SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1994
or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-8291
GREEN MOUNTAIN POWER CORPORATION
(Exact name of registrant as specified in its charter)
Vermont 03-0127430
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
25 Green Mountain Drive
South Burlington, VT 05402
Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (802) 864-5731
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class - Common Stock Outstanding June 30, 1994
$3.33 1/3 Par Value 4,579,577
<TABLE>
GREEN MOUNTAIN POWER CORPORATION
Consolidated Comparative Balance Sheets
(Unaudited)
Part 1
- - - ------
A.1
<CAPTION>
June 30 December 31
----------------------------------- ----------------
1994 1993 1993
---------------- ---------------- ----------------
(In thousands) (In thousands)
ASSETS
ELECTRIC UTILITY
<S> <C> C> <C>
Utility Plant
Utility plant, at original cost.................... $221,782 $204,722 $214,977
Less accumulated depreciation...................... 67,617 62,175 64,226
---------------- ---------------- ----------------
Net utility plant................................ 154,165 142,547 150,751
Property under capital lease....................... 11,029 11,950 11,029
Construction work in progress...................... 8,425 12,371 9,631
---------------- ---------------- ----------------
Total utility plant, net......................... 173,619 166,868 171,411
---------------- ---------------- ----------------
Other Investments
Associated companies, at equity (Note 2)........... 16,711 17,138 16,886
Non-utility property............................... 3,835 3,186 3,521
Other investments.................................. -- 2,093 2,121
---------------- ---------------- ----------------
Total other investments.......................... 20,546 22,417 22,528
---------------- ---------------- ----------------
Current Assets
Cash............................................... 413 82 50
Accounts receivable, customers and others,
less allowance for doubtful accounts............. 10,871 12,760 14,814
Accrued utility revenues (Note 1).................. 4,939 4,439 6,138
Fuel, materials and supplies, at average cost...... 2,860 2,923 2,841
Prepayments........................................ 558 635 1,984
Current revenue due to income taxes................ 394 396 729
Other.............................................. 237 204 388
---------------- ---------------- ----------------
Total current assets............................. 20,272 21,439 26,944
---------------- ---------------- ----------------
Deferred Charges
Future revenue due to income taxes................. 4,179 4,908 4,179
Unfunded future federal income taxes............... 4,487 4,713 4,590
Demand side management programs.................... 14,322 8,802 12,809
Environmental proceedings costs.................... 7,345 3,879 5,356
Purchased power costs.............................. 1,911 (47) 4,134
Other.............................................. 11,255 9,328 11,277
---------------- ---------------- ----------------
Total deferred charges........................... 43,499 31,583 42,345
---------------- ---------------- ----------------
NON-UTILITY
Cash and cash equivalents.......................... 631 328 177
Other current assets............................... 2,778 2,496 3,479
Property and equipment............................. 11,138 10,945 11,331
Intangible assets.................................. 3,247 3,758 3,484
Other assets....................................... 11,622 5,429 10,155
---------------- ---------------- ----------------
Total non-utility assets......................... 29,416 22,956 28,626
---------------- ---------------- ----------------
Total Assets........................................... $287,352 $265,263 $291,854
================ ================ ================
CAPITALIZATION AND LIABILITIES
ELECTRIC UTILITY
Capitalization
Common Stock Equity
Common stock,$3.33 1/3 par value,
authorized 10,000,000 shares (issued
4,595,433, 4,452,344, and 4,536,042).......... $15,318 $14,894 $15,120
Additional paid-in capital....................... 58,625 55,177 57,178
Retained earnings................................ 25,289 25,017 25,229
Treasury stock, at cost (15,856 shares).......... (378) (378) (378)
---------------- ---------------- ----------------
Total common stock equity...................... 98,854 94,710 97,149
Redeemable cumulative preferred stock.............. 9,385 9,575 9,385
Long-term debt, less current maturities............ 78,000 67,644 79,800
---------------- ---------------- ----------------
Total capitalization........................... 186,239 171,929 186,334
---------------- ---------------- ----------------
Capital lease obligation............................... 11,029 11,950 11,029
---------------- ---------------- ----------------
Current Liabilities
Current maturuties of long-term debt............... 1,800 2,486 1,800
Short-term debt.................................... 5,415 7,756 19,015
Accounts payable, trade, and accrued liabilities... 6,895 5,903 8,373
Accounts payable to associated companies........... 3,781 3,484 4,302
Dividends declared................................. 199 203 199
Customer deposits.................................. 1,127 1,052 1,197
Taxes accrued...................................... 1,476 1,746 397
Interest accrued................................... 1,257 2,128 2,070
Deferred revenues (Note 1)......................... 3,823 3,668 --
Current revenue reduction due to income taxes...... 122 122 225
Unfunded future federal income taxes............... 394 395 729
Other.............................................. 498 442 572
---------------- ---------------- ----------------
Total current liabilities...................... 26,787 29,385 38,879
---------------- ---------------- ----------------
Deferred Credits
Accumulated deferred income taxes.................. 19,768 16,515 20,683
Unamortized investment tax credits................. 5,542 5,825 5,672
Future revenue reduction due to income taxes....... 4,366 4,590 4,366
Unfunded future federal income taxes............... 4,179 4,908 4,179
Other.............................................. 21,786 12,543 13,541
---------------- ---------------- ----------------
Total deferred credits......................... 55,641 44,381 48,441
---------------- ---------------- ----------------
NON-UTILITY
Current liabilities................................ -- 432 666
Other liabilities.................................. 7,656 7,186 6,505
---------------- ---------------- ----------------
Total non-utility liabilities.................. 7,656 7,618 7,171
---------------- ---------------- ----------------
Total Capitalization and Liabilities................... $287,352 $265,263 $291,854
================ ================ ================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
GREEN MOUNTAIN POWER CORPORATION
Consolidated Comparative Income Statements
(Unaudited)
Part 1
- - - ------
A.2
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------------- -------------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
(In thousands, except amounts per share)
<S> <C> <C> <C> <C>
Operating Revenues (Note 1)................................... $33,603 $33,427 $74,214 $74,177
------------ ------------ ------------ ------------
Operating Expenses
Power Supply
Vermont Yankee Nuclear Power Corporation ................ 7,063 7,522 14,442 14,994
Company-owned generation................................. 658 724 1,837 1,473
Purchases from others.................................... 11,097 10,834 23,870 23,302
Other operating............................................. 4,681 4,476 9,450 8,979
Transmission................................................ 2,623 2,626 5,201 5,442
Maintenance................................................. 1,266 1,140 2,512 2,155
Depreciation and amortization............................... 2,244 2,143 4,549 4,286
Taxes other than income..................................... 1,521 1,467 3,247 3,102
Income taxes................................................ 578 402 2,341 3,191
------------ ------------ ------------ ------------
Total operating expenses................................. 31,731 31,334 67,449 66,924
------------ ------------ ------------ ------------
Operating Income....................................... 1,872 2,093 6,765 7,253
------------ ------------ ------------ ------------
Other Income
Equity in earnings of affiliates and non-utility operations. 944 365 1,692 1,225
Allowance for equity funds used during construction......... 122 116 210 168
Other income and deductions, net............................ 45 34 190 (8)
------------ ------------ ------------ ------------
Total other income........................................ 1,111 515 2,092 1,385
------------ ------------ ------------ ------------
Income before interest charges.......................... 2,983 2,608 8,857 8,638
------------ ------------ ------------ ------------
Interest Charges
Long-term debt.............................................. 1,739 1,642 3,481 3,270
Other....................................................... 163 91 393 241
Allowance for borrowed funds used during construction...... (156) (91) (294) (140)
------------ ------------ ------------ ------------
Total interest charges.................................... 1,746 1,642 3,580 3,371
------------ ------------ ------------ ------------
Net Income.................................................... 1,237 966 5,277 5,267
Dividends on preferred stock.................................. 199 203 398 406
------------ ------------ ------------ ------------
Net Income Applicable to Common Stock......................... $1,038 $763 $4,879 $4,861
============ ============ ============ ============
Common Stock Data
Earnings per share.......................................... $0.23 $0.17 $1.07 $1.10
Cash dividends declared per share........................... $0.53 $0.525 $1.06 $1.05
Weighted average shares outstanding......................... 4,564 4,442 4,550 4,428
Consolidated Comparative Statements of Retained Earnings
(Unaudited)
Balance - beginning of period................................. $26,668 $26,585 $25,229 $24,801
Net Income.................................................... 1,237 966 5,277 5,267
------------ ------------ ------------ ------------
27,905 27,551 30,506 30,068
------------ ------------ ------------ ------------
Cash Dividends - redeemable cumulative preferred stock........ 199 203 398 406
- common stock................................. 2,417 2,331 4,819 4,645
------------ ------------ ------------ ------------
2,616 2,534 5,217 5,051
------------ ------------ ------------ ------------
Balance - end of period....................................... $25,289 $25,017 $25,289 $25,017
============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
GREEN MOUNTAIN POWER CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Part 1
- - - ------
A.3
<CAPTION>
Six Months Ended
June 30
---------------------------------------
1994 1993
----------------- -----------------
(In thousands)
<S> <C> <C>
Operating Activities:
Net Income........................................................... $5,277 $5,268
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................... 4,549 4,286
Dividends from associated companies less equity income........... 175 1
Allowance for funds used during construction..................... (504) (308)
Amortization of purchased power costs............................ 2,290 1,774
Deferred income taxes............................................ (915) 1,011
Deferred revenues (Note 1)....................................... 3,823 3,668
Amortization of gain on sale of property......................... (26) (26)
Deferred purchased power costs................................... (66) (282)
Amortization of investment tax credits........................... (130) (131)
Environmental proceedings costs, net............................. 7,960 (953)
Changes in:
Accounts receivable............................................ 3,942 4,439
Accrued utility revenues....................................... 1,199 1,161
Fuel, materials, and supplies.................................. (19) (29)
Prepayments and other current assets........................... 2,290 3,293
Accounts payable............................................... (2,000) (4,192)
Taxes accrued.................................................. 1,078 931
Interest accrued............................................... (813) 961
Other current liabilities...................................... (821) (2,855)
Other............................................................ 504 (1,391)
----------------- -----------------
Net cash provided by operating activities.......................... 27,793 16,626
----------------- -----------------
Investing Activities:
Construction expenditures.......................................... (6,194) (6,370)
Conservation expenditures.......................................... (1,971) (2,892)
Investment in non-utility property................................. 162 200
Special fund for postretirement benefits........................... -- (573)
----------------- -----------------
Net cash used in investing activities............................ (8,003) (9,635)
----------------- -----------------
Financing Activities:
Issuance of common stock........................................... 1,645 1,849
Short-term debt, net............................................... (13,601) (3,858)
Cash dividends..................................................... (5,217) (5,052)
Reduction in long-term debt........................................ (1,800) --
----------------- -----------------
Net cash used in financing activities............................ (18,973) (7,061)
----------------- -----------------
Net increase (decrease) in cash and cash equivalents............... 817 (70)
Cash and cash equivalents at beginning of period................... 227 480
----------------- -----------------
Cash and Cash Equivalents at End of Period............................. $1,044 $410
================= =================
Supplemental Disclosure of Cash Flow Information:
Cash paid year-to-date:
Interest (net of amounts capitalized)........................... $4,626 $2,500
Income taxes.................................................... 1,880 932
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
GREEN MOUNTAIN POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
Part 1
- - - ------
A.4
1. SIGNIFICANT ACCOUNTING POLICIES
Pursuant to an order of the Vermont Public Service Board (VPSB), the
Company's rate structure is seasonally differentiated, with higher rates
billed during the four winter months and lower rates billed during the
remaining eight months of the year. In order to match revenues with
related costs more accurately on an interim basis, the Company
recognizes revenue in a manner that seeks to eliminate the impact of
such seasonally differentiated rates. At June 30, 1994 and 1993, the
Company had recorded deferred revenues of $2.3 million and $2.5 million,
respectively, in accordance with this policy. These deferred revenues
are recognized in subsequent interim periods.
Included in equity in earnings of affiliates and non-utility operations
in the Other Income section of the Consolidated Comparative Income
Statements are the results of operations of the Company's rental water
heater program, which is not regulated by the VPSB, and four of the
Company's wholly-owned subsidiaries, Green Mountain Propane Gas Company,
Mountain Energy, Inc., GMP Real Estate Corporation, and Lease-Elec, Inc.
(also unregulated). Summarized financial information is as follows:
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands) (In Thousands)
Revenue . . . . . . . . . $2,787 $2,018 $6,621 $6,210
Expenses . . . . . . . . . 2,360 2,271 5,958 6,238
------ ------- ------ -------
Net Income . . . . . . . . $ 427 $ (253) $ 663 $ (28)
====== ======= ====== =======
2. INVESTMENT IN ASSOCIATED COMPANIES
The Company accounts for its investment in the companies listed below
using the equity method. Summarized financial information is as
follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands)
Vermont Yankee Nuclear Power Corporation
Gross Revenue . . . . . $37,093 $40,919 $76,262 $80,568
Net Income Applicable
to Common Stock . . . 1,595 2,148 3,278 4,285
Company's Equity in
Net Income . . . . . 280 386 587 765
Vermont Electric Power Company, Inc.
Gross Revenue . . . . . $10,782 $11,333 $23,046 $23,563
Net Income
Before Dividends . . 370 365 684 718
Company's Equity in
Net Income (Includes
preferred equity) . . 114 105 199 206
3. ENVIRONMENTAL MATTERS
In 1982, the United States Environmental Protection Agency (EPA)
notified the Company that the EPA, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (CERCLA),
was considering spending public funds to investigate and take corrective
action involving claimed releases of allegedly hazardous substances at a
site identified as the Pine Street Marsh in Burlington, Vermont. On
part of this site was located a manufactured-gas facility owned and
operated by a number of separate enterprises, including the Company,
from the late 19th century to 1967. In its notice, the EPA stated that
the Company may be a "potentially responsible party" (PRP) under CERCLA
from which reimbursement of costs of investigation and of corrective
action may be sought. On February 23, 1988, the Company received a
Special Notice letter from the EPA stating that the letter constituted a
formal demand for reimbursement of costs, including interest thereon,
that were incurred and were expected to be incurred in response to the
environmental problems at the site.
On December 5, 1988, the EPA brought suit against the Company, New
England Electric System, and Vermont Gas Systems, Inc. in the United
States District Court for the District of Vermont seeking reimbursement
for costs it incurred in conducting activities in 1985 to remove
allegedly hazardous substances from the site, and requested a
declaratory judgment that the Company and the other defendants are
liable for all costs that have been incurred since the removal and that
continue to be incurred in responding to claims of releases or
threatened releases from the Maltex Pond Area -- the portion of the site
where the removal action occurred. The complaint specifically alleged
that the EPA expended at least $741,000 during the 1985 removal action
and sought interest on this amount from the date the funds were expended
and costs of litigation, including attorneys' fees. The Company entered
a cross-claim against New England Electric System and third-party claims
against UGI Corporation, Southern Union Corporation, the State of
Vermont, and an individual property owner at the site for recovery of
its response costs and for contribution. Fourth-party defendants
subsequently were joined.
In July 1990, the Company and other parties signed a proposed Consent
Decree settling the removal action litigation. All 14 settling
defendants contributed to the aggregate settlement amount of $945,000.
Individual contributions were treated as confidential under the proposed
Consent Decree.
On December 26, 1990, upon the unopposed motion of the United States,
the Consent Decree was entered by the Court.
During the summer and fall of 1989, the EPA conducted the initial phase
of the Remedial Investigation (RI) and commenced the Feasibility Study
(FS) relating to the site. In the fall of 1990 and in 1991, the EPA
conducted a second phase of RI work and studied the treatability of
soils and groundwater at the site. In the fall of 1991, the EPA
responded favorably to a request from the Company and other PRPs to
participate in informal discussions on the EPA's ongoing investigation
and evaluation of the site, and invited the Company and other interested
parties to share technical information and resources with the EPA that
might assist it in evaluating remedial options. Thereafter, the Company
and other PRPs held several meetings with the EPA to discuss technical
issues and received copies of the EPA's Supplemental Remedial
Investigation Final Report, and its Baseline Risk Assessment Final
Report.
On November 6, 1992, the EPA released its final RI/FS and announced a
proposed remedy with an estimated total cost of approximately
$49.5 million, including 30 years' operation and maintenance costs, with
a net present value of approximately $26.4 million. The EPA's preferred
remedy called for construction of a Containment/Disposal Facility (CDF)
over a portion of the site. The CDF would have consisted of subsurface
vertical barriers and a low permeability cap, with collection trenches
and hydraulic control system to capture groundwater and prevent its
migration outside of the CDF. Collected groundwater would have been
treated and discharged or stored and disposed of off-site. The proposed
remedy also would have required construction of new wetlands to replace
those that would be destroyed by construction of the CDF and a long-term
monitoring program.
On May 15, 1993, the PRP group in which the Company participated
submitted extensive comments to the EPA opposing the proposed remedy.
In response to an earlier request from the EPA, the PRP group also
submitted a detailed analysis of an alternative remedy anticipated to
cost approximately $20 million. In early June 1993, in response to
overwhelming negative comment, the EPA withdrew its proposed remedy and
announced that it would work with all interested parties in developing a
new proposal. Since then, the EPA has established a coordinating
council, with representatives of PRPs, environmental groups, and
government agencies, and presided over by a neutral mediator. The
Company is represented on the council, which is charged with determining
what additional studies may be appropriate for the site and may also
eventually address additional response activities.
In July 1994, the Company, New England Electric Systems, and Vermont Gas
Systems, Inc. entered into an Administrative Order by Consent, with the
EPA, pursuant to which these PRPs will conduct certain additional
studies that have been agreed to by the coordinating council. These
studies constitute the first phase of action the council has decided on
to fill data gaps at the site. A second phase is expected to begin next
year unless the coordinating council finds that the first phase provided
sufficient data to decide on a remedy. The EPA is not requiring
reimbursement for its past RI/FS study costs as a condition to allowing
the PRPs to conduct these additional studies. The EPA has previously
advised the Company that ultimately it will seek to hold the Company and
the PRPs liable for such costs.
In September 1993, the Company, New England Electric System and Vermont
Gas Systems, Inc. entered into confidential negotiations with most other
PRPs concerning allocation of unresolved liabilities concerning the
site. Those negotiations are continuing.
In December 1991, the Company brought suit against several previous
insurers seeking recovery of unrecovered past costs and indemnity
against future liabilities associated with environmental problems at the
site. The parties to this action are engaged in discovery and motions
practice.
The Company has reached confidential settlements with two of the
defendants in its insurance litigation. One of these defendants
provided the Company with comprehensive general liability insurance
between 1976 and 1982, and with environmental impairment liability
insurance from 1981 to 1984. These policies were in place in 1982 when
the EPA first notified the Company that it might be a potentially
responsible party at the Pine Street Marsh site. The other defendant
provided the Company with second layer excess liability coverage for a
seven-month period in 1976.
The Company has deferred amounts received from third parties pending
further resolution of the Company's ultimate liability with respect to
the site and rate recognition of that liability. The Company is unable
to predict at this time the magnitude of any liability resulting from
potential claims for the costs of the RI/FS or the performance of any
remedial action, or the likely disposition or magnitude of claims the
Company may have against others, including its insurers, except to the
extent described above.
Through rate cases filed in 1991 and 1993, the Company has sought and
received recovery for ongoing expenses associated with the Pine Street
Marsh site. Specifically, the Company proposed rate recognition of its
unrecovered expenditures between January 1991 and July 31, 1993 (in the
total of approximately $4.6 million) for technical consultants and legal
assistance in connection with the EPA's enforcement actions at the site
and insurance litigation. While reserving the right to argue in the
future about the appropriateness of rate recovery for Pine Street Marsh
related costs, the Company and the Vermont Department of Public Service
(Department) reached agreements in both cases that the full amount of
Pine Street Marsh costs reflected in those rate cases should be
recovered in rates. The Company's rates approved by the Vermont Public
Service Board (VPSB) on April 2, 1992, and on May 13, 1994, reflected
the Pine Street Marsh related expenditures referred to above.
As of June 30, 1994, the Company had reserved approximately $680,000 for
costs attributable to the site, other than those costs that are the
subject of the agreements between the Department and the Company
mentioned above. Management expects to seek and receive ratemaking
treatment for other costs incurred beyond the amounts that have been
reserved. As of June 30, 1994, such other costs are approximately
$6,941,000, which includes the $4.6 million in costs that were approved
by the VPSB referred to above.
4. 1993 RETAIL RATE CASE
On October 1, 1993, the Company filed a request with the VPSB to
increase retail rates by 8.6 percent. The increase was needed primarily
to cover the cost of buying power from independent power producers, the
cost of energy conservation programs, the cost of plant additions made
in the past two years, and costs incurred in 1992 and 1993 associated
with the Company's response to the EPA's RI/FS and proposed remedy at
the Pine Street Marsh site and with the Company's litigation against its
previous insurers seeking recovery of past costs incurred and indemnity
against future liabilities in connection with the site. On January 28,
1994, the Company and the other parties in the proceeding reached a
settlement agreement providing for a 2.9 percent retail rate increase
effective June 15, 1994, and a target return on equity for utility
operations of 10.5 percent. The settlement agreement also provided for
the Company's recovery in rates of $4.2 million in costs associated with
the Pine Street Marsh site, as described herein above. The agreement
was approved by the VPSB on May 13, 1994.
5. 1991 RETAIL RATE CASE
On July 19, 1991, the Company filed a request with the VPSB to increase
retail rates by 9.96 percent to cover power supply cost increases
expected in 1992, the costs of upgrading and maintaining the Company's
generation, transmission and distribution facilities; expenditures
associated with the Company's conservation programs; and higher employee
pension and health care costs. In orders dated April 2, 1992 and May
21, 1992, the VPSB approved an increase of 5.6 percent, or approximately
$6.6 million, effective April 2, 1992.
The Department appealed the VPSB orders challenging, among other
rulings, the VPSB's acceptance of the Company's method of treating
accumulated depreciation and certain Vermont Yankee-related power costs.
The Company filed a cross-appeal contending, among other things, that
the VPSB had erred in reducing ratebase relating to certain demand-side
management (DSM) program cost projections that had been made in the
Company's prior rate case.
On April 22, 1994, the Vermont Supreme Court affirmed in part and
reversed in part the VPSB orders. The Court overturned the VPSB's
decision disallowing certain DSM costs. The impact of this portion of
the Court's ruling resulted in the Company's other income since April
1992 being increased by $162,000. On the other hand, the Court
overturned the VPSB decision in the Company's favor on an issue
involving the method of treating accumulated depreciation, and on the
inclusion of one item of Vermont Yankee's capital projections in power
costs. The overall impact of the Court's ruling resulted in a reduction
of $840,000 in the Company's revenues.
The Consolidated Financial Statements are unaudited and, in the
opinion of the Company, reflect the adjustments necessary to a
fair statement of the results of the interim periods. All such
adjustments, except as specifically noted in the Consolidated
Financial Statements, are of a normal, recurring nature.
GREEN MOUNTAIN POWER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1994
Part 1
- - - ------
A.5
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Earnings per share of common stock in the second quarter of 1994 were
$0.23 compared to $0.17 in the second quarter of 1993. The increase in
earnings was primarily due to a $560,000 increase in earnings of
Mountain Energy, Inc., a wholly-owned subsidiary that makes investments
in energy-related development projects. For the second quarter of 1994,
the Company's unregulated operations contributed a total of nine cents
to the per-share earnings, compared to a loss of six cents per share in
the second quarter of 1993. (See Note 1 to Notes to Consolidated
Financial Statements.)
For the six months ended June 30, 1994 and 1993, earnings were $1.07 and
$1.10, respectively.
OPERATING REVENUES AND MWH SALES
Operating revenues, megawatthour (MWh) sales and average number of
customers are summarized as follows:
Three Months Ended Six Months Ended
June 30 June 30
-------------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
Operating Revenues
(In thousands)
Retail* . . . . . $ 30,241 $ 29,397 $ 66,133 $ 65,663
Sales for Resale . 2,661 3,340 6,270 7,144
Other . . . . . . 701 690 1,811 1,370
-------- -------- -------- ---------
Total Operating
Revenues . . . . $ 33,603 $ 33,427 $ 74,214 $ 74,177
========= ========= ========= =========
MWh Sales
Retail* . . . . . 388,882 380,230 866,051 847,120
Sales for Resale . 66,537 84,957 166,098 168,031
------- ------- --------- ---------
Total MWh Sales . 455,419 465,187 1,032,149 1,015,151
======= ======= ========= =========
Average Number of Customers
Residential . . . 68,620 67,854 68,599 67,823
Commercial &
Industrial . . . 11,630 11,435 11,624 11,424
Other . . . . . . . 74 74 74 74
------ ------ ------ ------
Total Customers . . 80,324 79,363 80,297 79,321
====== ====== ====== ======
*Includes lease transmissions.
Total operating revenues were virtually unchanged in the second quarter
of 1994 as compared to the second quarter of 1993. Retail revenues
increased 2.9 percent in the second quarter of 1994 as compared to the
same period in 1993 due primarily to a 1.4 percent increase in sales to
commercial and industrial customers and a 2.3 percent increase in sales
to residential customers, attributable to warmer weather in 1994. The
increase in retail revenues was almost entirely offset by a 20.3 percent
decrease in wholesale revenues in the second quarter of 1994 as compared
to the same period in 1993 primarily due to the greater availability of
low-cost energy in New England which drove down wholesale electricity
prices.
For the six months ended June 30, 1994, total operating revenues were
virtually unchanged as compared to the same period in 1993. Retail
revenues increased nearly 1 percent primarily due to a 3.4 percent
increase in sales to small commercial and industrial customers
(reflecting increased economic activity in this sector in 1994) and a
3.2 percent increase in sales to residential customers (reflecting
colder than normal winter weather and warmer than normal summer weather
in 1994.) This increase in sales was partially offset by a Vermont
Supreme Court decision that caused a reduction in revenues of
approximately $840,000. (See Note 5 of Notes to Consolidated Financial
Statements). Wholesale revenues decreased 12.2 percent, principally as
a result of the regional electricity market conditions mentioned above.
OPERATING EXPENSES
Power supply expenses decreased 1.4 percent in the second quarter of
1994 compared to the same period in 1993 caused primarily by a
6.1 percent decrease in electricity purchases from Vermont Yankee
Nuclear Power Corporation due to the absence of a scheduled refueling
outage in 1994 and a 10-day unplanned outage that increased 1993 costs.
This decrease in power supply expenses was partially offset by a
2.4 percent increase in purchases from independent power producers
mandated by federal legislation. Power supply expenses increased
1 percent for the six months ended June 30,1994 over the same period in
1993 due primarily to such purchases from independent power producers.
Transmission expenses were essentially unchanged in the second quarter
of 1994 as compared to the same period in 1993. Transmission expenses
decreased 4.4 percent for the six months ended June 30, 1994 compared to
the same period in 1993 primarily due to the restructuring of a series
of transmission contracts.
Other operating expenses increased 4.6 percent in the second quarter of
1994 over the same period in 1993 primarily due to a settlement with a
former insurance carrier which resulted in a one-time offset of $359,000
to such expenses in 1993. Other operating expenses increased
5.3 percent for the six months ended June 30, 1994 over the same period
in 1993 for the same reason.
Maintenance expenses increased 11.1 percent in the second quarter of
1994 over the same period in 1993 primarily due to a scheduled increase
in plant maintenance. Maintenance expenses increased 16.5 percent for
the six months ended June 30, 1994 over the same period in 1993 for the
same reason.
Depreciation and amortization expenses increased 4.7 percent in the
second quarter of 1994 over the same period in 1993, due to an increase
in utility plant additions. Depreciation and amortization expenses
increased 6.1 percent for the six months ended June 30, 1994 over the
same period in 1993 for the same reason.
Taxes other than income taxes increased 3.7 percent in the second
quarter of 1994 over the same period in 1993, primarily due to an
increase in property taxes. Taxes other than income taxes increased
4.7 percent for the six months ended June 30, 1994 over the same period
in 1993 for the same reason.
INCOME TAXES
Income taxes were higher in the second quarter of 1994 compared to the
same period in 1993, primarily due to greater taxable income. Income
taxes were lower for the six months ended June 30, 1994, compared to the
same period in 1993, primarily due to lower taxable income resulting
from the Supreme Court decision reducing income in the first quarter of
1994.
OTHER INCOME
Other income more than doubled in the second quarter of 1994 as compared
to the same period in 1993, primarily due to a $560,000 increase in
earnings generated by Mountain Energy, Inc. Other income increased
51.1 percent for the six months ended June 30, 1994 over the same period
in 1993 due primarily to increases in earnings generated by Green
Mountain Propane Gas Company and Mountain Energy, Inc. of $420,000 and
$300,000, respectively.
INTEREST CHARGES
Interest charges increased 6.3 percent in the second quarter of 1994
over the same period in 1993 primarily due to interest charges related
to the sale of $20 million of the Company's first mortgage bonds in
November 1993 and an increase in short-term debt outstanding during the
period. Interest charges increased 6.2 percent for the six months ended
June 30, 1994 over the same period in 1993 for the same reasons.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1994, construction and conservation
expenditures totaled $8.2 million. Such expenditures in 1994 are
expected to be approximately $20.0 million, principally for expansion
and improvements of the Company's transmission and distribution plant
and for conservation measures.
The Company anticipates issuing additional shares of common stock in
1995. The Company has not determined the date or the amount of the
stock issuance.
GREEN MOUNTAIN POWER CORPORATION
June 30, 1994
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Notes 3, 4 and 5 of Notes to Consolidated Financial
Statements
ITEM 2. Changes in Securities
NONE
ITEM 3. Defaults Upon Senior Securities
NONE
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Annual Shareholder's Meeting held May 19, 1994,
shareholders elected the nominees listed below as Directors of
the Company. The voting results are set forth below.
Election of Directions
Total Votes Total Votes
Nominee For Withheld
- - - -------- ----------- -----------
Robert E. Boardman 3,797,994 38,432
Nordahl L. Brue 3,796,458 39,968
William H. Bruett 3,799,203 37,223
Merrill O. Burns 3,799,229 37,197
Lorraine E. Chickering 3,783,356 53,070
John V. Cleary 3,799,787 36,639
Richard I. Fricke 3,790,578 45,848
Douglas G. Hyde 3,800,372 36,054
Euclid A. Irving 3,786,912 49,514
Martin L. Johnson 3,789,687 46,739
Ruth W. Page 3,787,412 49,014
Thomas P. Salmon 3,794,764 41,662
ITEM 5. Other Information
NONE
ITEM 6. (a) EXHIBITS
10-d-1e Amendment No. 94-1 to the Amended and Restated
Deferred Compensation Plan for Officers.
10-d-12 Green Mountain Power Corporation Officer
Compensation Program, Highlights Brochure /
Program Document.
(b) REPORTS ON FORM 8-K
Form 8-K was not required to be filed
during the current quarter
GREEN MOUNTAIN POWER CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GREEN MOUNTAIN POWER CORPORATION
(Registrant)
Date: August 11, 1994 /s/ E. M. Norse
E. M. Norse, Vice President, Chief
Financial Officer and Treasurer
Date: August 11, 1994 /s/ G. J. Purcell
G. J. Purcell, Controller
EXHIBIT 10-d-1e
Amendment No. 94-1
To The Deferred Compensation Plan For Certain Officers
As Amended and Restated Effective July 16, 1993
______________________________________________________
Effective May 19, 1994, Paragraph 3(a) of said Plan shall be
amended to read as follows:
********************
3. Participant's Election
"For the purpose of this plan, "compensation" shall
mean the salary paid by the Company to said Participant as an
officer of the Company, including base salary and the cash
amount of any variable compensation (including any amounts
thereof, which a Participant elects to defer under this Plan,
but not including amounts credited to gross pay, if any, under
the Company's automobile policy)."
********************
In witness whereof, the Company has caused this Amendment to be
executed by its duly elected officer this 1st day of June 1994.
GREEN MOUNTAIN POWER CORPORATION
By: /s/ Douglas G. Hyde
_________________________________
Its CEO and President
Attest:
/s/ Donna S. Laffan
_______________________
Witness (seal)
(Board of Directors: 5/19/94)
EXHIBIT 10-d-12
Green Mountain Power Corporation
Officer Compensation Program
Highlights Brochure/Program Document
Plan Year 1994
Table of Contents
Page
Preamble 1
Purpose of Program 1
Participants 1
Effective Date 1
Definitions 2
Program Components 3
Base Salary 3
Variable Compensation 5
Determination of Award 7
Variable Compensation Award Payment 7
Program Administration 8
Appendix 9
Preamble
This document describes the Officer Compensation Program for Green
Mountain Power Corporation ("GMP" or "the Company"). The program is
intended to assure that total compensation is competitive in the
marketplace and promotes the Company's strategic objectives.
Purpose of Program
The purpose of GMP's Officer Compensation Program is to:
o ensure that base compensation compares favorably with regard to
organizations competing for similar talent;
o provide an opportunity for officers to share in the success of GMP
by linking a portion of compensation (variable compensation) to
corporate performance results;
o encourage a longer-term view by paying part of an earned variable
compensation award in deferred/restricted stock; and
o foster and reinforce teamwork among officers.
Participants
All senior officers of GMP are eligible to participate in this program
Effective Date
The stock award provisions contained herein shall be effective upon
shareholder and other required regulatory approval. The program is
otherwise effective January 1, 1994.
Definitions
The following definitions pertain to the program.
Circuit Breaker - a performance level below which no variable
compensation will be paid regardless of performance against the
corporate measures. For this program, no awards will be paid unless
earnings, less provision for awards, are greater than dividends paid in
the year for which variable compensation is to be awarded.
Compensation Committee - the Compensation Committee of the Board of
Directors.
Market Average - the average of salaries paid in the marketplace for
positions similar to those at GMP.
Market Range - a range running from 10% below to 10% above the market
average.
Marketplace - Companies that are determined by GMP to be those competing
for similar talent. Depending on the position within GMP, marketplace
companies can be utilities, general industry -- local, regional,
national, or any combination thereof.
Maximum - the maximum or optimal level of corporate performance with
respect to a corporate performance measure. This determination will be
applied separately to each performance measure. No variable
compensation with respect to a performance measure will be paid in
excess of the maximum level indicated.
Officer Compensation Program - the compensation program, which consists
of base salary and the opportunity to earn variable compensation.
Organization Bands - tiers within which officer positions are clustered,
to reflect the nature and scope of the jobs, reporting relationships,
and the like.
Peer Companies - a select group of utilities against which GMP's
performance will be measured.
Performance Measure - a critical factor used to measure the success of
the business.
Program Year - GMP's fiscal year.
Restricted Stock Grants - the portion of the variable compensation award
paid to officers in the form of GMP common stock that will be subject to
two restrictions of a five (5) year duration: (1) no transferability;
and (2) forfeiture of the stock upon termination of employment with the
Company (except for retirement, death or disability). During the five-
year restriction period, dividends will be paid and officers will have
voting rights. The value of restricted stock is taxable when the
restrictions lapse (after five years, or earlier in the case of the
officer's retirement, disability or death). The restriction period
begins on the date the awards are granted.
Stock Grants - the portion of the variable compensation award paid to
officers in the form of shares of GMP common stock. These shares are
the property of the officer upon grant and may be retained or sold.
Upon grant, shares are subject to current taxation.
Target - the desired level of corporate performance with respect to a
performance measure. This determination will be applied separately for
each performance measure.
Threshold - the acceptable level of corporate performance with respect
to a performance measure. This determination will be applied separately
to each performance measure. No variable compensation with respect to a
performance measure will be paid unless the threshold level is attained.
Total Compensation - an amount comprised of base salary and variable
compensation.
Variable Compensation - compensation that is earned based on the
achievement of corporate performance objectives and that may be paid in
cash, stock grants, or restricted stock grants.
Program Components
The Officer Compensation Program is comprised of two compensation
components:
o Base Salary
o Variable Compensation
Base Salary
Each officer is paid a base salary intended to be competitive with base
compensation paid for similar positions in the marketplace.
Variable Compensation
Each officer is eligible to earn additional compensation when GMP's
performance meets or exceeds various performance objectives.
Base Salary
Base salaries are intended to provide a competitive rate of fixed
compensation. Base salary levels will be assessed by compiling and
analyzing salary information from various published survey sources on an
annual basis. Survey sources include:
o Mercer Finance, Accounting & Legal Compensation
Survey
o Wyatt Top Management Report
o Edison Electric Executive Compensation Survey
Within one year after the adoption of the program, base salaries are
intended to be managed to the market average (in any event, within a
plus or minus 10% range around the market average) as determined from
the survey analysis. The average and the range may or may not change
from year to year depending on movement in the market and, therefore, it
is possible that base salaries may not be increased annually.
Appropriate adjustments will be made in May of each year.
Actual base compensation within the market range will depend on internal
equity, overall scope of responsibilities of the position, recruitment
needs, and significant individual performance variations.
The market ranges have been incorporated into three organization bands
(in lieu of job grades). These bands reflect the nature of the
positions and their impact on the organization. Additionally, these
bands signify varying levels of participation in the variable
compensation component of the program.
The band assignments are determined on the basis of survey data and the
role of the position.
Band Position Role
_____ _________________________ _________________
A President and CEO Stragetic
Senior VP & COO
B VP Finance & CFO Strategic
VP Law & Administration
VP External Affairs &
Customer Service
VP Planning
C Controller Strategic/Tactical
AVP Engineering
AVP Human Resources
AVP Electric Operations
Assistant General Counsel
Assistant Treasurer
Variable Compensation
The purpose of the variable compensation component of this program is to
tie compensation directly to the achievement of key corporate-wide
objectives. Awards earned will be paid in cash, stock grants, and
restricted stock as deemed appropriate by the Compensation Committee of
the Board of Directors. The initial variable award payments will be
made as set forth below. This award delivery feature is intended to
motivate officers toward the annual attainment of critical corporate
objectives consistent with the need to manage GMP to achieve longer-term
success.
Variable Compensation Award Opportunities
Each band has a different variable compensation opportunity as noted in
the following table.
Award Table (AT)
___________________________________________________
Band Variable Cash Opportunities as a %
of Base Salary
___________________________________________________
Threshold Target Maximum
___________________________________________________
A 25% 50% 75%
B 17.5% 35% 52.5%
C 12.5% 25% 37.5%
___________________________________________________
Performance Measures - Establishment
At the beginning of each year, appropriate corporate performance
measures will be determined for purposes of generating the variable
compensation award. These measures are expected to remain in
substantially the same form year-to-year. They may change, however, as
GMP revisits its strategic and operational plans.
The measures are:
o Return on Equity
o Total Shareholder Return
o Rates
o Customer Satisfaction; and
o Reliability
Performance objectives associated with these measures are established
for each fiscal year by the Compensation Committee and reviewed by the
Board of Directors. (See appendix for measures and specific objectives
for 1994.)
After the close of each year, the Compensation Committee, with input
from the CEO, will determine the degree to which these performance
objectives were accomplished to determine if variable cash awards are to
be paid. If the threshold level of performance is not met, an award
will not be paid with respect to that specific performance measure.
In addition, the program incorporates a circuit breaker to protect
shareholder investment. The circuit breaker ensures that awards will
not be paid unless earnings, after subtracting the variable awards, are
greater than dividends paid in the year for which variable compensation
is to be awarded.
Performance Measures - Individual Performance Assessment
Individual performance may, on an exceptions basis, be taken into
consideration in determining the final award. However, the maximum
shown in Table AT cannot be exceeded.
Performance Measures - Weighting
The performance measures will be weighted each year to reflect the
strategic plan and the impact each organization band/officer position
has on performance. The number of measures used will be limited to
ensure that the significance of the measures will not be diluted
(weights less than 10% cannot be used).
The performance measures will be weighted as noted in the Appendix.
Determination of Award
An award will be determined in accordance with the following example.
Assume:
o Participant = Officer in Band B
o Base Salary = $100,000
o Individual Performance = meets expectations
o Circuit Breaker = achieved required level
Performance Performance Award % Adjusted Award %
Measure Weight Results (Table AT) Weight Time %
____________ ______ __________ __________ _______________
ROE 30% 75% ile 35% 10.5%
TSR
oD&P 15% Threshold 17.5% 2.625%
oSelect 15% Threshold 17.5% 2.625%
Rates 20% 80% ile 35% 7.0%
Customer
Satisfaction 10% 80% 35% 3.5%
Reliability
oSAII 3.3% Threshold 17.5% .583%
oSAIFI 3.3% Threshold 17.5% .583%
oCAIDI 3.3% Threshold 17.5% .583%
_____________________________________________________
Total Award % = 28%
Award = $28,000
_____________________________________________________________
Variable Compensation Award Payment
An award earned will be paid in cash and, subject to shareholder and
required regulatory approval, stock grant and restricted stock grant in
accordance with the following schedule:
Band Cash Stock Grant Restricted Stock
A 1/4 1/4 1/2
B&C 1/3 1/3 1/3
The Compensation Committee may make changes in this schedule, subject to
review by the Board.
Cash
The cash portion of the award will be paid in a separate check.
Stock Grants
The stock grant portion of the award will be paid in shares of GMP
common stock. The number of shares will be determined by dividing the
portion of the award to be paid in stock by the closing stock price on
the day the Board authorizes variable compensation payments (i.e., the
annual meeting). The number of shares so determined will be rounded up
to the nearest full share.
Relevant taxes (e.g., federal, FICA, State), based on the cash and stock
grant portions of the award, will be withheld from the payment.
Restricted Stock
The grant of restricted stock will be made upon execution of an
agreement between the officer and the Company that will provide, for a
period of five (5) years from the date of the grant, that: (a) the
shares will not be transferable; and (b) the shares will be forfeited by
the officer upon termination of employment with GMP, except where the
termination of employment results from retirement, disability or death.
The number of restricted stock shares to be awarded will be determined
as described immediately above with respect to stock grants.
Program Administration
The program will be administered by the Chief Executive Officer with
approval of the Compensation Committee.
The Compensation Committee will review the operation of the program no
less frequently than annually and, as it deems necessary, recommend
appropriate actions to the Board of Directors.
The Board of Directors will have the full power and authority to:
o Interpret the program
o Approve participants
o Act on the CEO's recommendations
o Amend or terminate the Program, subject to required
shareholder and regulatory approval
o Approve the CEO's award
Participation in the program does not confer any right or privilege
regarding continued employment with GMP upon an officer .
Payment of the cash and, subject to required shareholder and regulatory
approval, the stock grant portions, will be made during the second
quarter following the end of the program year.
Participants must be employed on the date the award is paid in order to
receive an award unless the participant has retired, is disabled or is
deceased, or the Compensation Committee determines that the
circumstances under which the participant terminated employment warrant
special consideration.
Payments of variable compensation awards will not affect an officer's
levels of entitlement to participate in other benefit plans unless
expressly stated in documentation for such plans existing as of January
1, 1994.
The program will be administered in accordance with the laws of the
State of Vermont.
Appendix
Performance Measures -- Weights
o Return on Equity 30%
o Total Shareholder Return 30%
o Rates 20%
o Customer Satisfaction 10%
o Reliability 10%
Performance Measures -- Objectives
The objectives for 1994 for each of the performance measures are:
o Return on Equity
-- The peer group is the Duff & Phelps 90
-- To achieve threshold performance, GMP's ROE for electric
operations must be equal to or greater than the allowed ROE
level, or equal to or greater than 60% of the peer group
-- Target level is equal to or greater than 75% of the peer group
-- Maximum performance is equal to or greater than 90% of the peer
group
o Total Shareholder Return
-- Performance is measured using two different peer groups: the
Duff & Phelps 90, and a select peer group. The select group
includes:
__ Atlantic Energy
__ Bangor-Hydro
__ Black Hills
__ Central Hudson
__ Central Vermont Public Service
__ Eastern Utilities Associates
__ Empire District
__ Idaho Power
__ Minnesota Power & Light
__ Otter Tail Power
-- Total Shareholder Return (TSR) is defined as dividends plus
capital appreciation using a three-year rolling average
-- To achieve threshold performance, GMP's TSR must be in the top
half of the peer group
-- Target performance is equal to or greater than 60% of the peer
group
-- Maximum performance is equal to or greater than 70% of the peer
group
o Rates
-- Performance is measured against 10 New England utilities. They
are:
__ Central Maine Power
__ Bangor-Hydro
__ Public Service of New Hampshire
__ Central Vermont
__ Boston Edison
__ Commonwealth Energy
__ Massachusetts Electric
__ Connecticut Power & Light
__ United Illuminating
__ Narragansett Electric
-- To achieve threshold performance, GMP's rates must be equal to
or lower than 70% of the peer group
-- Target performance is achieved when GMP's rates are equal to or
lower than 80% of peer group
-- Maximum performance is reached when GMP's rates are lowest or
second lowest among the peer group
o Customer Satisfaction
-- Performance is measured using two surveys (i.e.,
Commercial/Industrial, Residential) with respect to the following
aspects of customer satisfaction: reliability of service,
responsiveness to trouble calls, responsiveness to customer
inquiries, accuracy of customers' bills, effectiveness of
telephone communications, effective delivery of DSM services.
-- To achieve threshold performance, 70% or more of customers must
indicate satisfaction
-- Target performance is achieved when 80% or more of customers
indicate satisfaction
-- Maximum performance is reached when 90% or more indicate
satisfaction
o Reliability
-- Performance is measured using three indices:
__ System average interruption index
__ System average interruption frequency index
__ Customer average interruption duration index
-- To reach threshold performance, GMP's performance must improve
5% or more from that achieved in the previous year
-- Target performance is 10% or greater improvement from the
previous year
-- Maximum performance is 12% or greater improvement from the
previous year
