SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
March 31, 1996
For the quarterly period ended. . . . . . . .. . . . . . . . . .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from. . . . . . . .to. . . . . . . . .
1-3103-2
Commission file number. . . . . . . . . . . .. . . . . . . . . .
New York State Electric & Gas Corporation
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Exact name of registrant as specified in its charter)
New York 15-0398550
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 3287, Ithaca, New York 14852-3287
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Address of principal executive offices) (Zip Code)
607 347-4131
Registrant's telephone number, including area code . . . . . . .
N/A
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
Former name, former address and former fiscal year, if changed
since last report.
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 number of shares of common stock (par value $6.66 2/3
per share) outstanding as of April 30, 1996 was 71,502,827.
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Financial Statements . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(a) Liquidity and Capital Resources . . . . . 6
(b) Results of Operations . . . . . . . . . . 12
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. . . . . . . . . . . . . . . . . 16
(b) Report on Form 8-K. . . . . . . . . . . . 16
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
New York State Electric & Gas Corporation
Consolidated Statements of Income - (Unaudited)
(Thousands, except per share amounts)
Periods Ended March 31 Three Months
1996 1995
Operating Revenues
Electric . . . . . . . . . . . . . . . . $472,352 $450,001
Natural gas. . . . . . . . . . . . . . . 146,412 121,909
---------- ----------
Total Operating Revenues . . . . . . 618,764 571,910
---------- ----------
Operating Expenses
Fuel used in electric generation . . . . 59,581 63,505
Electricity purchased. . . . . . . . . . 90,626 79,662
Natural gas purchased. . . . . . . . . . 65,751 67,351
Other operating expenses . . . . . . . . 76,123 78,362
Maintenance. . . . . . . . . . . . . . . 25,116 23,954
Depreciation and amortization. . . . . . 47,091 46,026
Federal income taxes . . . . . . . . . . 61,890 46,567
Other taxes. . . . . . . . . . . . . . . 58,123 55,727
---------- ----------
Total Operating Expenses. . . . . . . 484,301 461,154
---------- ----------
Operating Income. . . . . . . . . . . . . 134,463 110,756
Other Income and Deductions . . . . . . . (3,675) (1,372)
---------- ----------
Income Before Interest Charges. . . . . . 130,788 109,384
---------- ----------
Interest Charges
Interest on long-term debt . . . . . . . 27,700 29,585
Other interest . . . . . . . . . . . . . 4,780 4,604
Allowance for borrowed funds used
during construction . . . . . . . . (368) (389)
---------- ----------
Interest Charges, Net. . . . . . . . . 32,112 33,800
---------- ----------
Net Income. . . . . . . . . . . . . . . . 98,676 75,584
Preferred Stock Dividends . . . . . . . . 2,333 4,759
---------- ----------
Earnings Available for Common Stock . . . $96,343 $70,825
========== ==========
Earnings Per Share. . . . . . . . . . . . $1.35 $.99
Dividends Per Share . . . . . . . . . . . $.35 $.35
Average Shares Outstanding. . . . . . . . 71,503 71,503
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Balance Sheets - (Unaudited)
(Thousands)
March 31, Dec. 31,
1996 1995
Assets
Utility Plant, at Original Cost
Electric . . . . . . . . . . . . . . . . . . . . . . .$5,106,740 $5,090,044
Natural gas. . . . . . . . . . . . . . . . . . . . . . 451,395 445,256
Common . . . . . . . . . . . . . . . . . . . . . . . . 132,932 140,686
---------- ----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,691,067 5,675,986
Less accumulated depreciation . . . . . . . . . . . . . 1,826,276 1,791,625
---------- ----------
Net Utility Plant in Service . . . . . . . . . . . . 3,864,791 3,884,361
Construction work in progress . . . . . . . . . . . . . 90,313 79,229
---------- ----------
Total Utility Plant. . . . . . . . . . . . . . . . . 3,955,104 3,963,590
Other Property and Investments, Net . . . . . . . . . . 104,648 99,633
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . . 6,206 11,433
Special deposits . . . . . . . . . . . . . . . . . . . 2,862 5,785
Accounts receivable, net . . . . . . . . . . . . . . . 244,779 195,834
Fuel, at average cost. . . . . . . . . . . . . . . . . 18,188 33,682
Materials and supplies, at average cost. . . . . . . . 43,900 44,809
Prepayments. . . . . . . . . . . . . . . . . . . . . . 51,300 31,371
Accumulated deferred federal income
tax benefits, net . . . . . . . . . . . . . . . . . 12,977 7,594
---------- ----------
Total Current Assets. . . . . . . . . . . . . . . . 380,212 330,508
Regulatory and Other Assets
Regulatory assets
Unfunded future federal income taxes. . . . . . . . 322,576 323,446
Unamortized debt expense. . . . . . . . . . . . . . 84,393 85,023
Demand-side management program costs. . . . . . . . 74,178 74,824
Other regulatory assets . . . . . . . . . . . . . . 202,532 206,736
---------- ----------
Total regulatory assets. . . . . . . . . . . . . . . . 683,679 690,029
Other assets . . . . . . . . . . . . . . . . . . . . . 18,504 30,571
---------- ----------
Total Regulatory and Other Assets . . . . . . . . . 702,183 720,600
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . .$5,142,147 $5,114,331
========== ==========
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Balance Sheets - (Unaudited)
(Thousands)
March 31, Dec. 31,
1996 1995
Capitalization and Liabilities
Capitalization
Common stock equity
Common stock . . . . . . . . . . . . . . . . . . $476,686 $476,686
Capital in excess of par value. . . . . . . . . . 842,656 842,442
Retained earnings . . . . . . . . . . . . . . . . 489,769 424,412
---------- ----------
Total common stock equity. . . . . . . . . . . . . . . 1,809,111 1,743,540
Preferred stock redeemable solely at the
option of the company . . . . . . . . . . . . . . . 140,500 140,500
Preferred stock subject to mandatory
redemption requirements . . . . . . . . . . . . . . 25,000 25,000
Long-term debt . . . . . . . . . . . . . . . . . . . . 1,520,651 1,581,448
---------- ----------
Total Capitalization. . . . . . . . . . . . . . . . 3,495,262 3,490,488
Current Liabilities
Current portion of long-term debt. . . . . . . . . . . 74,277 37,003
Current portion of preferred stock . . . . . . . . . . - 100,000
Commercial paper . . . . . . . . . . . . . . . . . . . 68,300 28,620
Accounts payable and accrued liabilities . . . . . . . 107,851 117,637
Interest accrued . . . . . . . . . . . . . . . . . . . 37,560 24,093
Taxes accrued. . . . . . . . . . . . . . . . . . . . . 81,053 22,231
Other. . . . . . . . . . . . . . . . . . . . . . . . . 47,000 68,027
---------- ----------
Total Current Liabilities . . . . . . . . . . . . . 416,041 397,611
Regulatory and Other Liabilities
Regulatory liabilities:
Deferred income taxes - unfunded future federal
income taxes. . . . . . . . . . . . . . . . . . . . 128,114 128,643
Deferred income taxes . . . . . . . . . . . . . . . . 106,855 108,605
Other regulatory liabilities. . . . . . . . . . . . . 56,126 56,729
---------- ----------
Total regulatory liabilities. . . . . . . . . . . . 291,095 293,977
Other liabilities
Accumulated deferred investment tax credit. . . . . . 124,482 126,032
Deferred income taxes - other . . . . . . . . . . . . 627,108 617,452
Other postretirement benefits . . . . . . . . . . . . 78,542 75,683
Liability for environmental restoration . . . . . . . 31,800 31,800
Other . . . . . . . . . . . . . . . . . . . . . . . . 77,817 81,288
---------- ----------
Total other liabilities . . . . . . . . . . . . . . 939,749 932,255
Total Regulatory and Other Liabilities. . . . . . . 1,230,844 1,226,232
Commitments and Contingencies . . . . . . . . . . . . . - -
---------- ----------
Total Capitalization and Liabilities. . . . . . . .$5,142,147 $5,114,331
========== ==========
The notes on page 6 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Statements of Cash Flows - (Unaudited)
(Thousands)
Periods Ended March 31 Three Months
1996 1995
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . $98,676 $75,584
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . 47,091 46,026
Deferred fuel and purchased gas. . . . . . . . . 55 19,049
Federal income taxes and investment tax credits
deferred, net. . . . . . . . . . . . . . . . . 581 6,821
Changes in current operating assets and liabilities:
Accounts receivable excluding accounts
receivable sold. . . . . . . . . . . . . . . . (48,945) (10,911)
Prepayments. . . . . . . . . . . . . . . . . . . (19,929) (18,640)
Inventory. . . . . . . . . . . . . . . . . . . . 16,403 22,082
Accounts payable and accrued liabilities . . . . (9,786) (19,803)
Taxes accrued. . . . . . . . . . . . . . . . . . 58,822 40,225
Interest accrued . . . . . . . . . . . . . . . . 13,467 12,992
Other, net . . . . . . . . . . . . . . . . . . . . 1,518 (15,348)
------- -------
Net Cash Provided by Operating Activities . . . 157,953 158,077
------- -------
Investing Activities
Utility plant capital expenditures . . . . . . . . (45,966) (34,380)
Proceeds received from governmental and
other sources. . . . . . . . . . . . . . . . . . 31 3,400
Expenditures for other property and investments. . (552) (1,184)
Funds restricted for capital expenditures. . . . . - 1,324
------- -------
Net Cash Used in Investing Activities . . . . . (46,487) (30,840)
------- -------
Financing Activities
Issuance of pollution control notes. . . . . . . . - 37,000
Repayments of preferred stock and first mortgage
bonds, including premiums. . . . . . . . . . . . (128,960) (60,000)
Long-term notes, net . . . . . . . . . . . . . . . 2,234 (2,258)
Commercial paper, net. . . . . . . . . . . . . . . 39,680 (83,100)
Dividends on common and preferred stock. . . . . . (29,647) (29,762)
------- -------
Net Cash Used in Financing Activities . . . . . (116,693) (138,120)
------- -------
Net Decrease in Cash and Cash Equivalents . . . . . (5,227) (10,883)
Cash and Cash Equivalents, Beginning of Period. . . 11,433 22,322
------- -------
Cash and Cash Equivalents, End of Period. . . . . . $6,206 $11,439
======= =======
Supplemental Disclosure of Cash Flows Information
Cash paid during the period
Interest, net of amounts capitalized. . . . . . . $15,362 $18,111
Income taxes. . . . . . . . . . . . . . . . . . . $1,770 -
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Statements of Retained Earnings - (Unaudited)
(Thousands)
Periods ended March 31 Three Months
1996 1995
Balance, beginning of period. . . . . . . . . . $424,412 $346,547
Add net income. . . . . . . . . . . . . . . . . 98,676 75,584
-------- --------
523,088 422,131
Deduct dividends on capital stock:
Preferred. . . . . . . . . . . . . . . . . . . 2,333 4,759
Common . . . . . . . . . . . . . . . . . . . . 25,026 25,026
-------- --------
27,359 29,785
Deduct premium paid on preferred stock redemption 5,960 -
-------- --------
Balance, end of period. . . . . . . . . . . . . $ 489,769 $392,346
======== ========
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
Note 1. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements
reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of New York State Electric &
Gas Corporation's (company) consolidated results for the interim
periods. All such adjustments are of a normal recurring nature.
The unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
contained in the company's annual report for the year ended
December 31, 1995. Due to the seasonal nature of the company's
operations, financial results for interim periods are not neces-
sarily indicative of trends for a twelve-month period.
Note 2. Reclassification
Certain items have been reclassified on the consolidated
financial statements to conform to the 1996 presentation.
Item 2. Management's discussion and analysis of
financial condition and results of operations
(a) Liquidity and Capital Resources
Competitive Conditions (See Form 10-K for fiscal year ended
December 31, 1995, Item 1(c)(x) - Competitive conditions)
The electric and natural gas utility landscape is changing
rapidly as energy markets become more competitive, complex and
dynamic. The company is positioning itself to take maximum
advantage of the industry's move to a competitive market.
Regulatory changes, accounting issues, customer satisfaction, the
economic climate and operational and financial flexibility will
all affect the company's competitive position. In addition,
diversified opportunities closely related to the company's core
business are receiving focused attention as the company
transforms itself into a successful competitor.
<PAGE>
Regulatory Changes
Regulatory issues being addressed by the Public Service
Commission of the State of New York (PSC), regulators in other
states and the Federal Energy Regulatory Commission (FERC) will
ultimately bring about dramatic changes in the electric industry.
The FERC recently issued two orders in its proceeding (Mega-NOPR)
relating to the development of competitive wholesale electric
markets and the PSC is expected to issue an order later this
month in its Competitive Opportunities Proceeding.
Mega-NOPR: On April 24, 1996, FERC issued Orders 888 and
889 adopting final rules to facilitate the development of
competitive wholesale electric markets by opening up transmission
services and to address the resulting stranded costs. The final
rules will require compliance filings 60 days after publication
in the Federal Register.
FERC Order 888 requires the company and other utilities with
whom the company engages in transmission and wholesale power
transactions to:
- file open access transmission tariffs under which they
would provide services, including ancillary services, to
third parties on a non-discriminatory basis; and
- charge themselves, in the context of each one's wholesale
power sales and purchases, the same rate for transmission
that it charges its wholesale transmission customers for
the use of its system.
FERC Order 888 allows utilities to recover legitimate,
prudent and verifiable stranded costs associated with a
municipality establishing its own electric system and newly
created wholesale customers. In these cases, FERC stated that it
is the primary forum for recovery. In contrast, the Order
provides that if costs are stranded by retail wheeling, utilities
should look to the states first for recovery of those costs.
FERC would become involved only if state regulators lack
authority under state law to provide for stranded cost recovery.
The Order states that FERC has exclusive jurisdiction over
the rates, terms and conditions of unbundled transmission in
interstate commerce used by retail customers that obtain retail
wheeling. States have jurisdiction over local distribution
facilities and over the service of delivering electric energy to
end users.
<PAGE>
Orders 888 and 889 do not require corporate unbundling or
divestiture of assets. Order 889, however, requires a functional
separation of wholesale power marketing and transmission
operation functions.
The requirements imposed by Orders 888 and 889 could provide
new markets for the company's low-cost excess generation and new
transmission business from suppliers who use the company's
transmission lines to send power to wholesale customers. On the
other hand, the requirements imposed by such Orders could
adversely affect the revenues received and payments made by the
company in connection with its transmission and wholesale power
transactions. The company is currently unable to estimate the
impact of Orders 888 and 889, if any, on revenues and payments.
Requests for rehearing are due by May 24, 1996. These
requests are a prerequisite to appeals to the U.S. Court of
Appeals. The company is considering, either individually or
jointly with other utilities, filing a request for rehearing on
certain issues.
Economic Climate
The company is continuing to focus on maintaining and
improving sales through its marketing efforts. The company has
developed flexible rates that allow it to negotiate long-term
contracts with eligible electric and natural gas customers. The
contracts may cover existing load, new load or both. To date, 30
major electric customers have signed contracts with terms ranging
from three to seven years. The contracts retain more than $58
million and are expected to add another $21 million in annual
revenues. Together the contracts will represent about 5% of the
company's total annual electric revenues.
<PAGE>
Natural Gas Industry
The PSC issued an Opinion and Order in December 1994 that
set forth the policy framework to guide the transition and
movement of New York's gas distribution industry to a more
competitive marketplace in the post-FERC Order 636 environment.
The PSC subsequently issued an Order on Reconsideration in August
1995 addressing petitions for rehearing or clarification of this
Opinion. In November 1995 the company, and other utilities, filed
restructuring tariffs in compliance with the PSC's Opinion and
Order on Reconsideration. Under the company's tariffs, approved
by PSC Order on March 28, 1996 with certain modifications,
residential and small businesses may buy natural gas from other
sources with the company providing delivery service for a
separate fee. The Order approving the company's tariffs is not
expected to have a material impact on the company's natural gas
operations. In addition, consistent with this Order, the company
is implementing new services to compete more effectively for
sales to larger, more sophisticated transportation customers.
On April 29, 1996, the company and other utilities filed a
petition for rehearing of certain of the determinations made in
the PSC's March 28, 1996 Order, including the determination
relating to deferring consideration of stranded cost issues until
1999 and providing that new customers have the same access to
pipeline capacity as existing customers.
Diversification (See Form 10-K for fiscal year ended December 31,
1995, Item 1(a) - Diversification)
NGE Enterprises, Inc. (NGE), a wholly owned subsidiary, owns
three unregulated businesses - EnerSoft Corporation (Enersoft),
XENERGY, Inc. (XENERGY) and NGE Funding Corporation (NGE
Funding).
Enersoft, formed in May 1993, develops and markets computer
software and real-time information and trading systems for
natural gas utilities, marketers and pipeline operators.
Enersoft, in an alliance with the New York Mercantile Exchange,
has developed Channel 4, a natural gas pipeline capacity trading
and information system for the North American market. The system
was available for use on August 11, 1995.
<PAGE>
Electronic trading of natural gas and pipeline capacity is
an emerging market. The electronic trading industry is
continuously developing new products and the nature of the
industry and competition create a risk that certain products may
not recover the cost of their development. Channel 4 is competing
against other electronic gas trading systems, most of which are
owned and operated by natural gas pipeline companies. The company
believes Channel 4 is well positioned in features and
functionality to compete with other trading systems that are
available. The Channel 4 system has been adding subscribers;
however, sales to date continue to be disappointing.
Enersoft has been incurring operating losses, and it is
anticipated that this will continue in 1996 and 1997. Market
acceptance of electronic gas trading and of the Channel 4 product
is key to improving Enersoft's financial performance.
XENERGY, acquired in June 1994, is an energy services,
information systems and energy-consulting company providing
energy services, conservation engineering and professional
services to utilities, governmental agencies and end-use energy
consumers. XENERGY's 1995 revenues were lower than expected due
to a soft utility demand-side management consulting market.
Revenues in 1996 are expected to be slightly less than 1995.
However, as a result of the reorganization mentioned below,
revenues are expected to begin to improve later this year.
In order to meet the changing demands of the marketplace,
XENERGY's management undertook a major reorganization in November
1995. This will better position XENERGY to take advantage of the
emerging opportunities in a competitive utility industry. In
addition to focusing on new revenue sources, actions were taken
to reduce corporate overhead costs, including a workforce
reduction.
To expand its presence in the end-use energy services
market, XENERGY, on April 29, 1996, purchased KENETECH Energy
Management, Inc. This acquisition provides XENERGY with a number
of performance based energy contracts, an expanded client base,
and a greater depth of experience in the performance based
contract area.
NGE formed NGE Funding on April 18, 1996. This financing
entity was created to provide debt and lease financing to end-use
energy customers as a value-added service in support of NGE's
efforts in the energy services business.
NGE is also exploring environmental and operating services
opportunities with both domestic and foreign strategic partners
in the United States and international markets.
<PAGE>
For the quarter ended March 31, 1996 and for the year ended
December 31, 1995, NGE incurred net losses of $3 million and $12
million, respectively. The company expects that NGE will
continue to incur operating losses at least through 1997. The
loss in 1996 is expected to be comparable to 1995 with a slight
improvement expected in 1997. As of April 30, 1996 and December
31, 1995, the Company had invested approximately $55 million and
$54 million, respectively, in NGE to finance its diversified
investments.
Investing Activities
Capital expenditures for the first quarter of 1996 totaled
$46 million, primarily for the purchase of facilities, extension
of service, necessary improvements at existing facilities and
environmental compliance requirements. The company estimates its
capital expenditures in 1996 will total $215 million and will be
financed entirely with internally generated funds.
Financing Activities
During the first quarter of 1996, the company redeemed $100
million of 8.95% preferred stock, at a premium, and redeemed $23
million of 9 7/8% Series first mortgage bonds due 2020 pursuant
to a sinking fund provision in its mortgage. The redemptions
were funded through commercial paper issuances.
In April 1996 the company redeemed the remaining $37 million
of its 8 5/8% Series first mortgage bonds due 2007, at a premium,
through the issuance of commercial paper.
<PAGE>
(b) Results of Operations
Three months ended March 31, 1996 compared with three months
ended March 31, 1995:
1996 1995 Change
(Thousands, except per share amounts)
Operating revenues $618,764 $571,910 8%
Earnings available for
common stock $96,343 $70,825 36%
Average shares outstanding 71,503 71,503 -
Earnings per share $1.35 $.99 36%
Dividends per share $.35 $.35 -
Earnings per share for the three months ended March 31,
1996, increased 36 cents compared to the prior year period.
Higher operating income contributed 33 cents to earnings per
share for the period. Higher natural gas and electric retail
sales, due to a combination of colder weather this year compared
to the mild winter last year, additional customers and success
with flexible rates increased earnings by 18 cents per share over
1995's first quarter. Earnings increased up to eight cents per
share due to eliminating the gas adjustment clause, which will
reverse later this year.
In addition to the 33 cent increase contributed by operating
income, a decrease in preferred stock dividends in 1996, due to
the January 1996 redemption of $100 million of 8.95% preferred
stock net of interest expense on commercial paper, contributed
two cents to earnings per share. Also, lower interest charges in
1996 added three cents to first quarter earnings. Those
increases were partially offset by a two cent charge to earnings
per share resulting from a decrease in other income and
deductions.
<PAGE>
Operating Results by Business Segment
Electric Three Months ended March 31,
1996 1995 Change
(Thousands)
Retail sales-kilowatt-
hours(kwh) 3,642,506 3,462,090 5%
Operating revenues $472,352 $450,001 5%
Operating expenses $372,101 $358,279 4%
Operating income $100,251 $91,722 9%
Electric retail sales increased 5% for the quarter ended
March 31, 1996, primarily as a result of the colder weather this
year compared to the mild winter a year ago and success with
flexible rates.
The $22 million increase in electric operating revenues for
the quarter is primarily due to higher sales, which contributed
$20 million to revenues. Changes in prices effective in August
1995 added another $4 million to revenues.
The increase of $14 million in electric operating expenses
for the three months is mainly attributable to an $11 million
increase in electricity purchased, primarily from NUGs, and a $7
million increase in federal income taxes, the result of higher
pre-tax book income. Those increases were partially offset by a
$4 million decrease in fuel used in electric generation (due to
reduced generation).
Natural Gas Three Months ended March 31,
1996 1995 Change
(Thousands)
Deliveries-
dekatherms(dth) 25,337 22,539 12%
Operating revenues $146,412 $121,909 20%
Operating expenses $112,200 $102,875 9%
Operating income $34,212 $19,034 80%
Natural gas deliveries increased 12% for the first quarter
of 1996 compared to 1995 due to a combination of additional
customers and colder weather this year compared to the mild
winter last year.
<PAGE>
For the three months ended March 31, 1996, natural gas
operating revenues rose $25 million, or 20%, compared to the same
quarter in 1995. Higher retail sales contributed $16 million to
revenues due to a combination of colder weather this year,
additional customers and the migration of larger volume customers
from transportation to retail sales as a result of market
conditions. Changes in prices effective in August 1995 added
another $6 million to revenues. Also, transportation of customer-
owned gas increased revenues by $2 million and wholesale sales
added $1 million.
The increase in natural gas operating expenses of $9 million
is primarily due to an $8 million increase in federal income
taxes, the result of higher pre-tax book income.
<PAGE>
PART II - OTHER INFORM ATION
Item 1. Legal Proceedings
(a) By letter dated April 20, 1992, the U.S. Environmental
Protection Agency (EPA) notified the company that it had been
identified as a potentially responsible party (PRP) at the Bern
Metals Removal Site (Bern Metals Site) in Buffalo, New York. Six
other PRPs have been identified by the EPA. The EPA has taken
response actions at the Bern Metals Site, including
investigation, excavation, and removal of drums and contaminated
soil, and implementation of measures to prevent surface water
run-off. The EPA had demanded that the company reimburse the EPA
Hazardous Substances Superfund $2 million in response costs
previously incurred by the EPA, with interest accruing from the
date of the demand. In September 1995 the company and the EPA
reached agreement on a consent order under which the company will
pay the sum of $10,000 in return for a covenant by the EPA not to
sue the company for the EPA's response costs, and to protect the
company from claims of contribution by other PRPs for such costs.
The order is awaiting final government approval.
In addition to the foregoing, the New York State Department
of Environmental Conservation (NYSDEC), by letter dated July 21,
1992, notified the company that it had been identified as a PRP
at the Bern Metals Site, which the NYSDEC defined to include an
adjacent property known as the Universal Iron & Metal Site (Bern
Metals/Universal Iron Site). The Bern Metals/Universal Iron Site
is listed on the New York State Registry. The NYSDEC also
identified eight other PRPs for the Bern Metals/Universal Iron
Site. The NYSDEC requested that the company, and the eight other
identified PRPs, enter into negotiations in which the company and
the other identified PRPs would agree to finance or conduct a
Remedial Investigation and Feasibility Study (RI/FS) designed to
determine what further remediation or removal actions may be
appropriate for the Bern Metals/Universal Iron Site. By letter
dated December 3, 1992, the company declined to negotiate with
NYSDEC to finance or conduct an RI/FS for the Bern
Metals/Universal Iron Site, because the company believes it was
only a very small contributor to the Bern Metals/Universal Iron
Site.
<PAGE>
An RI/FS was performed at the Bern Metals/Universal Iron
Site by certain of the other PRPs, and a proposed remedial action
plan identifying the preferred remedy and summarizing the other
alternatives considered has been issued for the site. The
NYSDEC, by letter dated March 22, 1996 to the company and six of
the other eight PRPs, inquired whether the company and such six
other PRPs were willing to conduct or finance the design and
implementation of the remedial alternative once it was selected.
The NYSDEC informed the company that if it declined to enter into
negotiations with it for such purpose, it might remediate the
Bern Metals/Universal Iron Site itself using the Hazardous Waste
Remedial Fund and would seek recovery of its expense from the
company. The costs of the remedial alternative will not be known
until the NYSDEC selects the final remedial alternative for the
Bern Metals/Universal Iron Site. By letter dated April 4, 1996,
the company offered to enter into such negotiations with NYSDEC
without admission of liability or responsibility even though the
company's contribution to the site, if any, was of a de minimis
nature, provided that (a) NYSDEC take action to send notices of
responsibility to a substantial number of other PRPs; and (b) a
final remedial alternative is adopted consistent with the RI/FS.
In addition, the company believes that it does not have any
connection with the Universal Iron & Metal Site.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index.
(b) Report on Form 8-K
No reports on Form 8-K were filed during the quarter for
which this report is filed.<PAGE>
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.
NEW YORK STATE ELECTRIC & GAS CORPORATION
(Registrant)
By Gary J. Turton
GARY J. TURTON
Vice President and Controller
(Chief Accounting Officer)
Date: May 9, 1996
<PAGE>
EXHIBIT INDEX
21 -- Subsidiaries.
27 -- Financial Data Schedule.
EXHIBIT 21
Subsidiaries
Somerset Railroad Corporation - Incorporated in the State of New
York.
NGE Enterprises, Inc. - Incorporated in the State of Delaware.
EnerSoft Corporation - Incorporated in the State of Delaware.
XENERGY, Inc. - Incorporated in the State of Massachusetts.
NGE Funding Corporation - Incorporated in the State of Delaware.
KENETECH Energy Management, Inc. - Incorporated in the State of
Massachusetts.
<TABLE> <S> <C>
<ARTICLE> UT EXHIBIT 27
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FINANCIAL STATEMENTS INCLUDED IN ITS FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996 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-31-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,955,104
<OTHER-PROPERTY-AND-INVEST> 104,648
<TOTAL-CURRENT-ASSETS> 380,212
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 702,183
<TOTAL-ASSETS> 5,142,147
<COMMON> 476,686
<CAPITAL-SURPLUS-PAID-IN> 842,656
<RETAINED-EARNINGS> 489,769
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,809,111
25,000
140,500
<LONG-TERM-DEBT-NET> 1,520,651
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 68,300
<LONG-TERM-DEBT-CURRENT-PORT> 74,277
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,504,308
<TOT-CAPITALIZATION-AND-LIAB> 5,142,147
<GROSS-OPERATING-REVENUE> 618,764
<INCOME-TAX-EXPENSE> 61,890
<OTHER-OPERATING-EXPENSES> 422,411
<TOTAL-OPERATING-EXPENSES> 484,301
<OPERATING-INCOME-LOSS> 134,463
<OTHER-INCOME-NET> (3,675)
<INCOME-BEFORE-INTEREST-EXPEN> 130,788
<TOTAL-INTEREST-EXPENSE> 32,112
<NET-INCOME> 98,676
2,333
<EARNINGS-AVAILABLE-FOR-COMM> 96,343
<COMMON-STOCK-DIVIDENDS> 25,026
<TOTAL-INTEREST-ON-BONDS> 27,700
<CASH-FLOW-OPERATIONS> 157,953
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
</TABLE>
