FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
[x] Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[_] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
_________________________
<TABLE>
<CAPTION>
Commission Exact name of registrant as specified in its charter State of I.R.S. Employer
File Number and principal office address and telephone number Incorporation I.D. Number
<S> <C> <C> <C>
1-14514 CONSOLIDATED EDISON, INC. New York 13-3965100
4 Irving Place, New York, New York 10003
(212) 460-3900
1-1217 CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC. New York 13-5009340
4 Irving Place, New York, New York 10003
(212) 460-4600
</TABLE>
Each Registrant 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 and
has been subject to such filing requirements for the past 90 days.
Yes X No _______
-------
As of the close of business on July 31, 1998, (i) Consolidated Edison, Inc.
("CEI") had outstanding 233,829,394. Common Shares ($.10 par value) and (ii) all
of the outstanding Common Stock ($2.50 par value) of Consolidated Edison
Company of New York, Inc. was held by CEI.
<PAGE>
-2-
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
FILING FORMAT 2
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Edison, Inc.
Consolidated Balance Sheet 3-4
Consolidated Income Statements 5-7
Consolidated Statements of Cash Flows 8-9
Consolidated Edison Company of New York, Inc.
Consolidated Balance Sheet 10-11
Consolidated Income Statements 12-14
Consolidated Statement of Cash Flows 15-16
Notes to Financial Statements 17-18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 19-27
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 27
ABOUT MARKET RISK
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 28-29
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 29-30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 30-31
</TABLE>
_________________________
FILING FORMAT
This Quarterly Report on Form 10-Q is a combined quarterly report being filed
separately by two different registrants: CEI and Consolidated Edison Company of
New York, Inc. ("Con Edison"). CEI became the holding company for Con Edison on
January 1, 1998. See "Corporate Structure" in Item 1 of the combined CEI and Con
Edison Annual Reports on Form 10-K for the year ended December 31, 1997 (File
Nos. 1-14514 and 1-1217, the "1997 Form 10-K"). Any 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.
<PAGE>
-3-
CONSOLIDATED EDISON, INC.
-------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
AS AT JUNE 30, 1998, DECEMBER 31, 1997 AND JUNE 30, 1997
--------------------------------------------------------
<TABLE>
<CAPTION>
As At
--------------
June 30, 1998 Dec. 31, 1997 June 30, 1997
-------------- -------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C>
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric $ 11,878,103 $ 11,743,745 $ 11,754,898
Gas 1,784,322 1,741,562 1,686,174
Steam 588,534 576,206 546,949
General 1,203,749 1,203,427 1,159,098
------------- ------------ ------------
Total 15,454,708 15,264,940 15,147,119
Less: Accumulated depreciation 4,562,740 4,392,377 4,447,539
------------- ------------ ------------
Net 10,891,968 10,872,563 10,699,580
Construction work in progress 298,349 292,218 324,400
Nuclear fuel assemblies and components,
less accumulated amortization 105,515 102,321 102,101
------------- ------------ ------------
NET UTILITY PLANT 11,295,832 11,267,102 11,126,081
------------- ------------ ------------
CURRENT ASSETS
Cash and temporary cash investments 105,008 183,458 12,231
Funds held for refunding of debt 99,519 328,874 -
Accounts receivable - customer, less
allowance for uncollectible accounts
of $22,570, $21,600 and $20,804 521,262 581,163 472,773
Other receivables 56,653 60,759 51,763
Regulatory accounts receivable (593) (1,682) (866)
Fuel, at average cost 34,745 53,697 34,940
Gas in storage, at average cost 40,701 37,209 37,746
Materials and supplies, at average cost 191,489 191,759 199,795
Prepayments 74,260 75,516 293,592
Other current assets 16,769 16,457 15,732
------------- ------------ ------------
TOTAL CURRENT ASSETS 1,139,813 1,527,210 1,117,706
------------- ------------ ------------
INVESTMENTS AND NONUTILITY PROPERTY 341,424 292,397 217,745
------------- ------------ ------------
DEFERRED CHARGES
Enlightened Energy program costs 91,026 117,807 120,837
Unamortized debt expense 135,679 126,085 125,770
Recoverable fuel costs 17,339 98,301 43,170
Power contract termination costs 69,943 80,978 38,636
Other deferred charges 245,338 239,559 277,102
------------- ------------ ------------
TOTAL DEFERRED CHARGES 559,325 662,730 605,515
------------- ------------ ------------
REGULATORY ASSET-FUTURE FEDERAL
INCOME TAXES 899,799 973,079 948,410
------------- ------------ ------------
TOTAL $ 14,236,193 $ 14,722,518 $ 14,015,457
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-4-
CONSOLIDATED EDISON, INC.
-------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
AS AT JUNE 30, 1998, DECEMBER 31, 1997 AND JUNE 30, 1997
--------------------------------------------------------
<TABLE>
<CAPTION>
As At
---------------------------------------------------
June 30, 1998 Dec. 31, 1997 June 30, 1997
------------- ------------- -------------
(Thousands of Dollars)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, authorized 500,000,000
shares; outstanding 234,151,294 shares,
235,489,650 shares and 235,023,795 shares $ 1,482,343 $ 1,482,351 $ 1,478,768
Retained earnings 4,409,589 4,484,703 4,242,133
Capital stock expense (36,835) (36,975) (34,754)
----------- ----------- -----------
TOTAL COMMON SHAREHOLDERS' EQUITY 5,855,097 5,930,079 5,686,147
----------- ----------- -----------
Preferred stock
Subject to mandatory redemption
7.20% Series I 47,500 47,500 47,500
6-1/8% Series J 37,050 37,050 37,050
----------- ----------- -----------
TOTAL SUBJECT TO MANDATORY REDEMPTION 84,550 84,550 84,550
----------- ----------- -----------
Other preferred stock
$ 5 Cumulative Preferred 175,000 175,000 175,000
5-3/4% Series A 7,061 7,061 7,061
5-1/4% Series B 13,844 13,844 13,844
4.65% Series C 15,330 15,330 15,330
4.65% Series D 22,233 22,233 22,233
6% Convertible Series B - - 4,398
----------- ----------- -----------
TOTAL OTHER PREFERRED STOCK 233,468 233,468 237,866
----------- ----------- -----------
TOTAL PREFERRED STOCK 318,018 318,018 322,416
----------- ----------- -----------
Long-term debt 4,197,577 4,188,906 4,288,383
----------- ----------- -----------
TOTAL CAPITALIZATION 10,370,692 10,437,003 10,296,946
----------- ----------- -----------
NONCURRENT LIABILITIES
Obligations under capital leases 38,475 39,879 41,265
Other noncurrent liabilities 132,933 106,137 82,109
----------- ----------- -----------
TOTAL NONCURRENT LIABILITIES 171,408 146,016 123,374
----------- ----------- -----------
CURRENT LIABILITIES
Long-term debt due within one year 200,000 529,385 202,630
Accounts payable 366,314 440,114 375,438
Notes payable 44,024 - 15,000
Customer deposits 170,653 161,731 159,749
Accrued taxes 67,718 65,736 (56,676)
Accrued interest 83,512 85,613 83,310
Accrued wages 80,586 82,556 78,312
Other current liabilities 186,199 183,122 142,910
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 1,199,006 1,548,257 1,000,673
----------- ----------- -----------
PROVISIONS RELATED TO FUTURE FEDERAL INCOME TAXES
AND OTHER DEFERRED CREDITS
Accumulated deferred federal income tax 2,227,669 2,307,835 2,333,097
Accumulated deferred investment tax credits 159,300 163,680 168,070
Other deferred credits 108,118 119,727 93,297
----------- ----------- -----------
TOTAL DEFERRED CREDITS 2,495,087 2,591,242 2,594,464
----------- ----------- -----------
TOTAL $14,236,193 $14,722,518 $14,015,457
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-5-
CONSOLIDATED EDISON, INC.
-------------------------
CONSOLIDATED INCOME STATEMENT
-----------------------------
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
-------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Operating revenues
Electric $1,286,320 $1,228,366
Gas 196,562 213,376
Steam 57,411 62,272
Non-utility 20,748 4,074
---------- ----------
TOTAL OPERATING REVENUES 1,561,041 1,508,088
---------- ----------
OPERATING EXPENSES
Purchased power 324,426 314,221
Fuel 123,870 122,426
Gas purchased for resale 86,902 89,494
Other operations 289,388 288,881
Maintenance 132,709 146,859
Depreciation and amortization 129,265 125,003
Taxes, other than federal income tax 290,415 270,828
Federal income tax 36,015 24,044
---------- ----------
TOTAL OPERATING EXPENSES 1,412,990 1,381,756
---------- ----------
OPERATING INCOME 148,051 126,332
OTHER INCOME (DEDUCTIONS)
Investment income 3,080 2,942
Allowance for equity funds used during construction 575 1,520
Other income less miscellaneous deductions 1,038 (205)
Federal income tax 525 (1,296)
---------- ----------
TOTAL OTHER INCOME 5,218 2,961
---------- ----------
INCOME BEFORE INTEREST CHARGES 153,269 129,293
Interest on long-term debt 76,985 79,192
Other interest 10,066 3,287
Allowance for borrowed funds used during construction (294) (745)
---------- ----------
NET INTEREST CHARGES 86,757 81,734
---------- ----------
PREFERRED STOCK DIVIDEND REQUIREMENTS 4,536 4,603
---------- ----------
NET INCOME FOR COMMON STOCK $ 61,976 $ 42,956
========== ==========
COMMON SHARES OUTSTANDING - AVERAGE (000) 234,992 235,016
BASIC AND DILUTED EARNINGS PER SHARE $ 0.26 $ 0.18
========== ==========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.53 $ 0.525
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-6-
CONSOLIDATED EDISON, INC.
-------------------------
CONSOLIDATED INCOME STATEMENT
-----------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Operating revenues
Electric $2,577,643 $2,497,316
Gas 595,732 668,396
Steam 192,801 224,450
Non-utility 47,912 33,481
---------- ----------
TOTAL OPERATING REVENUES 3,414,088 3,423,643
---------- ----------
OPERATING EXPENSES
Purchased power 682,676 666,929
Fuel 258,424 273,780
Gas purchased for resale 276,341 341,205
Other operations 565,218 566,956
Maintenance 250,684 261,022
Depreciation and amortization 257,523 248,797
Taxes, other than federal income tax 592,634 575,811
Federal income tax 127,976 115,931
---------- ----------
TOTAL OPERATING EXPENSES 3,011,476 3,050,431
---------- ----------
OPERATING INCOME 402,612 373,212
OTHER INCOME (DEDUCTIONS)
Investment income 5,984 3,978
Allowance for equity funds used during construction 1,087 3,320
Other income less miscellaneous deductions 535 (726)
Federal income tax (454) (1,599)
---------- ----------
TOTAL OTHER INCOME 7,152 4,973
---------- ----------
INCOME BEFORE INTEREST CHARGES 409,764 378,185
Interest on long-term debt 156,043 157,944
Other interest 11,313 7,701
Allowance for borrowed funds used during construction (557) (1,627)
---------- ----------
NET INTEREST CHARGES 166,799 164,018
---------- ----------
PREFERRED STOCK DIVIDEND REQUIREMENTS 9,072 9,207
---------- ----------
NET INCOME FOR COMMON STOCK $ 233,893 $ 204,960
========== ==========
COMMON SHARES OUTSTANDING - AVERAGE (000) 235,205 235,009
BASIC AND DILUTED EARNINGS PER SHARE $ 0.99 $ 0.87
========== ==========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 1.06 $ 1.05
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-7-
CONSOLIDATED EDISON, INC.
-------------------------
CONSOLIDATED INCOME STATEMENT
-----------------------------
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 AND 1997
--------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Operating revenues
Electric $5,715,902 $5,507,860
Gas 1,021,216 1,053,175
Steam 360,151 381,763
Non-utility 89,328 123,921
---------- ----------
TOTAL OPERATING REVENUES 7,186,597 7,066,719
---------- ----------
OPERATING EXPENSES
Purchased power 1,365,334 1,314,196
Fuel 581,468 542,779
Gas purchased for resale 487,733 572,087
Other operations 1,122,965 1,167,447
Maintenance 464,450 470,887
Depreciation and amortization 512,182 492,713
Taxes, other than federal income tax 1,197,978 1,158,528
Federal income tax 389,767 366,977
---------- ----------
TOTAL OPERATING EXPENSES 6,121,877 6,085,614
---------- ----------
OPERATING INCOME 1,064,720 981,105
OTHER INCOME (DEDUCTIONS)
Investment income 14,220 8,988
Allowance for equity funds used during construction 2,215 5,530
Other income less miscellaneous deductions (2,839) (6,253)
Federal income tax (853) 107
---------- ----------
TOTAL OTHER INCOME 12,743 8,372
---------- ----------
INCOME BEFORE INTEREST CHARGES 1,077,463 989,477
Interest on long-term debt 316,257 313,289
Other interest 20,695 16,551
Allowance for borrowed funds used during construction (1,110) (2,665)
---------- ----------
NET INTEREST CHARGES 335,842 327,175
---------- ----------
PREFERRED STOCK DIVIDEND REQUIREMENTS 18,209 18,424
---------- ----------
NET INCOME FOR COMMON STOCK $ 723,412 $ 643,878
========== ==========
COMMON SHARES OUTSTANDING - AVERAGE (000) 235,152 234,997
BASIC AND DILUTED EARNINGS PER SHARE $ 3.08 $ 2.74
========== ==========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 2.11 $ 2.09
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-8-
CONSOLIDATED EDISON, INC.
-------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
-----------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income for common stock $ 233,893 $ 204,960
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 257,523 248,797
Deferred recoverable fuel costs 80,962 58,292
Federal income tax deferred (17,810) 74,360
Common equity component of allowance
for funds used during construction (1,057) (3,225)
Other non-cash credits (7,139) 13,680
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customer, less
allowance for uncollectibles 59,901 71,231
Regulatory accounts receivable (1,089) 46,263
Materials and supplies, including fuel
and gas in storage 15,730 42,008
Prepayments, other receivables and
other current assets 5,050 (239,372)
Enlightened Energy program costs 26,781 12,881
Power contract termination costs 904 15,414
Cost of removal less salvage (36,390) (28,538)
Accounts payable (73,800) (55,677)
Accrued income taxes 15,760 (81,412)
Other - net 2,244 (75,154)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 561,463 304,508
--------- ---------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (264,331) (292,308)
Nuclear fuel expenditures (3,194) (7,230)
Contributions to nuclear decommissioning trust (10,650) (17,047)
Common equity component of allowance
for funds used during construction 1,057 3,225
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
INCLUDING CONSTRUCTION (277,118) (313,360)
--------- ---------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
Repurchase of common stock (59,340) -
Net proceeds from short-term debt 44,024 15,000
Issuance of long-term debt 385,000 150,000
Retirement of long-term debt (100,000) (3,626)
Advance refunding of long-term debt (605,240) -
Issuance and refunding costs (6,975) (410)
Funds held for refunding of debt 229,355 -
Common stock dividends (249,619) (246,763)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCLUDING DIVIDENDS (362,795) (85,799)
--------- ---------
NET DECREASE IN CASH AND TEMPORARY
CASH INVESTMENTS (78,450) (94,651)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 183,458 106,882
--------- ---------
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30 $ 105,008 $ 12,231
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 153,462 $ 151,686
Income taxes 174,426 126,133
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-9-
CONSOLIDATED EDISON, INC.
-------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 AND 1997
--------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income for common stock $ 723,412 $ 643,878
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 512,182 492,713
Deferred recoverable fuel costs 25,831 (21,202)
Federal income tax deferred (69,550) 120,800
Common equity component of allowance
for funds used during construction (2,153) (5,311)
Other non-cash credits (3,551) 33,715
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customer, less
allowance for uncollectibles (48,489) 26,743
Regulatory accounts receivable (273) 5,804
Materials and supplies, including fuel
and gas in storage 5,546 7,476
Prepayments, other receivables and
other current assets 213,405 (237,619)
Enlightened Energy program costs 29,811 8,902
Power contract termination costs (2,959) 38,930
Cost of removal less salvage (81,571) (68,323)
Accounts payable (9,124) 34,203
Accrued income taxes 120,997 (94,251)
Other - net 63,568 (36,804)
---------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 1,477,082 949,654
---------- ---------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (626,244) (654,261)
Nuclear fuel expenditures (10,543) (56,117)
Contributions to nuclear decommissioning trust (14,904) (21,301)
Common equity component of allowance
for funds used during construction 2,153 5,311
---------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
INCLUDING CONSTRUCTION (649,538) (726,368)
---------- ---------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
Repurchase of common stock (59,340) -
Net proceeds from short-term debt 29,024 15,000
Issuance of long-term debt 715,000 300,000
Retirement of long-term debt (202,630) (82,095)
Advance refunding of long-term debt (605,240) -
Issuance and refunding costs (15,495) (10,179)
Funds held for refunding of debt (99,519) -
Common stock dividends (496,567) (491,150)
---------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCLUDING DIVIDENDS (734,767) (268,424)
---------- ---------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS 92,777 (45,138)
CASH AND TEMPORARY CASH INVESTMENTS AT JULY 1 12,231 57,369
---------- ---------
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30 $ 105,008 $ 12,231
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 312,086 $ 304,948
Income taxes 383,924 341,888
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-10-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
---------------------------------------------
BALANCE SHEET
-------------
AS AT JUNE 30, 1998, DECEMBER 31, 1997 AND JUNE 30, 1997
--------------------------------------------------------
<TABLE>
<CAPTION>
As At
--------------
June 30, 1998 Dec. 31, 1997 June 30, 1997
-------------- -------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C>
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric $11,878,103 $11,743,745 $11,754,898
Gas 1,784,322 1,741,562 1,686,174
Steam 588,534 576,206 546,949
General 1,203,749 1,203,427 1,159,098
----------- ----------- -----------
Total 15,454,708 15,264,940 15,147,119
Less: Accumulated depreciation 4,562,740 4,392,377 4,447,539
----------- ----------- -----------
Net 10,891,968 10,872,563 10,699,580
Construction work in progress 298,349 292,218 324,400
Nuclear fuel assemblies and components,
less accumulated amortization 105,515 102,321 102,101
----------- ----------- -----------
NET UTILITY PLANT 11,295,832 11,267,102 11,126,081
----------- ----------- -----------
CURRENT ASSETS
Cash and temporary cash investments 20,258 183,458 12,231
Funds held for refunding of debt 99,519 328,874 -
Accounts receivable - customer, less
allowance for uncollectible accounts
of $21,739, $21,600 and $20,804 508,905 581,163 472,773
Other receivables 47,306 60,759 51,763
Regulatory accounts receivable (593) (1,682) (866)
Fuel, at average cost 34,745 53,697 34,940
Gas in storage, at average cost 37,985 37,209 37,746
Materials and supplies, at average cost 191,489 191,759 199,795
Prepayments 72,956 75,516 293,592
Other current assets 16,756 16,457 15,732
----------- ----------- -----------
TOTAL CURRENT ASSETS 1,029,326 1,527,210 1,117,706
----------- ----------- -----------
INVESTMENTS AND NONUTILITY PROPERTY 254,302 292,397 217,745
----------- ----------- -----------
DEFERRED CHARGES
Enlightened Energy program costs 91,026 117,807 120,837
Unamortized debt expense 135,679 126,085 125,770
Recoverable fuel costs 17,339 98,301 43,170
Power contract termination costs 69,943 80,978 38,636
Other deferred charges 245,338 239,559 277,102
----------- ----------- -----------
TOTAL DEFERRED CHARGES 559,325 662,730 605,515
----------- ----------- -----------
REGULATORY ASSET - FUTURE FEDERAL
INCOME TAXES 899,799 973,079 948,410
----------- ----------- -----------
TOTAL $14,038,584 $14,722,518 $14,015,457
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-11-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
---------------------------------------------
BALANCE SHEET
-------------
AS AT JUNE 30, 1998, DECEMBER 31, 1997 AND JUNE 30, 1997
--------------------------------------------------------
<TABLE>
<CAPTION>
As At
--------------
June 30, 1998 Dec. 31, 1997 June 30, 1997
----------------- -------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock $1,482,343 $ 1,482,351 $ 1,478,768
Retained earnings 4,214,561 4,484,703 4,242,133
Capital stock expense (36,835) (36,975) (34,754)
----------- ----------- -----------
TOTAL COMMON SHAREHOLDERS' EQUITY 5,660,069 5,930,079 5,686,147
----------- ----------- -----------
Preferred stock
Subject to mandatory redemption
7.20% Series I 47,500 47,500 47,500
6-1/8% Series J 37,050 37,050 37,050
----------- ----------- -----------
TOTAL SUBJECT TO MANDATORY REDEMPTION 84,550 84,550 84,550
----------- ----------- -----------
Other preferred stock
$ 5 Cumulative Preferred 175,000 175,000 175,000
5-3/4% Series A 7,061 7,061 7,061
5-1/4% Series B 13,844 13,844 13,844
4.65% Series C 15,330 15,330 15,330
4.65% Series D 22,233 22,233 22,233
6% Convertible Series B - - 4,398
----------- ----------- -----------
TOTAL OTHER PREFERRED STOCK 233,468 233,468 237,866
----------- ----------- -----------
TOTAL PREFERRED STOCK 318,018 318,018 322,416
----------- ----------- -----------
Long-term debt 4,197,577 4,188,906 4,288,383
----------- ----------- -----------
TOTAL CAPITALIZATION 10,175,664 10,437,003 10,296,946
----------- ----------- -----------
NONCURRENT LIABILITIES
Obligations under capital leases 38,475 39,879 41,265
Other noncurrent liabilities 132,933 106,137 82,109
----------- ----------- -----------
TOTAL NONCURRENT LIABILITIES 171,408 146,016 123,374
----------- ----------- -----------
CURRENT LIABILITIES
Long-term debt due within one year 200,000 529,385 202,630
Accounts payable 354,532 440,114 375,438
Notes payable 44,024 - 15,000
Customer deposits 180,853 161,731 159,749
Accrued taxes 74,662 65,736 (56,676)
Accrued interest 83,512 85,613 83,310
Accrued wages 80,586 82,556 78,312
Other current liabilities 183,704 183,122 142,910
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 1,201,873 1,548,257 1,000,673
----------- ----------- -----------
PROVISIONS RELATED TO FUTURE FEDERAL INCOME TAXES
AND OTHER DEFERRED CREDITS
Accumulated deferred federal income tax 2,222,210 2,307,835 2,333,097
Accumulated deferred investment tax credits 159,300 163,680 168,070
Other deferred credits 108,129 119,727 93,297
----------- ----------- -----------
TOTAL DEFERRED CREDITS 2,489,639 2,591,242 2,594,464
----------- ----------- -----------
TOTAL $14,038,584 $14,722,518 $14,015,457
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-12-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
---------------------------------------------
INCOME STATEMENT
----------------
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
-------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(THOUSANDS OF DOLLARS)
Operating revenues
Electric $ 1,289,860 $ 1,228,366
Gas 196,562 213,376
Steam 57,411 62,272
Non-utility - 4,074
----------- -----------
TOTAL OPERATING REVENUES 1,543,833 1,508,088
----------- -----------
OPERATING EXPENSES
Purchased power 322,147 314,221
Fuel 123,870 122,426
Gas purchased for resale 75,033 89,494
Other operations 281,340 288,881
Maintenance 132,709 146,859
Depreciation and amortization 129,002 125,003
Taxes, other than federal income tax 290,265 270,828
Federal income tax 37,500 24,044
----------- -----------
TOTAL OPERATING EXPENSES 1,391,866 1,381,756
----------- -----------
OPERATING INCOME 151,967 126,332
OTHER INCOME (DEDUCTIONS)
Investment income 1,665 2,942
Allowance for equity funds used during construction 575 1,520
Other income less miscellaneous deductions (1,462) (205)
Federal income tax 1,766 (1,296)
----------- -----------
TOTAL OTHER INCOME 2,544 2,961
----------- -----------
INCOME BEFORE INTEREST CHARGES 154,511 129,293
Interest on long-term debt 76,985 79,192
Other interest 10,066 3,287
Allowance for borrowed funds used during construction (294) (745)
----------- -----------
NET INTEREST CHARGES 86,757 81,734
----------- -----------
NET INCOME 67,754 47,559
PREFERRED STOCK DIVIDEND REQUIREMENTS 4,536 4,603
----------- -----------
NET INCOME FOR COMMON STOCK $ 63,218 $ 42,956
=========== ===========
CON EDISON SALES
Electric (Thousands of kilowatthours)
Con Edison customers 8,760,065 8,281,386
Delivery service to NYPA and others 2,105,633 2,028,973
Service for municipal agencies 265,858 296,530
----------- -----------
Total sales in service territory 11,131,556 10,606,889
Off-system and ESCO sales 411,652 701,070
Gas (dekatherms)
Firm (A) 17,845,799 19,747,792
Off-peak firm/interruptible 3,646,403 5,215,550
----------- -----------
Total sales to Con Edison customers 21,492,202 24,963,342
Transportation of customer-owned gas
NYPA 641,921 4,668,422
Other 3,598,938 1,736,419
Off-system sales 4,600,307 1,255,168
----------- -----------
Total sales and transportation 30,333,368 32,623,351
Steam (Thousands of pounds) 4,540,725 4,796,828
</TABLE>
(A) Includes firm sales and transportation volumes.
The accompanying notes are an integral part of these financial statements.
<PAGE>
-13-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
---------------------------------------------
INCOME STATEMENT
----------------
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
-----------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(THOUSANDS OF DOLLARS)
Operating revenues
Electric $ 2,581,183 $ 2,497,316
Gas 595,732 668,396
Steam 192,801 224,450
Non-utility - 33,481
----------- -----------
TOTAL OPERATING REVENUES 3,369,716 3,423,643
----------- -----------
OPERATING EXPENSES
Purchased power 680,383 666,929
Fuel 258,424 273,780
Gas purchased for resale 239,743 341,205
Other operations 549,500 566,956
Maintenance 250,684 261,022
Depreciation and amortization 257,054 248,797
Taxes, other than federal income tax 592,383 575,811
Federal income tax 131,640 115,931
----------- -----------
TOTAL OPERATING EXPENSES 2,959,811 3,050,431
----------- -----------
OPERATING INCOME 409,905 373,212
OTHER INCOME (DEDUCTIONS)
Investment income 2,708 3,978
Allowance for equity funds used during construction 1,087 3,320
Other income less miscellaneous deductions (1,966) (726)
Federal income tax 1,363 (1,599)
----------- -----------
TOTAL OTHER INCOME 3,192 4,973
----------- -----------
INCOME BEFORE INTEREST CHARGES 413,097 378,185
Interest on long-term debt 156,043 157,944
Other interest 11,313 7,701
Allowance for borrowed funds used during construction (557) (1,627)
----------- -----------
NET INTEREST CHARGES 166,799 164,018
----------- -----------
NET INCOME 246,298 214,167
PREFERRED STOCK DIVIDEND REQUIREMENTS 9,072 9,207
----------- -----------
NET INCOME FOR COMMON STOCK $ 237,226 $ 204,960
=========== ===========
CON EDISON SALES
Electric (Thousands of kilowatthours)
Con Edison customers 17,790,466 17,213,254
Delivery service to NYPA and others 4,360,230 4,250,306
Service for municipal agencies 465,482 510,591
----------- -----------
Total sales in service territory 22,616,178 21,974,151
Off-system and ESCO sales 760,433 1,012,848
Gas (dekatherms)
Firm (A) 54,285,625 59,021,742
Off-peak firm/interruptible 11,187,254 13,419,753
----------- -----------
Total sales to Con Edison customers 65,472,879 72,441,495
Transportation of customer-owned gas
NYPA 1,725,535 7,368,630
Other 7,186,264 3,453,753
Off-system sales 9,932,608 4,760,561
----------- -----------
Total sales and transportation 84,317,286 88,024,439
Steam (Thousands of pounds) 13,526,399 14,937,516
</TABLE>
(A) Includes firm sales and transportation volumes.
The accompanying notes are an integral part of these financial statements.
<PAGE>
-14-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
---------------------------------------------
INCOME STATEMENT
----------------
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 AND 1997
--------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(THOUSANDS OF DOLLARS)
Operating revenues
Electric $ 5,719,441 $ 5,507,860
Gas 1,021,216 1,053,175
Steam 360,151 381,763
Non-utility 41,416 123,921
------------ ------------
TOTAL OPERATING REVENUES 7,142,224 7,066,719
------------ ------------
OPERATING EXPENSES
Purchased power 1,363,041 1,314,196
Fuel 581,468 542,779
Gas purchased for resale 451,135 572,087
Other operations 1,107,247 1,167,447
Maintenance 464,450 470,887
Depreciation and amortization 511,712 492,713
Taxes, other than federal income tax 1,197,727 1,158,528
Federal income tax 393,431 366,977
------------ ------------
TOTAL OPERATING EXPENSES 6,070,211 6,085,614
------------ ------------
OPERATING INCOME 1,072,013 981,105
OTHER INCOME (DEDUCTIONS)
Investment income 10,945 8,988
Allowance for equity funds used during construction 2,215 5,530
Other income less miscellaneous deductions (5,339) (6,253)
Federal income tax 963 107
------------ ------------
TOTAL OTHER INCOME 8,784 8,372
------------ ------------
INCOME BEFORE INTEREST CHARGES 1,080,797 989,477
Interest on long-term debt 316,257 313,289
Other interest 20,695 16,551
Allowance for borrowed funds used during construction (1,110) (2,665)
------------ ------------
NET INTEREST CHARGES 335,842 327,175
------------ ------------
NET INCOME 744,955 662,302
PREFERRED STOCK DIVIDEND REQUIREMENTS 18,209 18,424
------------ ------------
NET INCOME FOR COMMON STOCK $ 726,746 $ 643,878
============ ============
CON EDISON SALES
Electric (Thousands of kilowatthours)
Con Edison customers 38,105,191 36,781,964
Delivery service to NYPA and others 8,903,302 8,674,514
Service for municipal agencies 800,785 843,657
------------ ------------
Total sales in service territory 47,809,278 46,300,135
Off-system and ESCO sales 2,247,172 3,661,056
Gas (dekatherms)
Firm (A) 88,757,674 92,669,039
Off-peak firm/interruptible 21,679,035 22,600,610
------------ ------------
Total sales to Con Edison customers 110,436,709 115,269,649
Transportation of customer-owned gas
NYPA 11,398,600 12,141,058
Other 11,389,385 6,583,194
Off-system sales 19,131,031 8,917,528
------------ ------------
Total sales and transportation 152,355,725 142,911,429
Steam (Thousands of pounds) 26,011,444 27,610,425
</TABLE>
(A) Includes firm sales and transportation volumes.
The accompanying notes are an integral part of these financial statements.
<PAGE>
-15-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
---------------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
-----------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 246,298 $ 214,167
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 257,054 248,797
Deferred recoverable fuel costs 80,962 58,292
Federal income tax deferred (17,810) 74,360
Common equity component of allowance
for funds used during construction (1,057) (3,225)
Other non-cash charges (credits) (7,139) 13,680
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customer, less
allowance for uncollectibles 49,334 71,231
Regulatory accounts receivable (1,089) 46,263
Materials and supplies, including fuel
and gas in storage 18,446 42,008
Prepayments, other receivables and
other current assets 9,404 (239,372)
Enlightened Energy program costs 26,781 12,881
Power contract termination costs 904 15,414
Cost of removal less salvage (36,390) (28,538)
Accounts payable (60,932) (55,677)
Accrued income taxes 23,072 (81,412)
Other - net 19,345 (75,151)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 607,183 313,718
--------- ---------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (264,331) (292,308)
Nuclear fuel expenditures (3,194) (7,230)
Contributions to nuclear decommissioning trust (10,650) (17,047)
Common equity component of allowance
for funds used during construction 1,057 3,225
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
INCLUDING CONSTRUCTION (277,118) (313,360)
--------- ---------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
Repurchase of common stock (59,340) -
Net proceeds from short-term debt 44,024 15,000
Issuance of long-term debt 385,000 150,000
Retirement of long-term debt (100,000) (3,626)
Advance refunding of long-term debt (605,240) -
Issuance and refunding costs (6,975) (410)
Funds held for refunding of debt 229,355 -
Common stock dividends (249,619) (246,763)
Preferred stock dividends (9,066) (9,210)
Corporate reorganization (121,404) -
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCLUDING DIVIDENDS (493,265) (95,009)
--------- ---------
NET DECREASE IN CASH AND TEMPORARY
CASH INVESTMENTS (163,200) (94,651)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 183,458 106,882
--------- ---------
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30 $ 20,258 $ 12,231
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 153,462 $ 151,686
Income taxes 174,426 126,133
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-16-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
---------------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 AND 1997
--------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 744,955 $ 662,302
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 511,712 492,713
Deferred recoverable fuel costs 25,831 (21,202)
Federal income tax deferred (69,550) 120,800
Common equity component of allowance
for funds used during construction (2,153) (5,311)
Other non-cash charges (credits) (3,551) 33,715
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customer, less
allowance for uncollectibles (59,056) 26,743
Regulatory accounts receivable (273) 5,804
Materials and supplies, including fuel
and gas in storage 8,262 7,476
Prepayments, other receivables and
other current assets 217,757 (237,619)
Enlightened Energy program costs 29,811 8,902
Power contract termination costs (2,959) 38,930
Cost of removal less salvage (81,571) (68,323)
Accounts payable 3,745 34,203
Accrued income taxes 128,309 (94,251)
Other - net 80,736 (36,804)
---------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 1,532,005 968,078
---------- ---------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (626,244) (654,261)
Nuclear fuel expenditures (10,543) (56,117)
Contributions to nuclear decommissioning trust (14,904) (21,301)
Common equity component of allowance
for funds used during construction 2,153 5,311
---------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
INCLUDING CONSTRUCTION (649,538) (726,368)
---------- ---------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
Repurchase of common stock (59,340) -
Net proceeds from short-term debt 29,024 15,000
Issuance of long-term debt 715,000 300,000
Retirement of long-term debt (202,630) (82,095)
Advance refunding of long-term debt (605,240) -
Issuance and refunding costs (15,495) (10,179)
Funds held for refunding of debt (99,519) -
Common stock dividends (496,567) (491,150)
Preferred stock dividends (18,269) (18,424)
Corporate reorganization (121,404) -
---------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCLUDING DIVIDENDS (874,440) (286,848)
---------- ---------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS 8,027 (45,138)
CASH AND TEMPORARY CASH INVESTMENTS AT JULY 1 12,231 57,369
---------- ---------
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30 $ 20,258 $ 12,231
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 312,086 $ 304,948
Income taxes 383,924 341,888
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
-17-
NOTE A - GENERAL
These footnotes accompany and form an integral part of (i) the interim
consolidated financial statements of Consolidated Edison, Inc. ("CEI") and its
subsidiaries, including Consolidated Edison Company of New York, Inc. ("Con
Edison"), the regulated utility, and several non-utility subsidiaries, and (ii)
the interim consolidated financial statements of Con Edison on a stand-alone
basis. These financial statements are unaudited but, in the respective opinions
of the managements of CEI and Con Edison, represent all adjustments (which
include only normally recurring adjustments) necessary for a fair statement of
the results for the interim periods presented. These financial statements should
be read together with the audited financial statements (including the notes
thereto) included in the combined CEI and Con Edison Annual Reports on Form 10-K
for the year ended December 31, 1997 (the "1997 Form 10-K").
NOTE B - 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 June 30,
1998, the highest amount that could be assessed for losses during the current
policy year under all of the policies was $19 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 $88.1 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 2003 and not less than once
every five years thereafter.
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).
<PAGE>
-18-
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 June 30, 1998 a liability of approximately $23 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 Con Edison. 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 June 30, 1998, Con Edison had an accrued liability of $16.6 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 to the financial statements included in the 1997 Form 10-
K) or otherwise.
ASBESTOS CLAIMS Suits have been brought in New York State and federal courts
against Con Edison and many other defendants, wherein a large number of
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 Con Edison's financial position, results of operations or liquidity.
EMF Electric and magnetic fields (EMF) are found wherever electricity is used.
In the event 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.
<PAGE>
-19-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis relates to (i) the interim
consolidated financial statements of Consolidated Edison, Inc. (CEI) and its
subsidiaries, including Consolidated Edison Company of New York, Inc. (Con
Edison), the regulated utility, and several non-utility subsidiaries, and (ii)
the interim consolidated financial statements of Con Edison on a stand-alone
basis. CEI is a holding company, operates only through its subsidiaries and has
no material assets other than the stock of its subsidiaries. Con Edison is the
principal subsidiary of CEI. Unless otherwise indicated, this discussion and
analysis applies to each of CEI and Con Edison. References in this report to
the "Company" are to CEI and Con Edison, collectively.
This discussion and analysis should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7 of the combined CEI and Con Edison Annual Reports on Form
10-K for the year ended December 31, 1997 (File Nos. 1-14514 and 1-1217, the
1997 Form 10-K). Reference is also made to the notes to the financial
statements in Part I, Item 1 of this report, which notes are incorporated herein
by reference.
LIQUIDITY AND CAPITAL RESOURCES
Con Edison's cash balances reflect, among other things, the timing and
amount of external financing and the January 1, 1998 corporate reorganization
(see "Corporate Structure" in Item 1 of the 1997 10-K). In addition, the June
1997 balance reflects a prepayment of $226 million for New York City property
taxes.
Con Edison initiated a $500 million commercial paper program in January
1998. The highest amount outstanding during the six months ended June 30, 1998
was $195 million. There was $44 million of commercial paper outstanding at June
30, 1998.
Con Edison's interest coverage for the 12 months ended June 30, 1998 was
4.19 times, compared with 4.09 times for the year 1997 and 3.96 times for the 12
months ended June 30, 1997. The increase in interest coverage reflects higher
pre-tax income.
In June 1998 Con Edison issued $100 million of 6.15 percent 10-year taxable
debentures to refund, in July 1998, its 7-3/8 percent tax-exempt debt issued
through the New York State Energy Research and Development Authority. For
information about securities refunded by Con Edison during the first quarter of
1998, see "Liquidity and Capital Resources - Refundings" in Item 7 of the 1997
Form 10-K.
In May 1998 CEI commenced its common stock repurchase program.
Approximately 1.3 million shares were repurchased by Con Edison at a cost of
$59.3 million through June 30, 1998.
Con Edison's equivalent number of days of revenue outstanding as customer
accounts receivable was 27.6 days at June 30, 1998 compared with 28.2 days at
December 31, 1997 and 27.8 days at June 30, 1997.
Recoverable fuel costs amounted to $17.3 million at June 30, 1998 compared
with $98.3 million at December 31, 1997 and $43.2 million at June 30, 1997,
reflecting the ongoing recovery of previously deferred amounts and the changes
in purchased power, fuel and gas purchased for resale discussed below in
"Results of Operations."
<PAGE>
-20-
TRANSITION TO COMPETITION
Reference is made to (i) "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 the Settlement
Agreement" in Item 3 of the 1997 Form 10-K, (ii) "Liquidity and Capital
Resources - Transition to Competition" in Part I, Item 2 of the combined CEI and
Con Edison Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998 (First Quarter Form 10-Q) and (iii) "Challenges to the Settlement
Agreement" in Part II, Item 1 of this report for information about the September
1997 Settlement Agreement among Con Edison, the staff of the New York State
Public Service Commission (PSC) and certain other parties (the Settlement
Agreement) and additional information about the transition to competitive
electric markets.
In June 1998 approximately 68,000 Con Edison customers representing
approximately 1,000 megawatts of aggregate customer load began purchasing
electricity from other power providers under the first phase of Con Edison's
Retail Choice program. The electricity purchased by these customers is
delivered through Con Edison's transmission and distribution system.
In July 1998 the PSC issued an order (the Divestiture Order) authorizing
Con Edison to auction all of its New York City fossil-fueled electric generating
capacity (approximately 5,500 MW). Sales pursuant to the auction will be
subject to PSC approval and contingent upon an independent system operator being
operational in New York State. The Divestiture Order also directed Con Edison
to analyze and report to PSC staff the feasibility of divesting its entitlements
under its contracts with non-utility generators and to provide a detailed plan
for divestiture of its property not required for Con Edison's continuing
operations. In the Divestiture Order, the PSC indicated that it "agree[s]
generally that Con Edison need not plan on constructing new generation as the
competitive market develops," but considers "overly broad" and does not adopt
Con Edison's request for a declaration that, solely with respect to providing
generating capacity, it will no longer be required to engage in long-range
planning to meet potential demand and, in particular, that it will no longer
have the obligation to construct new generating facilities, regardless of the
market price of capacity.
In August 1998 the PSC also approved a proposal pursuant to which Con
Edison affiliates would not participate in the auction and Con Edison would be
permitted to apply up to $50 million of any net after-tax gains resulting from
divestiture of its in-City capacity, jointly-owned Bowline Point and Roseton
generating stations and potential generating sites (which are also required to
be sold pursuant to the Divestiture Order) to reduce Con Edison's unrecovered
investment in Indian Point 2. The net after-tax gain to be applied would be in
excess of the $50 million of any net after-tax gain that under the Settlement
Agreement would be retained by shareholders.
In June 1998 FERC conditionally authorized the establishment of the
independent system operator that would control and operate most electric
transmission facilities in New York and a New York State Reliability Council
that would promulgate reliability rules.
<PAGE>
-21-
ACQUISITION
In May 1998 CEI agreed to acquire Orange and Rockland Utilities, Inc. (O&R)
for cash at a price of $58.50 per share of O&R common stock (approximately $790
million in aggregate) pursuant to an Agreement and Plan of Merger among the
parties. The acquisition is to be accomplished through the merger of C
Acquisition Corp., a CEI subsidiary, with O&R. The transaction is subject to
certain conditions, including the approval of the holders of O&R's common stock
and the approval of the New York, New Jersey and Pennsylvania utility
regulators, the Federal Energy Regulatory Commission and the Securities and
Exchange Commission. The transaction is not subject to the approval of CEI's
shareholders. O&R has called a Special Meeting of the Common Shareholders of
O&R, to be held on August 20, 1998, to consider and vote upon the Agreement and
Plan of Merger. CEI, Con Edison and O&R have submitted joint petitions for
approval of the acquisition to the PSC, the New Jersey Board of Public
Utilities, and the Pennsylvania Public Utilities Commission.
FINANCIAL MARKET RISKS
Reference is made to "Liquidity and Capital Resources - Financial Market
Risks" in Item 7 of the 1997 Form 10-K and Part I, Item 3 of the First Quarter
Form 10-Q. Currently, CEI and its consolidated subsidiaries, including Con
Edison, enter into derivative transactions only when such transactions meet the
criteria for hedging and qualify for deferred accounting treatment. See Note A
to the financial statements included in Item 8 of the 1997 Form 10-K. At June
30, 1998 neither the fair value of the derivatives outstanding nor potential
derivative losses from reasonably possible near-term changes in market prices
were material to the financial position, results of operations or liquidity of
the Company.
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS 133), which will apply to the Company beginning
January 1, 2000. SFAS 133 requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether or not a derivative is designated as part of a
hedge transaction and, if it is, the type of hedge transaction. The effect that
SFAS 133 will have on the Company's financial position and results of operations
in future periods will depend on the nature and extent of the Company's
derivative transactions and changes in the prices of the commodities or
financial or other instruments relating to the derivative transactions during
such periods.
NUCLEAR GENERATION
Reference is made to (i) "Electric Facilities - Generating Facilities" in
Item 2 and "Liquidity and Capital Resources - Nuclear Generation and 1995
Electric Rate Agreement - Partial Pass-Through Fuel Adjustment Clause (PPFAC)"
in Item 7 of the 1997 Form 10-K and (ii) "Liquidity and Capital Resources -
Nuclear Generation" in Part 1, Item 2 of the First Quarter Form 10-Q, for
information about Con Edison's Indian Point 2 nuclear generating unit, which has
been out of service since October 15, 1997. In July 1998 the Nuclear Regulatory
Commission fined Con Edison $110,000 for testing and repair violations at
Indian Point 2.
ENVIRONMENTAL CLAIMS AND OTHER CONTINGENCIES
Reference is made to the notes to the financial statements included in this
report for information concerning potential liabilities of the Company 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 the Company is subject.
<PAGE>
-22-
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, regulatory policies or public policy doctrines, technological
developments and other presently unknown or unforeseen factors.
RESULTS OF OPERATIONS
CEI's net income for common stock for the second quarter, six months and 12
months ended June 30, 1998 was higher than in the corresponding 1997 periods by
$19.0 million ($.08 per share), $28.9 million ($.12 per share) and $79.5 million
($.34 per share), respectively. The increased earnings reflect higher electric
revenues from an improving New York City economy and lower expenses from
continued cost reduction programs and voluntary attrition in the labor force,
partially offset by the expenses incurred during the current outage of Indian
Point 2. The 1997 results were also impacted by cooler than normal spring
weather in the second quarter of the year and by hotter than normal weather in
the third quarter. The results of operations of CEI include the results of
operations of Con Edison and of the several non-utility subsidiaries of CEI.
<TABLE>
<CAPTION>
Increases (Decreases)
Three Months Ended Six Months Ended Twelve Months Ended
June 30, 1998 June 30, 1998 June 30, 1998
Compared With Compared With Compared with
Three Months Ended Six Months Ended Twelve Months Ended
June 30, 1997 June 30, 1997 June 30, 1997
Amount Percent Amount Percent Amount Percent
(Amounts are for CEI and are in Millions)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 52.9 3.5% $ (9.6) (0.3)% $119.9 1.7%
Purchased power - electric
and steam 10.2 3.2 15.8 2.4 51.1 3.9
Fuel - electric and steam 1.4 1.2 (15.4) (5.6) 38.7 7.1
Gas purchased for resale (2.6) (2.9) (64.9) (19.0) (84.3) 14.7)
Operating revenues less
purchased power, fuel and
gas purchased for resale
(Net revenues) 43.9 4.5 54.9 2.6 114.4 2.5
Other operations and maintenance (13.7) (3.1) (12.1) (1.5) (50.9) (3.1)
Depreciation and amortization 4.3 3.4 8.7 3.5 19.5 4.0
Taxes, other than federal
income tax 19.6 7.2 16.8 2.9 39.4 3.4
Federal income tax 12.0 49.8 12.1 10.4 22.8 6.2
Operating income 21.7 17.2 29.4 7.9 83.6 8.5
Other income less deductions
and related federal income tax 2.2 76.2 2.2 43.8 4.4 52.2
Net interest charges 5.0 6.1 2.8 1.7 8.7 2.6
Preferred stock dividend
requirements 0.1 1.5 0.1 1.5 0.2 1.2
Net income for common stock $ 19.0 44.3% $ 28.9 14.1% $ 79.5 12.4%
====== ====== ======
</TABLE>
<PAGE>
-23-
CEI's investment in its non-utility subsidiaries was $136.3 million at June
30, 1998. CEI's results of operations include the net after-tax losses of its
non-utility subsidiaries as follows (with amounts shown in millions):
<TABLE>
<CAPTION>
1998 1997
Amount Per Share Amount Per Share
<S> <C> <C> <C> <C>
Second Quarter $ (2.0) $(.01) $(3.6) $(.02)
Six months ended June 30, $ (5.2) $(.02) $(4.1) $(.02)
Twelve Months ended June 30, $(10.7) $(.05) $(4.4) $(.02)
</TABLE>
For additional information about CEI's non-utility subsidiaries, see
"Competitive Businesses and Competition" in Item 1 of the 1997 Form 10-K.
SECOND QUARTER 1998 COMPARED WITH
SECOND QUARTER 1997
CEI's net revenues (operating revenues less purchased power, fuel and gas
purchased for resale) increased $43.9 million in the second quarter of 1998
compared with the 1997 period. Electric, steam and non-utility net revenues
increased $40.8 million, $2.9 million and $6.6 million, respectively. Gas net
revenues decreased $6.4 million.
Electric net revenues in the 1998 period were higher than in the 1997
period primarily as a result of higher sales, partially reflecting warmer
weather in the 1998 period, offset in part by the $107.5 million annualized rate
reductions that went into effect in January and April 1998. See "Liquidity and
Capital Resources - PSC Settlement Agreement - Rate Plan" in Item 7 of the 1997
Form 10-K.
Con Edison's electric sales, excluding off-system sales, in the 1998 period
compared with the 1997 period were:
<TABLE>
<CAPTION>
MILLIONS OF KWHRS.
2ND QUARTER 2ND QUARTER PERCENT
DESCRIPTION 1998 1997 VARIATION VARIATION
<S> <C> <C> <C> <C>
Residential/Religious 2,429 2,308 121 5.2%
Commercial/Industrial 6,175 5,833 342 5.9%
Other 157 140 17 12.1%
Total Con Edison Customers 8,761 8,281 480 5.8%
NYPA, Municipal Agency
and Other Sales 2,371 2,326 45 1.9%
Total Service Area 11,132 10,607 525 4.9%
</TABLE>
For the 1998 period, Con Edison's firm gas sales volume, including firm
transportation, decreased 9.6 percent and interruptible sales
decreased 30.1 percent compared with the 1997 period as a result of warmer
winter weather in 1998. Under the gas rate agreements covering the 1998 and
1997 periods, most weather-related variations in firm gas sales and
transportation did not affect earnings. Transportation of customer-owned gas
(other than gas transported for the New York Power Authority), which comprised
approximately 12 percent of the gas Con Edison sold or transported to customers
in the 1998 period, increased 107 percent. See "Gas Operations - Gas Sales" in
Item 1 of the 1997 Form 10-K.
<PAGE>
-24-
Steam sales volume decreased 5.3 percent compared with the 1997 period as a
result of the warmer winter weather in 1998.
After adjusting for variations, primarily in weather and billing days in
each period, electric sales volume in Con Edison's service territory increased
3.4 percent in the 1998 period, firm gas sales volume (including firm
transportation) increased 1.0 percent and steam sales volume decreased 2.5
percent.
Electric fuel costs increased $10.0 million in the 1998 period due to an
increase in the unit cost of fuel, partially offset by lower electric
generation. Electric purchased power costs increased in the 1998 period due to
higher purchased volumes. Steam fuel costs decreased $8.6 million in the 1998
period due to decreased generation of steam and lower unit cost. Steam
purchased power costs increased $0.8 million due to higher unit cost, partially
offset by lower purchased volumes. Gas purchased for resale decreased,
reflecting lower sendout and a lower unit cost of purchased gas.
Other operations and maintenance expenses decreased in the 1998 period
compared with the 1997 period, due primarily to lower nuclear production
expenses (lower expenses for the maintenance outage at Indian Point 2 in the
1998 period compared with the refueling and maintenance outage expenses at
Indian Point 2 in the 1997 period) and continued voluntary attrition in the
labor force.
Depreciation and amortization increased in the 1998 period due principally
to higher plant balances.
Taxes other than federal income tax increased in the 1998 period due to
higher revenue and property taxes.
Federal income tax increased in the 1998 period due to higher taxable
income.
Net interest charges increased due to increased short-term borrowing by
Con Edison.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1997
CEI's net revenues increased $54.9 million in the six months ended June 30,
1998 compared with the 1997 period. Electric, steam and non-utility net
revenues increased $48.7 million, $2.0 million and $8.5 million, respectively.
Gas net revenues decreased $4.3 million.
Electric net revenues in the 1998 period were higher than in the
corresponding 1997 period primarily as a result of higher sales, offset in part
by the rate reductions that went into effect in January and April 1998.
Electric net revenues in the 1998 period include $3.9 million of earnings under
the partial pass-through fuel adjustment clause (PPFAC) incentive, compared with
$1.1 million of PPFAC and other incentive earnings for the 1997 period.
<PAGE>
-25-
Con Edison's electric sales, excluding off-system sales, in the 1998 period
compared with the 1997 period were:
<TABLE>
<CAPTION>
MILLIONS OF KWHRS.
SIX MONTHS SIX MONTHS
ENDED ENDED PERCENT
DESCRIPTION JUNE 30,1998ON JUNE 30, 1997 VARIATION VARIATION
<S> <C> <C> <C> <C>
Residential/Religious 5,081 4,949 132 2.7%
Commercial/Industrial 12,392 11,976 416 3.5%
Other 317 288 29 10.1%
Total Con Edison Customers 17,790 17,213 577 3.4%
NYPA, Municipal Agency
and Other Sales 4,826 4,761 65 1.4%
Total Service Area 22,616 21,974 642 2.9%
</TABLE>
For the 1998 period, Con Edison's firm gas sales volume, including firm
transportation, decreased 8.0 percent and interruptible sales
decreased 16.6 percent compared with the 1997 period, as a result of warmer
winter weather in 1998. Transportation of customer-owned gas (other than gas
transported for the New York Power Authority), which comprised approximately
nine percent of the gas Con Edison sold or transported to customers in the 1998
period, increased 108 percent. See "Gas Operations - Gas Sales " In Item 1 of
the 1997 Form 10-K.
Steam sales volume decreased 9.4 percent compared with the 1997 period, as
a result of the warmer winter weather in 1998.
After adjusting for variations, primarily in weather and billing days in
each period, electric sales volume in Con Edison's service territory increased
2.4 percent in the 1998 period, firm gas sales volume (including firm
transportation) was unchanged and steam sales volume decreased 2.0 percent.
Electric fuel costs increased $17.9 million in the 1998 period due to an
increase in the unit cost of fuel, partially offset by lower electric
generation. Electric purchased power costs increased in the 1998 period due to
higher purchased volumes. Steam fuel costs decreased $33.3 million in the 1998
period due to decreased generation of steam and lower unit cost. Steam
purchased power costs decreased $0.4 million due to lower purchased volumes,
partially offset by higher unit cost. Gas purchased for resale decreased,
reflecting lower sendout and a lower unit cost of purchased gas.
Other operations and maintenance expenses decreased in the 1998 period
compared with the 1997 period, due primarily to lower pension and retiree
benefit expenses, continued cost reduction programs and voluntary attrition in
the labor force, partially offset by increased Indian Point 2 outage expenses
(higher expenses for the maintenance outage at Indian Point 2 in the 1998 period
compared with the refueling and maintenance outage expenses at Indian Point 2 in
the 1997 period).
<PAGE>
-26-
Depreciation and amortization increased in the 1998 period due principally
to higher plant balances.
Taxes other than federal income tax increased in the 1998 period due
primarily to higher property taxes.
Federal income tax increased in the 1998 period due to higher taxable
income.
Net interest charges increased due to increased short-term borrowing by
Con Edison.
TWELVE MONTHS ENDED JUNE 30, 1998 COMPARED WITH
TWELVE MONTHS ENDED JUNE 30, 1997
CEI's net revenues increased $114.4 million in the 12 months ended June 30,
1998 compared with the 1997 period. Electric, gas, steam and non-utility net
revenues increased $89.8 million, $6.2 million, $9.3 million and $9.1 million,
respectively.
Electric net revenues in the 1998 period were higher than in the
corresponding 1997 period primarily as a result of higher sales, offset in part
by the rate reductions that went into effect in January and April 1998.
Electric net revenues in the 1998 period include $1.6 million of PPFAC incentive
earnings compared with $31.3 million for PPFAC and other incentive earnings for
the 1997 period.
Gas net revenues in the 1998 period reflect the retention of net revenues
from interruptible sales in accordance with the 1997 gas rate agreement. Steam
net revenues in the 1998 period reflect rate increases, offset in part by
weather-related sales decreases.
Con Edison's electric sales, excluding off-system sales, for the 1998
period compared with the 1997 period were:
<TABLE>
<CAPTION>
MILLIONS OF KWHRS.
TWELVE MONTHS TWELVE MONTHS
ENDED ENDED PERCENT
DESCRIPTION JUNE 30, 1998 JUNE 30, 1997 VARIATION VARIATION
<S> <C> <C> <C> <C>
Residential/Religious 11,135 10,728 407 3.8%
Commercial/Industrial 26,327 25,450 877 3.4%
Other 643 604 39 6.5%
Total Con Edison Customers 38,105 36,782 1,323 3.6%
NYPA Municipal Agency
and Other Sales 9,704 9,518 186 2.0%
Total Service Area 47,809 46,300 1,509 3.3%
</TABLE>
<PAGE>
-27-
For the 1998 period, Con Edison's firm gas sales volume (including firm
transportation) decreased 4.2 percent and interruptible sales
decreased 4.1 percent. Transportation of customer-owned gas (other than gas
transported for the New York Power Authority), which comprised approximately
seven percent of the gas Con Edison sold or transported to customers in the 1998
period, increased 73 percent. Steam sales volume decreased 5.8 percent compared
with the 1997 period. The decreases in firm gas and steam sales volumes for the
1998 period were due primarily to milder than normal 1998 winter weather.
After adjustment for variations, primarily in weather and billing days in
each period, electric sales volume in Con Edison's service territory in the 1998
period increased 2.2 percent. Similarly adjusted, firm gas sales volume
(including firm transportation) increased 0.1 percent and steam sales volume
decreased 2.2 percent.
Electric fuel costs increased $77.8 million in the 1998 period due to a
higher unit cost of fuel, partially offset by decreased generation of
electricity. Electric purchased power costs increased in the 1998 period,
reflecting increased purchased volumes. The variations in electric fuel and
purchased power costs also reflect the greater availability of Indian Point 2 in
the 1997 period than in the 1998 period. Steam fuel costs decreased $39.1
million in the 1998 period due to decreased generation of steam by Con Edison
and a lower unit cost of fuel. Steam purchased power costs were $8.3 million
higher reflecting greater purchased volumes. Gas purchased for resale
decreased, reflecting a lower unit cost of fuel.
Other operations and maintenance expenses decreased in the 1998 period due
primarily to lower pension, retiree benefits and health insurance costs,
continued cost reduction programs and voluntary attrition of the labor force,
partially offset by increased Indian Point 2 outage expenses (higher expenses
for the maintenance outage at Indian Point 2 in the 1998 period compared with
the refueling and maintenance outage expenses at Indian Point 2 in the 1997
period).
Depreciation and amortization increased in the 1998 period due principally
to higher plant balances.
Taxes other than federal income tax increased in the 1998 period compared
with the 1997 period due primarily to higher property and revenue taxes.
Federal income tax increased in the 1998 period due to higher taxable
income.
ITEM 3. 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 2 of this report and Item 7 of the 1997 Form 10-
K.
<PAGE>
-28-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GRAMERCY PARK
Reference is made to "Gramercy Park" in Part I, Item 3, Legal Proceedings in the
1997 Form 10-K and in Part II, Item 1, Legal Proceedings in the combined CEI and
Con Edison Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998.
CHALLENGES TO THE SETTLEMENT AGREEMENT
Reference is made to "Challenges to the Settlement Agreement" in Part I, Item 3,
Legal Proceedings in the 1997 Form 10-K. Con Edison and the New York State
Public Service Commission (the "PSC") have each filed a motion to dismiss the
lawsuit commenced by the Public Utility Law Project of New York, Inc. Travelers
Group Inc. and Smith Barney Inc. have withdrawn, without prejudice, their
lawsuit against the PSC.
RATE PROCEEDINGS
Reference is made to "Rate Proceedings" in Part I, Item 3, Legal Proceedings in
the 1997 Form 10-K. In July 1998, the United States Court of Appeals for the
Second Circuit affirmed the dismissal by the United States District Court for
the Southern District of New York of the suit against Con Edison. In the state
court proceeding by these plaintiffs, the New York State Supreme Court, County
of Kings has denied Con Edison's motion to dismiss.
SUPERFUND - GLOBAL LANDFILL SITE
Reference is made to the information under the caption "SUPERFUND - Global
Landfill Site" in Part I, Item 3, Legal Proceedings in the 1997 Form 10-K. In
September 1997, the EPA issued a Record of Decision in which it selected a Phase
II cleanup program estimated to cost approximately $2.35 million of which Con
Edison's share has not yet been determined.
SUPERFUND - ANCHOR MOTOR SITE
Reference is made to the information under the caption "SUPERFUND - Anchor Motor
Site" in Part I, Item 3, Legal Proceedings in the 1997 Form 10-K. The costs of
the cleanup programs being considered for the contaminated section of the Hudson
River range from approximately $1.87 million to $2.82 million. The cost of the
cleanup program for the coal tar contamination present on the Anchor Motor and
asphalt plant properties could exceed $8 million if the DEC requires Con Edison
to excavate all of the coal tar.
<PAGE>
-29-
SUPERFUND - BORNE CHEMICAL SITE
Reference is made to the information under the caption "SUPERFUND - Borne
Chemical Site" in Part I, Item 3, Legal Proceedings in the 1997 Form 10-K. Con
Edison and four other third-party defendants in the lawsuit have reached a
tentative settlement with the third-party plaintiffs under which Con Edison
would pay about $70,000 as reimbursement of the $8.25 million in expenses that
the third-party plaintiffs incurred performing emergency removal actions at the
site and would assume responsibility for approximately 0.67% of the expenses
that the third-party plaintiffs incur conducting the site investigation study
ordered by the NJDEP and any soil or groundwater cleanup program that the NJDEP
may require after the site investigation study is completed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) At the Annual Meeting of Stockholders of CEI and the Annual Meeting of
Stockholders of Con Edison held concurrently on May 18, 1998, the stockholders
of CEI voted to elect management's nominees for the Board of Directors, to
ratify and approve the appointment of CEI's independent accountants, and not to
adopt two stockholder proposals, and the stockholders of Con Edison (including
CEI, which owned all 235,489,650 shares of Con Edison's common stock outstanding
and entitled to vote at the Annual Meeting and the holders of 1,915,319 shares
of cumulative preferred stock) voted to elect management's nominees for the
Board of Trustees and to ratify and approve the appointment of Con Edison's
independent accountants. The stockholder proposals were submitted by Con Edison
stockholders prior to January 1, 1998 when CEI became the holding company for
Con Edison and (as provided in the Proxy Statement and Prospectus of CEI and Con
Edison included in CEI's Registration Statement on Form S-4 (No. 333-39164))
were deemed to apply to CEI.
(b) The name of each nominee for election as a member of CEI's Board of
Directors or Con Edison's Board of Trustees and the number of shares voted for
or with respect to which authority to vote for was withheld are as follows:
<TABLE>
<CAPTION>
CEI's Board of Directors Con Edison's Board of Trustees
------------------------ -------------------------------
For Withheld For Withheld
<S> <C> <C> <C> <C>
E. Virgil Conway 185,755,137 2,491,838 236,902,361 16,658
Gordon J. Davis 185,861,901 2,385,074 236,902,206 16,813
Ruth M. Davis 185,761,066 2,485,909 236,902,431 16,588
Joan S. Freilich 185,866,162 2,380,813 236,901,532 17,487
Ellen V. Futter 185,861,575 2,385,400 236,902,506 16,513
Sally Hemandez-Pinero 185,609,960 2,637,015 236,900,653 18,366
Peter W. Likins 185,908,394 2,338,581 236,902,398 16,621
Eugene R. McGrath 185,878,900 2,368,075 236,903,738 15,281
Robert G. Schwartz 185,746,103 2,500,872 236,902,839 16,180
Richard A. Voell 185,928,911 2,318,064 236,903,658 15,361
Stephen R. Volk 185,833,071 2,363,904 236,902,629 16,390
</TABLE>
(c) The results of the vote on the appointment of Price Waterhouse LLP (now
PricewaterhouseCoopers LLP) as independent accountants for CEI for 1998 were as
follows: 186,093,507 shares were voted for this proposal; 946,966 shares were
voted against the proposal; and 1,206,502 shares were abstentions.
(d) The results of the vote on the appointment of Price Waterhouse LLP (now
PricewaterhouseCoopers LLP) as independent accountants for Con Edison for 1998
were as follows: 236,881,512 shares were voted for this proposal; 9,012 shares
were voted against the proposal; and 28,495 shares were abstentions.
<PAGE>
-30-
(e) The following stockholder-proposed resolution was voted upon by the
stockholders of CEI at the Annual Meeting:
"RESOLVED: That the stockholders of Consolidated Edison Company of New
York, Inc., assembled in annual meeting in person and by proxy, hereby
request the Board of Directors to take the steps necessary to provide for
cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal the number of
shares he or she owns multiplied by the number of directors to be elected,
and he or she may cast all of such votes for a single candidate, or any two
or more of them as he or she may see fit."
The results of the vote on this proposal were as follows: 37,868,522 shares were
voted for this proposal; 111,343,829 shares were voted against the proposal;
8,396,663 shares were abstentions; and 30,637,961 shares were broker nonvotes.
(f) The following stockholder-proposed resolution was voted upon by the
stockholders of CEI at the Annual Meeting:
"RESOLVED: That the shareholders recommend that the Board take the
necessary step that Con Edison specifically identify by name and corporate
title in all future proxy statements those executive officers, not
otherwise so identified, who are contractually entitled to receive in
excess of $100,000 annually as base salary, together with whatever other
additional compensation bonuses and other cash payments were due them."
The results of the vote on this proposal were as follows: 15,229,325 shares were
voted for this proposal; 136,710,753 shares were voted against the proposal;
5,668,936 shares were abstentions; and 30,637,961 shares were broker nonvotes
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit 3.2.1 By-laws of CEI, effective June 23, 1998.
Exhibit 3.2.2 By-laws of Con Edison, effective June 23, 1998.
Exhibit 12.1 Statement of computation of CEI ratio of earnings to fixed
charges for the twelve-month periods ended June 30, 1998 and
1997.
Exhibit 12.2 Statement of computation of Con Edison's ratio of earnings to
fixed charges for the twelve-month periods ended June 30, 1998
and 1997.
Exhibit 27.1 Financial Data Schedule for CEI.*
Exhibit 27.2 Financial Data Schedule for Con Edison.*
___________
*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.
<PAGE>
-31-
(B) REPORTS ON FORM 8-K
CEI and Con Edison each filed a Current Report on Form 8-K, dated May 10, 1998,
reporting (under Item 5) the proposed acquisition of Orange and Rockland
Utilities, Inc. discussed in "Liquidity and Capital Resources - Acquisition"
Item 2 of Part I of this report. Con Edison filed a Current Report on Form 8-K,
dated June 22, 1998, reporting (under Item 5) the sale of debentures and
refunding of a series of outstanding debt securities. No other CEI or Con
Edison Current Reports on Form 8-K were filed during the quarter ended June 30,
1998.
<PAGE>
-32-
SIGNATURES
Pursuant to the requirements 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.
DATE: August 14, 1998 By: JOAN S. FREILICH
Joan S. Freilich
Executive Vice President,
Chief Financial Officer and
Duly Authorized Officer
DATE: August 14, 1998 By: HYMAN SCHOENBLUM
Hyman Schoenblum
Vice President, Controller and
Chief Accounting Officer
BY-LAWS
OF
CONSOLIDATED EDISON, INC.
Effective as of June 23, 1998
SECTION 1. Meetings of the shareholders of the Company may be held at such time
and at such place within or without the State of New York as may be designated
by the Board of Directors or stockholders holding one-fourth of the outstanding
shares entitled to vote at such meeting, except that the annual meeting of
shareholders of the Company for the election of Directors and such other
business as may properly come before such meeting shall be held on the third
Monday in May of each year, unless otherwise determined by the Board of
Directors.
SECTION 2. Notice of the time and place of each shareholders' meeting and the
purpose of the meeting shall be mailed by the Secretary of the Company, or other
officer performing his or her duties, not less than the minimum nor more than
the maximum number of days permitted under New York law, to each shareholder of
record, at his or her last known Post Office address; provided, however, that if
a shareholder be present at a meeting, in person or by proxy, without protesting
prior to the conclusion of the meeting the lack of notice of such meeting, or in
writing waives notice thereof before or after the meeting, the mailing to the
shareholder of notice of the meeting is unnecessary.
SECTION 3. The holders of a majority of the outstanding shares of the Company
entitled to vote at a shareholders' meeting, present in person or by proxy,
shall constitute a quorum, but less than a quorum shall have power to adjourn.
SECTION 4. The Chairman of the Board of Directors, or in his or her absence the
President of the Company, shall preside over each shareholders' meeting as
Chairman of the meeting. In their absence, a Vice President designated by the
Board of Directors shall preside as Chairman of the meeting. The Chairman of the
meeting is authorized to establish such procedures for the conduct of the
meeting, and to make all determinations with respect to the conduct of the
meeting, that the Chairman, in his or her sole discretion, deems appropriate,
including determinations as to whether business was properly brought before the
meeting. If the Chairman of the meeting shall determine, in his or her sole
discretion, that any business was not properly brought before the meeting or was
not in compliance, or conflicts, with the procedures for the conduct of the
meeting, these By-laws, the Company's Certificate of Incorporation or any
applicable law or regulation, then such business shall not be voted upon, or
otherwise considered, at the meeting. The Secretary of the Company shall act as
Secretary of the meeting, if present. In his or her absence, the Chairman of the
meeting may appoint any person to act as Secretary of the meeting.
<PAGE>
SECTION 5. A shareholders' meeting may be adjourned by the Chairman of the
meeting, or by the vote of a majority of the shares of the Company that are
represented, in person or by proxy, at the meeting whether or not a quorum is
present.
SECTION 6. At each meeting of shareholders at which votes are to be taken by
ballot there shall be at least two and not more than five inspectors of election
of shareholders' votes, who shall be either designated prior to such meeting by
the Board of Trustees or, in the absence of such designation, appointed by the
Chairman of the meeting.
SECTION 7. Business properly brought before any shareholders' meeting shall
include matters specifically set forth in the Company's notice of the meeting
given to shareholders and matters which the Chairman of the meeting, in his or
her sole discretion, causes to be placed on the agenda of any such meeting. Such
business shall also include any proposal of a shareholder of this Company and
any nomination by a shareholder of a person or persons for election as director
or directors, if such shareholder has made a written request to this Company to
have such proposal or nomination considered at such meeting, as provided herein,
and further provided that such proposal or nomination is otherwise proper for
consideration under the procedures for the conduct of the meeting, these
By-laws, the Company's Certificate of Incorporation or any applicable law or
regulation.
Written notice of any proposal to be presented by any shareholder or any person
to be nominated by any shareholder for election as a Director must be received
by the Secretary of the Company at its principal executive office not less than
70 nor more than 90 days prior to the anniversary date of the previous year's
annual meeting (the anniversary date for the Company's first annual meeting
shall be deemed to be May 19, 1998); provided, however, that if the date of the
annual meeting is first publicly announced or disclosed (in a public filing or
otherwise) less than 80 days prior to the date of the meeting, such notice shall
be given not more than ten days after such date is first so announced or
disclosed. Public notice shall be deemed to have been given more than 80 days in
advance of the annual meeting if the Company shall have previously disclosed, in
these By-laws or otherwise, that the annual meeting in each year is to be held
on a determinable date, unless and until the Board of Directors determines to
hold the meeting on a different date.
A shareholder's notice of any proposal shall set forth the text of the proposal,
a brief statement of the reasons why the shareholder favors the proposal, the
shareholder's name and address, the number and class of all shares of the
Company beneficially owned by the shareholder, any material interest of the
shareholder in the proposal and, if the shareholder intends to solicit proxies
in support of the proposal, a statement to that effect.
<PAGE>
A shareholder's notice of any person to be nominated by the shareholder for
election as a Director shall set forth the name of the person to be nominated,
the number and class of all shares of the Company beneficially owned by the
shareholder's nominee, any information regarding the shareholder's nominee that
would have been required to be included in a proxy statement filed pursuant to
the rules under the Securities Exchange Act of 1934, as amended, if proxies for
such shareholder's nominee had been solicited by the Board of Directors, the
signed consent of the shareholder's nominee to serve as a Director if elected,
the shareholder's name and address, the number and class of all shares of the
Company beneficially owned by the shareholder, a description of all arrangements
or understandings between the shareholder and the shareholder's nominee or any
other person or persons (naming such person or persons) with respect to the
nomination of the shareholder's nominee and, if the shareholder intends to
solicit proxies in support of the proposal, a statement to that effect. .
SECTION 8. The affairs of the Company shall be managed under the direction of
the Board of Directors, who shall be elected annually by the shareholders by
ballot and shall hold office until their successors are elected and qualified.
Vacancies in the Board of Directors may be filled by the Board by the vote of a
majority of Directors then in office. Members of the Board of Directors shall be
entitled to receive such reasonable fees or other forms of compensation, on a
per diem, annual or other basis, as may be fixed by resolution of the Board of
Directors or the shareholders in respect of their services as such, including
attendance at meetings of the Board and its committees; provided, however, that
nothing herein contained shall be construed as precluding any Director from
serving the Company in any capacity other than as a member of the Board or a
committee thereof and receiving compensation for such other services.
SECTION 9. Meetings of the Board of Directors shall be held at the time and
place fixed by resolution of the Board or upon call of the Chairman of the
Board, the President, or any three Directors. The Secretary of the Company or
officer performing his duties shall give 24 hours' notice of all meetings of the
Board provided that a meeting may be held without notice immediately after the
annual election of Directors, and notice need not be given of regular meetings
held at times fixed by resolution of the Board. Meetings may be held at any time
without notice if all the Directors are present and none protests the lack of
notice either prior to the meeting or at its commencement, or if those not
present waive notice either before or after the meeting. Notice by mailing or
telegraphing, telecopying, electronically mailing or delivering by hand, to the
usual business address, residence or electronic mailbox of the Director not less
than the time above specified before the meeting shall be sufficient. A majority
of the Directors in office, but not less than one-third of the entire Board,
shall constitute a quorum, but less than a quorum shall have power to adjourn.
The Chairman of the Board or, in his or her absence, a Chairman pro tem elected
by the meeting from among the Directors present shall preside at all meetings of
the Board. Any one or more members of the Board may participate in a meeting of
the Board by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at such
meeting. Any action required or permitted to be taken by the Board may
<PAGE>
be taken without a meeting if all members of the Board consent in writing to
the adoption of a resolution authorizing the action. Each resolution so adopted
and the written consents thereto by the members of the Board shall be filed with
the minutes of the proceedings of the Board.
SECTION 10. The Board of Directors, as soon as may be after the election of
Directors in each year, may by a resolution passed by a majority of the entire
Board, appoint an Executive Committee, to consist of the Chairman of the Board
and three or more additional Directors as the Board may from time to time
determine, which shall have and may exercise during the intervals between the
meetings of the Board all the powers vested in the Board except that neither the
Executive Committee nor any other committee appointed pursuant to this section
of these By-laws shall have authority as to any of the following matters: the
submission to shareholders of any action as to which shareholders' authorization
is required by law; the filling of vacancies on the Board or on any committee
thereof; the fixing of compensation of any Directors for serving on the Board or
on any committee thereof; the amendment or repeal of these By-laws; or the
adoption of new By-laws; and the amendment or repeal of any resolution of the
Board which by its terms shall not be so amendable or repealable. The Board
shall have the power at any time to change the membership of the Executive
Committee and to fill vacancies in it. The Executive Committee may make rules
for the conduct of its business and may appoint such committees and assistants
as it may deem necessary. Four members of the Executive Committee shall
constitute a quorum. The Chairman of the Board or, in his or her absence, a
Chairman pro tem elected by the meeting from among the members of the Executive
Committee present shall preside at all meetings of the Executive Committee. The
Board may designate one or more Directors as alternate members of any committee
appointed pursuant to this section of the By-laws who may replace any absent
member or members at any meeting of the committee. The Board of Directors may
also from time to time appoint other committees consisting of three or more
Directors with such powers as may be granted to them by the Board of Directors,
subject to the restrictions contained in this section of the By-laws. Any one or
more members of any committee appointed pursuant to this section may participate
in any meeting of the committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting. Any action required or permitted to be taken
by any committee appointed pursuant to this section may be taken without a
meeting if all members of the committee consent in writing to the adoption of a
resolution authorizing the action. Each resolution so adopted and the written
consents thereto by the members of the committee shall be filed with the minutes
of the proceedings of the committee.
SECTION 11. The Board of Directors, as soon as may be after the election of
Directors in each year, shall elect from their number a Chairman of the Board,
who shall be the chief executive officer of the Company, and shall elect a
President. The Board shall also elect one or more Vice Presidents, a Secretary
and a Treasurer, and may from time to time elect such other officers as they may
deem proper. Any two or more offices may be held by the same person, except as
otherwise may be required by law.
<PAGE>
SECTION 12. The term of office of all officers shall be until the next election
of Directors and until their respective successors are chosen and qualify, but
any officer may be removed from office at any time by the Board of Directors.
Vacancies among the officers may be filled by the Board of Directors at any
meeting.
SECTION 13. The Chairman of the Board and the President shall have such duties
as usually pertain to their respective offices, except as otherwise directed by
the Board of Directors or the Executive Committee, and shall also have such
powers and duties as may from time to time be conferred upon them by the Board
of Directors or the Executive Committee. In the absence or disability of the
Chairman of the Board, the President shall perform the duties and exercise the
powers of the Chairman of the Board. In the absence or disability of the
President, one of the Vice Presidents, as designated by the Board of Directors,
shall perform the duties and exercise the powers of the President . The Vice
Presidents and the other officers of the Company shall have such duties as
usually pertain to their respective offices, except as otherwise directed by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President, and shall also have such powers and duties as may from time to time
be conferred upon them by the Board of Directors, the Executive Committee, the
Chairman of the Board or the President.
SECTION 14. The Board of Directors shall select such depositories as they shall
deem proper for the funds of the Company. All checks and other transfers of such
deposited funds shall be authorized only pursuant to resolutions of the Board of
Directors. No officers, agents, employees of the Company, or other person, alone
or with others, shall have power to make any checks, notes, drafts or other
negotiable instruments in the name of the Company or to bind the Company
thereby, except pursuant to resolutions of the Board of Directors.
SECTION 15. The Board of Directors may, in their discretion, appoint one or more
transfer agents, paying agents and/or registrars of the stock of the Company.
SECTION 16. The Company shall limit the liability to the Company of, and
indemnify, Directors and officers of the Company and other persons serving at
the request of the Company any other enterprise as a director, officer or in any
other capacity as and to the extent provided in the Certificate of Incorporation
of the Company.
BY-LAWS
OF
CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.
Effective as of June 23, 1998
SECTION 1. The annual meeting of stockholders of the Company for the
election of Trustees and such other business as may properly come before such
meeting shall be held on the third Monday in May in each year at such hour and
at such place in the City of New York or the County of Westchester as may be
designated by the Board of Trustees.
SECTION 2. Special meetings of the stockholders of the Company may be held
upon call of the Chairman of the Board, the Vice Chairman of the Board, the
President, the Board of Trustees, or stockholders holding one-fourth of the
outstanding shares of stock entitled to vote at such meeting.
SECTION 3. Notice of the time and place of every meeting of stockholders,
the purpose of such meeting and, in case of a special meeting, the person or
persons by or at whose direction the meeting is being called, shall be mailed by
the Secretary, or other officer performing his duties, at least ten days, but
not more than fifty days, before the meeting to each stockholder of record, at
his last known Post Office address; provided, however, that if a stockholder be
present at a meeting, in person or by proxy, without protesting prior to the
conclusion of the meeting the lack of notice of such meeting, or in writing
waives notice thereof before or after the meeting, the mailing to such
stockholder of notice of such meeting is unnecessary.
SECTION 4. The holders of a majority of the outstanding shares of stock of
the Company, entitled to vote at a meeting, present in person or by proxy shall
constitute a quorum, but less than a quorum shall have power to adjourn.
SECTION 5. The Chairman of the Board, or in his absence the Vice Chairman
of the Board, or in his absence the President shall preside over all meetings of
stockholders. In their absence one of the Vice Presidents shall preside over
such meetings. The Secretary of the Board of Trustees shall act as Secretary of
such meeting, if present. In his absence, the Chairman of the meeting may
appoint any person to act as Secretary of the meeting.
<PAGE>
SECTION 6. At each meeting of stockholders at which votes are to be taken
by ballot there shall be at least two and not more than five inspectors of
election and of stockholders' votes, who shall be either designated prior to
such meeting by the Board of Trustees or, in the absence of such designation,
appointed by the Chairman of the meeting.
SECTION 7. The Board of Trustees may, in their discretion, appoint one or
more transfer agents, paying agents and/or registrars of the stock of the
Company.
SECTION 8. The affairs of the Company shall be managed under the direction
of a Board consisting of eleven Trustees, who shall be elected annually by the
stockholders by ballot and shall hold office until their successors are elected
and qualified. Vacancies in the Board of Trustees may be filled by the Board at
any meeting, but if the number of Trustees is increased or decreased by the
Board by an amendment of this section of the By-laws, such amendment shall
require the vote of a majority of the whole Board. Members of the Board of
Trustees shall be entitled to receive such reasonable fees or other forms of
compensation, on a per diem, annual or other basis, as may be fixed by
resolution of the Board of Trustees or the stockholders in respect of their
services as such, including attendance at meetings of the Board and its
committees; provided, however, that nothing herein contained shall be construed
as precluding any Trustee from serving the Company in any capacity other than as
a member of the Board or a committee thereof and receiving compensation for such
other services.
SECTION 9. Meetings of the Board of Trustees shall be held at the time and
place fixed by resolution of the Board or upon call of the Chairman of the
Board, the Vice Chairman of the Board, the President, or a Vice President or any
two Trustees. The Secretary of the Board or officer performing his duties shall
give 24 hours' notice of all meetings of Trustees; provided that a meeting may
be held without notice immediately after the annual election of Trustees, and
notice need not be given of regular meetings held at times fixed by resolution
of the Board. Meetings may be held at any time without notice if all the
Trustees are present and none protests the lack of notice either prior to the
meeting or at its commencement, or if those not present waive notice either
before or after the meeting. Notice by mailing or telegraphing, or delivering by
hand, to the usual business address or residence of the Trustee not less than
the time above specified before the meeting shall be sufficient. A Majority of
the Trustees in office shall constitute a quorum, but less than such quorum
shall have power to adjourn. The Chairman of the Board or, in his absence the
Vice Chairman of the Board or, in his absence a Chairman pro term elected by the
meeting from among the Trustees present shall preside at all meetings of the
Board. Any one or more members of the Board may participate in a special meeting
of the Board by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation
<PAGE>
by such means shall constitute presence in person at such special meeting.
Any action required or permitted to be taken by the Board may be taken without a
meeting if all members of the Board consent in writing to the adoption of a
resolution authorizing the action; provided, however, that no action taken by
the Board by unanimous written consent shall be taken in lieu of a regular
monthly meeting of the Board. Each resolution so adopted and the written
consents thereto by the members of the Board shall be filed with the minutes of
the proceedings of the Board.
SECTION 10. The Board of Trustees, as soon as may be after the election of
Trustees in each year, shall elect from their number a Chairman of the Board,
who shall be the chief executive officer of the Company, and shall elect a Vice
Chairman of the Board and a President. The Board shall also elect one or more
Vice Presidents, a Secretary and a Treasurer, and may from time to time elect
such other officers as they may deem proper. Any two or more offices may be held
by the same person, except the offices of President and Secretary.
SECTION 11. The term of office of all officers shall be until the next
election of Trustees and until their respective successors are chosen and
qualify, but any officer may be removed from office at any time by the Board of
Trustees. Vacancies among the officers may be filled by the Board of Trustees at
any meeting.
SECTION 12. The Chairman of the Board and the President shall have such
duties as usually pertain to their respective offices, except as otherwise
directed by the Board of Trustees or the Executive Committee, and shall also
have such powers and duties as may from time to time be conferred upon them by
the Board of Trustees or the Executive Committee. The Vice Chairman of the Board
shall have such powers and duties as may from time to time be conferred upon him
by the Board of Trustees, the Executive Committee or the Chairman of the Board.
In the absence or disability of the Chairman of the Board, the Vice Chairman of
the Board shall perform the duties and exercise the powers of the Chairman of
the Board. The Vice Presidents and the other officers of the Company shall have
such duties as usually pertain to their respective offices, except as otherwise
directed by the Board of Trustees, the Executive Committee, the Chairman of the
Board, the Vice Chairman of the Board or the President, and shall also have such
powers and duties as may from time to time be conferred upon them by the Board
of Trustees, the Executive Committee, the Chairman of the Board, the Vice
Chairman of the Board or the President.
SECTION 13. The Board of Trustees, as soon as may be after the election of
Trustees in each year, may by a resolution passed by a majority of the whole
Board, appoint an Executive Committee, to consist of the Chairman of the Board
(and in his absence the Vice Chairman of the Board) and three or more additional
Trustees as the Board may from time to time determine, which shall have and may
exercise during the intervals between the meetings of the Board all the powers
vested in the Board except that neither the Executive Committee nor any other
committee appointed pursuant to this section of the By-laws shall have authority
as to any of the following
<PAGE>
matters: the submission to stockholders of any action as to which
stockholders' authorization is required by law; the filling of vacancies on the
Board or on any committee thereof; the fixing of compensation of any Trustee for
serving on the Board or on any committee thereof; the amendment or repeal of
these By-laws, or the adoption of new By-laws; and the amendment or repeal of
any resolution of the Board which by its terms shall not be so amendable or
repealable. The Board shall have the power at any time to change the membership
of such Executive Committee and to fill vacancies in it. The Executive Committee
may make rules for the conduct of its business and may appoint such committees
and assistants as it may deem necessary. Four members of said Executive
Committee shall constitute a quorum. The Chairman of the Board or, in his
absence a Chairman pro term elected by the meeting from among the members of the
Executive Committee present shall preside at all meetings of the Executive
Committee. The Board may designate one or more Trustees as alternate members of
any committee appointed pursuant to this section of the By-laws who may replace
any absent member or members at any meeting of such committee. The Board of
Trustees may also from time to time appoint other committees consisting of three
or more Trustees with such powers as may be granted to them by the Board of
Trustees, subject to the restrictions contained in this section of the By-laws.
Any one or more members of any committee appointed pursuant to this section may
participate in any meeting of such committee by means of a conference telephone
or similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at such meeting. Any action required or permitted
to be taken by any committee appointed pursuant to this section may be taken
without a meeting if all members of such committee consent in writing to the
adoption of a resolution authorizing the action. Each resolution so adopted and
the written consents thereto by the members of such committee shall be filed
with the minutes of the proceedings of such committee.
SECTION 14. The Board of Trustees are authorized to select such
depositories as they shall deem proper for the funds of the Company. All checks
and drafts against such deposited funds shall be signed by such person or
persons and in such manner as may be specified by the Board of Trustees.
SECTION 15. The Company shall fully indemnify in all circumstances to the
extent not prohibited by law any person made, or threatened to be made, a party
to an action or proceeding, whether civil or criminal, including an
investigative, administrative or legislative proceeding, and including an action
by or in the right of the Company or any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust, employee benefit
plan or other enterprise, by reason of the fact that he, his testator or
intestate, is or was a Trustee or officer of the Company, or is or was serving
at the request of the Company any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust, employee benefit
plan or other enterprise, as a director, officer or in any other capacity
against any and all judgments, fines, amounts paid in settlement, and expenses,
<PAGE>
including attorneys' fees, actually and reasonably incurred as a result of
or in connection with any such action or proceeding or related appeal; provided,
however, that no indemnification shall be made to or on behalf of any Trustee,
director or officer if a judgment or other final adjudication adverse to the
Trustee, director or officer establishes that his acts were committed in bad
faith or were the result of active and deliberate dishonesty and were material
to the cause of action so adjudicated, or that he personally gained in fact a
financial profit or other advantage to which he was not legally entitled; and,
except in the case of an action or proceeding specifically approved by the Board
of Trustees, the Company shall pay expenses incurred by or on behalf of such a
person in defending such a civil or criminal action or proceeding (including
appeals) in advance of the final disposition of such action or proceeding
promptly upon receipt by the Company, from time to time, of a written demand of
such person for such advancement, together with an undertaking by or on behalf
of such person to repay any expenses so advanced to the extent that the person
receiving the advancement is ultimately found not to be entitled to
indemnification for such expenses; and the right to indemnification and
advancement of defense expenses granted by or pursuant to this by-law (i) shall
not limit or exclude, but shall be in addition to, any other rights which may be
granted by or pursuant to any statute, certificate of incorporation, by-law,
resolution or agreement, (ii) shall be deemed to constitute contractual
obligations of the Company to any Trustee, director or officer who serves in
such capacity at any time while this by-law is in effect, (iii) are intended to
be retroactive and shall be available with respect to events occurring prior to
the adoption of this by-law and (iv) shall continue to exist after the repeal or
modification hereof with respect to events occurring prior thereto. It is the
intent of this by-law to require the Company to indemnify the persons referred
to herein for the aforementioned judgments, fines, amounts paid in settlement
and expenses, including attorneys' fees, in each and every circumstance in which
such indemnification could lawfully be permitted by an express provision of a
by-law, and the indemnification required by this by-law shall not be limited by
the absence of an express recital of such circumstances. The Company may, with
the approval of the Board of Trustees, enter into an agreement with any person
who is, or is about to become, a Trustee or officer of the Company, or who is
serving, or is about to serve, at the request of the Company, any other
corporation of any type or kind, domestic or foreign, or any partnership, joint
venture, trust, employee benefit plan or other enterprise, as a director,
officer or in any other capacity, which agreement may provide for
indemnification of such person and advancement of defense expenses to such
person upon such terms, and to the extent, as may be permitted by law.
SECTION 16. Wherever the expression "Trustees" or "Board of Trustees" is
used in these By-laws the same shall be deemed to apply to the Directors or
Board of Directors, as the case may be, if the designation of those persons
constituting the governing board of this Company is changed from "Trustees" to
"Directors".
SECTION 17. Either the Board of Trustees or the stockholders may alter or
amend these By-laws at any meeting duly held as above provided, the notice of
which includes notice of the proposed amendment.
<PAGE>
EMERGENCY BY-LAWS
OF
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
As Amended
February 23, 1966
Effective May 16, 1966
SECTION 1. These Emergency By-laws may be declared effective by the Defense
Council of New York as constituted under the New York State Defense Emergency
Act in the event of attack and shall cease to be effective when the Council
declares the end of the period of attack.
SECTION 2. In the event of attack and until the Defense Council declares
the end of the period of attack the affairs of the Company shall be managed by
such Trustees theretofore elected as are available to act, and a majority of
such Trustees shall constitute a quorum. In the event that there are less than
three Trustees available to act, then and in that event the Board of Trustees
shall consist of such Trustees theretofore elected and available to act plus
such number of senior officers of the Company not theretofore elected as
Trustees as will make a Board of not less than three nor more than five members.
The Board as so constituted shall continue until such time as the Defense
Council declares the end of the period of attack and their successors are duly
elected.
SECTION 3. The By-laws of the Company shall remain in effect during the
period of emergency to the extent that said By-laws are not inconsistent with
these Emergency By-laws.
CONSOLIDATED EDISON, INC.
Ratio of Earnings to Fixed Charges
Twelve Months Ended
(Thousands of Dollars)
JUNE JUNE
1998 1997
---------- ---------
Earnings
Net Income $741,621 $662,302
Federal Income Tax 460,170 246,070
Federal Income Tax Deferred (60,780) 129,590
Investment Tax Credits Deferred (8,770) (8,790)
---------- ----------
Total Earnings Before Federal Income Tax 1,132,241 1,029,172
Fixed Charges* 355,319 348,015
---------- ----------
Total Earnings Before Federal Income Tax
and Fixed Charges $1,487,560 $1,377,187
========== ==========
* Fixed Charges
Interest on Long-Term Debt $303,379 $301,853
Amort. of Debt Discount, Premium & Expense 12,878 11,436
Interest on Component of Rentals 18,367 18,175
Other Interest 20,695 16,551
---------- ----------
Total Fixed Charges $355,319 $348,015
========== ==========
Ratio of Earnings to Fixed Charges 4.19 3.96
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
Ratio of Earnings to Fixed Charges
Twelve Months Ended
(Thousands of Dollars)
JUNE JUNE
1998 1997
---------- ---------
Earnings
Net Income $744,955 $662,302
Federal Income Tax 462,018 246,070
Federal Income Tax Deferred (60,780) 129,590
Investment Tax Credits Deferred (8,770) (8,790)
---------- ----------
Total Earnings Before Federal Income Tax 1,137,423 1,029,172
Fixed Charges* 355,319 348,015
---------- ----------
Total Earnings Before Federal Income Tax
and Fixed Charges $1,492,742 $1,377,187
========== ==========
* Fixed Charges
Interest on Long-Term Debt $303,379 $301,853
Amort. of Debt Discount, Premium & Expense 12,878 11,436
Interest on Component of Rentals 18,367 18,175
Other Interest 20,695 16,551
---------- ----------
Total Fixed Charges $355,319 $348,015
========== ==========
Ratio of Earnings to Fixed Charges 4.20 3.96
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> The schedule contains summary financial
Information extracted from Consolidated Balance
Sheet, Income Statement and Statement of Cash
Flows for Consolidated Edison, Inc. and is
qualified in its entirety by reference to such
financial statements and the notes thereto.
</LEGEND>
<CIK> 0001047862
<NAME> Consolidated Edison, Inc.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Jun-30-1998
<PERIOD-TYPE> 6-Mos
<BOOK-VALUE> Per-Book
<TOTAL-NET-UTILITY-PLANT> 11,295,832
<OTHER-PROPERTY-AND-INVEST> 341,424
<TOTAL-CURRENT-ASSETS> 1,139,813
<TOTAL-DEFERRED-CHARGES> 559,325
<OTHER-ASSETS> 899,799
<TOTAL-ASSETS> 14,236,193
<COMMON> 585,378
<CAPITAL-SURPLUS-PAID-IN> 860,130
<RETAINED-EARNINGS> 4,409,589
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,855,097
84,550
233,468
<LONG-TERM-DEBT-NET> 4,197,577
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 44,024
<LONG-TERM-DEBT-CURRENT-PORT> 200,000
0
<CAPITAL-LEASE-OBLIGATIONS> 38,475
<LEASES-CURRENT> 2,790
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,580,212
<TOT-CAPITALIZATION-AND-LIAB> 14,236,193
<GROSS-OPERATING-REVENUE> 3,414,088
<INCOME-TAX-EXPENSE> 127,976
<OTHER-OPERATING-EXPENSES> 2,883,500
<TOTAL-OPERATING-EXPENSES> 3,011,476
<OPERATING-INCOME-LOSS> 402,612
<OTHER-INCOME-NET> 7,152
<INCOME-BEFORE-INTEREST-EXPEN> 409,764
<TOTAL-INTEREST-EXPENSE> 166,799
<NET-INCOME> 242,965
9,072
<EARNINGS-AVAILABLE-FOR-COMM> 233,893
<COMMON-STOCK-DIVIDENDS> 249,619
<TOTAL-INTEREST-ON-BONDS> 156,043
<CASH-FLOW-OPERATIONS> 561,463
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> The schedule contains summary financial
information extracted from Consolidated Balance
Sheet, Income Statement and Statement of Cash
Flows for Consolidated Edison Company of New
York, Inc. and is qualified in its entirety by
reference to such financial statements and
the notes thereto.
</LEGEND>
<CIK> 0000023632
<NAME> Consolidated Edison Company of New York, Inc.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Jun-30-1998
<PERIOD-TYPE> 6-Mos
<BOOK-VALUE> Per-Book
<TOTAL-NET-UTILITY-PLANT> 11,295,832
<OTHER-PROPERTY-AND-INVEST> 254,302
<TOTAL-CURRENT-ASSETS> 1,029,326
<TOTAL-DEFERRED-CHARGES> 559,325
<OTHER-ASSETS> 899,799
<TOTAL-ASSETS> 14,038,584
<COMMON> 585,378
<CAPITAL-SURPLUS-PAID-IN> 860,130
<RETAINED-EARNINGS> 4,214,561
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,660,069
84,550
233,468
<LONG-TERM-DEBT-NET> 4,197,577
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 44,024
<LONG-TERM-DEBT-CURRENT-PORT> 200,000
0
<CAPITAL-LEASE-OBLIGATIONS> 38,475
<LEASES-CURRENT> 2,790
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,577,631
<TOT-CAPITALIZATION-AND-LIAB> 14,038,584
<GROSS-OPERATING-REVENUE> 3,369,716
<INCOME-TAX-EXPENSE> 131,640
<OTHER-OPERATING-EXPENSES> 2,828,171
<TOTAL-OPERATING-EXPENSES> 2,959,811
<OPERATING-INCOME-LOSS> 409,905
<OTHER-INCOME-NET> 3,192
<INCOME-BEFORE-INTEREST-EXPEN> 413,097
<TOTAL-INTEREST-EXPENSE> 166,799
<NET-INCOME> 246,298
9,072
<EARNINGS-AVAILABLE-FOR-COMM> 237,226
<COMMON-STOCK-DIVIDENDS> 249,619
<TOTAL-INTEREST-ON-BONDS> 156,043
<CASH-FLOW-OPERATIONS> 607,183
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
