SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
DATE OF REPORT - JANUARY 4, 1995
NIAGARA MOHAWK POWER CORPORATION
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(Exact name of registrant as specified in its charter)
State of New York 15-0265555
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Commission file Number 1-2987
300 Erie Boulevard West Syracuse, New York 13202
(Address of principal executive offices) (zip code)
(315) 474-1511
Registrant's telephone number, including area code<PAGE>
Item 5. Other Events
1. Rate Case Status
As discussed in the Form 10-Q for the quarterly period ended
September 30, 1994, on July 29, 1994, the Company announced
an early retirement program (VERP) and a voluntary
separation program (the Programs) to achieve substantial
reductions in its staffing levels in an effort to bring the
Company's staffing levels and work practices more into line
with other peer group utilities and become more competitive
in its cost structure. On August 30, 1994, union employees
approved amendments to the current labor agreement which
offered union employees the Programs in exchange for a
negotiated package of work rule changes.
Elections under the Programs became final on October 26,
1994 and 1381 employees have elected the early retirement
and voluntary separation program. Most of the participants
terminated their employment as of October 31, 1994. The
results of the VERP did not meet management's expectations,
and some layoffs have and will continue to occur in an
effort to reach a level of approximately 8750 regular
employees during 1995. The 1995 labor cost savings
associated with achieving this level of employees are
approximately $88.6 million. The estimated cost of the
Programs, including severance payments for employees subject
to layoff, is estimated at approximately $206 million. Most
of the cost will be paid from pension fund assets over time,
thereby limiting the immediate cash impact to the Company.
The cash cost will be approximately $17.3 million, primarily
in the first quarter of 1995. The cost of the Programs is
greater than previous estimates primarily because there was
a higher number of younger participants electing the VERP
than originally assumed.
In a filing with the PSC on December 23, 1994, the Company
proposed to update its rate request for 1995 to reflect the
labor and labor-related savings in operating costs as a
result of the Programs. The savings are expected to amount
to approximately $60 million, of which $50 million is the
labor allocable to electric and gas expense (the remaining
savings, generally allocable to construction, should allow
the Company to achieve its construction spending plans for
1995, which have been reduced from prior forecasts). The
Company also proposed to absorb the cost of the Programs
that is allocable to electric customers [approximately $195
million ($.89 per share) before any allocation to cotenant
and other ventures]. The Company is seeking recovery of the
portion of the costs allocable to gas customers over a five
year period beginning in 1995. In making these proposals,
the Company considered, among other things, the impact on
future rates of deferring and recovering these costs. The
PSC Staff has proposed to defer all of the costs and savings<PAGE>
resulting from the programs in 1995 to be used as an offset
against future transition costs (see Management's Discussion
and Analysis of Financial Condition and Results of
Operations, "1995 Five-Year Rate Plan Filing" in the
Company's Form 10-Q for the quarterly period ended September
30, 1994, for a discussion of PSC Staff's rate case
proposals). Therefore, the Company can provide no assurance
that its proposals will be accepted by the PSC.
With the filing, the Company updated its rate request and
resultant total bill impact for 1995. The Company is now
requesting an increase in 1995 electric revenues of
approximately $89 million (2.8%), which reflects the delay
in implementing new rates, and an increase in 1995 gas
revenues of $20.6 million (3.4%). This compares favorably
with the electric bill impact of approximately 4.4% and gas
revenue increase of 4.1% anticipated in its original filing.
The 1995 and multi-year phases of the rate proceeding (see
Management's Discussion and Analysis of Financial Condition
and Results of Operations, "1995 Five-Year Rate Plan Filing"
in the Company's Form 10-Q for the quarterly period ended
September 30, 1994) have been separated into two distinct
phases. With respect to 1995 rates, an Administrative Law
Judge Recommended Decision is expected to be issued on
January 20, 1995, with temporary gas rates to be effective
on or about that date. A PSC decision on 1995 rates is not
expected until the end of April 1995 and new electric rates
would be implemented about that time along with any final
adjustments to gas rates. A schedule for the multi-year
phase of the proceeding has not been established, but is
expected to extend beyond the schedule established for
determining 1995 rates.
2. Competition/Restructuring
A number of electric utilities have recently announced
consideration of plans to organize their operations so that
generation and power supply activities are conducted by a
separate entity within the corporate group from the entity
which provides transmission and distribution services to the
utility's customers. The Company is also studying such a
division of function for its own operations, in part because
of suggestions by New York governmental officials that power
supply should be separated from transmission and
distribution functions and in part as a means of dealing
with issues related to unregulated generator contracts.
This possible restructuring is one of a number of options
currently being considered by the Company. No assurances
can be given as to whether, when or on what terms any
potential transaction of the type described above may
actually occur, or as to the ultimate effect thereof on the
financial condition or competitive position of the Company.
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NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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.
NIAGARA MOHAWK POWER CORPORATION
(Registrant)
Date: January 4, 1995 By /s/ Steven W. Tasker
Steven W. Tasker
Vice President-Controller and
Principal Accounting Officer,
in his respective capacities
as such<PAGE>
