FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
[x] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
-------------------------
Commission File No. 1-1217
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
(Name of Registrant)
NEW YORK 13-5009340
(State of Incorporation) (IRS Employer Identification No.)
4 IRVING PLACE, NEW YORK, NEW YORK 10003 - (212) 460-4600
(Address and Telephone Number)
The Registrant 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 has
been subject to such filing requirements for the past 90 days.
Yes __X__ No ____
As of the close of business on April 30 1997, the Registrant had outstanding
235,012,433 shares of Common Stock ($2.50 par value).
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PART I - FINANCIAL INFORMATION
CONTENTS PAGE NO.
ITEM 1. Financial Statements:
Consolidated Balance Sheet 3-4
Consolidated Income Statements 5-6
Consolidated Statements of Cash Flows 7-8
Note to Financial Statements 9-10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-19
-------------------------
The following consolidated financial statements are unaudited but, in the
opinion of management, reflect all adjustments (which include only normal
recurring adjustments) necessary to a fair statement of the results for the
interim periods presented. These condensed unaudited interim financial
statements do not contain the detail, or footnote disclosure concerning
accounting policies and other matters, which would be included in full-year
financial statements and, accordingly, should be read in conjunction with the
Company's audited financial statements (including the notes thereto) included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996
(File No. 1-1217).
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31,1997, DECEMBER 31, 1996 AND MARCH 31, 1996
As At
March 31, 1997 Dec. 31, 1996 March 31, 1996
(Thousands of Dollars)
ASSETS
Utility plant, at original cost
Electric $ 11,678,164 $ 11,588,344 $ 11,344,951
Gas 1,665,996 1,642,231 1,560,433
Steam 538,924 536,672 513,345
General 1,160,419 1,152,001 1,108,114
------------ ------------ ------------
Total 15,043,503 14,919,248 14,526,843
Less: Accumulated depreciation 4,371,046 4,285,732 4,125,708
------------ ------------ ------------
Net 10,672,457 10,633,516 10,401,135
Construction work in progress 309,315 332,333 338,666
Nuclear fuel assemblies and components,
less accumulated amortization 100,720 101,461 78,896
------------ ------------ ------------
Net utility plant 11,082,492 11,067,310 10,818,697
------------ ------------ ------------
Current assets
Cash and temporary cash investments 94,903 106,882 103,232
Accounts receivable - customers, less
allowance for uncollectible accounts
of $21,535, $21,600 and $22,128 570,595 544,004 586,578
Other receivables 36,497 42,056 44,789
Regulatory accounts receivable 60,954 45,397 (883)
Fuel, at average cost 45,946 64,709 41,533
Gas in storage, at average cost 22,660 44,979 8,453
Materials and supplies, at average cost 203,675 204,801 219,421
Prepayments 170,852 64,492 171,808
Other current assets 15,453 15,167 14,619
------------ ------------ ------------
Total current assets 1,221,535 1,132,487 1,189,550
------------ ------------ ------------
Investments and nonutility property 193,894 177,224 157,422
------------ ------------ ------------
Deferred charges
Enlightened Energy program costs 128,204 133,718 134,261
Unamortized debt expense 128,234 130,786 131,244
Recoverable fuel costs 52,389 101,462 63,300
Power contract termination costs 46,848 58,560 93,696
Other deferred charges 289,795 271,356 264,953
------------ ------------ ------------
Total deferred charges 645,470 695,882 687,454
------------ ------------ ------------
Regulatory asset-future federal
income taxes 967,977 984,282 1,029,062
------------ ------------ ------------
Total $ 14,111,368 $ 14,057,185 $ 13,882,185
============ ============ ============
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31,1997, DECEMBER 31, 1996 AND MARCH 31, 1996
As At
March 31, 1997 Dec. 31, 1996 March 31, 1996
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock, authorized 340,000,000 shares;
outstanding 235,008,078 shares, 234,993,596
shares and 234,968,376 shares $ 1,478,647 $ 1,478,536 $ 1,478,341
Capital stock expense (34,831) (34,903) (35,036)
Retained earnings 4,322,562 4,283,935 4,144,779
------------ ------------ ------------
Total common shareholders' equity 5,766,378 5,727,568 5,588,084
------------ ------------ ------------
Preferred stock
Subject to mandatory redemption
7.20% Series I 47,500 47,500 47,500
6-1/8% Series J 37,050 37,050 37,050
------------ ------------ ------------
Total subject to mandatory
redemption 84,550 84,550 84,550
------------ ------------ ------------
Other preferred stock
$ 5 Cumulative Preferred 175,000 175,000 175,000
5-3/4% Series A 7,061 7,061 7,061
5-1/4% Series B 13,844 13,844 13,844
4.65% Series C 15,330 15,330 15,330
4.65% Series D 22,233 22,233 22,233
6% Convertible Series B 4,519 4,630 4,824
------------ ------------ ------------
Total other preferred stock 237,987 238,098 238,292
------------ ------------ ------------
Total preferred stock 322,537 322,648 322,842
------------ ------------ ------------
Long-term debt 4,239,066 4,238,622 4,189,242
------------ ------------ ------------
Total capitalization 10,327,981 10,288,838 10,100,168
------------ ------------ ------------
Noncurrent liabilities
Obligations under capital leases 41,958 42,661 44,610
Other noncurrent liabilities 81,800 80,499 78,941
------------ ------------ ------------
Total noncurrent liabilities 123,758 123,160 123,551
------------ ------------ ------------
Current liabilities
Long-term debt due within one year 103,762 106,256 82,812
Accounts payable 352,461 431,115 384,561
Customer deposits 159,176 159,616 157,856
Accrued taxes 109,052 27,342 94,035
Accrued interest 67,706 83,090 71,544
Accrued wages 78,300 80,225 75,602
Other current liabilities 145,787 147,968 163,695
------------ ------------ ------------
Total current liabilities 1,016,244 1,035,612 1,030,105
------------ ------------ ------------
Provisions related to future federal income
taxes and other deferred credits
Accumulated deferred federal income tax 2,299,747 2,289,092 2,330,716
Accumulated deferred investment tax credits 170,290 172,510 179,140
Other deferred credits 173,348 147,973 118,505
------------ ------------ ------------
Total deferred credits 2,643,385 2,609,575 2,628,361
------------ ------------ ------------
Total $ 14,111,368 $ 14,057,185 $ 13,882,185
============ ============ ============
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
--------------------------------------------------
1997 1996
---- ----
(Thousands of Dollars)
Operating revenues
Electric $ 1,268,950 $ 1,286,268
Gas 455,020 406,864
Steam 162,178 174,233
----------- -----------
Total operating revenues 1,886,148 1,867,365
Operating expenses
Purchased power 352,708 303,999
Fuel 151,354 183,888
Gas purchased for resale 222,712 180,840
Other operations 276,780 277,311
Maintenance 114,222 125,025
Depreciation and amortization 123,752 132,565(A)
Taxes, other than federal income tax 304,962 306,036
Federal income tax 92,140 105,040
----------- -----------
Total operating expenses 1,638,630 1,614,704
Operating income 247,518 252,661
Other income (deductions)
Investment income 844 1,438
Allowance for equity funds used during construction 1,800 513
Other income less miscellaneous deductions (1,220) (677)
Federal income tax (50) (420)
----------- -----------
Total other income 1,374 854
----------- -----------
Income before interest charges 248,892 253,515
Interest on long-term debt 78,752 74,369
Other interest 4,414 4,852
Allowance for borrowed funds used during construction (882) (241)
----------- -----------
Net interest charges 82,284 78,980
----------- -----------
Net income 166,608 174,535
Preferred stock dividend requirements (4,604) (6,035)
Gain on refunding of preferred stock - 13,943(A)
----------- -----------
Net income for common stock $ 162,004 $ 182,443
=========== ===========
Common shares outstanding - average (000) 235,001 234,963
Earnings per share $ .69 $ .78
========= =========
Dividends declared per share of common stock $ .525 $ .52
========== =========
Sales
Electric (Thousands of kilowatthours)
Con Edison customers 8,931,868 9,173,421
Delivery service to NYPA and others 2,221,333 2,319,834
Service for municipal agencies 214,061 107,455
---------- ----------
Total sales in service territory 11,367,262 11,600,710
Off-system sales 311,778(B) 160,703
Gas (dekatherms)
Firm 39,242,462 44,842,439
Off-peak firm/interruptible 8,204,203 6,854,310
---------- ----------
Total sales to Con Edison customers 47,446,665 51,696,749
Transportation of customer-owned gas 4,449,030 638,990
Off-system sales 3,505,393 3,848,951
---------- ----------
Total sales and transportation 55,401,088 56,184,690
Steam (Thousands of pounds) 10,140,688 11,864,687
(A) The gain from the preferred stock refunding was offset by an additional
provision for depreciation.
(B) Includes 63,800 thousands of kWh subsequently purchased by the Company for
sale to its customers.
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED MARCH 31, 1997 AND 1996
---------------------------------------------------
1997 1996
---- ----
(Thousands of Dollars)
Operating revenues
Electric $ 5,523,800 $ 5,452,368
Gas 1,063,225 901,264
Steam 391,494 381,844
----------- -----------
Total operating revenues 6,978,519 6,735,476
Operating expenses
Purchased power 1,321,564 1,163,538
Fuel 540,741 574,146
Gas purchased for resale 460,143 329,591
Other operations 1,162,805 1,134,934
Maintenance 447,834 505,638
Depreciation and amortization 487,599 479,182(A)
Taxes, other than federal income tax 1,165,125 1,150,502
Federal income tax 384,260 383,960
----------- -----------
Total operating expenses 5,970,071 5,721,491
Operating income 1,008,448 1,013,985
Other income (deductions)
Investment income 7,734 17,049
Allowance for equity funds used during construction 4,755 2,763
Other income less miscellaneous deductions (9,293) (8,424)
Federal income tax 1,340 (1,010)
----------- -----------
Total other income 4,536 10,378
----------- -----------
Income before interest charges 1,012,984 1,024,363
Interest on long-term debt 312,203 301,729
Other interest 16,893 26,604
Allowance for borrowed funds used during construction (2,270) (1,326)
----------- -----------
Net interest charges 326,826 327,007
Net income 686,158 697,356
Preferred stock dividend requirements (18,429) (32,706)
Gain on refunding of preferred stock - 13,943(A)
----------- -----------
Net income for common stock $ 667,729 $ 678,593
=========== ===========
Common shares outstanding - average (000) 234,987 234,943
Earnings per share $ 2.84 $ 2.89
========= =========
Dividends declared per share of common stock $ 2.085 $ 2.05
========== =========
Sales
Electric (Thousands of kilowatthours)
Con Edison customers 36,962,401 37,293,488
Delivery service to NYPA and others 8,718,372 8,919,160
Service for municipal agencies 723,899 457,020
----------- -----------
Total sales in service territory 46,404,672 46,669,668
Off-system sales (B) 4,068,429 4,343,726
Gas (dekatherms)
Firm 93,180,134 96,745,941
Off-peak firm/interruptible 21,656,329 16,997,841
----------- -----------
Total sales to Con Edison customers 114,836,463 113,743,782
Transportation of customer-owned gas 13,788,145 25,353,567
Off-system sales 10,949,867 7,135,839
----------- -----------
Total sales and transportation 139,574,475 146,233,188
Steam (Thousands of pounds) 28,271,763 30,979,774
(A) The gain from the preferred stock refunding was offset by an additional
provision for depreciation.
(B) Includes 1,617,564 and 2,243,461 thousands of kWh, respectively,
subsequently purchased by the Company for sale to its customers.
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
(Thousands of Dollars)
Operating activities
Net income $ 166,608 $ 174,535
Principal non-cash charges (credits) to income
Depreciation and amortization 123,752 132,565
Deferred recoverable fuel costs 49,073 (3,846)
Federal income tax deferred 24,310 44,890
Common equity component of allowance
for funds used during construction (1,749) (485)
Other non-cash charges (56) (14,327)
Changes in assets and liabilities
Accounts receivable - customers, less
allowance for uncollectibles (26,591) (89,363)
Regulatory accounts receivable (15,557) (5,598)
Materials and supplies, including fuel
and gas in storage 42,208 18,577
Prepayments, other receivables and
other current assets (101,087) (104,384)
Enlightened Energy program costs 5,514 10,021
Power contract termination costs 11,620 (2,601)
Accounts payable (78,654) (36,291)
Accrued income taxes 68,364 61,054
Other - net (7,971) 4,289
--------- ---------
Net cash flows from operating activities 259,784 189,036
--------- ---------
Investing activities including construction
Construction expenditures (127,723) (130,888)
Nuclear fuel expenditures (3,149) (655)
Contributions to nuclear decommissioning trust (12,127) (12,127)
Common equity component of allowance
for funds used during construction 1,749 485
--------- ---------
Net cash flows from investing activities
including construction (141,250) (143,185)
--------- ---------
Financing activities including dividends
Issuance of long-term debt - 275,000
Retirement of long-term debt (2,494) (103,206)
Advance refunding of preferred stock - (316,982)
Issuance and refunding costs (36) (8,652)
Common stock dividends (123,377) (122,182)
Preferred stock dividends (4,606) (8,889)
--------- ---------
Net cash flows from financing activities
including dividends (130,513) (284,911)
--------- ---------
Net decrease in cash and temporary
cash investments (11,979) (239,060)
Cash and temporary cash investments
at January 1 106,882 342,292
--------- ---------
Cash and temporary cash investments
at March 31 $ 94,903 $ 103,232
========= =========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 91,181 $ 93,854
Income taxes - -
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
---- ----
(Thousands of Dollars)
Operating activities
Net income $ 686,158 $ 697,356
Principal non-cash charges (credits) to income
Depreciation and amortization 487,599 479,184
Deferred recoverable fuel costs 10,911 (61,665)
Federal income tax deferred 20,020 27,500
Common equity component of allowance
for funds used during construction (4,538) (2,605)
Other non-cash charges 23,873 12,063
Changes in assets and liabilities
Accounts receivable - customers, less
allowance for uncollectibles 15,983 (114,753)
Regulatory accounts receivable (61,837) 34,514
Materials and supplies, including fuel
and gas in storage (2,874) 52,173
Prepayments, other receivables and
other current assets 8,414 18,266
Enlightened Energy program costs 6,057 36,487
Power contract termination costs 45,048 57,964
Federal income tax refund - (52,937)
Accounts payable (32,100) 56,500
Accrued income taxes 17,129 20,685
Other - net (41,758) 58,725
Net cash flows from operating activities 1,178,085 1,319,457
Investing activities including construction
Construction expenditures (672,068) (679,634)
Nuclear fuel expenditures (51,199) (10,922)
Contributions to nuclear decommissioning trust (21,301) (28,103)
Common equity component of allowance
for funds used during construction 4,538 2,605
Net cash flows from investing activities
including construction (740,030) (716,054)
Financing activities including dividends
Issuance of long-term debt 250,000 503,285
Retirement of long-term debt (82,812) (111,171)
Advance refunding of preferred stock - (316,982)
Advance refunding of long-term debt (95,329) (155,699)
Issuance and refunding costs (9,864) (13,786)
Common stock dividends (489,951) (481,639)
Preferred stock dividends (18,428) (35,564)
Net cash flows from financing activities
including dividends (446,384) (611,556)
Net decrease in cash and temporary
cash investments (8,329) (8,153)
Cash and temporary cash investments
at beginning of period 103,232 111,385
Cash and temporary cash investments
at March 31 $ 94,903 $ 103,232
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 306,606 $ 318,308
Income taxes 346,755 344,754
The accompanying note is an integral part of these financial statements.
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Contingency Note
Indian Point. Nuclear generating units similar in design to the Company's Indian
Point 2 unit have experienced problems that have required steam generator
replacement. Inspections of the Indian Point 2 steam generators since 1976 have
revealed various problems, some of which appear to have been arrested, but the
remaining service life of the steam generators is uncertain and may be shorter
than the unit's life. The projected service life of the steam generators is
reassessed periodically in the light of the inspections made during scheduled
outages of the unit. Based on the latest available data and current Nuclear
Regulatory Commission criteria, the Company estimates that steam generator
replacement will not be required before 1999, and possibly not until some years
later. To avoid procurement delays in the event replacement is necessary, the
Company purchased replacement steam generators, which are stored at the site. If
replacement of the steam generators is required, such replacement is presently
estimated (in 1996 dollars) to require additional expenditures of approximately
$110 million (exclusive of replacement power costs) and an outage of
approximately four months. However, securing necessary permits and approvals or
other factors could require a substantially longer outage if steam generator
replacement is required on short notice.
Nuclear Insurance. The insurance policies covering the Company's nuclear
facilities for property damage, excess property damage, and outage costs permit
assessments under certain conditions to cover insurers' losses. As of March 31,
1997, the highest amount which could be assessed for losses during the current
policy year under all of the policies was $29 million. While assessments may
also be made for losses in certain prior years, the Company is not aware of any
losses in such years which it believes are likely to result in an assessment.
Under certain circumstances, in the event of nuclear incidents at facilities
covered by the federal government's third-party liability indemnification
program, the Company could be assessed up to $79.3 million per incident of which
not more than $10 million may be assessed in any one year. The per-incident
limit is to be adjusted for inflation not later than 1998 and not less than once
every five years thereafter.
The Company participates in an insurance program covering liabilities for
injuries to certain workers in the nuclear power industry. In the event of such
injuries, the Company is subject to assessment up to an estimated maximum of
approximately $3.1 million.
Environmental Matters. The normal course of the Company's operations necessarily
involves activities and substances that expose the Company to potential
liabilities under federal, state and local laws protecting the environment. Such
liabilities 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. Sources of such potential liabilities
include (but are not limited to) the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("Superfund"), a 1994
settlement with the New York State Department of Environmental Conservation
(DEC), asbestos, and electric and magnetic fields (EMF).
- 10 -
Superfund. By its terms Superfund imposes joint and several strict liability,
regardless of fault, upon generators of hazardous substances for resulting
removal and remedial costs and environmental damages. The Company has received
process or notice concerning possible claims under Superfund or similar state
statutes relating to a number of sites at which it is alleged that hazardous
substances generated by the Company (and, in most instances, a large number of
other potentially responsible parties) were deposited. Estimates of the
investigative, removal, remedial and environmental damage costs (if any) the
Company will be obligated to pay with respect to each of these sites range from
extremely preliminary to highly refined. Based on these estimates, the Company
had accrued a liability at March 31, 1997 of approximately $22.2 million. There
will be additional costs with respect to these and possibly other sites, the
materiality of which is not presently determinable.
DEC Settlement. In 1994 the Company agreed to a consent order settling a civil
administrative proceeding instituted by the DEC alleging environmental
violations by the Company. Pursuant to the consent order, the Company has
conducted an environmental management systems evaluation and is conducting an
environmental compliance audit. The Company also must implement "best management
practices" plans for certain facilities and undertake a remediation program at
certain sites. At March 31, 1997, the Company had an accrued liability of $17.3
million for these sites. Expenditures for environment-related projects in the
five years 1997-2001, including expenditures to comply with the consent order,
are currently estimated at $147 million. There will be additional costs,
including costs arising out of the compliance audit, the materiality of which is
not presently determinable.
Asbestos Claims. Suits have been brought in New York State and federal courts
against the Company and many other defendants, wherein several hundred
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 the
Company, 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 is
the opinion of the Company that these suits will not have a material adverse
effect on the Company's financial position.
EMF. Electric and magnetic fields are found wherever electricity is used. The
Company is the defendant in several suits claiming property damage or personal
injury allegedly resulting from EMF. In the event that a causal relationship
between EMF and adverse health effects is established, or independently of any
such causal determination, in the event of adverse developments in related legal
or public policy doctrines, there could be a material adverse effect on the
electric utility industry, including the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis relates to the interim financial
statements appearing in this report and should be read in conjunction with
Management's Discussion and Analysis appearing in Item 7 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 (File No. 1-1217).
Reference is made to the note to the financial statements in Item 1 of this
report, which note is incorporated herein by reference.
This report includes forward-looking statements, which are statements of
future expectation and not facts. Words such as "estimates," "expects,"
"anticipates," "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, changes in economic conditions, changes
in historical weather patterns, changes in laws, regulations or regulatory
policies, developments in legal or public policy doctrines, technological
developments and other presently unknown or unforeseen factors.
LIQUIDITY AND CAPITAL RESOURCES
Cash and temporary cash investments were $94.9 million at March 31, 1997
compared with $106.9 million at December 31, 1996 and $103.2 million at March
31, 1996. Net cash flows from operating activities in the first quarter of 1997
were favorably affected by the recovery from customers of previously deferred
costs for fuel, partially offset by lower operating income. The Company's cash
balances also reflect, among other things, the timing and amounts of external
financing.
The Company borrowed from banks at various times during the first quarter
of 1997 at prevailing market rates. The highest amount outstanding was $165
million. The borrowings were repaid during the quarter.
Customer accounts receivable, less allowance for uncollectible accounts,
amounted to $570.6 million at March 31, 1997 compared with $544.0 million at
December 31, 1996 and $586.6 million at March 31, 1996. In terms of equivalent
days of revenue outstanding (ENDRO), these amounts represented 28.6, 28.6 and
28.7 days, respectively.
The regulatory accounts receivable balances of $61.0 million at March 31,
1997 and $45.4 million at December 31, 1996 represent amounts to be recovered
from customers. See, however, "PSC Settlement Agreement," below. The regulatory
accounts receivable negative balance of $0.9 million at March 31, 1996
represented an amount to be refunded to customers.
- 12 -
The changes in regulatory accounts receivable during the first three
months of 1997 were as follows:
1997
Balance Recoveries Balance
Dec. 31, 1997 from March 31,
(Millions of Dollars) 1996* Accruals* Customers** 1997*
Modified ERAM $ .4 $ 18.0 $ 9.4 $ 27.8
Electric Incentives
Enlightened Energy program 29.1 - (4.9) 24.2
Customer service 5.5 1.4 (1.5) 5.4
Fuel and purchased power 3.5 .4 (4.0) (.1)
Reliability penalty - (.9) - (.9)
Gas Incentives
System improvement 4.9 - (1.6) 3.3
Customer service 2.0 - (.7) 1.3
Total $ 45.4 $ 18.9 $ (3.3) $ 61.0
- ------------
* Negative amounts are refundable; positive amounts recoverable.
**Negative amounts were recovered; positive amounts refunded.
In January 1997 the Company made a $225 million semi-annual payment to New
York City for property taxes. The prepayments balance at March 31, 1997 includes
the unamortized portion ($113.6 million) of this payment.
Interest coverage under the SEC formula for the 12 months ended March 31,
1997 was 4.03 times, compared with 4.18 times for the year 1996 and 4.11 times
for the 12 months ended March 31, 1996. The decline in interest coverage from
year-end 1996 reflects a lower level of pre-tax earnings and higher interest
charges.
1995 Electric Rate Agreement
In April 1995 the New York Public Service Commission (PSC) approved a
three-year electric rate agreement effective April 1, 1995. See, however, "PSC
Settlement Agreement," below.
For details of the 1995 electric rate agreement, including the electric
revenue adjustment and revenue per customer mechanisms (Modified ERAM), see the
Management's Discussion and Analysis appearing in Item 7 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, under the heading
"Liquidity and Capital Resources - 1995 Electric Rate Agreement."
- 13 -
For the second rate year of the 1995 electric rate agreement, the 12
months ended March 31, 1997, the Company's actual rate of return on electric
common equity, excluding incentives, exceeded the sharing threshold of 10.81
percent, principally due to increased productivity and earnings under the
revenue per customer provisions of the Modified ERAM. A provision for excess
earnings of $26.4 million ($18.0 million in 1996 and $8.4 million in the first
quarter of 1997) was set aside for the future benefit of customers.
PSC Settlement Agreement
On March 13, 1997, the Company and the PSC staff entered into a settlement
agreement (the Settlement Agreement) with respect to the PSC's Competitive
Opportunities proceeding. For details concerning the Settlement Agreement, see
the Management's Discussion and Analysis appearing in Item 7 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, under the
heading "Liquidity and Capital Resources - PSC Settlement Agreement."
The Settlement Agreement, which is subject to PSC approval, includes a
rate plan for the five-year period beginning April 1, 1997 which supersedes the
provisions of the 1995 electric rate agreement applicable to the 12-month period
beginning April 1, 1997. The 1995 electric rate agreement will continue in
effect, in accordance with its terms, until the PSC approves the Settlement
Agreement, at which time the Company expects that the Settlement Agreement will
be given effect retroactive to April 1, 1997. A PSC order with respect to the
Settlement Agreement is expected by mid-1997.
The Office of the Chief Accountant of the Securities and Exchange
Commission is considering whether utilities which are subject to plans that,
like the Settlement Agreement, use a transition period to recover stranded costs
must discontinue the use of Statement of Financial Accounting Standards (SFAS)
No. 71, "Accounting for the Effects of Certain Types of Regulation," for the
affected portion of their businesses and apply the standards in SFAS No. 101,
"Regulated Enterprises-Accounting for the Discontinuation of Application of FASB
Statement No. 71." The Company understands that the Emerging Issues Task Force
of the Financial Accounting Standards Board will also consider this issue. The
Company believes that the Settlement Agreement will not adversely affect its
eligibility to continue to apply SFAS No. 71. If such eligibility were adversely
affected, a material write-down of assets, the amount of which is not presently
determinable, could be required.
Gas and Steam Rate Increases
For details of the Company's gas and steam rate agreements, see
Management's Discussion and Analysis appearing in Item 7 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, under the heading
"Liquidity and Capital Resources - Gas and Steam Rate Agreements."
- 14 -
In April 1997 the PSC staff filed its position in the steam rate
proceeding initiated by the Company's November 1996 steam rate filing. The
Company presented justification for a rate increase of $44 million but proposed
as an alternative a four-year rate plan that would provide annual rate increases
of $16.6 million. The PSC staff recommended that the Company's proposal for a
multi-year rate plan be rejected and that the one-year revenue requirement be
reduced from $44 million to $13 million due principally to a disallowance of the
Company's request for increased depreciation expense and return on equity lower
than that requested.
Competition and Industry Restructuring
In recent years federal and New York State initiatives have promoted the
development of competition in the sale of electricity and gas. For information
about these initiatives, see Management's Discussion and Analysis appearing in
Item 7 of the Company's Annual Report on Form 10-K for the year ended December
31, 1996, under the heading "Liquidity and Capital Resources Competition and
Industry Restructuring."
Environmental Claims and Other Contingencies
Reference is made to the note to the financial statements included in this
report for information concerning potential liabilities of the Company arising
from the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("Superfund"), from claims relating to alleged exposure to
asbestos, and from certain other contingencies to which the Company is subject.
RESULTS OF OPERATIONS
Net income for common stock for the first quarter and 12 months ended
March 31, 1997 was lower than in the corresponding 1996 periods by $20.4 million
($.09 a share) and $10.9 million ($.05 a share), respectively, due primarily to
the provisions of the 1995 electric rate agreement and lower steam net revenues
during milder than normal winter weather in 1997.
In reviewing period-to-period comparisons, it should be noted that not all
changes in sales volume affected operating revenues. Pursuant to the Modified
ERAM most of the variations in electric sales from the level used in setting
rates are subject to reconciliation and deferral for refund to or recovery from
customers and therefore do not affect earnings. Under the Settlement Agreement,
which is subject to PSC approval, the Modified ERAM will no longer apply,
effective April 1, l997. Under the current gas rate agreement, most
weather-related variations in gas sales likewise do not affect earnings.
- 15 -
Increases (Decreases)
Three Months Ended Twelve Months Ended
March 31, 1997 March 31, 1997
Compared With Compared With
Three Months Ended Twelve Months Ended
March 31, 1996 March 31, 1996
Amount Percent Amount Percent
(Amounts in Millions)
Operating revenues $ 18.8 1.0% $ 243.0 3.6%
Purchased power-electric and steam 48.7 16.0 158.0 13.6
Fuel - electric and steam (32.5) (17.7) (33.4) (5.8)
Gas purchased for resale 41.9 23.2 130.5 39.6
Operating revenues less purchased
power, fuel and gas purchased for
resale (Net revenues) (39.3) (3.3) (12.1) (0.3)
Other operations and maintenance (11.4) (2.8) (29.9) (1.8)
Depreciation and amortization (8.8) (6.6) 8.4 1.8
Taxes, other than federal income tax (1.1) (0.4) 14.6 1.3
Federal income tax (12.9) (12.3) 0.3 0.1
Operating income (5.1) (2.0) (5.5) (0.5)
Other income less deductions
and related federal income tax 0.5 60.9 (5.9) (56.3)
Interest charges 3.3 4.2 (0.2) (0.1)
Net income (7.9) (4.5) (11.2) (1.6)
Preferred stock dividend requirements 1.4 23.7 14.2 43.7
Gain on refunding of preferred stock (13.9) Large (13.9) Large
Net income for common stock $ (20.4) (11.2)% $ (10.9) (1.6)%
First Quarter 1997
Compared with
First Quarter 1996
Net revenues (operating revenues less purchased power, fuel and gas
purchased for resale) decreased $39.3 million in the first quarter of 1997
compared with the 1996 period. Electric and steam net revenues decreased $34.6
million and $11.0 million, respectively. Gas net revenues increased $6.3
million.
Electric net revenues in the 1997 period were lower than in the
corresponding 1996 period, due primarily to a lower allowed return on common
equity and a lower level of incentive opportunities under the 1995 electric rate
agreement. Electric net revenues for the first quarter of 1997 were increased by
$14.0 million under the revenue per customer provisions of the Modified ERAM,
compared with $6.8 million for the 1996 period. Electric net revenues for the
first quarter of 1997 include $.9 million, compared with $10.4 million for the
1996 period, for incentives earned under the provisions of the 1995 electric
rate agreement.
- 16 -
Gas net revenues in the 1997 period reflect increased retention of net
revenues from interruptible sales. Steam net revenues in the 1997 period reflect
milder than normal winter weather, offset in part by a rate increase effective
October 1996. There is no weather normalization provision for steam revenues.
Electric sales, excluding off-system sales, in the first quarter of 1997
compared with the 1996 period were:
1st Quarter 1st Quarter Percent
Description 1997 1996 Variation Variation
(Millions of Kwhrs.)
Residential/Religious 2,642 2,710 (68) (2.5)%
Commercial/Industrial 6,142 6,311 (169) (2.7)%
Other 148 153 (5) (3.3)%
Total Con Edison Customers 8,932 9,174 (242) (2.6)%
NYPA, Municipal Agency
and Other Sales 2,435 2,427 8 .3 %
Total Service Area 11,367 11,601 (234) (2.0)%
For the first quarter of 1997, firm gas sales volume decreased 12.5
percent and steam sales volume decreased 14.5 percent compared with the 1996
period.
The decreases in electric, gas and steam sales volumes for the 1997 period
were due primarily to milder than normal 1997 winter weather compared with
colder than normal 1996 winter weather. The first quarter of 1997 was almost 17
percent warmer than the 1996 period. After adjustment for comparability in both
periods, primarily for variations in weather, electric sales volume in the
Company's service territory increased 0.6 percent in the first quarter of 1997,
firm gas sales volume decreased 0.4 percent and steam sales volume decreased 0.3
percent.
Electric fuel costs decreased $19.7 million in the 1997 period due to
decreased generation of electricity by the Company. Electric purchased power
costs increased in the first quarter of 1997 by $36.9 million over the 1996
period due to increased unit purchases. During the 1997 period the Company
purchased 69 percent of its electric energy requirements, compared with 58
percent for the 1996 period. The variations in fuel and purchased power costs
also reflect the availability of the Company's Indian Point Unit 2 nuclear
generating station, which was out of service for part of the 1997 period but was
operating during most of the 1996 period. Steam fuel costs decreased $12.8
million due to decreased generation of steam by the Company. Steam purchased
power costs were $11.8 million in the 1997 period; the Company did not purchase
steam in the 1996 period. Gas purchased for resale increased $41.9 million
reflecting a higher unit cost of purchased gas, partially offset by lower
sendout.
Other operations and maintenance expenses decreased $11.4 million for the
first quarter of 1997 compared with the 1996 period, due primarily to lower
distribution expenses, reflecting the milder than normal winter.
- 17 -
Depreciation and amortization decreased $8.8 million in the first quarter
of 1997; an additional provision for depreciation expense of $13.9 million was
recorded in the 1996 period to offset a gain on refunding of preferred stock.
Federal income tax decreased $12.9 million for the quarter reflecting
lower pre-tax income.
Interest on long-term debt for the quarter increased $4.4 million,
principally as a result of the issuance in March 1996 of subordinated debentures
to refund preferred stock.
Twelve Months Ended March 31, 1997
Compared with
Twelve Months Ended March 31, 1996
Net revenues (operating revenues less purchased power, fuel and gas
purchased for resale) decreased $12.1 million in the 12 months ended March 31,
1997 compared with the 1996 period. Electric and steam net revenues decreased
$32.8 million and $10.7 million, respectively. Gas net revenues increased $31.4
million.
Electric net revenues in the 1997 period were lower than in the
corresponding 1996 period, primarily due to a lower allowed return on common
equity under the 1995 electric rate agreement. Electric net revenues for the 12
months ended March 31, 1997 were increased by $66.8 million under the revenue
per customer provisions of the Modified ERAM, compared with $20.1 million for
the 1996 period. Electric net revenues for the 12 months ended March 31, 1997
include $45.8 million, compared with $46.8 million for the 1996 period, for
incentives earned under the 1995 electric rate agreement.
Under the accounting provision of the 1995 electric rate agreement for
Indian Point Unit 2 refueling and maintenance outages, electric net revenues for
the 12 months ended March 31, 1997 were reduced by $22.5 million; related
expenses decreased in like amount.
Gas net revenues in the 1997 period reflect the October 1995 rate increase
and retention of net revenues from interruptible sales. Gas net revenues for the
1997 and 1996 periods include $9.2 million and $7.4 million, respectively, for
incentives earned under the 1994 gas rate agreement, related to achievement of
gas system improvement targets and to customer service performance. Steam net
revenues in the 1997 period reflect milder than normal winter weather, offset in
part by a rate increase in October 1996.
- 18 -
Electric sales, excluding off-system sales, for the 12 months ended March
31, 1997 compared with the 12 months ended March 31, 1996 were:
12 Months 12 Months
Ended Ended
March 31, March 31, Percent
Description 1997 1996 Variation Variation
(Millions of Kwhrs.)
Residential/Religious 10,800 10,988 (188) (1.7)%
Commercial/Industrial 25,557 25,685 (128) (0.5)%
Other 606 621 (15) (2.4)%
Total Con Edison Customers 36,963 37,294 (331) (0.9)%
NYPA, Municipal Agency
and Other Sales 9,442 9,376 66 0.7 %
Total Service Area 46,405 46,670 (265) (0.6)%
For the 12 months ended March 31, 1997, firm gas sales volume decreased
3.7 percent and steam sales volume decreased 8.7 percent compared with the 1996
period.
The decreases in electric, gas and steam sales volumes for the 1997 period
are due primarily to milder than normal 1997 winter weather compared with colder
than normal 1996 winter weather. After adjustment for comparability in both
periods, primarily for variations in weather, electric sales volume in the
Company's service territory in the 12 months ended March 31, 1997 increased 0.9
percent. Similarly adjusted, firm gas sales volume increased 0.5 percent and
steam sales volume decreased 1.3 percent.
Electric fuel costs decreased $38.2 million in the 1997 period due to
decreased generation of electricity by the Company. Purchased power costs
increased in the 1997 period by $142.4 million over the 1996 period reflecting
increased unit purchases and unit costs. During the 1997 period, the Company
purchased 62 percent of its electric energy requirements, compared with 58
percent for the 1996 period. The variations in fuel and purchased power costs
also reflect the operation of the Company's Indian Point Unit 2 nuclear
generating station, which had higher availability in the 1997 period than in the
1996 period. Steam fuel costs increased $4.8 million due to a higher unit cost
of fuel, partially offset by decreased generation of steam by the Company. Steam
purchased power costs were $15.6 million in the 1997 period; the Company did not
purchase steam in the 1996 period. Gas purchased for resale increased $130.5
million, reflecting a higher unit cost of purchased gas, partially offset by
lower sendout.
- 19 -
Other operations and maintenance expenses decreased $29.9 million in the 12
months ended March 31, 1997 compared with the 1996 period, due to decreases in:
(1) the amortization of previously deferred Enlightened Energy program costs,
reflecting lower program costs; (2) electric production expenses (principally
due to the Indian Point Unit 2 refueling and maintenance outage in the 1996
period); and (3) distribution expenses. These decreases were partially offset by
higher pension and other postretirement benefit expenses (due to changes in
actuarial assumptions).
Depreciation and amortization increased $8.4 million in the 1997 period
due principally to higher plant balances.
Taxes, other than federal income tax, increased $14.6 million in the 12
months ended March 31, 1997 compared with the 1996 period, reflecting primarily
increased property taxes.
Investment income decreased $9.3 million in the 1997 period due primarily
to lower investment balances.
Interest on long-term debt for the 12-month period ended March 31, 1997
increased $10.5 million, principally as a result of the issuance in March 1996
of subordinated debentures to refund preferred stock.
- 20 -
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 12 Statement of computation of ratio of earnings to fixed charges
for the twelve-month periods ended March 31, 1997 and 1996.
Exhibit 27 Financial Data Schedule. (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.)
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated March 13, 1997,
reporting (under Item 5) matters discussed under "Liquidity and Capital
Resources - Competition and Industry Restructuring and PSC Settlement Agreement"
in Item 7 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996. As to these matters, see also the discussion under "Liquidity
and Capital Resources - PSC Settlement Agreement" in Item 2 of this report. The
Company filed no other Current Reports on Form 8-K during the quarter ended
March 31, 1997.
- 21 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.
DATE: May 5, 1997 Joan S. Freilich
Joan S. Freilich
Senior Vice President,
Chief Financial Officer and
Duly Authorized Officer
DATE: May 5, 1997 John F. Cioffi
John F. Cioffi
Vice President, Controller, and
Chief Accounting Officer
INDEX TO EXHIBITS
SEQUENTIAL PAGE
EXHIBIT NUMBER AT WHICH
NO. DESCRIPTION EXHIBIT BEGINS
12 Statement of computation of ratio of earnings to fixed
charges for the twelve-month periods ended March 31, 1997
and 1996.
27 Financial Data Schedule. (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.)
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS ENDED
(Thousands of Dollars)
MARCH MARCH
1997 1996
Earnings
Net Income $ 667,729 $ 697,356
Federal Income Tax 362,900 357,470
Federal Income Tax Deferred 28,870 36,750
Investment Tax Credits Deferred (8,850) (9,250)
Total Earnings Before
Federal Income Tax 1,050,649 1,082,326
Fixed Charges* 347,154 347,929
Total Earnings Before Federal
Income Tax and Fixed Charges $1,397,803 $1,430,255
*Fixed Charges
Interest on Long-Term Debt $ 300,781 $ 287,567
Amortization of Debt Discount,
Premium and Expenses 11,421 14,162
Interest Component of Rentals 18,058 19,596
Other Interest 16,894 26,604
Total Fixed Charges $ 347,154 $ 347,929
Ratio of Earnings to Fixed Charges 4.03 4.11
UT
