annuity payment to a retired Employee or
Surviving Spouse who enrolls or has prescription drug coverage. The monthly
contribution will cover the retired Employee or Surviving Spouse and any family
members covered for prescription drug benefits. An annual deductible of $50 per
family is required to be met before any prescription drugs may be obtained under
the prescription card program, and participants are required tomake a copayment
for each prescription or refill obtained under the prescription card program.
Effective July 1, 1996, the required copayment for basic coverage shall be $8.00
for brand name drugs and $5.00 for generic drugs."
8. Effective January 1, 1998, in paragraph I. under the heading Benefits
Hospital in Appendix I, I. Hospital/Medical Benefits, relating to the inpatient
treatment of alcoholism and substance abuse, delete the words ", but not more
than 60 days in a lifetime" in the two places the words appear. The lifetime
maximum of 60 days for the treatment of alcoholism or drug abuse shall no longer
apply.
9. Effective January 1, 1998, in paragraph B under the heading Benefits Medical,
in Appendix I, I. Hospital/Medical Benefits, delete the following words:
"Outpatient
2
<PAGE>
treatment of mental, psychoneurotic and personality disorders
(subject to a $1,500 annual maximum per person provided, however that a minimum
reimbursement of $30 a visit will apply)", and add a new paragraph E to read as
follows:
"Effective January 1, 1998, payment of 80% of reasonable and customary
charges, subject to deductible, of up to $70 for each outpatient visit in a
calendar year for treatment of mental, psychoneurotic or personality disorders,
and payment, subject to deductible, of $60 per visit for three crisis
intervention visits in a calendar year."
IN WITNESS WHEREOF, the undersigned has executed this instrument this ____
day of November, 1997.
----------------------------
Richard P. Cowie
Vice President-Employee Relations
Consolidated Edison Company
of New York, Inc.
3
CONSOLIDATED EDISON, INC.
1996 STOCK OPTION PLAN, AS AMENDED
AND RESTATED FEBRUARY 24, 1998
ARTICLE 1
Purpose
Section 1.1. Purpose. The purpose of this plan (the "Plan") is to
promote the interests of Consolidated Edison, Inc. (the "Company") and its
shareholders by providing long-term incentives to those persons with significant
responsibility for the success and growth of the Company, by strengthening the
Company's ability to attract and retain officers and other employees of the
Company and its subsidiaries on a competitive basis and by aligning the
interests of the officers and other employees with the Company's shareholders,
through facilitating their acquisition of equity interests in the Company.
ARTICLE 2
Definitions
For purposes of the Plan, the following terms shall have the
meanings provided herein:
Section 2.1. "Board" means the Board of Directors of
the Company.
Section 2.2. "Code" means the Internal Revenue Code of
1986, as amended from time to time.
Section 2.3. "Committee" means the Executive Personnel and Pension
Committee of the Board or such other committee as may be appointed by the Board
to administer the Plan; provided, however, that the Committee shall consist of
three or more non-employee members of the Board who shall qualify to administer
the Plan as contemplated by both Rule 16b-3 under the Exchange Act and Section
162(m) of the Code.
Section 2.4. "Disability" means permanent and total disability as
defined under the Long-Term Disability Plan for Management Employees of
Consolidated Edison Company of New York, Inc.
("CECONY"), as in effect from time to time.
Section 2.5. "Exchange Act" means the Securities
Exchange Act of 1934, as amended from time to time.
Section 2.6. "Fair Market Value" means the closing price of a Share
in the Consolidated Reporting System as reported in the Wall Street Journal or
in a similarly readily available public source for the trading day immediately
prior to the applicable transaction date under the Plan. If no trading of Shares
occurred on such date, the closing price of a Share in such System as reported
for the preceding day on which sales of Shares occurred shall be used.
Section 2.7. "Incentive Option" means an option granted under the
Plan to purchase Shares and which is intended to qualify as an incentive stock
option under Section 422 of the Code.
Section 2.8. "Non-qualified Option" means an option
granted under the Plan to purchase Shares and which is not intended to
qualify as an Incentive Option.
Section 2.9. "Option" means, collectively, Incentive
Options and Non-qualified Options.
Section 2.10. "Shares" means shares of the Company's
common shares, $ .10 par value.
<PAGE>
ARTICLE 3
Administration
Section 3.1. Administration. (a) The Plan shall be administered by
the Committee. The Committee shall have authority in its sole discretion,
subject to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including without limitation authority to select the
employees to be granted Options, to determine the size and terms of the Options
to be granted to each employee selected, to determine the time or times when
Options will be granted, the period or periods during which Options will be
exercisable, and to prescribe the form of the agreements embodying Options
granted under the Plan. The Committee shall be authorized to interpret the Plan
and the Options granted under the Plan, to establish, amend and rescind any
rules and regulations relating to the Plan, and to make any other determinations
which it believes necessary or advisable for the administration of the Plan. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Option in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. In no event,
however, shall the Committee have the right to grant dividend equivalents in
respect of Options or to cancel outstanding Options for the purpose of replacing
or regranting such Options with a purchase price that is less than the purchase
price of the original Option.
(b) The Committee shall maintain a written record of its
proceedings. Any decision of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive and binding on all persons
affected by the decision, including the Company, any employee or optionee or any
person claiming any rights under the Plan from or through any employee or
optionee. The Committee may delegate to one or more of its members or to any
officer or officers of the Company or CECONY such administrative duties under
the Plan as the Committee may deem advisable.
ARTICLE 4
Eligibility and Participation
Options may be granted to officers and other employees of the
Company as the Committee may from time to time select. Any officer or employee
of the Company shall be eligible to receive one or more Options, subject to the
limitation set forth in Section 5.1. In determining the persons to whom Options
are to be granted and the number of Shares subject to each Option, the Committee
shall take into consideration the person's present and potential contribution to
the success of the Company and such other factors as the Committee may deem
proper and relevant. For purposes of participation in the Plan, the term
"Company" shall include any entity that is directly or indirectly controlled by
the Company or any entity, including an acquired entity, in which the Company
has a significant equity interest, as determined by the Committee.
ARTICLE 5
Shares Subject to Plan
Section 5.1. Amount of Stock. There may be delivered under the Plan
an aggregate of not more than 10,000,000 Shares, subject to adjustment as
provided in Section 5.2. The aggregate number of Shares that may be covered by
Options granted to a single individual under the Plan shall not exceed 1,500,000
Shares. Shares delivered pursuant to the Plan may consist in whole or in part of
authorized and unissued Shares or reacquired Shares, and no fractional Shares
shall be delivered under the Plan. Cash may be paid in lieu of any fractional
Shares in the exercise of Options under the Plan. In the event that Options
shall be forfeited or cancelled or shall terminate or expire without being
exercised in whole or in part, new Options may be granted covering the Shares
not purchased under such forfeited, cancelled, terminated or expired Options.
For purposes of this Section, the number of Shares deemed to be delivered under
the Plan upon the exercise of an Option shall equal the number of Shares as to
which the Option is exercised less the number of Shares tendered, if any,
pursuant to Section 6.5. However, the number of Shares deemed exercised by the
optionee under the applicable option(s) shall be the full number of Shares
specified in the exercise notice required under Section 6.5.
Section 5.2. Dilution and Other Adjustments. In the event of any
change in the number of outstanding Shares or Share price by reason of any stock
split, stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of equity securities or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other similar
change, if the Committee shall determine, in its sole discretion, that such
change equitably requires an adjustment in the limitations on the numbers of
Shares that may be delivered as set forth in
2
<PAGE>
Section 5.1, in the number or kind of shares that may be delivered under
the Plan, or in the number or kind of shares which are subject to outstanding
Options and in the exercise price per Share relating thereto, such adjustment
shall be made by the Committee and shall be conclusive and binding for all
purposes of the Plan.
ARTICLE 6
Terms and Conditions of Options
Section 6.1. Terms and Options. An Option granted under the Plan
shall be in such form as the Committee may from time to time approve. Each
Option shall be subject to the terms and conditions provided in this Article 6
and shall contain such other or additional terms and conditions as the Committee
may deem desirable, but in no event shall such terms and conditions be
inconsistent with the Plan and, in the case of Incentive Options, with the
provisions of the Code applicable to "incentive stock options" as described in
Section 422 of the Code.
Section 6.2. Option Price. The purchase price per
Share under an Option shall be determined by the Committee, but may not
be less than 100 percent of the Fair Market Value of a Share on the
date the Option is granted.
Section 6.3. Option Period. The period during which an Option may be
exercised shall be fixed by the Committee; provided, that no Option shall be
exercisable after the expiration of ten years from the date such Option is
granted, except that, in the event of the death of an optionee holding one or
more options, the option(s) may remain exercisable for up to one year following
the optionee's death.
Section 6.4 Exercisability of Options. The Committee may provide in
the Option agreement that such Option may be immediately exercisable, or that
such Option shall become exercisable at such times or upon such events as the
Committee may specify.
Section 6.5. Exercise of Option. (a) An Option may be exercised in
whole or in part from time to time during the Option period (or, if determined
by the Committee, in specified installments during the Option period) by giving
written notice of exercise to the Secretary of the Company specifying the number
of Shares to be purchased. Notice of exercise of an Option must be accompanied
by payment in full of the purchase price either by cash or such other method as
may be permitted by the Committee, including but not limited to (i) check, (ii)
tendering (either actually or by attestation) Shares owned by the optionee
having a Fair Market Value at the date of exercise equal to such purchase price,
(iii) a third-party exercise procedure, or (iv) in a combination of the
foregoing. The Committee, in its sole discretion, may, in lieu of delivering
Shares covered by an Option upon its exercise, settle the exercise of the Option
by means of a cash payment to the optionee equal to the positive difference
between the Fair Market Value on the exercise date and the option price, or by
delivering Shares having an aggregate Fair Market Value equal to such a payment,
or by a combination of both.
(b) No Shares shall be delivered in connection with the exercise of
an Option until full payment therefor has been made. An optionee shall have the
rights of a shareholder only with respect to Shares for which certificates have
been issued to such person.
Section 6.6. Nontransferability of Options. No Option granted under
the Plan shall be transferable by the optionee otherwise than by will or by the
laws of descent and distribution, except that the Committee may provide for the
transferability of an Option:
(a) by gift or other transfer to (i) a spouse or other immediate relative,
or (ii) a trust or an estate in which the original optionee or the optionee's
spouse or other immediate relative has a substantial interest;
(b) pursuant to a qualified domestic relations order; and (c) as may be
otherwise permitted by Rule 16b-3 under the
Exchange Act; provided, however, that any Option so transferred shall continue
to be subject to all the terms and conditions contained in the Option agreement.
If so permitted by the Committee, an optionee may designate a beneficiary or
beneficiaries to exercise the rights of the optionee under the Plan upon the
death of the optionee.
Section 6.7. Termination of Employment. The Committee shall provide
in the Option agreement the terms and conditions applicable to the Option in the
event of the optionee's termination of employment by reason of retirement,
death, Disability or any other reason.
Section 6.8. Annual Limitation. The maximum aggregate Fair Market
Value of
3
<PAGE>
Shares (determined as of the date of grant of the Incentive Option) for
which Incentive Options are exercisable for the first time by an employee during
any calendar year (under the Plan and any other plan of the Company or its
subsidiaries) shall not exceed $100,000 as and to the extent required by Section
422(d) of the Code.
Section 6.9. Withholding Obligations. (a) As a condition to the
delivery of any Shares pursuant to the exercise of an Option, the Committee may
require that the optionee, at the time of such exercise, pay to the Company an
amount sufficient to satisfy any applicable tax withholding obligations or such
greater amount of withholding as the Committee shall determine from time to
time, or the Committee may take such other action as it may deem necessary to
satisfy any such withholding obligations.
(b) The Committee, in its sole discretion, may permit or require an
optionee to satisfy all or a part of the tax withholding obligations incident to
the exercise of an Option by having the Company withhold a portion of the Shares
that would otherwise be issuable to the optionee. Such Shares shall be valued
based on their Fair Market Value on the date the tax withholding is required to
be made. Any such Share withholding with respect to an optionee subject to
Section 16(a) of the Exchange Act shall be subject to such limitations as the
Committee may impose to comply with the requirements of Section 16 of the
Exchange Act.
ARTICLE 7
Miscellaneous Provisions
Section 7.1. No Implied Rights. No employee or other person shall
have any claim or right to be granted an Option under the Plan. Neither the Plan
nor any action taken hereunder shall be construed as giving any employee any
right to be retained in the employ of the Company or any subsidiary or affect
any right of the Company or any subsidiary to terminate any employee's
employment.
Section 7.2. Securities Law Compliance. No Shares shall be delivered
hereunder unless counsel for the Company shall be satisfied that such delivery
will be in compliance with applicable Federal and state securities laws.
Section 7.3. Ratification of Actions. By accepting any Option or
other benefit under the Plan, each employee and each person claiming under or
through such person shall be conclusively deemed to have indicated such person's
acceptance and ratification of, and consent to, any action taken under the Plan
by the Company, the Board or the Committee.
Section 7.4. Unfunded Plan. Unless otherwise determined by the
Committee, the Plan shall be unfunded and shall not create (or be construed to
create) a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company and any employee, optionee or other
person. To the extent any person holds any rights by virtue of an Option granted
under the Plan, such rights shall constitute general, unsecured liabilities of
the Company and shall not confer upon such person any right, title or interest
in any assets of the Company.
ARTICLE 8
Amendments or Discontinuance
The Plan may be amended at any time and from time to time by the
Board and without the approval of shareholders of the Company, except that no
amendment which increases the aggregate number of Shares which may be delivered
pursuant to the Plan or which, in the absence of shareholder approval, would
cause the Plan not to comply with Rule 16b-3 under the Exchange Act or Section
162(m) of the Code shall be effective unless and until the same is approved by
the shareholders of the Company. No amendment of the Plan shall materially
adversely affect any of the rights or obligations of any person, without such
person's written consent, under any Option theretofore granted under the Plan.
ARTICLE 9
Termination
The Plan shall terminate upon the earlier of the following dates or
events to occur:(a) upon the adoption of a resolution of the Board terminating
the Plan; or (b) May 20, 2006. After termination of the Plan, no Options may be
granted. No termination of the Plan shall materially adversely affect any of the
rights or obligations of any person, without such person's written consent,
4
<PAGE>
under any Option theretofore granted under the Plan.
ARTICLE 10
Change in Control; Dissolution or Merger
Either in contemplation of the Company's undergoing, or in the event
the Company undergoes, a change in control (as determined by the Committee) or
in the event of a merger, consolidation, other business combination, liquidation
or reorganization of the Company, the Committee may provide for appropriate
adjustments, including (i) rescinding or taking any other action with respect to
any Option to the extent necessary to permit the Company to engage in a merger,
consolidation or business combination intended to be accounted for as a pooling
of interests transaction or (ii) accelerating any exercisability or expiration
dates, and settlements of Options either at the time the Option is granted or at
a subsequent date.
ARTICLE 11
Governing Law and Interpretation
The provisions of the Plan shall take precedence over any
conflicting provision contained in an Option. The Plan shall be governed by and
construed in accordance with the laws of the State of New York. If any term or
provision of the Plan is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms and provisions will
remain in full force and effect and will in no way be affected, impaired or
invalidated.
Consent of Independent Accountants
We hereby consent to the incorporation by reference of our report dated February
24, 1998, appearing on page 44 of this Annual Report on Form 10-K, in (i) the
Prospectus constituting part of the Registration Statement on Form S-8 (No.
333-48475) relating to The Consolidated Edison Discount Stock Purchase Plan,
(ii) the Prospectus constituting part of the Registration Statement on Form S-3
(No.333-45745) relating to $540 million principal amount of unsecured debt
securities of Consolidated Edison Company of New York, Inc., (iii) the
Prospectus, dated March 14, 1996, as amended by the prospectus supplement dated
January 2, 1998, and the Prospectus, dated November 23, 1993, as amended by
prospectus supplements dated March 14, 1996 and January 2, 1998, constituting
part of the Registration Statement on Form S-3 (No.333-01717-99) relating to the
Consolidated Edison, Inc. Automatic Dividend Reinvestment and Cash Payment Plan,
and (iv) the Prospectus constituting part of the Registration Statement on Form
S-8 (No. 333-04463-99) relating to the Consolidated Edison, Inc. 1996 Stock
Option Plan.
PRICE WATERHOUSE LLP
New York, New York
March 26, 1998
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
24th day of March 1998.
E. Virgil Conway
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
25th day of March 1998.
Gordon J. Davis
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
24th day of March 1998.
Ruth M. Davis
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
24th day of March 1998.
Joan S. Freilich
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
24th day of March 1998.
Ellen V. Futter
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
20th day of March 1998.
Arthur Hauspurg
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
24th day of March 1998.
Sally Herenandez-Pinero
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
23rd day of March 1998.
Peter W. Likins
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
24th day of March 1998.
Eugene R. McGrath
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
24th day of March 1998.
Donald K. Ross
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
25th day of March 1998.
Robert G. Schwartz
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
20th day of March 1998.
Richard A. Voell
<PAGE>
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
POWER OF ATTORNEY
WHEREAS Consolidated Edison, Inc. ("CEI") and Consolidated Edison Company
of New York, Inc. ("Con Edison") each intends to file with the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"Act"), its Annual Report on Form 10-K for the fiscal year ended December 31,
1997 with any and all exhibits and other documents having relation thereto, as
prescribed by the Securities and Exchange Commission pursuant to the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder ("Form 10-K").
NOW, THEREFORE,
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, in his or her
capacity as a Director or officer, or both, of CEI (the "CEI Delegated
Capacity") and/or a Trustee or officer, or both, of Con Edison (the "Con Edison
Delegated Capacity"), as the case may be, does hereby constitute and appoint
Eugene R. McGrath, Joan S. Freilich, Hyman Schoenblum and Peter A. Irwin, and
each of them severally, his or her true and lawful attorneys-in-fact, with power
to act with or without the others and with full power of substitution and
resubstitution, to execute in his or her name, place and stead, in the CEI
Delegated Capacity the CEI Form 10-K and/or in the Con Edison Delegated Capacity
the Con Edison Form 10-K, as the case may be, and any and all amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file or cause to be filed the same with the Securities and Exchange
Commission. Each of said attorneys shall have full power and authority to do and
perform, in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, the undersigned hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
24th day of March 1998.
Hyman Schoenblum
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> The schedule contains summary financial
information extracted from Consolidated
Balance Sheet, Income Statement and
Statement of Cash Flows and is qualified
in its entirety by reference to such financial
statements and the notes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
<PERIOD-TYPE> 12-Mos
<BOOK-VALUE> Per-Book
<TOTAL-NET-UTILITY-PLANT> 11,267,102
<OTHER-PROPERTY-AND-INVEST> 292,397
<TOTAL-CURRENT-ASSETS> 1,527,210
<TOTAL-DEFERRED-CHARGES> 662,730
<OTHER-ASSETS> 973,079
<TOTAL-ASSETS> 14,722,518
<COMMON> 588,724
<CAPITAL-SURPLUS-PAID-IN> 856,652
<RETAINED-EARNINGS> 4,484,703
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,930,079
84,550
233,468
<LONG-TERM-DEBT-NET> 4,188,906
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 529,385
0
<CAPITAL-LEASE-OBLIGATIONS> 39,879
<LEASES-CURRENT> 2,768
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,713,483
<TOT-CAPITALIZATION-AND-LIAB> 14,722,518
<GROSS-OPERATING-REVENUE> 7,121,254
<INCOME-TAX-EXPENSE> 382,910
<OTHER-OPERATING-EXPENSES> 5,692,956
<TOTAL-OPERATING-EXPENSES> 6,075,866
<OPERATING-INCOME-LOSS> 1,045,388
<OTHER-INCOME-NET> 496
<INCOME-BEFORE-INTEREST-EXPEN> 1,045,884
<TOTAL-INTEREST-EXPENSE> 333,061
<NET-INCOME> 712,823
18,344
<EARNINGS-AVAILABLE-FOR-COMM> 694,479
<COMMON-STOCK-DIVIDENDS> 493,711
<TOTAL-INTEREST-ON-BONDS> 318,158
<CASH-FLOW-OPERATIONS> 1,238,540
<EPS-PRIMARY> 2.95
<EPS-DILUTED> 2.95
</TABLE>
