SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-3571
LONG ISLAND LIGHTING COMPANY d/b/a LIPA
(Exact name of registrant as specified in its charter)
New York 11-1019782
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
333 Earle Ovington Boulevard, Suite 403, Uniondale, New York 11553
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 222-7700
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
The total number of shares of the registrant's Common Stock $1 par value,
outstanding on May 17, 1999, was 1.
<PAGE>
Long Island Lighting Company d/b/a LIPA
Page No.
--------
Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Statement of Operations 2
Balance Sheet 3-4
Statement of Cash Flows 5
Notes to Financial Statements 6-11
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-19
Item 3- Quantitative and Qualitative Disclosures
About Market Risk 19
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings 20-21
Item 2 - Changes in Securities and Use of Proceeds 22
Item 3 - Defaults upon Senior Securities 22
Item 4 - Submission of Matters to a Vote of Security Holders 22
Item 5 - Other Information 22
Item 6 - Exhibits and Reports on Form 8-K 22
Signature 23
<PAGE>
2
PART I. FINANCIAL INFORMATION
ITEM I. Financial Statements
Long Island Lighting Company d/b/a LIPA (a
wholly owned subsidiary of the Long Island Power Authority)
Statement of Operations
(Unaudited)
(Thousands of Dollars - Except Per Share Information)
LIPA LILCO
---- -----
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Revenue - Electric $ 475,608 $ 555,682
Expenses
Operations - fuel and purchased power 154,113 166,024
Operations and maintenance 167,832 100,083
Depreciation and amortization 52,221 33,504
Base financial component amortization -- 25,243
Rate moderation component amortization -- (42,694)
Regulatory liability component amortization -- (22,143)
Other regulatory amortization -- (276)
Operating taxes 61,123 92,403
Customer rebates 168 --
Federal income tax - current -- 4,077
Federal income tax - deferred and other -- 43,335
--------- ---------
Total Expenses 435,457 399,556
--------- ---------
Operating Income 40,151 156,126
--------- ---------
Other Income and (Deductions)
Other income and deductions, net 971 5,284
Allowance for other funds used during construction -- 574
Federal income tax - current -- (284)
Federal income tax - deferred and other -- (348)
--------- ---------
Total Other Income 971 5,226
--------- ---------
Income from Continuing Operations
Before Interest Charges 41,122 161,352
--------- ---------
Interest Charges and (Credits)
Interest on long-term debt 1,147 87,731
Interest on advances from and note payable to
the Authority 71,380 --
Other interest 7,089 13,381
Allowance for borrowed funds used during construction (539) (1,085)
--------- ---------
Total Interest Charges 79,077 100,027
--------- ---------
(Loss) Income from Continuing Operations (37,955) 61,325
Income from discontinued operations net of
taxes of zero and $22,861, respectively -- 54,614
--------- ---------
Net (Loss) Income (37,955) 115,939
Preferred stock dividend requirements -- 12,947
--------- ---------
Earnings for Common Stock $ (37,955) $ 102,992
========= =========
Average Common Shares Outstanding (000) (a) N/A 121,667
Basic and Diluted Earnings per Common Share from
Continuing Operations (a) N/A $ .41
Basic and Diluted Earnings per Common Share from
Discontinued Operations (a) N/A $ .44
Basic and Diluted Earnings per Common Share (a) N/A $ .85
Dividends Declared per Common Share (a) N/A $ .45
(a) Share and per share data are not meaningful on or after May 29, 1998 because
of the significant change in the capital structure in connection with the Merger
and because no public equity of LIPA is outstanding as of March 31, 1999.
The accompanying notes are an integral part of these financial statements.
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3
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Balance Sheet
(Thousands of Dollars)
March 31, December 31,
1999 1998
(unaudited)
---------- -----------
Assets
Utility Plant
Generation - nuclear $ 662,867 $ 662,893
Transmission and distribution 1,412,912 1,385,099
Common 3,093 3,827
Construction work in progress 44,904 52,897
Nuclear fuel in process and in reactor 14,875 17,053
---------- ----------
2,138,651 2,121,769
Less- Accumulated depreciation and amortization 67,170 50,287
---------- ----------
Total Net Utility Plant 2,071,481 2,071,482
---------- ----------
Current Assets
Customer accounts receivable (less allowance
for doubtful accounts of $18,357 and
$20,211, respectively) 113,191 119,161
Accrued unbilled revenues 67,779 78,414
Other accounts receivable 4,646 10,096
Promissory note receivable 398,000 398,000
Prepayments and other current assets 30,305 28,583
---------- ----------
Total Current Assets 613,921 634,254
---------- ----------
Promissory Note Receivable 646,902 646,902
---------- ----------
Designated Funds 74,145 194,972
---------- ----------
Nonutility Property and Other Investments 19,606 19,410
---------- ----------
Deferred Charges 84,815 78,507
---------- ----------
Acquisition Adjustment (net of accumulated amortization
of $98,112 and $68,766, respectively) 3,997,543 4,026,956
---------- ----------
Total Assets $7,508,413 $7,672,483
========== ==========
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4
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Balance Sheet
(Thousands of Dollars)
March 31, December 31,
1999 1998
(unaudited)
------------ -----------
Capitalization and Liabilities
Capitalization
Long-term debt $ 645,000 $ 778,075
Note Payable - the Authority 4,863,181 5,355,085
Due to the Authority 1,441,019 855,684
Accumulated deficit (117,936) (79,981)
----------- -----------
Total Capitalization 6,831,264 6,908,863
----------- -----------
Current Liabilities
Current maturities of long-term debt 398,278 398,000
Due to the Authority 70,880 70,880
Due to KeySpan 31,192 75,085
Accounts payable and accrued expenses 26,995 35,921
Accrued taxes 44,705 79,021
Accrued interest 16,975 29,851
Customer deposits 22,984 23,205
----------- -----------
Total Current Liabilities 612,009 711,963
----------- -----------
Deferred Credits 49,833 34,059
----------- -----------
Claims and Damages 15,307 17,598
----------- -----------
Commitments and Contingencies
----------- -----------
Total Capitalization and Liabilities $ 7,508,413 $ 7,672,483
=========== ===========
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5
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Statement of Cash Flows
(Unaudited)
(Thousands of Dollars)
LIPA LILCO
---- -----
Three Months Ended
March 31,
---------------------
1999 1998
---- ----
Operating Activities
Net (Loss) Income $ (37,955) $ 115,939
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities
Depreciation and amortization 52,221 40,583
Base financial component amortization -- 25,243
Rate moderation component amortization -- (42,694)
Regulatory liability component amortization -- (12,929)
Provision for fuel and purchased power cost adjustment 15,018 --
Other regulatory amortization -- 3,350
Rate moderation component carrying charges -- (5,789)
Class Settlement -- 3,208
Amortization of cost of issuing and redeeming securities 1,951 7,939
Federal income tax - deferred and other -- 48,333
Allowance for other funds used during construction -- 2,808
Pensions and Other Post Retirement Benefits -- 10,193
1989 Settlement credits amortization -- (9,213)
Gas Cost Adjustment -- (1,250)
Other 3,956 24,334
Changes in operating assets and liabilities
Accounts receivable, net 11,420 (41,077)
Accrued unbilled revenues 10,635 20,768
Materials and supplies, fuel oil and gas in storage -- 70,624
Accounts payable and accrued expenses (8,926) (60,075)
Due to KeySpan (43,893) --
Accrued taxes (34,316) (3,309)
Accrued interest (12,876) (13,804)
Class Settlement -- (12,238)
Special deposits -- (28,994)
Other (13,010) (13,244)
-------- ---------
Net Cash (Used in) Provided by Operating Activities (55,775) 128,706
-------- ---------
Investing Activities
Construction and nuclear fuel expenditures (22,874) (55,736)
Shoreham post settlement costs -- (9,621)
Other -- 332
-------- ---------
Net Cash Used in Capital and Related
Financing Activities (22,874) (65,025)
-------- ---------
Capital and related financing activities
Proceeds from sale of common stock -- 4,554
Repayment of note payable - Authority (491,904) --
Net Proceeds from Authority loan 585,335 --
Redemption of long-term debt (135,609) --
Preferred stock dividends paid -- (12,948)
Common stock dividends paid -- (54,032)
Other -- (331)
-------- ---------
Net Cash Used in Financing Activities (42,178) (62,757)
-------- ---------
Net (Decrease) Increase in Cash and Cash Equivalents (120,827) 924
Cash and cash equivalents at beginning of period 194,972* 179,995
-------- ---------
Cash and cash equivalents at end of period $ 74,145* $ 180,919
======== =========
*Cash and cash equivalents include designated funds
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6
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Notes to Financial Statements
For the Three Months Ended March 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Note 1. Basis of Presentation
As used herein, the term "LILCO" refers to the Long Island Lighting
Company, the publicly owned gas and electric utility company as it existed
prior to the LIPA/LILCO Merger, as described in Note 2, and the term
"LIPA" refers to that company as it exists after the LIPA/LILCO Merger as
a wholly-owned electric utility subsidiary company of the Long Island
Power Authority (the "Authority"), doing business as LIPA.
The Authority was established as a corporate municipal instrumentality of
the State of New York, constituting a political subdivision of the State,
created by Chapter 517 of the Laws of 1986 (the "LIPA Act"). As such, it
is a component unit of the State and is included in the State's annual
financial statements.
On April 11, 1997, LILCO changed its year-end from December 31 to March
31. Subsequent to the LIPA/LILCO Merger, LIPA adopted a calendar year-end.
Accordingly, unless otherwise indicated, references to March 31, 1999 and
1998 represent the three month periods ended March 31, 1999 and March 31,
1998, respectively. The financial information as of March 31, 1999, and
for the three months ended March 31, 1999 and 1998 is unaudited. However,
in the opinion of management, the financial statements include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the financial statements for the periods presented.
Operating results for any of the periods presented are not necessarily
indicative of results to be expected for the entire year due to the
seasonal nature of the electric business.
These Notes to Financial Statements should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three months ended March 31, 1999 and LIPA's Annual
Report on Form 10-K for the nine months ended December 31, 1998. In
addition, please refer to the discussion following in Note 2 regarding the
change in control of LILCO on May 28, 1998.
Note 2. Merger/Change in Control
On May 28, 1998, LIPA Acquisition Corp., a wholly-owned subsidiary of the
Authority, was merged with and into LILCO (the "Merger") pursuant to an
Agreement and Plan of Merger dated as of June 26, 1997, by and among
LILCO, MarketSpan Corporation (formerly known as BL Holding Corp., and
currently known as KeySpan Energy, "KeySpan"), the Authority and LIPA
Acquisition Corp., (the "Merger Agreement").
Pursuant to the Merger Agreement, immediately prior to the Merger, all of
the assets and liabilities of LILCO related to the conduct of its gas
distribution business and its non-nuclear electric generation business,
and all common assets used by LILCO in the operation and management of its
electric transmission and distribution business and its gas distribution
business and/or its non-nuclear electric generation business (the
"Transferred Assets") were sold to KeySpan. The consideration received by
LILCO for the Transferred Assets consisted of: (i)
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7
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Notes to Financial Statements
For the Three Months Ended March 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
3,440,625 shares of the common stock of KeySpan; (ii) 553,000 shares of
the Series B Preferred Stock of KeySpan; and (iii) 197,000 shares of the
Series C Preferred Stock of KeySpan. The value of the consideration was
determined by KeySpan and LILCO to be equal to the net fair market value
of the Transferred Assets. The transfer of assets and liabilities was
effected by a Bill of Sale, dated as of May 28, 1998, made and executed by
LILCO and acknowledged by KeySpan.
As a result of the Merger, the Authority became the holder of 1 share of
LILCO's common stock, representing 100% of the outstanding voting
securities of LILCO. In addition, KeySpan issued promissory notes to LIPA
of approximately $1.048 billion. The interest rate and timing of principal
and interest payments on the promissory notes from KeySpan are identical
to the terms of certain LILCO indebtedness assumed by LIPA in the Merger.
KeySpan is required to make principal and interest payments to LIPA thirty
days prior to the corresponding payment due dates, and LIPA then transfers
those amounts to debtholders in accordance with the original debt
repayment schedule.
The former holders of LILCO's common stock, primarily individual public
shareowners, became entitled to receive a pro-rata share of: (i) cash
consideration of $2.497 billion; and (ii) 3,440,625 shares of the common
stock of KeySpan, which were received by LILCO in exchange for the
Transferred Assets. Pursuant to the Merger Agreement, the former holders
of LILCO's common stock (other than holders of dissenting shares) were
deemed to have subscribed for additional shares of the common stock of
KeySpan, with an aggregate purchase price equal to the cash consideration.
In order to effect the Merger, it was necessary to: (i) retire all shares
of LILCO's preferred stock, whether by conversion, redemption or
cancellation; and (ii) redeem certain of LILCO's bonds, at a cost to LIPA
of approximately $1.557 billion. The cash consideration required for the
Merger was obtained by the Authority from the proceeds of the issuance and
sale of its Electric System General Revenue Bonds, Series 1998A and
Electric System Subordinated Revenue Bonds, Series 1 through Series 6. The
proceeds from the sale of the bonds were then transferred by the Authority
to LIPA in exchange for a promissory note of approximately $4.949 billion.
As a result of the Merger, there was a change in control of LILCO which
effectively resulted in the creation of a new reporting entity, LIPA.
Accordingly, the accompanying financial statements for the periods prior
to May 28, 1998 are not comparable to the financial statements presented
subsequent to May 28, 1998. Therefore, a black line has been drawn on the
Statement of Operations and the Statement of Cash Flows to distinguish
between LIPA and LILCO balances and activity.
The remaining assets and liabilities of LILCO acquired by LIPA consist of:
(i) LILCO's electric transmission and distribution system; (ii) its net
investment in Nine Mile Point Nuclear Power Station, Unit 2; (iii) certain
regulatory assets and liabilities associated with its electric business,
(iv) allocated accounts receivable and other assets and liabilities; and
(v) substantially all of its long-term debt.
The financial statements of LIPA include the push down of the Authority's
basis, including costs
<PAGE>
8
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Notes to Financial Statements
For the Three Months Ended March 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
related to the acquisition, of the assets acquired and liabilities
assumed. Because of the manner in which LIPA's rates and charges will be
established by the Authority's Board of Trustees, the original net book
value of the transmission and distribution and nuclear generation assets
acquired in the Merger is considered to be their fair value. The excess of
the acquisition costs over the fair value of the net assets acquired has
been recorded as an intangible asset titled "acquisition adjustment" and
is being amortized over a 35 year period. The acquisition adjustment
principally arose through the elimination of LILCO's regulatory assets and
liabilities, totaling $6.3 billion, and net deferred federal income tax
liability of approximately $2.4 billion. Therefore, the amortization of
the regulatory assets and liabilities has effectively been replaced by the
amortization of the acquisition adjustment. In addition, as a wholly-owned
subsidiary of the Authority, LIPA is exempt from Federal, state and local
income taxes. Accordingly, adjustments were made by LIPA on May 28, 1998
to eliminate deferred tax assets and liabilities. The results of
operations for the three months ended March 31, 1999 do not include a
provision for income taxes.
Effective May 29, 1998, the Authority contracted with KeySpan through
certain of its subsidiaries to provide operations and management services
for LIPA's transmission and distribution system through a management
services agreemen("MSA"). Therefore, LIPA pays KeySpan directly for their
services and KeySpan, in turn, pays the salaries of their employees. LIPA
has no employees, however LIPA is charged a management fee by the
Authority to oversee LIPA's operations of which the salaries of the
Authority's employees is a significant component. Through a power supply
agreement("PSA") LIPA contracts for capacity and, to the extent necessary,
energy from the fossil fired generating plants of KeySpan, formerly owned
by LILCO. Energy and fuel are purchased by KeySpan on LIPA's behalf
through an energy management agreement("EMA") (collectively; the
"Operating Agreements").
The electric transmission and distribution system is located in the New
York Counties of Nassau and Suffolk (with certain limited exceptions) and
a small portion of Queens County known as the Rockaways. The service area
covers an area of approximately 1,230 square miles and the population of
the service area is approximately 2.75 million persons, including
approximately 98,500 persons who reside in Queens County within the City
of New York. LIPA receives approximately 49% of its revenues from
residential sales, 48% from sales to commercial and industrial customers,
and the balance from sales to other utilities and public authorities.
Discontinued Operations
The statement of operations of LILCO for the three months ended March 31,
1998 has been prepared to present the gas business (as transferred to
KeySpan subsidiaries pursuant to the Merger Agreement) as a discontinued
operation, in accordance with the provisions of Accounting Principles
Board Opinion No. 30.
The income from discontinued operations includes revenue from the gas
business of approximately $271.9 million for the three months ended March
31, 1998.
<PAGE>
9
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Notes to Financial Statements
For the Three Months Ended March 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Note 3. Capitalization
On January 4, 1999, LIPA redeemed $102.6 million of the NYSERDA Electric
Facilities Revenue Bonds Series 1993B, 1994A, and 1995A, which were called
for redemption prior to December 31, 1998.
On March 1, 1999, the variable rate bonds listed below were converted to
fixed interest rates of 5.15% on the PCRBs and 5.3% on the EFRBs.
Balances
Interest Subsequent to
Maturity Rate Conversion
-------- ---- ----------
PCRBs
1985 Series A March 1, 2016 Variable $ 58,020
1985 Series B March 1, 2016 Variable 50,000
EFRBs
1993 Series B November 1, 2023 Variable 29,600
1994 Series A October 1, 2024 Variable 2,600
1995 Series A August 1, 2025 Variable 15,200
Also, on March 1, 1999, LIPA redeemed $30.1 million of the NYSERDA
Pollution Control Revenue Bonds, 1985 Series A.
Note 4. Rate Matters
Under current New York law, the Authority is empowered to set rates for
electric service in its service area without being required by law to
obtain the approval of the New York State Public Service Commission (the
"PSC") or any other state regulatory body. However, the Authority has
agreed, in connection with the approval of the Merger by the New York
State Public Authorities Control Board (the "PACB"), that it will not
impose any permanent increase, nor extend or reestablish any portion of a
temporary rate increase, in average customer rates over a 12 month period
in excess of 2.5% without approval of the PSC, following a full
evidentiary hearing. Another of the PACB conditions requires that the
Authority reduce average rates within LIPA's service area by no less than
14% over a ten year period commencing on the date when LIPA began
providing electric service, when measured against LILCO's base rates in
effect on July 16, 1997 (excluding the impact of the proposed Shoreham tax
settlement, but adjusted to reflect emergency conditions and extraordinary
unforeseeable events.)
The LIPA Act requires that any bond resolution of the Authority contain a
covenant that it will at all times maintain rates, fees or charges
sufficient to pay the costs of operation and maintenance of facilities
owned or operated by the Authority; payments in lieu of taxes ("PILOT's");
<PAGE>
10
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Notes to Financial Statements
For the Three Months Ended March 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
renewals, replacements and capital additions; the principal of and
interest on any obligations issued pursuant to such resolution as the same
become due and payable, and to establish or maintain any reserves or other
funds or accounts required or established by or pursuant to the terms of
such resolution.
LIPA's rates include the fuel and purchased power cost adjustment
("FPPCA") which adjusts rates to reflect significant changes in the cost
of fuel, purchased power and related costs. The FPPCA is designed to
ensure that LIPA will recover from or return to customers any fuel costs
that fall outside an established base fuel and purchased power tolerance
band. The tolerance band is equal to one percent above and one percent
below LIPA's cost of fuel and purchased power costs for 1999. The
tolerance band increases to two percent in 2000 and continues to increase
in one percent increments annually thereafter. Expenses for fuel and
purchased power cost in excess of or below this level will be recovered
from or returned to customers beginning the following year. Should fuel
and purchased power costs increase in excess of five percent cumulatively
over the original base cost, the FPPCA will recover, from that year
forward, all costs in excess of the original base cost.
LIPA's rates are largely based on LILCO's pre-Merger rate design to avoid
customer confusion and facilitate an efficient transition from LILCO
billing to LIPA billing. In addition, LIPA's rates include the FPPCA, a
PILOT recovery rider, a rider providing for the Shoreham settlement and a
rider providing for the RICO Credits (credits to the bills of customers as
a result of the settlement by LILCO of a RICO action in connection with
the construction and completion of nuclear generating facilities).
The LIPA Act requires LIPA to make PILOTs for certain New York State and
local revenue taxes which would otherwise have been imposed on LILCO. The
PILOT recovery rider allows for rate adjustments to accommodate the
PILOTs.
Note 5. Contingencies
Legal and Environmental Proceedings
Except as discussed below, no significant changes have occurred with
respect to legal and environmental contingencies as discussed in Note 13
of Notes to Financial Statements in LIPA's Annual Report on Form 10-K for
the nine months ended December 31, 1998, as filed on March 31, 1999.
In April 1999, the Attorney General of the State of New York announced a
settlement with KeySpan relating to certain compensation payments made to
former officers and directors of LILCO. The Attorney General also
announced that his office would not be commencing any additional actions
with regard to the payments.
<PAGE>
11
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)
Notes to Financial Statements
For the Three Months Ended March 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Note 6. Reclassifications
Certain prior period amounts have been reclassified in the financial
statements to conform with the current period presentation.
<PAGE>
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
This report contains statements which, to the extent they are not
recitations of historical fact, constitute "forward-looking statements"
within the meaning of the Securities Litigation Reform Act of 1996. In
this respect, the words "estimate," "project," "anticipate," "expect,"
"intend," "believe" and similar expressions are intended to identify
forward-looking statements. All such forward-looking statements are
intended to be subject to the safe harbor protection provided by the
Reform Act. A number of important factors affecting the Registrant's
business and financial results could cause actual results to differ
materially from those stated in the forward-looking statements. Those
factors include regulatory rate proceedings, competition, and certain
legal and environmental matters each as discussed herein, in the
Registrant's Annual Report on Form 10-K filed March 31, 1999, for the nine
months ended December 31, 1998, or in other reports filed by the
Registrant with the Securities and Exchange Commission.
General
Effective May 29, 1998, KeySpan Energy ("KeySpan"), through certain of its
subsidiaries provides operations and management services for LIPA's
transmission and distribution system through a management services
agreement ("MSA"). LIPA contracts for capacity and to the extent
necessary, energy from the fossil fuel fired generating plants formerly
owned by Long Island Lighting Company ("LILCO"), through a power supply
agreement ("PSA") with KeySpan. Energy is purchased by KeySpan on LIPA's
behalf through an energy management agreement ("EMA"), (collectively; the
"Operating Agreements").
As LIPA is a wholly owned subsidiary of the Authority and not an investor
owned utility, the PSC does not have jurisdiction with respect to the
determination of rates and charges. See, however, Note 4 of Notes to the
Financial Statements. Rates and charges for LIPA are determined by the
Authority's Board of Trustees.
The excess of the acquisition cost over the fair value of the net assets
acquired has been recorded as an intangible asset titled "acquisition
adjustment" and is being amortized over a 35 year period. The acquisition
adjustment principally arose through the elimination of LILCO's regulatory
assets and liabilities, totaling $6.3 billion, and net deferred Federal
income tax liability of approximately $2.4 billion. Therefore, the
amortization of the regulatory assets and liabilities has effectively been
replaced by the amortization of the acquisition adjustment. Because of the
tax exempt status of LIPA, the results of operations for the three months
ended March 31, 1999, do not include a provision for income taxes.
Results of Operations
Three Months Ended March 31, 1999 and 1998
Earnings
Net loss for the three month period ended March 31, 1999 was approximately
$38 million. The loss was principally due to the seasonal nature of the
business, whereby revenues during the first quarter are significantly less
than those expected to be generated during the summer cooling
<PAGE>
13
season. This, combined with the fact that the majority of LIPA's costs
(other than fuel, for which there is a separate rate mechanism, the FPPCA,
as discussed below) are either fixed, or charged in accordance with terms
specified by the MSA and the PSA, resulted in a net loss during this
period.
For the three months ended March 31, 1998, earnings were enhanced as a
result of the change in the method of amortizing the Rate Moderation
Component ("RMC") to eliminate the effects of seasonality on monthly
operating income, as more fully discussed in the section entitled
"Regulatory Amortization".
Electric Revenues
The decrease in electric revenues of approximately $80.1 million for the
three months ended March 31, 1999, when compared to the same period in
1998, was principally the result of the rate reduction (approximately
20%), for all customers, effective May 29, 1998. Partially offsetting the
reduction in revenues was an increase in usage by existing customers which
is attributable to a strong and growing economy and price elasticity
reflecting the effect of LIPA's 20% rate reduction. In addition, there has
been an increase in customers relative to the same period last year.
Fuel and Purchased Power
Fuel and purchased power expense for the three months ended March 31, 1999
and 1998, were as follows:
1999 1998
-------------- ---------------
in millions) (in millions)
Oil $ 42 $ 43
Gas 20 32
Nuclear 2 2
Purchased power 75 89
---- ----
139 166
FPPCA 15 --
---- ----
Total $154 $166
==== ====
Electric Energy Available
The percentage of total electric energy available, by type of fuel, for
electric operations for the three months ended March 31, 1999 and 1998
were as follows:
<PAGE>
14
1999 1998
------------------ -------------------
(Mwh = Megawatt hours)
Mwh % Mwh %
-------- ----- -------- ------
Oil 1,782 40 1,205 29
Gas 785 18 845 20
Nuclear 444 10 394 9
Purchased 1,414 32 1,761 42
----- --- ----- ---
Total 4,425 100 4,205 100
===== === ===== ===
Variations in fuel and purchased power expenses have a minimal impact on
operating results as LIPA's current rate structure includes a mechanism
(the FPPCA mechanism) which requires LIPA to return to customers or allows
LIPA to recover from customers, actual fuel costs which fall outside of
the fuel cost tolerance band, which is defined as 1% higher and 1% lower
than the base cost of fuel collected through rates. These percentages
increase to two percent in 2000 and continue to increase in one percent
increments annually thereafter.
Fuel expense for the three months ended March 31, 1999 decreased when
compared to the same period of the prior year, despite a 5% increase in
sales. This decrease is primarily the result of sharply lower oil prices,
partially offset by incentives recognized and fees paid to KeySpan to
manage the fuel and purchased power supplies in accordance with the EMA,
and the recognition of a $15 million expense associated with the FPPCA
mechanism. Generation with oil increased substantially (from 29% of
requirements for the three months ended March 31, 1998 to 40% for the
three months ended March 31, 1999) as it became more economical than
generation with gas and purchased power.
Operations and Maintenance
Operations and Maintenance ("O&M") expenses, excluding fuel and purchased
power, increased approximately $67.7 million during the three month period
ended March 31, 1999, when compared to the same period in 1998. The
increase is primarily due to the fact that LILCO classified expenses such
as depreciation and amortization, property taxes and other operating taxes
separately. These costs are incurred by LIPA as part of the costs of
contracts with KeySpan for the management of LIPA's assets and are
classified as O&M expense by LIPA. In addition, there were charges
incurred by LIPA related to the overhead expenses of the Authority.
Depreciation and Amortization
Depreciation and amortization expense increased for the three month period
ended March 31, 1999, when compared to the same period of the prior year,
primarily due to the amortization of the acquisition adjustment which
totals approximately $10 million per month. This increase was partially
offset by the absence of depreciation expense on LILCO's non-nuclear
generating assets, which is included in O&M as a component of the PSA
billings.
Operating Taxes
Operating taxes decreased during the three months ended March 31, 1999,
when compared to the same period in 1998, as a result of the decrease in
revenue taxes resulting from lower revenues primarily due to the 20% rate
reduction, a decrease in the gross income tax rate, and the absence of
<PAGE>
15
property and payroll taxes related to the operation of the non-nuclear
generating facilities of LILCO, partially offset by PILOTs on the Shoreham
Nuclear Power Station (LILCO was able to capitalize these PILOTs under its
electric rate structure).
Regulatory Amortization
For the three month period ended March 31, 1999, the amortization of
various regulatory assets and liabilities were not recorded as a result of
the adjustments made on May 29, 1998, to eliminate the related regulatory
assets and liabilities.
Rate Moderation Component ("RMC")
The RMC represented the difference between LILCO's revenue requirements
under conventional ratemaking and the revenues provided under LILCO's
electric rate structure. In addition, the RMC was adjusted for the
operation of LILCO's Fuel Moderation Component ("FMC") mechanism and the
difference between LILCO's share of actual operating costs at Nine Mile
Point Nuclear Power Station, Unit 2 ("NMP2") and amounts provided for in
electric rates.
In April 1998, the PSC authorized a revision to LILCO's method for
recording its monthly RMC amortization. Prior to this revision, the
amortization of the annual level of RMC was recorded monthly on a
straight-line, levelized basis over LILCO's rate year which ran from
December 1 to November 30. However, revenue requirements fluctuated from
month to month based upon consumption, which is greatly impacted by the
effects of weather. Under the revised method, effective December 1, 1997,
the monthly amortization of the annual RMC level varied based upon each
month's forecasted revenue requirements, which more closely aligned such
amortization with LILCO's cost of service. As a result of this change, for
the three months ended March 31, 1998, LILCO recorded approximately $51.1
million more of non-cash RMC credits to income than it would have under
the previous method.
Federal Income Tax
The decrease in Federal income tax expense for the three months ended
March 31, 1999, when compared to the same period in 1998, is due to the
fact that LIPA is exempt from Federal income taxes.
Other Income and Deductions
The decrease in other income and deductions of approximately $4.3 million
for the three months ended March 31, 1999, when compared to the same
period in 1998 was primarily due to the absence of carrying charges on
regulatory assets of LILCO, combined with the effects of the reversal in
March of 1998 of previously recognized benefits for certain officers and
directors of LILCO.
Interest Expense
Interest expense for the three months ended March 31, 1999, is
approximately $21 million less than that of the same period in 1998. This
decrease is principally attributable to the lower borrowing rates of LIPA
relative to the borrowing rates of LILCO. This decrease in interest
expense was partially offset by the higher levels of debt that LIPA had
outstanding during this period, when compared to LILCO during the same
period in 1998. This increase in the level of debt is due to the fact that
LIPA's entire capital structure is debt, where LILCO's capitalization
structure was composed of debt, common stock and preferred stock. As a
result, the entire cost of LIPA's capital is reflected in interest
expense, where LILCO's cost of capital was reflected in interest expense,
common and preferred stock dividends.
<PAGE>
16
Liquidity and Capital Resources
Liquidity
Since May 29, 1998, LIPA has received approximately $6.7 billion from the
Authority to finance the Merger, as more fully discussed in Note 7 of
Notes to the Financial Statements included in LIPA's Annual Report on Form
10-K for the nine months ended December 31, 1998, in exchange for a
promissory note. All cash from customer payments and other sources is
collected by the Authority. The Authority makes all disbursements on
LIPA's behalf. Accordingly, all operating cash amounts are held at the
Authority. Cash collections and disbursements by the Authority on LIPA's
behalf increase or decrease amounts due the Authority by LIPA. LIPA has
repaid approximately $329 million of its debt to the Authority because
cash collected by the Authority from customers and other sources since May
29, 1998 has exceeded cash paid on LIPA's behalf by the Authority.
Pursuant to the Authority's Electric System General Revenue Bond
Resolution dated May 13, 1998, all amounts to be paid by the Authority to
LIPA in respect of the debt obligations of LIPA are subordinated in right
of payment to the payment of amounts due on the debt obligations of the
Authority. As a result, all debt assumed from LILCO is structurally
subordinated in right of payment to the Authority's debt obligations.
At March 31, 1999, the Authority's and LIPA's cash and cash equivalents
amounted to approximately $485.5 million. In addition, LIPA has designated
funds aggregating $74 million on hand, $43.4 million of which are
available to fund capital expenditures.
During the three months ended March 31, 1999, LIPA retired prior to
maturity, with cash on hand, $132.7 million of outstanding NYSERDA bonds
which were assumed from LILCO as part of the Merger. LIPA believes that
cash from operations for 1999 will be sufficient to meet its operating,
capital and debt service requirements. However, LIPA intends to access the
capital markets in 1999 in order to finance capital expenditures and to
refinance higher cost debt, if conditions prove favorable.
LIPA estimates that for the remainder of 1999, capital spending will total
approximately $102 million and debt maturities will total approximately
$469 million. Of the $469 million, $398 million is due from KeySpan in
accordance with the promissory note between them and LIPA. With respect to
the remaining $71 million, the Authority will use cash generated from
operations to satisfy such maturities.
The Authority also expects to use cash from operations to make optional
redemptions of debt in 1999. Such actions are consistent with the
Authority's plan to retire in 16 years, the approximately $4 billion it
borrowed to purchase the Shoreham regulatory assets from LILCO.
On May 29, 1998, LIPA began issuing credits to the bills of customers
arising from the proposed settlement of the Shoreham Property Tax
Litigation. Credits will be issued over the five years after May 29, 1998,
in the total amount of $106.3 million for Suffolk County customers and
$208 million for Nassau County and Rockaway customers. The Authority has
issued $145.7 million of bonds and has proposed to issue additional bonds
over the next four years to finance the cost of the proposed settlement.
Beginning in May 2004, a surcharge will be levied upon the Suffolk County
customers in order to repay the bonds. See Part II, Item-1-Legal
Proceedings-Shoreham Tax Matters.
<PAGE>
17
ended December 31, 1998.
Capital Requirements
Capital expenditures are expected to be made by LIPA in the ordinary
course of business for purposes of the normal upgrading and expansion of
the T&D System. LIPA considers the T&D System to be adequate and in good
condition. The actual amount and timing of future financing will depend
upon actual capital expenditures, the timeliness and adequacy of rate
increases, the availability and cost of capital and the ability to meet
interest and fixed charge coverage requirements. The Authority has been
advised by KeySpan that the amount of capital expenditures budgeted to be
made in 1999 is adequate to maintain system reliability and insures
customer and employee safety.
Impact of Year 2000
The Authority recently purchased new computer software to support certain
activities of LIPA and believes that these systems are Year 2000
compliant. Management also believes that, based on available information,
it will be able to manage its Year 2000 transition for systems and
infrastructure, without any material adverse effect on its business
operations or financial position. However, there can be no assurance that
failure to resolve any issue relating to such transition would not have a
material adverse effect on LIPA. LIPA has had discussions with their
largest vendor, KeySpan, which is responsible for the management and
operation of LIPA's transmission and distribution system, and KeySpan has
indicated that it has evaluated the extent to which modifications to its
computer software, hardware and database will be necessary to accommodate
the new millenium. KeySpan's computer applications are generally based on
two digits and do require some additional programming to recognize the
start of the new millennium. A corporate-wide program has been established
by KeySpan to review all software, hardware, embedded systems and
associated compliance plans of KeySpan and its subsidiaries. The program
includes both information technology (IT) and non-IT systems. The critical
non-IT systems are generally in the areas of electric production,
distribution, transmission, gas distribution and communications. The
readiness of suppliers and vendor systems is also under review. The
project is under the direction of the Year 2000 Program Office, chaired by
the Vice President, Technology Operations and Corporate Y2K Officer. The
critical areas of operations are being addressed through a business
process review methodology. Each of KeySpan's critical business processes
is being reviewed to: identify and inventory sub-components; assess for
Year 2000 compliance; establish repair plans as necessary; and test in a
Year 2000 environment. The inventory phase for both the IT systems and
non-IT systems is complete. The total assessment phase is 100% complete
for the IT systems, and as of March 31, 1999, over 83% complete for non-IT
systems.
Hardware, software and embedded systems are being tested and certified to
be Year 2000 ready. As of March 31, 1999, repair was 84% complete and
testing was 39% complete. Non-IT systems were 62% repaired and 25% tested.
Components needed to support the critical business process and associated
business contingency plans are expected to be ready for the Year 2000 by
July 1, 1999.
Vendors and business partners needed to support the critical business
processes of KeySpan are also being reviewed for their Year 2000
readiness. At this time none of these vendors have indicated to KeySpan
that they will be materially affected by the Year 2000 issue.
<PAGE>
18
Risk Scenarios and Contingency Plans
KeySpan is presently in the process of analyzing each of the critical
business processes to identify possible Year 2000 risks. Each critical
business process will be certified by the responsible corporate officer as
being Year 2000 ready. However, the most reasonable likely worst case
scenarios are also being identified. Business operating procedures are
being reviewed to ensure that risks are minimized when entering the Year
2000 and other high risk dates. Contingency plans are being developed to
address possible failure points in each critical business process, and are
scheduled to be completed by July 1999. Testing of systems and contingency
plans will be performed internally, as well as with neighboring utilities
and business partners.
While KeySpan must plan for the following possible worst case scenarios,
management believes that these events are improbable:
Loss of generating flexibility:
KeySpan's generation subsidiary receives gas delivery from multiple
national and international pipelines and, therefore the effects of a loss
in any one pipeline can be mitigated through the use of other pipelines.
Complete loss of all the supply lines is not considered a reasonable
scenario. Nevertheless, the impact of the loss of any one pipeline is
dependent on temperature and vaporization rate. The partial loss of gas
supply will not affect KeySpan's ability to supply electricity since many
of the plants have the ability to operate on oil.
Loss of electric grid interconnections/KeySpan operated electric
distribution facilities:
Electric utilities are physically connected on a regional basis to manage
electric load. This is often referred to as the regional grid. Presently,
KeySpan is working, on behalf of LIPA with other regional utilities to
develop a coordinated operating plan. Should there be an instability in
the grid, KeySpan has the ability to remove LIPA and operate
independently.
Certain electric system components such as individual generating units,
transmission and distribution system facilities, and the electric energy
management system have the potential to be affected by the Year 2000
issue. KeySpan has inventoried electric system components and developed a
plan to certify mission critical process as Year 2000 ready. Contingency
plans are being developed, where appropriate, for loss of critical system
elements. KeySpan presently estimates that contingency plans regarding its
electric facilities should be completed by July 1999.
Loss of telecommunications:
KeySpan has a substantial dependency on many telecommunication systems and
services for both internal and external communication providers. External
communications with the public and the ability of customers to contact
KeySpan in cases of emergency response, are essential. KeySpan intends to
coordinate its emergency response efforts with the offices of emergency
management of the various local governments within its service territory.
Internally, there are a number of critical processes in both the gas and
electric operating areas that rely on external communication providers.
Contingency plans will address methods for manually monitoring these
functions and/or utilizing alternative communication methods. These
contingency plans, KeySpan presently estimates, should be finalized by
July 1999.
In addition to the above, KeySpan is also planning for the following
scenarios: short term reduction in system power generating capability;
limitation of fuel oil operations; reduction in quality of power output;
loss of automated meter reading; loss of ability to read customer meters,
<PAGE>
19
prepare bills and collect and process customer payments; and loss of the
purchasing/materials management system.
KeySpan believes that, with modifications to existing software and
conversions to new hardware and software, the Year 2000 issue will not
pose significant operational problems for its computer systems. However,
if such modifications and conversions are not made, or are not completed
on time, and contingency plans fail the Year 2000 issue could have a
material adverse impact on the operations of LIPA.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No material changes have occurred in this section as of March 31, 1999
from the information provided in LIPA's Annual Report on Form 10-K for the
nine months ended December 31, 1998, as filed on March 31, 1999.
<PAGE>
20
Part II. OTHER INFORMATION
Item 1. Legal proceedings
Shoreham Tax Matters
Through November 1992, Suffolk County and the following Suffolk County
political subdivisions (collectively, the "Suffolk Taxing Jurisdictions"),
the Town of Brookhaven, Shoreham-Wading River Central School District,
Wading River Fire District and the Shoreham-Wading River Library District
(which was succeeded by the North Shore Library District), levied and
received real estate taxes from LILCO on the Shoreham plant. When the
Authority acquired the Shoreham plant in February 1992, it was obligated
pursuant to the Act to make PILOTs on the Shoreham plant beginning in
December 1992. As part of the agreement between LILCO and the Authority
providing for the transfer of Shoreham to the Authority, LILCO agreed to
fund these payments. Prior to the Merger, LILCO charged rates sufficient
to make these payments to the Authority. Both LILCO and the Authority
contested the assessments, claiming the Shoreham plant was overassessed.
To date, the Authority has made such payments, in whole or in part,
pursuant to interim PILOT agreements and collected the costs thereof
pursuant to the PILOTs rider which is part of LIPA's rates.
On March 26, 1997, a judgment was entered in the Supreme Court, State of
New York, Suffolk County, on behalf of LILCO against the Suffolk Taxing
Jurisdictions ordering them to refund to LILCO property tax overpayments
(resulting from over-assessments of Shoreham) in an amount exceeding $868
million, including interest as of the date of the judgment. In addition,
the judgment provides for the payment of post-judgment interest (the
"Shoreham Property Tax Litigation"). The Court also determined that the
Shoreham plant had a value of nearly zero during the period the Authority
has owned Shoreham. This judgment was unanimously affirmed by the
Appellate Division of the State of New York on July 13, 1998. Certain
Suffolk Taxing Jurisdictions sought to appeal this judgment to the New
York State Court of Appeals. Their applications were unanimously denied by
the Appellate Division. New applications for leave to appeal were made to
the Court of Appeals. On January 19, 1999, the Court of Appeals denied the
motions. There is no further review in the New York State court system.
The Authority had proposed a settlement agreement with the Suffolk Taxing
Jurisdictions and Nassau County. The proposed settlement agreement would,
among other things, cause the Authority: (i) not to enforce the judgment
in favor of LILCO; and (ii) not to make any claim for a refund of what the
Authority believes is an overpayment of PILOTs, in exchange for the
payment by the Suffolk Taxing Jurisdictions to the Authority of $625
million.
On February 1, 1999, a lawsuit was filed in the Supreme Court of the State
of New York, Nassau County, by the Association for a Better Long Island
against the Authority and LIPA. This lawsuit seeks: (i) to require the
Authority to collect the full amount of the judgment obtained by the
Authority in the Shoreham Property Tax Litigation as well as certain
overpaid PILOTs; and (ii) to declare that the offer of the Authority to
settle the Shoreham Property Tax Litigation is void and legally
unenforceable. No assurance can be given as to the method, amount (if any)
or timing of any recovery by the Authority related to the Shoreham
Property Tax Litigation.
The proposed settlement agreement with the Suffolk Taxing Jurisdictions
was not accepted and on March 1, 1999, the Authority withdrew its offer to
settle the Shoreham Property Tax Litigation including claims related to
the Authority's overpayment of PILOTs on the Shoreham plant for
<PAGE>
21
$625 million and indicated that any settlement would have to be at a
higher amount. On that date, the Authority also demanded that the Suffolk
Taxing Jurisdictions pay refunds of real estate taxes in the amount of
approximately $784 million consisting of: (i) refunds and interest due as
of the entry of the judgment on March 26, 1997, for the period from and
after January 15, 1987, (the effective date of the Act), of approximately
$675 million; and (ii) accrued post-judgment interest in the amount of
approximately $109 million. Post-judgment interest will continue to accrue
until the judgment is satisfied.
On September 15, 1998, Suffolk County filed an action against the
Authority in the Supreme Court of the State of New York, Suffolk County
seeking to enjoin the Authority from recovering tax refunds based upon the
over-assessment of the Shoreham nuclear plant. The action claims that the
Authority does not have the right to recover property taxes previously
assessed against LILCO for tax years 1984-1985 through 1991-1992. On April
14, 1999, a judgment was entered ordering that the Authority shall
discontinue and abandon all proceedings which seek the repayment of all or
part of the taxes assessed against the Shoreham plant, and enjoining the
Authority from enforcing any judgment for refund of taxes paid on the
Shoreham plant. The Authority has appealed this decision to the Appellate
Division, Second Department. Oral arguments have been scheduled for June
21, 1999. The Authority does not believe that an adverse decision in this
litigation will have a material adverse effect on the Authority's or
LIPA's financial condition. Further, the court stated that under a ruling
of the State Court of Appeals, the Authority is not prohibited from
seeking refunds of PILOTs paid on over-assessments of the Shoreham plant.
On May 10, 1999, Suffolk County filed an action against the Authority in
the Supreme Court of the State of New York, Suffolk County seeking, among
other things, to enjoin the Authority from implementing or collecting a
bifurcated rate for electric service and directing the Authority to refund
monies already collected from Suffolk County ratepayers as a result of the
implementation of the proposed Shoreham Settlement Agreement. The
Authority does not believe that an adverse decision in this litigation
will have a material adverse effect on the Authority's or LIPA's financial
condition.
The New York State Court of Appeals in a separate case has ruled that the
Act does not prohibit the Authority from recovering overpayments of PILOTs
plus interest based upon inflated assessed valuations of Shoreham. The
Authority has made PILOTs of approximately $345 million which it believes
were based on such inflated assessed valuations. On February 24, 1999, the
Authority filed an action against the Suffolk Taxing Jurisdictions in the
Supreme Court of the State of New York, Nassau County seeking a judgment
in an amount equal to the total amount of PILOTs overpaid by the
Authority, plus interest.
On March 23, 1999, the Shoreham Wading River Central School District filed
an action against the Authority in the Supreme Court of the State of New
York, County of Nassau seeking an order directing the Authority to pay
approximately $6.4 million of PILOTs which the plaintiff alleges are due
and owing and approximately $24.6 million of PILOTs which the plaintiff
alleges is the cumulative deficiency as of June 1, 1998. The Authority
does not believe that an adverse decision in this litigation will have a
material adverse effect on the Authority's or LIPA's financial condition.
<PAGE>
22
Item 2. Changes in securities and use of proceeds
None
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security holders
None
Item 5. Other information
None
Item 6. Exhibits and reports on form 8-k
(A) Exhibits
27 Financial Data Schedule.
(B) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1999.
<PAGE>
23
SIGNATURE
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.
Date: May 17, 1999 LONG ISLAND LIGHTING COMPANY d/b/a LIPA
(Registrant)
/s/David P. Warren
--------------------------
David P. Warren
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Income, Balance Sheet and Statement of Cash Flows, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,071,481
<OTHER-PROPERTY-AND-INVEST> 19,606
<TOTAL-CURRENT-ASSETS> 613,921
<TOTAL-DEFERRED-CHARGES> 84,815
<OTHER-ASSETS> 4,718,590
<TOTAL-ASSETS> 7,508,413
<COMMON> 0
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<RETAINED-EARNINGS> (117,936)
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0
0
<LONG-TERM-DEBT-NET> 645,000
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 278,871
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<GROSS-OPERATING-REVENUE> 475,608
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 435,457
<TOTAL-OPERATING-EXPENSES> 435,457
<OPERATING-INCOME-LOSS> 40,151
<OTHER-INCOME-NET> 971
<INCOME-BEFORE-INTEREST-EXPEN> 41,122
<TOTAL-INTEREST-EXPENSE> 79,077
<NET-INCOME> (37,955)
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
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