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 JUNE 30, 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 July 31, 2000, Consolidated Edison, Inc. ("Con
Edison") had outstanding 211,970,337 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
FILING FORMAT 3
FORWARD-LOOKING STATEMENTS 3
PART I. - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Con Edison Consolidated Balance Sheet 4-5
Consolidated Income Statements 6-7
Consolidated Statement of Cash Flows 8
Notes to Financial Statements 9-12
Con Edison of New York Consolidated Balance Sheet 13-14
Consolidated Income Statements 15-16
Consolidated Statement of Cash Flows 17
Notes to Financial Statements 18-20
O&R Consolidated Balance Sheet 21-22
Consolidated Income Statements 23-24
Consolidated Statement of Cash Flows 25
Notes to Financial Statements 26-29
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Con Edison 30-40
Con Edison of New York 41-50
O&R *
O&R MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS 51-53
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
Con Edison 54
Con Edison of New York 54
O&R *
PART II. - OTHER INFORMATION
ITEM 1. Legal Proceedings 54-55
ITEM 4. Submission of Matters to a Vote of Securities Holders 56
ITEM 6. Exhibits and Reports on Form 8-K 57-58
- --------------------
* 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 JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
As at
------------------------------------
June 30, 2000 December 31, 1999
------------- -----------------
(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric $11,502,711 $11,323,826
Gas 2,228,437 2,197,735
Steam 730,387 722,265
General 1,398,193 1,328,544
Unregulated generating assets 352,039 48,583
----------- -----------
Total 16,211,767 15,620,953
Less: Accumulated depreciation 4,941,490 4,733,613
----------- -----------
Net 11,270,277 10,887,340
Construction work in progress 415,137 381,804
Nuclear fuel assemblies and components,
less accumulated amortization 104,398 84,701
----------- -----------
NET UTILITY PLANT 11,789,812 11,353,845
----------- -----------
CURRENT ASSETS
Cash and temporary cash investments 37,656 485,050
Accounts receivable - customer, less
allowance for uncollectible accounts
of $ 33,222 and $ 34,821 685,790 647,545
Other receivables 143,135 98,454
Fuel, at average cost 24,291 24,271
Gas in storage, at average cost 43,881 55,387
Materials and supplies, at average cost 151,238 142,905
Prepayments 297,926 197,671
Other current assets 45,449 61,395
----------- -----------
TOTAL CURRENT ASSETS 1,429,366 1,712,678
----------- -----------
INVESTMENTS
Nuclear decommissioning trust funds 314,774 305,717
Other 192,757 182,201
----------- -----------
TOTAL INVESTMENTS 507,531 487,918
----------- -----------
DEFERRED CHARGES AND REGULATORY ASSETS
Goodwill 422,034 427,496
Regulatory assets
Future federal income tax 773,323 785,014
Recoverable energy costs 278,846 95,162
Power contract termination costs 72,659 71,861
Accrued unbilled gas revenues 77,204 67,775
Divestiture - capacity replacement reconciliation 73,850 24,373
MTA business tax surcharge 64,942 60,712
Other 355,447 279,255
----------- -----------
Total regulatory assets 1,696,271 1,384,152
Other deferred charges 176,439 165,387
----------- -----------
TOTAL DEFERRED CHARGES AND
REGULATORY ASSETS 2,294,744 1,977,035
----------- -----------
TOTAL $16,021,453 $15,531,476
=========== ===========
The accompanying notes are an integral part of these financial statements.
- 5 -
CONSOLIDATED EDISON, INC.
CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
As at
-------------------------------------
June 30, 2000 December 31, 1999
------------- -----------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, authorized 500,000,000
shares; outstanding 211,968,422 shares
and 213,810,634 shares $ 1,482,341 $ 1,482,341
Retained earnings 4,946,907 4,921,089
Treasury stock, at cost; 23,210,700 shares
and 21,358,500 shares (1,015,642) (955,311)
Capital stock expense (35,952) (36,112)
------------ ------------
TOTAL COMMON SHAREHOLDERS' EQUITY 5,377,654 5,412,007
------------ ------------
Preferred stock subject to mandatory redemption 37,050 37,050
Other preferred stock 212,563 212,563
Long-term debt 4,933,529 4,524,604
------------ ------------
TOTAL CAPITALIZATION 10,560,796 10,186,224
------------ ------------
NONCURRENT LIABILITIES
Obligations under capital leases 33,040 34,544
Accumulated provision for injuries and damages 128,062 119,010
Pension and benefits reserve 183,640 143,757
Other noncurrent liabilities 43,666 42,865
------------ ------------
TOTAL NONCURRENT LIABILITIES 388,408 340,176
------------ ------------
CURRENT LIABILITIES
Long - term debt due within one year 328,230 395,000
Notes payable 204,280 495,371
Accounts payable 875,904 615,983
Customer deposits 203,687 204,421
Accrued taxes 76,662 18,389
Accrued interest 58,336 60,061
Accrued wages 80,704 79,408
Other current liabilities 261,482 232,706
------------ ------------
TOTAL CURRENT LIABILITIES 2,089,285 2,101,339
------------ ------------
DEFERRED CREDITS AND REGULATORY LIABILITIES
Accumulated deferred federal income tax 2,289,261 2,267,548
Regulatory liabilities
Gain on divestiture 307,130 306,867
Accumulated deferred investment tax credits 135,750 139,838
Other 250,823 189,317
------------ ------------
Total regulatory liabilities 693,703 636,022
Other deferred credits -- 167
------------ ------------
TOTAL DEFERRED CREDITS AND
REGULATORY LIABILITIES 2,982,964 2,903,737
------------ ------------
TOTAL $ 16,021,453 $ 15,531,476
============ ============
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED EDISON, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 1,531,262 $ 1,162,543
Gas 247,016 189,701
Steam 74,600 52,878
Non-utility 189,016 73,959
----------- -----------
TOTAL OPERATING REVENUES 2,041,894 1,479,081
----------- -----------
OPERATING EXPENSES
Purchased power 786,689 281,452
Fuel 47,381 121,427
Gas purchased for resale 164,538 78,012
Other operations 289,865 278,421
Maintenance 128,140 103,286
Depreciation and amortization 145,618 133,616
Taxes, other than federal income tax 275,349 284,978
Federal income tax 32,985 48,204
----------- -----------
TOTAL OPERATING EXPENSES 1,870,565 1,329,396
----------- -----------
OPERATING INCOME 171,329 149,685
OTHER INCOME (DEDUCTIONS)
Investment income 2,503 577
Allowance for equity funds used during construction 485 937
Other income less miscellaneous deductions (4,037) (1,046)
Federal income tax 1,049 (658)
----------- -----------
TOTAL OTHER INCOME (DEDUCTIONS) - (190)
----------- -----------
INCOME BEFORE INTEREST CHARGES 171,329 149,495
Interest on long-term debt 87,658 75,820
Other interest 12,559 4,317
Allowance for borrowed funds used during construction (1,032) (438)
----------- -----------
NET INTEREST CHARGES 99,185 79,699
----------- -----------
PREFERRED STOCK DIVIDEND REQUIREMENTS 3,398 3,398
----------- -----------
NET INCOME FOR COMMON STOCK $ 68,746 $ 66,398
=========== ===========
COMMON SHARES OUTSTANDING - AVERAGE (000) 211,966 225,982
BASIC EARNINGS PER SHARE $ 0.33 $ 0.30
=========== ===========
DILUTED EARNINGS PER SHARE $ 0.33 $ 0.30
=========== ===========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.545 $ 0.535
=========== ===========
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED EDISON, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 3,043,511 $ 2,356,043
Gas 716,489 571,042
Steam 244,858 193,611
Non-utility 355,627 134,971
----------- -----------
TOTAL OPERATING REVENUES 4,360,485 3,255,667
----------- -----------
OPERATING EXPENSES
Purchased power 1,515,851 569,277
Fuel 133,645 238,967
Gas purchased for resale 430,837 258,543
Other operations 601,963 574,224
Maintenance 234,972 204,882
Depreciation and amortization 288,340 266,324
Taxes, other than federal income tax 566,429 585,359
Federal income tax 134,410 149,938
----------- -----------
TOTAL OPERATING EXPENSES 3,906,447 2,847,514
----------- -----------
OPERATING INCOME 454,038 408,153
OTHER INCOME (DEDUCTIONS)
Investment income 6,826 1,992
Allowance for equity funds used during construction (91) 1,909
Other income less miscellaneous deductions (4,205) (1,413)
Federal income tax (152) (878)
----------- -----------
TOTAL OTHER INCOME (DEDUCTIONS) 2,378 1,610
----------- -----------
INCOME BEFORE INTEREST CHARGES 456,416 409,763
Interest on long-term debt 170,971 151,663
Other interest 24,555 9,150
Allowance for borrowed funds used during construction (2,787) (892)
----------- -----------
NET INTEREST CHARGES 192,739 159,921
----------- -----------
PREFERRED STOCK DIVIDEND REQUIREMENTS 6,796 6,796
----------- -----------
NET INCOME FOR COMMON STOCK $ 256,881 $ 243,046
=========== ===========
COMMON SHARES OUTSTANDING - AVERAGE (000) 212,352 228,496
BASIC EARNINGS PER SHARE $ 1.21 $ 1.06
=========== ===========
DILUTED EARNINGS PER SHARE $ 1.21 $ 1.06
=========== ===========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 1.09 $ 1.07
=========== ===========
The accompanying notes are an integral part of these financial statements.
- 8 -
CONSOLIDATED EDISON, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
(Thousands of Dollars)
OPERATING ACTIVITIES
Net income for common stock $ 256,881 $ 243,046
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 288,340 266,324
Federal income tax deferred 28,134 (21,368)
Common equity component of allowance for funds used during construction 91 (1,909)
Other non-cash charges 29,156 16,954
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customer, less allowance for uncollectibles (38,245) (936)
Materials and supplies, including fuel and gas in storage 3,153 67,314
Prepayments, other receivables and other current assets (128,990) (47,325)
Enlightened Energy program costs 12,463 18,987
Deferred recoverable energy costs (183,684) 9,803
Cost of removal less salvage (44,575) (34,144)
Power contract termination costs (1,050) (1,050)
Accounts payable 259,921 13,689
Accrued income taxes 31,470 21,018
Other-net (20,417) 53,784
----------- -----------
NET CASH FLOWS FROM OPERATING ACTIVITIES 492,648 604,187
----------- -----------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (391,189) (271,035)
Nuclear fuel expenditures (24,114) (2,947)
Contributions to nuclear decommissioning trust (10,650) (10,650)
Common equity component of allowance for funds used during construction (91) 1,909
Funds held - divestiture of utility plant -- (1,101,814)
Divestiture of utility plant (net of federal income tax) -- 1,167,016
Non-regulated subsidiary investments (4,786) (54,560)
Non-regulated subsidiary utility plant (258,987) --
----------- -----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES
INCLUDING CONSTRUCTION (689,817) (272,081)
----------- -----------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
Repurchase of common stock (68,531) (423,500)
Net proceeds from short-term debt (291,091) 258,498
Additions to long-term debt 567,395 275,000
Retirement of long-term debt (225,000) --
Issuance and refunding costs (1,768) (8,716)
Common stock dividends (231,230) (244,548)
----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCLUDING DIVIDENDS (250,225) (143,266)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS (447,394) 188,840
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 485,050 102,295
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30 $ 37,656 $ 291,135
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 166,605 $ 145,132
Income taxes 74,245 118,283
The accompanying notes are an integral part of these financial statements.
- 9 -
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 June 30, 2000, Con Edison had accrued $67.5 million 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.
Con Edison's utility subsidiaries are permitted under current rate agreements to
defer for subsequent recovery through rates certain site investigation and
remediation costs with respect to hazardous waste. At June 30, 2000, $42.7
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's 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.
- 10 -
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 of its four steam generators. Nuclear Regulatory Commission
approval will be required for restart.
On March 30, 2000, the New York State Public Service Commission (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 PSC Outage Proceeding). 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.
On May 25, 2000, Westchester County, New York sued the PSC and Con Edison of New
York seeking to prevent the company from recovering costs relating to the
ongoing outage. The suit, which is entitled The County of Westchester et al., v.
Maureen O. Helmer, et al., was brought in the Supreme Court of the State of New
York, County of Albany.
The costs resulting from the unavailability of Indian Point 2 to produce energy
have been included in the purchased power costs that Con Edison of New York has
billed to customers under PSC-approved rate provisions.
Con Edison of New York has commenced replacement of the steam generators with
steam generators it has owned since 1988. The company expects the steam
generator replacement to be completed by the end of 2000 and estimates that
replacement will require additional expenditures (exclusive of replacement power
costs) of up to $150 million.
At June 30, 2000, Con Edison had accrued $30 million for its potential liability
to customers in connection with the ongoing outage.
On August 8, 2000, the Governor of State of New York signed into law an act (the
Indian Point 2 Law) which provides that:
"With respect to the February 15, 2000 outage at the Indian Point 2
Nuclear Facility, the New York state public service commission shall
prohibit the Consolidated Edison Company from recovering from its
ratepayers any costs associated with replacing the power from such
facility. Such prohibition shall apply to any such costs incurred until
the conclusion of such outage, or incurred at any time until all
defective steam generation equipment at the facility has been replaced,
whichever occurs later. Such prohibition shall apply to automatic
adjustment mechanisms as well as base rates or any other rate recovery
mechanism. The commission shall order the company to refund any such
costs which have been recovered from ratepayers."
On August 9, 2000, the PSC issued an order with respect to the Indian Point 2
Law. The order directs Con Edison of New York to revise its electric tariff to
prevent prospective recovery of these replacement power costs and, commencing
September 2000, to implement a refund of all such costs collected since February
15, 2000. The order indicates that "the anticipated amount to be refunded to
customers is approximately $162 million."
On August 14, 2000, the company initiated an action in the United States
District Court for the Northern District of New York, entitled Consolidated
Edison Company of New York, Inc. v. Pataki, et al., seeking to prevent
implementation of the Indian Point 2 Law and to have the Indian Point 2 Law
declared unconstitutional.
Con Edison believes that the operation, maintenance and inspection practices
related to Indian Point 2 have been prudent. However, if the Indian Point 2 Law
is implemented and determined to be constitutional, Con Edison of New York will
not recover from its customers its Indian Point 2 replacement power costs. In
addition, Con Edison is unable to predict whether or not any other Indian Point
2-related proceedings, lawsuits, legislation or other actions, including the
PSC's Outage Proceeding, will have a material adverse effect on its financial
position, results of operations or liquidity.
- 11 -
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 and six-month periods ended June
30,1999, 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 and six-month periods of the goodwill recorded by Con Edison in
connection 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 Six Months
except per share amounts) Ended Ended
June 30, 1999 June 30, 1999
Revenues $1,621,518 $3,581,159
Operating income 127,523 393,572
Net income 54,983 230,115
Earnings per share $ 0.24 $ 1.01
Average shares outstanding (000) 225,982 228,496
NOTE E - FINANCIAL INFORMATION BY BUSINESS SEGMENT
CONSOLIDATED EDISON, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
ELECTRIC GAS
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Operating revenues $1,531,262 $1,162,543 $ 247,016 $ 189,701
Intersegment revenues 12,993 40,234 2,106 615
Depreciation and amortization 118,541 112,573 17,259 15,991
Operating income 151,215 130,207 29,065 24,620
STEAM OTHER
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Operating revenues $ 74,600 $ 52,878 $ 189,016 $ 73,959
Intersegment revenues 517 414 323 88
Depreciation and amortization 4,618 4,476 5,200 576
Operating income (4,088) (2,386) (4,863) (2,756)
TOTAL
-----------------------------
2000 1999
---------- ----------
Operating revenues $2,041,894 $1,479,081
Intersegment revenues 15,939 41,351
Depreciation and amortization 145,618 133,616
Operating income 171,329 149,685
- 12 -
CONSOLIDATED EDISON, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
ELECTRIC GAS
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Operating revenues $3,043,511 $2,356,043 $ 716,489 $ 571,042
Intersegment revenues 31,737 59,626 4,437 1,230
Depreciation and amortization 235,720 224,685 34,143 31,703
Operating income 304,670 277,356 129,682 113,066
STEAM OTHER
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Operating revenues $ 244,858 $ 193,611 $ 355,627 $ 134,971
Intersegment revenues 934 827 691 309
Depreciation and amortization 9,210 8,925 9,267 1,011
Operating income 26,337 27,316 (6,651) (9,585)
TOTAL
------------------------------
2000 1999
---------- ----------
Operating revenues $4,360,485 $3,255,667
Intersegment revenues 37,799 61,992
Depreciation and amortization 288,340 266,324
Operating income 454,038 408,153
- 13 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
BALANCE SHEET
AS AT JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
As at
------------------------------------
June 30, 2000 December 31, 1999
----------- -----------
(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric $10,872,604 $10,670,257
Gas 1,970,437 1,934,090
Steam 730,387 722,265
General 1,248,594 1,220,948
----------- -----------
Total 14,822,022 14,547,560
Less: Accumulated depreciation 4,534,397 4,384,783
----------- -----------
Net 10,287,625 10,162,777
Construction work in progress 387,891 359,431
Nuclear fuel assemblies and components,
less accumulated amortization 104,398 84,701
----------- -----------
NET UTILITY PLANT 10,779,914 10,606,909
----------- -----------
CURRENT ASSETS
Cash and temporary cash investments 1,164 349,033
Accounts receivable - customer, less
allowance for uncollectible accounts
of $ 22,227 and $ 22,600 534,431 541,978
Other receivables 81,992 71,746
Fuel, at average cost 23,666 23,641
Gas in storage, at average cost 35,145 40,280
Materials and supplies, at average cost 145,139 138,300
Prepayments 271,125 178,693
Other current assets 37,936 32,513
----------- -----------
TOTAL CURRENT ASSETS 1,130,598 1,376,184
----------- -----------
INVESTMENTS
Nuclear decommissioning trust funds 314,774 305,717
Other 16,659 18,491
----------- -----------
TOTAL INVESTMENTS 331,433 324,208
----------- -----------
DEFERRED CHARGES AND REGULATORY ASSETS
Regulatory assets
Future federal income tax 740,697 751,899
Recoverable energy costs 245,129 78,650
Divestiture - capacity replacement reconciliation 73,850 24,373
Power contract termination costs 72,659 71,861
MTA business tax surcharge 59,938 60,712
Property tax reconciliation 45,266 29,751
Accrued unbilled gas revenue 43,594 43,594
Other 179,987 164,411
----------- -----------
Total regulatory assets 1,461,120 1,225,251
Other deferred charges 150,904 149,600
----------- -----------
TOTAL DEFERRED CHARGES AND
REGULATORY ASSETS 1,612,024 1,374,851
----------- -----------
TOTAL $13,853,969 $13,682,152
=========== ===========
The accompanying notes are an integral part of these financial statements.
- 14 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
BALANCE SHEET
AS AT JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
As at
--------------------------------------
June 30, 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 3,906,176 3,887,993
Capital stock expense (35,951) (36,086)
------------ ------------
TOTAL COMMON SHAREHOLDERS' EQUITY 4,390,474 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 4,418,735 4,243,080
------------ ------------
TOTAL CAPITALIZATION 9,058,822 8,886,464
------------ ------------
NONCURRENT LIABILITIES
Obligations under capital leases 32,931 34,406
Accumulated provision for injuries and damages 119,633 110,131
Pension and benefits reserve 113,861 76,807
Other noncurrent liabilities 17,210 17,210
------------ ------------
TOTAL NONCURRENT LIABILITIES 283,635 238,554
------------ ------------
CURRENT LIABILITIES
Long - term debt due within one year 300,000 275,000
Accounts payable 714,508 505,357
Notes payable 109,930 495,371
Customer deposits 192,641 208,865
Accrued taxes 70,049 23,272
Accrued interest 52,427 51,581
Accrued wages 80,704 79,408
Other current liabilities 198,473 202,657
------------ ------------
TOTAL CURRENT LIABILITIES 1,718,732 1,841,511
------------ ------------
DEFERRED CREDITS AND REGULATORY LIABILITIES
Accumulated deferred federal income tax 2,135,706 2,121,054
Regulatory liabilities
Gain on divestiture 307,130 306,867
Accumulated deferred investment tax credits 128,626 132,487
Other 221,318 155,215
------------ ------------
Total regulatory liabilities 657,074 594,569
TOTAL DEFERRED CREDITS AND
REGULATORY LIABILITIES 2,792,780 2,715,623
------------ ------------
TOTAL $ 13,853,969 $ 13,682,152
============ ============
The accompanying notes are an integral part of these financial statements.
- 15 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
------------ ------------
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 1,429,502 $ 1,200,079
Gas 217,380 189,701
Steam 74,600 52,878
------------ ------------
TOTAL OPERATING REVENUES 1,721,482 1,442,658
------------ ------------
OPERATING EXPENSES
Purchased power 639,181 274,556
Fuel 42,731 121,427
Gas purchased for resale 90,628 65,192
Other operations 239,195 261,982
Maintenance 121,556 103,286
Depreciation and amortization 132,959 133,040
Taxes, other than federal income tax 257,116 281,313
Federal income tax 32,160 49,421
------------ ------------
TOTAL OPERATING EXPENSES 1,555,526 1,290,217
------------ ------------
OPERATING INCOME 165,956 152,441
OTHER INCOME (DEDUCTIONS)
Investment income 817 130
Allowance for equity funds used during construction 400 937
Other income less miscellaneous deductions (2,315) (608)
Federal income tax 1,206 (887)
------------ ------------
TOTAL OTHER INCOME (DEDUCTIONS) 108 (428)
------------ ------------
INCOME BEFORE INTEREST CHARGES 166,064 152,013
Interest on long-term debt 81,148 75,820
Other interest 11,292 4,061
Allowance for borrowed funds used during construction (905) (438)
------------ ------------
NET INTEREST CHARGES 91,535 79,443
------------ ------------
NET INCOME 74,529 72,570
PREFERRED STOCK DIVIDEND REQUIREMENTS 3,398 3,398
------------ ------------
NET INCOME FOR COMMON STOCK $ 71,131 $ 69,172
============ ============
CON EDISON OF NEW YORK SALES
Electric (thousands of kilowatthours)
Con Edison of New York customers 7,402,219 7,167,682
Delivery service for Retail Choice 2,120,980 1,817,004
Delivery service to NYPA and others 2,336,904 2,256,496
------------ ------------
Total sales in service territory 11,860,103 11,241,182
Off-system and ESCO sales 877,683 2,470,029
Gas (dekatherms)
Firm sales and transportation 18,949,573 17,609,992
Off-peak firm/interruptible 3,500,595 2,799,192
------------ ------------
Total sales to Con Edison of New York customers 22,450,168 20,409,184
Transportation of customer-owned gas
NYPA 5,756,826 2,251,072
Other 24,811,439 4,667,475
Off-system sales 6,911,069 8,003,871
------------ ------------
Total sales and transportation 59,929,502 35,331,602
Steam (thousands of pounds) 4,666,444 4,558,681
The accompanying notes are an integral part of these financial statements.
- 16 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
------------ ------------
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 2,852,663 $ 2,410,274
Gas 611,022 571,042
Steam 244,858 193,611
------------ ------------
TOTAL OPERATING REVENUES 3,708,543 3,174,927
------------ ------------
OPERATING EXPENSES
Purchased power 1,257,424 556,998
Fuel 127,929 238,967
Gas purchased for resale 250,180 213,253
Other operations 496,294 543,400
Maintenance 222,241 204,882
Depreciation and amortization 264,498 265,313
Taxes, other than federal income tax 527,419 580,189
Federal income tax 128,117 154,187
------------ ------------
TOTAL OPERATING EXPENSES 3,274,102 2,757,189
------------ ------------
OPERATING INCOME 434,441 417,738
OTHER INCOME (DEDUCTIONS)
Investment income 1,550 192
Allowance for equity funds used during construction (226) 1,909
Other income less miscellaneous deductions (2,298) (1,243)
Federal income tax 816 (945)
------------ ------------
TOTAL OTHER INCOME (DEDUCTIONS) (158) (87)
------------ ------------
INCOME BEFORE INTEREST CHARGES 434,283 417,651
Interest on long-term debt 157,898 151,663
Other interest 22,762 8,895
Allowance for borrowed funds used during construction (2,585) (892)
------------ ------------
NET INTEREST CHARGES 178,075 159,666
------------ ------------
NET INCOME 256,208 257,985
PREFERRED STOCK DIVIDEND REQUIREMENTS 6,796 6,796
------------ ------------
NET INCOME FOR COMMON STOCK $ 249,412 $ 251,189
============= ============
CON EDISON OF NEW YORK SALES
Electric (thousands of kilowatthours)
Con Edison of New York customers 15,018,669 15,573,926
Delivery service for Retail Choice 4,375,829 2,866,072
Delivery service to NYPA and others 4,811,793 4,729,835
------------ ------------
Total sales in service territory 24,206,291 23,169,833
Off-system and ESCO sales 2,444,237 3,828,190
Gas (dekatherms)
Firm sales and transportation 60,647,576 58,205,342
Off-peak firm/interruptible 8,355,644 7,962,748
------------ ------------
Total sales to Con Edison of New York customers 69,003,220 66,168,090
Transportation of customer-owned gas
NYPA 8,981,343 2,267,025
Other 45,133,010 11,468,573
Off-system sales 15,809,633 16,461,693
------------ ------------
Total sales and transportation 138,927,206 96,365,381
Steam (thousands of pounds) 14,892,054 14,774,938
The accompanying notes are an integral part of these financial statements.
- 17 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
(Thousands of Dollars)
OPERATING ACTIVITIES
Net income $ 256,208 $ 257,985
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 264,498 265,313
Federal income tax deferred 21,235 (27,847)
Common equity component of allowance for funds used during construction 226 (1,909)
Other non-cash charges 4,976 16,954
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customer, less allowance for uncollectibles 7,547 10,919
Materials and supplies, including fuel and gas in storage (1,729) 66,435
Prepayments, other receivables and other current assets (108,101) (42,636)
Enlightened Energy program costs 12,463 18,987
Deferred recoverable energy costs (166,479) 9,803
Cost of removal less salvage (44,575) (34,144)
Power contract termination costs (1,050) (1,050)
Accounts payable 209,151 12,525
Accrued income taxes 23,754 16,553
Other-net 34,564 81,202
----------- -----------
NET CASH FLOWS FROM OPERATING ACTIVITIES 512,688 649,090
----------- -----------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (370,878) (271,035)
Nuclear fuel expenditures (24,114) (2,947)
Contributions to nuclear decommissioning trust (10,650) (10,650)
Common equity component of allowance for funds used during construction (226) 1,909
Funds held - divestiture of utility plant -- (1,101,814)
Divestiture of utility plant (net of federal income tax) -- 1,167,016
----------- -----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES
INCLUDING CONSTRUCTION (405,868) (217,521)
----------- -----------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
Repurchase of common stock (29,454) (423,500)
Net proceeds from short-term debt (385,441) 221,498
Issuance of long-term debt 325,000 275,000
Retirement of long-term debt (125,000) --
Issuance and refunding costs (1,768) (8,716)
Common stock dividends (231,230) (244,548)
Preferred stock dividends (6,796) (6,796)
----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCLUDING DIVIDENDS (454,689) (187,062)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS (347,869) 244,507
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 349,033 30,026
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30 $ 1,164 $ 274,533
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 151,794 $ 145,132
Income taxes 67,515 129,217
The accompanying notes are an integral part of these financial statements.
- 18 -
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 June 30, 2000, Con Edison of New York had accrued $50.2 million 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 June 30, 2000, $24.2 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.
- 19 -
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 of its four steam generators. Nuclear Regulatory Commission
approval will be required for restart.
On March 30, 2000, the New York State Public Service Commission (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 PSC Outage Proceeding). 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.
On May 25, 2000, Westchester County, New York sued the PSC and Con Edison of New
York seeking to prevent the company from recovering costs relating to the
ongoing outage. The suit, which is entitled The County of Westchester et al., v.
Maureen O. Helmer, et al., was brought in the Supreme Court of the State of New
York, County of Albany.
The costs resulting from the unavailability of Indian Point 2 to produce energy
have been included in the purchased power costs that Con Edison of New York has
billed to customers under PSC-approved rate provisions.
Con Edison of New York has commenced replacement of the steam generators with
steam generators it has owned since 1988. The company expects the steam
generator replacement to be completed by the end of 2000 and estimates that
replacement will require additional expenditures (exclusive of replacement power
costs) of up to $150 million.
At June 30, 2000, Con Edison had accrued $30 million for its potential liability
to customers in connection with the ongoing outage.
On August 8, 2000, the Governor of State of New York signed into law an act (the
Indian Point 2 Law) which provides that:
"With respect to the February 15, 2000 outage at the Indian Point 2
Nuclear Facility, the New York state public service commission shall
prohibit the Consolidated Edison Company from recovering from its
ratepayers any costs associated with replacing the power from such
facility. Such prohibition shall apply to any such costs incurred until
the conclusion of such outage, or incurred at any time until all
defective steam generation equipment at the facility has been replaced,
whichever occurs later. Such prohibition shall apply to automatic
adjustment mechanisms as well as base rates or any other rate recovery
mechanism. The commission shall order the company to refund any such
costs which have been recovered from ratepayers."
On August 9, 2000, the PSC issued an order with respect to the Indian Point 2
Law. The order directs Con Edison of New York to revise its electric tariff to
prevent prospective recovery of these replacement power costs and, commencing
September 2000, to implement a refund of all such costs collected since February
15, 2000. The order indicates that "the anticipated amount to be refunded to
customers is approximately $162 million."
On August 14, 2000, the company initiated an action in the United States
District Court for the Northern District of New York, entitled Consolidated
Edison Company of New York, Inc. v. Pataki, et al., seeking to prevent
implementation of the Indian Point 2 Law and to have the Indian Point 2 Law
declared unconstitutional.
Con Edison of New York believes that the operation, maintenance and inspection
practices related to Indian Point 2 have been prudent. However, if the Indian
Point 2 Law is implemented and determined to be constitutional, Con Edison of
New York will not recover from its customers its Indian Point 2 replacement
power costs. In addition, Con Edison of New York is unable to predict whether or
not any other Indian Point 2-related proceedings, lawsuits, legislation or other
actions, including the PSC's Outage Proceeding, will have a material adverse
effect on its financial position, results of operations or liquidity.
- 20 -
NOTE D - FINANCIAL INFORMATION BY BUSINESS SEGMENT
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
ELECTRIC GAS
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Operating revenues $1,429,502 $1,200,079 $ 217,380 $ 189,701
Intersegment revenues 2,142 2,698 734 615
Depreciation and amortization 113,396 112,573 14,945 15,991
Operating income 140,064 130,207 29,979 24,620
STEAM TOTAL
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Operating revenues $ 74,600 $ 52,878 $1,721,482 $1,442,658
Intersegment revenues 517 414 3,393 3,727
Depreciation and amortization 4,618 4,476 132,959 133,040
Operating income (4,087) (2,386) 165,956 152,441
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
ELECTRIC GAS
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Operating revenues $2,852,663 $2,410,274 $ 611,022 $ 571,042
Intersegment revenues 5,327 5,395 1,437 1,230
Depreciation and amortization 225,612 224,685 29,676 31,703
Operating income 286,801 277,356 121,303 113,066
STEAM TOTAL
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Operating revenues $ 244,858 $ 193,611 $3,708,543 $3,174,927
Intersegment revenues 934 827 7,698 7,452
Depreciation and amortization 9,210 8,925 264,498 265,313
Operating income 26,337 27,316 434,441 417,738
- 21 -
ORANGE AND ROCKLAND UTILITIES, INC.
CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
As at
------------------------------------
June 30, 2000 December 31, 1999
------------- -----------------
(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric $ 661,526 $ 653,503
Gas 268,770 263,645
General 107,410 107,661
----------- -----------
Total 1,037,706 1,024,809
Less: accumulated depreciation 361,855 348,060
----------- -----------
Net 675,851 676,749
Construction work in progress 27,246 22,373
----------- -----------
NET UTILITIY PLANT 703,097 699,122
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 31,845 78,927
Customer accounts receivable, less allowance for
uncollectable accounts of $4,450 and $5,395 52,660 58,586
Other accounts receivable, less allowance for
uncollectable accounts of $1,482 and $1,401 23,137 13,333
Accrued utility revenue 33,610 24,181
Gas in storage, at average cost 8,473 14,856
Materials and supplies, at average cost 4,578 4,333
Prepayments 24,983 20,761
Other current assets 20,602 22,316
----------- -----------
TOTAL CURRENT ASSETS 199,888 237,293
----------- -----------
INVESTMENTS
Non-Utility Property-net of accumulated depreciation and amortization 3,406 3,415
Other 6 6
----------- -----------
TOTAL INVESTMENTS 3,412 3,421
----------- -----------
DEFERRED CHARGES AND REGULATORY ASSETS
Regulatory Assets
Future federal income tax 32,626 33,115
Recoverable energy costs 35,371 18,400
Deferred revenue taxes 9,457 10,130
Deferred pension and other postretirement benefits 42,831 45,328
Other regulatory assets 48,448 34,730
----------- -----------
Total regulatory assets 168,733 141,703
Other deferred charges 13,704 7,237
----------- -----------
TOTAL DEFERRED CHARGES AND
REGULATORY ASSETS 182,437 148,940
----------- -----------
TOTAL $ 1,088,834 $ 1,088,776
=========== ===========
The accompanying notes are an integral part of these financial statements.
- 22 -
ORANGE AND ROCKLAND UTILITIES, INC.
BALANCE SHEET
AS AT JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
As at
--------------------------------------
June 30, 2000 December 31, 1999
------------- -----------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock $ 5 $ 5
Additional paid in capital 194,499 194,499
Capital stock expense - (25)
Retained earnings 135,080 137,535
----------- -----------
TOTAL COMMON SHAREHOLDER'S EQUITY 329,584 332,014
Long term debt 335,601 281,524
----------- -----------
TOTAL CAPITALIZATION 665,185 613,538
----------- -----------
NON-CURRENT LIABILITIES:
Pension and benefit reserve 69,779 66,950
Other noncurrent liabilities 34,888 34,538
----------- -----------
TOTAL NON-CURRENT LIABILITIES 104,667 101,488
----------- -----------
CURRENT LIABILITIES:
Long-term debt due within one year 20,000 120,000
Notes payable 19,650 -
Accounts payable 56,182 54,731
Accrued federal income and other taxes 4,807 -
Customer deposits 6,651 7,217
Accrued interest 6,743 8,521
Other current liabilities 53,661 22,319
----------- -----------
TOTAL CURRENT LIABILITIES 167,694 212,788
----------- -----------
DEFERRED CREDITS AND REGULATORY LIABILITIES
Deferred federal income taxes 114,659 119,509
Deferred investment tax credits 7,124 7,351
Regulatory liabilities and other deferred credits 29,505 34,102
----------- -----------
TOTAL DEFERRED CREDITS AND 151,288 160,962
REGULATORY LIABILITIES ----------- -----------
TOTAL $ 1,088,834 $ 1,088,776
=========== ===========
The accompanying notes are an integral part of these financial statements.
- 23 -
ORANGE AND ROCKLAND UTILITIES, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Unaudited
2000 1999
----------- -----------
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 112,609 $ 115,409
Gas 31,009 26,485
Non-utility 21 543
----------- -----------
TOTAL OPERATING REVENUES 143,639 142,437
----------- -----------
OPERATING EXPENSES
Purchased power 54,435 23,960
Fuel -- 10,384
Gas purchased for resale 18,779 14,981
Other operations 28,829 66,109
Maintenance 6,584 9,653
Depreciation and amortization 7,460 9,733
Taxes, other than federal income tax 14,530 21,458
Federal income tax 2,951 (4,712)
----------- -----------
TOTAL OPERATING EXPENSES 133,568 151,566
----------- -----------
OPERATING INCOME 10,071 (9,129)
OTHER INCOME (DEDUCTIONS)
Investment income 1,280 233
Allowance for equity funds used during construction 85 6
Other income and deductions 105 (2,022)
Federal income tax (479) (13)
----------- -----------
TOTAL OTHER INCOME (DEDUCTIONS) 991 (1,796)
----------- -----------
Income before interest charges 11,062 (10,925)
INTEREST CHARGES
Interest on long-term debt 5,107 6,734
Other interest 749 2,136
Allowance for borrowed funds used during construction (128) (70)
----------- -----------
TOTAL INTEREST CHARGES 5,728 8,800
----------- -----------
NET INCOME (LOSS) 5,334 (19,725)
PREFERRED AND PREFERENCE STOCK REQUIREMENTS -- 187
----------- -----------
NET INCOME (LOSS) FOR COMMON STOCK $ 5,334 $ (19,912)
=========== ===========
ORANGE AND ROCKLAND SALES & DELIVERIES
Electric - Thousands of killowatthours (Mwhr's)
O&R Customers 1,212,049 1,197,606
Off-system sales -- 71,400
----------- -----------
Total Electric Sales & Deliveries 1,212,049 1,269,006
----------- -----------
Gas - Dekatherms (Dth) 4,916,392 4,830,683
----------- -----------
The accompanying notes are an integral part of these financial statements.
- 24 -
ORANGE AND ROCKLAND UTILITIES, INC.
CONSOLIDATED INCOME STATEMENT
FOR SIX MONTHS ENDED JUNE 30, 2000 AND 1999
UNAUDITED
2000 1999
------------ ------------
(Thousands of Dollars)
OPERATING REVENUES
Electric $ 217,252 $ 224,323
Gas 108,467 100,553
Non-utility 116 616
------------ ------------
TOTAL OPERATING REVENUES 325,835 325,492
------------ ------------
OPERATING EXPENSES
Purchased power 109,171 43,689
Fuel 39 23,064
Gas purchased for resale 66,926 56,944
Other operations 57,740 103,732
Maintenance 12,732 18,610
Depreciation and amortization 14,577 19,221
Taxes, other than federal income tax 30,991 46,255
Federal income tax 7,801 2,493
------------ ------------
TOTAL OPERATING EXPENSES 299,977 314,008
------------ ------------
OPERATING INCOME 25,858 11,484
OTHER INCOME (DEDUCTIONS)
Investment income 4,385 233
Allowance for equity funds used during construction 135 15
Other income and deductions (243) (2,187)
Federal income tax (1,370) 172
------------ ------------
TOTAL OTHER INCOME (DEDUCTIONS) 2,907 (1,767)
------------ ------------
Income before interest charges 28,765 9,717
INTEREST CHARGES
Interest on long-term debt 11,670 12,801
Other interest 1,253 4,544
Allowance for borrowed funds used during construction (202) (118)
------------ ------------
TOTAL INTEREST CHARGES 12,721 17,227
------------ ------------
NET INCOME (LOSS) 16,044 (7,510)
PREFERRED AND PREFERENCE STOCK REQUIREMENTS -- 886
------------ ------------
NET INCOME FOR (LOSS) COMMON STOCK $ 16,044 $ (8,396)
============ ============
ORANGE AND ROCKLAND SALES & DELIVERIES
Electric - Thousands of killowatthours (Mwhr's)
O&R Customers 2,403,530 2,355,913
Off-system sales 2,400 108,230
------------ ------------
Total Electric Sales & Deliveries 2,405,930 2,464,143
------------ ------------
Gas - Dekatherms (Dth) 17,230,365 16,781,045
------------ ------------
The accompanying notes are an integral part of these financial statements.
- 25 -
ORANGE AND ROCKLAND UTILITIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Unaudited
2000 1999
--------- ---------
(THOUSANDS OF DOLLARS)
OPERATING ACTIVITIES
Net Income $ 16,044 $ (7,510)
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
Depreciation and amortization 14,577 19,221
Amortization of investment tax credit (227) (6,083)
Federal income tax deferred (4,361) (17,450)
Common equity component of allowance for funds used during construction (135) (15)
Other non-cash changes (debits) 1,351 577
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable -- net, and accrued utility revenue (3,503) (5,302)
Materials and supplies, including fuel and gas in storage 6,138 5,721
Prepayments, other receivables and other current assets (12,317) 7,455
Deferred recoverable energy costs 2,697 11,688
Accounts payable 1,451 16,537
Refunds to customers 800 2,293
Other -- net (5,544) 31,544
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 16,971 58,676
--------- ---------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
Construction expenditures (20,312) (18,211)
Net proceeds from the sale of the electric generating assets -- 339,272
Common equity component of allowance for funds used during construction 135 15
--------- ---------
NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION (20,177) 321,076
--------- ---------
FINANCING ACTIVITIES
Issuance of long-term debt 55,000 45,000
Retirement of long-term debt (100,026) (2,341)
Retirement of preference and preferred stock -- (43,516)
Retirement of capital lease obligations -- (1,472)
Short-term debt arrangements 19,650 (82,403)
Common stock dividends (18,500) (17,858)
Preferred stock dividends -- (886)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES INCLUDING DIVIDENDS (43,876) (103,476)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS (47,081) 276,276
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 78,927 6,143
--------- ---------
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30 31,846 282,419
--------- ---------
Cash paid during the period for:
Interest 14,811 14,224
Income Taxes 27,819 11,000
The accompanying notes are an integral part of these financial statements.
- 26 -
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 (the Form 10-K).
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 may be imposed without regard to fault, or may imposed for past
acts, even though such past acts may have been lawful at the time they occurred.
At June 30, 2000, O&R had accrued $17.3 million 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.
The total amount of liability is not presently determinable but may be material
to the company's financial position, results of operations or liquidity.
Under O&R's current gas rate agreement, O&R may defer for subsequent recovery
through rates the costs of investigating and remediating manufactured gas
sites. At June 30, 2000, $18.5 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 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.
In May 2000, the New York State Department of Environmental Conservation (DEC)
issued notices of violation to O&R and four other companies that have operated
coal-fired electric generating facilities in New York State. The notices allege
violations of the federal Clean Air Act and the New York State Environmental
Conservation Law resulting from the alleged failure of the companies to obtain
DEC permits for physical modifications to their generating facilities and to
install air pollution control equipment that would have reduced harmful
emissions. The notice of violation received by O&R relates to the Lovett
Generating Station that it sold in June 1999. O&R is unable to predict whether
or not the alleged violations will have a material adverse effect on its
financial position, results of operation or liquidity.
- 27 -
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 of
plaintiff's motion. O&R cannot predict the ultimate outcome of this proceeding.
NOTE C - FINANCIAL INFORMATION BY BUSINESS SEGMENT
ORANGE AND ROCKLAND UTILTIES, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
ELECTRIC GAS
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales revenues $ 112,609 $ 115,409 $ 31,009 $ 26,485
Intersegment revenues 2 3 - 5
Depreciation and amortization 5,145 7,966 2,314 1,703
Operating income 11,151 (6,891) (914) (1,311)
OTHER TOTAL
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales revenues $ 21 $ 543 $ 143,639 $ 142,437
Intersegment revenues - - 2 8
Depreciation and amortization 1 64 7,460 9,733
Operating income (166) (927) 10,071 (9,129)
- 28 -
ORANGE AND ROCKLAND UTILTIES, INC.
SEGMENT FINANCIAL INFORMATION
$000's
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
ELECTRIC GAS
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales revenues $ 217,252 $ 224,323 $ 108,467 $ 100,553
Intersegment revenues 6 7 - 37
Depreciation and amortization 10,108 15,807 4,467 3,320
Operating income 17,869 3,546 8,379 9,558
OTHER TOTAL
------------------------------ ------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales revenues $ 116 $ 616 $ 325,835 $ 325,492
Intersegment revenues - - 6 44
Depreciation and amortization 2 94 14,577 19,221
Operating income (390) (1,620) 25,858 11,484
- 29 -
NOTE D - RELATED PARTY TRANSACTIONS
Each month O&R is invoiced by Con Edison and its affiliates for the cost of any
services rendered to O&R by Con Edison and its affiliates. These services,
provided primarily by Con Edison of New York, include substantially all
administrative support operations such as corporate directorship and associated
ministerial duties, accounting, treasury, investor relations, information
resources, legal, human resources, fuel supply and energy management services.
The cost of these services totaled $5.6 million during the first six months of
2000. In addition, O&R purchased $21.3 million of gas from Con Edison of New
York during this period.
O&R provides certain recurring services to Con Edison of New York on a monthly
basis, including cash receipts processing, rubber goods testing, and certain
administrative services. The cost of these services totaled $3.7 million during
the first six months of 2000. In addition, O&R sold $4.9 million of gas to Con
Edison of New York during this period.
NOTE E- RESTATEMENT OF RETAINED EARNINGS
In July 1999, O&R's retained earnings as of the effective date of its
acquisition by Con Edison was reclassified to additional paid in capital. See
"Acquisition By Con Edison" immediately preceding Note A to the O&R financial
statements included in the Form 10-K. As of June 30, 2000, O&R has reversed this
reclassification. The amounts shown as additional paid in capital and retained
earnings on O&R's December 31, 1999 balance sheet have been restated to reflect
this reclassification. This classification did not change the total common
shareholder's equity for any of the periods presented.
- 30 -
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 Annual Reports on Form 10-K for the year
ended December 31, 1999 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K)
and Con Edison's Management's Discussion and Analysis of Financial Condition and
Results of Operations (Con Edison's First Quarter 10-Q MD&A) in Part I, Item 2
of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on
Form 10-Q for the quarterly period ended March 31, 2000 (the First Quarter Form
10-Q). 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
(shown as notes payable on the balance sheet) at June 30, 2000 and December 31,
1999 were (amounts shown in millions):
June 30, 2000 December 31, 1999
-------------- -----------------
Cash and temporary cash investments $ 37.7 $485.1
Commercial paper $204.3 $495.4
Cash and temporary cash investments, net of commercial paper, decreased
at June 30, 2000, compared to December 31, 1999, reflecting reduced cash flows
from operations, increased construction expenditures by Con Edison of New York,
investment in nonregulated electric generating facilities, long-term debt
repayments and issuances and repurchases of common stock.
Net cash flows from operating activities during the first six months of
2000 decreased $111.5 million, compared to the first six months of 1999,
principally because net cash flows in the 2000 period reflect the effects of
generation divestiture, including increased recoverable energy costs and
accounts payable related to the purchase of electricity for customers.
The approximately $1.1 billion of divestiture net proceeds that was
held by Con Edison of New York at June 30, 1999 was used in 1999 to pay
dividends to Con Edison (which it used to repay commercial paper issued to fund
initially its acquisition of O&R), to repay commercial paper and for the Con
Edison common stock repurchase program.
Construction expenditures during the first six months of 2000 increased
$120.2 million compared to the first six months of 1999, principally as a result
of expenditures related to meeting load growth on Con Edison of New York's
electric distribution system.
- 31 -
In June 2000 an unregulated subsidiary of Con Edison purchased an 80
percent interest in a partnership that owns a 236-MW electric generating unit in
Lakewood, New Jersey (the Lakewood Project) for $96.3 million. The Lakewood
Project had $187 in long term debt outstanding which has been included in Con
Edison's interim consolidated financial statements.
In January 2000 Con Edison of New York repaid at maturity $125 million of
7.6 percent Series 1992 C debentures. In March 2000 O&R redeemed $80 million of
9.375 percent Series 1990 A debentures and $20 million of 6.14 percent Series
1993 C debentures.
In May 2000 Con Edison of New York issued $325 million aggregate principal
amount of 10-year 8.125 percent debentures. In June 2000 O&R issued $55 million
of 10-year 7.5 percent debentures. See "Liquidity and Capital Resources -
Capital Resources" in Con Edison's 10-K MD&A and in Con Edison's First Quarter
10-Q MD&A.
During the first quarter of 2000, Con Edison purchased approximately 1.9
million shares of its common stock at an aggregate cost of $60.6 million. No
shares were repurchased in the second quarter of 2000. 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 $38.2 million at June 30, 2000, compared with
year-end 1999, due primarily to increased billings by Consolidated Edison
Solutions, Inc., Con Edison's unregulated energy services subsidiary, reflecting
pricing based on a higher wholesale cost of power. Con Edison of New York's
equivalent number of days of revenue outstanding (ENDRO) of customer accounts
receivable was 27.4 days at June 30, 2000, compared with 28.8 days at December
31, 1999. For O&R, the ENDRO was 35.0 days at June 30, 2000 and 40.4 days at
December 31, 1999.
Other receivables increased $44.7 million, compared with year-end 1999, due
primarily to the inclusion in Con Edison's interim consolidated financial
statements of other receivables of the Lakewood Project.
Prepayments at June 30, 2000 include cumulative credits to pension expense
for Con Edison of New York of $218.0 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 energy costs increased $183.7 million at June 30, 2000,
compared with year-end 1999, reflecting increased purchased power costs
discussed below in "Results of Operations," offset, partially, by the ongoing
recovery of previously deferred amounts. See "Recoverable Fuel Costs" in Note A
to the Con Edison financial statements included in Item 8 of the Form 10-K. Also
see 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).
- 32 -
Other regulatory assets increased $76.2 million at June 30, 2000,
compared with year-end 1999, reflecting the deferral of $49.5 million of
electric capacity costs under contracts with the buyers of the generating assets
sold by Con Edison of New York (see Note I to the Con Edison financial
statements included in Item 8 of the Form 10-K), and the deferral of $19.1
million of Indian Point 2 refueling and maintenance outage expenses discussed
below in "Results of Operations."
Unfunded other post-employment benefit (OPEB) obligations (shown as
pension and benefit reserve on the balance sheet) were $183.6 million at June
30, 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. O&R's obligations also include a reserve for its supplemental
executive retirement program. 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 June 30, 2000, compared to $119.0 million at December 31, 1999. The increase
resulted primarily from increased workers' compensation claims.
Accounts payable increased $259.9 million, compared with year-end 1999, due
primarily to the higher costs of power purchases.
Accrued taxes increased $58.3 million, compared to year-end 1999, due
principally to timing differences.
Other regulatory liabilities increased $61.5 million, compared with
year-end 1999, reflecting the accrual of a $30 million liability relating to the
ongoing Indian Point 2 outage (see "Nuclear Generation," below) and the deferral
for future refund to customers of $26.9 million of certain transmission revenues
received from the New York Independent System Operator, offset by the
recognition of $22.3 million of previously deferred revenues relating to a
scheduled Indian Point 2 refueling and maintenance outage.
CAPITAL RESOURCES
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:
June 30, 2000 December 31, 1999
-------------- -----------------
Earnings to fixed charges (SEC basis) 3.77 4.04
Common equity ratio* 50.9 53.1
* Common shareholders' equity as a percentage of total capitalization
- 33 -
NORTHEAST UTILITIES
In April 2000 Con Edison and Northeast Utilities shareholders approved Con
Edison's pending acquisition of Northeast Utilities. In June 2000 the Federal
Energy Regulatory Commission approved the acquisition. Approvals are still
required by utility regulators in New York, New Hampshire, Connecticut, and the
Securities and Exchange Commission. In addition, the Hart-Scott-Rodino Antitrust
Improvements Act and the related rules and regulations prohibit Con Edison from
completing the acquisition until applicable waiting periods requirements have
been satisfied. Con Edison is in the process of responding to requests for
additional information from the Department of Justice. In June 2000, to
partially hedge its interest rate risk with respect to financing the
approximately $1.8 billion cash portion of the merger consideration, Con Edison
purchased, for $8.9 million, cash-settled options expiring in December 2000 on
an aggregate $800 million notional amount of interest rate swap contracts. See
"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 annually 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 four steam
generators. See "Nuclear Generation" in Con Edison's 10-K MD&A and Con Edison's
First Quarter Form 10-Q MD&A, the combined Con Edison and Con Edison of New York
Current Report on Form 8-K, dated March 30, 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 June 30, 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 of this report and also see Part II, Item 3 of this report.
- 34 -
RESULTS OF OPERATIONS
Second Quarter of 2000 Compared with Second Quarter of 1999
Con Edison's net income for common stock for the second quarter of 2000
was $68.7 million or $.33 a share (based upon an average of 212.0 million common
shares outstanding), compared with $66.4 million or $.30 a share (based upon an
average of 226.0 million common shares outstanding) for the second quarter of
1999. O&R financial results are not included in earnings for periods prior to
its July 1999 acquisition by Con Edison.
Earnings for the quarters ended June 30, 2000 and 1999 were as follows:
(Millions of dollars) 2000 1999
----- ----
Con Edison of New York $71.1 $69.2
O&R 5.3 ---
Nonregulated subsidiaries (4.0) (2.2)
Other* (3.7) (0.6)
Con Edison $68.7 $66.4
* 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 second quarter of 2000, compared to the
second quarter of 1999, increased $2.3 million, reflecting $5.3 million of O&R
earnings, $23.2 million of increased pension credits (see Note D to the Con
Edison financial statements included in Item 8 of the Form 10-K), $5.5 million
of lower employee benefit expenses and higher electric sales of $57.3 million
as a result of weather and the favorable economy for Con Edison of New York,
offset, partially, by $27.8 million of increased distribution expense, $23.4
million of rate reductions under Con Edison of New York's 1997 electric
restructuring plan (see "Regulatory Matters - Electric" in Con Edison's 10-K
MD&A and "Regulatory Matters," above), $11.2 million of expenses incurred and
the accrual of a $15 million liability relating to the ongoing Indian Point 2
outage.
Con Edison estimates that the divestiture of most of Con Edison of New
York's electric generating capacity in 1999 did not significantly impact its
earnings per share in the 2000 period. The company estimates that reductions in
property taxes, depreciation and other operating and maintenance costs, its
acquisition of O&R and the common stock repurchase program have substantially
offset the effects of divestiture.
A comparison of the results of operations of Con Edison for the second
quarter of 2000 compared to the second quarter of 1999 follows.
- 35 -
Three Months Ended June 30, 2000 Compared With Three Months Ended June 30, 1999
(Millions of dollars) Increases (Decreases) Increases (Decreases)
Amount Percent
Operating revenues $562.8 38.1%
Purchased power - electric and steam 505.2 (A)
Fuel - electric and steam (74.0) (61.0)
Gas purchased for resale 86.5 (A)
Operating revenues less purchased power, 45.1 4.5
fuel and gas purchased for resale (net
revenues)
Other operations and maintenance 36.3 9.5
Depreciation and amortization 12.0 9.0
Taxes, other than federal income tax (9.6) (3.4)
Federal income tax (15.2) (31.6)
Operating income 21.6 14.5
Other income less deductions and 0.2 (A)
related federal income tax
Net interest charges 19.5 24.4
Preferred stock dividend - -
requirements
Net income for common stock $2.3 3.5%
(A) Amounts in excess of 100 percent
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.
Electric
Con Edison's electric operating revenues in the second quarter of 2000
increased $368.7 million, compared to the second quarter of 1999, reflecting Con
Edison of New York's increased sales volumes and increased purchased power costs
(which it bills to customers under PSC-approved rate provisions), offset by
electric rate reductions of approximately $23.4 million. The increase also
reflects $112.6 million of O&R electric operating revenues. See 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).
- 36 -
Electricity sales volume in Con Edison of New York's service territory
increased 5.5 percent in the second quarter of 2000, compared to the second
quarter of 1999. The increase in sales volume reflects the continued strength of
the New York City economy. 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 3.7 percent in the 2000 period.
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 purchased power costs increased $359.0 million
in the second quarter of 2000, compared to the second quarter of 1999, as a
result of its divestiture of most of its generating capacity in 1999, the
ongoing Indian Point 2 outage and increases in the price of purchased power.
Fuel costs decreased $91.0 million as a result of generation divestiture.
Con Edison's electric operating income increased $21.0 million in the
second quarter of 2000, compared to the second quarter of 1999. The principal
components of the increase were: O&R's electric operating income of $11.1
million and an increase in Con Edison of New York's electric operating income of
$9.9 million, comprised primarily of a reduction in net revenues (operating
revenues less fuel and purchased power) of $38.5 million, $11.2 million of
expenses incurred and the accrual of a $15 million liability relating to the
ongoing Indian Point 2 outage, offset by lower pension expenses ($18.4 million),
lower employee benefit expenses ($4.8 million), property taxes ($15.8 million),
Federal income tax ($15.8 million) and the deferral of $12.4 million of electric
capacity costs.
The increase in the 2000 period in other operations and maintenance
expenses reflects certain expenses relating to Indian Point 2 and a $37.7
million decrease in expenses relating to Con Edison of New York's other electric
generating assets (most of which were sold in 1999). Refueling and maintenance
procedures that had been planned for a previously scheduled April 2000 outage
have been performed as part of the ongoing Indian Point 2 outage. Refueling and
maintenance expenses of $18.7 million and a like amount of revenues were
recognized in income in the second quarter of 2000. An additional $19.1 million
of refueling and maintenance expenses have been deferred for recovery through
rates during the remaining months of the rate year ending March 2001. See
"Outage Accounting" in Note G to the Con Edison financial statements included in
the Form 10-K. In addition operation and maintenance expenses in the second
quarter of 2000 reflect $11.2 million of other expenses related to the ongoing
Indian Point 2 outage.
Gas
Con Edison's gas operating revenues and gas operating income increased
$57.3 million and $4.4 million, respectively, in the second quarter of 2000,
compared to the second quarter of 1999. These changes reflect O&R's gas
operating revenues of approximately $31.0 million and gas operating loss of $0.9
million, and Con Edison of New York's increased gas sales and transportation
volumes.
Gas sales and transportation volume for Con Edison of New York's firm
customers increased 7.6 percent in the second quarter of 2000, compared to the
second quarter of 1999. After adjusting for variations, principally weather and
billing days, in each period, firm gas sales and transportation volume increased
0.7 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 moderates, but does not
eliminate, the effect of weather-related changes on gas operating income.
- 37 -
Steam
Con Edison's steam operating revenues increased $21.7 million and
operating income decreased $1.7 million in the second quarter of 2000, compared
to the second quarter of 1999. The higher revenues reflect Con Edison of New
York's increased fuel and purchased power costs (which it bills to customers
under the fuel adjustment clause applicable to steam sales).
Steam sales volume increased 2.3 percent in the 2000 period. After
adjusting for variations, principally weather and billing days, in each period,
steam sales volume decreased 0.1 percent in the 2000 period.
Net Interest Charges
Net interest charges increased $19.5 million in the 2000 period,
reflecting primarily the addition of $5.7 million of O&R debt expense and, with
respect to Con Edison of New York, $5.6 million of increased interest on
long-term borrowings, $1.9 million of increased interest related to short-term
borrowing and $4.0 million of interest accrued on the gain on generation
divestiture that has been deferred for disposition by the PSC.
Six Months Ended June 30, 2000 Compared with the Six Months Ended June 30, 1999
Con Edison's net income for common stock for the six months ended June
30, 2000 was $256.9 million or $1.21 a share (based upon an average of 212.4
million common shares outstanding), compared with $243.0 million or $1.06 a
share (based upon an average of 228.5 million common shares outstanding) for the
six months ended June 30, 1999. O&R financial results are not included in
earnings for periods prior to its July 1999 acquisition by Con Edison.
Earnings for the six months ended June 30, 2000 and 1999 were as
follows:
(Millions of dollars) 2000 1999
----- ----
Con Edison of New York $249.4 $251.2
O&R 16.0 ---
Nonregulated subsidiaries (1.7) (7.9)
Other* (6.8) (0.3)
Con Edison $256.9 $243.0
* Includes holding company expenses (including amortization
of $5.5 million of goodwill from the acquisition of O&R)
and intercompany eliminations.
Con Edison's earnings for the first six months of 2000, compared to the
first six months of 1999, increased $13.9 million, reflecting $16.0 million of
O&R earnings, $57.0 million of increased pension credits (see Note D to the Con
Edison financial statements included in Item 8 of the Form 10-K), $5.0 million
of lower employee benefits expenses and higher electric sales of $78.0 million
as a result of weather and the favorable economy for Con Edison of New York,
offset, partially, by $40.2 million of increased distribution and transmission
expense, $47.6 million of rate reductions under Con Edison of New York's 1997
electric restructuring plan (see "Regulatory Matters - Electric" in Con Edison's
10-K MD&A and "Regulatory Matters," above), $15.2 million of expenses incurred
and the accrual of a $30 million liability relating to the ongoing Indian Point
2 outage.
- 38 -
Con Edison estimates that the divestiture of most of Con Edison of New
York's electric generating capacity in 1999 did not significantly impact its
earnings per share in the 2000 period. The company estimates that reductions in
property taxes, depreciation and other operating and maintenance costs, its
acquisition of O&R and the common stock repurchase program have substantially
offset the effects of divestiture.
A comparison of the results of operations of Con Edison for the six
months ended June 30, 2000 compared to the six months ended June 30, 1999
follows.
Six Months Ended June 30, 2000 Compared With Six Months Ended June 30, 1999
(Millions of dollars) Increases (Decreases) Increases (Decreases)
Amount Percent
Operating revenues $1,104.8 33.9%
Purchased power - electric and steam 946.5 (A)
Fuel - electric and steam (105.3) (44.1)
Gas purchased for resale 172.3 66.7
Operating revenues less purchased power, 91.3 4.2
fuel and gas purchased for resale (net
revenues)
Other operations and maintenance 57.8 7.4
Depreciation and amortization 22.0 8.3
Taxes, other than federal income tax (18.9) (3.2)
Federal income tax (15.5) (10.4)
Operating income 45.9 11.2
Other income less deductions and 0.8 47.7
related federal income tax
Net interest charges 32.8 20.5
Preferred stock dividend - -
requirements
Net income for common stock $13.9 5.7%
(A) Amounts in excess of 100 percent
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.
- 39 -
Electric
Con Edison's electric operating revenues for the six months ended June
30, 2000 increased $687.5 million compared to the comparable period of 1999,
reflecting Con Edison of New York's increased sales volumes and increased
purchased power costs (which it bills to customers under PSC-approved rate
provisions), offset by electric rate reductions of approximately $47.6 million.
The increase also reflects $217.3 million of O&R electric operating revenues.
See 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).
Electricity sales volume in Con Edison of New York's service territory
increased 4.5 percent for the six months ended June 30, 2000, compared to the
six months ended June 30, 1999. The increase in sales volume reflects the
continued strength of the New York City economy. 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 3.4 percent in the 2000
period. 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 purchased power costs increased $693.5 million
in the six months ended June 30, 2000, compared to the six months ended June
30,1999, as a result of its divestiture of most of its generating capacity in
1999, the ongoing Indian Point 2 outage and increases in the price of purchased
power. Fuel costs decreased $145.6 million as a result of generation
divestiture.
Con Edison's electric operating income increased $27.3 million for the
six months ended June 30, 2000 from the comparable 1999 period. The principal
components of the increase were: O&R's electric operating income of $17.9
million and an increase in Con Edison of New York's electric operating income of
$9.4 million, comprised primarily of a reduction in net revenues (operating
revenues less fuel and purchased power) of $105.5 million, $15.2 million of
expenses incurred and the accrual of a $30 million liability relating to the
ongoing Indian Point 2 outage, offset by lower pension expenses ($45.5 million),
employee benefit expenses ($4.9 million), property taxes ($35.7 million),
Federal income tax ($23.5 million) and the deferral of $49.5 million of electric
capacity costs.
The increase in the 2000 period in other operations and maintenance
expenses reflects certain expenses relating to Indian Point 2 and a $71.4
million decrease in expenses relating to Con Edison of New York's other electric
generating assets (most of which were sold in 1999). Refueling and maintenance
procedures that had been planned for a previously scheduled April 2000 outage
have been performed as part of the ongoing Indian Point 2 outage. Refueling and
maintenance expenses of $36.7 million and a like amount of revenues were
recognized in income in the 2000 period. An additional $19.1 million of
refueling and maintenance expenses have been deferred for recovery through rates
during the remaining months of the rate year ending March 2001. See "Outage
Accounting" in Note G to the Con Edison financial statements included in the
Form 10-K. In addition operation and maintenance expenses in the second quarter
of 2000 reflect $15.2 million of other expenses related to the ongoing Indian
Point 2 outage.
- 40 -
Gas
Con Edison's gas operating revenues and gas operating income increased
$145.4 million and $16.6 million, respectively, for the six months ended June
30, 2000, compared to the six months ended June 30, 1999. These changes reflect
O&R's gas operating revenues of approximately $108.5 million and gas operating
income of approximately $8.4 million, and Con Edison of New York's increased gas
sales and transportation volumes.
Gas sales and transportation volume for Con Edison of New York's firm
customers increased 4.2 percent in the six months ended June 30, 2000, compared
to the six months ended June 30, 1999. After adjusting for variations,
principally weather and billing days, in each period, firm gas sales and
transportation volume increased 1.2 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 moderates, but does not
eliminate, the effect of weather-related changes on gas operating income.
Steam
Con Edison's steam operating revenues increased $51.2 million and
operating income decreased $1.0 million for the six months ended June 30, 2000,
compared to the six months ended June 30, 1999. The higher revenues reflect Con
Edison of New York's increased fuel and purchased power costs (which it bills to
customers under the fuel adjustment clause applicable to steam sales).
Steam sales volume increased slightly (0.8 percent) in the 2000 period.
After adjusting for variations, principally weather and billing days, in each
period, steam sales volume decreased 0.7 percent in the 2000 period.
Net Interest Charges
Net interest charges increased $32.8 million in the 2000 period,
reflecting primarily the addition of $12.7 million of O&R debt expense and, with
respect to Con Edison of New York, $6.8 million of increased interest on
long-term borrowings, $7.9 million of increased interest related to short-term
borrowing and $4.0 million of interest accrued on the gain on generation
divestiture that has been deferred for disposition by the PSC.
- 41 -
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 in Item 7 of the combined Con Edison, Con Edison of
New York and Orange and Rockland Utilities, Inc. (O&R) Annual Reports on Form
10-K for the year ended December 31, 1999 (File Nos. 1-14514, 1-1217 and 1-4315,
the Form 10-K) and Con Edison of New York's Management's Discussion and Analysis
of Financial Condition and Results of Operations (Con Edison of New York's First
Quarter 10-Q MD&A) in Part I, Item 2 of the combined Con Edison, Con Edison of
New York and O&R Quarterly Reports on Form 10-Q for the quarterly period ended
March 31, 2000 (Con Edison of New York's First Quarter Form 10-Q). 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
(shown as notes payable on the balance sheet) at June 30, 2000 and December 31,
1999 were (amounts shown in millions):
June 30, 2000 December 31, 1999
-------------- -----------------
Cash and temporary cash investments $ 1.2 $349.0
Commercial paper $109.9 $495.4
Cash and temporary cash investments, net of commercial paper, decreased
at June 30, 2000, compared to December 31, 1999, reflecting reduced cash flows
from operations, increased construction expenditures and long-term debt
repayments and issuances.
Net cash flows from operating activities during the first six months of
2000 decreased $136.4 million, compared to the first six months of 1999,
principally because net cash flows in the 2000 period reflect the effects of
generation divestiture, including increased recoverable energy costs and
accounts payable related to the purchase of electricity for customers.
The approximately $1.1 billion of divestiture net proceeds that was
held by Con Edison of New York at June 30, 1999 was used in 1999 to pay
dividends to Con Edison (which it used to repay commercial paper issued to fund
initially its acquisition of O&R), to repay commercial paper and for the Con
Edison common stock repurchase program.
Construction expenditures during the first six months of 2000 increased
$99.8 million, compared to the first six months of 1999, principally as a result
of expenditures related to meeting load growth on the company's electric
distribution system.
- 42 -
In January 2000 Con Edison of New York repaid at maturity $125 million
of 7.6 percent Series 1992 C debentures.
In May 2000 Con Edison of New York issued $325 million aggregate
principal amount of 10-year 8.125 percent debentures. See "Liquidity and Capital
Resources - Capital Resources" in Con Edison of New York's 10-K MD&A and in Con
Edison of New York's First Quarter 10-Q MD&A.
Con Edison of New York's accounts receivable - customer, less allowance
for uncollectible accounts decreased $7.5 million at June 30, 2000, compared
with year-end 1999. Con Edison of New York's equivalent number of days of
revenue outstanding (ENDRO) of customer accounts receivable was 27.4 days at
June 30, 2000, compared with 28.8 days at December 31, 1999.
Prepayments at June 30, 2000 include cumulative credits to pension
expense of $218.0 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 energy costs increased $166.5 million at June 30, 2000,
compared with year-end 1999, reflecting increased purchased power costs
discussed below in "Results of Operations," offset, partially, by the ongoing
recovery of previously deferred amounts. 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. Also see 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).
Deferred charges for divestiture - capacity replacement reconciliation
increased $49.5 million at June 30, 2000, compared with year-end 1999,
reflecting the deferral of additional electric capacity costs under contracts
with the buyers of the generating assets sold by Con Edison of New York. See
Note G to the Con Edison of New York financial statements included in Item 8 of
the Form 10-K.
Other regulatory assets increased $15.6 million at June 30, 2000,
compared with year-end 1999, reflecting the deferral of $19.1 million of Indian
Point 2 refueling and maintenance outage expenses discussed below in "Results of
Operations."
Unfunded other post-employment benefit (OPEB) obligations (shown as
pension and benefit reserve on the balance sheet) were $113.9 million at June
30, 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 $119.6 million
at June 30, 2000, compared to $110.1 million at December 31, 1999. The increase
resulted primarily from increased workers' compensation claims.
Accounts payable increased $209.2 million, compared with year-end 1999, due
primarily to the higher costs of power purchases.
Accrued taxes increased $46.8 million, compared to year-end 1999, due
principally to timing differences.
- 43 -
Other regulatory liabilities increased $66.1 million, compared with
year-end 1999, reflecting the accrual of a $30 million liability relating to the
ongoing outage at Indian Point 2 (see "Nuclear Generation," below) and the
deferral for future refund to customers of $26.9 million of certain transmission
revenues received from the New York Independent System Operator, offset by the
recognition of $22.3 million of previously deferred revenues relating to a
scheduled Indian Point 2 refueling and maintenance outage.
CAPITAL RESOURCES
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:
June 30, 2000 December 31, 1999
-------------- -----------------
Earnings to fixed charges (SEC basis) 3.91 4.17
Common equity ratio* 48.5 49.4
* Common shareholders' equity as a percentage of total capitalization
COLLECTIVE BARGAINING AGREEMENTS
In June 2000 Con Edison of New York concluded a four-year collective
bargaining agreement with the union representing approximately two-thirds of its
employees. The agreement, among other things, provides for general wage
increases of 3.0 percent in each of the first three years and 2.5 percent in
year four, with a potential 0.5 percent merit increase in each year.
REGULATORY MATTERS
In April 2000 Con Edison of New York, pursuant to its 1997
restructuring agreement, reduced its electric rates by approximately $103
million annually and expanded its electric Retail Choice 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 four steam generators.
See "Nuclear Generation" in Con Edison of New York's 10-K MD&A and Con Edison of
New York's First Quarter Form 10-Q MD&A, the combined Con Edison and Con Edison
of New York Current Report on Form 8-K, dated March 30, 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 June 30, 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 Con Edison of New
York 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 of this report and also see Part II, Item 3 of this
report.
- 44 -
RESULTS OF OPERATIONS
Second Quarter of 2000 Compared with Second Quarter of 1999
Con Edison of New York's net income for common stock for the second
quarter of 2000 was $71.1 million, compared with $69.2 million for the second
quarter of 1999. Con Edison of New York's net income reflects higher electric
sales of $57.3 million as a result of weather and the favorable economy and
increased pension credits of $23.2 million, offset, partially, by electric rate
reductions of $23.4 million, increased distribution expenses of $22.5 million,
$11.2 million of expenses incurred and the accrual of a $15 million liability
relating to the ongoing Indian Point 2 outage.
A comparison of the results of operations of Con Edison of New York for
the second quarter of 2000 compared to the second quarter of 1999 follows.
Three Months Ended June 30, 2000 Compared With Three Months Ended June 30, 1999
(Millions of dollars) Increases (Decreases) Increases (Decreases)
Amount Percent
Operating revenues $278.8 19.3%
Purchased power - electric and steam 364.6 (A)
Fuel - electric and steam (78.7) (64.8)
Gas purchased for resale 25.4 39.0
Operating revenues less purchased power, (32.5) (3.3)
fuel and gas purchased for resale (net
revenues)
Other operations and maintenance (4.4) (1.2)
Depreciation and amortization (0.1) (0.1)
Taxes, other than federal income tax (24.2) (8.6)
Federal income tax (17.3) (34.9)
Operating income 13.5 8.9
Other income less deductions and 0.5 (A)
related federal income tax
Net interest charges 12.1 15.2
Net income for common stock $1.9 2.8%
(A) Amounts in excess of 100 percent
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. For
additional information about Con Edison of New York's business segments, see the
notes to the Con Edison of New York financial statements included in Part I,
Item 1 of this report.
- 45 -
Electric
Con Edison of New York's electric operating revenues in the second
quarter of 2000 increased $229.4 million, compared to the second quarter of
1999. The increase reflects increased sales volumes and increased purchased
power costs (which it bills to customers under PSC-approved rate provisions)
offset by electric rate reductions of approximately $23.4 million. See 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).
Con Edison of New York's electric sales, excluding off-system sales,
for the second quarter of 2000 compared with the second quarter of 1999 were:
Millions of Kwhrs.
Description Three Months Three Months Percent
Ended Ended Variation Variation
June 30, 2000 June 30, 1999
-------------- -------------- ------------ ------------
Residential/Religious 2,610 2,469 141 5.7%
Commercial/Industrial 4,688 4,578 110 2.4
Other 104 121 (17) (14.0)
-------------- -------------- ------------ ------------
Total Full Service Customers 7,402 7,168 234 3.3
Retail Choice Customers 2,121 1,817 304 16.7
-------------- -------------- ------------ ------------
Sub-total 9,523 8,985 538 6.0
-------------- -------------- ------------ ------------
NYPA, Municipal Agency and Other Sales 2,337 2,256 81 3.6
-------------- -------------- ------------ ------------
Total Service Area 11,860 11,241 619 5.5%
Electricity sales volume in Con Edison of New York's service territory
increased 5.5 percent in the second quarter of 2000, compared to the second
quarter of 1999. The increase in sales volume reflects the continued strength of
the New York City economy. 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 3.7 percent in the 2000 period.
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 purchased power costs increased $359.0 million
in the second quarter of 2000, compared to the second quarter of 1999, as a
result of its divestiture of most of its generating capacity in 1999, increases
in the price of purchased power, and the ongoing Indian Point 2 outage. Fuel
costs decreased $91.0 million as a result of generation divestiture.
Con Edison of New York's electric operating income increased $9.9
million in the second quarter of 2000, compared with the second quarter of 1999,
as a result of decreased net revenues (operating revenues less fuel and
purchased power) of $38.5 million, $11.2 million of expenses incurred and the
accrual of a $15 million liability relating to the ongoing Indian Point 2
outage, offset by reduced pension expenses ($18.4 million), employee benefit
expenses ($4.8 million), property taxes ($15.8 million), Federal income tax
($15.8 million) and the deferral of $12.4 of electric capacity costs.
- 46 -
The increase in the 2000 period in other operations and maintenance
expenses reflects certain expenses relating to Indian Point 2 and a $37.7
million decrease in expenses relating to Con Edison of New York's other electric
generating assets (most of which were sold in 1999). Refueling and maintenance
procedures that had been planned for a previously scheduled April 2000 outage
have been performed as part of the ongoing Indian Point 2 outage. Refueling and
maintenance expenses of $18.7 million and a like amount of revenues were
recognized in income in the second quarter of 2000. An additional $19.1 million
of refueling and maintenance expenses have been deferred for recovery through
rates during the remaining months of the rate year ending March 2001. See
"Outage Accounting" in Note G to the Con Edison of New York financial statements
included in the Form 10-K. In addition operation and maintenance expenses in the
second quarter of 2000 reflect $11.2 million of other expenses related to the
ongoing Indian Point 2 outage.
Gas
Con Edison of New York's gas operating revenues and gas operating
income increased $27.7 million and $5.4 million, respectively, in the second
quarter of 2000, compared to the second quarter of 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 7.6 percent in the second quarter of 2000, compared to the
1999 period. After adjusting for variations, principally weather and billing
days, in each period, firm gas sales and transportation volume increased 0.7
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 increased $21.7
million and operating income decreased $1.7 million in the second quarter of
2000, compared to the second quarter of 1999. The higher revenues reflect
increased fuel and purchased power costs (which it bills to customers under the
fuel adjustment clause applicable to steam sales).
Steam sales volume increased 2.3 percent in the 2000 period. After
adjusting for variations, principally weather and billing days, in each period,
steam sales volume decreased 0.1 percent in the 2000 period.
Net Interest Charges
Net interest charges increased $12.1 million in the 2000 period,
reflecting $5.6 million of increased interest on long-term borrowings, $1.9
million of increased interest related to short-term borrowing and $4.0 million
of interest accrued on the gain on generation divestiture that has been deferred
for disposition by the PSC.
- 47 -
Six Months Ended June 30, 2000 Compared with the Six Months Ended June 30, 1999
Con Edison of New York's net income for common stock for the six months
ended June 30, 2000 was $249.4 million, compared with $251.2 million for the six
months ended June 30, 1999. Con Edison of New York's net income reflects higher
electric sales of $78.0 million as a result of weather and the favorable economy
and increased pension credits of $57.0 million, offset by electric rate
reductions of $47.6 million, increased distribution expenses of $33.5 million,
$15.2 million of expenses incurred and the accrual of a $30 million liability
relating to the ongoing Indian Point 2 outage.
A comparison of the results of operations of Con Edison of New York
for the six months ended June 30, 2000 compared to the six months ended June 30,
1999 follows.
Six Months Ended June 30, 2000 Compared With Six Months Ended June 30, 1999
(Millions of dollars) Increases (Decreases) Increases (Decreases)
Amount Percent
Operating revenues $533.6 16.8%
Purchased power - electric and steam 700.4 (A)
Fuel - electric and steam (111.0) (46.5)
Gas purchased for resale 36.9 17.3
Operating revenues less purchased power, (92.7) (4.3)
fuel and gas purchased for resale (net
revenues)
Other operations and maintenance (29.7) (4.0)
Depreciation and amortization (0.8) (0.3)
Taxes, other than federal income tax (52.8) (9.1)
Federal income tax (26.1) (16.9)
Operating income 16.7 4.0
Other income less deductions and (0.1) (81.6)
related federal income tax
Net interest charges 18.4 11.5
Net income for common stock $(1.8) (0.7)%
(A) Amounts in excess of 100 percent
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. For
additional information about Con Edison of New York's business segments, see the
notes to the Con Edison of New York financial statements included in Part I,
Item 1 of this report.
- 48 -
Electric
Con Edison of New York's electric operating revenues in the six months
ended June 30, 2000 increased $442.4 million, compared to the six months ended
June 30, 1999. The increase reflects increased sales volumes and increased
purchased power costs (which it bills to customers under PSC-approved rate
provisions), offset by electric rate reductions of approximately $47.6 million.
See 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).
Con Edison of New York's electric sales, excluding off-system sales,
for the six months ended June 30, 2000 compared with the six months ended June
30, 1999 were:
Millions of Kwhrs.
Description Six Months Six Months Percent
Ended Ended Variation Variation
June 30, 2000 June 30, 1999
-------------- -------------- ------------ ------------
Residential/Religious 5,407 5,193 214 4.1%
Commercial/Industrial 9,371 10,120 (749) (7.4)
Other 240 261 (21) (8.1)
-------------- -------------- ------------ ------------
Total Full Service Customers 15,018 15,574 (556) (3.6)
Retail Choice Customers 4,376 2,866 1,510 52.7
-------------- -------------- ------------ ------------
Sub-total 19,394 18,440 954 5.2
-------------- -------------- ------------ ------------
NYPA, Municipal Agency and Other Sales 4,812 4,730 82 1.7
-------------- -------------- ------------ ------------
Total Service Area 24,206 23,170 1,036 4.5%
Electricity sales volume in Con Edison of New York's service territory
increased 4.5 percent for the six months ended June 30, 2000, compared to the
six months ended June 30, 1999. The increase in sales volume reflects the
continued strength of the New York City economy. 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 3.4 percent in the 2000
period. Weather-adjusted sales represent an estimate of the sales that would
have been made if historical average weather conditions had prevailed.
- 49 -
Con Edison of New York's purchased power costs increased $693.5 million
for the six months ended June 30, 2000, compared to the six months ended June
30, 1999, as a result of its divestiture of most of its generating capacity in
1999, increases in the price of purchased power, and the ongoing Indian Point 2
outage. Fuel costs decreased $145.6 million as a result of generation
divestiture.
Con Edison of New York's electric operating income increased $9.4
million in the six months ended June 30, 2000, compared with the six months
ended June 30, 1999, as a result of decreased net revenues (operating revenues
less fuel and purchased power) of $105.5 million, increased distribution and
transmission expenses associated with system reinforcement and the relocation of
company facilities to avoid interference with municipal infrastructure projects
of $33.1 million, $15.2 million of expenses incurred and the accrual of a $30
million liability relating to the ongoing Indian Point 2 outage, offset by
reduced pension expenses ($45.5 million), employee benefit expenses ($4.9
million), property taxes ($35.7 million), Federal income tax ($23.5 million) and
the deferral of $49.5 million of electric capacity costs.
The increase in the 2000 period in other operations and maintenance
expenses reflects certain expenses relating to Indian Point 2 and a $71.4
million decrease in expenses relating to Con Edison of New York's other electric
generating assets (most of which were sold in 1999). Refueling and maintenance
procedures that had been planned for a previously scheduled April 2000 outage
have been performed as part of the ongoing Indian Point 2 outage. Refueling and
maintenance expenses of $36.7 million and a like amount of revenues were
recognized in income in the 2000 period. An additional $19.1 million of
refueling and maintenance expenses have been deferred for recovery through rates
during the remaining months of the rate year ending March 2001. See "Outage
Accounting" in Note G to the Con Edison of New York financial statements
included in the Form 10-K. In addition operation and maintenance expenses in the
2000 period reflect $15.2 million of other expenses related to the ongoing
Indian Point 2 outage.
Gas
Con Edison of New York's gas operating revenues and gas operating
income increased $40.0 million and $8.2 million, respectively, for the six
months ended June 30, 2000, compared to the six months ended June 30, 1999.
These changes reflect increased gas sales and transportation volumes and higher
pension credits.
- 50 -
Gas sales and transportation volume for Con Edison of New York's firm
customers increased 4.2 percent for the six months ended June 30, 2000, compared
to the 1999 period. After adjusting for variations, principally weather and
billing days, in each period, firm gas sales and transportation volume increased
1.2 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 increased $51.2
million and operating income decreased $1.0 million for the six months ended
June 30, 2000, compared to the six months ended June 30, 1999. The higher
revenues reflect increased fuel and purchased power costs (which it bills to
customers under the fuel adjustment clause applicable to steam sales).
Steam sales volume increased slightly (0.8 percent) in the 2000 period.
After adjusting for variations, principally weather and billing days, in each
period, steam sales volume decreased 0.7 percent in the 2000 period.
Net Interest Charges
Net interest charges increased $18.4 million in the 2000 period,
reflecting $6.8 million of increased interest on long-term borrowings, $7.9
million of increased interest related to short-term borrowing and $4.0 million
of interest accrued on the gain on generation divestiture that has been deferred
for disposition by the PSC.
- 51 -
O&R MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
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 (Management's Discussion and Analysis
of Financial Condition and Results of Operations).
O&R's net income for common stock for the six month period ended June
30, 2000 was $16.0 million, $24.4 million higher than the corresponding 1999
period. The 1999 period included $21.5 million of non-recurring merger and
divestiture related charges. Excluding the impact of these charges, net income
would have increased $2.9 million in the 2000 period, compared to the
corresponding 1999 period. This increase was due primarily to higher electric
and gas sales, and reduced operation and maintenance expenses, property taxes,
depreciation expense and interest charges, offset, in part, by electric rate
changes implemented in the third quarter of 1999.
In June 2000 O&R concluded a new four-year collective bargaining
agreement with the union representing approximately 65 percent of its employees.
The O&R agreement, among other things, provides for general wage increases of
3.25 percent in the first year, and 3.0 percent for the next two years and 3.25
percent in the fourth year of the contract.
A comparison of the results of operations of O&R for the six months
ended June 30, 2000 compared to the six months ended June 30, 1999 follows.
(Millions of dollars) Increases (Decreases) Increases (Decreases)
Amount Percent
Operating revenues $0.3 0.1%
Purchased power - electric 65.5 (A)
Fuel - electric (23.0) (A)
Gas purchased for resale 10.0 17.5
Operating revenues less purchased power, (52.2) (25.8)
fuel and gas purchased for resale (net
revenues)
Other operations and maintenance (51.9) (42.4)
Depreciation and amortization (4.7) (24.2)
Taxes, other than federal income tax (15.3) (33.0)
Federal income tax 5.3 (A)
Operating income 14.4 (A)
Other income less deductions and 4.6 (A)
related federal income tax
Net interest charges (4.5) (26.2)
Preferred stock dividend (0.9) (A)
requirements
Net income for common stock $24.4 (A)
(A) Amounts in excess of 100 percent
- 52 -
A discussion of O&R's operating revenues by business segment follows.
O&R's principal business segments are its electric and gas utility businesses.
For additional information about O&R's business segments, see the notes to the
O&R financial statements included in Part I, Item 1 of this report.
Electric operating revenues decreased $7.1 million in the six months
ended June 30, 2000, compared to the corresponding 1999 period. In the 1999
period, O&R reduced revenues by $3.2 million to reflect a liability to refund to
customers this portion of the proceeds of its June 1999 divestiture of the
company's electric generating assets. Excluding the impact of this non-recurring
accrual, electric operating revenues would have decreased $10.3 million in the
2000 period, compared to the corresponding 1999 period. This decrease was
attributable primarily to the rate reductions implemented by O&R in July and
August 1999. These rate reductions were made as a result of the divestiture by
O&R of its generating capacity in June 1999 and O&R's acquisition by Con Edison
in July 1999. See Note A to the O&R financial statements in Item 8 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 (File Nos. 1-14514, 1-1217 and 1-4315, the
Form 10-K).
O&R's electric energy sales in the six months ended June 30, 2000
increased 2.0 percent to 2,403,530 megawatt hours (MWhr) from 2,355,913 MWhr in
the corresponding 1999 period. The increase was due primarily to the continued
strength of the economy. After adjusting for variations, principally weather and
billing days, electricity sales were 2.8 percent higher in the 2000 period.
Weather-adjusted sales represent an estimate of the sales that would have been
made if historical average weather conditions had prevailed.
O&R's purchased power costs increased $65.5 million during the six
months ended June 30, 2000, compared to the corresponding 1999 period. Fuel
costs decreased $23.0 million in the 2000 period. These variations are
attributable primarily to the June 1999 divestiture of the company's electric
generating assets, higher customer sales, and increases in the cost of purchased
energy. O&R`s purchased power and fuel costs are recoverable from O&R's
customers under rate provisions approved by the appropriate state utility
regulatory commissions and did not impact earnings in the 2000 or 1999 periods.
O&R's gas operating revenues increased $7.9 million in the six months
ended June 30, 2000, compared to the corresponding 1999 period. The increase was
due primarily to recovery from customers of higher gas costs and increases in
gas sales and transportation volumes in the 2000 period. O&R's total sales of
gas to customers during the 2000 period totaled 17,230,365 Dekatherms (Dth),
compared with 16,781,045 Dth during the 1999 period, an increase of 2.7 percent.
O&R's revenues from gas sales in New York are subject to a weather
normalization clause. After adjusting for variations, principally weather and
billing days, in each period, gas sales and transportation volume to firm
customers was 0.2 percent lower for the 2000 period, compared to the 1999
period.
- 53 -
O&R's cost of gas purchased for resale increased $10 million in the six
months ended June 30, 2000, compared to the corresponding 1999 period, due
primarily to higher gas costs and an increase in firm sales for the period.
O&R's other operation and maintenance expenses decreased $51.9 million
in the six months ended June 30, 2000, compared to the corresponding 1999
period, due primarily to the June 1999 divestiture of the company's electric
generating assets and operating efficiencies resulting from Con Edison's July
1999 acquisition of the company.
Taxes other than federal income tax decreased $15.3 million in the six
months ended June 30, 2000, compared to the corresponding 1999 period, due
primarily to reduced property taxes resulting from the June 1999 divestiture of
the company's electric generating assets.
O&R's other income increased $4.7 million in the six months ended June
30, 2000, compared to the corresponding 1999 period, due primarily to interest
earned on proceeds from the June 1999 divestiture of the company's electric
generating assets. In addition, the 1999 period included non-recurring
adjustments to expense related to O&R's acquisition by Con Edison of $1.3
million.
O&R's interest charges decreased $4.5 million in the six months ended
June 30, 2000, compared to the corresponding 1999 period, due primarily to lower
debt outstanding as a result of repayment of indebtedness with a portion of the
proceeds from the June 1999 divestiture of the company's electric generating
assets.
O&R redeemed all outstanding shares of its preferred stock in April
1999 and therefore had no preferred stock dividend requirements in the six
months ended June 30, 2000.
- 54 -
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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CON EDISON
NORTHEAST UTILITIES SHAREHOLDERS' SUIT
Reference is made to "Northeast Utilities Shareholders Suit" in Part II, Item 1,
Legal Proceedings in the combined Con Edison, Con Edison of New York and O&R
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000 (the
"First Quarter Form 10-Q")
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") and in Part II, Item 1, Legal Proceedings in the First Quarter Form 10-Q.
SUPERFUND - MANUFACTURED GAS SITES
Reference is made to "Superfund - Manufactured Gas Sites" in Part I, Item 3,
Legal Proceedings of the Form 10-K.
Coal tar and other manufactured gas plant-related contamination have been
detected in the soil and groundwater beneath a Con Edison of New York electric
distribution substation in White Plains, New York. Based on the limited testing
conducted to date, it appears that the contamination extends to at least one
neighboring property and possibly others. Additional studies are planned to
delineate the full extent of the contamination. Depending on the results of
those studies and the cleanup requirements imposed by the DEC, the costs of
cleaning up the contamination could exceed $10 million.
SUPERFUND - BCF OIL REFINING SITE
In May 2000, the United States Environmental Protection Agency (EPA) designated
Con Edison of New York and numerous other parties as potentially responsible
parties (PRPs) for the BCF Oil Refining Site in Brooklyn, New York. The site was
operated as a waste oil reprocessing facility from the late 1970's until August
1994, when the facility was forced to close down because its storage and
processing tanks had become contaminated with elevated concentrations of
polychlorinated biphenyls (PCBs). In November 1994, the owners of the site sued
Con Edison of New York, alleging that its shipments of waste oil and oily
wastewater to the facility were the source of the high concentration of PCBs
that had contaminated the facility's tanks. The action was dismissed after a
jury verdict in Con Edison of New York's favor. However, the facility's tanks
still contain significant quantities of PCB-contaminated oil and EPA has
determined that an emergency cleanup program estimated to cost $2.1 million is
required for them. EPA is currently attempting to negotiate with the owners of
the facility for the implementation of the required emergency cleanup program,
but has indicated that it may order PRPs who shipped waste oil to the facility
to implement or to fund the program if the facility owners do not agree to carry
out the program.
- 55 -
SUPERFUND - MATTIACE PETROCHEMICAL COMPANY SITE
In July 2000, Con Edison of New York was served with an EPA Superfund
information request for the Mattiace Petrochemical Company Superfund Site in
Glen Cove, New York. According to EPA, the Mattiace Petrochemical Company
processed, blended, repacked, and distributed solvents at the site from the
mid-1960's until 1987. Between 1974 and 1982, Mattiace Petrochemical's
affiliate, the M&M Drum Company, cleaned and refurbished metal drums at the
site. Since 1988, EPA has spent in excess of $12 million conducting emergency
removal and cleanup work at the site. Con Edison of New York is presently
investigating whether it shipped hazardous substances to the site. While the
investigation is not yet complete, it appears that during the early 1980's, Con
Edison of New York purchased naphta and a mineral spirit solvent from Mattiace
Petrochemical and sold scrap drums to Mattiace and M&M Drum.
EMPLOYEES' CLASS ACTION
Reference is made to "Employees' Class Action" in Part I, Item 3, Legal
Proceedings of the Form 10-K. In June 2000, the court preliminarily approved a
settlement agreement between Con Edison of New York and the plaintiffs. If the
agreement receives final approval, the company will pay an estimated aggregate
$10 million (including attorneys' fees) and will take certain actions with
respect to its personnel practices. At June 30, 2000, the company had
approximately $10 million accrued as its liability with respect to this action.
INDIAN POINT 2 OUTAGE LITIGATION
Reference is made to Note C to the Con Edison of New York financial statements
included in Part I, Item 1 of this report.
O&R
SHAREHOLDER LAWSUITS
Reference is made to "Shareholder Lawsuits" in Part I, Item 3, Legal Proceedings
of the Form 10-K and in Part II, Item 1, Legal Proceedings in the First Quarter
Form 10-Q. In May 2000, the trial court dismissed plaintiffs' actions and
imposed sanctions on plaintiffs' counsel in Suzanne Hennessy, et al. v. D. Louis
Peoples, et al.
O&R CLEAN AIR ACT PROCEEDING
In May 2000, the New York State Department of Environmental Conservation ("DEC")
issued notices of violation to O&R and four other companies that have operated
coal-fired electric generating facilities in New York State. The notices allege
violations of the federal Clean Air Act and the New York State Environmental
Conservation Law resulting from the alleged failure of the companies to obtain
DEC permits for physical modifications to their generating facilities and to
install air pollution control equipment that would have reduced harmful
emissions. The notice of violation received by O&R relates to the Lovett
Generating Station that it sold in June 1999. O&R is unable to predict whether
or not the alleged violations will have a material adverse effect on its
financial position, results of operation or liquidity.
- 56 -
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
CON EDISON
(a) At the Annual Meeting of Stockholders of Con Edison on May 15, 2000, the
stockholders of Con Edison voted to elect management's nominees for the Board of
Directors, to ratify and approve the appointment of Con Edison's independent
accountants, and not to adopt a stockholder proposal. 161,785,528 shares of
Common Stock of Con Edison, representing approximately 76.21% of the 212,292,190
shares of Common Stock outstanding and entitled to vote, were present at the
meeting in person or by proxy.
(b) The name of each nominee for election as a member of Con Edison's Board of
Directors and the number of shares voted for or with respect to which authority
to vote for was withheld are as follows:
VOTES VOTES
FOR WITHHELD
E. VIRGIL CONWAY 159,242,410 2,543,118
PETER W. LIKINS 159,481,540 2,303,988
RUTH M. DAVIS 159,243,513 2,542,015
EUGENE R. MCGRATH 159,439,504 2,346,024
GORDON J. DAVIS 158,276,938 3,508,590
ELLEN V. FUTTER 159,413,924 2,371,604
RICHARD A. VOELL 159,079,447 2,706,081
SALLY HERNANDEZ-PINERO 159,320,147 2,465,381
STEPHEN R. VOLK 158,928,813 2,856,715
JOAN S. FREILICH 159,496,944 2,288,584
MICHAEL J. DEL GIUDICE 159,475,634 2,309,894
GEORGE CAMPBELL, JR. 159,431,695 2,353,833
(c) The results of the vote on the appointment of PricewaterhouseCoopers LLP as
independent accountants for Con Edison for 2000 were as follows: 159,387,727
shares were voted for this proposal; 1,057,945 shares were voted against the
proposal; and 1,339,856 shares were abstentions.
(d) The following stockholder-proposed resolution was voted upon by the
stockholders of Con Edison at the Annual Meeting:
"RESOLVED: That the shareholders recommend that the Board take the necessary
step that Con Edison specifically identify by name and corporate title in all
future proxy statements those executive officers, not otherwise so identified,
who are contractually entitled to receive in excess of $250,000 annually as base
salary, together with whatever other additional compensation bonuses and other
cash payments were due them."
The results of the vote on this proposal were as follows: 17,246,681 shares were
voted for this proposal; 108,946,848 shares were voted against the proposal;
4,900,600 shares were abstentions; and 30,691,399 shares were broker nonvotes
CON EDISON OF NEW YORK
At the Annual Meeting of Stockholders of Con Edison of New York on May 15, 2000,
all 235,488,094 outstanding shares of common stock of Con Edison of New York
were voted to elect as members of Con Edison of New York's Board of Trustees
management's nominees for the Board of Trustees (George Cambell, Jr., E. Virgil
Conway, Ruth M. Davis, Gordon J. Davis, Joan S. Freilich, Ellen V. Futter, Sally
Hernandez-Pinero, Peter W. Likins, Eugene R. McGrath, Richard A. Voel and
Stephen R. Volk), and to ratify and approve the appointment of
PricewaterhouseCoopers LLP as Con Edison of New York's independent accountants
for 2000. All of the common stock of Con Edison of New York is owned by Con
Edison.
- 57 -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
CON EDISON
Exhibit 10 The Consolidated Edison, Inc. Discount Stock Plan.
Exhibit 12.1 Statement of computation of Con Edison's ratio of earnings
to fixed charges for the twelve-month periods ended
June 30, 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 June 30, 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 June 30, 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.
- 58 -
(b) REPORTS ON FORM 8-K
CON EDISON
Con Edison, along with Con Edison of New York, filed a combined Current Report
on Form 8-K, dated March 29, 2000, reporting (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 the First Quarter Form 10-Q. Con Edison,
along with O&R, filed a combined Current Report on Form 8-K, dated May 25, 2000,
reporting (under Item 5) the proceeding referred to under "O&R Clean Air Act
Proceeding" in the discussion of O&R's legal proceedings in Part II, Item 1 of
this report.
CON EDISON OF NEW YORK
Con Edison of New York, along with Con Edison, filed a combined Current Report
on Form 8-K, dated March 29, 2000, reporting (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 the First Quarter Form 10-Q. 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, along with Con Edison, filed a combined Current Report on Form 8-K, dated
May 25, 2000, reporting (under Item 5) the proceeding referred to under "O&R
Clean Air Act Proceeding" in the discussion of O&R's legal proceedings in Part
II, Item 1 of this report. O&R also filed a Current Report, dated June 13, 2000,
reporting (under Item 5) the issuance and sale of $55 million aggregate
principal amount of its 7.50 % Debentures, Series 2000 A.
- 59 -
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: August 14, 2000 By Joan S. Freilich
Joan S. Freilich
Executive Vice President, Chief
Financial Officer and Duly
Authorized Officer
ORANGE AND ROCKLAND UTILITIES, INC.
DATE: August 14, 2000 By Hyman Schoenblum
Hyman Schoenblum
Vice President, Chief Financial
Officer and Duly Authorized Officer
THE CONSOLIDATED EDISON, INC.
STOCK PURCHASE PLAN
As Amended and Restated Effective April 20, 2000
203530
THE CONSOLIDATED EDISON, INC.
STOCK PURCHASE PLAN
Table of Contents
Article Title
Page
1. Definitions......................................................1
2. Maximum Employee Investment......................................4
3. Means of Payment of Employee Contributions.......................5
4. Employer Contributions...........................................7
5. Purchase of Shares...............................................8
6. Custody of Shares; Distributions from Accounts...................9
7. Termination of Status as Employee; Leave of Absence.............11
8. Stock Dividends and Stock Splits; Rights Offerings; Other Non-Cash
Distributions...................................................12
9. Voting of Shares................................................13
10. Termination and Modification; Responsibility of
Company and Plan Director .....................................14
11. Administration, Operation and General Provisions................15
Appendix A - Employer Contributions
Appendix B - Employer and Participating Employers
i
Article 1. Definitions.
(a) "Account" means a custodian account established with the Agent to
hold Shares purchased under the Plan, and any Shares transferred to
such Account pursuant to Article 11, beneficially owned by an
Employee. Such Account shall be an individual Account unless such
Employee shall designate in writing that it shall be a joint Account,
in which case it shall be a joint Account of such Employee and such
other person as such Employee shall have designated. A joint Account
may be converted to an individual Account of an Employee who is joint
holder of such Account, upon written request signed by such Employee
and the other joint holder of such Account. Any transfer taxes
payable in connection with a change from individual to joint Account
or vice versa will be the responsibility of the Employee. An Employee
may not have more than one Account, except that two Employees, each
having an Account, may hold one or both of such Accounts jointly. All
distributions from a joint Account, whether of cash or Shares, shall
be made jointly to the Employee and the other holder of such joint
Account. All references in this Plan to distributions to an Employee
shall in the case of a joint Account be subject to the preceding
sentence. Ineligibility of an Employee to make investments under the
Plan shall render the other holder of a joint Account with such
Employee likewise ineligible to make investments through such
Account.
(b) "Affiliate" means any company which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) which also includes
as a member the Company; any trade or business under common control (as
defined in Section 414(c) of the Code) with the Company; any organization
(whether or not incorporated) which is a member of an affiliated service
group (as defined in Section 414(m) of the Code) which includes the
Company; and any other entity required to be aggregated with the Company
pursuant to regulations under Section 414(o) of the Code.
(c) "Agent" means State Street Bank and Trust Company or a successor or
successors designated by the Board to serve as Agent under this Plan.
(d) "Anniversary Date" for any Share or fractional Share held in an
Account shall mean the first day of the thirteenth month next
following the Purchase Period during which such Share or fractional
Share was purchased for such Account.
(e) "Basic Rate of Pay" means in respect of a particular Purchase Period:
(i) In the case of an Employee compensated on an hourly basis, 40
times his or her basic hourly rate in effect at the beginning
of such Purchase Period;
1
(ii) In the case of an Employee compensated on a monthly basis, his
or her basic annual rate in effect at the beginning of such
Purchase Period, divided by 12; and
(iii) In the case of an Employee compensated on a semi-monthly basis,
his or her basic annual rate in effect at the beginning of such
Purchase Period, divided by 24.
(f) "Board of Directors" means the Board of Directors of the Company.
(g) "Board of Trustees" means the Board of Trustees of the Employer.
(h) "Company" means Consolidated Edison, Inc.
(i) "Effective Date" means April 20, 2000.
(j) "Employee" means any person employed by the Employer or a
Participating Employer who has attained regular status as an active
employee or who has completed three months of the "on trial" or
"probationary" period as of the beginning of a Purchase Period. For
purposes of this Plan only, "Employee" shall also include a person
who is a member of the Board of Directors of the Company, the Board
of Trustees of the Employer, and, if applicable, the board of
directors of a Participating Employer and not otherwise an Employee.
Employee also means a duly elected or appointed officer of the
Company, the Employer or a Participating Employer.
(k) "Employer" means Consolidated Edison Company of New York, Inc.
(l) "Investment Funds" means all funds received by the Agent pursuant to
Articles 3(a), 3(b), 4(a), 4(b), and 4(c), plus the amount of all
cash dividends received by the Agent, other than dividends which are
to be distributed to Employees in accordance with instructions
pursuant to Article 3(c).
(m) "Participating Employer" means an Affiliate which, with the approval
of the Board of Directors, has adopted the Plan for its Employees.
(n) "Plan" means the Consolidated Edison Inc. Stock Purchase
Plan, as now or hereafter in effect.
2
(o) "Plan Director" means the Vice President - Human Resources of the
Employer or such other person or persons as may from time to time be
designated by the Company or the Chief Executive Officer of the
Employer to act as such Plan Director in respect of the Plan. The
Plan Director shall serve as such without compensation and at the
discretion of the Company or the Chief Executive Officer of the
Employer.
(p) "Purchase Period" means a calendar month.
(q) "Shares" means shares of Common Stock of the Company and includes
both full and fractional Shares unless otherwise specified.
(r) "Share Price" for any Purchase Period means the average cost,
exclusive of brokerage commissions and other expenses of purchase, of
all Shares purchased by the Agent pursuant to Article 5 during such
Purchase Period.
3
Article 2. Maximum Employee Investment.
(a) With respect to a particular Purchase Period, and subject to Article
6(e), an Employee may invest in the purchase of Shares pursuant to
the Plan an amount not in excess of 20% of such Employee's Basic Rate
of Pay, multiplied by the number of pay periods of such Employee
ending within such Purchase Period; provided, however, that an
Employee may not invest more than $25,000 pursuant to the Plan during
any calendar year; and provided further than an Employee who is a
member of the Board of Directors or Board of Trustees or board of
directors of a Participating Employer and who is not otherwise an
Employee may invest up to $1,000 in each Purchase Period; and
provided further that amounts invested pursuant to Article 3(c) shall
not be subject to such limits.
(b) If at any time it is discovered that an Employee has invested in any
Purchase Period an amount in excess of the maximum investment
permitted by this Article 2 for such Employee in such Purchase
Period, then the maximum investment permitted for such Employee shall
thereafter be reduced by subtracting the amount of such excess from
the maximum amount which such Employee would otherwise be permitted
to invest in the Purchase Period or Periods next following such
discovery, until the aggregate of such reductions shall equal the
amount of such excess. In any such case the Employee involved shall
be notified by the Plan Director and requested to appropriately
restrict or suspend his or her investments under the Plan during such
Purchase Period or Periods. If an Employee repeatedly exceeds the
limitations of this Article 2, the Plan Director may, in his or her
sole discretion, suspend the eligibility of such Employee for such
period as the Plan Director, in his or her sole discretion, may
determine. Any such suspension shall have the same effect as a period
of ineligibility pursuant to Article 6(e).
4
Article 3. Means of Payment of Employee Contributions.
-----------------------------------------------------
Subject to the limitations of Article 2, an Employee may provide funds for
the purchase of Shares under the Plan by any one or more of the following
methods:
(a) Payroll deductions. On a form provided by the Employer or a Participating
------------------- Employer, or in some other means as authorized by the
Plan Director, an Employee may authorize payroll deductions to be made
which are not less than $2.00 per week for weekly-paid Employees, $5.00 per
pay period for semi-monthly-paid Employees or $10.00 per month for
monthly-paid Employees, but in no case more than 20% of such Employee's
Basic Rate of Pay. Payroll deductions shall commence with respect to the
first Purchase Period ending in the first calendar month beginning not less
than 15 days after receipt by the Employer, Participating Employer or Agent
of the payroll deduction authorization. Payroll deductions shall continue
for successive Purchase Periods until such Employee instructs the Employer,
Participating Employer or Agent to make no further deductions or until such
Employee's participation in the Plan shall be suspended under the
provisions of Articles 2(b), 6(e) or 7(b), or until his or her status as an
Employee ceases, whichever shall first occur. An Employee may change the
rate of or terminate his or her payroll deductions, but no such change or
termination shall be effective until the first Purchase Period beginning
not less than 15 days after receipt by the Employer, or Participating
Employer or Agent of a new authorization to terminate such deductions. The
Employer and any Participating Employer shall pay over the amount of each
payroll deduction so authorized to the Agent, for the Account of the
Employee, within five business days after the date such amount would
otherwise have been payable to such Employee.
(b) Cash Payments. From time to time, but not more frequently than once during
-------------- each Purchase Period, an Employee may deliver to the Agent a
money order or a check acceptable to, and payable to the order of, the
Agent, in an amount in each case not less than $10.00, together with a
direction, on a form provided by the Employer, Participating Employer or
the Agent, to purchase Shares pursuant to the Plan. If such money order or
check shall prove uncollectible, the Agent shall notify the Employee and
allow the Employee 15 days to substitute a collectible money order or
check, failing which the Agent shall be authorized to sell sufficient
Shares from such Employee's Account to pay, net of the expenses of sale,
the uncollected amount. The aggregate amount so delivered by an Employee
during any Purchase Period may not exceed $1,000.00.
5
(c) Dividend Reinvestment. Unless the Employee otherwise instructs the
Agent, the Agent shall apply dividends received with respect to
Shares held in his or her Account to the purchase of additional
Shares. However, the Employee may instruct the Agent to distribute to
the Employee any such dividends received by the Agent for which the
record date has not occurred prior to the Agent's receipt of such
instructions. Any dividends covered by such instructions shall be
distributed by the Agent to such Employee as promptly as practicable.
Such instructions shall be revocable by the Employee, effective with
respect to any dividends for which the record date has not occurred
prior to the Agent's receipt of such revocation.
(d) No Interest. There shall be no payment or accrual of interest in
respect of payments under the foregoing Articles 3(a), (b) and (c),
while held by the Employer, any Participating Employer or the Agent,
or otherwise.
(e) Automated Telephone System. The Agent's automated telephone voice
response system enables Employees to access account information and
authorize transactions over the telephone twenty-four (24) hours a
day and generally replaces, other than the initial enrollment form,
all written authorization forms.
6
Article 4. Employer Contributions.
The Employer and any Participating Employer shall separately determine,
in its sole and absolute discretion, whether to make contributions on behalf
of its Employees who participate in the Plan. If the Employer or a
Participating Employer decides to make contributions on behalf of its
Employees, Appendix "A", attached and incorporated herein as part of the
Plan, shall provide the terms and conditions for such contributions made by
the Employer and any Participating Employer.
Appendix B, attached and incorporated herein as part of the Plan, sets
forth a list of the Employer and Participating Employers and states whether
the Employer or Participating Employer has determined to make contributions
on behalf of its Employees.
7
Article 5. Purchase of Shares.
(a) As and when Investment Funds are received by it, the Agent shall
promptly apply the same to the purchase, in one or more transactions,
of the maximum number of whole Shares obtainable at then prevailing
prices, exclusive of brokerage commissions and other expenses of
purchase. Such purchases may be made on any securities exchange where
Shares are traded, in the over-the-counter market, or in negotiated
transactions, and may be on such terms as to price, delivery and
otherwise as the Agent may determine to be in the best interest of
the Employees participating in the Plan. The Agent shall complete
such purchases as soon as practical after receipt of such funds,
having due regard for any applicable requirements of law affecting
the timing or manner of such purchases.
(b) If, for any reason, the Agent is unable, on or before the last day of
any Purchase Period, to apply, pursuant to Article 5(a), all
Investment Funds received by it during such Purchase Period, then any
such Investment Funds remaining in any Account at the end of such
Purchase shall be held by the Agent and applied as soon as practical
in a subsequent Purchase Period or Periods as provided in Article
5(a).
(c) Notwithstanding Article 5(b), an Employee may at any time elect to
instruct the Agent to promptly return any Investment Funds held by
the Agent for such Employee's Account as of the end of the current
month which have not been applied pursuant to Article 5(a), except
that if such instructions are received by the Agent less than 10 days
before the end of the current month, the Agent shall return any such
unapplied funds remaining in such Account as of the end of the next
succeeding month. In such case, funds contributed by the Employee
pursuant to Article 3 shall be returned to the Employee and funds, if
applicable, contributed by the Employer or Participating Employer
pursuant to Article 4 shall be returned to the Employer or
Participating Employer.
(d) Promptly after the end of each Purchase Period, the Agent shall
compute the Share Price for such Purchase Period and shall allocate
the Shares purchased during such Purchase Period among the
Employees' Accounts by allocating to each Account the number of full
and fractional shares obtained by dividing the Share Price for such
Purchase Period into the amount of Investment Funds applied for such
Account during such Purchase Period pursuant to Articles 5(a) and
5(b).
8
Article 6. Custody of Shares; Distributions from Accounts.
(a) The Shares purchased under the Plan shall be held in the name and custody
of the Agent or a nominee. Promptly after the end of each Purchase Period
the Agent shall mail a statement of account to each participating Employee,
showing (i) the number and (ii) Share Price of any additional Shares
purchased and allocated to such Employee's Account with respect to such
Purchase Period, (iii) the total amount of Investment Funds applied to the
purchase of Shares for such Account during such Period (i.e., the product
of items (i) and (ii)), (iv) the amount of any Investment Funds held in
such Account for investment during subsequent Purchase Periods pursuant to
Article 5(b), (v) the aggregate number of Shares held in such Account as of
the end of such Purchase Period, (vi) the number of Shares distributed or
sold from such Account during such Purchase Period pursuant to Article
6(b), and (vii) if applicable, the aggregate number of such Shares for
which the Anniversary Date will have occurred as of the date immediately
after the end of such Purchase Period.
(b) An Employee may at any time direct that:
(i) Certificates for some or all of the full Shares in his
or her Account be distributed to such Employee; or
(ii) Some or all of the Shares in his or her Account, both full
Shares and any fractional Share, be sold, and the resulting
cash proceeds distributed to such Employee.
In any such event, promptly after receipt of such direction by the
Agent, such distribution, or sale and distribution, shall be made by
the Agent, whose judgment as to the terms of any such sale shall be
conclusive and binding. All cash distributions, whether in respect
of sales of full Shares or fractional Shares, shall be net of any
brokerage commissions, transfer taxes and service charges incurred
in connection with such sales.
(c) No Shares held in an Account may be assigned, pledged or
hypothecated prior to distribution from such Account of the related
Share certificates. Neither may any interest of an Employee in or
under the Plan be assigned, pledged or hypothecated.
(d) Subject to Article 1(a), all Share certificates distributed pursuant
to this Article 6 shall be in the name of the respective Employee.
9
(e) Subject to Article 11(c), an Employee participating in the Plan shall at
all times have the right to have all of the Shares in his or her Account
distributed or sold in accordance with Article 6(b). However, if an
Employee shall direct that a Share or fractional Share in his or her
Account be so distributed or sold prior to the Anniversary Date of such
Share or fractional Share, such Employee shall thereafter be ineligible
(effective as of the first day of the Purchase Period next succeeding such
distribution or sale) to make further investments under the Plan until the
Anniversary Date of the most recently acquired Share or fractional Share
sold or distributed from such Employee's Account pursuant to Article 6(b)
shall occur. In the event of such ineligibility:
(i) Any authorization for payroll deductions given by such
Employee pursuant to Article 3(a) shall thereupon be revoked,
such Employee shall be deemed to have given instructions to
distribute dividends pursuant to Article 3(c), any Investment
Funds held in such Employee's Account shall be distributed in
the manner provided in case of an instruction pursuant to
Article 5(c), and no further contributions pursuant to Article
3(b) shall be accepted during such ineligibility.
(ii) Any full or fractional Shares remaining in such Employee's
Account shall remain in such Account unless and until disposed
of in accordance with Article 6(b), 7(a) or 11(c).
(iii) The Employee may conclusively rely on the statement furnished
by the Agent pursuant to Article 6(a), for the purpose of
determining the number of Shares in such Employee's Account
for which the Anniversary Date has occurred. Any direction for
the sale or distribution of Shares pursuant to Article 6(b)
shall be satisfied first from those Shares in such Account for
which the Anniversary Date has at the time occurred, unless
the Employee otherwise expressly directs. Upon application by
an Employee, the Plan Director may, for good cause shown,
waive all or any part of any period of ineligibility which
would otherwise result under this Article 6(e) from a sale or
distribution of a specified Share or Shares from such
Employee's Account. Such waiver shall be within the sole
discretion of the Plan Director, whose decision on any such
application shall be final.
(iv) The concept of "Anniversary Date" shall only apply to Shares
of those Employees of the Employer and of any Participating
Employer who has determined to make contributions on behalf of
its Employees.
10
Article 7. Termination of Status as Employee; Leave of Absence.
(a) Subject to Article 1(a), when an Employee's status as an Employee
ceases, any fractional Share in such Employee's Account shall be sold
and the proceeds thereof, together with all full Shares in such
Employee's Account, shall be distributed to such Employee (or in the
event of death or disability, to his or her legal representatives),
without the necessity of any request by or on behalf of the Employee
under Article 6(b), as promptly as practicable after receipt by the
Agent of notice of such change of status, unless the Agent receives,
within thirty days after such change of status and prior to any such
distribution, an election by such former Employee (or his or her
legal representatives as aforesaid), to have such full Shares sold
and the resulting cash proceeds distributed. The judgment of the
Agent as to the terms of any such sale shall be conclusive and
binding. All cash distributions, whether in respect of sale of full
Shares or fractional Shares, shall be net of any brokerage or
commissions, transfer taxes, and service charges incurred in
connection with such sales. Any Investment Funds held in such
Employee's Account shall be distributed in the manner provided in
case of an instruction pursuant to Article 5(c).
(b) An Employee on an unpaid leave of absence shall be ineligible
(effective as of the first day of the first Purchase Period beginning
during such an unpaid leave of absence) to make further investments
under the Plan until the termination of such an unpaid leave of
absence. Such ineligibility shall have the same effects as a period
of ineligibility arising under Article 6(e).
11
Article 8. Stock Dividends and Stock Splits; Rights Offerings;
------------------------------------------------------------------
Other Non-Cash Distributions.
(a) Any Shares received as stock dividends or split shares distributed by the
Company on full or fractional Shares held in the Plan for an Employee will
be credited to the Employee's Account. The Anniversary Date of any Share so
received shall be that of the Share in respect of which it shall be
received.
(b) If the Company should determine to offer securities through the issuance of
rights to subscribe, warrants representing the rights on all Shares
registered in the name of the Agent (or a nominee) will be issued to the
Agent. Except as provided in the last three sentences of this Article 8(b),
the Agent shall sell such rights and distribute the proceeds among the
Employees in proportion to the full and fractional Shares held in each
Employee's Account on the record date for such rights. Any Employee who
wishes to exercise subscription rights on his or her Plan Shares shall,
prior to the record date for any such rights, advise the Agent of such
desire and make arrangements, satisfactory to the Company and the Agent, to
provide the Agent with funds to exercise such rights. Any Shares so
purchased shall be added to such Employee's Account and any other
securities so purchased shall be delivered to such Employee. No
contribution shall be made under the Plan by the Employer or a
Participating Employer in connection with any such exercise of rights.
(c) Any non-cash distribution which the Company may make in respect of Shares
held by the Agent for the Accounts of Employees, except a distribution
subject to Articles 8(a) or 8(b), shall, to the extent practicable, be
distributed in kind to the Employees in proportion to the respective
numbers of Shares in their Accounts. To the extent that such a distribution
in kind is not practicable, such non-cash distribution shall be sold and
the proceeds distributed in like manner.
12
Article 9. Voting of Shares.
Each Employee shall be entitled to direct the Agent as to the manner in
which any Shares held in such Employee's Account are to be voted and
appropriate procedures shall be established to enable the Employee to
exercise such right. The Company shall provide to each Employee for whose
account Shares are held under the Plan a copy of all proxy statements and
annual, quarterly and other reports distributed by the Company to holders of
record of Shares.
13
Article 10. Termination and Modification;
Responsibility of Company and Plan Director.
(a) The Board of Directors of the Company shall have the power to
suspend, terminate, amend or otherwise modify the Plan and the
Chairman of the Board, the Vice Chairman of the Board, the Vice
President-Human Resources and the Treasurer of the Employer are each
authorized to make such changes from time to time to the Plan as such
officer may approve as necessary or desirable to comply with law or
to facilitate the administration of the Plan. No such suspension,
termination, amendment or modification shall restrict the right of
any Employee to withdraw all full Shares held in his or her Account,
and to receive the net proceeds, after expenses of sale, of any
fractional Share held in such Account. All participating Employees
shall be given notice of any such suspension, termination, amendment
or modification at least 30 days prior to the effective date thereof.
Termination of the Plan shall have the same effects, with respect to
each Employee, as are provided for in Article 7(a) in the event of
termination of such Employee's status as an Employee.
(b) Any Affiliate may adopt this Plan with the consent of the Board of
Directors of the Company; provided, however, that the Chairman of the
Board, the President, the Executive Vice President and Chief
Financial Officer and the Vice President-Human Resources of the
Employer shall each have authority to permit participation in the
Plan by an Affiliate on such terms and conditions as such officer may
approve. Upon the effective date of the adoption of the Plan by an
Affiliate, the Affiliate shall become a Participating Employer. Each
Participating Employer shall be named in Appendix B. A Participating
Employer may terminate its participation in the Plan upon appropriate
action.
(c) The Company, Employer, Participating Employer(s), and the Plan
Director shall not be liable hereunder for any act done in good
faith, or for any good faith omission to act, including, without
limitation, any claim for delay in paying funds over to the Agent for
the Account of an Employee.
14
Article 11. Administration, Operation and General Provisions
(a) Plan Director Authority All determinations required or permitted under the
Plan or in its administration, which are not reserved to the Board of
Directors of the Company, the Chief Executive Officer of the Employer, or
the Agent or otherwise specified under the Plan, shall be made by the Plan
Director. All such determinations, whether reserved or not reserved, shall
be conclusive and binding on the Employee or Employees affected.
(b) Expenses of Plan. Except as otherwise provided in the Plan, the Employer
and any Participating Employer shall pay all expenses in connection with
administration of the Plan, including, without limitation, the fees and
expenses of the Agent applicable to its Employees
(c) Recoupment of Company Overpayments. Notwithstanding anything in this Plan
to ---------------------------------- the contrary, if at any time it is
discovered that through error, inadvertence, mistake or for any other
reason, the Employer or any Participating Employer has paid over to the
Agent for the Account of an Employee an amount which is in excess of the
amount which should have been paid over for such Account, pursuant to
Article 4 and Appendix A, or if it shall be discovered that an amount paid
over to the Agent pursuant to Article 3(a) was in excess of the pay due
such Employee (net of all other deductions) from which such amount was to
have been deducted, and if such overpayment shall be discovered and notice
given to the Agent prior to the application of such overpayment by the
Agent to the purchase of Shares, the Agent shall promptly return the amount
of such overpayment to the Employer or Participating Employer).
(d) Agent's Tenure and Responsibility.
(i) The Agent may resign at any time by delivering its written resignation
to the Employer, and the Employer may remove the Agent at any time by
delivering to the Agent a written notice of removal; provided that
such resignation or removal shall not take effect until the effective
date of an appointment of a successor Agent. A successor Agent may be
appointed by the Employer upon 30 days notice to the participating
Employees and the incumbent Agent. Each participating Employee shall
be deemed to have consented to such appointment unless such Employee
directs, pursuant to Article 6(b), a distribution or sale of all
shares in such Employee's Account prior to the effective date of such
appointment. If no successor Agent shall be appointed
15
within 90 days of delivery of the Agent's resignation or notice
of removal, the Plan shall terminate.
(ii)The Agent shall not be liable hereunder for any act done in good faith,
or for any good faith omission to act, including without limitation,
any claims with respect to the prices at which Shares are purchased or
sold for Employees' Accounts.
16
APPENDIX A
EMPLOYER CONTRIBUTIONS
(a) This Appendix A applies tothe Employer and any Participating
Employer listed in Appendix B who has determined to make
contributions to the Plan for the account of its Employees who
participate in the Plan..
(b) At the time the Employer or Participating Employer pays over to
the Agent any amount for the Account of an Employee pursuant to
Article 3(a) of the Plan, the Employer or Participating Employer
shall concurrently pay over to the Agent for the Account of the
Employee an additional amount equal to one-ninth of the amount
so provided by such Employee.
(c) Within 10 business days after the receipt of funds from an
Employee pursuant to Article 3(b) of the Plan, the Agent shall
advise the Employer or Participating Employer of such receipt
and the Employer or Participating Employer shall promptly pay
over to the Agent for the Account of such Employee an additional
amount equal to one-ninth of the amount so provided by such
Employee.
(d) Not less than 10 business days after each dividend record date
in respect of Shares, the Agent shall advise the Employer or
Participating Employer of the amount of dividends to be received
by the Agent for the Account of each Employee on the
corresponding dividend payment date, excluding those dividends
for which the Agent has received instructions pursuant to
Article 3(c) of the Plan. On such dividend payment date the
Employer or Participating Employer shall pay over to the Agent,
for the Account of each such Employee, an amount equal to
one-ninth of the amount of such dividends to be received by the
Agent on such date for such Account.
(e) The Employer or Participating Employer shall, promptly upon
request by the Agent, reimburse or provide funds to the Agent
for the payment of brokerage commissions and other reasonable
expenses of purchase incurred by the Agent pursuant to Article
5.
1
APPENDIX B
EMPLOYER AND PARTICIPATING EMPLOYERS
(a) Consolidated Edison Company of New York, Inc. is the Employer and has
made contributions on behalf of its Employees since the Plan's
inception.
(b) Consolidated Edison Development, Inc. became a Participating Employer
in the Plan effective as of January 1, 2000, and has determined to
make contributions on behalf of its Employees.
(c) Consolidated Edison Energy, Inc. became a Participating Employer in
the Plan effective as of January 1, 2000, and has determined to make
contributions on behalf of its Employees.
(d) Orange and Rockland Utilities, Inc. has become a Participating
Employer in the Plan effective as of May 1, 2000, and has determined
not to make contributions on behalf of its Employees.
Date: May 1, 2000
CONSOLIDATED EDISON, INC.
RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS ENDED
(Thousands of Dollars)
JUNE JUNE
2000 1999
---------- ----------
Earnings
Net Income for Common Stock $714,450 $721,895
Preferred Dividends 13,593 14,731
Federal Income Tax 356,571 427,797
---------- ----------
Total Earnings Before Federal Income Tax 1,084,614 1,164,423
Fixed Charges* 391,754 338,967
---------- ----------
Total Earnings Before Federal Income Tax
and Fixed Charges $1,476,368 $1,503,390
========== ==========
* Fixed Charges
Interest on Long-Term Debt $325,730 $290,520
Amortization of Debt Discount, Premium and Expense 12,972 13,771
Interest on Component of Rentals 17,583 18,283
Other Interest 35,469 16,393
---------- ----------
Total Fixed Charges $391,754 $338,967
========== ==========
Ratio of Earnings to Fixed Charges 3.77 4.44
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS ENDED
(Thousands of Dollars)
JUNE JUNE
2000 1999
---------- ----------
Earnings
Net Income $710,067 $756,826
Federal Income Tax 338,250 439,090
---------- ----------
Total Earnings Before Federal Income Tax 1,048,317 1,195,916
Fixed Charges* 360,309 338,556
---------- ----------
Total Earnings Before Federal Income Tax
and Fixed Charges $1,408,626 $1,534,472
========== ==========
* Fixed Charges
Interest on Long-Term Debt $298,524 $290,520
Amortization of Debt Discount, Premium and Expense 12,972 13,771
Interest on Component of Rentals 17,583 18,283
Other Interest 31,230 15,982
---------- ----------
Total Fixed Charges $360,309 $338,556
========== ==========
Ratio of Earnings to Fixed Charges 3.91 4.53
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
Twelve Months Ended
(Thousands of Dollars)
JUNE JUNE
2000 1999
-------------- -------------
Earnings
Net Income $38,279 $18,577
Federal Income Tax 45,008 15,142
State Income Tax 1,599 2,112
---------- ----------
Total Earnings Before Federal and State Income Tax 84,886 35,831
Fixed Charges* 30,001 37,305
---------- ----------
Total Earnings Before Federal and State
Income Tax and Fixed Charges $114,887 $73,136
========== ==========
* Fixed Charges
Interest on Long-Term Debt $24,637 $24,709
Amortization of Debt Discount, Premium and Expense 1,166 1,170
Interest Component on lease Payment 1,595 2,517
Other Interest 2,603 8,909
---------- ----------
Total Fixed Charges $30,001 $37,305
========== ==========
Ratio of Earnings to Fixed Charges 3.83 1.96
UT 0001047862 Consolidated Edison, Inc. 1,000 Dec-31-2000 Jun-30-2000 6-Mos Per-Book 11,789,812 507,531 1,429,366 2,294,744 0 16,021,453 588,720 857,669 4,946,907 5,377,654 37,050 212,563 4,933,529 0 0 204,280 328,230 0 33,040 2,694 4,892,413 16,021,453 4,360,485 134,410 3,772,037 3,906,447 454,038 2,378 456,416 192,739 263,677 6,796 256,881 231,230 170,971 492,648 1.21 1.21
UT 0000023632 Consolidated Edison Company of New York, Inc. 1,000 Dec-31-2000 Jun-30-2000 6-Mos Per-Book 10,779,914 331,433 1,130,598 1,612,024 0 13,853,969 588,720 857,670 3,906,176 4,390,474 37,050 212,563 4,418,735 0 0 109,930 300,000 0 32,931 2,694 4,349,592 13,853,969 3,708,543 128,117 3,145,985 3,274,102 434,441 (158) 434,283 178,075 256,208 6,796 249,412 231,230 157,898 512,688 0 0
UT 0000074778 Orange and Rockland Utilities, Inc. 1,000 Dec-31-1999 Jun-30-2000 6-Mos Per-Book 703,097 3,412 199,888 182,437 0 1,088,834 5 194,499 135,080 329,584 0 0 335,601 0 0 0 20,000 0 0 0 403,649 1,088,834 325,835 7,801 292,176 299,977 25,858 2,907 28,765 12,721 16,044 0 16,044 0 11,670 16,971 0 0