ORANGE & ROCKLAND UTILITIES INC, 10-Q, 1994-11-10

ORANGE & ROCKLAND UTILITIES INC
10-Q, 1994-11-10
ELECTRIC & OTHER SERVICES COMBINED

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UNITED STATES 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

For the quarterly period ended September 30, 1994

__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-4315

ORANGE AND ROCKLAND UTILITIES, INC.
(Exact name of registrant as specified in its charter)

New York 13-1727729
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

One Blue Hill Plaza, Pearl River, New York 10965
(Address of principal executive offices) (Zip Code)

(914) 352-6000
(Registrant's telephone number, including area code)

NONE
(Former name, former address and former fiscal year, if changed since
last report)

Indicate by check mark whether the registrant (l) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No

Indicate the number of shares outstanding of each of the issuer's
class of common stock, as of the close of the latest practicable date.

Common Stock - $5 Par Value 13,652,742 Shares
(Class) (Outstanding at October 31, 1994)<PAGE>

TABLE OF CONTENTS

Page
PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Consolidated Balance Sheets (Unaudited)
at September 30, 1994 and December 31, 1993 1

Consolidated Statements of Income (Unaudited)
for the three months and nine months ended
September 30, 1994 and September 30, 1993 3

Consolidated Cash Flow Statements (Unaudited)
for the nine months ended September 30, 1994 and
September 30, 1993 4

Notes to Consolidated Financial Statements 5

ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings 18

ITEM 6. Exhibits and Reports on Form 8-K 21

Signatures 22
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Assets
<CAPTION>
September 30, December 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Utility Plant:
Electric $ 945,818 $ 931,827
Gas 194,743 189,000
Common 54,292 52,525
Utility Plant in Service 1,194,853 1,173,352
Less accumulated depreciation 394,156 372,279
Net Utility Plant in Service 800,697 801,073
Construction work in progress 33,856 30,907
Net Utility Plant 834,553 831,980

Non-utility Property:
Non-utility property 35,356 35,049
Less accumulated depreciation, depletion and amortization 13,789 13,041
Net Non-utility Property 21,567 22,008

Current Assets:
Cash and cash equivalents 4,493 14,256
Temporary cash investments 1,433 1,447
Customer accounts receivable, less allowance for
uncollectible accounts of $2,011 and $2,026 58,113 60,289
Accrued utility revenue 13,621 23,017
Other accounts receivable, less allowance for
uncollectible accounts of $295 and $60 9,131 11,619
Gas marketing accounts receivable, less allowance
for uncollectible accounts of $349 and $513 42,158 49,206
Materials and supplies (at average cost) 39,609 39,062
Prepayments and other current assets 60,450 40,626
Total Current Assets 229,008 239,522

Deferred Debits:
Income tax recoverable in future rates 74,161 75,468
Extraordinary property loss - Sterling nuclear project 11,474 15,481
Deferred Order No. 636 transition costs 15,010 21,500
Deferred revenue taxes 17,058 17,588
Deferred pension and other postretirement benefits 12,413 7,277
Unamortized debt expense (amortized over
term of securities) 10,547 8,565
Other deferred debits 44,815 41,584
Total Deferred Debits 185,478 187,463

Total $1,270,606 $1,280,973

The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<TABLE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Capitalization and Liabilities
<CAPTION>
September 30, December 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Capitalization:
Common stock (13,649,050 and 13,532,055 shares
outstanding) $ 68,245 $ 67,660
Premium on capital stock 133,501 130,313
Capital stock expense (6,107) (6,108)
Retained earnings 189,824 184,179
Total Common Stock Equity 385,463 376,044
Non-redeemable preferred stock (428,443 shares
outstanding) 42,844 42,844
Non-redeemable cumulative preference stock (13,178
and 13,590 shares outstanding) 429 443
Total Non-Redeemable Stock 43,273 43,287
Redeemable preferred stock (41,580 shares outstanding) 4,158 4,158
Long-term debt 379,894 380,266
Total Capitalization 812,788 803,755

Non-current Liabilities:
Reserve for claims and damages 4,434 3,830
Postretirement benefits 13,619 6,719
Pension costs 38,298 34,275
Obligation under capital leases 407 793
Total Non-current Liabilities 56,758 45,617

Current Liabilities:
Lease obligations due within one year 508 479
Long-term debt due within one year 1,068 984
Preferred stock to be redeemed within one year 1,384 1,384
Notes payable - 1,200
Commercial paper 5,245 45,000
Accounts payable 69,074 57,359
Gas marketing accounts payable 48,860 54,247
Dividends payable 751 752
Customer deposits 5,762 5,807
Accrued Federal income and other taxes 7,944 9,586
Accrued interest 5,137 9,877
Refundable gas costs 8,752 8,967
Other current liabilities 27,332 17,114
Total Current Liabilities 181,817 212,756

Deferred Taxes and Other:
Deferred Federal income taxes 172,162 172,672
Deferred investment tax credits 17,378 18,004
Accrued Order No. 636 transition costs 15,010 21,500
Refundable fuel costs 12,442 4,405
Other deferred credits 2,251 2,264
Total Deferred Taxes and Other 219,243 218,845

Total $1,270,606 $1,280,973

The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $144,265 $146,726 $370,375 $370,285
Gas 12,411 14,008 119,646 109,129
Electric sales to other utilities 1,414 2,143 6,229 5,398
Total Utility Revenues 158,090 162,877 496,250 484,812
Diversified activities 81,124 74,671 265,374 231,879
Total Operating Revenues 239,214 237,548 761,624 716,691
Operating Expenses:
Operations:
Fuel used in electric production 22,278 24,473 68,845 55,122
Electricity purchased for resale 14,019 15,033 36,438 50,688
Gas purchased for resale 6,080 7,050 71,352 62,645
Non-utility gas marketing purchases 77,453 71,294 251,003 220,710
Other expenses of operation 38,191 37,688 113,330 110,435
Maintenance 10,980 11,294 31,452 31,203
Depreciation and amortization 9,173 8,682 26,682 25,718
Amortization of property losses 1,416 1,304 4,247 3,912
Taxes other than income taxes 24,344 24,414 73,367 70,521
Federal income taxes 7,097 8,585 21,400 19,934
Deferred Federal income taxes 2,598 1,310 438 805
Deferred investment tax credit (30) (33) (90) (163)
Total Operating Expenses 213,599 211,094 698,464 651,530
Income from Operations 25,615 26,454 63,160 65,161
Other Income and (Deductions):
Allowance for other funds used
during construction 32 7 89 23
Investigation costs (1,722) (1,019) (7,731) (1,019)
Other - net 71 (364) 582 (807)
Taxes other than income taxes (33) (19) (87) (71)
Federal income taxes 412 514 2,537 896
Deferred Federal income taxes 262 70 188 (16)
Deferred investment tax credit 179 197 536 592
Total Other Income and (Deductions) (799) (614) (3,886) (402)
Income Before Interest Charges 24,816 25,840 59,274 64,759
Interest Charges:
Interest on long-term debt 7,637 7,499 22,627 22,883
Other interest 589 796 2,155 2,238
Amortization of debt premium and expense-net 300 299 903 813
Allowance for borrowed funds used during
construction (92) (66) (241) (172)
Total Interest Charges 8,434 8,528 25,444 25,762
Net Income 16,382 17,312 33,830 38,997
Dividends on preferred and preference stock,
at required rates 812 841 2,438 2,523
Earnings applicable to common stock $ 15,570 $ 16,471 $ 31,392 $ 36,474

Avg. number of common shares outstanding (000's) 13,627 13,532 13,575 13,532

Earnings per average common share outstanding $ 1.14 $ 1.22 $ 2.31 $ 2.70

Dividends declared per common share outstanding $ - $ - $ 1.90 $ 1.86
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<TABLE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Cash Flow Statements (Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Cash Flow from Operations:
Net income $33,830 $38,997
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 26,674 25,812
Deferred Federal income taxes 797 801
Deferred investment tax credit (626) (755)
Deferred and refundable fuel and gas costs 7,822 2,234
Allowance for funds used during construction (330) (195)
Changes in certain current assets and liabilities:
Accounts and gas marketing accounts receivable,
net and accrued utility revenues 21,108 (5,651)
Materials and supplies (547) 481
Prepayments and other current assets (19,824) (13,423)
Operating and gas marketing accounts payable 6,328 16,941
Accrued Federal Income and other taxes (1,642) 2,535
Accrued interest (4,740) (1,223)
Other current liabilities 10,173 9,286
Other-net 7,088 996
Net Cash Provided from Operations 86,111 76,836

Cash Flow from Investing Activities:
Additions to plant (29,759) (34,645)
Allowance for funds used during construction 330 195
Temporary cash investments 14 (562)
Net Cash Used in Investing Activities (29,415) (35,012)

Cash Flow from Financing Activities:
Proceeds from:
Issuance of common stock 3,759 -
Issuance of long-term debt 55,000 75,000
Retirements of:
Long-term debt (55,721) (74,899)
Capital lease obligations (357) (330)
Net repayments under short-term debt
arrangements* (40,955) (22,500)
Dividends on preferred and common stock (28,184) (27,692)
Change in dividends payable (1) 1
Net Cash Used in Financing Activities (66,459) (50,420)
Net Change in Cash and Cash Equivalents (9,763) (8,596)
Cash and Cash Equivalents at Beginning of Period 14,256 15,378
Cash and Cash Equivalents at End of Period $ 4,493 $ 6,782

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $29,309 $25,942
Federal income taxes $15,229 $19,920

* Debt with maturities of 90 days or less.

The accompanying notes are an integral part of these statements.
</TABLE>

ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The consolidated balance sheet as of September 30, 1994, the consolidated
statements of income for the three month and nine month periods ended
September 30, 1994 and 1993, and the consolidated cash flow statements
for the nine month periods then ended have been prepared by Orange and
Rockland Utilities, Inc. (the "Company") without an audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position
and results of operations at September 30, 1994, and for all periods
presented, have been made. The amounts in the consolidated balance sheet
as of December 31, 1993 are from audited financial statements.

2. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
unaudited consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
December 31, 1993 Annual Report to Shareholders. The results of
operations for the period ended September 30, 1994 are not necessarily
indicative of the results of operations for the full year.

3. The consolidated financial statements include the accounts of the
Company, all subsidiaries and the Company's pro rata share of an
unincorporated joint venture. All significant intercompany balances and
transactions have been eliminated.

4. Contingencies at September 30, 1994 are substantially the same as the
contingencies described in the "Notes to Consolidated Financial
Statements" included in the Company's December 31, 1993 Annual Report to
Shareholders, which material is incorporated by reference to the
Company's December 31, 1993 Form 10-K Annual Report, except, during
June, 1994, the Company entered into an agreement with Harriman Energy
Partners, LTD. to terminate a long-term power purchase agreement for 57
Mw of capacity. The Company will request NYPSC approval of deferred
accounting of all associated termination costs pending recovery of those
costs in rates.

5. Certain amounts from prior years have been reclassified to conform with
the current year presentation.

6. Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 112 "Employers'
Accounting for Postretirement Benefits" which required the recording of a
liability of approximately $.8 million. The Company recorded an
offsetting regulatory asset and the adoption of Statement No. 112 did not
have a significant impact on the results of current operations.

7. On September 8, 1994 the Company adopted a formal plan to sell the radio
broadcasting properties operated by its wholly owned subsidiary, Saddle
River Holdings, Inc. The disposal date is anticipated to be June 1,
1995. The assets to be sold consist primarily of radio broadcast
licenses and operating plant and equipment. At this time the Company is
unable to determine the gain or loss which will result from the
disposition of the properties; however, management does not believe the
disposition will have a material effect on the Company's financial
statements. Further, no material operating income (loss) is expected to
result during the period from September 8, 1994 through the date of
disposal. Actual operating losses of the radio broadcasting properties,
which are included in Income from Operations in the Consolidated
Statement of Income, for the nine months ended September 30, 1994 and
1993 were ($370,892) and ($560,138), respectively.

8. Events Subsequent to Earnings Release

Legal Proceedings

As more fully described in Part II, Item 1. Legal Proceedings, the
Company has reached a tentative settlement, subject to court approval, of
two purported shareholder class action complaints against the Company
agreeing to create a settlement fund of $1.85 million to resolve all
claims in both cases. The Company's insurance carrier has agreed to
contribute $.7 million to the settlement fund. The net amount of $1.15
million will be charged to operations during the fourth quarter of 1994.

Regulatory Matters

On or about November 10, 1994, the Company will file with the New York
Public Service Commission ("NYPSC") a quantification of the rate making
effects of its ongoing investigation into prior financial improprieties.
The Company will be requesting the NYPSC to approve the refund of
approximately $3.2 million to its New York electric and gas customers.
This amount will be charged to operations in the fourth quarter of 1994.
The Company anticipates that the NYPSC will require that a proceeding be
established to provide the opportunity for other parties, including NYPSC
Staff who are conducting an independent investigation, to be heard on
this matter. The Company is unable to predict the final results of this
proceeding and what modifications, if any, will be made to the amount
proposed to be refunded.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations

Financial Condition:
Financial Performance

The Company's consolidated earnings per average common share outstanding for
the third quarter of 1994 were $1.14 as compared to $1.22 for the third
quarter of 1993. Fluctuations within the components of earnings are discussed
in the "Results of Operations". The average number of common shares
outstanding were 13.6 million for the third quarter of 1994 and 13.5 million
for the third quarter of 1993.

The current quarterly dividend rate of $.64 is equivalent to an annual
dividend rate of $2.56 per share. Dividends declared during the twelve months
ended September 30, 1994 amounted to $2.53 with a dividend payout ratio of
94.4% as compared to $2.48 a year ago with a payout ratio of 74.5%.

The return on average common equity for the twelve months ended
September 30, 1994 was 9.67%, as compared to 12.23% for the twelve months
ended September 30, 1993.

Capital Resources and Liquidity

At September 30, 1994, the Company and its utility subsidiaries had unsecured
bank lines of credit totaling $59 million. The Company may borrow under the
lines of credit through the issuance of promissory notes to the banks. The
Company, however, utilizes such lines of credit to fully support commercial
paper borrowings. The aggregate amount of borrowings through the issuance of
promissory notes and commercial paper cannot exceed the aggregate lines of
credit. In addition, non-utility lines of credit amounted to $15.0 million at
September 30, 1994, and the non-utility subsidiaries may undertake short-term
borrowings or make short-term investments. The average daily balance of
short-term borrowings for the nine months ended September 30, 1994 amounted to
$30.4 million at an effective interest rate of 4.2% as compared to $33.8
million at an effective interest rate of 3.3% for the same period of 1993.
The level of temporary cash investments for the nine months ended September
30, 1994 increased to an average daily balance of $8.0 million from $4.4
million for the same period of 1993.

Effective May 1, 1994 through October 31, 1994, all shares of common stock
purchased under the Company's Dividend Reinvestment and Stock Purchase Plan
("DRP") and the Employee Stock Purchase and Dividend Reinvestment Plan
("ESPP") with reinvested dividends and optional cash payments, were original
issue shares purchased from the Company. During that time, $3.8 million of
common equity was generated through the issuance of approximately 116,400
shares of common stock under the Company's DRP and ESPP. The New York Public
Service Commission ("NYPSC") has authorized the Company to issue up to 750,000
shares under the DRP and ESPP. At the option of the Company, however, common
stock used to satisfy the requirements of the DRP and ESPP may be purchased on
the open market. Effective November 1, 1994, common stock acquired under
the DRP and ESPP is being purchased on the open market.
<PAGE>
On August 31, 1994, the New York State Energy Research and Development
Authority ("NYSERDA") issued, on behalf of the Company, $55 million of
variable rate Pollution Control Refunding Revenue Bonds due October 1, 2014
(the "1994 Bonds"). The proceeds from the issuance of the 1994 Bonds were
used to refund, on October 1, 1994, the $55 million NYSERDA 10 1/4% Pollution
Control Revenue Bonds, 1984 Series, issued on behalf of the Company. In
anticipation of issuing the 1994 Bonds, the Company entered into a forward
interest rate swap agreement in 1992. Pursuant to the swap agreement, the
Company will pay interest at a fixed rate of 6.09% to a swap counter party and
will receive a variable rate of interest in return which is identical to the
variable rate payment made on the 1994 Bonds. The result is to effectively
establish a fixed rate of interest on the 1994 Bonds of 6.09%.

Rate Activities

New York

On September 1, 1993, the Company filed with the NYPSC, the first adjustment
to gas rates pursuant to a four-year settlement agreement ("Settlement
Agreement") that the Company and the NYPSC Staff entered into regarding an
application the Company filed with the NYPSC on January 16, 1992. The
Settlement Agreement, approved by the NYPSC on September 30, 1992, contains a
weather adjustment clause which automatically adjusts rates to offset the
effects of variations in weather from that assumed for setting rates. The
Settlement Agreement provides for an overall rate of return of 10.26%, with a
return on common equity of 12.15% including incentives of 50 basis points.
The increase in annual gas revenues as a result of the second-stage adjustment
is $3.8 million or 2.5%. Although the Settlement Agreement provided for an
effective date for this adjustment of January 1, 1994, the Company agreed to
extend the effective date until June 30, 1994, in connection with the ongoing
investigations of alleged financial improprieties. The effective date of this
adjustment was further extended until December 30, 1994 by NYPSC Order issued
June 3, 1994.

On September 1, 1994, the Company filed a plan to implement the second-stage
rate adjustment on January 1, 1995 and to postpone the next adjustment to gas
rates from January 1, 1995 to January 1, 1996. On September 19, 1994, the
Company subsequently requested the further postponement of the second-stage
gas rate adjustment until the Commission's investigation of alleged financial
improprieties is concluded. The purpose of the request was to combine the
result of the investigation and staged filings into a single rate change. On
November 4, 1994, the NYPSC issued an Order terminating the rate Settlement
Agreement effective December 31, 1994. The Order denies the Company the
opportunity for rate adjustments in the third and fourth years (1995 and 1996)
of the four-year settlement agreement. However, the Order authorizes the
Company to defer the second-stage rate adjustment and all previously
authorized reconciliations through the end of 1994, pending review and audit
by the NYPSC staff and the conclusion of the NYPSC's investigation of alleged
financial improprieties.

On January 29, 1993, the Company filed with the NYPSC for an increase in
electric rates of $17.1 million to be effective January 1, 1994. The rate
application proposed a three-year (1994-1996) extension of the Revenue
Decoupling Mechanism ("RDM") revenue reconciliation and operating cost
adjustment procedures. Continuation of the energy efficiency and customer
service incentive programs was also requested. In addition, the Company
sought approval to implement a new power plant efficiency incentive. The rate
increase request included a 12.25% return on equity.

As a result of ongoing investigations of alleged financial improprieties, the
NYPSC issued an Order on December 26, 1993 and related Orders which resulted
in (1) the postponement of the effective date of new electric rates from
January 1, 1994 until June 30, 1994; (2) the estabishment of up to $3.0
million ($2.25 million electric and $.75 million gas) of annual revenue as
temporary and subject to refund; and (3) a change in the Demand Side
Management ("DSM") incentive to allow the Company to retain 5% of net resource
savings and termination of the customer service incentive, effective
January 1, 1994.

By Order issued June 10, 1994, (the "June Order") the electric rate
application was terminated by the NYPSC. The June Order provides for the
continuation of the RDM revenue reconciliation and operating cost adjustment
procedures and the continuation of other provisions of the December 16, 1993
Order including up to $3.0 million of revenue made subject to refund, a 5% net
resource saving DSM incentive, and elimination of a customer service
incentive. The June Order also provides for a reduction in the RDM adjustment
factor effective July 1, 1994 reflecting the new recovery level required for
1993 net RDM deferrals. Finally, the June Order reduces the threshold for
measuring excess earnings from 12.0% to 10.6% effective retroactively to
January 1, 1994. All earnings in excess of 10.6% are to be deferred for
future disposition pending the conclusion of the ongoing investigations.

On September 19, 1994, the Company filed an appeal with the Supreme Court of
New York challenging the legality of the June Order. The appeal argues that
by changing the targeted return on common equity from 11.45% to 10.6% for the
first six months of 1994, the Commission engaged in retroactive ratemaking.
The appeal also argues that there is no evidence in the record to support a
determination that the cost of equity is 10.6%.

In addition, the NYPSC accepted the Company's proposal for a two-month
(November and December, 1993) temporary rate reduction of $115,000 per month
related to the misappropriation of funds. The Company voluntarily extended
the temporary rate reduction for a third month, through January 1994, bringing
the total amount refunded to New York ratepayers to $345,000. It is not
possible to predict at this time the extent of additional refunds that may be
required by the NYPSC, if any.

New Jersey

In January 1992, in response to Rockland Electric Company's ("RECO's")
March 18, 1991 petition requesting a $12.9 million increase in base rates, an
increase in electric rates of $5.1 million was granted by the New Jersey Board
of Regulatory Commissioners ("NJBRC"). (The NJBRC was renamed effective July
5, 1994 and is now the New Jersey Board of Public Utilities ("NJBPU")). This
increase includes a 12% rate of return on common equity. In addition, the
NJBRC initiated a Phase II proceeding in this case to address the effect of
the State of New Jersey's June 1, 1991 tax legislation. That legislation
changed the procedure under which certain taxes are collected from the State's
utilities. Previously, utilities had been subject to a 12.5% gross receipts
and franchise tax, which the utilities paid in lieu of property taxes;
however, the new tax is based upon the number of units of energy (kwh or
therms) delivered by a utility rather than revenues. The legislation also
requires that utilities accelerate payment to the State of the taxes
collected. As a result, RECO is required to make additional tax payments of
approximately $16 million during the period 1993-1994. On November 12, 1992,
the NJBRC issued a Decision and Order approving the recovery of the additional
tax over a ten-year period. A carrying charge of 7.5% on the unamortized
balance was also approved. The amount of unrecovered accelerated payments is
included in Deferred Revenue Taxes.

On February 26, 1993 the New Jersey Department of Public Advocate, Division of
Rate Counsel ("Rate Counsel") filed a Notice of Appeal from the NJBRC Decision
and Order with the Superior Court of New Jersey, Appellate Division, stating
as grounds for the appeal that the Decision is arbitrary and capricious and
would result in unjust and unreasonable rates. On March 21, 1994, the
Superior Court of New Jersey, Appellate Division, upheld the NJBRC Decision,
stating the NJBRC used proper rate-making principles.

Under an agreement with the NJBRC to return to customers any funds found to be
misappropriated as a result of an ongoing investigation of certain officers
and former employees, RECO has refunded to New Jersey ratepayers $94,100
through reductions in the applicable fuel adjustment charges in February and
March 1994. The Company has also pledged to return any other funds that are
discovered to have been misappropriated.

Pennsylvania

On November 19, 1992, Pike County Light & Power Company ("Pike") filed with
the Pennsylvania Public Utility Commission ("PPUC") for a $497,000 increase in
electric rates and a $36,300 increase in gas rates. The proposed rates apply
to all residential, commercial, industrial and municipal customers. During
April 1993, Pike and the other parties involved in this proceeding signed a
stipulated agreement providing for an increase of $270,000, or 6.6% for
electric rates and $12,000, or 1.5% for gas rates. On June 10, 1993, the PPUC
approved the electric rate settlement with rates effective June 11, 1993. On
June 24, 1993, the PPUC approved the gas rate settlement with rates effective
June 25, 1993. With regard to the ongoing investigation into the alleged
financial improprieties, Pike has pledged to return to ratepayers any funds
discovered to have been misappropriated.

Results of Operations:

QUARTERLY COMPARISON

Earnings per average common share outstanding for the third quarter of 1994
amounted to $1.14 per share as compared to $1.22 per share for the third
quarter of 1993. This decrease is attributed to the expenses associated with
the continuing investigation and litigation involving misappropriation of
company funds and lower utility revenues, which were partially offset by lower
utility operating expenses.<PAGE>
Electric and Gas Revenues

Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, decreased by $4.8 million in the third quarter of 1994 as
compared to the same quarter of 1993.

Electric operating revenues during the current quarter were $145.7 million as
compared to $148.9 million for the third quarter of 1993, a decrease of $3.2
million. The components of the changes in electric operating revenues for the
quarter ended September 30, 1994 as compared to the same quarter of 1993 are
as follows:

(Millions of Dollars)
Retail sales:
Base Revenues* $ (3.6)
Fuel cost recoveries (1.6)
Sales volume changes .2
Subtotal (5.0)
Sales for resale (.7)
Other operating revenue:
RDM revenue reconciliation
and DSM incentives .2
Other 2.3
Total $(3.2)

*Includes miscellaneous surcharges and revenue tax recoveries.

Actual total sales of electric energy to retail customers during the third
quarter of 1994 were 1,242,008 megawatt hours ("Mwh"), compared with 1,239,606
Mwh during the comparable period a year ago. This increase is the result of
an increase in the average number of customers when compared to the same
period a year ago. Before reflecting the effect of the RDM and the DSM
incentives in the Company's New York jurisdiction, electric revenues
associated with these sales were $145.2 million during the current quarter
compared to $150.2 million during the third quarter of 1993, a decrease of
$5.0 million.

New York electric revenue targets under the Company's RDM, as established in a
base rate case, net of fuel and taxes, amounted to $70.8 million for the third
quarter of 1994. In accordance with RDM procedures, deviations between
revenue targets and actual sales revenue are deferred and either recovered
from or returned to customers. The variation between the target revenue and
the Company's actual sales revenue of $74.0 million for the third quarter of
1994 was $3.2 million, and is recorded as a reduction to revenue. In the
third quarter of 1993, the Company recorded $4.0 million as a reduction to
revenue.

With regard to the DSM goal achievement incentives, the Company's performance
during the third quarter of 1994 allowed it to record $.2 million of incentive
related revenue. The incentive revenue recorded in the third quarter of 1993
was $.8 million.

The Company's performance during the remainder of 1994 will determine what, if
any, RDM revenue adjustments may be recorded.

Revenues from sales to other utilities in the third quarter of 1994 amounted
to $1.4 million, a decrease of $.7 million from a year ago. Sales to such
utilities totaled 64,500 Mwh, compared with 81,622 Mwh in the third quarter a
year ago. Because revenues from these sales are primarily a recovery of costs
in accordance with applicable tariff regulations, they have little impact on
the Company's annual earnings.

Gas operating revenues during the quarter were $12.4 million compared to $14.0
million for the third quarter of 1993, a decrease of $1.6 million. The
components of the changes in gas operating revenues for the quarter ended
September 30, 1994 as compared to the same quarter of 1993 are as follows:

(Millions of Dollars)

Sales to firm customers:
Base revenues* $ (.2)
Gas cost recoveries (.9)
Sales volume changes (.1)
Subtotal (1.2)
Sales to interruptible .2
Other operating revenue (.6)
Total $ (1.6)

* Includes miscellaneous surcharges and revenue tax recoveries.

Gas sales to firm customers during the third quarter of 1994 totaled 1,581
million cubic feet ("Mmcf"), compared with 1,605 Mmcf during the same period a
year ago. Gas revenues from firm customers were $11.2 million, compared with
$12.4 million in the third quarter of 1993.

Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas
Marketing

The cost of fuel used in the production of electricity and purchased
electricity costs decreased by $3.2 million during the third quarter of 1994
when compared to the same quarter of 1993. The components of the change are
as follows:

(Millions of Dollars)

Prices paid for fuel and purchased power $ (4.0)
Changes in kilowatt-hours generated
or purchased (.6)
Deferred fuel charge 1.4
Total $ (3.2)

The average cost per kilowatt-hour generated and purchased was 2.40 cents for
the quarter ended September 30, 1994 compared to 2.68 for the same quarter of
1993.

Purchased gas costs for utility operations were $6.1 million in the third
quarter of 1994 compared to $7.1 million in 1993, a decrease of $1.0 million.
<PAGE>
The components of the changes in purchased gas costs are as follows:

(Millions of Dollars)

Prices paid for gas supplies* $(3.4)
Gas sendout volume 1.4
Deferred fuel charges 1.0
Total $(1.0)

*Net of refunds received from gas suppliers.

The average cost per thousand cubic feet ("Mcf") purchased for the third
quarter of 1994 including transportation and storage costs, was $5.97 compared
to $7.57 in the third quarter of 1993.

Other Operating and Maintenance Expenses

The Company's total operating and maintenance expenses excluding fuel,
purchased power and gas purchased for resale for the third quarter, increased
by $.5 million compared with the same period in 1993. The increase in
expenses associated with utility operations accounted for $.1 million of this
increase.

The increase in other utility operation and maintenance expense is the result
of an increase in depreciation and amortization expense of $.5 million offset
by decreases in Federal income taxes of $.3 and other taxes of $.1 million.

Diversified Activities

The Company's diversified activities consist of gas marketing, gas production,
land development and communications businesses conducted by wholly owned non-
utility subsidiaries.

Revenues from diversified activities increased by $6.5 million for the third
quarter of 1994 as compared to the same quarter of 1993, as a result of the
gas marketing subsidiary's success in adding customers and increasing its
sales volume. These revenues were offset by increases in operating expenses
for all diversified activities of $6.6 million, which is the result of
increased gas purchases of $6.2 and increases in depreciation, taxes, and
other operating expenses of $.4 million.

Other Income, Deductions and Interest Charges - Net

Other income, net of interest charges and other deductions, decreased by $.1
million during the third quarter of 1994 when compared to the same quarter of
1993. This decrease is primarily the result of an increase in outside
professional and consulting services related to the investigations of alleged
financial improprieties. It is estimated that the Company will incur from $.5
million to $1.0 million of additional expenses in the fourth quarter of 1994
in connection with legal and regulatory proceedings related to these events.
<PAGE>

YEAR TO DATE COMPARISON

Earnings per average common share outstanding for the nine month period ended
September 30, 1994 amounted to $2.31 per share as compared to $2.70 for the
same period of 1993. This decrease is attributed to the expenses associated
with the continuing investigation and litigation involving misappropriation of
company funds and increased operating expenses, offset by increased revenues,
and the favorable results of the gas marketing subsidiary.

Electric and Gas Revenues

Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, increased by $11.4 million for the first nine months of 1994
as compared to the same period of 1993.

Electric operating revenues during the current period were $376.6 million as
compared to $375.7 million for the comparable period of 1993, an increase of
$.9 million. The components of the changes in electric operating revenues for
the nine months ended September 30, 1994 as compared to the same period in
1993 are as follows:

(Millions of Dollars)
Retail sales:
Base rates* $(2.1)
Fuel cost recoveries (2.0)
Sales volume changes 6.3
Subtotal 2.2
Sales for resale .8
Other operating revenues:
RDM revenue reconciliation
and DSM incentives (4.2)
Other 2.1
Total $ .9

*Includes miscellaneous surcharges and revenue tax recoveries.

Actual total sales of electric energy to retail customers during the first
nine months of 1994 were 3,392,027 Mwh, compared with 3,316,118 Mwh during the
comparable period a year ago. Before reflecting the effect of the RDM and the
DSM incentives in the Company's New York jurisdiction, electric revenue
associated with these sales was $376.1 million during the current period
compared to $373.9 million during the first nine months of 1993, an increase
of $2.2 million.

New York electric revenue targets under the Company's RDM, as established in a
base rate case, amounted to $175.5 million for the first nine months of 1994.
In accordance with RDM procedures, deviations between revenue targets and
actual sales revenue are deferred and either recovered from or returned to
customers. The variation between the target revenue and the Company's actual
sales revenue of $184.3 million for the first nine months of 1994 was $8.8
million, which is recorded as a reduction to revenue. For the first nine
months of 1993, the Company recorded a reduction in revenues of $6.6 million.

With regard to the DSM goal achievement incentives provided for in the RDM
agreement, the Company's performance during the first nine months of 1994
allowed it to record $.3 million of incentive related revenue compared to $2.3
million of incentive revenue recorded during the comparable period of 1993.

The Company's performance during the remainder of 1994 will determine what, if
any, additional RDM revenue adjustments may be recorded.

Revenues from sales to other utilities in the first nine months of 1994
amounted to $6.2 million compared to $5.4 million a year ago. Such sales
totaled 238,675 Mwh compared with 192,310 Mwh in the first nine months of
1993. Because revenues from these sales are primarily a recovery of costs in
accordance with applicable tariff regulations, they have little impact on the
Company's annual earnings.

Gas operating revenues during the first nine months of 1994 were $119.6
million compared to $109.1 million for the first nine months of 1993, an
increase of $10.5 million. The components of the changes in gas operating
revenues for the nine months ended September 30, 1994 as compared to the same
period in 1993 are as follows:

(Millions of Dollars)
Sales to firm customers:
Base rates* $(1.4)
Gas cost recoveries 9.1
Sales volume changes 2.3
Subtotal 10.0
Sales to interruptibles 1.5
Sales for resale (.1)
Other operating revenue (.9)
Total $10.5

* Includes miscellaneous surcharges and revenue tax recoveries.

Firm gas sales amounted to 14,937 Mmcf during the first nine months of 1994,
an increase of 5.2% from the 1993 level of 14,194 Mmcf. Gas revenues from
firm customers were $112.9 million in the current period compared to $102.9
million during the first nine months of 1993. Sales of interruptible gas for
the first nine months of 1994 amounted to 832 Mmcf, an increase of 346 Mmcf
from 1993. Revenues from these sales were $3.5 million as compared to $2.0
million for the same period of 1993.

Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas Marketing

The cost of fuel used in the production of electricity and purchased
electricity costs decreased by $.5 million for the first nine months of 1994
when compared to the $105.8 million recorded during the same period of 1993.
<PAGE>
The components of the changes in electric energy costs are as follows:

(Millions of Dollars)
Prices paid for fuel and
purchased power $(5.6)
Changes in kilowatt-hours
generated or purchased 3.7
Deferred fuel charge 1.4
Total $ (.5)

The average cost per kilowatt-hour generated and purchased was 2.55 cents in
the first nine months of 1994 and 2.69 cents for the same period of 1993.

Purchased gas costs for utility operations, excluding the cost of gas
purchased for the Company's diversified activities which is discussed in this
year-to-date comparison under the heading "Diversified Activities", were
$71.3 million for the first nine months of 1994 compared to $62.6 million for
the comparable period of 1993.

The components of the change are as follows:

(Millions of Dollars)

Prices paid for gas suppliers* $(1.0)
Gas sendout volume 6.0
Deferred fuel charges 3.7
Total $ 8.7

*Net of refunds received from gas suppliers

The average cost per Mcf purchased for the first nine months of 1994,
including transportation and storage costs, was $3.72 as compared to $3.77 for
the same period of 1993.

Other Operating and Maintenance Expenses

The Company's total operation and maintenance expenses excluding fuel,
purchased power and gas purchased for resale, increased by $8.5 million
compared to a year ago. Expenses from Diversified Activities accounted for
$2.2 million of this increase, as described below. The increase associated
with utility operations was $6.3 million. This increase is the result of a
recent NYPSC decision, which resulted in a non-recurring accounting adjustment
as well as a reduction in the amount of operating expenses reconciled in the
RDM which together amounted to $2.8 million and increases in taxes primarily
as a result of increased revenue taxes of $3.1 million. Other operating and
maintenance expense plus depreciation increased $.4 million when compared to
the same period of 1993.

Diversified Activities

Revenues from diversified activities increased by $33.5 million for the first
nine months of 1994 as compared to the same period of 1993. The increase is
primarily the result of increased sales from gas marketing activities. While
revenues from gas marketing activities were significantly higher during the
first nine months of 1994 as compared to the first nine months of 1993, an
extremely competitive market resulted in narrower profit margins during the
current period. These revenues were offset by increases in operating expenses
for all diversified activities of $32.5 million, which is the result of
increased gas purchases of $30.3 million and increases in depreciation, taxes
and other operating expenses of $2.2 million.

Other Income, Deductions and Interest Charges - Net

Other income, net of interest charges and other deductions, decreased by $3.1
million during the first nine months of 1994 when compared to the first nine
months of 1993. This decrease is primarily the result of the costs of the
investigation and litigation involving former officers and others, partially
offset by a decrease in interest expense which resulted from lower interest
rates and increases in other income. It is estimated that the Company will
incur from $.5 million to $1.0 million of additional expenses in the fourth
quarter of 1994 in connection with legal and regulatory proceedings related to
these events.<PAGE>
PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Investigation and Related Litigation

Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, for a
description of a Joint Cooperation Agreement dated November 3, 1993, executed
by the Rockland County (New York) District Attorney and the Company. As
stated therein, the Joint Cooperation Agreement provides, among other things,
that the Company shall establish, independent from the Company, the position
of "Inspector General", for a period of seven years, to be assigned the
authority and resources necessary, including staff, to investigate and report
on improper or unethical conduct by Company officers or employees, the cost of
such Inspector General to be borne by the shareholders of the Company and not
the ratepayers. The Joint Cooperation Agreement provides that the duration of
the Inspector General's appointment may be modified by the parties as
circumstances may warrant.

Pursuant to the terms of the Joint Cooperation Agreement, the Company and
Kroll Associates, Inc. ("Kroll") have entered into an Agreement dated as of
November 1, 1994 (the "IG Agreement"), pursuant to which the Company has
engaged, at its expense, for a period of up to seven years, the services of
Robert J. McGuire, President of Kroll, to act as Inspector General. A copy of
the IG Agreement is attached as an exhibit to this Form 10-Q Quarterly Report.

Reference is made to Part II, Item 1. Legal Proceedings, in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, for a
description of an action entitled James F. Smith v. Orange and Rockland
Utilities, Inc., which was brought in New York State Supreme Court, Rockland
County. On September 23, 1994, Judge Howard Miller issued a decision granting
the Company's motion for summary judgment thereby dismissing this complaint.

Reference is made to Part II, Item 1. Legal Proceedings, in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June
30, 1994, respectively, for a description of an action entitled Bernstein v.
Orange and Rockland Utilities, Inc. and James F. Smith, a purported
shareholder class action complaint against the Company and a former Chairman
of the Board of Directors and Chief Executive Officer of the Company which was
filed in the United States District Court, Southern District of New York, and
Gross v. Orange and Rockland Utilities, Inc., a purported shareholder class
action complaint, filed against the Company in the United States District
Court, Southern District of New York. On November 3, 1994, the Company signed
a tentative settlement in each of these actions, subject to Court approval.
The settlements have been filed with Judge Brieant who has been asked to
consolidate the two cases and certify class actions for settlement purposes
only. If the settlements are approved by the Court after members of the
classes are given notice and an opportunity to be heard, the Company will
create a settlement fund of $1.85 million to resolve all claims in both cases.
Additional information regarding these settlements is included under the
caption "Notes to Consolidated Financial Statements" in Part I, Item 1.
"Financial Statements" of this Quarterly Report on Form 10-Q.

Other Litigation

Reference is made to Part 2, Item 1. Legal Proceedings, in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June
30, 1994, respectively, for a description of an action entitled Carpenters
Local No. 964 Pension Fund v. DiGiacinto, et al., filed in the Supreme Court
of the State of New York, County of Rockland. As stated therein, the Company
is a third party defendant in this action which is based on an action entitled
Guarino et al. v. Carpenters Local No. 964 Pension Fund ("Guarino"), brought
in New York State Supreme Court, Rockland County by residents of a subdivision
who claim that the deterioration of wallboard materials buried at the
subdivision site has resulted in a continuous release of hydrogen sulfide gas
thereby rendering their homes unfit for dwelling. On August 8, 1994, the
Company was served with an additional third party summons and complaint naming
it as a one of 18 third party defendants in United States Gypsum Company v.
Broadhaver Realty Corp., et al., filed in the New York Supreme Court, County
of Rockland. This action is based on a public nuisance claim entitled State of
New York v. Carpenters Local No. 964 Pension Fund, et al., filed in the
Supreme Court of the State of New York, County of Rockland, which, in turn, is
based on the same facts underlying Guarino. At this time, the Company does
not believe that these actions will have a material effect on the business or
financial condition of the Company.

In September 1994, the Company agreed to contribute $6,500 to, and
participate in, together with other defendants in the foregoing actions, a
remediation effort at the subdivision site.

Regulatory Matters

Reference is made to Part II, Item 1. Legal Proceedings, in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June
30, 1994, respectively for a description of an electric rate case filed by the
Company with the NYPSC on January 29, 1993 (Case 93-E-0082). On September 19,
1994, the Company filed an appeal in New York State Supreme Court, Albany
County, in response to the NYPSC's June 10, 1994 Order setting the Company's
targeted rate of return on equity at 10.6% and making it retroactive to
January 1, 1994. The appeal contests the retroactivity of the NYPSC Order,
contending that during the first six months of 1994 the Company had operated
under a December 1993 NYPSC Order that permitted a target return on equity of
11.54%. Further information regarding Case 93-E-0082 is contained under the
caption "Rate Activities" in Part I, Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of this Quarterly
Report on Form 10-Q.

Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, for a
description of the New York State Department of Law and NYPSC Staff motions
regarding the Company's 1992 gas rate case (Case 92-G-0050). On November 4,
1994, the NYPSC issued an Order (the "November 4 Order") which affects the
second stage gas rate increase contained in the approved settlement of Case
92-G-0050. Further information regarding the November 4 Order is contained
under the caption "Rate Activities" in Part I, Item 2. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
this Quarterly Report on Form 10-Q.

<PAGE>
Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.26 Letter agreement dated September 29, 1994 between Orange and
Rockland Utilities, Inc. and R. Lee Haney regarding
participation in the Officers' Supplemental Retirement Plan of
Orange and Rockland Utilities, Inc.

10.27 Letter agreement dated September 29, 1994 between Orange and
Rockland Utilities, Inc. and D. Louis Peoples regarding
participation in the Officers' Supplemental Retirement Plan of
Orange and Rockland Utilities, Inc.

99.5 Agreement Between Orange and Rockland Utilities, Inc. and Kroll
Associates, Inc. dated as of November 1, 1994.

(b) Reports on Form 8-K

Reference is made to Item 6.(b), Reports on Form 8-K, in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, for a
description of a Current Report on Form 8-K dated July 14, 1994, filed by the
Company with the SEC on July 18, 1994.

On August 24, 1994, the Company filed with the SEC a Current Report on
Form 8-K dated August 22, 1994, disclosing the issuance of the Final Report of
the Special Committee of the Board of Directors of the Company, which Report
summarizes the findings and conclusions of the Special Committee's
investigation which commenced on August 20, 1993 following the arrest of a
former Vice President of the Company.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

ORANGE AND ROCKLAND UTILITIES, INC.
(Registrant)

Date: November 10, 1994 By TERRY L. DITTRICH
Terry L. Dittrich
Acting Controller

Date: November 10, 1994 By ROBERT J. McBENNETT
Robert J. McBennett
Treasurer

<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORANGE AND
ROCKLAND UTILITIES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 834,553
<OTHER-PROPERTY-AND-INVEST> 21,567
<TOTAL-CURRENT-ASSETS> 229,008
<TOTAL-DEFERRED-CHARGES> 185,478
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,270,606
<COMMON> 68,245
<CAPITAL-SURPLUS-PAID-IN> 127,394
<RETAINED-EARNINGS> 189,824
<TOTAL-COMMON-STOCKHOLDERS-EQ> 385,463
4,158
43,273
<LONG-TERM-DEBT-NET> 379,894
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 5,245
<LONG-TERM-DEBT-CURRENT-PORT> 1,068
1,384
<CAPITAL-LEASE-OBLIGATIONS> 407
<LEASES-CURRENT> 508
<OTHER-ITEMS-CAPITAL-AND-LIAB> 449,206
<TOT-CAPITALIZATION-AND-LIAB> 1,270,606
<GROSS-OPERATING-REVENUE> 761,624
<INCOME-TAX-EXPENSE> 21,748
<OTHER-OPERATING-EXPENSES> 676,716
<TOTAL-OPERATING-EXPENSES> 698,464
<OPERATING-INCOME-LOSS> 63,160
<OTHER-INCOME-NET> (3,886)
<INCOME-BEFORE-INTEREST-EXPEN> 59,274
<TOTAL-INTEREST-EXPENSE> 25,444
<NET-INCOME> 33,830
2,438
<EARNINGS-AVAILABLE-FOR-COMM> 31,392
<COMMON-STOCK-DIVIDENDS> 25,746
<TOTAL-INTEREST-ON-BONDS> 22,627
<CASH-FLOW-OPERATIONS> 86,111
<EPS-PRIMARY> 2.31
<EPS-DILUTED> 0

</TABLE>

September 29, 1994

Mr. R. Lee Haney
Vice President and
Chief Financial Officer
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, NY 10965

Dear Mr. Haney:

In connection with and as part of the consideration for your
retention by Orange and Rockland Utilities, Inc. and
election as Vice President and Chief Financial Officer, the
Board wishes to enter into this letter agreement concerning your
participation in the Officers' Supplemental Retirement Plan of
Orange and Rockland Utilities, Inc. (the "Plan").

Upon your election as an officer, you will become a
participant in the Plan and your participation will be
governed in all respects by the terms of the Plan, except to
the extent specificially provided otherwise as follows:

1. Upon your participation in the Plan, you shall
be treated as having satisfied the five years of
Service as an Officer requirement for purposes
of eligibility for a Vested Retirement Allowance,
other Retirement Allowances and Death Allowance
protection, but not for the purpose of the calcu-
lation of the amount of any such Allowance.

2. A year of Service shall be granted under the Plan
for the 1994 Plan Year regardless of the number of
hours of service otherwise required or completed.
<PAGE>
Mr. R. Lee Haney
Page 2
September 29, 1994

3. For each of the first five years of Service you
complete under the Plan (including 1994), you will
receive credit under the Plan for two years of
Service. Accordingly, at the end of 1994, you
will have credit for two years of Service under the
Plan. If you complete a year of Service under the
Plan in 1995, you will then have four years of
Service under the the Plan, and so on through 1998.
Thereafter, you will be credited with one year of
Service under the Plan for each year of Service you
complete under the Plan in accordance with its
terms.

4. Because at that time you will be considered to
have completed eleven years of Service under the
Plan, once you have actually completed six years
of Service under the Plan, in accordance with
Section 2(B) of the Plan, your compensation covered
by the Plan shall include a portion of your
corporate performance based annual award declared
under the Annual Incentive Plan provisions of
the Company's Incentive Compensation Plan.

5. In the event your Final Average Compensation must
be determined at such time when you have not been
an Officer covered by the Plan for 36 months, your
Final Average Compensation shall be computed by taking
the sum of your compensation (on a monthly basis)
covered by the Plan for each month you are an Officer
covered by the Plan and dividing the sum by that
number of months.
<PAGE>
Mr. R. Lee Haney
Page 3
September 29, 1994

In all other respects, the terms of the Plan shall be
applicable with respect to your participation and benefit
under the Plan.

Please indicate your acceptance of this letter agreement by
signing the extra copy provided and returning it to us.

/s/H. Kent Vanderhoef
_______________________
H. Kent Vanderhoef
Chairman of the Board

/s/Frank A. McDermott, Jr.
_______________________
Frank A. McDermott, Jr.
Chairman, Compensation
Committee of the Board

I accept the foregoing letter agreement concerning my

participation in the Officers' Supplemental Retirement Plan

of Orange and Rockland Utilities, Inc. and evidence my

acceptance by setting forth my signature this __6th__ day of

__October__, 1994.

WITNESS:

_/s/Krystyna M. Romas_______ __/s/R. Lee Haney____
R. Lee Haney

September 29, 1994

Mr. D. Louis Peoples
Vice Chairman and
Chief Executive Officer
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, NY 10965

Dear Mr. Peoples:

In connection with, and as part of the consideration for your retention by
Orange and Rockland Utilities, Inc. and election as Vice Chairman and Chief
Executive Officer, the Board wishes to enter into this letter agreement
concerning your participation in the Officers' Supplemental Retirement Plan of
Orange and Rockland Utilities, Inc. (the "Plan").

Upon your election as an officer, you will become a participant in the Plan
and your participation will be governed in all respects by the terms of the
Plan except to the extent specifically provided otherwise as follows:

1. Upon your participation in the Plan, you shall be treated
as having satisfied the five years of Service as an Officer
requirement for purposes of eligibility for a Vested
Retirement Allowance, other Retirement Allowances and
Death Allowance protection, but not for the purpose of
the calculation of the amount of any such Allowance.

2. A year of Service shall be granted under the Plan for
the 1994 Plan Year regardless of the number of hours
of service otherwise required or completed.

3. Your Benefit Formula Percentage under the Plan shall be
based upon a maximum of seventy percent. Upon com-
pletion of five or more years of Service under the Plan,
your Benefit Formula Percentage will be seventy percent.
During your first five years of Service under the Plan,
the 70% Benefit Formula Percentage shall be earned in
increments as follows:

Mr. D. Louis Peoples
Page 2
September 29, 1994

Total
Percent of Seventy Percent Benefit Formula
Maximum Earned Percentage Earned
Event During That Period At End of Period

Date of Election 10% 7%

Completion of:

One Year of Service 10% 14%
Second Year of Service 20% 28%
Third Year of Service 20% 42%
Fourth Year of Service 20% 56%
Fifth Year of Service 20% 70%

4. In accordance with Section 2(B) of the Plan, your compensation
covered by the Plan shall include a portion of your corporate
performance based annual award declared under the Annual Incentive
Plan provisions of the Company's Incentive Compensation Plan.
Upon completion of five or more years of Service under the
Plan, the portion of your annual award included shall be
equal to 100%. During your first five years of Service
under the Plan, the percentage of your annual award included
shall be determined as follows:

Percentage of Annual Award
Event Included

Date of Election 10%

Completion of:

First Year of Service 20%
Second Year of Service 40%
Third Year of Service 60%
Fourth Year of Service 80%
Fifth Year of Service 100%

5. In the event your Final Average Compensation must be determined at
such time when you have not been an Officer covered by the Plan for
36 months, your Final Average Compensation shall be computed by
taking the sum of your compensation (on a monthly basis) covered
by the Plan for each month you are an Officer covered by the Plan
and dividing the sum by that number of months.
Mr. D. Louis Peoples
Page 3
September 29, 1994

In all other respects, the terms of the Plan shall be applicable with respect
to your participation and benefit under the Plan.

Please indicate your acceptance of this letter agreement by signing the extra
copy provided and returning it to us.

ORANGE AND ROCKLAND UTILITIES, INC.

__/s/H. Kent Vanderhoef_____
H. Kent Vanderhoef
Chairman of the Board

_/s/Frank A. McDermott,Jr.____
Frank A. McDermott, Jr.
Chairman, Compensation
Committee of the Board

I accept the foregoing letter agreement concerning my participation

in the Officers' Supplemental Retirement Plan of Orange and Rockland

Utilities, Inc. and evidence my acceptance by setting forth my

signature this _6th_ Day of _October___, 1994.

WITNESS:

_/s/Krystyna M. Romas________ _/s/D. Louis Peoples_____
D. Louis Peoples

<PAGE>

AGREEMENT

This AGREEMENT dated as of November 1, 1994, between ORANGE AND
ROCKLAND UTILITIES, INC., a New York corporation (the "Corporation"), with
offices at One Blue Hill Plaza, Pearl River, New York 10965, and Kroll
Associates, Inc. (the "Contractor"), 900 Third Avenue, New York, N.Y. 10022
(hereinafter "the parties").

W I T N E S S E T H
WHEREAS, the Corporation has entered into a Joint Cooperation
Agreement ("JCA") dated November 3, 1993 with the Office of the District
Attorney, Rockland County ("DAO"), in which the Corporation agreed to engage
at its expense for a period of up to seven (7) years, the services of an
independent Inspector General;
WHEREAS, the DAO, the Corporation, and Contractor recognize that,
to utilize an Inspector General successfully in a private sector corporation
requires that the Inspector General not only be independent and able, but also
function in a cost-effective manner and without interfering with legitimate
managerial discretion and business operations;
WHEREAS, pursuant to the JCA, the choice of an Inspector General
was to be made by the Corporation from a list of reputable and qualified
candidates provided by the DAO, and the Corporation has chosen Robert J.
McGuire, President of Contractor from that list to act as Inspector General
(Robert J. McGuire being hereinafter referred to as the "IG"); and
WHEREAS, the Corporation and Contractor desire to set forth their
agreement for the performance of services by the Inspector General, more fully
described below;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the
parties agree as follows:
1. Work to be performed. The IG, in performing his duties under this
agreement, will assist the Corporation in developing the systems and standards
necessary to accomplish the purposes of the JCA in a cost effective manner and
as soon as practicable. The functions of the IG under this agreement will be
to work in cooperation with the management of the Corporation in order to:
(a) assure that the business practices of the Corporation remain free of
illegal and unethical conduct by and between officers and employees of the
corporation and outside vendors and entities with whom the Corporation
conducts business; (b) identify illegal and unethical conduct and report
possible violations of the law to the appropriate law enforcement and
regulatory agencies and subsequently provide necessary cooperation to those
agencies; (c) devise, implement and review programs to raise and maintain
ethical standards within the Corporation; (d) examine and evaluate the
Corporation's policies and practices regarding the contracting of services to
outside vendors, political contributions and reimbursement of expenses
incurred by Corporation officers and employees; (e) cooperate and interact, if
required, with regulatory bodies and officials concerning Contractor's
activities and findings (including conferences and testimony); (f) report in
writing at least every three months, and upon the completion or termination of
this Agreement, describing Contractor's activities and findings to the
Corporation's officers, its Board of Directors and relevant committees, the
DAO, and, if required, to the relevant public utility commissions; (g) include
in each annual report submitted Contractor's views with regard to the measures
which the Corporation has taken and still needs to take in order to fulfill
the purposes of the JCA in establishing an IG position.
2. Authority of Contractor. The IG is and shall remain independent
of the Corporation for the duration of this Agreement. The IG shall have the
right and the responsibility to examine issues within the scope of the IG's
assignment, to form his own judgments on such issues, and to report the facts
and his judgments to appropriate recipients of such information. In
performing these tasks, the IG shall have the following powers, among others,
as provided in the JCA:
a. access to all books, records, files, accounts and correspondence
of the corporation;
b. power to interview witnesses and seize documents and to take
testimony formally or informally, or otherwise in the discretion
of the Contractor, consistent with the due process and other
rights of affected individuals;
c. power to review and report with respect to certain business
operations of the organization including, but not limited to,
expenditures, vendor contracts and human resource decisions; and
d. power to review, report and recommend the removal from his or her
position any officer, supervisor, agent, representative or
employee.
It is agreed by the parties that the IG will have full authority over
his staff, but shall have no authority to hire, fire or determine the terms of
employment of any individual officer or employee of the Corporation other than
the IG's ability to review, report and recommend as enumerated above.
Additionally, to supplement the IG's authority to investigate and provide
meaningful access to employees, the Corporation agrees that no official or
employee may be disciplined, penalized, or in any way disadvantaged by the
Corporation for communicating information to the IG in a manner considered by
the IG to have been in good faith. A statement reflecting this policy shall
be published and made known to all employees.
In exercising his authority, the IG will not perform any managerial
function for the Corporation or interfere with the business judgments and
managerial discretion of Corporation officials. The IG will also accurately
state the views of the Corporation in any oral or written report made by the
IG and conveyed to persons outside the Corporation concerning any matter with
regard to which the IG and the Corporation may have a difference of views.
3. Facilities and Personnel. The Corporation will supply the IG
adequate office space, equipment, and personnel support to perform the work
contemplated in this Agreement. The Contractor acknowledges that the
Corporation has retained it to provide the services of Robert J. McGuire to
perform the role of IG and that his personal services are an essential part of
the agreed exchange for this contract. To the extent the IG needs to rely on
additional personnel in performing this Agreement, the IG shall endeavor to
the extent possible (consistent with the IG's obligations and independence) to
rely upon the Corporation's regular employees, agents, and professionals. The
Corporation agrees that the IG may routinely utilize the services of the non-
Corporation personnel reflected in Appendix A, and their services shall be
considered covered by the contract price. Where the IG concludes that,
because extraordinary services are required, the use of additional non-
Corporation employees, agents, or professionals is necessary, the IG shall so
notify the Corporation, specifying the reasons for his conclusion and the type
and number of non-Corporation personnel that the IG believes it is necessary
to retain. The Corporation and the IG shall discuss any questions each may
have with regard to any such proposal, and may seek the assistance of the DAO
in resolving any differences. Where the IG believes it is necessary to
utilize non-Corporation personnel or otherwise expend funds beyond the
contract price without previously notifying the Corporation due to an
overriding need for confidentiality, the IG will seek the prior approval of
the DAO for such actions and will notify the Corporation as soon as possible.
The Corporation will pay the reasonable and necessary costs associated with
the retention of non-Corporation personnel, when approved by the Corporation
or to the extent considered necessary by the DAO.
4. Compensation. The Corporation will pay Contractor, for all the
regular services contemplated in this Agreement, by the IG, the staff of
Contractor and any other non-Corporation personnel, the Sum of $250,000.00, to
be paid in twelve equal installments at the end of each month during the first
year and any subsequent annual renewal. The Corporation will not be
responsible for providing the IG or any of Contractor's staff or other non-
Corporation personnel with any form of employee benefit. The contract price
will cover all services contemplated in this Agreement, and all expenses
incurred by the IG, Contractor and the Contractor's staff associated with
such services. If additional, extraordinary services are required, or
reasonable and necessary expenses associated with such services are incurred,
Contractor will file claims for such services and/or expenses in accordance
with the Corporation's policies, as set forth in Appendix B of this Agreement.
Costs beyond the contract price shall be incurred on the basis of the
procedures described in paragraph 3 above.
5. Confidentiality. The IG and Contractor will treat all information
received from Corporation personnel, written or oral, as confidential. The IG
and Contractor will not disclose any such information to any person or entity
except as necessary to fulfill the IG's and Contractor's duties under this
Agreement. The IG and Contractor will seek to ensure that all materials
supplied by the IG to the DAO and other governmental authorities are accorded
the maximum degree of protection permitted by applicable law. See, e.g., N.Y.
Freedom of Information Law, N.Y. Pub. Off. Law Sections 84-90.
6. Policies of Employment. The IG and Contractor will at all times
in the performance of this Agreement comply with all federal, state and local
laws, rules and regulations with respect to labor relations, minimum wages and
hours or other matters relating to employment. Without limiting the
foregoing, the IG and Contractor will comply with the requirements of
Executive Orders 11246 and 11701, as amended, and any regulations thereunder,
and, specifically, the IG and Contractor will comply with the Equal Employment
Provisions set forth as Appendix C to this Agreement, except as the IG and
Contractor may indicate on such attachment an exemption from such provisions.
7. Independence of the IG. The IG and Contractor are independent
contractors and neither is an employee, subcontractor, agent or representative
of the Corporation, and each of the Contractor's employees to be engaged in
the performance of this Agreement, including the IG, shall be at all times an
employee of the Contractor and not an employee, agent or representative of the
Corporation.
<PAGE>
8. Duration.
a. This Agreement is for a one-year period, commencing on the
date of its complete execution but no sooner than November 1, 1994. It will
be extended automatically for up to six consecutive annual periods after the
first year, unless the Corporation and the DAO both agree to an earlier
termination date, in which case Contractor should be given no less than sixty
(60) days written notice of such earlier termination.
b. This Agreement may be terminated for cause at any time, on
30 days' written notice to Contractor from the Corporation, with the written
consent of the DAO.
c. Contractor agrees that any notice of termination for cause or
otherwise, received from the Corporation and duly consented to by the DAO, will
be final and not subject to any form of challenge by Contractor.
d. Contractor may terminate this Agreement on 30 days written
notice to the Corporation and the DAO without cause.
9. Disputes. Any controversy or claim arising out of or relating to
this Agreement will be settled by arbitration in New York City under the
Commercial Arbitration Rules of the American Arbitration Association, before a
single arbitrator. The arbitrator must render his or her decision within 30
days following selection. Judgment upon any award of the arbitrator may be
entered in any court having jurisdiction thereof.
10. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, as if all acts or
omissions related hereto occurred in such state.
11. Indemnification.
(a) To the fullest extent permitted by law, Contractor shall
indemnify and save harmless the Corporation (for purposes of this paragraph 11
and paragraph 12, the word "Corporation" shall be deemed to include its
officers, employees, representatives and agents) from all liability, losses,
damages, costs and expenses (including attorneys' fees), claims, actions,
demands, suits, judgments and settlements of any nature whatsoever resulting
from any actions by Contractor or any of its employees, including the IG,
constituting negligence, gross negligence, fraud, willful or unlawful conduct
during the performance of this Agreement or work performed hereunder,
including but not limited to any such liability, losses or claim for injury or
death to any person or damage to property.
(b) The provisions of this paragraph 11 shall survive Contractor's
completion of performance hereunder and any other termination of this
Agreement.
12. Insurance.
(a) Before commencing work under this Agreement, Contractor shall
procure and maintain at its own expense until the termination of this
Agreement, and for a longer time period as required below, the following
minimum insurance in forms and with insurance companies acceptable to the
Corporation:
(1) Workers' Compensation Insurance for statutory obligations
imposed by Workers' Compensation or Occupational Disease Laws, and
Employer's Liability Insurance with a minimum limit of $500,000. When
applicable, coverage shall include the United States Longshoreman's and
Harbor Workers' Compensation Act and the Jones Act.
(2) General Liability Insurance including Personal Injury, Broad
form Property Damage, Products/Completed Operations, Contractual
Liability and Contractor Protective Liability Insurance covering all
operations required to complete Contractor's work with minimum limits of
liability of $1,000,000 per occurrence.
(3) Automobile Liability Insurance, including coverage for all
owned, non-owned and hired automotive equipment used by Contractor in
the performance of the work with minimum limits of liability of
$1,000,000 per occurrence.
(4) Professional liability errors and omissions insurance with
minimum limits of liability of $1,000,000 per occurrence.
(b) If any of Contractor's work under this Agreement is subcontracted,
Contractor shall require each subcontractor to carry all insurance required
under this paragraph 12 and to submit acceptable Certificates of Insurance to
the Corporation prior to subcontractor's commencement of its work.
(c) For all insurance required hereunder, except Worker's
Compensation, professional liability errors and omissions, and Employers
Liability, the Corporation shall be named as an additional insured.
(d) All of the insurance required hereunder shall be primary to any or
all other insurance coverage and shall not contribute with similar insurance
in effect for the Corporation.
(e) All insurance where the Corporation is an additional insured must
contain provisions which state that the policy will respond to claims or suits
by the Corporation and Contractor or any other insured thereunder.
(f) All insurance required hereunder shall provide insurance for
occurrences during the performance of services by Contractor and all
subcontractors pursuant to this Agreement and for a period of two years after
termination of this Agreement. In the event that any insurance as required
herein is available only on a "claims-made" basis, such insurance shall
provide for a retroactive date not later than the commencement of the work
hereunder and such insurance shall be maintained by Contractor, with a
retroactive date not later than the retroactive date required above, for a
minimum period of five years after termination of this Agreement.
(g) All insurance required herein shall be issued by an insurer
licensed to do business in the States of New York and New Jersey and shall
have a Best's Rating of not less than "A" and a net surplus of not less than
$25,000,000.
(h) Contractor's insurance carrier shall notify the Corporation of any
material change in, or cancellation of, the insurance required hereunder at
least 30 days prior to the effective date of any such change or cancellation.
(i) Prior to commencement of work, Contractor shall provide, for the
Corporation's review and approval, a Certificate of Insurance verifying the
existence of insurance coverages in compliance with the requirements of this
paragraph 12, from insurance companies acceptable to the Corporation. Unless
otherwise specified, the Certificate of Insurance should be mailed to:

Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attention: General Counsel
13. Modification; Waiver.
(a) No modification of this Agreement shall be valid unless made
in writing and duly executed by the party to be bound by such modification.
(b) Waiver of the breach of any of the terms or conditions of
this Agreement shall not be deemed to constitute the waiver of any other
breach of the same or any other term or condition.
14. Assignment. Contractor shall not assign this personal-service
Agreement or any part thereof or interest therein, or any monies due or to
become due thereunder without the prior written consent of the Corporation,
and any such assignment without such consent shall be void. Any consent by
the Corporation, in its exclusive discretion, to any such assignment, shall
not in any event relieve Contractor from full responsibility and liability for
the due performance of all of the terms and conditions of this Agreement.
Furthermore, in the event such consent is given, Contractor shall remain fully
responsible to the Corporation for acts and omissions of Contractor's assignee
and Contractor shall save Corporation harmless from any and all losses and
expense caused thereby. In the event Robert J. McGuire becomes disassociated
with Kroll Associates, the parties agrees that at the request of the
Corporation they will take all necessary steps to enable Mr. McGuire to
continue his service as IG and to relieve Contractor of all its obligations
under this Agreement.
15. Notices.
(a) Except as otherwise agreed to in writing by the parties
hereto, any notice or other communication to either party hereto pursuant to
any provision of this Agreement shall be effective only if it is in writing
and if delivered personally or mailed postage prepaid, first class mail,
return receipt requested, prior to the expiration of any time limitation
governing the giving of the same:
If to the Corporation, addressed to:

Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attention: General Counsel
If to the Contractor, addressed to:

Robert J. McGuire, Esq.
Kroll Associates, Inc.
900 Third Avenue
New York, N.Y. 10022
(b) Each party may at any time or times change the place to
which such notices or other communications are to be addressed, on 30-days'
written notice to the other party.
(c) All such notices or other communications shall be deemed
given, if mailed, when mailed to the appropriate address provided above, or
when delivered personally to the party to receive such notice or other
communication, provided, however, if pursuant to any provision of this
Agreement, any response to any notice or other communication must be given
within a specified time period, such time period shall not begin to run until
the actual receipt of such notice or other communication by the party to
receive such notice or other communication.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

ORANGE AND ROCKLAND UTILITIES, INC.

By ___D. L. Peoples_______________

Title _Vice Chairman + CEO________

KROLL ASSOCIATES, INC.

By_Robert P. Connolly_____________

Title _Managing Director and General Counsel

ACCEPTED AND AGREED

_Robert J. McGuire___
Robert J. McGuire

APPENDIX A

1. Michael G. Cherkasky

2. James R. Murray

3. Accountants employed by
Kroll Associates, Inc.
who will be designated
from time to time

APPENDIX B

ORANGE AND ROCKLAND UTILITIES, INC.
AND SUBSIDIARIES
LAW FIRM BILLING PROCEDURES

A. The Firm will bill the Company at the beginning of each month
for services rendered and disbursements made in the previous month.
Each invoice shall contain the following information:

1. Title of each matter for which time or disbursements are
billed and the period covered by the bill.

2. Name of each person whose time is separately billed, such
person's billing rate and classification (i.e., partner,
associate, paralegal).

3. Total time (expressed in hours and fractions thereof) worked
each day by each person, by matter.

4. Brief narrative description of work performed each day by each
person.

5. Disbursements for each matter, each item to be listed
individually by date and organized by classification (e.g.,
duplicating, telecopying, postage, air express, etc.); billing
for disbursements will be in accordance with Attachment 1 -
Billing for Expenses.

6. Total time and fees for each matter billed for the period
(including a summary of total time and fees for each person
whose time is billed), total disbursements and total charges.

7. Year-to-date amounts billed for services and disbursements by
matter and for all matters in the aggregate; if the matter
extends over more than one calendar year, additionally the
cumulative total for services and disbursements since the
matter's inception.

8. Adjustments for fees and disbursements for discounted or
nonrecoverable items, capped fees or similarly negotiated
reduction.

9. In litigation matters, and in other matters as specified by
the Company, time and disbursements also shall be described
and billed by task (e.g., work on a particular motion, work on
interrogatories).<PAGE>
B. The Firm will specify the following items in its bills: time
shared with other clients; travel time; legal research and the subject
of the research; computer research time and computer charges (if any);
the subject of all meetings, conferences and telephone calls.

C. There will be no charge for word processing services, computer
time (other than computerized legal research) or other support services
except as part of authorized clerical overtime (see E below).

D. Transportation, lodging and meal charges are expected to be
reasonable. The Company will not pay for first class air travel.
Billing for expenses will be in accordance with Attachment 1 - Billing
for Expenses.

E. The Company expects that work by the Firm will ordinarily be
performed during the normal working day. Overtime should not be billed
unless the Company agrees in advance or there is an extraordinary
circumstance. When travel occurs on the Company's behalf, the Company
will compensate for time spent in transit at three quarters (3/4) the
applicable hourly rate per individual. However, if work is done for
other clients in transit, the Company will not reimburse for transit
time. If travel time is devoted to working for one or more clients in
addition to the Company, the Company should be billed only for the
proportionate time. Unless agreed to in advance, time away from home or
the office which is not in transit or spent performing legal services
will not be compensated.

F. Charges in excess of Proposal amounts will not be paid unless
the billing attorney is able to provide justification for such charges.
Charges will not be accepted for repetitive work, unnecessary internal
conferences, training or over-staffing. The Firm will not charge for
the negotiation or preparation of any agreement between the Company and
the Firm for services by the Firm, for the Firm's billings, for the
preparation of billing estimates or explanations of charges or for any
work of a similar nature.

G. In litigation matters, charges for more than one attorney
attending meetings, depositions, court appearances and trial will not be
accepted absent advance approval by the Company or unusual
circumstances. Expert witnesses, investigators, consultants or local
counsel may not be retained without the Company's prior approval.

H. The Company reserves the right to audit all charges billed to
it utilizing its internal auditors or auditing firms designated by it.

I. Please submit invoices to:

Legal Department
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, NY 10965
<PAGE>
ORANGE AND ROCKLAND UTILITIES, INC.
AND SUBSIDIARIES
LAW FIRM BILLING PROCEDURES

Attachment 1

Billing For Expenses

1. Payment for actual charges only; required documentation

With respect to billing for disbursements, the Company will
only accept charges which reflect the actual cost incurred.
Expenses should be itemized with documentation available on request
for all expense items of $100 or above. When documentation is
requested, the Company expects to be provided with an actual vendor
invoice reflecting the charge. If the allowable expense does not
involve a vendor (e.g., in-house document duplication), then a unit
log detailing how the costs were incurred should be provided.

2. Copying

All billing which includes charges for copying must reflect
the number of copies made and the charge per page. Copying should
be done in a cost effective manner absent extenuating
circumstances. In this regard, large volume copying should be
contracted out to a commercial service where appropriate. Large
volume copying charges will be reviewed and charges for in-house
copying which are substantially higher than commercial rates will
be questioned and may be disallowed. Invoices from copying
services should be retained and provided to the Company on request.

3. Telecopying; overnight mail

The Company will not pay for receipt by counsel of telecopies
from the Company or from third parties on Company matters. Counsel
should apply discretion when determining to send correspondence via
overnight mail. Supporting documentation for telecopying and
overnight mail should be available on request.

4. Travel-related Expenses

- Air travel

The Company expects counsel to obtain the lowest fare
available. Any price paid above coach fare will be disallowed
absent prior approval or extenuating circumstance.
<PAGE>
- Mileage; ground transportation

Common sense should dictate the mode of transportation
utilized on Company matters - personal automobile, public
transportation, taxi or rental of automobiles used by counsel.
Mileage for personal automobile use will be reimbursed in
accordance with the per mile rate approved by the IRS.
Reimbursement for car rental expense is limited to compact or
intermediate cars. Limousine or car service use will require
prior approval. Car rentals should be limited to instances
where such method of transportation represents the most
economic form in terms of convenience and cost.

- Accommodations; personal expenses

Reasonable and necessary hotel charges of counsel
traveling on Company matters will be reimbursed. Counsel may
reserve and use standard, first quality motel and hotel
facilities. Luxurious and exorbitantly priced accommodations
will not be reimbursed in full. Personal items and services
(e.g. dry cleaning, laundry, entertainment, toiletries) are
not reimbursable.

- Food, beverage and entertainment

Counsel are expected to use discretion regarding food and
beverage expense while traveling. Counsel may use standard,
first quality restaurants while traveling. Meals at expensive
restaurants are not considered necessary and will not be
reimbursed. Business entertaining is not reimbursable by the
Company unless authorized in advance by the Company.

5. Extraordinary expenses

Prior approval from the Company is required before
extraordinary expenses (e.g., investigative services, retention of
consultants or expert witnesses, computer litigation support
services, videotaping of depositions) are incurred.

APPENDIX C
EQUAL EMPLOYMENT PROVISIONS

For the purposes of this Exhibit, the following terms shall
have the meaning indicated:
"Agreement" shall mean the Agreement, to which this Exhibit
is appended and of which it is a part.

"Contracting officer", "agency contracting officer", and
"contracting agency", shall mean Orange and Rockland
Utilities, Inc.

"Government contracts" shall be deemed to include this
Agreement.

"Seller" shall mean the Contractor and its permitted
assigns under the Agreement.

Except as Seller may indicate Seller's exception from the
applicability of the following provisions, Seller represents,
warrants and agrees as follows:
1. Equal Employment Opportunity: ( / / Seller is exempt )
(a) Seller will not discriminate against any employee or
applicant for employment because of age, race, color, religion,
sex or national origin. Seller will take affirmative action to
ensure that applicants are employed, and that employees are
treated during employment, without regard to their age, race,
color, religion, sex or national origin. Such action shall
include, but not be limited to, the following: employment,
upgrading, demotion or transfer; recruitment or recruitment
advertising; lay-off or termination; rates of pay or other forms
of compensation; and selection for training, including
apprenticeship. Seller agrees to post in conspicuous places,
available to employees and applicants for employment, notices to
be provided by the contracting officer setting forth the
provisions of this non-discrimination clause.
(b) Seller will, in all solicitations or advertisements for
employees placed by or on behalf of Seller, state that all
qualified applicants will receive consideration for employment
without regard to age, race, color, religion, sex or national
origin.
(c) Seller will send to each labor union or representative
of workers with which Seller has a collective bargaining
agreement or other contract or understanding, a notice to be
provided by the agency contracting officer, advising the labor
union or workers' representative of the Seller's commitments
under this Equal Employment Opportunity clauses and shall post
copies of the notice in conspicuous places available to employees
and applicants for employment.
(d) Seller will comply with all provisions of Executive
Order 11246 of September 24, 1965 ("Executive Order 11246") and
the rules, regulations and relevant orders of the Secretary of
Labor.
(e) The Seller will furnish all information and reports
required by Executive Order 11246 and by the rules, regulations
and orders of the Secretary of Labor and will permit access to
his books, records and accounts by the contracting officer and
the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations and orders.
(f) In the event of Seller's noncompliance with the non-
discrimination clauses of this contract or with Executive Order
11246 or any of such rules, regulations or orders of the
Secretary of Labor, this Agreement may be cancelled, terminated
or suspended in whole or in part and Seller may be declared
ineligible for further Government contracts in accordance with
procedures authorized in Executive Order 11246, and such other
sanctions may be imposed and remedies invoked as provided in
Executive Order 11246, or by rule, regulation or order of the
Secretary of Labor, or as otherwise provided by law.
(g) Seller will include the provisions of paragraph (a)
through (g) of this clause in every subcontract or purchase order
unless exempt by rules, regulations or orders of the Secretary of
Labor issued pursuant to Section 204 of Executive Order 11246, so
that such provisions will be binding upon each subcontractor or
vendor. Seller will take such action with respect to any
subcontract or purchase order as the contracting agency may
direct as means of enforcing such provisions, including sanctions
for noncompliance; provided, however, that in the event Seller
becomes involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction by the
<PAGE>
contracting agency, Seller may request the United States to enter
such litigation to protect the interests of the United States.
2. Certificate of Nonsegregated Facilities:
( / / Seller is exempt)

Seller certifies that Seller does not maintain or provide
for Seller's employees any segregated facilities at any of
Seller's establishments, and that Seller does not permit Seller's
employees to perform their services at any location, under
Seller's control, where segregated facilities are maintained.
Seller certifies further that Seller will not maintain or provide
for Seller's employees any segregated facilities at any of
Seller's establishments, and that Seller will not permit Seller's
employees to perform their services at any location, under
Seller's control, where segregated facilities are maintained.
Seller agrees that a breach of this certification is a violation
of the Equal Opportunity clause in this order.
As used in this certification, the term "segregated
facilities" means any waiting rooms, work areas, rest rooms and
wash rooms, restaurants and other eating areas, time clocks,
locker rooms and other storage or dressing areas, parking lots,
drinking fountains, recreation or entertainment areas,
transportation and housing facilities provided for employees
which are segregated by explicit directive or are in fact
segregated on the basis of age, race, color, religion or national
origin, because of habit, local custom or otherwise. Seller
further agrees that (except where Seller has obtained identical
certifications from proposed subcontractors for specific time
periods) Seller will obtain identical certifications from
proposed subcontractors prior to the award of subcontracts
exceeding $10,000 which are not exempt from the provisions of
the Equal Opportunity clause; that Seller will forward the
following notice to such proposed subcontractors (except where
the proposed subcontractors have submitted identical
certifications for specific time periods):
"NOTICE TO PROSPECTIVE SUBCONTRACTORS
OF REQUIREMENT FOR CERTIFICATIONS ON
NON-SEGREGATED FACILITIES"
A certificate of Nonsegregated Facilities must be
submitted prior to the award of a subcontract exceeding
$10,000 which is not exempted from the provisions of the
Equal Employment Opportunity clause contained in Section 202
of Executive Order 11246 of September 24, 1965. The
certification may be submitted either for each subcontract
or for all subcontracts during a period (i.e., quarterly,
semi-annually, or annually).

NOTE: The Penalty for making false statements in offers is
prescribed in 18 U. S. C. 1001.

3. Employment of the Handicapped: ( / / Seller is exempt)
Seller shall take affirmative action to employ and advance
in employment and otherwise treat qualified handicapped
individuals, without discrimination based upon their physical
or mental handicap, as required by Section 60-747.3 and
Section 60-741.4 of Title 41 of the Code of Federal Regulations.
4. Special Disabled and Vietnam Era Veterans:
Unless otherwise exempt from the provisions of the Vietnam
Era Veterans Readjustment Act of 1972, Seller shall list all
suitable employment openings with the local employment service
office and take affirmative action to employ, and advance in
employment, qualified special disabled veterans and veterans of
the Vietnam Era without discrimination based on their disability
or veterans status.
5. Utilization of Small Business Concerns and Small
Disadvantaged Business Concerns:
( / / Seller is exempt from this clause.)

(a) It is the policy of the United States that small
business concerns and small business concerns owned and
controlled by socially and economically disadvantaged individuals
shall have the maximum practicable opportunity to participate in
the performance of Government contracts.
(b) Seller agrees to use Seller's best efforts to carry out
this policy in the award of Seller's subcontracts to the fullest
extent consistent with the efficient performance of this order.
The Seller further agrees to cooperate in any studies as may be
conducted by the United States Small Business Administration or
the awarding agency of the United States as may be necessary to
determine the extent of the Seller's compliance with this clause.
(c) As used in this clause, the term "small business
concern" shall mean a small business as defined pursuant to
Section 3 of the Small Business Act and relevant regulations
promulgated pursuant thereto. The term "small business concern
controlled by socially and economically disadvantaged
individuals" shall mean a small business concern--
1. which is at least 51 percent owned by one or
more socially and economically disadvantaged
individuals; or in the case of any publicly-owned
business, at least 51 percent of the stock of which is
owned by one or more socially and economically
disadvantaged individuals, and
2. whose management and daily business operations are
controlled by one or more of such individuals.

The Seller shall presume that socially and
economically disadvantaged individuals include Black
Americans, Hispanic Americans, Native Americans, Asian-
Pacific Americans, Asian-Indian Americans and other
minorities, or any other individual found to be
disadvantaged by the Administration pursuant to
Section 8(a) of the Small Business Act.

(d) Seller acting in good faith may rely on written
representations by his subcontractors regarding their status as
either a small business concern or a small business concern owned
and controlled by socially and economically disadvantaged
individuals.
6. Utilization of Women-Owned Small Businesses:
Seller shall use his best efforts to give women-owned
small businesses the maximum practicable opportunity to
participate in the subcontracts or orders it awards to the
fullest extent consistent with the efficient performance of the
contract.
As used in this clause "women-owned small businesses" means
business that are at least 51 percent owned by women who are
United States citizens and who also control and operate the
business. "Control" means exercising the power to make policy
decisions, and "operate" means being actively involved in the
day-to-day management of the business.
7. Affirmative Action Compliance Programs:
Seller agrees to develop a written Affirmative Action
Compliance Program for each of its establishments as required by
Section 60-250 of Title 41 of the Code of Federal Regulations.

EQEMPPRO.WP
7/01/94