SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: September 22, 2000
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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
1-14514 Consolidated Edison, Inc. New York 13-3965100
4 Irving Place, New York, New York 10003
(212) 460-4600
1-1217 Consolidated Edison Company
of New York, Inc. New York 13-5009340
4 Irving Place, New York, New York 10003
(212) 460-4600
1-4315 Orange and Rockland Utilities, Inc. New York 13-1727729
One Blue Hill Plaza, Pearl River, New York 10965
(914) 352-6000
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
NEW YORK AGREEMENT
On October 2, 2000, Consolidated Edison, Inc. ("Con Edison"), Consolidated
Edison Company of New York, Inc. ("Con Edison of New York"), Orange and Rockland
Utilities, Inc. ("O&R") and Northeast Utilities entered into an agreement with
the staff of the New York State Public Service Commission ("PSC") and certain
other parties (the "Agreement").
The Agreement, which is subject to PSC approval, revises and extends the
electric rate plan provisions of the September 1997 restructuring agreement
pursuant to which Con Edison of New York has been implementing retail choice for
all its electric customers and has divested most of its electric generating
assets (the "1997 restructuring agreement") and addresses certain
divestiture-related issues.
For additional information about the 1997 restructuring agreement, see
"Regulatory Matters - Electric" in Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") of Con Edison and Con
Edison of New York in Item 7 of the combined Con Edison, Con Edison of New York
and O&R Annual Report on Form 10-K for the year ended December 31, 1999 (the
"Form 10-K") and "Regulatory Matters" in the MD&A of Con Edison and Con Edison
of New York in Part I, Item 2 of the combined Con Edison, Con Edison of New York
and O&R Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2000 (the "Form 10-Q") (File Nos. 1-14514,1-1217 and 1-4315).
The Agreement also provides for the approval by the PSC of Con Edison's
acquisition of Northeast Utilities. For additional information about the merger,
see "Liquidity and Capital Resources - Northeast Utilities" in the MD&A of Con
Edison and Con Edison of New York in Item 7 of the Form 10-K, "Northeast
Utilities" in Con Edison's MD&A in Part I, Item 2 of the Form 10-Q and
"Connecticut Draft Decision" and "Merger Consideration," below.
The following summary of the material provisions of the Agreement is qualified
in its entirety by reference to the Agreement, a copy of which is filed as an
exhibit hereto.
The electric rate plan provisions of the Agreement, which cover the five-year
period ending March 2005, revise and extend the rate plan provisions of the 1997
restructuring agreement. The Agreement provides for Con Edison of New York to
reduce the distribution component of its electric rates by $170 million on an
annual basis, effective October 2000, and, in accordance with the 1997
restructuring agreement, to reduce the generation-related component of its
electric rates by $208.7 million on an annual basis, effective April 2001.
Following completion of Con Edison's acquisition of Northeast Utilities, Con
Edison of New York's electric rates would be further reduced by $18.5 million on
an annual basis to reflect approximately half of the net synergy savings
applicable to its electric operations that are expected to result from the
merger.
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In general, under the Agreement, Con Edison of New York's base electric
transmission and distribution rates will not otherwise be changed during the
five-year period ending March 2005 except (i) with respect to certain changes in
costs above anticipated annual levels resulting from legal or regulatory
requirements, inflation in excess of a 4 percent annual rate, property tax
changes and environmental cost increases or (ii) if the PSC determines that
circumstances have occurred which either threaten the company's economic
viability or ability to provide, or render the company's rate of return
unreasonable for the provision of, safe and adequate service.
The Agreement continues the rate provisions pursuant to which Con Edison of New
York recovers from its customers purchased power and fuel costs. The Agreement
does not address the New York State Attorney General's August 2000 petition to
the PSC regarding these rate provisions. See Con Edison of New York's Current
Report on Form 8-K, dated August 23, 2000 (File No. 1-1217). The Agreement
contains the recommendation that the PSC establish a proceeding to consider rate
measures that reduce the volatility of fuel and energy costs experienced during
months of peak usage, provided that such measures may neither be materially
inconsistent with the Agreement nor adversely impact Con Edison of New York's
financial integrity. For information about recovery of replacement power and
other costs relating to Con Edison of New York's Indian Point 2 nuclear
generating unit, see Note C to the Con Edison and Con Edison of New York
financial statements included in Part I, Item 1 of the Form 10-Q.
Under the Agreement, 50 percent of any earnings in each of the rate years ending
March 2002 through 2005 in excess of a specified rate of return on electric
common equity (12.9 percent for the rate year ending March 2002; 11.75 percent
for the other rate years, the "Earnings Sharing Level") will be retained for
shareholders and 50 percent will be applied for customer benefit through rate
reductions or as otherwise determined by the PSC. The rate of return calculation
will exclude certain items, including incentives, penalties and the synergy
savings from Con Edison's acquisition of Northeast Utilities that have been
allocated to the company's shareholders. For the rate year ending March 2004,
the calculation will reflect the amount, if any, by which the calculated rate of
return fell below the Earnings Sharing Level for the rate year ending March
2003; for the rate year ended March 2005, the calculation will reflect any
shortfall in the prior two rate years.
Under the Agreement's performance incentive mechanisms, the Earnings Sharing
Level for the rate years ending March 2003 through 2005 may be increased to 12
percent if certain customer service and reliability objectives are achieved. The
Agreement continues other incentive mechanisms, pursuant to which Con Edison of
New York could be required to pay up to $40 million annually in penalties if
certain threshold service and reliability objectives are not achieved.
The Agreement continues the stranded cost recovery provisions of the 1997
restructuring agreement, stating that Con Edison of New York "will be given a
reasonable opportunity to recover stranded and strandable costs remaining at
March 31, 2005, including a reasonable return on investments, under the
parameters and during the time periods set forth therein."
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The Agreement provides for the following disposition of the approximately $303.9
million estimated net gain on the sale by Con Edison of New York of most of its
electric generating assets: $192.3 million will be credited against electric
distribution plant balances; $103.8 million may be retained by the company to
offset a like amount of existing regulatory assets (including deferred power
contract termination costs, property tax increases and retail-choice customer
incentives), and the balance will be set aside as a partial funding source for
low-income ratepayer programs.
The Agreement also addresses Con Edison of New York's recovery of an
approximately $77 million regulatory asset representing incremental capacity
costs incurred to purchase capacity from the buyers of the generating assets it
sold. The Agreement provides for the company to amortize the asset to expense
against the shareholders' portion of any earnings above the Earnings Sharing
Levels and by March 2005 to charge to expense any remaining asset balance.
The Agreement provides for the approval of Con Edison's acquisition of Northeast
Utilities, indicates that the PSC should authorize the merger as being in the
public interest and allocates to New York customers approximately half of the
net synergy savings applicable to New York utility operations that are expected
to result from the merger over the ten-year period ending March 2011. To reflect
this allocation, following completion of the merger Con Edison of New York will
reduce its electric rates by $18.5 million (discussed above) and annually accrue
credits of about $3.4 million and $0.9 million, respectively, for its gas and
steam customers, and O&R will annually accrue credits of about $1.15 million and
$0.4 million, respectively, for its electric and gas customers. The Agreement
also amends the existing guidelines governing transactions among affiliates of
Con Edison of New York to reflect, to the extent necessary, the requirements of
the Public Utility Holding Company Act that will apply following the merger.
CONNECTICUT DRAFT DECISION
On September 22, 2000, the Connecticut Department of Public Utility Control
("DPUC") issued a draft decision imposing stringent conditions on its approval
of Con Edison's acquisition of Northeast Utilities. On September 29, 2000, Con
Edison and Northeast Utilities filed written exceptions to the draft decision,
in which they, among other things, object to the financial and other conditions
of the draft decision and suggest that if the draft decision is not
substantially changed the merger is likely not to happen. The DPUC's final
decision on the merger is scheduled for October 19, 2000.
MERGER CONSIDERATION
On September 27, 2000, the required Connecticut regulatory approval with respect
to the sale by subsidiaries of Northeast Utilities of interests in certain
nuclear facilities was received and, as a result, the merger consideration that
Con Edison will be required to pay to shareholders of Northeast Utilities under
the merger agreement is increased by $1.00 per share to $26.00 per share plus
$.0034 for every day after August 5, 2000 through the day prior to the closing
of the merger.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10 Settlement Agreement, dated October 2, 2000, by and among Con
Edison, Con Edison of New York, O&R, Northeast Utilities, the
Staff of the New York State Public Service Commission and
certain other parties.
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SIGNATURE
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 hereunto duly authorized.
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.
ORANGE AND ROCKLAND UTILITIES, INC.
By: HYMAN SCHOENBLUM
Hyman Schoenblum
Vice President and Controller
DATE: October 4, 2000
