<PAGE>
THE PROVIDENCE GAS COMPANY
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended December 31, 1996
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- ------------------
Commission file number 0-1160
------------------
THE PROVIDENCE GAS COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Rhode Island 05-0203650
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Weybosset Street, Providence, Rhode Island 02903
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
401-272-5040
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Common Stock, $1.00 par value; 1,243,598 shares outstanding at
- --------------------------------------------------------------
February 10, 1997.
- ------------------
<PAGE>
THE PROVIDENCE GAS COMPANY
FORM 10-Q
DECEMBER 31, 1996
PART I: FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Consolidated Statements of Income for the
three and twelve months ended
December 31, 1996 and 1995 I-1
Consolidated Balance Sheets as of
December 31, 1996, December 31, 1995
and September 30, 1996 I-2
Consolidated Statements of Cash Flows for the
three months ended December 31, 1996 and 1995 I-3
Consolidated Statements of Capitalization as of
December 31, 1996, December 31, 1995
and September 30, 1996 I-4
Notes to Consolidated Financial Statements I-5
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations I-8
PART II: OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K II-1
Signature II-2
<PAGE>
PART I. FINANCIAL INFORMATION
- -----------------------------------------------------------------
ITEM I. FINANCIAL STATEMENTS
- -----------------------------------------------------------------
THE PROVIDENCE GAS COMPANY
-------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31
-----------------------------------------
(Unaudited)
-------------
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
------------------- -------------------
1996 1995 1996 1995
------------------- -------------------
(thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues $ 61,673 $ 57,270 $215,004 $189,031
Cost of gas sold 35,673 31,144 122,580 104,437
-------- -------- -------- --------
Operating margin 26,000 26,126 92,424 84,594
-------- -------- -------- --------
Operating expenses:
Operation and maintenance 11,004 11,502 47,618 44,290
Depreciation and amortization 3,019 2,784 11,792 10,349
Taxes
State gross earnings 1,770 1,611 6,220 5,323
Local property and other 1,689 1,630 6,829 6,626
Federal income 2,302 2,310 4,410 3,662
-------- -------- -------- --------
Total operating expenses 19,784 19,837 76,869 70,250
-------- -------- -------- --------
Operating income 6,216 6,289 15,555 14,344
Other, net 72 622 426 1,271
-------- -------- -------- --------
Income before interest expense 6,288 6,911 15,981 15,615
-------- -------- -------- --------
Interest expense:
Long-term debt 1,520 1,313 6,096 5,116
Other 349 551 1,296 2,360
Interest capitalized (39) (7) (125) (87)
-------- -------- -------- --------
1,830 1,857 7,267 7,389
-------- -------- -------- --------
Net income 4,458 5,054 8,714 8,226
Dividends on preferred stock (174) (174) (696) (696)
-------- -------- -------- --------
Net income applicable to
common stock $ 4,284 $ 4,880 $ 8,018 $ 7,530
======== ======== ======== ========
Earnings per common share $ 3.44 $ 3.92 $ 6.45 $ 6.06
======== ======== ======== ========
Dividends paid per common share $ .96 $ .92 $ 3.76 $ 3.68
======== ======== ======== ========
Weighted average common shares
outstanding 1,243.6 1,243.6 1,243.6 1,243.6
======== ======== ======== ========
</TABLE>
I-1
<PAGE>
THE PROVIDENCE GAS COMPANY
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------
(Unaudited)
----------
(Thousands)
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1996 1995 1996
-----------------------------------------
<S> <C> <C> <C>
ASSETS
- ------
Gas plant, at original cost $275,223 $256,859 $270,149
Less -Accumulated depreciation and
utility plant acquisition adjustments 101,294 93,452 98,563
-------- -------- --------
173,929 163,407 171,586
-------- -------- --------
Current assets:
Cash and temporary cash investments 2,535 2,518 923
Accounts receivable, less allowance of
$2,793 at 12/31/96, $2,427 at 12/31/95
and $2,983 at 9/30/96 31,962 28,577 14,001
Unbilled revenues 10,341 13,723 2,333
Deferred gas costs 15,518 - 13,128
Inventories, at average cost -
Liquefied natural gas, propane and
underground storage 14,741 8,507 15,794
Materials and supplies 1,089 1,465 1,151
Prepaid and refundable taxes 2,531 2,964 3,215
Prepayments 780 797 1,465
-------- -------- --------
79,497 58,551 52,010
-------- -------- --------
Deferred charges and other assets 13,293 13,644 13,919
-------- -------- --------
Total assets $266,719 $235,602 $237,515
======== ======== ========
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization (see accompanying
statement) $156,716 $155,521 $155,299
-------- -------- --------
Current liabilities:
Notes payable 38,000 20,140 20,800
Current portion of long-term debt 2,029 1,983 2,023
Accounts payable 24,608 17,888 16,480
Accrued taxes 5,091 3,345 1,867
Accrued vacation 1,637 1,614 1,673
Customer deposits 3,913 3,995 3,956
Refundable gas costs - 621 -
Other 4,036 3,701 5,036
-------- -------- --------
79,314 53,287 51,835
-------- -------- --------
Deferred credits and reserves:
Accumulated deferred Federal income
taxes 20,113 18,229 19,903
Unamortized investment tax credits 2,471 2,629 2,510
Other 8,105 5,936 7,968
-------- -------- --------
30,689 26,794 30,381
-------- -------- --------
Commitments and contingencies - - -
Total capitalization and liabilities $266,719 $235,602 $237,515
======== ======== ========
</TABLE>
I-2
<PAGE>
THE PROVIDENCE GAS COMPANY
--------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED DECEMBER 31
--------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
1996 1995
----------------------
(Thousands of Dollars)
<S> <C> <C>
Cash provided by (used for)
Operating Activities:
Net income $ 4,458 $ 5,054
Items not requiring cash:
Depreciation and amortization-plant 3,051 2,817
Changes as a result of regulatory actions - (1,453)
Deferred Federal income taxes 210 340
Amortization of investment tax credits (39) (39)
Changes in assets and liabilities
which provided (used) cash:
Accounts receivable (17,961) (14,787)
Unbilled revenues (8,008) (11,086)
Deferred gas costs (2,390) 1,817
Inventories 1,115 1,431
Prepaid and refundable taxes 684 2,305
Prepayments 685 531
Accounts payable 8,128 3,992
Accrued taxes 3,224 1,540
Accrued vacation, customer deposits
and other (1,003) 232
Deferred charges and other 793 936
-------- --------
Net cash used for operations (7,053) (6,370)
-------- --------
Investing Activities:
Expenditures for property, plant and
equipment, net (5,470) (4,696)
-------- --------
Financing Activities:
Issuance of mortgage bonds - 15,000
Payments on long-term debt (1,697) (1,692)
Increase in notes payable, net 17,200 803
Cash dividends on preferred stock (174) (174)
Cash dividends on common stock (1,194) (1,144)
-------- --------
Net cash provided by financing activities 14,135 12,793
-------- --------
Increase in cash & temporary cash
investments 1,612 1,727
Cash and cash equivalents at beginning
of period 923 791
-------- --------
Cash and cash equivalents at end of period $ 2,535 $ 2,518
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period-
Interest (net of amount capitalized) $ 1,722 $ 1,444
Income taxes (net of refunds) $ 3 $ 86
</TABLE>
I-3
<PAGE>
THE PROVIDENCE GAS COMPANY
--------------------------
CONSOLIDATED STATEMENTS OF
--------------------------
CAPITALIZATION
--------------
(UNAUDITED)
-----------
(Thousands)
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1996 1995 1996
-----------------------------------------
Common stockholders' investment:
<S> <C> <C> <C>
Common stock, $1 par
Authorized - 2,500 shares
Outstanding - 1,244 as of 12/31/96,
12/31/95 and 9/30/96 $ 1,244 $ 1,244 $ 1,244
Amount paid in excess of par 37,687 37,828 37,657
Retained earnings 39,033 35,692 35,943
-------- -------- --------
Total common equity 77,964 74,764 74,844
-------- -------- --------
Cumulative preferred stock:
Redeemable 8.70% Series, $100 par
Authorized - 80 shares
Outstanding - 80 shares as of
12/31/96, 12/31/95 and 9/30/96 8,000 8,000 8,000
-------- -------- --------
Long-term debt:
First Mortgage Bonds 71,200 72,800 72,800
Capital Leases 1,581 1,940 1,678
-------- -------- --------
Total long-term debt 72,781 74,740 74,478
Less current portion 2,029 1,983 2,023
-------- -------- --------
Long-term debt, net 70,752 72,757 72,455
-------- -------- --------
Total capitalization $156,716 $155,521 $155,299
======== ======== ========
</TABLE>
I-4
<PAGE>
THE PROVIDENCE GAS COMPANY
Notes to Consolidated Financial Statements
Accounting Policies
- -------------------
It is the Registrant's opinion that the financial information contained in
this report reflects all normal, recurring adjustments necessary to a fair
statement of the results for the periods reported; however, such results are not
necessarily indicative of results to be expected for the year, due to the
seasonal nature of the Registrant's operations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted in
this Form 10-Q pursuant to the rules and regulations of the Securities and
Exchange Commission. However, the disclosures herein when read with the annual
report for 1996 filed on Form 10-K are adequate to make the information
presented not misleading.
Reclassifications
- -----------------
Certain prior period amounts have been reclassified for consistent
presentation with the current year.
Environmental Matters
- ---------------------
Federal, state and local laws and regulations establishing standards and
requirements for the protection of the environment have increased in number and
in scope within recent years. The Registrant cannot predict the future impact
of such standards and requirements which are subject to change and can take
effect retroactively. The Registrant continues to monitor the status of these
laws and regulations. Such monitoring involves the review of past activities
and current operations, and may include expending funds to investigate or clean-
up certain sites. To the best of its knowledge, subject to the following, the
Registrant believes it is in substantial compliance with such laws and
regulations.
At December 31, 1996, the Registrant is aware of four sites at which future
costs may be incurred.
The Registrant has been designated as a potentially responsible party (PRP)
under the Comprehensive Environmental Response Compensation and Liability Act of
1980 at two sites at Plympton, Massachusetts on which waste material is alleged
to have been deposited by disposal contractors employed in the past either
directly or indirectly by the Registrant and other PRP's. With respect to one of
the Plympton sites, the Registrant has joined with other PRP's in entering into
an Administrative Consent Order with the Massachusetts Department of
Environmental Protection. The costs to be borne by the Registrant, in connection
with both Plympton sites, are not anticipated to be material to the financial
condition of the Registrant.
During 1995, the Registrant voluntarily began a study at its primary gas
distribution facility located in Providence, Rhode Island. This site formerly
contained a manufactured gas plant operated by the Registrant. As
I-5
<PAGE>
of December 31, 1996, approximately $1.6 million has been spent primarily
on studies at this site. In accordance with state laws, such a voluntary study
is monitored by the Rhode Island Department of Environmental Management (DEM).
The purpose of this study was to determine the extent of environmental
contamination at this site. The Registrant has completed the study which
indicated that remediation will be required. The Registrant has several
remediation options for the site and is currently negotiating with DEM and
contractors to arrive at the best alternative. At December 31, 1996, the
Registrant has compiled a preliminary range of costs based on remediation
alternatives, ranging from $1.3 million to in excess of $5.0 million. Based on
the proposals for remediation work, the Registrant has accrued $1.3 million at
December 31, 1996 for anticipated future remediation costs at this site. Also,
the Registrant has negotiated an agreement, which is subject to Federal
regulatory approval, with a third party which provides for reimbursement of up
to $2.5 million of certain remediation costs to be incurred at this site.
Tests conducted following the recent discovery of an abandoned underground
oil storage tank at the Registrant's Westerly, Rhode Island operations center
confirm the existence of contaminants at this site. The Registrant is currently
conducting tests at this site, the costs of which are being shared equally with
the prior owner, to determine the nature and extent of the contamination. Due to
the early stages of investigation, management cannot offer any conclusions as to
whether any remediation will be required at this site. In addition, in the first
quarter of 1997, contamination from scrapped meters and regulators was
discovered at this site. The Registrant has reported this to the DEM and the
Rhode Island Department of Health and is in the process of remediation. It is
anticipated that remediation will cost between $50,000 and $100,000.
In prior rate cases filed, the Registrant requested that environmental
investigation and remediation costs be recovered by inclusion in its
depreciation factors consistent with the rate recovery treatment for all types
of costs of removal. Accordingly, environmental investigation costs of
approximately $1.8 million and an estimated $1.3 million for environmental
remediation costs have been charged to the accumulated depreciation reserve at
December 31, 1996. Management believes that this rate recovery mechanism is
appropriate for recovery of any future costs. Additionally, it is the
Registrant's practice to consult with the Rhode Island Public Utilities
Commission (RIPUC) on a periodic basis when, in management's opinion,
significant amounts might be expended for environmental related costs. Should
future developments warrant additional rate recovery mechanisms, management will
seek recovery.
Gas Supply Restructuring
- ------------------------
Federal Energy Regulatory Commission (FERC) Order 636 and other related orders
(the Orders) have significantly changed the structure and types of services
offered by pipeline transportation companies. The most significant components of
the restructuring occurred in November 1993. In response to these changes, the
Registrant has successfully negotiated new pipeline transportation and gas
storage contracts.
I-6
<PAGE>
At the same time, a number of contracts with gas suppliers have been
negotiated to complement the transportation and storage contracts. The
portfolio of supply contracts is designed to be market responsive and is
diversified with respect to contract lengths, source location and other contract
terms. On a periodic basis, the Registrant reviews all of its contracts to
ensure a diverse, secure, flexible and economical supply portfolio is
maintained.
To meet the requirements of the Orders, the pipelines have incurred
significant costs, collectively known as transition costs. The majority of
these costs will be reimbursed by the pipeline's customers, including the
Registrant. Based upon current information, the Registrant anticipates its
transition costs to net between $21 million and $22 million of which $14.2
million has been included in the Gas Charge Clause (GCC), net of refunds
received based on FERC settlements, and is currently being collected from
customers. The remaining minimum obligation of $6.8 million has been recorded
in the accompanying consolidated balance sheet along with a regulatory asset
anticipating future recovery through the GCC.
The Registrant's ultimate liability may differ from the above estimates
based on FERC settlements with the Registrant's pipeline transportation
suppliers. FERC has approved settlements with three of its pipelines, which
account for the bulk of the Registrant's transition costs. Negotiations are
continuing on one additional pipeline, and based on the information available,
the Registrant believes that its current range for transition costs is
reasonable.
New Accounting Pronouncements
- -----------------------------
In October 1996, the Registrant adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." The adoption of this statement did not
have an impact on the financial position or operations of the Registrant for the
quarter ended December 31, 1996.
I-7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
Providence Gas Company (the Registrant) and its subsidiary and their
representatives may from time to time make written or oral statements, including
statements contained in the Registrant's filings with the Securities and
Exchange Commission (SEC), which constitute or contain "forward-looking"
information as that term is defined in the Private Securities Litigation Reform
Act of 1995 or by the SEC in its rules, regulations and releases.
All statements other than statements of historical facts included in this
quarterly report regarding the Registrant's financial position and strategic
initiatives and addressing industry developments are forward-looking statements.
Where, in any forward-looking statement, the Registrant, or its management,
expresses an expectation or belief as to future results, such expectation or
belief is expressed in good faith and believed to have a reasonable basis, but
there can be no assurance that the statement of expectation or belief will
result or be achieved or accomplished. Factors which could cause actual results
to differ materially from those anticipated include but are not limited to:
general economic, financial and business conditions; competition in the energy
services sector; regional weather conditions; the availability and cost of
natural gas; development and operating costs; the success and costs of
advertising and promotional efforts; the availability and terms of capital; the
business abilities and judgment of personnel; unanticipated environmental
liabilities; changes in, or the failure to comply with, government regulations;
the costs and effects of unanticipated legal proceedings, the impacts of unusual
items resulting from ongoing evaluations of business strategies and asset
valuations; and changes in business strategy.
RESULTS OF OPERATIONS
For the current quarter, the Registrant's operating revenues have
increased, while operating margin and net income have decreased over the
comparable period presented, as shown in the table below:
(thousands where applicable)
<TABLE>
<CAPTION>
Percent
1996 1995 Change Change
------- ------- ------ ------
<S> <C> <C> <C> <C>
Operating revenues $61,673 $57,270 $4,403 7.7
======= ======= ====== ======
Operating margin $26,000 $26,126 $ (126) (0.5)
======= ======= ====== ======
Net income applicable
to common stock $ 4,284 $ 4,880 $ (596) (12.2)
======= ======= ====== ======
</TABLE>
I-8
<PAGE>
Operating Revenues and Operating Margin
- ---------------------------------------
During the latest quarter, the Registrant experienced normal weather,
however temperatures averaged 4.8 percent warmer than the same quarter last
year. The Registrant's operating revenues increased approximately $4.4 million
or 7.7 percent due to rate increases offset by the warmer weather. The increased
revenues were offset by increased gas costs, which resulted in decreased
operating margin of approximately $126,000 or 0.5 percent. The increased gas
costs had no effect on margin due to the fact that the Registrant recovers
actual gas costs from its customers through the Gas Charge Clause (GCC).
Operating and Maintenance Expenses
- ----------------------------------
Overall, other operating and maintenance expenses decreased approximately
$498,000 or 4.3 percent from the same quarter last year. This decrease is
attributable to lower uncollectible revenues due to improved collection efforts
and a decrease in pension expense due to the funded status of the Registrant's
plan. These decreases were partially offset by inflationary increases.
Taxes
- -----
Taxes for the current quarter versus last year increased approximately
$210,000 or 3.8 percent. The increase in taxes, mainly state gross earnings tax,
was the result of higher operating revenues.
Other, net
- ----------
Other, net decreased approximately $550,000. The decrease was due to
regulatory adjustments in the first quarter of 1996, including a one-time gain
for the regulatory change in accounting for property taxes, which was offset by
the write-offs of previously deferred reorganization and other costs for which
recovery was not allowed as part of the rate award received from the Rhode
Island Public Utilities Commission (RIPUC) on November 17, 1995.
Interest Expense
- ----------------
Interest expense decreased approximately $27,000 or 1.5 percent. The
decrease in interest was due to a decrease in the Registrant's short-term
borrowing rates. This decrease was offset by an increase in weighted average
short-term borrowings and an increase in long-term debt resulting from the
issuance of $15 million of Series R First Mortgage Bonds in December 1995.
Future Outlook
- --------------
In May 1996, the RIPUC approved a Rate Design Settlement Agreement among
the Registrant, the Division of Public Utilities and Carriers (Division), The
Energy Council of Rhode Island and a consortium of oil heat organizations. The
Agreement begins a process of unbundling natural gas service in Rhode Island
enabling customers to choose their gas suppliers. The Agreement went into effect
June 2, 1996. While this initial program is available to approximately 120 of
the largest commercial
I-9
<PAGE>
and industrial customers, the Registrant is required to make an additional
filing in March 1997 that would expand the eligibility of unbundled services to
other customers. The Registrant does not know the number of customers that
would be impacted by the March 1997 filing at this time.
On October 8, 1996, the RIPUC approved a one year Pilot Hedging Program
Agreement between the Registrant and the Division. The objective of the pilot
program is to mitigate the impact of natural gas price escalation through
utilization of Financial Risk Management (FRM) tools, to develop a more balanced
gas supply cost approach and finally, to study in more detail the benefits and
costs associated with the program. The FRM tools will be limited to the use of
options, including calls, puts and collars, under the pilot program. The total
expenditures for the purchase and exercise of the FRM tools and the net proceeds
from the sale of FRM tools will be flowed through the Variable Gas Cost
component of the GCC and, under the terms of the Agreement, cannot exceed
$800,000. The Registrant began trading FRM tools in the second quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant meets seasonal cash requirements and finances its capital
expenditures program on an interim basis through short-term borrowings. For
example, during the latest quarter, the Registrant's accounts receivable and
unbilled revenue have increased $26.0 million. These fluctuations are the
result of higher monthly sales during the latest quarter and a moratorium on
residential shut-offs during the heating season. Because of these increases,
which negatively impact cashflow, the Registrant must borrow to maintain an
appropriate level of liquidity. Management believes its available financings
are sufficient to meet these seasonal needs.
The Registrant experienced a decrease in its net cash used by operations
during the latest quarter as compared to last year, primarily as the result of
a substantial underrecovery of gas costs in the first quarter of 1997.
In December 1995, the Registrant received proceeds of $15 million related
to an issuance of First Mortgage Bonds, Series R (7.5%), which will mature in
December 2025. The net proceeds received from the issuance were used to pay down
short-term debt.
Capital expenditures for the latest quarter of $5.5 million increased when
compared to $4.7 million last year. The increase in capital expenditures was due
to increased spending for technology to redesign and integrate the Registrant's
customer-related information systems. Capital expenditures for the remainder of
the fiscal year are expected to be approximately $14.7 million. Anticipated
capital expenditures for the next three years are expected to total between $50
million to $60 million.
I-10
<PAGE>
In February 1995, the Registrant filed for rate relief requesting an
approximate eight percent general rate increase. In November 1995, the RIPUC
authorized the Registrant to increase its rates to recover additional annual
revenues in the amount of $3,990,000. Subsequent to the issuance of the rate
decision, the RIPUC approved the Registrant's motion to reconsider a revenue
adjustment of $171,572. That approval increases the overall rate increase to
$4,161,572. As part of this award, the Registrant is allowed to earn a 10.9%
return on common equity. As previously discussed, the rate decision also
resulted in several accounting adjustments which had no impact on the
Registrant's cash flow in the first quarter of 1996.
In February 1996, the Registrant received approval of a three-year
Settlement Agreement between itself and the Division regarding the Integrated
Resource Plan (IRP), which was filed with the RIPUC in July 1994. The purpose of
the IRP is to optimize the utilization of production transmission and
distribution resources so that customers receive high quality services at the
lowest possible cost.
The Settlement Agreement provides for: (1) funding associated with Demand
Side Management programs, which are designed to provide equipment rebates for
specific load building programs; (2) funding associated with a low income
weatherization program, which is designed to assist low income customers through
the installation of conservation measures; and (3) a performance-based
ratemaking incentive. The Settlement Agreement also contains a general agreement
that the Registrant's strategy and steps included in its supply plan are
reasonable.
The Settlement Agreement also provided for a one-time funding in 1996 of
$800,000 for a Low Income Assistance Program (LIAP) through a portion of the
Registrant's share of the performance-based ratemaking incentive. The LIAP was
developed in response to the Registrant's anticipated decrease in 1996 of
approximately $900,000 in Federal funding for the low income heat assistance
program administered by the State of Rhode Island.
The funding of these programs is generated through annual gas cost savings
beginning in July 1995. The Registrant performed an analysis of gas cost savings
from July 1995 through June 1996 and achieved sufficient savings to provide
funding for these programs without incurring a charge to income. Accordingly, in
1996, the Registrant recorded its annual share of the performance-based
ratemaking incentive under this agreement which resulted in a $1.5 million
increase in operating margin. An analysis of gas cost savings will be performed
in June of each year for the duration of the IRP, at which time any annual share
of the performance-based ratemaking incentive will be recorded.
I-11
<PAGE>
THE PROVIDENCE GAS COMPANY
--------------------------
PART II. OTHER INFORMATION
- ---------------------------
Item 6 (b). Reports on Form 8-K
- ----------- -------------------
No reports on Form 8-K were filed during the quarter for which this report is
filed.
II-1
<PAGE>
THE PROVIDENCE GAS COMPANY
--------------------------
PART II. OTHER INFORMATION
- -------- -----------------
It is the opinion of management that the financial information contained in this
report reflects all adjustments necessary for a fair statement of results for
the periods reported, but such results are not necessarily indicative of results
to be expected for the year, due to the seasonal nature of the Registrant's gas
operations. All accounting policies and practices have been applied in a manner
consistent with prior periods.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Providence Gas Company
(Registrant)
BY:/s/ Gary S. Gillheeney
---------------------------
GARY S. GILLHEENEY
Senior Vice President,
Chief Financial Officer and
Treasurer
Date: February 14, 1997
-------------------
II-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 173,929
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 79,497
<TOTAL-DEFERRED-CHARGES> 13,293
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 266,719
<COMMON> 1,244
<CAPITAL-SURPLUS-PAID-IN> 37,687
<RETAINED-EARNINGS> 39,033
<TOTAL-COMMON-STOCKHOLDERS-EQ> 77,964
0
8,000
<LONG-TERM-DEBT-NET> 70,752
<SHORT-TERM-NOTES> 38,000
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0
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174
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<CASH-FLOW-OPERATIONS> (7,053)
<EPS-PRIMARY> 3.44
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</TABLE>
