SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report - August 17, 1995
ROCHESTER GAS AND ELECTRIC CORPORATION
(Exact name of registrant as specified in charter)
New York
(State or other jurisdiction of incorporation)
1-672
(Commission File Number)
16-0612110
(IRS Employer Identification No.)
89 EAST AVENUE, ROCHESTER, NEW YORK 14649
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 546-2700
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Item 5. Other Events
On August 17, 1995, the Company announced that a negotiated settlement had
been reached with the Staff of the New York State Public Service Commission
("PSC") and other parties which would resolve various PSC proceedings which were
commenced to review the factors affecting the Company's gas costs. The
settlement is subject to the approval of the PSC which is expected to act on the
settlement prior to November 1, 1995, the date upon which it would take effect.
The settlement affects the rate treatment of various gas costs through October
31, 1998.
Under the settlement the Company would forego, for three years, gas rate
increases exclusive of the cost of natural gas and certain cost increases
imposed by interstate pipelines. The Company has also agreed to write off
excess gas pipeline capacity and other costs incurred through 1995 and to take
the economic risk of remarketing excess gas capacity for the years 1996 through
1998, the cost of which will be borne by the Company net of resale credits.
The economic effect on the Company of the proposed settlement in 1995 would
be approximately $38.4 million, which would represent the following actions:
- As previously disclosed, pre-tax earnings from gas operations were
reduced by approximately $5.3 million this year due to a decision to
eliminate weather normalization charges on customer bills for the 1995
heating season which ended in May.
- $1.9 million in revenue from a gas rate increase scheduled for the
rate year July 1, 1995, which the Company will forego.
- $8 million in gas pipeline capacity costs for 1995, net of capacity
release payments, which the Company will forego recovering in rates.
Of this amount, $4.2 million of costs were reflected in the June 30,
1995 financial statements.
- $23.2 million in gas pipeline capacity and other costs, which will be
written off when the settlement is approved by the PSC.
The amounts described above, could increase by as much as $4.0 million due
to the ratemaking methodology applicable to certain retroactive pipeline
charges, which are now pending before the Federal Energy Regulatory
Commission.
As described above, the Company has agreed not to charge customers for
pipeline capacity costs in 1996, 1997 and 1998 of $22.5 million, $24.5 million,
and $27.2 million, respectively.
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Under FERC rules, the Company may release its excess transportation capacity in
the market.
The Company has entered into a marketing agreement with CNG Transmission
Corporation (CNG), pursuant to which CNG will assist the Company in obtaining
permanent replacement customers for transportation capacity the Company will not
require. As a result of this marketing agreement and FERC approval of the
Chambersburg Project (described below), a substantial portion of this capacity
will be released to replacement shippers through the settlement period described
above. The Company is now in the process of assigning the subject capacity. On
May 31, 1995, the FERC issued an order approving the construction and rate
treatment of the Chambersburg Project which includes modifications to CNG's
pipeline which are required to facilitate the use of pipeline capacity by the
replacement shippers.
The Company has also entered into a Supply Portfolio Management agreement
with MidCon Gas Services Corp. (MGSC). MGSC will work with the Company to
identify and implement opportunities for temporary and permanent release of
surplus pipeline capacity, as well as advise with respect to the management of
the Company's gas supply, transportation and storage assets consistent with the
goal of providing reliable service and reducing the cost of gas.
Together, the agreements described above constitute a release of a
substantial portion of the capacity costs in each of the three years of the
settlement period. More information with respect to these two agreements is
contained in the Company's Quarterly Report on Form 10Q for the period ending
June 30, 1995.
The gas base rate increases the Company has agreed to forego subsequent to
1995 during the period of the settlement are approximately $10.4 million in the
aggregate.
The actions taken with respect to the settlement described above will
reduce 1995 earnings by approximately sixty-five cents per share after tax.
Sixteen cents of this amount has already reduced earnings through June 30,
1995. The Company believes that this settlement, by itself, will not
affect its ability to pay dividends on its Common Stock at the current
annual rate of $1.80 per share.
Item 7. Financial Statements, Proforma Financial Information and Exhibits.
(c) Exhibits. See Exhibit Index below.
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EXHIBIT INDEX
Exhibit 99-1 - Press release of the Company dated August 17, 1995 relating to
the negotiated settlement with the PSC Staff and other parties
which affects the rate treatment of various gas costs through
October 31, 1998.
Exhibit 99-2 - Press release of the Gas Settlement Parties dated August 17,
1995 relating to the negotiated settlement with the PSC Staff
and other parties which affects the rate treatment of
various gas costs through October 31, 1998.
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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 hereunto duly authorized.
ROCHESTER GAS AND ELECTRIC CORPORATION
--------------------------------------
(Registrant)
By DANIEL J. BAIER
-----------------------------------
Daniel J. Baier
Controller
Date: August 17, 1995
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Exhibit 99-1
[NEWS RELEASE LETTERHEAD OF ROCHESTER GAS AND ELECTRIC CORPORATION]
GAS COST SETTLEMENT TO BE FILED WITH SEC
August 17, 1995 - Today the Company issued a joint press release with
various parties relative to the Company's gas costs. The Company is filing the
following report with the Security and Exchange Commission on Form 8-K regarding
this matter:
On August 17, 1995, the Company announced that a negotiated settlement had
been reached with the Staff of the New York State Public Service Commission
("PSC") and other parties which would resolve various PSC proceedings which were
commenced to review the factors affecting the Company's gas costs. The
settlement is subject to the approval of the PSC which is expected to act on the
settlement prior to November 1, 1995, the date upon which it would take effect.
The settlement affects the rate treatment of various gas costs through October
31, 1998.
Under the settlement the Company would forego, for three years, gas rate
increases exclusive of the cost of natural gas and certain cost increases
imposed by interstate pipelines. The <PAGE>
<PAGE>
Company has also agreed to write off excess gas pipeline capacity and other
costs incurred through 1995 and to take the economic risk of
remarketing excess gas capacity for the years 1996 through 1998, the cost of
which will be borne by the Company net of resale credits.
The economic effect on the Company of the proposed settlement in 1995 would
be approximately $38.4 million, which would represent the following actions:
- As previously disclosed, pre-tax earnings from gas operations were
reduced by approximately $5.3 million this year due to a decision to
eliminate weather normalization charges on customer bills for the 1995
heating season which ended in May.
- $1.9 million in revenue from a gas rate increase scheduled for the
rate year July 1, 1995, which the Company will forego.
- $8 million in gas pipeline capacity costs for 1995, net of capacity
release payments, which the Company will forego
2 <PAGE>
<PAGE>
recovering in rates. Of this amount, $4.2 million of costs were reflected
in the June 30, 1995 financial statements.
- $23.2 million in gas pipeline capacity and other costs, which will be
written off when the settlement is approved by the PSC.
The amounts described above, could increase by as much as $4.0 million due
to the ratemaking methodology applicable to certain retroactive pipeline
charges, which are now pending before the Federal Energy Regulatory
Commission.
As described above, the Company has agreed not to charge customers for
pipeline capacity costs in 1996, 1997 and 1998 of $22.5 million, $24.5 million,
and $27.2 million, respectively. Under FERC rules, the Company may release its
excess transportation capacity in the market.
The Company has entered into a marketing agreement with CNG Transmission
Corporation (CNG), pursuant to which CNG will assist the Company in obtaining
permanent replacement customers for transportation capacity the Company will not
require. As a
3<PAGE>
<PAGE>
result of this marketing agreement and FERC approval of the Chambersburg
Project (described below), a substantial portion of this capacity will be
released to replacement shippers through the settlement period described
above. The Company is now in the process of assigning the subject capacity.
On May 31, 1995, the FERC issued an order approving the construction and
rate treatment of the Chambersburg Project which includes modifications to
CNG's pipeline which are required to facilitate the use of pipeline capacity
by the replacement shippers.
The Company has also entered into a Supply Portfolio Management agreement
with MidCon Gas Services Corp. (MGSC). MGSC will work with the Company to
identify and implement opportunities for temporary and permanent release of
surplus pipeline capacity, as well as advise with respect to the management of
the Company's gas supply, transportation and storage assets consistent with the
goal of providing reliable service and reducing the cost of gas.
Together, the agreements described above constitute a release of a
substantial portion of the capacity costs in each of the three years of the
settlement period.
4<PAGE>
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The gas base rate increases the Company has agreed to forego subsequent to
1995 during the period of the settlement are approximately $10.4 million in the
aggregate.
The actions taken with respect to the settlement described above will
reduce 1995 earnings by approximately sixty-five cents per share after tax.
Sixteen cents of this amount has already reduced earnings through June 30,
1995. The Company believes that this settlement, by itself, will not
affect its ability to pay dividends on its Common Stock at the current
annual rate of $1.80 per share.
5
EXHIBIT 99-2
[NEWS RELEASE LETTERHEAD OF GAS SETTLEMENT PARTIES]
GAS CAPACITY COST SETTLEMENT REACHED;
RG&E RESPONSIBLE FOR SURPLUS CAPACITY
Rochester, NY, Aug. 17, 1995 -- The staff of the New York State Department
of Public Service, Rochester Gas & Electric Corp. (RG&E), the New York State
Consumer Protection Board (CPB), the New York State Attorney General's Office,
the New York Citizens Utility Board (CUB), American Association of Retired
Persons (AARP) and Jerome Bowe announced today a negotiated settlement which
will moderate natural gas prices to RG&E customers. According to the agreement,
RG&E will:
- REDUCE FUTURE PIPELINE CAPACITY CHARGES AN ADDITIONAL $29.2 MILLION BY
RELEASING CAPACITY TO THIRD PARTIES FOR 1996-1998.
- ABSORB $31.2 MILLION IN GAS PIPELINE AND OTHER COSTS IN 1995.
- FORGO $12.6 MILLION IN REVENUE INCREASES IN 1995 AND 1996.
- FORGO A COMPANY-ESTIMATED $5 MILLION IN REVENUES FROM 1996-1998.
RG&E customers will not be responsible for the costs of any surplus
pipeline capacity. The risk for those costs will be borne by RG&E.<PAGE>
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RG&E will also forgo increases in base rates for three years. Base rates,
which are traditionally adjusted every year, include the cost of operating and
maintaining the local system that delivers gas to customers, taxes, and
depreciation.
The settlement will now be studied by a Department of Public Service
administrative law judge and, after an opportunity for further public comment,
will be sent to the Commission for review and final approval. The Commission is
expected to reach a decision in October. If approved in October, the agreement
will become effective Nov.1.
Negotiations to reach the settlement began in June after customer outcry in
January over a spike in RG&E gas bills. The increase in bills was caused by
several factors -- among them surplus pipeline capacity which RG&E had
contracted for with interstate gas pipelines, errors in calculating some
customer bills, charges related to federal deregulation of the natural gas
industry, and application of the Weather Normalization Adjustment to customer
bills in December and January.
The parties to the settlement said they preferred negotiation to litigation
because it was likely to bring about an equitable solution more quickly.
"We recognize that last winter's gas costs placed a substantial burden on
many of our customers," said RG&E Chairman, President and Chief Executive
Officer Roger W. Kober. "We decided to step forward and take responsibility for
relieving that burden. We accept this settlement in the interest of
stabilizing prices and moving forward to better serve our customers."<PAGE>
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Michelle Phillips, staff counsel for the Department of Public Service noted
that "through the proposal, RG&E consumers would not be charged for capacity in
excess of the levels necessary to provide safe and adequate service and that the
responsibility for decisions made by the company, rests with the company. This
proposal, if approved by the Commission, will provide benefits to consumers in
the upcoming heating season and beyond."
Catherine Dudley, deputy executive director of the New York State Consumer
Protection Board (CPB) said: "The proposed settlement will provide substantial
benefits for consumers. It will reduce and stabilize RG&E gas rates for the
next three years by barring the utility form charging ratepayers for $123
million of excess pipeline capacity and other costs. In addition, we expect
that concerns over RG&E's gas purchasing, billing and customer service problems
will be resolved in further negotiations."
The CPB said the PSC's investigation into the prudence of RG&E's
investments in excess pipeline capacity came in response to a Consumer
Protection Board petition. The CPB also filed comments and motions urging
disallowance of excess pipeline costs.
New York State Attorney General Dennis C. Vacco said: "This settlement not
only makes good sense for RG&E customers, who will receive $123 million in the
form of lower heating bills over the next several winters, but also for the
utility itself.
3<PAGE>
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By acting quicky to address the concerns caused by last winter's excessive gas
bills, the utility has reaffirmed its committment to its customers and the
economy of the Rochester area."
Larry Owens of the American Association of Retired Persons, said: "By
freezing base rates and forbidding RG&E from passing on unwarranted charges to
consumers, this settlement represents a victory for consumers."
Robert Ceisler, executive director of the New York Citizens Utility Board
said: "This agreement marks the first step in CUB's battle to rein in an
otherwise out-of-control utility. This shows the enormous power of thousands of
angry consumers acting together to roll back unfair rates."
Jerome Bowe, a private citizen who was also part of the negotiation
proceeding said, "I have signed this agreement because, in this instance, I
believe the process has worked and the best interest of the ratepayers has been
served. It is the best deal that could be struck without extensive and costly
litigation. However, I continue to have strong concerns about how this process
operates. These chronic problems will not be resolved until this whole process
is overhauled and all energy purchases can be made in an atmosphere of true
competition."
The settlement covers the issues associated with surplus capacity; customer
bills may still fluctuate up or down in the future depending on the actual cost
of the gas commodity itself, as well as certain other factors beyond the
company's control.
4<PAGE>
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RG&E's cost-per-therm for heating customers going into the next heating
season is illustrated by the following table:
THERMS BILL AVERAGE PRICE-PER-THERM
120 $94.01 78.3 CENTS
200 $152.09 76.0 CENTS
300 $224.70 74.9 CENTS
During the coming heating season, the settlement reduces rates by about 15
cents per therm for the average residential spaceheating customer from what they
would have been without the settlement. If this settlement had not been
achieved, RG&E and the other negotiating parties said the typical residential
gas spaceheating customer would have paid about $180 more in the coming year.
Rates for the coming heating season for the average residential
spaceheating customer will be reduced by 10 cents from the rates that were in
effect in January, 1995.
Costs absorbed by the company in 1995 are:
- $23.2 MILLION IN PIPELINE CAPACITY AND OTHER GAS COSTS.
- $8 MILLION OF THE $16 MILLION IN PIPELINE CAPACITY COSTS WHICH THE
COMPANY AND THE PSC AGREED TO DEFER BEGINNING IN 1995. (THE
REMAINING $8 MILLION IS EXPECTED TO BE SOLD).
- $1.9 MILLION IN REVENUE THROUGH THE END OF 1995 FROM A GAS RATE
INCREASE THE COMPANY REQUESTED IN JULY FOR 1995-96 AS PART OF ITS
CURRENT RATE AGREEMENT, BUT NOW WILL WITHDRAW.
- $5.3 MILLION IN REVENUE NOT COLLECTED THIS YEAR RESULTING FROM
SUSPENSION AND REFUNDS OF THE WEATHER NORMALIZATION ADJUSTMENT (WNA)
ON CUSTOMER BILLS FOR THE 1994-95 HEATING SEASON.
5<PAGE>
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Other costs customers will not pay between 1996 and 1998 are:
- $5.4 MILLION FROM THE BALANCE OF THE 1995-96 GAS RATE INCREASE, WHICH
THE COMPANY HAS WITHDRAWN.
- $22.5 MILLION IN PIPELINE CAPACITY COSTS IN 1996.
- $1 MILLION IN COMPANY-ESTIMATED REVENUE RESULTING FROM WITHDRAWAL OF
GAS RATE CASE PROPOSED TO GO INTO EFFECT IN 1996.
- $24.5 MILLION IN PIPELINE CAPACITY COSTS IN 1997.
- $4 MILLION IN COMPANY-ESTIMATED REVENUE RESULTING FROM FORGOING A GAS
RATE INCREASE IN 1997.
- $27.2 MILLION IN PIPELINE CAPACITY COSTS IN 1998.
In a separate proceeding before the Commission, RG&E is also discussing
with the parties ways to improve its billing and bill estimating processes,
meter reading, and customer outreach efforts. The parties expect these problems
to be resolved before the beginning of the next heating season.
RG&E has also sought approval from the state Public Service Commission to
abandon the Weather Normalization Adustment on customer bills as part of this
settlement. The adjustment was a mechanism designed to moderate gas bills by
applying discounts in colder-than-normal winter weather and applying surcharges
in warmer-than-normal winter weather.
6<PAGE>
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Contact persons are:
ROCHESTER GAS & ELECTRIC MIKE POWER 716-724-8828
NYS DEPT. OF PUBLIC SERVICE HONOR KENNEDY 518-474-7080
NYS CONSUMER PROTECTION BOARD JACK KINNICUTT 518-474-1471
NYS ATTORNEY GENERAL'S OFFICE CHRIS MCKENNA 518-473-5525
NY CITIZENS UTILITY BOARD ROBERT CEISLER OR
KEITH GORDON 518-426-4282
AARP LARRY OWENS 716-223-2235
PRIVATE CITIZEN JEROME P. BOWE 716-381-9062
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