FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
[x] Quarterly Report Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
-------------------------
Commission Exact name of registrant as specified in its charter State of I.R.S. Employer
File Number and principal office address and telephone number Incorporation I.D. Number
1-14514 Consolidated Edison, Inc. New York 13-3965100
4 Irving Place, New York, New York 10003
(212) 460-4600
1-1217 Consolidated Edison Company
of New York, Inc. New York 13-5009340
4 Irving Place, New York, New York 10003
(212) 460-4600
1-4315 Orange and Rockland Utilities, Inc. New York 13-1727729
One Blue Hill Plaza, Pearl River, New York 10965
(914) 352-6000
Indicate by check mark whether each 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes ___X___ No _______
As of the close of business on April 30, 2000, Consolidated Edison, Inc. ("Con
Edison") had outstanding 211,966,422 Common Shares ($.10 par value). Con Edison
owns all of the outstanding common equity of Consolidated Edison Company of New
York, Inc.("Con Edison of New York") and Orange and Rockland Utilities, Inc.
("O&R").
O&R MEETS THE CONDITIONS SPECIFIED IN GENERAL INSTRUCTION H (1) (a) AND (b) OF
FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
- 2 -
TABLE OF CONTENTS
PAGE
PART I. - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Con Edison Consolidated Balance Sheet 4-5
Consolidated Income Statements 6
Consolidated Statements of Cash Flows 7
Notes to Financial Statements 8-10
Con Edison Consolidated Balance Sheet 11-12
of New York Consolidated Income Statements 13
Consolidated Statement of Cash Flows 14
Notes to Financial Statements 15-16
O&R Consolidated Balance Sheet 17-18
Consolidated Income Statements 19
Consolidated Statement of Cash Flows 20
Notes to Financial Statements 21-22
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Con Edison 23-29
Con Edison of New York 30-35
O&R *
O&R MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS 36-38
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
Con Edison 39
Con Edison of New York 39
O&R *
PART II. - OTHER INFORMATION
ITEM 1. Legal Proceedings 40
ITEM 4. Submission of Matters to a Vote of Securities Holders 41
ITEM 6. Exhibits and Reports on Form 8-K 41-42
- --------------------
* O&R is omitting this information pursuant to General Instruction H of Form
10-Q.
- 3 -
FILING FORMAT
This Quarterly Report on Form 10-Q is a combined report being filed separately
by three different registrants: Consolidated Edison, Inc. ("Con Edison"),
Consolidated Edison Company of New York, Inc. ("Con Edison of New York") and
Orange and Rockland Utilities, Inc. ("O&R"). Neither Con Edison of New York nor
O&R makes any representation as to the information contained in this report
relating to Con Edison or the subsidiaries of Con Edison other than itself.
O&R, a wholly-owned subsidiary of Con Edison, meets the conditions specified in
General Instruction H of Form 10-Q and is permitted to use the reduced
disclosure format for wholly-owned subsidiaries of companies, such as Con
Edison, that are reporting companies under the Securities Exchange Act of 1934.
Accordingly, O&R has omitted from this report the information called for by Part
1, Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations and has included in this report its Management's Narrative
Analysis of the Results of Operations. In accordance with general instruction H,
O&R has also omitted from this report the information, if any, called for by
Part 1, Item 3, Quantitative and Qualitative Disclosure About Market Risk; Part
II, Item 2, Changes in Securities and Use of Proceeds; Part II, Item 3,
Defaults Upon Senior Securities; and Part II, Item 4, Submission of Matters to a
Vote of Security Holders.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements, which
are statements of future expectation and not facts. Words such as "estimates,"
"expects," "anticipates," "intends," "plans" and similar expressions identify
forward-looking statements. Actual results or developments might differ
materially from those included in the forward-looking statements because of
factors such as competition and industry restructuring, Con Edison's pending
acquisition of Northeast Utilities, technological developments, changes in
economic conditions, changes in historical weather patterns, changes in laws,
regulations or regulatory policies, developments in legal or public policy
doctrines, and other presently unknown or unforeseen factors
-4-
CONSOLIDATED EDISON, INC.
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 2000 AND DECEMBER 31, 1999
As at
---------------------------------------
March 31, 2000 December 31, 1999
---------------- -------------------
(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric $11,376,954 $11,323,826
Gas 2,203,542 2,197,735
Steam 727,163 722,265
General 1,377,427 1,328,544
Unregulated generating assets 49,787 48,583
----------- -----------
Total 15,734,873 15,620,953
Less: Accumulated depreciation 4,810,147 4,733,613
----------- -----------
Net 10,924,726 10,887,340
Construction work in progress 416,569 381,804
Nuclear fuel assemblies and components,
less accumulated amortization 101,407 84,701
----------- -----------
NET UTILITY PLANT 11,442,702 11,353,845
----------- -----------
CURRENT ASSETS
Cash and temporary cash investments 73,604 485,050
Accounts receivable - customer, less
allowance for uncollectible accounts
of $ 33,913 and $ 34,821 706,053 647,545
Other receivables 73,557 98,454
Fuel, at average cost 31,902 24,271
Gas in storage, at average cost 34,762 55,387
Materials and supplies, at average cost 143,680 142,905
Prepayments 345,716 197,671
Other current assets 65,883 61,395
----------- -----------
TOTAL CURRENT ASSETS 1,475,157 1,712,678
----------- -----------
INVESTMENTS
Nuclear decommissioning trust funds 300,397 305,717
Other 189,776 182,201
----------- -----------
TOTAL INVESTMENTS 490,173 487,918
----------- -----------
DEFERRED CHARGES
Goodwill 424,691 427,496
Regulatory assets
Future federal income tax 777,327 785,014
Recoverable fuel costs 118,465 95,162
Power contract termination costs 72,260 71,861
Accrued unbilled gas revenues 72,119 67,775
MTA business tax surcharge 64,517 60,712
Other 352,314 303,628
----------- -----------
Total regulatory assets 1,457,002 1,384,152
Other deferred charges 164,406 165,387
----------- -----------
TOTAL DEFERRED CHARGES 2,046,099 1,977,035
----------- -----------
TOTAL $15,454,131 $15,531,476
=========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
CONSOLIDATED EDISON, INC.
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 2000 AND DECEMBER 31, 1999
As at
------------------------------------------
March 31, 2000 December 31, 1999
----------------- -------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, authorized 500,000,000
shares; outstanding 211,959,922 shares
and 213,810,634 shares $ 1,482,341 $ 1,482,341
Retained earnings 4,993,778 4,921,089
Treasury stock, at cost; 23,210,700 shares
and 21,358,500 shares (1,015,946) (955,311)
Capital stock expense (36,044) (36,112)
------------ ------------
TOTAL COMMON SHAREHOLDERS' EQUITY 5,424,129 5,412,007
------------ ------------
Preferred stock subject to mandatory redemption 37,050 37,050
Other preferred stock 212,563 212,563
Long-term debt 4,375,030 4,524,604
------------ ------------
TOTAL CAPITALIZATION 10,048,772 10,186,224
------------ ------------
NONCURRENT LIABILITIES
Obligations under capital leases 33,805 34,544
Accumulated provision for injuries and damages 128,114 119,010
Pension and benefits reserve 161,423 143,757
Other noncurrent liabilities 42,984 42,865
------------ ------------
TOTAL NONCURRENT LIABILITIES 366,326 340,176
------------ ------------
CURRENT LIABILITIES
Long - term debt due within one year 320,000 395,000
Notes payable 510,129 495,371
Accounts payable 610,989 615,983
Customer deposits 201,000 204,421
Accrued taxes 38,276 18,389
Accrued interest 47,849 60,061
Accrued wages 79,565 79,408
Other current liabilities 271,608 232,706
------------ ------------
TOTAL CURRENT LIABILITIES 2,079,416 2,101,339
------------ ------------
DEFERRED CREDITS
Accumulated deferred federal income tax 2,327,477 2,267,548
Regulatory liabilities
Gain on divestiture 307,019 306,867
Accumulated deferred investment tax credits 137,796 139,838
Other 187,325 189,317
------------ ------------
Total regulatory liabilities 632,140 636,022
Other deferred credits -- 167
------------ ------------
TOTAL DEFERRED CREDITS 2,959,617 2,903,737
------------ ------------
TOTAL $ 15,454,131 $ 15,531,476
============ ============
The accompanying notes are an integral part of these financial statements.
-6-
CONSOLIDATED EDISON, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
----- ----
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 1,512,248 $ 1,193,500
Gas 469,473 381,342
Steam 170,258 140,733
Non-utility 166,612 61,011
----------- -----------
TOTAL OPERATING REVENUES 2,318,591 1,776,586
----------- -----------
OPERATING EXPENSES
Purchased power 729,161 287,826
Fuel 86,265 117,540
Gas purchased for resale 266,298 180,531
Other operations 312,098 295,803
Maintenance 106,832 101,596
Depreciation and amortization 142,722 132,708
Taxes, other than federal income tax 291,081 300,380
Federal income tax 101,425 101,735
----------- -----------
TOTAL OPERATING EXPENSES 2,035,882 1,518,119
----------- -----------
OPERATING INCOME 282,709 258,467
OTHER INCOME (DEDUCTIONS)
Investment income 4,323 1,415
Allowance for equity funds used during construction (577) 972
Other income less miscellaneous deductions (168) (366)
Federal income tax (1,200) (220)
----------- -----------
TOTAL OTHER INCOME 2,378 1,801
----------- -----------
INCOME BEFORE INTEREST CHARGES 285,087 260,268
Interest on long-term debt 83,313 75,843
Other interest 11,996 4,834
Allowance for borrowed funds used during construction (1,755) (454)
----------- -----------
NET INTEREST CHARGES 93,554 80,223
----------- -----------
PREFERRED STOCK DIVIDEND REQUIREMENTS 3,398 3,398
----------- -----------
NET INCOME FOR COMMON STOCK $ 188,135 $ 176,647
=========== ===========
COMMON SHARES OUTSTANDING - AVERAGE (000) 212,641 230,997
BASIC EARNINGS PER SHARE $ 0.88 $ 0.76
=========== ===========
DILUTED EARNINGS PER SHARE $ 0.88 $ 0.76
=========== ===========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.545 $ 0.535
=========== ===========
The accompanying notes are an integral part of these financial statements.
-7-
CONSOLIDATED EDISON, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
---- ----
(Thousands of Dollars)
OPERATING ACTIVITIES
Net income for common stock $ 188,135 $ 176,647
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 142,722 132,708
Federal income tax deferred 67,211 42,175
Common equity component of allowance for funds used
during construction (561) (952)
Other non-cash charges 27,701 8,606
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customer, less allowance for
uncollectibles (58,508) (52,762)
Materials and supplies, including fuel and gas in storage 12,219 32,505
Prepayments, other receivables and other current assets (127,636) (114,518)
Enlightened Energy program costs 7,615 11,323
Deferred recoverable fuel costs (23,303) 29,626
Cost of removal less salvage (18,800) (17,143)
Power contract termination costs (1,050) (1,050)
Accounts payable (4,994) (19,579)
Accrued income taxes 28,529 (1,129)
Other-net (40,098) 62,698
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 199,182 289,155
--------- ---------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (180,226) (120,896)
Nuclear fuel expenditures (21,123) (1,337)
Contributions to nuclear decommissioning trust (5,325) (5,325)
Common equity component of allowance for funds used
during construction 561 952
Non-regulated subsidiary investments (9,237) (1,217)
Non-regulated subsidiary utility plant (734) --
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
INCLUDING CONSTRUCTION (216,084) (127,823)
--------- ---------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
Repurchase of common stock (68,524) (204,205)
Net proceeds from short-term debt 14,757 121,906
Additions to long-term debt (20) --
Retirement of long-term debt (225,000) --
Issuance and refunding costs (49) (53)
Common stock dividends (115,708) (123,772)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCLUDING DIVIDENDS (394,544) (206,124)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS (411,446) (44,792)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 485,050 102,295
--------- ---------
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31 $ 73,604 $ 57,503
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 93,563 $ 85,512
Income taxes -- --
The accompanying notes are an integral part of these financial statements.
-8-
NOTES TO FINANCIAL STATEMENTS - CON EDISON
NOTE A - GENERAL
These footnotes accompany and form an integral part of the interim consolidated
financial statements of Consolidated Edison, Inc. (Con Edison) and its
subsidiaries, including the regulated utility Consolidated Edison Company of New
York, Inc. (Con Edison of New York), the regulated utility Orange and Rockland
Utilities, Inc. (O&R), which Con Edison acquired in July 1999, and several
non-utility subsidiaries. These financial statements are unaudited but, in the
opinion of Con Edison's management, reflect all adjustments (which include only
normally recurring adjustments) necessary for a fair statement of the results
for the interim periods presented. These financial statements should be read
together with the audited Con Edison financial statements (including the notes
thereto) included in the combined Con Edison, Con Edison of New York and O&R
Annual Report on Form 10-K for the year ended December 31, 1999 (the "Form
10-K").
NOTE B - ENVIRONMENTAL MATTERS
Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and
coal tar, have been used or generated in the course of operations of Con
Edison's utility subsidiaries and may be present in their facilities and
equipment.
The Federal Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (Superfund) and similar state statutes impose joint and several strict
liability, regardless of fault, upon generators of hazardous substances for
resulting removal and remedial costs and environmental damages. Liabilities
under these laws can be material and in some instances may be imposed without
regard to fault, or may be imposed for past acts, even though such past acts may
have been lawful at the time they occurred.
At March 31, 2000, Con Edison had accrued a $59.1 million liability as its best
estimate of the utility subsidiaries' liability for sites as to which they have
received process or notice alleging that hazardous substances generated by them
(and, in most instances, other potentially responsible parties) were deposited.
There will be additional liability at these sites and other sites, the amount of
which is not presently determinable but may be material to Con Edison's
financial position, results of operations or liquidity.
Under the utility subsidiaries' current rate agreements, certain site
investigation and remediation costs incurred with respect to hazardous waste for
which it is responsible are to be deferred and subsequently reflected in rates.
At March 31, 1999, $18.4 million of such costs had been deferred as a regulatory
asset.
Suits have been brought in New York State and federal courts against the utility
subsidiaries and many other defendants, wherein a large number of plaintiffs
sought large amounts of compensatory and punitive damages for deaths and
injuries allegedly caused by exposure to asbestos at various premises of the
utility subsidiaries. Many of these suits have been disposed of without any
payment by the utility subsidiaries, or for immaterial amounts. The amounts
specified in all the remaining suits total billions of dollars but Con Edison
believes that these amounts are greatly exaggerated, as were the claims already
disposed of. Based on the information and relevant circumstances known to Con
Edison at this time, it does not believe that these suits will have a material
adverse effect on its financial position, results of operations or liquidity.
-9-
NOTE C - NUCLEAR GENERATION
Con Edison of New York owns the Indian Point 2 nuclear generating unit, which
has a capacity of approximately 1,000 MW, and the retired Indian Point 1 nuclear
generating unit. See Note G to the Con Edison financial statements included in
the Form 10-K.
On February 15, 2000, Con Edison of New York shut down Indian Point 2 following
a leak in one if its steam generators. The company is continuing its analysis of
the leak and the steam generators. Nuclear Regulatory Commission approval will
be required to restart the plant.
Refueling and maintenance procedures that had been planned for a previously
scheduled late April 2000 outage are being performed as part of the current
outage. In addition, Con Edison of New York has undertaken preliminary
engineering and other work for the replacement of the steam generators. The
company has owned replacement steam generators since 1988, and estimates that
replacing the steam generators could require additional expenditures of
approximately $135 million (exclusive of replacement power costs). The company
expects that the work to replace the steam generators could take six to eight
months. However, the company is unable to predict how long Indian Point 2 would
be out of service for steam generator replacement since a significant part of
the work could be performed while the unit is in service. The company has not
yet determined whether steam generator replacement will be required before the
unit returns to service from the current outage or after its return to service
and operation.
The costs of buying electric power to replace the power that would have been
generated at Indian Point 2 had it remained in service are being billed to
customers pursuant to the fuel adjustment mechanism applicable to Con Edison of
New York's electric rates. See "Recoverable Fuel Costs" in Note A to the Con
Edison financial statements included in the Form 10-K. Since the start of the
outage, the replacement power costs have been estimated at approximately
$600,000 per day. These costs vary with the market price of energy. A number of
parties have threatened legal action, and legislation is pending in the New York
State legislature, to prevent Con Edison of New York from recovering replacement
power costs. On March 30, 2000, the New York State Public Service Commission
(the "PSC") issued an order instituting a proceeding to investigate the Indian
Point 2 outage and its causes and the prudence of the company's actions
regarding the operation and maintenance of Indian Point 2. The order indicated
that the examination should include, among other things, Con Edison of New
York's inspection practices, the circumstances surrounding Indian Point 2's
October 1997 to September 1998 outage, the basis for postponement of the steam
generator replacement and whether, and to what extent, increased replacement
power costs and repair and replacement costs should be borne by Con Edison's
shareholders.
Con Edison believes that Con Edison of New York's operation, maintenance and
inspection practices related to Indian Point 2 have been prudent, but it is
unable to predict whether or not the PSC's proceeding or any Indian Point
2-related proceedings, lawsuits, legislation or other actions will have a
material adverse effect on Con Edison's financial position, results of
operations or liquidity.
-10-
NOTE D - O&R
In July 1999, Con Edison completed its acquisition of O&R for $791.5 million in
cash. See Note K to the Con Edison financial statements included in the Form
10-K. The unaudited pro-forma consolidated Con Edison financial information
shown below has been prepared based upon the historical consolidated income
statements of Con Edison and O&R for the three month period ended March 31,
1999, giving effect to the acquisition as if it had occurred at January 1, 1999.
The historical information has been adjusted to reflect amortization for the
three month period of the goodwill recorded by Con Edison in connection with the
acquisition and the after-tax cost Con Edison would have incurred during the
period for financing the acquisition by issuing debt on January 1, 1999 at an
assumed 8 percent per annum interest rate. The proforma information is not
necessarily indicative of the results that Con Edison would have had if the
acquisition had been completed prior to July 1999, or the results that Con
Edison will have in the future.
(Dollars in Thousands, Three Months Ended
except per share amounts) March 31, 1999
Revenues $1,959,641
Operating income 266,047
Net income 175,130
Earnings per share $ 0.76
Average shares outstanding (000) 230,997
NOTE E - FINANCIAL INFORMATION BY BUSINESS SEGMENT
CONSOLIDATED EDISON, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
ELECTRIC GAS
-------- ---
2000 1999 2000 1999
---- ---- ---- ----
Operating revenues $ 1,512,248 $ 1,193,500 $ 469,473 $381,342
Intersegment revenues 18,743 19,392 2,331 615
Depreciation and amortization 117,179 112,112 16,884 15,712
Operating income 153,454 147,149 100,614 88,446
STEAM OTHER
----- -----
2000 1999 2000 1999
---- ---- ---- ----
Operating revenues $ 170,258 $ 140,733 $ 166,612 $ 61,011
Intersegment revenues 417 414 369 221
Depreciation and amortization 4,592 4,449 4,067 435
Operating income 30,425 29,702 (1,784) (6,830)
TOTAL
-----
2000 1999
---- ----
Operating revenues $ 2,318,591 $ 1,776,586
Intersegment revenues 21,860 20,642
Depreciation and amortization 142,722 132,708
Operating income 282,709 258,467
-11-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
BALANCE SHEET
AS AT MARCH 31, 2000 AND DECEMBER 31, 1999
As at
------------------------------------------
March 31, 2000 December 31, 1999
------------------- --------------------
(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric $10,750,069 $10,670,257
Gas 1,947,876 1,934,090
Steam 727,163 722,265
General 1,228,109 1,220,948
----------- -----------
Total 14,653,217 14,547,560
Less: Accumulated depreciation 4,454,541 4,384,783
----------- -----------
Net 10,198,676 10,162,777
Construction work in progress 392,225 359,431
Nuclear fuel assemblies and components,
less accumulated amortization 101,407 84,701
----------- -----------
NET UTILITY PLANT 10,692,308 10,606,909
----------- -----------
CURRENT ASSETS
Cash and temporary cash investments 14,880 349,033
Accounts receivable - customer, less
allowance for uncollectible accounts
of $ 23,303 and $ 22,600 589,782 541,978
Other receivables 69,027 71,746
Fuel, at average cost 31,257 23,641
Gas in storage, at average cost 20,205 40,280
Materials and supplies, at average cost 139,354 138,300
Prepayments 333,494 178,693
Other current assets 38,312 32,513
----------- -----------
TOTAL CURRENT ASSETS 1,236,311 1,376,184
----------- -----------
INVESTMENTS
Nuclear decommissioning trust funds 300,397 305,717
Other 16,478 18,491
----------- -----------
TOTAL INVESTMENTS 316,875 324,208
----------- -----------
DEFERRED CHARGES
Regulatory assets
Future federal income tax 744,138 751,899
Recoverable fuel costs 106,597 78,650
Power contract termination costs 72,260 71,861
Accrued unbilled gas revenue 43,594 43,594
MTA business tax surcharge 59,335 60,712
Other 264,445 218,535
----------- -----------
Total regulatory assets 1,290,369 1,225,251
Other deferred charges 149,040 149,600
----------- -----------
TOTAL DEFERRED CHARGES 1,439,409 1,374,851
----------- -----------
TOTAL $13,684,903 $13,682,152
=========== ===========
The accompanying notes are an integral part of these financial statements.
-12-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
BALANCE SHEET
AS AT MARCH 31, 2000 AND DECEMBER 31, 1999
As at
------------------------------------------
March 31, 2000 December 31, 1999
----------------- --------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock $ 1,482,341 $ 1,482,341
Repurchased CEI common stock (962,092) (940,477)
Retained earnings 3,950,567 3,887,993
Capital stock expense (36,019) (36,086)
------------ ------------
TOTAL COMMON SHAREHOLDERS' EQUITY 4,434,797 4,393,771
------------ ------------
Preferred stock
Subject to mandatory redemption
6-1/8% Series J 37,050 37,050
------------ ------------
TOTAL SUBJECT TO MANDATORY REDEMPTION 37,050 37,050
------------ ------------
Other preferred stock
$5 Cumulative Preferred 175,000 175,000
4.65% Series C 15,330 15,330
4.65% Series D 22,233 22,233
------------ ------------
TOTAL OTHER PREFERRED STOCK 212,563 212,563
------------ ------------
TOTAL PREFERRED STOCK 249,613 249,613
------------ ------------
Long - term debt 4,093,512 4,243,080
------------ ------------
TOTAL CAPITALIZATION 8,777,922 8,886,464
------------ ------------
NONCURRENT LIABILITIES
Obligations under capital leases 33,672 34,406
Accumulated provision for injuries and damages 118,799 110,131
Pension and benefits reserve 95,336 76,807
Other noncurrent liabilities 17,210 17,210
------------ ------------
TOTAL NONCURRENT LIABILITIES 265,017 238,554
------------ ------------
CURRENT LIABILITIES
Long - term debt due within one year 300,000 275,000
Accounts payable 506,215 505,357
Notes payable 480,629 495,371
Customer deposits 194,106 208,865
Accrued taxes 40,081 23,272
Accrued interest 42,166 51,581
Accrued wages 79,565 79,408
Other current liabilities 217,874 202,657
------------ ------------
TOTAL CURRENT LIABILITIES 1,860,636 1,841,511
------------ ------------
DEFERRED CREDITS
Accumulated deferred federal income tax 2,186,731 2,121,054
Regulatory liabilities
Gain on divestiture 307,019 306,867
Accumulated deferred investment tax credits 130,558 132,487
Other 157,020 155,215
------------ ------------
Total regulatory liabilities 594,597 594,569
TOTAL DEFERRED CREDITS 2,781,328 2,715,623
------------ ------------
TOTAL $ 13,684,903 $ 13,682,152
============ ============
The accompanying notes are an integral part of these financial statements.
-13-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
----- ----
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 1,423,160 $ 1,210,194
Gas 393,643 381,342
Steam 170,258 140,733
------------ ------------
TOTAL OPERATING REVENUES 1,987,061 1,732,269
------------ ------------
OPERATING EXPENSES
Purchased power 618,243 282,442
Fuel 85,198 117,540
Gas purchased for resale 159,552 148,061
Other operations 257,099 281,418
Maintenance 100,684 101,596
Depreciation and amortization 131,540 132,273
Taxes, other than federal income tax 270,303 298,876
Federal income tax 95,957 104,766
------------ ------------
TOTAL OPERATING EXPENSES 1,718,576 1,466,972
------------ ------------
OPERATING INCOME 268,485 265,297
OTHER INCOME (DEDUCTIONS)
Investment income 639 61
Allowance for equity funds used during construction (626) 972
Other income less miscellaneous deductions 111 (634)
Federal income tax (390) (58)
------------ ------------
TOTAL OTHER INCOME (266) 341
------------ ------------
INCOME BEFORE INTEREST CHARGES 268,219 265,638
Interest on long-term debt 76,750 75,843
Other interest 11,470 4,834
Allowance for borrowed funds used during construction (1,681) (454)
------------ ------------
NET INTEREST CHARGES 86,539 80,223
------------ ------------
NET INCOME 181,680 185,415
PREFERRED STOCK DIVIDEND REQUIREMENTS 3,398 3,398
------------ ------------
NET INCOME FOR COMMON STOCK $ 178,282 $ 182,017
============ ============
CON EDISON OF NEW YORK SALES
Electric (thousands of kilowatthours)
Con Edison of New York customers 7,616,450 8,406,243
Delivery service for Retail Choice 2,254,849 1,049,068
Delivery service to NYPA and others 2,474,889 2,473,339
------------ ------------
Total sales in service territory 12,346,188 11,928,650
Off-system and ESCO sales 1,566,554 1,358,161
Gas (dekatherms)
Firm sales and transportation 41,698,003 40,595,350
Off-peak firm/interruptible 4,855,049 5,163,556
------------ ------------
Total sales to Con Edison of New York customers 46,553,052 45,758,906
Transportation of customer-owned gas
NYPA 3,224,517 15,953
Other 20,321,571 6,801,098
Off-system sales 8,898,564 8,457,822
------------ ------------
Total sales and transportation 78,997,704 61,033,779
Steam (thousands of pounds) 10,225,610 10,216,257
The accompanying notes are an integral part of these financial statements.
-14-
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
---- ----
(Thousands of Dollars)
OPERATING ACTIVITIES
Net income $ 181,680 $ 185,415
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 131,540 132,273
Federal income tax deferred 70,582 39,671
Common equity component of allowance for funds used
during construction (609) (952)
Other non-cash charges 3,520 8,606
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customer, less allowance for
uncollectibles (47,804) (46,002)
Materials and supplies, including fuel and gas in storage 11,405 32,053
Prepayments, other receivables and other current assets (157,881) (116,721)
Enlightened Energy program costs 7,615 11,323
Deferred recoverable fuel costs (27,947) 29,626
Cost of removal less salvage (18,800) (17,143)
Power contract termination costs (1,050) (1,050)
Accounts payable 858 (12,686)
Accrued income taxes 25,783 4,445
Other-net (29,475) 74,893
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 149,417 323,751
--------- ---------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (169,386) (120,896)
Nuclear fuel expenditures (21,123) (1,337)
Contributions to nuclear decommissioning trust (5,325) (5,325)
Common equity component of allowance for funds used
during constructn 609 952
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
INCLUDING CONSTRUCTION (195,225) (126,606)
--------- ---------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
Repurchase of common stock (29,447) (204,205)
Net proceeds from short-term debt (14,743) 121,906
Retirement of long-term debt (125,000) --
Issuance and refunding costs (49) (53)
Common stock dividends (115,708) (123,772)
Preferred stock dividends (3,398) (3,398)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCLUDING DIVIDENDS (288,345) (209,522)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS (334,153) (12,377)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 349,033 30,026
--------- ---------
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31 $ 14,880 $ 17,649
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 83,651 $ 85,512
Income taxes -- --
The accompanying notes are an integral part of these financial statements.
-15-
NOTES TO FINANCIAL STATEMENTS - CON EDISON OF NEW YORK
NOTE A - GENERAL
These footnotes accompany and form an integral part of the interim consolidated
financial statements of Consolidated Edison Company of New York, Inc. (Con
Edison of New York) and its subsidiaries. Consolidated Edison, Inc. (Con Edison)
owns all of the outstanding common stock of Con Edison of New York. These
financial statements are unaudited but, in the opinion of Con Edison of New
York's management, reflect all adjustments (which include only normally
recurring adjustments) necessary for a fair statement of the results for the
interim periods presented. These financial statements should be read together
with the audited Con Edison of New York financial statements (including the
notes thereto) included in the combined Con Edison, Con Edison of New York and
Orange and Rockland Utilities, Inc. Annual Report on Form 10-K for the year
ended December 31, 1999 (the "Form 10-K").
NOTE B - ENVIRONMENTAL MATTERS
Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and
coal tar, have been used or generated in the course of operations of Con Edison
of New York and may be present in its facilities and equipment. The Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund) and similar state statutes impose joint and several strict
liability, regardless of fault, upon generators of hazardous substances for
resulting removal and remedial costs and environmental damages. Liabilities
under these laws can be material and in some instances may be imposed without
regard to fault, or may be imposed for past acts, even though such past acts may
have been lawful at the time they occurred.
At March 31, 2000, Con Edison of New York had accrued a $51.8 million liability
as its best estimate of its liability for sites as to which it has received
process or notice alleging that hazardous substances generated by the company
(and, in most instances, other potentially responsible parties) were deposited.
There will be additional liability at these sites and other sites, the amount of
which is not presently determinable but may be material to the company's
financial position, results of operations or liquidity.
Under Con Edison of New York's current electric, gas and steam rate agreements,
site investigation and remediation costs in excess of $5 million annually
incurred with respect to hazardous waste for which it is responsible are to be
deferred and subsequently reflected in rates. At March 31, 2000, $10 million of
such costs had been deferred as a regulatory asset.
Suits have been brought in New York State and federal courts against Con Edison
of New York and many other defendants, wherein a large number of plaintiffs
sought large amounts of compensatory and punitive damages for deaths and
injuries allegedly caused by exposure to asbestos at various premises of the
company. Many of these suits have been disposed of without any payment by Con
Edison of New York, or for immaterial amounts. The amounts specified in all the
remaining suits total billions of dollars but the company believes that these
amounts are greatly exaggerated, as were the claims already disposed of. Based
on the information and relevant circumstances known to the company at this time,
it does not believe that these suits will have a material adverse effect on its
financial position, results of operations or liquidity.
-16-
NOTE C - NUCLEAR GENERATION
Con Edison of New York owns the Indian Point 2 nuclear generating unit, which
has a capacity of approximately 1,000 MW, and the retired Indian Point 1 nuclear
generating unit. See Note G to the Con Edison of New York financial statements
included in the Form 10-K.
On February 15, 2000, Con Edison of New York shut down Indian Point 2 following
a leak in one if its steam generators. The company is continuing its analysis of
the leak and the steam generators. Nuclear Regulatory Commission approval will
be required to restart the plant.
Refueling and maintenance procedures that had been planned for a previously
scheduled late April 2000 outage are being performed as part of the current
outage. In addition, Con Edison of New York has undertaken preliminary
engineering and other work for the replacement of the steam generators. The
company has owned replacement steam generators since 1988, and estimates that
replacing the steam generators could require additional expenditures of
approximately $135 million (exclusive of replacement power costs). The company
expects that the work to replace the steam generators could take six to eight
months. However, the company is unable to predict how long Indian Point 2 would
be out of service for steam generator replacement since a significant part of
the work could be performed while the unit is in service. The company has not
yet determined whether steam generator replacement will be required before the
unit returns to service from the current outage or after its return to service
and operation.
The costs of buying electric power to replace the power that would have been
generated at Indian Point 2 had it remained in service are being billed to
customers pursuant to the fuel adjustment mechanism applicable to Con Edison of
New York's electric rates. See "Recoverable Fuel Costs" in Note A to the Con
Edison of New York financial statements included in the Form 10-K. Since the
start of the outage, the replacement power costs have been estimated at
approximately $600,000 per day. These costs vary with the market price of
energy. A number of parties have threatened legal action, and legislation is
pending in the New York State legislature, to prevent Con Edison of New York
from recovering replacement power costs. On March 30, 2000, the New York State
Public Service Commission (the "PSC") issued an order instituting a proceeding
to investigate the Indian Point 2 outage and its causes and the prudence of the
company's actions regarding the operation and maintenance of Indian Point 2. The
order indicated that the examination should include, among other things, Con
Edison of New York's inspection practices, the circumstances surrounding Indian
Point 2's October 1997 to September 1998 outage, the basis for postponement of
the steam generator replacement and whether, and to what extent, increased
replacement power costs and repair and replacement costs should be borne by Con
Edison's shareholders.
Con Edison of New York believes that its operation, maintenance and inspection
practices related to Indian Point 2 have been prudent, but it is unable to
predict whether or not the PSC's proceeding or any Indian Point 2-related
proceedings, lawsuits, legislation or other actions will have a material adverse
effect on its financial position, results of operations or liquidity.
NOTE D - FINANCIAL INFORMATION BY BUSINESS SEGMENT
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
ELECTRIC GAS
-------- ---
2000 1999 2000 1999
---- ---- ---- ----
Operating revenues $1,423,160 $1,210,194 $ 393,643 $ 381,342
Intersegment revenues 3,185 2,697 703 615
Depreciation and amortization 112,217 112,112 14,731 15,712
Operating income 146,737 147,149 91,323 88,446
STEAM TOTAL
----- -----
2000 1999 2000 1999
---- ---- ---- ----
Operating revenues $ 170,258 $ 140,733 $ 1,987,061 $ 1,732,269
Intersegment revenues 417 414 4,305 3,726
Depreciation and amortization 4,592 4,449 131,540 132,273
Operating income 30,425 29,702 268,485 265,297
-17-
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As at March 31, 2000 and December 31, 1999
As At
------------------------------------------
March 31, 2000 December 31, 1999
------------------- ------------------
(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric $ 626,885 $ 653,503
Gas 255,666 263,645
Common 149,318 107,661
---------- ----------
Total 1,031,869 1,024,809
Less: accumulated depreciation 354,368 348,060
---------- ----------
Net 677,501 676,749
Construction work in progress 24,344 22,373
---------- ----------
NET UTILITY PLANT 701,845 699,122
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 25,283 78,927
Customer accounts receivable, less allowance for
uncollectable accounts of $4,511 and $5,395 59,477 58,586
Other accounts receivable, less allowance for
uncollectable accounts of $1,308 and $1,401 11,781 13,333
Accrued utility revenue 28,525 24,181
Fuel, at average cost 644 630
Gas in storage, at average cost 4,306 14,226
Materials and supplies, at average cost 4,326 4,333
Prepayments 11,209 20,761
Other current assets 22,211 22,316
---------- ----------
TOTAL CURRENT ASSETS 167,762 237,293
---------- ----------
INVESTMENTS
Non-Utility Property-net of accumulated depreciation and amortization 3,411 3,415
Other 6 6
---------- ----------
TOTAL INVESTMENTS 3,417 3,421
---------- ----------
DEFERRED CHARGES
Regulatory Assets
Future federal income tax 33,189 33,115
Recoverable fuel costs 13,622 18,400
Deferred revenue taxes 9,855 10,130
Deferred pension and other postretirement benefits 42,955 45,328
Other regulatory assets 36,461 34,730
---------- ----------
Total Regulatory assets 136,082 141,703
Other deferred charges 15,054 7,237
---------- ----------
TOTAL DEFERRED CHARGES 151,136 148,940
---------- ----------
TOTAL $1,024,160 $1,088,776
========== ==========
The accompanying notes are an integral part of these financial statements.
-18-
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As at March 31, 2000 and December 31, 1999
As At
----------------------------------------
March 31, 2000 December 31, 1999
----------------- -------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $ 5 $ 5
Additional paid in capital 354,798 354,798
Capital stock expense (26) (25)
Retained earnings (12,054) (22,764)
----------- -----------
TOTAL COMMON SHAREHOLDERS' EQUITY 342,723 332,014
Long term debt 281,519 281,524
----------- -----------
TOTAL CAPITALIZATION 624,242 613,538
----------- -----------
NON-CURRENT LIABILITIES:
Pension and Benefit Reserve 66,087 66,950
Other noncurrent liabilities 35,092 34,538
----------- -----------
TOTAL NON-CURRENT LIABILITIES 101,179 101,488
----------- -----------
CURRENT LIABILITIES:
Long-term debt due within one year 20,000 120,000
Notes payable 29,500 --
Accounts payable 46,091 54,731
Accrued Federal income and other taxes 2,302 --
Customer deposits 6,894 7,217
Accrued interest 5,724 8,521
Other current liabilities 42,288 22,319
----------- -----------
TOTAL CURRENT LIABILTIES 152,799 212,788
----------- -----------
DEFERRED CREDITS
Deferred Federal income taxes 108,397 119,509
Deferred investment tax credits 7,238 7,351
Regulatory liabilities and other deferred credits 30,305 34,102
----------- -----------
TOTAL DEFERRED CREDITS 145,940 160,962
----------- -----------
TOTAL $ 1,024,160 $ 1,088,776
=========== ===========
The accompanying notes are an integral part of these financial statements.
-19-
ORANGE AND ROCKLAND UTILITIES, INC.
CONSOLIDATED INCOME STATEMENT
For the three months ended March 31, 2000 and 1999
2000 1999
---- ----
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 104,643 $ 108,914
Gas 77,458 74,068
Non-utility 95 73
------------ ------------
TOTAL OPERATING REVENUES 182,196 183,055
------------ ------------
OPERATING EXPENSES
Purchased power 54,557 12,680
Fuel 39 19,629
Gas purchased for resale 48,146 41,963
Purchases from Con Ed 180 100
Other operations 28,911 37,623
Maintenance 6,149 8,957
Depreciation and amortization 7,116 9,488
Taxes, other than federal income tax 16,461 24,797
Federal income tax 4,850 7,205
------------ ------------
TOTAL OPERATING EXPENSES 166,409 162,442
------------ ------------
OPERATING INCOME 15,787 20,613
OTHER INCOME (DEDUCTIONS)
Investment income 3,105 201
Allowance for equity funds used during construction 50 9
Other income and deductions (348) (323)
Federal income tax (892) 142
------------ ------------
TOTAL OTHER INCOME 1,915 29
------------ ------------
Income before interest charges 17,702 20,642
INTEREST CHARGES
Interest on long-term debt 6,563 6,067
Other interest 504 2,408
Allowance for borrowed funds used during construction (75) (48)
------------ ------------
TOTAL INTEREST CHARGES 6,992 8,427
------------ ------------
NET INCOME 10,710 12,215
PREFERRED AND PREFERENCE STOCK REQUIREMENTS -- 699
------------ ------------
NET INCOME FOR COMMON STOCK $ 10,710 $ 11,516
============ ============
ORANGE AND ROCKLAND SALES & DELIVERIES
Electric - Thousands of killowatthours (Mwhr's)
O&R Customers 1,191,481 1,158,307
Off-system sales 2,400 36,830
------------ ------------
Total Electric Sales & Deliveries 1,193,881 1,195,137
------------ ------------
Gas - Dekatherms (Dth) 12,313,973 11,654,646
------------ ------------
The accompanying notes are an integral part of these financial statements.
-20-
ORANGE AND ROCKLAND UTILITIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended March 31, 2000 and 1999
2000 1999
---- ----
(THOUSANDS OF DOLLARS)
OPERATING ACTIVITIES
Net income $ 10,710 $ 12,215
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 7,116 9,376
Amortization of investment tax credit (113) (189)
Federal income tax deferred (11,186) (5,500)
Common equity component of allowance for funds used during construction (50) (57)
Other non-cash changes (debits) (1,914) 792
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable -- net, and accrued utility revenue (5,235) (11,967)
Materials and supplies, including fuel and gas in storage 9,913 10,068
Prepayments, other receivables and other current assets 11,209 (41,873)
Deferred recoverable fuel costs 20,822 15,216
Accounts payable (8,640) (12,493)
Refunds to customers 118 (58)
Other -- net (5,084) 18,304
- ---------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 27,666 (6,166)
- ---------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (10,840) (9,236)
Common equity component of allowance for funds used during construction 50 57
- ---------------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION (10,790) (9,179)
- ---------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt 29,500 45,000
Retirement of long-term debt (100,020) (1,664)
Short-term debt arrangements - (17,900)
Common stock dividends - (8,720)
Preferred stock dividends - (699)
- ---------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES INCLUDING DIVIDENDS (70,520) 16,017
- ---------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS (53,644) 672
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 78,927 5,643
- ------------------------------------------------------------------------ ------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31 $ 25,283 6,315
- ------------------------------------------------------------------------ ------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 9,911 9,269
Income Taxes $ 4,487 -
The accompanying notes are an integral part of these financial statements.
-21-
NOTES TO FINANCIAL STATEMENTS - O&R
NOTE A - GENERAL
These footnotes accompany and form an integral part of the interim consolidated
financial statements of Orange and Rockland Utilities, Inc. ("O&R"), a
wholly-owned subsidiary of Consolidated Edison, Inc. (Con Edison). These
financial statements are unaudited but, in the opinion of O&R's management,
reflect all adjustments (which include only normally recurring adjustments)
necessary for a fair statement of the results for the interim periods presented.
These financial statements should be read together with the audited O&R
financial statements (including the notes thereto) included in the combined Con
Edison, Consolidated Edison Company of New York, Inc. and O&R Annual Report on
Form 10-K for the year ended December 31, 1999.
NOTE B - ENVIRONMENTAL AND OTHER LITIGATION
ENVIRONMENTAL MATTERS
Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and
coal tar, have been used or generated in the course of operations of O&R and may
be present in its facilities and equipment. The Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (Superfund) and
similar state statutes impose joint and several liability, regardless of fault,
upon generators of hazardous substances for resulting removal and remedial costs
and environmental damages. Liabilities under these laws can be material and in
some instances my be imposed without regard to fault, or may imposed for past
acts, even though such past acts may have been lawful at the time the they
occurred.
At March 31, 2000, O&R had accrued a $7.3 million liability as its best estimate
of its liability for sites as to which it has received process or notice
alleging that hazardous substances generated by the Company (and, in most
instances, other potentially responsible parties) were deposited. There will be
additional liability at these sites and other sites, including the costs of
investigating and remediating sites where the company or its predecessors
manufactured gas which O&R currently estimates could be as much as $30 million.
The total amount of such additional liability is not presently determinable but
may be material to O&R's financial position, results of operations or liquidity.
Under O&R's current gas rate agreement, O&R may defer the costs of investigating
and remediating the manufactured gas as a regulatory asset. At March 31, 2000,
$8.4 million of such costs had been deferred as a regulatory asset.
Suits have been brought in New York State and federal courts against O&R and
many other defendants, wherein a large number of plaintiffs sought large amounts
of compensatory and punitive damages for deaths and injuries allegedly caused by
exposure to asbestos at various premises of the company. Many of these suits
have been disposed of without any payment by O&R, or for immaterial amounts. The
amounts specified in all the remaining suits total hundreds of millions of
dollars but the company believes that these amounts are greatly exaggerated, as
were the claims already disposed of. Based on the information and relevant
circumstances known to the company at this time, it does not believe that these
suits will have a material adverse effect on its financial position, results of
operations or liquidity.
-22-
OTHER LITIGATION
In 1996, O&R was sued for its alleged breach of an agreement to purchase
electric capacity and associated energy from a 4 MW cogeneration facility and
for an alleged breach of an implied covenant of good faith. In 1999, plaintiff
filed a motion for summary judgment and O&R filed a motion in opposition to
plaintiff's motion. O&R cannot predict the ultimate outcome of this proceeding.
In March 1998, O&R shareholders filed a purported derivative action on behalf of
O&R alleging various claims against its directors, several officers, certain
other defendants and nominally against O&R. In 1999, the trial court dismissed
the action. In April 2000, an appellate court affirmed the dismissal. In June
1999, these plaintiffs and two other O&R shareholders filed a purported class
action alleging various claims against the directors, certain officers and
certain former officers and directors. O&R has filed a motion to dismiss the
purported class action and for imposition of sanctions against the plaintiffs
and their counsel.
NOTE C - FINANCIAL INFORMATION BY BUSINESS SEGMENT
ORANGE AND ROCKLAND UTILITIES, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
ELECTRIC GAS
-------- ---
2000 1999 2000 1999
---- ---- ---- ----
Sales Revenues 104,643 108,914 77,458 74,068
Intersegment Revenues 4 4 - 32
Depreciation and amortization 4,962 7,844 2,153 1,617
Operating Income 6,718 10,437 9,291 10,869
OTHER TOTAL
----- -----
2000 1999 2000 1999
---- ---- ---- ----
Sales Revenues 95 73 182,196 183,055
Intersegment Revenues - - 4 36
Depreciation and amortization 1 27 7,116 9,488
Operating Income (222) (693) 15,787 20,613
-23-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CON EDISON
Consolidated Edison, Inc. (Con Edison) is a holding company which
operates only through its subsidiaries and has no material assets other than the
stock of its subsidiaries. Con Edison's principal subsidiaries are regulated
utilities: Consolidated Edison Company of New York, Inc. (Con Edison of New
York) and Orange and Rockland Utilities, Inc. (O&R). Con Edison also has several
unregulated subsidiaries. In October 1999 Con Edison agreed to acquire Northeast
Utilities.
The following discussion and analysis, which relates to the interim
consolidated financial statements of Con Edison and its subsidiaries (including
Con Edison of New York and, from its date of acquisition in July 1999, O&R)
included in Part I, Item 1 of this report, should be read in conjunction with
Con Edison's Management's Discussion and Analysis of Financial Condition and
Results of Operations (Con Edison's 10-K MD&A) in Item 7 of the combined Con
Edison, Con Edison of New York and O&R Form 10-K for the year ended December 31,
1999 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K). Reference is also
made to the notes to the Con Edison financial statements in Part I, Item 1 of
this report, which notes are incorporated herein by reference.
LIQUIDITY AND CAPITAL RESOURCES
Cash and temporary cash investments and outstanding commercial paper at
March 31, 2000 and December 31, 1999 were (amounts shown in millions):
March 31, 2000 December 31, 1999
-------------------------- ----------------------------
Cash and temporary cash investments $ 73.6 $485.1
Commercial paper $510.1 $495.4
As discussed below, the decrease in cash and temporary cash investments
during the first quarter 2000 reflects reduced cash flows from operating
activities, the prepayment of property taxes, the payment at maturity of debt
securities and repurchases of common stock.
Net cash flows from operating activities during the first quarter 2000
were $199.2 million, compared to $289.2 million in the first quarter 1999,
reflecting the reduced net income and related cash flows resulting from Con
Edison of New York's divestiture of most of its electric generating capacity
offset, in part, by the increased net cash flows resulting from Con Edison's
acquisition of O&R.
In January 2000 Con Edison of New York repaid at maturity $125 million
of 7.6 percent Series 1992 C taxable debentures. In March 2000 O&R redeemed $80
million of 9.375 percent Series 1990 A taxable debentures and $20 million of
6.14 percent Series 1993 C taxable debentures.
During the first quarter 2000, approximately 1.9 million shares of Con
Edison common stock at an aggregate cost of $60.6 million were purchased under
Con Edison's stock repurchase program. See "Liquidity and Capital Resources--
Stock Repurchases" in Con Edison's 10-K MD&A.
Con Edison's accounts receivable - customer, less allowance for
uncollectible accounts increased $58.5 million at March 31, 2000, compared with
year-end 1999, primarily because increased purchased power costs resulted in
higher billings to customers in March 2000 than in
-24-
December 1999. Con Edison of New York's equivalent number of days of revenue
outstanding (ENDRO) of customer accounts receivable was 27.5 days at March 31,
2000, compared with 28.8 days at December 31, 1999. For O&R, the ENDRO was 38.0
days at March 31, 2000 and 40.4 days at December 31, 1999.
In January 2000 Con Edison of New York made a $235.7 million
semi-annual prepayment to New York City for property taxes. Prepayments at March
31, 2000 include the unamortized portion ($117.3 million) of this payment.
Prepayments at March 31, 2000 also include cumulative credits to pension expense
for Con Edison of New York of $167.0 million, compared with $116.0 million at
December 31, 1999. See Note D to the Con Edison financial statements included in
Item 8 of the Form 10-K.
Recoverable fuel costs increased $23.3 million at March 31, 2000,
compared with year-end 1999, reflecting the ongoing recovery of previously
deferred amounts and the changes in volumes and unit costs of purchased power,
fuel and gas purchased for resale discussed below in "Results of Operations."
See "Recoverable Fuel Costs" in Note A to the Con Edison financial statements
included in Item 8 of the Form 10-K.
Other regulatory assets increased $48.7 million at March 31, 2000,
compared with year-end 1999, reflecting the deferral of $37.1 million of
electric capacity costs under contracts with the buyers of the generating assets
sold by Con Edison of New York. These capacity costs are in excess of costs
already reflected in electric rates and were deferred pending future recovery.
See Note I to the Con Edison financial statements included in Item 8 of the Form
10-K.
The pension and benefits reserve, which is comprised primarily of
unfunded other post-employment benefit (OPEB) obligations, was $161.4 million at
March 31, 2000, compared to $143.8 million at December 31, 1999. Con Edison's
policy is to fund its estimated OPEB costs to the extent deductible under
current tax limitations. See Note E to the Con Edison financial statements
included in Item 8 of the Form 10-K.
The accumulated provision for injuries and damages was $128.1 million
at March 31, 2000, compared to $119.0 million at December 31, 1999. The increase
resulted primarily from increased workers' compensation claims.
Other current liabilities increased $38.9 million at March 31, 2000,
compared with year-end 1999, reflecting primarily an increase of $15.0 million
in a reserve for future environmental remediation expenses.
The increase in accrued taxes reflects primarily Federal income taxes
accrued for the first quarter 2000 paid in April 2000.
Con Edison's ratio of earnings to fixed charges (for the 12 months
ended on the date indicated) and common equity ratio (as of the date indicated)
were:
March 31, 2000 December 31, 1999
-------------------------- ---------------------------
Earnings to fixed charges (SEC basis) 3.96 4.04
Common equity ratio 54.0 53.1
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In April 2000 the New York State Public Service Commission (PSC)
approved Con Edison of New York's petition for authority to issue up to
$1.5 billion of long-term debt prior to 2003. See "Liquidity and Capital
Resources -- Capital Resources" in Con Edison's 10-K MD&A. In May 2000 Con
Edison of New York issued $325 million aggregate principal amount of 8-1/8
percent Debentures, Series 2000 A, the net proceeds of which are being used
to repay a like amount of outstanding short-term debt.
NORTHEAST UTILITIES
In April 2000 Con Edison and Northeast Utilities shareholders approved
Con Edison's pending acquisition of Northeast Utilities. See Part II, Item 4 of
this report and "Liquidity and Capital Resources -- Northeast Utilities Merger"
in Con Edison's 10-K MD&A.
REGULATORY MATTERS
In April 2000 Con Edison of New York, pursuant to its 1997
restructuring agreement, reduced its electric rates by approximately $103
million and expanded its electric Retail Choice program to a maximum of 3,000 MW
of peak load. See "Regulatory Matters--Electric" in Con Edison's 10-K MD&A.
In May 2000 the installed capacity market of the New York Independent
System Operator commenced operations, and Con Edison of New York ended its
purchases of capacity under agreements with the buyers of the generating assets
it sold in 1999. See Note I to the Con Edison financial statements in Item 8 of
the Form 10-K.
NUCLEAR GENERATION
Con Edison of New York's Indian Point 2 nuclear generating unit was shut
down on February 15, 2000 following a leak in one of its team generators.
See "Nuclear Generation" in Con Edison's 10-K MD&A, the combined Con Edison and
Con Edison of New York Current Report on Form 8-K, dated March 29, 2000 and Note
C to the Con Edison financial statements included in Part I, Item 1 of this
report (which Note C is incorporated herein by reference).
FINANCIAL MARKET RISKS
Reference is made to "Financial Market Risks" in Con Edison's 10-K
MD&A. At March 31, 2000 neither the fair value of derivatives outstanding nor
potential derivative losses from reasonably possible near-term changes in market
prices were material to the financial position, results of operations or
liquidity of the company.
ENVIRONMENTAL MATTERS
For information concerning potential liabilities of the company arising
from laws and regulations protecting the environment, including the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund), see the notes to Con Edison's financial statements included in Part
I, Item 1 and also see Part II, Item 1 of this report (which information is
incorporated herein by reference).
-26-
RESULTS OF OPERATIONS
Con Edison's net income for common stock for the first quarter 2000 was
$188.1 million or $.88 a share (based upon an average of 212.6 million common
shares outstanding), compared with $176.6 million or $.76 a share (based upon an
average of 231.0 million common shares outstanding) for the first quarter 1999.
Earnings for the first quarter 2000 and the first quarter 1999 were as
follows:
Three months ended March 31,
----------------------------
(Millions of dollars) 2000 1999
-------- --------
Con Edison of New York $ 178.3 $ 182.0
O&R* 10.7 --
Unregulated subsidiaries 2.3 (5.7)
Other** (3.2) 0.3
-------- --------
CON EDISON $ 188.1 $ 176.6
* O&R's earnings are for the period subsequent to its
acquisition by Con Edison in July 1999.
** Includes holding company expenses (including amortization of
$2.7 million of goodwill from the acquisition of O&R) and
intercompany eliminations.
Con Edison's earnings for the first quarter 2000, compared to the first
quarter 1999, increased $11.5 million, reflecting $10.7 million of O&R earnings,
$22.0 million of increased pension credits (see Note D to the Con Edison
financial statements included in Item 8 of the Form 10-K), higher electric sales
at Con Edison of New York, an estimated $21.0 million of lost equity return on
the generating assets that Con Edison of New York divested in 1999 and $15.7
million of rate reductions under the 1997 electric restructuring plan (see
"Regulatory Matters--Electric" in Con Edison's 10-K MD&A and "Regulatory
Matters," above).
-27-
A comparison of the results of operations of Con Edison for the first
quarter 2000 compared to the first quarter 1999 follows.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1999
(Millions of dollars) INCREASES (DECREASES) INCREASES (DECREASES)
AMOUNT PERCENT
--------------------- ---------------------
Operating revenues $542.0 30.5%
Purchased power- electric and steam 441.3 LARGE
Fuel-electric and steam (31.2) (26.6)
Gas purchased for resale 85.8 47.5
Operating revenues less purchased power, fuel 46.1 3.9
and gas purchased for resale (net revenues)
Other operations and maintenance 21.5 5.4
Depreciation and amortization 10.0 7.5
Taxes, other than federal income tax (9.3) (3.1)
Federal income tax (0.3) (0.3)
Operating income 24.2 9.4
Other income less deductions and 0.6 32.0
related federal income tax
Net interest charges 13.3 16.6
Preferred stock dividend 0.0 0.0
requirements
Net income for common stock $ 11.5 6.5%
A discussion of Con Edison's operating revenues and operating income by
business segment follows. Con Edison's principal business segments are its
electric, gas and steam utility businesses. For additional information about Con
Edison's business segments, see the notes to the Con Edison financial statements
included in Part I, Item 1 of this report.
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ELECTRIC
Con Edison's electric operating revenues in the first quarter 2000
increased $318.7 million compared to the first quarter 1999, reflecting Con
Edison of New York's increased sales volumes and increased purchased power costs
(which it bills to customers under the fuel adjustment clause applicable to its
electric rates), offset by electric rate reductions of approximately $24.2
million. The increase also reflects $104.6 million of O&R electric operating
revenues.
Electricity sales volume in Con Edison of New York's service territory
increased 3.5 percent in the first quarter 2000 compared to the first quarter
1999. The increase in sales volume reflects the continued strength of the
economy in New York City and Westchester County. Con Edison's electric sales
vary seasonally in response to weather, and peak in the summer. After adjusting
for variations, principally weather and billing days, in each period,
electricity sales volume in Con Edison of New York's service territory increased
3.1 percent in the first quarter 2000. Weather-adjusted sales represent an
estimate of the sales that would have been made if historical average weather
conditions had prevailed.
Con Edison of New York's electric purchased power costs increased
$334.5 million in the first quarter 2000, compared to the first quarter 1999, as
a result of its divestiture of most of its generating capacity in 1999, the
Indian Point 2 outage that commenced in February 2000 and increases in the price
of purchased power. The decrease in fuel costs reflects the 1999 generation
divestiture.
Con Edison's electric operating income increased $6.3 million in the
first quarter 2000, compared to the first quarter 1999. The principal components
of the increase were: O&R's electric
operating income of $6.7 million, offset by a decrease in Con Edison of New
York's electric operating income of $0.4 million, comprised primarily of a
reduction in net revenues (operating revenues less fuel and purchased power) of
$66.9 million, offset by lower pension expenses ($27.0 million), property taxes
($15.8 million) and Federal income tax ($7.7 million). In addition, Con Edison
of New York's maintenance expenses for its generating assets were $13.0 million
lower in the 2000 period, reflecting the sale in 1999 of most of its generating
assets, offset by increased maintenance expenses relating to Indian Point 2.
GAS
Con Edison's gas operating revenues and gas operating income increased
$88.1 million and $12.2 million, respectively, in the first quarter 2000,
compared to the first quarter 1999. These changes reflect O&R's gas operating
revenues of approximately $77.5 million and gas operating income of
approximately $9.3 million, and Con Edison of New York's increased gas sales and
transportation volumes.
-29-
Gas sales and transportation volume for Con Edison of New York's firm
customers increased 2.7 percent in the first quarter 2000, compared to the first
quarter 1999, reflecting slightly colder weather in the winter 2000 period. Con
Edison's firm gas sales and transportation vary seasonally in response to
weather, and peak in the winter. After adjusting for variations, principally
weather and billing days, in each period, firm gas sales and transportation
volume increased 1.4 percent in the 2000 period.
A weather-normalization provision that applies to the gas businesses of
Con Edison's utility subsidiaries operating in New York State moderates, but
does not eliminate, the effect of weather-related changes on gas operating
income.
STEAM
Con Edison's steam operating revenues and operating income increased
$29.5 million and $0.7 million, respectively, in the first quarter 2000,
compared to the first quarter 1999.
Steam sales volume increased slightly (0.1 percent) in the 2000 period,
reflecting slightly colder weather. Con Edison's steam sales vary seasonally in
response to weather, and peak in the winter. After adjusting for variations,
principally weather and billing days, in each period, steam sales volume
decreased 1.1 percent in the 2000 period. The steam rate tariffs do not include
a weather normalization clause, which leads to volatility in sales and revenues
during significant variations from normal winter weather.
NET INTEREST CHARGES
Net interest charges increased $13.3 million in the 2000 period,
reflecting the addition of $7.0 million of O&R debt expense and $6.0 million of
increased interest on short-term borrowings by Con Edison of New York.
-30-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CON EDISON OF NEW YORK
Consolidated Edison Company of New York, Inc. (Con Edison of New York)
is a regulated utility that provides electric service to over three million
customers and gas service to over one million customers in New York City and
Westchester County. It also provides steam service in parts of Manhattan. All of
the common stock of Con Edison of New York is owned by Consolidated Edison, Inc.
(Con Edison).
This discussion and analysis should be read in conjunction with Con
Edison of New York's Management's Discussion and Analysis of Financial Condition
and Results of Operations (Con Edison of New York's 10-K MD&A) in Item 7 of the
combined Con Edison, Con Edison of New York and Orange and Rockland Utilities,
Inc. Form 10-K for the year ended December 31, 1999 (File Nos. 1-14514, 1-1217
and 1-4315, the Form 10-K). Reference is also made to the notes to the financial
statements in Part I, Item 1 of this report, which notes are incorporated herein
by reference.
LIQUIDITY AND CAPITAL RESOURCES
Cash and temporary cash investments and outstanding commercial paper at
March 31, 2000 and December 31, 1999 were (amounts shown in millions):
March 31, 2000 December 31, 1999
-------------- -----------------
Cash and temporary cash investments $ 14.9 $349.0
Commercial paper $480.6 $495.4
As discussed below, the decrease in cash and temporary cash investments
during the first quarter 2000 reflects reduced cash flows from operating
activities, the prepayment of property taxes and the payment at maturity of debt
securities.
Net cash flows from operating activities during the first quarter 2000
were $149.4 million, compared to $323.8 million in the first quarter 1999,
reflecting the reduced net income and related cash flows resulting from
divestiture by the company of most of its electric generating capacity.
In January 2000 Con Edison of New York repaid at maturity $125 million
of 7.6 percent Series 1992 C taxable debentures.
Con Edison of New York's accounts receivable - customer, less allowance
for uncollectible accounts increased $47.8 million at March 31, 2000, compared
with year-end 1999, primarily because increased purchased power costs resulted
in higher billings to customers in March 2000 than in December 1999. Con Edison
of New York's equivalent number of days of revenue outstanding (ENDRO) of
customer accounts receivable was 27.5 days at March 31, 2000, compared with 28.8
days at December 31, 1999.
In January 2000 Con Edison of New York made a $235.7 million
semi-annual prepayment to New York City for property taxes. Prepayments at March
31, 2000 include the unamortized portion ($117.3 million) of this payment.
Prepayments at March 31, 2000 also include cumulative credits to
-31-
pension expense of $167.0 million, compared with $116.0 million at December 31,
1999. See Note D to the Con Edison of New York financial statements included in
Item 8 of the Form 10-K.
Recoverable fuel costs increased $27.9 million at March 31, 2000,
compared with year-end 1999, reflecting the ongoing recovery of previously
deferred amounts and the changes in volumes and unit costs of purchased power,
fuel and gas purchased for resale discussed below in "Results of Operations."
See "Recoverable Fuel Costs" in Note A to the Con Edison of New York financial
statements included in Item 8 of the Form 10-K.
Other regulatory assets increased $45.9 million at March 31, 2000,
compared with year-end 1999, reflecting the deferral of $37.1 million of
electric capacity costs under contracts with the buyers of the generating assets
sold by Con Edison of New York. These capacity costs are in excess of costs
already reflected in electric rates and were deferred pending future recovery.
See Note I to the Con Edison of New York financial statements included in Item 8
of the Form 10-K.
The pension and benefits reserve, which is comprised of unfunded other
post-employment benefit (OPEB) obligations, was $95.3 million at March 31, 2000,
compared to $76.8 million at December 31, 1999. Con Edison of New York's policy
is to fund its estimated OPEB costs to the extent deductible under current tax
limitations. See Note E to the Con Edison of New York financial statements
included in Item 8 of the Form 10-K.
The accumulated provision for injuries and damages was $118.8 million
at March 31, 2000, compared to $110.1 million at December 31, 1999. The increase
resulted primarily from increased workers' compensation claims.
Other current liabilities increased $15.2 million at March 31, 2000,
compared with year-end 1999, reflecting primarily an increase of $15.0 million
in a reserve for future environmental remediation expenses.
The increase in accrued taxes reflects primarily Federal income taxes
accrued for the first quarter 2000 paid in April 2000.
Con Edison of New York's ratio of earnings to fixed charges (for the 12
months ended on the date indicated) and common equity ratio (as of the date
indicated) were:
March 31, 2000 December 31, 1999
-------------- -----------------
Earnings to fixed charges (SEC basis) 4.06 4.17
Common equity ratio 50.5 49.4
In April 2000 the New York State Public Service Commission (PSC) approved
Con Edison of New York's petition for authority to issue up to $1.5 billion of
long-term debt prior to 2003. See "Liquidity and Capital Resources -- Capital
Resources" in Con Edison of New York's 10-K MD&A. In May 2000 Con Edison of New
York issued $325 million aggregate principal amount of 8-1/8 percent Debentures,
Series 2000 A, the net proceeds of which are being used to repay a like amount
of outstanding short-term debt.
REGULATORY MATTERS
In April 2000 Con Edison of New York, pursuant to its 1997
restructuring agreement, reduced its electric rates by approximately $103
million and expanded its electric Retail Choice
-32-
program to a maximum of 3,000 MW of peak load. See "Regulatory Matters--
Electric" in Con Edison of New York's 10-K MD&A.
In May 2000 the installed capacity market of the New York Independent
System Operator commenced operations, and Con Edison of New York ended its
purchases of capacity under agreements with the buyers of the generating assets
it sold in 1999. See Note I to the Con Edison of New York financial statements
in Item 8 of the Form 10-K.
NUCLEAR GENERATION
Con Edison of New York's Indian Point 2 nuclear generating unit was shut
down on February 15, 2000 following a leak in one of its steam generators.
See "Nuclear Generation" in Con Edison of New York's 10-K MD&A, the combined Con
Edison and Con Edison of New York Current Report on Form 8-K, dated March 29,
2000 and Note C to the Con Edison of New York financial statements included in
Part I, Item 1 of this report (which Note C is incorporated herein by
reference).
FINANCIAL MARKET RISKS
Reference is made to "Financial Market Risks" in Con Edison of New
York's 10-K MD&A. At March 31, 2000 neither the fair value of derivatives
outstanding nor potential derivative losses from reasonably possible near-term
changes in market prices were material to the financial position, results of
operations or liquidity of the company.
ENVIRONMENTAL MATTERS
For information concerning potential liabilities of the company arising
from laws and regulations protecting the environment, including the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund), see the notes to Con Edison of New York's financial statements
included in Part I, Item 1 and also see Part II, Item 1 of this report (which
information is incorporated herein by reference).
RESULTS OF OPERATIONS
Con Edison of New York's net income for common stock for the first
quarter 2000 was $178.3 million, compared with $182.0 million for the first
quarter 1999. Con Edison of New York's net income was favorably impacted by
higher electric sales, increased pension credits and reduced property taxes,
offset by reduced earnings resulting from the divestiture of plant assets.
A comparison of the results of operations of Con Edison of New York for
the first quarter 2000 compared to the first quarter 1999 follows.
-33-
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1999
(Millions of dollars) INCREASES (DECREASES) INCREASES (DECREASES)
AMOUNT PERCENT
------ -------
Operating revenues $254.8 14.7%
Purchased power- electric and steam 335.7 LARGE
Fuel-electric and steam (32.3) (27.5)
Gas purchased for resale 11.5 7.8
Operating revenues less purchased power, fuel (60.1) (5.1)
and gas purchased for resale (net revenues)
Other operations and maintenance (25.2) (6.6)
Depreciation and amortization (0.7) (0.6)
Taxes, other than federal income tax (28.6) (9.6)
Federal income tax (8.8) (8.4)
Operating income 3.2 1.2
Other income less deductions and (0.6) LARGE
related federal income tax
Net interest charges 6.3 7.9
Preferred stock dividend 0.0 0.0
requirements
Net income for common stock $(3.7) (2.1)%
A discussion of Con Edison of New York's operating revenues and
operating income by business segment follows. Con Edison of New York's principal
business segments are its electric, gas and steam utility businesses.
-34-
ELECTRIC
Con Edison of New York's electric operating revenues in the first
quarter 2000 increased $213.0 million compared to the first quarter 1999. The
increase reflects increased sales volumes, offset by electric rate reductions of
approximately $24.2 million.
Con Edison of New York's electric sales, excluding off-system sales,
for the first quarter 2000 compared with the first quarter 1999 were:
MILLIONS OF KWHRS.
Description Three Months Three Months Percent
Ended Ended Variation Variation
March 31, 2000 March 31, 1999
-------------- -------------- ------------ ------------
Residential/Religious 2,798 2,723 75 2.7%
Commercial/Industrial 4,682 5,542 (860) (15.5)
Other 136 141 (5) (3.5)
-------------- -------------- ------------ ------------
TOTAL FULL SERVICE CUSTOMERS 7,616 8,406 (790) (9.4)
Retail Choice Customers 2,255 1,049 1,206 Large
-------------- -------------- ------------ ------------
SUB-TOTAL 9,871 9,455 416 4.4
NYPA, Municipal Agency and Other Sales 2,475 2,474 1 --
-------------- -------------- ------------ ------------
TOTAL SERVICE AREA 12,346 11,929 417 3.5%
Electricity sales volume in Con Edison of New York's service territory
increased 3.5 percent in the first quarter 2000 compared to the first quarter
1999. The increase in sales volume reflects the continued strength of the New
York City and Westchester County economy. Con Edison of New York's electric
sales vary seasonally in response to weather, and peak in the summer. After
adjusting for variations, principally weather and billing days, in each period,
electricity sales volume in Con Edison of New York's service territory increased
3.1 percent in the first quarter 2000. Weather-adjusted sales represent an
estimate of the sales that would have been made if historical average weather
conditions had prevailed.
-35-
Con Edison of New York's electric purchased power costs increased
$334.5 million in the first quarter 2000, compared to the first quarter 1999, as
a result of its divestiture of most of its generating capacity in 1999, the
Indian Point 2 outage that commenced in February 2000 and increases in the price
of purchased power. The decrease in fuel costs reflects the 1999 generation
divestiture.
Con Edison of New York's electric operating income decreased $0.4
million in the first quarter 2000, compared with the first quarter 1999, as a
result of decreased net revenues (operating revenues less fuel and purchased
power) of $66.9 million, offset by reduced pension expense ($27.0 million),
property taxes ($15.8 million) and Federal income tax ($7.7 million). In
addition Con Edison of New York's maintenance expenses for its generating assets
were $13.0 million lower in the 2000 period, reflecting the sale in 1999 of most
of its generating assets, offset by increased maintenance expenses relating to
Indian Point 2.
GAS
Con Edison of New York's gas operating revenues and gas operating
income increased $12.3 million and $2.9 million, respectively, in the first
quarter 2000, compared to the first quarter 1999. These changes reflect
increased gas sales and transportation volumes.
Gas sales and transportation volume for Con Edison of New York's firm
customers increased 2.7 percent in the first quarter 2000, compared to the 1999
period, reflecting slightly colder weather in the winter 2000 period. Con Edison
of New York's firm gas sales and transportation vary seasonally in response to
weather, and peak in the winter. After adjusting for variations, principally
weather and billing days, in each period, firm gas sales and transportation
volume increased 1.4 percent in the 2000 period.
A weather-normalization provision that applies to Con Edison of New
York's gas business moderates, but does not eliminate, the effect of
weather-related changes on gas operating income.
STEAM
Con Edison of New York's steam operating revenues and operating income
increased $29.5 million and $0.7 million, respectively, in the first quarter
2000, compared to the first quarter 1999.
Steam sales volume increased slightly (0.1 percent) in the 2000 period,
reflecting slightly colder weather. Con Edison of New York's steam sales vary
seasonally in response to weather, and peak in the winter. After adjusting for
variations, principally weather and billing days, in each period, steam sales
volume decreased 1.1 percent in the 2000 period. The steam tariffs do not
include a weather normalization clause, which leads to volatility in sales and
revenues during significant variations from normal winter weather.
NET INTEREST CHARGES
Net interest charges increased $6.3 million in the 2000 period,
reflecting $6.0 million of increased interest on short-term borrowings.
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MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
ORANGE AND ROCKLAND
Orange and Rockland Utilities, Inc. (O&R), a wholly-owned subsidiary of
Consolidated Edison, Inc. (Con Edison) meets the conditions specified in General
Instruction H to Form 10-Q and is permitted to use the reduced disclosure format
for wholly-owned subsidiaries of companies, such as Con Edison, that are
reporting companies under the Securities Exchange Act of 1934. Accordingly, this
O&R Management's Narrative Analysis of the Results of Operations is included in
this report, and O&R has omitted from this report the information called for by
Part I, Item 2 of Form 10-Q (Management's Discussion and Analysis of Financial
Condition and Results of Operations).
O&R's net income for common stock for the first quarter 2000 was $10.7
million, $0.8 million lower than the first quarter 1999. The decrease was a
result of electric and gas rate decreases implemented in the third quarter of
1999, offset, in part, by reduced operations and maintenance expenses, property
taxes, depreciation expense and interest charges.
A comparison of the results of operations of O&R for the first quarter
2000 compared to the first quarter 1999 follows. Effective July 1999, O&R's
results of operations are included in the results of operations of Con Edison.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1999
(Millions of dollars) INCREASES (DECREASES) INCREASES (DECREASES)
AMOUNT PERCENT
--------------------- ---------------------
Operating revenues $(0.9) (0.5)%
Purchased power- electric 41.9 Large
Fuel-electric (19.6) Large
Gas purchased for resale 6.2 14.8
Operating revenues less purchased power, fuel (29.4) (27.0)
and gas purchased for resale (net revenues)
Other operations and maintenance (11.5) (24.7)
Depreciation and amortization (2.4) (25.0)
Taxes, other than federal income tax (8.3) (33.6)
Federal income tax (2.4) (32.7)
Operating income (4.8) (23.4)
Other income less deductions and 1.9 Large
related federal income tax
Net interest charges (1.4) (17.0)
Preferred stock dividend (0.7) Large
requirements
Net income for common stock $(0.8) (7.0)%
O&R's operating revenues decreased $0.9 million in the first quarter
2000, compared to the first quarter 1999, primarily as a result of a $4.3
million decrease in electric operating revenues, partially offset by a $3.4
million increase in gas operating revenues. A discussion of O&R's operating
revenues by business segment follows.
The decrease of $4.3 million in electric operating revenues was
attributable to the rate decreases implemented by O&R in July and August 1999.
These rate decreases were designed to reflect the divestiture by O&R of its
generating capacity in June 1999, and to flow to customers
-37-
certain synergy savings arising from O&R's acquisition by Con Edison. O&R's
total sales of electric energy during the first quarter 2000 were 1,191,481
megawatt hours (MWhr), compared with 1,158,307 MWhr during the first quarter
1999, an increase of 2.9 percent. The increase in sales volume was primarily the
result of the continued strength of the economy. O&R's electric sales vary
seasonally in response to weather. After adjusting for variations, principally
weather and billing days, in each period, O&R's electricity sales were 3.1
percent higher for the first quarter 2000, compared to the first quarter 1999.
Weather-adjusted sales represent an estimate of the sales that would have been
made if historical average weather conditions prevailed.
O&R's purchased power cost increased $41.9 million in the first quarter
2000, compared to the 1999 period, and fuel cost decreased $19.6 million during
the same periods, resulting in a net increase of $22.3 million. The increase was
primarily attributable to capacity purchases made to replace the capacity of the
electric generating assets sold in June 1999, higher customer sales, and
increases in the cost of purchased energy. The decrease in fuel costs reflects
the 1999 generation divestiture. These costs are recoverable through O&R's
energy cost adjustment mechanisms and did not impact earnings.
O&R's gas operating revenues increased $3.4 million in the first
quarter 2000, compared to the first quarter 1999. The increase was due primarily
to increases in gas sales and transportation volumes in the first quarter 2000.
O&R's sales of gas to customers during the first quarter 2000 totaled 12,313,973
dekatherms (Dth), compared with 11,654,646 Dth during the first quarter 1999, an
increase of 5.7 percent.
The level of revenues from gas sales in New York is subject to a
weather normalization clause. After adjusting for variations, principally
weather and billing days, in each period, gas sales
-38-
and transportation volume for firm customers was 8.7 percent higher for the
first quarter 2000, compared to the 1999 period.
O&R's cost of gas purchased for resale increased $6.2 million in the
first quarter 2000, compared to the first quarter 1999, due primarily to higher
firm sales for the period.
O&R's other operation and maintenance expenses and taxes other than
federal income tax were $11.5 million and $8.3 million, respectively, lower
during the first quarter 2000, compared to the first quarter 1999. These
decreases reflect the impact of the sale by O&R of its generating assets in June
1999. The sale of these assets resulted in a 25 percent reduction in the
workforce and significantly lower property taxes.
O&R's other income increased $1.9 million during the first quarter
2000, compared to the first quarter 1999, due primarily to interest earned on
proceeds received from the June 1999 sale of electric generating assets.
O&R's interest charges decreased $1.4 million during the first quarter
2000, compared to the 1999 period, due primarily to lower debt outstanding as a
result of the application of a portion of the proceeds from the 1999 generation
divestiture to repay outstanding indebtedness.
O&R had no preferred stock dividend requirements in the first quarter
2000 because it redeemed all outstanding shares of its preferred stock in April
1999.
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ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
CON EDISON
For information about Con Edison's primary market risks associated with
activities in derivative financial instruments, other financial instruments and
derivative commodity instruments, see "Financial Market Risks" in Con Edison's
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Part 1, Item 2 of this report and Item 7A of the combined Con
Edison, Con Edison of New York and O&R Annual Report on Form 10-K for the year
ended December 31, 1999 (the "Form 10-K"), which information is incorporated
herein by reference.
CON EDISON OF NEW YORK
For information about Con Edison of New York's primary market risks associated
with activities in derivative financial instruments, other financial instruments
and derivative commodity instruments, see "Financial Market Risks" in Con Edison
of New York's Management's Discussion and Analysis of Financial Condition and
Results of Operations in Part 1, Item 2 of this report and Item 7A of the Form
10-K, which information is incorporated herein by reference.
O&R
At March 31, 2000, neither the fair value of derivatives outstanding nor
potential derivative losses from reasonably possible near-term changes in market
prices were material to the financial position, results of operations or
liquidity of O&R. For additional information about O&R's primary market risks
associated with activities in derivative financial instruments, other financial
instruments and derivative commodity instruments, see Item 7A of the Form 10-K,
which information is incorporated herein by reference.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CON EDISON
NORTHEAST UTILITIES SHAREHOLDERS' SUIT
On March 29, 2000, two Northeast Utilities shareholders filed a purported class
action complaint, entitled Adele Brody, et al. V. Cotton Mather Cleveland, et
al., in the United States District Court for the Southern District of New York.
The complaint names Northeast Utilities, the members of its Board of Trustees
and Con Edison as defendants. The complaint alleges, among other things, that
the joint proxy statement/prospectus relating to the proposed merger between Con
Edison and Northeast Utilities was materially misleading, among other reasons,
because the joint proxy statement/prospectus failed to disclose potential
liabilities relating to the operation of Indian Point 2 and the shutdown of the
facility on February 15, 2000. The plaintiffs sought various forms of relief,
including enjoining the merger and the recovery of costs and attorneys' fees
incurred in the class action. On March 31, 2000, plaintiffs filed an application
for a preliminary injunction and expedited discovery. Plaintiffs' application
has been withdrawn and their complaint against Con Edison dismissed (except as
to any application for attorneys' fees or costs) in accordance with a
Stipulation and Order pursuant to which Con Edison and Northeast Utilities sent
to their respective shareholders a supplement to the joint proxy statement/
prospectus. A copy of the supplement was included in the combined Con Edison and
Con Edison of New York Current Report on Form 8-K, dated March 29, 2000.
CON EDISON OF NEW YORK
SUPERFUND - ARTHUR KILL TRANSFORMER SITE
Reference is made to "Superfund- Arthur Kill Transformer Site" in Part I, Item
3, Legal Proceedings of the combined Con Edison, Con Edison of New York and O&R
Annual Report on Form 10-K for the year ended December 31, 1999 (the "Form
10-K"). In April 2000, Con Edison of New York entered into a Stipulation and
Order of Consent with the United States Attorney for the Southern District of
New York pursuant to which the United States Attorney agreed not to prosecute
Con Edison of New York in connection with its response to the release of PCBs
during the September 1998 transformer fire and, among other things, Con Edison
of New York agreed to continue to develop, implement and maintain an effective
environmental compliance program and to submit the program to an examination and
evaluation by a person selected by the United States Attorney.
O&R
SHAREHOLDER LAWSUITS
Reference is made to "Shareholder Lawsuits" in Part I, Item 3, Legal Proceedings
of the Form 10-K. In April 2000, the Appellate Division, First Department
affirmed the trial court's dismissal of plaintiffs' complaint in Virgilio
Ciullo, et al. V. Orange and Rockland Utilities, Inc. et al.
-41-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of Stockholders of Con Edison held on April 14, 2000, the
stockholders of Con Edison approved the agreement and plan of merger between Con
Edison and Northeast Utilities. See "Liquidity and Capital Resources - Northeast
Utilities" in Con Edison's Management's Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 of the Form 10-K. The results of
the vote at the Special Meeting were: 143,804,986 shares were voted to approve
the agreement; 4,436,224 shares were voted against the agreement, and 2,105,781
shares were abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
CON EDISON
Exhibit12.1 Statement of computation of Con Edison's ratio of earnings to
fixed charges for the twelve-month periods ended March 31, 2000
and 1999.
Exhibit 27.1 Financial Data Schedule for Con Edison.*
CON EDISON OF NEW YORK
Exhibit 12.2 Statement of computation of Con Edison of New York's ratio of
earnings to fixed charges for the twelve-month periods ended
March 31, 2000 and 1999.
Exhibit 27.2 Financial Data Schedule for Con Edison of New York.*
O&R
Exhibit 12.3 Statement of computation of O&R's ratio of earnings to fixed
charges for the twelve-month periods ended March 31, 2000 and
1999.
Exhibit 27.3 Financial Data Schedule for O&R.*
- -----------
*To the extent provided in Rule 402 of Regulation S-T, this exhibit shall not be
deemed "filed", or otherwise subject to liabilities, or be deemed part of a
registration statement.
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(b) REPORTS ON FORM 8-K
CON EDISON
Con Edison filed Current Reports on Form 8-K, dated January 11, 2000, reporting
(under Item 5) the amendment of the agreement pursuant to which Con Edison is to
acquire Northeast Utilities, and February 28, 2000, reporting (under Item 5) the
election of Dr. George Campbell, Jr. to its Board of Directors and including as
an exhibit Con Edison financial statements which were subsequently included in
the Form 10-K. Con Edison, along with Con Edison of New York, filed a combined
Current Report on Form 8-K, dated March 29, 2000, in which Con Edison reported
(under Item 5) the information contained in the supplement to the joint proxy
statement/prospectus referred to under "Northeast Utilities Shareholders' Suit"
in the discussion of Con Edison's legal proceedings in Part II, Item 1 of this
report.
CON EDISON OF NEW YORK
Con Edison of New York filed no Current Report on Form 8-K during the quarter
ended March 31, 2000. Con Edison of New York, along with Con Edison, filed a
combined Current Report on Form 8-K, dated March 29, 2000, in which Con Edison
of New York reported (under Item 5) the information contained in supplement to
the joint proxy statement/prospectus referred to under "Northeast Utilities
Shareholders' Suit" in the discussion of Con Edison's legal proceedings in Part
II, Item 1 of this report. Con Edison of New York also filed a Current Report,
dated May 3, 2000, reporting (under Item 5) the issuance and sale of $325
million aggregate principal amount of its 8 1/8% Debentures, Series 2000 A.
O&R
O&R filed no Current Report on Form 8-K during the quarter ended March 31, 2000.
-43-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.
DATE: May 12, 2000 By: Joan S. Freilich
Joan S. Freilich
Executive Vice President, Chief
Financial Officer and Duly
Authorized Officer
ORANGE AND ROCKLAND UTILITIES, INC.
DATE: May 12, 2000 By: Hyman Schoenblum
Hyman Schoenblum
Vice President, Controller,
Chief Financial Officer
and Duly Authorized Officer
CONSOLIDATED EDISON, INC.
RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS ENDED
(Thousands of Dollars)
MARCH MARCH
2000 1999
---------- ----------
EARNINGS
Net Income for Common Stock $ 712,102 $ 717,473
Preferred Dividends 13,593 15,869
Federal Income Tax 373,495 414,425
---------- ----------
Total Earnings Before Federal Income Tax 1,099,190 1,147,767
FIXED CHARGES* 371,861 345,739
---------- ----------
Total Earnings Before Federal Income Tax
and Fixed Charges $1,471,051 $1,493,506
========== ==========
* Fixed Charges
Interest on Long-Term Debt $ 312,635 $ 291,664
Amortization of Debt Discount, Premium and Expense 13,246 13,791
Interest Component of Rentals 17,770 18,297
Other Interest 28,210 21,987
---------- ----------
Total Fixed Charges $ 371,861 $ 345,739
========== ==========
Ratio of Earnings to Fixed Charges 3.96 4.32
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS ENDED
(Thousands of Dollars)
MARCH MARCH
2000 1999
---------- ----------
EARNINGS
Net Income $ 708,108 $ 752,011
Federal Income Tax 357,604 424,515
---------- ----------
Total Earnings Before Federal Income Tax 1,065,712 1,176,526
FIXED CHARGES* 347,937 345,739
---------- ----------
Total Earnings Before Federal Income Tax
and Fixed Charges $1,413,649 $1,522,265
========== ==========
* Fixed Charges
Interest on Long-Term Debt $ 292,921 $ 291,664
Amortization of Debt Discount, Premium and Expense 13,246 13,791
Interest Component of Rentals 17,770 18,297
Other Interest 24,000 21,987
---------- ----------
Total Fixed Charges $ 347,937 $ 345,739
========== ==========
Ratio of Earnings to Fixed Charges 4.06 4.40
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
Twelve Months Ended
(Thousands of Dollars)
MARCH MARCH
2000 1999
-------------- -------------
EARNINGS
Net Income $ 13,221 $ 43,379
Federal Income Tax 34,675 23,631
State Income Tax 1,861 2,577
-------- --------
Total Earnings Before Federal and State Income Tax 49,757 69,587
FIXED CHARGES* 31,463 34,151
-------- --------
Total Earnings Before Federal and State
Income Tax and Fixed Charges $ 81,220 $103,738
======== ========
* Fixed Charges
Interest on Long-Term Debt $ 26,521 $ 23,989
Amortization of Debt Discount, Premium and Expense 1,214 1,150
Other Interest 3,728 9,012
-------- --------
Total Fixed Charges $ 31,463 $ 34,151
======== ========
Ratio of Earnings to Fixed Charges 2.58 3.04
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.UT 0001047862 Consolidated Edison, Inc. 1,000 Dec-31-2000 Mar-31-2000 3-Mos Per-Book 11,442,702 490,173 1,475,157 2,046,099 15,454,131 588,720 857,577 4,993,778 5,424,129 37,050 212,563 4,375,030 0 0 510,129 320,000 0 33,805 3,675 4,537,750 15,454,131 2,318,591 101,425 1,934,457 2,035,882 282,709 2,378 285,087 93,554 191,533 3,398 188,135 115,708 83,313 199,182 .88 .88
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.UT 0000023632 Consolidated Edison Company of New York, Inc. 1,000 Dec-31-2000 Mar-31-2000 3-Mos Per-Book 10,692,308 316,875 1,236,311 1,439,409 13,684,903 588,720 857,602 3,950,567 4,434,797 37,050 212,563 4,093,512 0 0 480,629 300,000 0 33,672 3,675 4,089,005 13,684,903 1,987,061 95,957 1,622,619 1,718,576 268,485 (266) 268,219 86,539 181,680 3,398 178,282 115,708 76,750 149,417 0 0
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.UT 0000074778 Orange and Rockland Utilities, Inc. 1,000 Dec-31-2000 Mar-31-2000 3-Mos Per-Book 701,845 3,417 167,762 15,054 1,024,160 5 354,772 (12,054) 342,723 0 0 281,519 0 0 0 20,000 0 0 0 379,918 1,024,160 182,196 4,850 161,559 166,409 15,787 1,915 17,702 6,992 10,710 0 10,710 0 6,563 27,591 0 0