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 SEPTEMBER 30, 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 September 30, 1997, the Registrant had
outstanding 235,033,168 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 5-7
Consolidated Statements of Cash Flows 8-9
Notes to Financial Statements 10-14
ITEM 2. Management's Discussion and Analysis 15-26
of Financial Condition and Results of
Operations
-------------------------
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 SEPTEMBER 30, 1997, DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
As At
Sept. 30, 1997 Dec. 31, 1996 Sept.30, 1996
(Thousands of Dollars)
ASSETS
Utility plant, at original cost
Electric $11,791,029 $11,588,344 $11,541,568
Gas 1,713,438 1,642,231 1,609,520
Steam 566,576 536,672 530,761
General 1,194,314 1,152,001 1,138,055
Total 15,265,357 14,919,248 14,819,904
Less: Accumulated depreciation 4,493,341 4,285,732 4,286,812
Net 10,772,016 10,633,516 10,533,092
Construction work in progress 278,244 332,333 342,496
Nuclear fuel assemblies and components,
less accumulated amortization 99,498 101,461 62,725
Net utility plant 11,149,758 11,067,310 10,938,313
Current assets
Cash and temporary cash investments 269,866 106,882 117,279
Accounts receivable - customers, less
allowance for uncollectible accounts
of $21,674, $21,600 and $21,500 543,821 544,004 565,713
Other receivables 62,921 42,056 38,713
Regulatory accounts receivable 10,013 45,397 33,501
Fuel, at average cost 41,894 64,709 42,193
Gas in storage, at average cost 49,099 44,979 42,874
Materials and supplies, at average cost 198,667 204,801 213,687
Prepayments 201,729 64,492 193,484
Other current assets 16,021 15,167 14,915
Total current assets 1,394,031 1,132,487 1,262,359
Investments and nonutility property 230,789 177,224 170,025
Deferred charges
Enlightened Energy program costs 112,164 133,718 127,307
Unamortized debt expense 123,273 130,786 133,348
Recoverable fuel costs 57,399 101,462 31,228
Power contract termination costs 54,330 58,560 70,272
Other deferred charges 268,779 271,356 284,301
Total deferred charges 615,945 695,882 646,456
Regulatory asset-future federal
Income taxes 930,681 984,282 1,003,774
Total $14,321,204 $14,057,185 $14,020,927
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1997, DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
As At
Sept 30, 1997 Dec. 31, 1996 Sept 30, 1996
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock, authorized 340,000,000
shares; outstanding 235,033,168 shares,
234,993,596 shares and 234,981,753 shares $ 1,478,840 $ 1,478,536 $ 1,478,444
Capital stock expense (36,249) (34,903) (34,972)
Retained earnings 4,469,185 4,283,935 4,290,590
Total common shareholders' equity 5,911,776 5,727,568 5,734,062
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 4,326 4,630 4,721
Total other preferred stock 237,794 238,098 238,189
Total preferred stock 322,344 322,648 322,739
Long-term debt 4,288,837 4,238,622 4,090,810
Total capitalization 10,522,957 10,288,838 10,147,611
Noncurrent liabilities
Obligations under capital leases 40,575 42,661 43,332
Other noncurrent liabilities 83,949 80,499 82,797
Total noncurrent liabilities 124,524 123,160 126,129
Current liabilities
Long-term debt due within one year 102,630 106,256 179,715
Accounts payable 416,872 431,115 353,918
Customer deposits 161,548 159,616 158,492
Accrued taxes 145,440 27,342 122,882
Accrued interest 67,336 83,090 70,560
Accrued wages 80,345 80,225 78,117
Other current liabilities 132,976 147,968 142,049
Total current liabilities 1,107,147 1,035,612 1,105,733
Provisions related to future federal income taxes
and other deferred credits
Accumulated deferred federal income tax 2,299,834 2,289,092 2,316,138
Accumulated deferred investment tax credits 165,850 172,510 174,580
Other deferred credits 100,892 147,973 150,736
Total deferred credits 2,566,576 2,609,575 2,641,454
Total $14,321,204 $14,057,185 $14,020,927
The accompanying notes are 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 SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
(Thousands of Dollars)
Operating revenues
Electric $1,786,147 $ 1,708,146
Gas 157,623 141,121
Steam 67,258 71,074
-------------- --------------
Total operating revenues 2,011,028 1,920,341
------------ ------------
Operating expenses
Purchased power 337,033 334,557
Fuel 188,708 145,942
Gas purchased for resale 46,725 38,595
Other operations 267,704 284,755
Maintenance 106,229 100,530
Depreciation and amortization 126,389 121,273
Taxes, other than federal income tax 312,709 302,990
Federal income tax 187,650 182,280
------------- ------------
Total operating expenses 1,573,147 1,510,922
------------ ------------
Operating income 437,881 409,419
Other income (deductions)
Investment income 2,552 1,170
Allowance for equity funds
used during construction 756 883
Other income less miscellaneous deductions (5,173) (2,435)
Federal income tax 2,250 2,070
-------------- ---------------
Total other income 385 1,688
--------------- ---------------
Income before interest charges 438,266 411,107
Interest on long-term debt 80,330 77,956
Other interest 3,262 5,578
Allowance for borrowed funds
used during construction (371) (415)
Net interest charges 83,221 83,119
------------- --------------
Net income 355,045 327,988
Preferred stock dividend requirements (4,601) (4,606)
Net Income for common stock $ 350,444 $ 323,382
=========== ============
Common shares outstanding - average (000) 235,030 234,981
Earnings per share $ 1.49 $ 1.38
=========== ============
Dividends declared per share of common stock $ 0.525 $ 0.52
========== ============
Sales
Electric (Thousands of kilowatthours)
Con Edison customers 11,093,900 10,633,845
Delivery service to NYPA and others 2,311,169 2,281,224
Service for municipal agencies 132,588 159,037
Total sales in service territory 13,537,657 13,074,106
Off-system sales (A) 839,518 1,778,475
Gas (dekatherms)
Firm 10,142,692 10,416,368
Off-peak firm/interruptible 4,147,786 3,793,915
Total sales to Con Edison customers 14,290,478 14,210,283
Transportation of customer-owned gas
NYPA 6,982,038 4,741,076
Others 1,954,061 1,767,555
Off-system sales 5,183,513 265,981
Total sales and transportation 28,410,090 20,984,895
Steam (Thousands of pounds) 5,986,582 6,420,558
(A)Includes 413,552 and 926,426 thousands of kWh, respectively, subsequently
purchased by the Company for sale to its customers.
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
(Thousands of Dollars)
Operating revenues
Electric $ 4,283,463 $ 4,238,720
Gas 826,019 771,413
Steam 291,708 317,308
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Total operating revenues 5,401,190 5,327,441
------------ ------------
Operating expenses
Purchased power 1,003,962 960,144
Fuel 462,488 450,219
Gas purchased for resale 354,845 315,989
Other operations 827,881 848,732
Maintenance 367,251 349,480
Depreciation and amortization 375,073 373,819(A)
Taxes, other than federal income tax 888,473 886,500
Federal income tax 305,780 328,200
------------- -------------
Total operating expenses 4,585,753 4,513,083
------------ ------------
Operating income 815,437 814,358
Other income (deductions)
Investment income 6,245 4,891
Allowance for equity funds
used during construction 4,076 2,141
Other income less miscellaneous deductions (12,157) (15,108)
Federal income tax 2,850 1,140
--------------- ---------------
Total other income 1,014 3,064
--------------- ---------------
Income before interest charges 816,451 817,422
Interest on long-term debt 238,274 230,431
Other interest 10,963 14,059
Allowance for borrowed funds
used during construction (1,998) (1,006)
Net interest charges 247,239 243,484
------------- -------------
Net income 569,212 573,938
Preferred stock dividend requirements (13,808) (15,249)
Gain on refunding of preferred stock - 13,943(A)
Net Income for common stock $ 555,404 $ 572,632
Common shares outstanding - average (000) 235,016 234,972
Earnings per share $ 2.36 $ 2.44
============ ===========
Dividends declared per share of common stock $ 1.575 $ 1.56
=========== ===========
Sales
Electric (Thousands of kilowatthours)
Con Edison customers 28,307,154 28,269,089
Delivery service to NYPA and others 6,561,475 6,673,889
Service for municipal agencies 643,179 443,264
Total sales in service territory 35,511,808 35,386,242
Off-system sales (B) 1,852,366 3,047,621
Gas (dekatherms)
Firm 69,070,785 75,549,180
Off-peak firm/interruptible 17,567,539 14,919,496
---------- ------------
Total sales to Con Edison customers 86,638,324 90,468,676
Transportation of customer-owned gas
NYPA 14,350,668 4,935,631
Others 5,501,464 3,649,238
Off-system sales 9,944,074 7,402,439
Total sales and transportation 116,434,530 106,455,984
Steam (Thousands of pounds) 20,924,098 23,743,411
(A)The gain from the preferred stock refunding was offset by an additional
provision for depreciation.
(B)Includes 901,575 and 1,463,871 thousands of kWh, respectively, subsequently
purchased by the Company for sale to its customers.
The accompanying notes are 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 SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
(Thousands of Dollars)
Operating revenues
Electric $ 5,585,861 $ 5,471,159
Gas 1,069,676 980,061
Steam 377,948 404,605
------------- -------------
Total operating revenues 7,033,485 6,855,825
------------ ------------
Operating expenses
Purchased power 1,316,672 1,219,503
Fuel 585,544 568,291
Gas purchased for resale 457,127 387,292
Other operations 1,142,308 1,147,972
Maintenance 476,586 478,367
Depreciation and amortization 497,665 490,773(A)
Taxes, other than federal income tax 1,168,173 1,169,765
Federal income tax 374,740 386,940
------------ -------------
Total operating expenses 6,018,815 5,848,903
----------- ------------
Operating income 1,014,670 1,006,922
Other income (deductions)
Investment income 9,678 13,235
Allowance for equity funds
used during construction 5,404 2,544
Other income less miscellaneous deductions (15,796) (8,134)
Federal income tax 2,680 (360)
--------------- -----------------
Total other income 1,966 7,285
--------------- ---------------
Income before interest charges 1,016,636 1,014,207
Interest on long-term debt 315,663 307,651
Other interest 14,235 20,694
Allowance for borrowed funds
used during construction (2,621) (1,200)
Net interest charges 327,277 327,145
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Net income 689,359 687,062
Preferred stock dividend requirements (18,418) (24,138)
Gain on refunding of preferred stock - 13,943(A)
Net Income for common stock $ 670,941 $676,867
Common shares outstanding - average (000) 235,009 234,967
Earnings per share $ 2.85 $ 2.88
=========== ===========
Dividends declared per share of common stock $ 2.095 $ 2.07
========== ===========
Sales
Electric (Thousands of kilowatthours)
Con Edison customers 37,242,020 37,146,106
Delivery service to NYPA and others 8,704,459 8,883,298
Service for municipal agencies 817,208 554,768
Total sales in service territory 46,763,687 46,584,172
Off-system sales (B) 2,722,099 3,690,644
Gas (dekatherms)
Firm 92,301,714 98,861,793
Off-peak firm/interruptible 22,954,481 19,051,789
Total sales to Con Edison customers 115,256,195 117,913,582
Transportation of customer-owned gas
NYPA 14,382,020 8,742,285
Others 6,863,348 5,164,710
Off-system sales 13,835,060 10,226,915
Total sales and transportation 150,336,623 142,047,492
Steam (Thousands of pounds) 27,176,449 30,822,617
(A)The gain from the preferred stock refunding was offset by an additional
provision for depreciation.
(B)Includes 991,468 and 1,848,447 thousands of kWh, respectively, subsequently
purchased by the Company for sale to its customers.
The accompanying notes are 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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
------ ----
(Thousands of Dollars)
Operating activities
Net income $ 569,212 $573,938
Principal non-cash charges (credits) to income
Depreciation and amortization 375,073 373,819
Deferred recoverable fuel costs 44,063 28,226
Federal income tax deferred 56,250 50,760
Common equity component of allowance
for funds used during construction (3,959) (2,021)
Other non-cash charges 18,968 341
Changes in assets and liabilities
Accounts receivable - customers, less
allowance for uncollectibles 183 (68,498)
Regulatory accounts receivable 35,384 (39,982)
Materials and supplies, including fuel
and gas in storage 24,829 (10,770)
Prepayments, other receivables and
other current assets (158,956) (120,280)
Enlightened Energy program costs 21,554 16,975
Accounts payable (14,243) (66,934)
Accrued income taxes 101,516 107,997
Other - net (108,006) (31,146)
Net cash flows from operating activities 961,868 812,425
Investing activities including construction
Construction expenditures (433,661) (478,847)
Nuclear fuel expenditures (10,402) (1,223)
Contributions to nuclear decommissioning trust (19,174) (19,174)
Common equity component of allowance
for funds used during construction 3,959 2,021
Net cash flows from investing activities
including construction (459,278) (497,223)
Financing activities including dividends
Issuance of long-term debt 150,000 375,000
Retirement of long-term debt (103,626) (107,435)
Advance refunding on long-term debt - (95,329)
Advance refunding of preferred stock - (316,982)
Issuance and refunding costs (2,013) (10,805)
Common stock dividends (370,155) (366,560)
Preferred stock dividends (13,812) (18,104)
Net cash flows from financing activities
including dividends (339,606) (540,215)
Net increase (decrease) in cash and temporary
cash investments 162,984 (225,013)
Cash and temporary cash investments at January 1 106,882 342,292
Cash and temporary cash investments at September 30 $ 269,866 $117,279
Supplemental disclosure of cash flow information Cash paid during the period
for:
Interest $ 247,138 $253,697
Income taxes 147,387 169,755
The accompanying notes are 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 SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
(Thousands of Dollars)
Operating activities
Net income $ 689,359 $ 687,062
Principal non-cash charges (credits) to income
Depreciation and amortization 497,665 490,773
Deferred recoverable fuel costs (26,171) (29,702)
Federal income tax deferred 46,090 37,000
Common equity component of allowance
for funds used during construction (5,212) (2,401)
Other non-cash charges 28,229 3,259
Changes in assets and liabilities
Accounts receivable - customers, less
allowance for uncollectibles 21,892 (56,890)
Regulatory accounts receivable 23,488 (44,818)
Materials and supplies, including fuel
and gas in storage 9,094 (5,387)
Prepayments, other receivables and
other current assets (33,559) 1,157
Enlightened Energy program costs 15,143 10,561
Accounts payable 62,954 49,170
Accrued income taxes 3,338 (41,409)
Other - net (75,530) 24,312
Net cash flows from operating activities 1,256,780 1,122,687
Investing activities including construction
Construction expenditures (630,047) (709,412)
Nuclear fuel expenditures (57,884) (5,462)
Contributions to nuclear decommissioning trust (21,301) (24,499)
Common equity component of allowance
for funds used during construction 5,212 2,401
Net cash flows from investing activities
including construction (704,020) (736,972)
Financing activities including dividends
Issuance of long-term debt 300,000 503,285
Retirement of long-term debt (179,715) (109,205)
Advance refunding of preferred stock - (316,982)
Advance refunding on long-term debt - (251,028)
Issuance and refunding costs (9,688) (11,016)
Common stock dividends (492,351) (486,385)
Preferred stock dividends (18,419) (26,992)
Net cash flows from financing activities
including dividends (400,173) (698,323)
Net decrease in cash and temporary cash investments 152,587 (312,608)
Cash and temporary cash investments at
beginning of period 117,279 429,887
Cash and temporary cash investments at September 30 $269,866 $ 117,279
Supplemental disclosure of cash flow information Cash paid during the period
for:
Interest $302,720 $ 317,766
Income taxes 324,387 393,937
The accompanying notes are an integral part of these financial statements.
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NOTES TO FINANCIAL STATEMENTS
NOTE A - Summary of Significant Accounting Policies
PSC Settlement Agreement. The New York State Public Service Commission ("PSC"),
by order issued and effective May 20, 1996 in its "Competitive Opportunities"
proceeding, endorsed a fundamental restructuring of the electric utility
industry in New York State, based on competition in the generation and energy
services sectors of the industry. The PSC, by order issued and effective
September 23, 1997, approved an amended and restated settlement agreement, dated
September 19, 1997, between the Company, the PSC staff and certain other parties
(the "Settlement Agreement").
The Settlement Agreement provides for a transition to a competitive electric
market by instituting "retail access;" a rate plan for the period ending March
31, 2002 (the "Transition"); a reasonable opportunity to recover electric
"strandable costs;" the divestiture by the Company to unaffiliated third parties
of at least 50 percent of its New York City electric fossil-fueled generating
capacity; and, subject to shareholder and other approvals, a corporate
reorganization into a holding company structure.
The "retail access" program will eventually permit all of the Company's electric
customers to buy electricity from other suppliers which will be delivered
through the Company's transmission and distribution systems. The Company's
electric fossil-fueled generating capacity not divested to third parties will be
transferred by December 31, 2002 to an unregulated affiliate of the Company. The
Company's contracts with non-utility generators ("NUGs"), absent renegotiation
of these contracts, will remain contractual obligations of the Company and the
Company could resell electricity provided by the NUGs under the contracts in the
competitive energy supply market. The Settlement Agreement does not contemplate
the divestiture or transfer of the Company's Indian Point 2 nuclear generating
unit. In August 1997, the PSC solicited comments as to the future treatment of
nuclear generating facilities in New York.
The Company's potential electric "strandable costs" are those prior utility
investments and commitments that may not be recoverable in a competitive energy
supply market, including the unrecovered cost of the Company's electric
generating plants, the future cost of decommissioning the Indian Point nuclear
generating station and charges under contracts with NUGs. During the Transition,
the Company will continue to recover its potential electric strandable costs in
the rates it charges all customers, including from those customers purchasing
electricity from others. Following the Transition, the Company will be given a
reasonable opportunity to recover, through a non-bypassable charge to customers,
remaining electric strandable costs, including a reasonable return on
investments, as adjusted for net gains or losses relating to the Company's
electric fossil generating capacity. For remaining fossil-related strandable
costs, the recovery period will be 10 years. For remaining nuclear-related
strandable costs, the recovery period will be the then-remaining life of the
Company's Indian Point 2 nuclear unit (the operating license for which extends
to 2013). With respect to its NUG contracts, the Company will be permitted to
recover at least 90 percent of the amount, if any, by which the actual costs of
its purchases under the contracts exceed market value after the Transition. Any
potential NUG contract disallowance after the Transition will be limited to the
lower of (i) 10 percent of the above-market costs or (ii) $300 million (net
present value in 2002). The potential disallowance will be offset by the amount
of NUG contract mitigation achieved by the Company after April 1, 1997 and 10
percent of the gross proceeds
- 11 -
of generating unit sales to third parties. The Company will be permitted a
reasonable opportunity to recover any costs subject to disallowance that are not
offset by these two factors if it makes good faith efforts in implementing
provisions of the Settlement Agreement leading to the development of a
competitive electric market in its service territory and the development of an
independent system operator (which is expected to administer the wholesale
electric market in New York State).
Accounting Policies. As a result of the Settlement Agreement, there have been
changes to certain of the accounting policies described in Note A to the
Company's audited financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 (the "Annual Report Financials
").
The Company's accounting policies conform to generally accepted accounting
principles. For regulated public utilities, generally accepted accounting
principles include Statement of Financial Accounting Standards ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation" and, in accordance
with SFAS No. 71, the accounting requirements and rate making practices of the
Federal Energy Regulatory Commission and the PSC.
SFAS No. 71 specifies the economic effects that result from the cause and effect
relationship of costs and revenues in the rate-regulated environment and how
these effects are to be accounted for by a regulated enterprise. For a number of
reasons, revenues intended to cover some costs may be provided either before or
after the costs are incurred. If regulation provides assurance that incurred
costs will be recovered in the future, these costs would be capitalized as
deferred charges under SFAS No. 71. If revenues are provided for costs that are
expected to be incurred in the future, these revenues would be accrued as
deferred credits under SFAS No. 71. Actions of a regulator may also reduce or
eliminate the value of an asset of, or impose a liability (or eliminate a
liability it imposed) on, a regulated enterprise. Authoritative accounting
pronouncements that apply to enterprises in general also apply to regulated
enterprises. However, enterprises subject to SFAS No. 71 are required to apply
it instead of any conflicting provisions of standards in other authoritative
pronouncements. If some of an enterprise's operations are regulated and meet the
criteria specified in SFAS No. 71, it is applied only to that regulated portion
of the enterprise's operations.
In September 1997 the Company applied the standards in SFAS No. 101, "Regulated
Enterprises - Accounting for the Discontinuation of Application of FASB
Statement No. 71" to the non-nuclear electric supply portion of its business
that is being deregulated as a result of the Settlement Agreement (the
"Deregulated Business"). The Deregulated Business includes all of the Company's
fossil electric generating assets, which had a net book value of approximately
$1.4 billion at September 30, 1997, including approximately $190 million
relating to the Company's share of the Bowline Point and Roseton stations (which
are located outside New York City and operated by other utilities). As discussed
below, the application of SFAS No. 101 to the Deregulated Business had no
material adverse effect on the Company's financial position or results of
operations.
- 12 -
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" requires certain assets to be reviewed for
impairment if the carrying amount of the asset may not be recoverable, requires
that assets to be disposed of be carried at the lower of net book value or fair
value, and amends SFAS No. 71 to require that regulatory assets be charged to
earnings if such assets are no longer considered probable of recovery. The
Company has not recognized an impairment of its fossil generating assets because
the estimated cash flows from the operation and/or sale of the assets together
with the cash flows from the strandable cost recovery provisions of the
Settlement Agreement will not be less than the net carrying amount of the
generating assets.
Certain deferred charges or "regulatory assets," principally relating to future
federal income taxes and certain deferred credits or "regulatory liabilities,"
have resulted from transactions relating or allocated to the Deregulated
Business. At September 30, 1997, regulatory assets, net of regulatory
liabilities, amounted to approximately $ 1.4 billion of which approximately $275
million is attributable to the Deregulated Business. The Company has not charged
against earnings any net regulatory assets because recovery of the assets is
probable under the Settlement Agreement.
SFAS No. 5 "Accounting for Contingencies" requires accrual of a loss if it is
probable that a liability has been incurred and the amount of loss can be
reasonably estimated. The Company has not accrued a loss for its contracts with
NUGs because it is not probable that the charges by NUGs under the contracts
will exceed the cash flows from the sale by the Company of the electricity
provided by the NUGs under the contracts together with the cash flows provided
pursuant to the Settlement Agreement.
Additional changes to the accounting policies described in Note A to the Annual
Report Financials are as follows:
Revenues - Revenues for electric, gas and steam service are recognized on
a monthly billing cycle basis. Effective April 1, 1997, the Settlement
Agreement eliminated the Modified ERAM provision of the 1995 electric rate
agreement. As a result, the Company is no longer reconciling revenues for
the difference between the actual electric net revenues and actual number
of customers to the target levels established in the 1995 electric rate
agreement. In addition, effective April 1, 1997, the Settlement Agreement
eliminated the Enlightened Energy and electric customer service
incentives.
Regulatory Accounts Receivable - Regulatory accounts receivable at
September 30, 1997 amounted to $10 million, reflecting accruals for the
partial pass-through electric fuel adjustment clause and for gas system
improvement and gas customer service incentives. Effective April 1, 1997,
the Settlement Agreement eliminated the Modified ERAM and the Enlightened
Energy and electric customer service incentives and the regulatory
accounts receivable recorded for the Modified ERAM and these incentives
were, along with certain other debit and credit balances in the Company's
financial statements, eliminated. The elimination of these balances had no
material adverse effect on the Company's financial position or results of
operations.
- 13 -
Note B - Contingencies
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. 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 2001. The
Company has replacement steam generators, which are stored at the site.
Replacement of the steam generators would require estimated additional
expenditures of approximately $110 million (1996 dollars, 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 September
30, 1997, the highest amount which could be assessed for losses during the
current policy year under all of the policies was $28 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).
- 14 -
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 September 30, 1997 of approximately $22.9 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 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 September 30, 1997, the Company had an accrued liability of $17.1
million for these sites. Expenditures for environmental-related capital projects
in the five years 1997-2001, including expenditures to comply with the consent
order, are 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, results of operations or liquidity.
EMF. Electric and magnetic fields are found wherever electricity is used. The
Company is the defendant in several suits claiming property damage resulting
from EMF. The aggregate amount sought in these suits is not material. In the
event, however, 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.
- 15-
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis relates to the unaudited
interim financial statements appearing in Item 1 of this Form 10-Q report and
should be read in conjunction with Management's Discussion and Analysis 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 Note B (Contingency Note) to the
financial statements in 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," "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, 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 $269.9 million at September
30, 1997 compared with $106.9 million at December 31, 1996 and $117.3 million at
September 30, 1996. The Company's cash balances reflect, among other things, the
timing and amounts of external financing.
In June 1997 the Company issued $150 million of five-year floating
rate debentures, the interest rate on which is reset quarterly. The proceeds of
this issue were used for a June 1997 prepayment of New York City property taxes
and for working capital purposes. The prepayment balance at September 30, 1997
includes the unamortized portion ( $113.5 million) of the June 1997 property tax
payment.
The Company intends to issue taxable debentures to refund three
series of tax-exempt debt, with an aggregate principal amount of approximately
$330 million, which the Company issued through the New York State Energy
Research and Development Authority: 7 1/2% 1986 A, 9 1/4% 1987 B and 7 3/4% 1989
A. The Company anticipates that it will secure substantial net present value
savings from this transaction.
- 16 -
The Company borrowed from banks at various times during the first
nine months of 1997 at prevailing market rates. The highest amount outstanding
was $165 million. No such borrowings were outstanding at September 30, 1997. In
October 1997 the Company submitted a petition to the New York State Public
Service Commission (PSC) for authority to enter into one or more revolving
credit agreements, for amounts not to exceed $500 million, in connection with
the Company's plans to establish a commercial paper program.
The PSC is expected to consider the petition in December 1997.
Customer accounts receivable, less allowance for uncollectible
accounts, amounted to $543.8 million at September 30, 1997 compared with $544.0
million at December 31, 1996 and $565.7 million at September 30, 1996. In terms
of equivalent number of days of revenue outstanding, these amounts represented
25.4, 28.6 and 25.9 days, respectively.
The regulatory accounts receivable balance of $10.0 million at
September 30, 1997 represents amounts to be recovered from customers pursuant to
the partial pass-through fuel adjustment clause (PPFAC), and from the incentive
mechanisms of the 1994 gas rate agreement. The regulatory accounts receivable
balances of $45.4 million at December 31, 1996 and $33.5 million at September
30, 1996 also represented amounts to be recovered from customers for the PPFAC
and gas incentives and, in addition, included amounts relating to the electric
revenue adjustment and revenue per customer mechanisms (Modified ERAM) and
Enlightened Energy and customer service incentives (which were eliminated
effective April 1, 1997). See "PSC Settlement Agreement" below.
Interest coverage under the SEC formula for the 12 months ended
September 30, 1997 was 4.05 times compared with 4.18 times for the year 1996 and
4.09 times for the 12 months ended September 30, 1996. The decline in interest
coverage 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 Modified ERAM, see "Liquidity and Capital Resources - 1995
Electric Rate Agreement" in Management's Discussion and Analysis in Item 7 of
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
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 provision (RPC) of the Modified ERAM. Pursuant to the
Settlement Agreement, the balance at March 31, 1997 that was set aside for the
future benefit of customers has been eliminated. See "PSC Settlement Agreement"
below.
- 17-
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 "Liquidity and Capital Resources -
Competition and Industry Restructuring" in Management's Discussion and Analysis
in Item 7 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
PSC Settlement Agreement
The PSC, by order issued and effective May 20, 1996 in its
"Competitive Opportunities" proceeding, endorsed a fundamental restructuring of
the electric utility industry in New York State, based on competition in the
generation and energy services sectors of the industry. The PSC, by order issued
and effective September 23, 1997, approved an amended and restated settlement
agreement, dated September 19, 1997, between the Company, the PSC staff and
certain other parties (the "Settlement Agreement"). For more information
regarding the Settlement Agreement, see the Company's Current Report on Form
8-K, dated September 23, 1997, and Note A (Summary of Significant Accounting
Policies) to the financial statements in Item 1 of this Form 10-Q report.
In October 1997, the Company, pursuant to the Settlement Agreement,
requested the PSC to defer certain costs related to agreements to terminate
contracts with non-utility generators (NUGs) for 42.5 megawatts of capacity.
Including these agreements, the Company has since 1993 entered into agreements
to terminate NUG contracts for approximately 768 megawatts. The Company
currently purchases approximately 2,100 megawatts of capacity under NUG
contracts.
Nuclear Generation
In October 1997 the Company submitted its comments objecting to
recommendations for the period following 2002 included in a PSC staff white
paper on nuclear generation issued in August 1997 in the PSC's Competitive
Opportunities proceeding. The PSC staff concluded that nuclear plants should
continue to be operated only if the "to go" or running costs (i.e., those costs
that could be reduced or avoided if the plant is shut down permanently) could be
recovered by the market price of electricity. The staff also expressed its
belief that the sale of generating plants to third parties, preferably through
an auction process, offers the greatest potential for mitigation of stranded
costs and the elimination of anti-competitive subsidies. Where third party sale
of nuclear units is not feasible (even where the buyer would not be liable for
decommissioning and the cost of spent fuel), the PSC staff proposed an
administrative valuation of the units and that recovery of "to go" or running
costs be limited to the wholesale market price of power. The Company's
objections to the PSC staff's recommendations related to the following issues:
possible acceleration of decommissioning funding, the feasibility of decoupling
operational and post-retirement responsibilities; the feasibility of selling a
nuclear plant through an auction process; the limited provisions for the
recovery of nuclear running costs; and the apparent lack of relationship between
nuclear plant ownership and market power in New York State.
- 18-
The Settlement Agreement does not contemplate the divestiture or
transfer of the Company's Indian Point 2 nuclear generating unit. The Settlement
Agreement provides that after March 31, 2002, the Company will have a reasonable
opportunity to recover, through a non-bypassable charge, its nuclear "strandable
costs" (i.e., the remaining net book value of the Indian Point 2 unit and the
balance of its decommissioning expense for Indian Point units 1 and 2) over a
period ending no later than the 2013 expiration of Indian Point 2's operating
license.
Gas and Steam Rate Agreements
For details of the Company's gas rate agreements and the Company's
1994 steam rate agreement, see "Liquidity and Capital Resources - Gas and Steam
Rate Agreements" in Management's Discussion and Analysis in Item 7 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
In September 1997 the PSC approved a steam rate agreement between
the Company and the PSC staff. The three-year agreement provides for a $16
million base rate increase, effective October 1, 1997. Base rates for the
remainder of the term of the agreement will not be increased or decreased except
in certain limited circumstances. With respect to $10.8 million eligible for
future recovery under the 1994 steam rate agreement, $6.2 million will be
recovered over the term of the new agreement, and $4.6 million will continue to
be deferred until amortized against earnings in excess of a rate of return on
steam common equity of 11.1 percent over the three-year period. Any earnings in
excess of a 12.6 percent rate of return over the three-year period will be
shared: 50 percent to be retained by shareholders and 50 percent to be set aside
for future refund to customers. In its order approving the steam rate agreement,
the PSC modified the agreement to require the Company to submit a long-range
plan for the steam system in time to be considered contemporaneously with the
divestiture plan in the Settlement Agreement in the Competitive Opportunities
proceeding.
Year 2000 Exposure
Many information systems have been designed to function based on
years that begin with 19. The Company expects that by the year 2000 it will have
adapted its systems, to the extent it considers necessary, to process years that
begin with 20, and does not expect that the year 2000 issue will have a material
adverse effect on its financial condition or results of operations.
- 19 -
New Air Quality Standards
In July 1997 the United States Environmental Protection Agency (EPA)
adopted new ambient air quality standards for ozone and particulate matter. The
New York State Department of Environmental Conservation will be required to
develop an implementation plan acceptable to the EPA to attain and maintain
these standards. The Company does not expect that compliance with the new ozone
standard will require additional capital expenditures in excess of the
approximately $150 million of capital expenditures estimated to be required for
compliance with the Clean Air Act amendments of 1990. (See "Liquidity and
Capital Resources - Clean Air Act Amendments" in Management's Discussion and
Analysis in Item 7 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.) Assuming that ambient air quality monitoring
identifies New York City as a nonattainment area for the new particulate matter
standard, the State will be required to adopt regulations to achieve compliance
with the new standard. It is not expected that regulations would be issued
before 2005. Depending on the requirements of the regulations, the Company's use
of oil to generate electricity and steam could be affected and compliance with
the regulations could require a material amount of additional capital
expenditures.
Environmental Claims and Other Contingencies
Reference is made to the notes 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 third quarter of 1997 was higher
than in the corresponding 1996 period by $27.1 million ($.11 a share). Net
income for common stock for the nine months and 12 months ended September 30,
1997 was lower than in the corresponding 1996 periods by $17.2 million ($.08 a
share) and $5.9 million ($.03 a share), respectively. These results reflect
weather-related sales variations and the agreements covering the Company's
electric rates.
The impact of weather on the Company's earnings depends on the
Company's rate agreements. The Modified ERAM under the 1995 electric rate
agreement removed from the Company's earnings the impact of variations in
forecasted electric sales due to weather. The Modified ERAM was eliminated
effective April 1, 1997. See "PSC Settlement Agreement" above. Most
weather-related variations in gas sales do not affect earnings, while
weather-related variations in steam sales do affect earnings.
- 20 -
Increases (Decreases)
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, 1997 September 30, 1997 September 30, 1997
Compared With Compared With Compared With
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, 1996 September 30, 1996 September 30, 1996
Amount Percent Amount Percent Amount Percent
(Amounts in Millions)
Operating revenues $ 90.7 4.7 % $ 73.7 1.4 % $177.7 2.6 %
Purchased power - electric and steam 2.5 0.7 43.8 4.6 97.2 8.0
Fuel - electric and steam 42.8 29.3 12.3 2.7 17.3 3.0
Gas purchased for resale 8.1 21.1 38.8 12.3 69.8 18.0
Operating revenues less purchased
power, fuel and gas purchased for
resale (Net revenues) 37.3 2.7 (21.2) (0.6) (6.6) (0.1)
Other operations and maintenance (11.4) (2.9) (3.1) (0.3) (7.4) (0.5)
Depreciation and amortization 5.1 4.2 1.2 0.3 6.9 1.4
Taxes, other than federal
income tax 9.7 3.2 2.0 0.2 (1.6) (0.1)
Federal income tax 5.4 2.9 (22.4) (6.8) (12.2) (3.2)
Operating income 28.5 7.0 1.1 0.1 7.7 0.8
Other income less deductions and
related federal income tax (1.3) (77.2) (2.1) (66.9) (5.3) (73.0)
Net interest charges 0.1 0.1 3.7 1.5 0.1 -
Net income 27.1 8.2 (4.7) (0.8) 2.3 0.3
Preferred stock dividend
requirements - - 1.4 9.4 5.7 23.7
Gain on refunding of preferred stock - - (13.9) Large (13.9) Large
Net income for common stock $ 27.1 8.4 % $ (17.2) (3.0) %$ (5.9) (0.9)%
Third Quarter 1997 Compared with
Third Quarter 1996
Net revenues (operating revenues less purchased power, fuel and gas
purchased for resale) increased $37.3 million in the third quarter of 1997
compared with the 1996 period. Electric and gas net revenues increased $30.6
million and $8.4 million, respectively. Steam net revenues decreased $1.7
million.
- 21 -
Electric net revenues in the 1997 period, reflecting the
implementation of the Settlement Agreement (including the elimination of the
Modified ERAM and Enlightened Energy and customer service incentives), were
higher than in the 1996 period primarily because of a short period of warmer
than normal weather during the July billing cycle.
In addition, $7.1 million of higher electric net revenues in the
1997 period can be attributed to the recognition of deferred revenues related to
the Indian Point 2 refueling and maintenance outage. This increase did not
affect net income because, under the accounting provisions of the agreements
covering the Company's electric rates (PSC Refueling Accounting), amounts
collected from customers for the estimated expenses of such outages are deferred
and are recognized when the actual expenses for the outage are incurred. Also,
electric net revenues for the third quarter of 1997 were higher than the
corresponding period by $13.1 million for non-utility generator (NUG) capacity
charge reconciliations. This increase did not affect net income because actual
capacity charge expenses were matched against revenues collected from customers.
Gas net revenues in the 1997 period reflect increased retention of
net revenues from interruptible sales in accordance with the 1996 gas rate
settlement agreement. Steam net revenues in the 1997 period reflect
weather-related sales decreases, offset in part by a rate increase effective
October 1996.
Electric sales, excluding off-system sales, in the third quarter of
1997 compared with the 1996 period were:
Millions of Kwhrs.
3rd Quarter 3rd Quarter Percent
Description 1997 1996 Variation Variation
Residential/Religious 3,433 3,212 221 6.9 %
Commercial/Industrial 7,485 7,249 236 3.3 %
Other 176 173 3 1.7 %
Total Con Edison Customers 11,094 10,634 460 4.3 %
NYPA, Municipal Agency
and Other Sales 2,444 2,440 4 0.2 %
Total Service Area 13,538 13,074 464 3.5 %
For the third quarter of 1997, compared with the 1996 period, firm
gas sales volume decreased 2.6 percent, off-peak firm/interruptible sales
increased 9.3 percent and transportation of customer-owned gas (other than gas
transported for the New York Power Authority) increased 10.6 percent. The
annualized volume of small-volume (less than 3,500 dekatherms) firm
transportation customers who are buying gas from third party suppliers has
increased to 1,823,000 dekatherms, or 2 percent of the Company's firm gas sales,
from 17,200 dekatherms at the end of 1996.
For the third quarter of 1997, steam sales volume decreased 6.8
percent compared with the 1996 period.
- 22 -
The increase in electric sales volume for the third quarter of 1997
was due primarily to a short period of warmer than normal summer weather. After
adjusting for variations, primarily in weather and billing days in each period,
electric sales volume in the Company's service territory increased 3.5 percent
in the third quarter of 1997, firm gas sales volume decreased 2.7 percent and
steam sales volume decreased 4.5 percent.
Electric fuel costs increased $50.2 million in the 1997 period due
to an increase in the unit cost of fuel and higher electric generation by the
Company. Electric purchased power costs decreased in the third quarter of 1997
by $2.8 million from the 1996 period due to lower purchased volumes partially
offset by higher unit costs. The variations in fuel and purchased power costs
also reflect the availability of Indian Point 2, which was out of service for a
refueling and maintenance outage for part of the 1997 period but was operating
during the 1996 period. Steam fuel costs decreased $7.4 million due to decreased
generation of steam by the Company. Steam purchased power costs were $5.3
million in the 1997 period; the Company did not purchase steam in the 1996
period. Gas purchased for resale increased $8.1 million, reflecting higher
sendout partially offset by a lower unit cost of purchased gas.
Other operations and maintenance expenses decreased $11.4 million
for the third quarter of 1997 compared with the 1996 period, due primarily to
lower administrative and general expenses partially offset by expenses related
to the Indian Point refueling and maintenance outage (a like amount of deferred
revenues was recognized under PSC Refueling Accounting).
Depreciation and amortization increased $5.1 million in the
third quarter of 1997 due principally to higher plant balances.
Taxes, other than federal income tax, increased $9.7 million due
principally to higher property taxes and revenue taxes.
Federal income tax increased $5.4 million for the quarter
reflecting higher pre-tax income.
Other income less miscellaneous deductions for the 1997 period
reflects the start-up and business development expenses of the Company's
subsidiaries, Consolidated Edison Solutions, Inc. (formerly ProMark Energy,
Inc.) and Consolidated Edison Development, Inc. (formerly Gramercy Development,
Inc.) (the "Subsidiaries").
Nine Months Ended September 30, 1997 Compared
with Nine Months Ended September 30, 1996
Net revenues decreased $21.2 million in the first nine months of
1997 compared with the first nine months of 1996. Electric and steam net
revenues decreased $18.4 million and $18.6 million, respectively, and gas net
revenues increased $15.8 million.
- 23 -
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 and the implementation of the Settlement Agreement (including
elimination of the Modified ERAM and Enlightened Energy and customer service
incentives) for financial statement purposes effective April 1, 1997. Electric
net revenues for the first nine months of 1997 were increased by $14.0 million
under the revenue per customer provisions of the Modified ERAM that was in
effect for the first three months of this period, compared with $42.7 million
for the 1996 period. Electric net revenues for the first nine months of 1997
also include $0.9 million to reflect incentives earned under the Company's rate
agreements, compared with $41.6 million for the 1996 period.
Electric net revenues for the 1997 period were $34.5 million higher
than in the 1996 period because of the recognition of deferred revenues related
to the Indian Point 2 refueling and maintenance outage. This increase did not
affect net income because of PSC Refueling Accounting. Electric net revenues for
the 1997 period were $15.3 million higher than in the 1996 period as a result of
NUG capacity charge reconciliations. This increase did not affect net income
because actual capacity charge expenses were matched against revenues.
Gas net revenues in the 1997 period reflect increased retention of
net revenues from interruptible sales in accordance with the 1996 gas rate
settlement agreement. Steam net revenues in the 1997 period reflect
weather-related sales decreases offset in part by a rate increase effective
October 1996.
Electric sales, excluding off-system sales, in the first nine months
of 1997 compared with the 1996 period were:
Millions of Kwhrs.
Nine Months Nine Months
Ended Ended Percent
Description Sept. 30, 1997 Sept. 30, 1996 Variation Variation
Residential/Religious 8,382 8,300 82 1.0 %
Commercial/Industrial 19,461 19,501 (40) (0.2)%
Other 464 468 (4) (0.9)%
Total Con Edison Customers 28,307 28,269 38 0.1 %
NYPA Municipal Agency
and Other Sales 7,205 7,117 88 1.2 %
Total Service Area 35,512 35,386 126 0.4 %
For the first nine months of 1997, compared with the 1996 period,
firm gas sales volume decreased 8.6 percent, off-peak firm/interruptible sales
increased 17.7 percent and transportation of customer-owned gas (other than gas
transported for the New York Power Authority) increased 34.3 percent. For the
first nine months of 1997, steam sales volume decreased 11.9 percent from the
1996 period. The decreases in firm gas and steam sales volumes for the 1997
period were due primarily to milder than normal 1997 winter weather, whereas
1996 winter weather was colder than normal.
-24 -
After adjusting for variations, primarily weather and billing days,
in each period, electric sales volume in the Company's service territory in the
first nine months of 1997 increased 2.0 percent. Similarly adjusted, firm gas
sales volume decreased 0.6 percent and steam sales volume decreased 1.2 percent.
Electric fuel costs increased $42.2 million in the 1997 period due
to a higher unit cost of fuel partially offset by decreased generation of
electricity by the Company. Electric purchased power costs increased $20.9
million over the 1996 period due to higher unit costs. The variations in fuel
and purchased power costs also reflect the availability of Indian Point 2, which
was out of service for a refueling and maintenance outage for part of the 1997
period but was operating during most of the 1996 period. Steam fuel costs
decreased $29.9 million due to lower sendout. Steam purchased power costs were
$22.9 million in the 1997 period; the Company did not purchase steam in the 1996
period. Gas purchased for resale increased $38.8 million reflecting a higher
unit cost of purchases.
Other operations and maintenance expenses decreased $3.1 million in
the first nine months of 1997 compared with the 1996 period due primarily to
lower administrative and general expenses partially offset by expenses related
to the Indian Point 2 refueling and maintenance outage (a like amount of
deferred revenues was recognized under PSC Refueling Accounting).
Depreciation and amortization increased $1.2 million in the 1997
period due principally to higher plant balances; 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.
Taxes, other than federal income tax, increased $2.0 million in the
first nine months of 1997 compared with the 1996 period due primarily to
increased property taxes partially offset by decreased revenue and sales taxes.
Federal income tax decreased $22.4 million in the 1997 period
compared with the 1996 period reflecting lower pre-tax income.
Other income less miscellaneous deductions for the 1997 period
reflects the business development expenses of the Subsidiaries.
Interest on long-term debt for the period ended September 30, 1997
increased $7.8 million principally as a result of new debt issues, including the
issuance of subordinated debentures to refund preferred stock in March 1996.
Twelve Months Ended September 30, 1997 Compared with
Twelve Months Ended September 30, 1996
Net revenues decreased $6.6 million in the 12 months ended September
30, 1997 compared with the 1996 period. Electric and steam net revenues
decreased $6.9 million and $19.5 million, respectively. Gas net revenues
increased $19.8 million.
- 25 -
Electric net revenues in the 1997 period were lower compared to the
1996 period due primarily to a lower allowed return on common equity under the
1995 electric rate agreement and the implementation of the Settlement Agreement
(including elimination of the Modified ERAM and Enlightened Energy and customer
service incentives) for financial statement purposes effective April 1, 1997.
Electric net revenues for the 12 months ended September 30, 1997 were increased
by $31.0 million under the RPC provision of the Modified ERAM, compared with
$50.0 million for the 1996 period. Electric net revenues for the 12 months ended
September 30, 1997 include $14.5 million for incentive earnings, compared with
$51.8 million for the 1996 period.
Electric net revenues for the 1997 period were $27.8 million higher
than the 1996 period because of the recognition of deferred revenues related to
the Indian Point 2 refueling and maintenance outage. This increase did not
affect net income because of PSC Refueling Accounting. Electric net revenues for
the 1997 period were $27.7 million higher than in the 1996 period as a result of
NUG capacity charge reconciliations. This increase did not affect net income
because actual capacity charge expenses were matched against revenues.
Gas net revenues in the 1997 period reflect the retention of net
revenues from interruptible sales in accordance with the 1996 gas rate
settlement agreement. Steam net revenues in the 1997 period reflect
weather-related sales decreases offset in part by a rate increase in October
1996.
Electric sales, excluding off-system sales, for the 12 months ended
September 30, 1997 compared with the 12 months ended September 30, 1996 were:
Millions of Kwhrs.
Twelve Months Twelve Months
Ended Ended Percent
Description Sept. 30, 1997 Sept. 30, 1996 Variation Variation
Residential/Religious 10,949 10,809 140 1.3 %
Commercial/Industrial 25,686 25,721 (35) (0.1)%
Other 607 616 (9) (1.5)%
Total Con Edison Customers 37,242 37,146 96 0.3 %
NYPA Municipal Agency
and Other Sales 9,522 9,438 84 0.9 %
Total Service Area 46,764 46,584 180 0.4%
For the 12 months ended September 30, 1997, compared with the 1996
period, firm gas sales volume decreased 6.6 percent, off-peak firm/interruptible
sales increased 20.5 percent and transportation of customer-owned gas (other
than gas transported for the New York Power Authority) increased 32.9 percent.
For the 12 months ended September 30, 1997, steam sales volume decreased 11.8
percent compared with the 1996 period.
- 26 -
The decreases in firm gas and steam sales volumes for the 1997
period were due primarily to milder than normal 1997 winter weather, whereas
1996 winter weather was colder than normal. After adjustment for variations,
primarily weather and billing days, in each period, electric sales volume in the
Company's service territory in the 12 months ended September 30, 1997 increased
1.8 percent. Similarly adjusted, firm gas sales volume decreased 0.4 percent and
steam sales volume decreased 1.3 percent.
Electric fuel costs increased $51.0 million in the 1997 period due
to a higher unit cost of fuel partially offset by decreased generation of
electricity by the Company. Electric purchased power costs increased in the 1997
period by $70.6 million over the 1996 period, reflecting increased purchased
volumes and unit costs. The variations in electric fuel and purchased power
costs also reflect the lower availability of Indian Point 2 in the 1997 period
as compared with the 1996 period. Steam fuel costs decreased $33.7 million due
to decreased generation of steam by the Company, partially offset by a higher
unit cost of fuel. Steam purchased power costs were $26.6 million in the 1997
period; the Company did not purchase steam in the 1996 period. Gas purchased for
resale increased $69.8 million reflecting a higher unit cost of fuel.
Other operations and maintenance expenses decreased $7.4 million in
the 1997 period compared with the 1996 period. This decrease was due primarily
to lower administrative and general and customer service expenses partially
offset by expenses related to the Indian Point refueling and maintenance outage
( a like amount of deferred revenues was recognized under PSC Refueling
Accounting).
Depreciation and amortization increased $6.9 million in the
1997 period due principally to higher plant balances.
Taxes, other than federal income tax, decreased $1.6 million in the
12 months ended September 30, 1997 compared with the 1996 period. Decreased
revenue taxes reflecting the elimination of the New York State corporate tax
surcharge were partially offset by higher property taxes.
Federal income tax decreased $12.2 million in the 1997 period
compared with the 1996 period reflecting lower pre-tax income.
Other income less miscellaneous deductions for the 1997 period
reflects the start-up and business development expenses of the Subsidiaries.
Interest on long-term debt for the 12-month period ended September
30, 1997 increased $8.0 million principally as a result of new debt issues,
including the issuance of subordinated debentures to refund preferred stock in
March 1996.
- 27 -
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
TOXIC SUBSTANCES CONTROL ACT
Reference is made to the information under the caption "TOXIC SUBSTANCES
CONTROL ACT" in Part I, Item 3, Legal Proceedings in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 and in Part II, Item 1, Legal
Proceedings in the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997.
RATE PROCEEDINGS
Reference is made to (i) the information under the captions "REGULATION
AND RATES" in Part I, Item 1, Business, "RATE PROCEEDINGS" in Part I, Item 3,
Legal Proceedings and "LIQUIDITY AND CAPITAL RESOURCES - Competition and
Industry Restructuring, 1992 Electric Rate Agreement, 1995 Electric Rate
Agreement, PSC Settlement Agreement, and Gas and Steam Rate Agreements" in Part
I, Item 7, Management's Discussion and Analysis in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996; (ii) the information under
the caption "RATE PROCEEDINGS" in Part II, Item 1, Legal Proceedings in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1997 and (iii) the information under the captions "LIQUIDITY AND CAPITAL
RESOURCES - 1995 Electric Rate Agreement, PSC Settlement Agreement, Nuclear
Generation and Gas and Steam Rate Agreements" in Part I, Item 2, Management's
Discussion and Analysis in this Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997.
In August 1997, the United States District Court for the Southern District
of New York dismissed the suit against the Company entitled Brownsville Baptist
Church, et. al. v. Consolidated Edison Company of New York, Inc. On August
29,1997, the plaintiffs filed a Notice of Appeal. The appeal is pending in the
United States Court of Appeals for the Second Circuit.
SUPERFUND - CURCIO SCRAP METAL SITE
Reference is made to the information under the caption "SUPERFUND - Curcio
Scrap Metal Site" in Part I, Item 3, Legal Proceedings in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
The groundwater studies to determine whether the soil cleanup reduced or
eliminated the groundwater contamination that had been detected have been
completed. On September 30, 1997, the United States Environmental Protection
Agency ("EPA") issued a Record of Decision which concludes that the soil cleanup
work had successfully remediated the principal threats associated with the site
and requires periodic groundwater monitoring for five years. EPA estimates that
the required groundwater monitoring will cost approximately $200,000. Depending
on the results of the monitoring, EPA could extend the monitoring program for an
additional five years or require remedial measures such as groundwater treatment
or cleanup work.
- 28 -
SUPERFUND - METAL BANK OF AMERICA SITES
Reference is made to the information under the caption "SUPERFUND - Metal
Bank of America Sites" in Part I, Item 3, Legal Proceedings in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
The Company does not expect that its share of the cost of the site cleanup
program selected by EPA will exceed 1.48 percent.
SUPERFUND - PCB TREATMENT, INC. SITES
Reference is made to the information under the caption "SUPERFUND - PCB
Treatment, Inc. Sites" in Part I, Item 3, Legal Proceedings in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
The EPA has indicated that more than 25 million pounds of PCB-contaminated
oil, equipment and materials were shipped to the sites by over 1,500 parties.
The Company has informed the EPA that it shipped approximately 2.9 million
pounds of PCB-contaminated oil and equipment to the sites.
SUPERFUND - PORT REFINERY SITE
Reference is made to the information under the caption "SUPERFUND - Port
Refinery Site" in Part I, Item 3, Legal Proceedings in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
The consent decree has been approved by the United States District Court
for the Southern District of New York.
SUPERFUND - BORNE CHEMICAL SITE
In May 1997, the Company was named as an additional third-party defendant
in a private cost recovery action in the New Jersey Superior Court (Union
County) under the New Jersey Spill Compensation and Spill Act for the Borne
Chemical site in Elizabeth, New Jersey. Borne Chemical used the site for the
processing and blending of various types of petroleum, dyes and chemical
products from approximately 1917 until 1985 when it became bankrupt and
abandoned the site. Between 1971 and 1981, a portion of the site was occupied by
a waste transporter and oil spill cleanup contractor that did work for the
Company at various times (the "Contractor").
The third-party plaintiffs in the lawsuit were ordered by the New Jersey
Department of Environmental Protection and Energy ("DEPE") to conduct emergency
removal actions for the oil and chemical drums, tanks and underground piping
systems at the site and to complete studies to determine the extent to which the
site's soil and groundwater is contaminated. The third-party plaintiffs are
seeking contribution for the more than $10 million that they expect to incur to
comply with the DEPE order and for the cost of any cleanup program that DEPE may
require in the future for the site's soil and groundwater.
- 29 -
The Company is investigating allegations by the third-party plaintiffs
that the Company returned over 1,000 empty drums to Borne Chemical containing
residue of oil and chemicals that it had purchased from Borne Chemical. The
Company is also investigating whether the Contractor used the site for storage
or handling of any contaminated materials from work the Contractor did for the
Company.
DEC PROCEEDINGS
Reference is made to the information under the caption "DEC Proceedings"
in Part I, Item 3, Legal Proceedings in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 and in Note B to the financial statements
included in this Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1997.
In September 1997, the Company agreed to a consent order settling a civil
administrative proceeding instituted by the New York State Department of
Environmental Conservation ("DEC") alleging opacity violations by the Company.
Pursuant to this consent order, the essential elements of the Company's existing
Opacity Reduction Program were established as enforceable conditions of the
operating permits that the DEC issues for the Company's facilities. The
September 1997 consent order also assessed a civil penalty of $25,000, which was
suspended provided that the Company complies with the order.
In October 1997, the Company agreed to a DEC consent order with respect to
oil and hazardous waste incidents occurring since November 1994. Under this
consent order, the Company will survey a number of its facilities and test the
integrity of underground fuel oil pipelines at the Company's major oil storage
facilities. The Company also will retire several of its underground fuel oil
pipelines that had been operated within New York City, In addition, the Company
will pay a $385,000 penalty, $58,000 for damages and $345,000 to programs
designed to benefit the environment.
The Company does not expect the September and October 1997 consent orders
to have a material adverse effect on the Company's financial position or results
of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10 The Con Edison Severance Pay Plan for Management Employees.
Exhibit 12 Statement of computation of ratio of earnings to fixed charges for
the twelve-month periods ended September 30, 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 Current Reports on Form 8-K, dated August 29, 1997 and
September 23,1997, reporting (under Item 5) certain information about the PSC
Settlement Agreement (discussed in Part I, Item 2 of this report). The Company
filed no other Current Reports on Form 8-K during the quarter ended September
30, 1997.
- 30 -
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: October 30, 1997 By: JOAN S. FREILICH
Joan S. Freilich
Senior Vice President,
Chief Financial Officer and
Duly Authorized Officer
DATE: October 30, 1997 By: HYMAN SCHOENBLUM
Hyman Schoenblum
Vice President, Controller and
Chief Accounting Officer
INDEX TO EXHIBITS
SEQUENTIAL PAGE
EXHIBIT NUMBER AT WHICH
NO. DESCRIPTION EXHIBIT BEGINS
10. The Con Edison Severance Pay Plan for
Management Employees.
12. Statement of computation of ratio of earnings to
fixed charges for the twelve-month periods ended
September 30, 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.
THE CON EDISON SEVERANCE PAY PLAN
FOR MANAGEMENT EMPLOYEES
1. Purpose; Effective Date
A. The Con Edison Severance Pay Plan for Management Employees ( the
"Severance Pay Plan") is designed to provide specified post-employment payments
to eligible management employees of Consolidated Edison Company of New York,
Inc. (the "Company").
B. This Severance Pay Plan is effective as of June 1, 1997 and replaces
and supersedes any other management severance or separation pay plan or program
currently in effect in the Company.
2. Type of Plan
The Severance Pay Plan is classified as a welfare plan under the provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). It is
intended to be a severance pay plan as defined in Federal Regulations 29 CFR
2510.3-2(b) for eligible management employees of the Company.
3. Participation
A "Participant" means a regular non-bargaining unit employee working as a full
time employee or a part time employee, whose regularly scheduled hours of annual
service are 1,000 hours or more in a 12-month period, of the Company who is on
the active payroll or who is on a leave of absence with a right to reemployment.
Participant shall exclude officers of the Company, temporary workers (agency or
independent), independent contractors, cooperative or student employees,
employees with an agreement providing for severance benefits, or employees
covered by a collective bargaining agreement that does not provide for
participation in the Severance Pay Plan. For purposes of the Severance Pay Plan
the Company in its sole discretion shall determine who is a Participant.
4. Eligibility
In order to be eligible to receive benefits under the Severance Pay Plan a
Participant must be involuntarily separated from service with the Company
because of a reduction in staffing levels or any other reasons which the Company
in the exercise of its business judgment may deem appropriate.
5. Exclusions
Benefits under this Severance Pay Plan shall not be payable to
Participants:
(1) whose employment terminates due to death prior to the Participant's
Termination Date;
(2) who are discharged for misconduct or cause or who resign in lieu
of being discharged for misconduct or cause, as determined by the Company
in its sole discretion, or who are discharged or who resign in lieu of
being discharged for any other reason except those pursuant to Section 4
above, as determined by the Company in its sole discretion;
(3) who transfer or are offered the opportunity to transfer from the
Comapny to a company affiliated (directly or indirectly) with the Company;
(4) who transfer or are offered the opportunity to transfer from the
Company to another employer as a result of a sale, merger, acquisition or
other transaction, provided the Participant continues to perform or is
offered the opportunity to continue to perform the same or similar duties
immediately following the transfer; whether the Participant is offered the
opportunity to transfer and \or continues to perform or is offered the
opportunity to continue to perform the same or similar duties immediately
following the transfer shall be determined by the Company in its sole
discretion;
(5) whose employment is terminated in connection with the expiration
of a sick or other authorized leave of absence; or
(6) who voluntarily terminate employment with the Company, except if
the Company in its sole discretion decides otherwise.
6. Plan Benefits
A. For purposes of determining Plan Benefits, the following shallapply:
(1) "Salary" means a Participant's base annual salary as of the
Participant's Termination Date including shift differential and
salary reduction contributions under Sections 125 and 401(k) of the
Internal Revenue Code of 1986, as amended, to an employee benefit
plan of the Company, but excluding bonuses, incentive compensation,
overtime pay and other pay or allowances.
(2) "Equivalent Week's Salary" means Salary divided by 52.
(3) "Termination Date" means the date set by the Company as the date
the Participant terminates employment with the Company for any
reason consistent with the terms of the Severance Pay Plan. The
Company reserves the right to alter the Termination Date at its sole
discretion for any reason it deems appropriate.
(4) "Years of Service" means a Participant's completed years of
service with the Company ending on the Termination Date computed
under the Company's adjusted service credit rules for computing
continuous service. If a Participant has previously been paid a
benefit under this Severance Pay Plan, the Participant's Years of
Service will be computed from the date of the Participant's
reemployment by the Company, and not from the Participant's original
continuous service date.
. B. (1) A payment will be made in one lump sum as soon as practicable after the
Participant's Termination Date based upon the guidelines indicated below. The
Company may pay amounts over a period of time and may pay amounts other than the
indicated guidelines taking all pertinent facts and circumstances into
consideration. The Company may determine, on a case by case basis, whether a
Participant is eligible for an additional, a reduced, or no severance payment.
Guideline A- Guideline B-
Without a Release With a Release
Number of Equivalent Number of Equivalent
Years of Service Week's Salary Week's Salary
Less than 1 0 0
1 but less than 10 2 The sum of 4 and one
times the number of Years of
10 and over 4 Service up to a maximum
sum of 30 Equivalent Week's
Salary.
(2) Participants who sign a release of all known and unknown claims
in such form as the Company in its sole discretion shall determine
may receive a payment based upon Guideline B in subdivision (1)
above. Other Participants may receive a payment based upon Guideline
A in subdivision (1) above. As additional benefits to Participants
who sign a release, the Company shall offer to continue the
Participant's group health and employee group life insurance
coverage with the Participant contributing the same amount as if he
or she were an active employee for a period equal to the
Participant's number of Equivalent Week's Salary. The Company may
deduct the Participant's contributions for such continued insurance
coverage from any payment made to the Participant under subdivision
(1) above. Any such extended period of group health insurance
coverage shall be considered part of the Participant's COBRA
continuation period of coverage. As additional benefits to
Participants who sign a release the Company may provide outplacement
services to such extent and level as the Company in its sole
discretion shall determine.
(3) If a Participant who receives a payment under this Severance Pay
Plan is re-employed in a comparable position by the Company or an
affiliate of the Company, the Participant shall repay to the Company any
amount of the severance payment attributable to the number of Equivalent
Weeks in excess of the number of weeks from the Participant's Termination
Date to the re-employment date.
7. Effect of Plan Benefits on Other Benefits
Payment under this Severance Pay Plan will not be considered in determining a
Participant's benefits under the Company's Retirement Plan for Management
Employees, Thrift Savings Plan for Management Employees, Group Life Insurance
Plan or any other employee benefit plan of the Company.
8. Tax Withholding
Payments made pursuant to this Severance Pay Plan are subject to the withholding
of federal, state and local taxes, FICA (Social Security taxes), and FUTA and
SUTA (unemployment taxes) at the time of payment and will be reported to the IRS
on form W-2.
9. Payment Upon Death, Disability or Leave of Absence
If a Participant dies prior to the specified Termination Date, no payments will
be made under this Severance Pay Plan to the Participant or the Participant's
heirs or estate. If a Participant dies after terminating service but before
payment is made, payment will be made to the Participant's spouse or, if the
Participant leaves no surviving spouse, the Participant's estate in a single
lump sum as soon as practicable after the Participant's death.
If a Participant is on sick leave or other leave of absence at the time of
receiving official notification of his or her Termination Date, or if a
Participant goes on sick leave or other leave of absence after receiving
official notification of his or her Termination Date, the Participant's
employment and sick pay will be terminated as of the Participant's Termination
Date and any payment under the Severance Pay Plan to Participant shall be paid
as soon as practicable after the Termination Date.
10. Financing of Benefits
Plan Benefits shall be payable out of the Company's general assets.
11. Administration
The Company's Vice President-Employee Relations is the named fiduciary and Plan
Administrator under the Severance Pay Plan who shall determine conclusively any
and all questions arising from the administration of the Severance Pay Plan and
shall have sole and complete discretionary authority and control to manage the
operation and administration of the Severance Pay Plan, including but not
limited to, the determination of all questions relating to eligibility for
participation and benefits, interpretation of all Plan provisions, determination
of the amount of benefits payable to any Participant, spouse, heirs or estate,
and construction of disputed or ambiguous terms.
The named fiduciary and Plan Administrator may delegate responsibilities under
the Severance Pay Plan.
12. Claims Procedure
A Participant, or any person duly authorized by such a Participant, may file a
written claim for benefits under this Severance Pay Plan if the Participant
believes he/she has been treated unfairly under the Severance Pay Plan. Such
claim may only relate to a benefit under the Severance Pay Plan and not any
matter under any other policy, practice or guideline of the Company.
The written claim shall be sent to the Plan Administrator-Severance Pay Plan,
c/o Employee Benefits, Con Edison, Office E, 4 Irving Place, New York, New York
10003. Such claim must be received within 60 days of the event which gave rise
to the claim.
If the claim is denied the claimant will receive written notice of the decision,
including the specific reason for the decision, within 90 days of the date the
claim was received.
In some cases, more than 90 days may be needed to make a decision. In such cases
the claimant will be notified in writing, within the initial 90-day period, of
the reason more time is needed. An additional 90 days may be taken to make the
decision if the claimant is sent such a notice. The extension notice will show
the date by which the decision will be sent.
13. Procedure to Appeal Claim Denial
The "Review Procedure" which follows gives the rules for appealing a denied
claim.
(i) A claimant may use this Procedure if:
no reply at all is received by the claimant within 90 days after
filing the claim;
a notice has extended the time an additional 90 days and no reply is
received within 180 days after filing the claim; or
written denial of the claim for benefits or other matters is received
within the proper time limit and the claimant wishes to appeal
the written denial.
If the claim for benefits or review of any other matter under the Severance Pay
Plan is denied, the Participant, or other duly authorized person, may appeal
this denial in writing within 60 days after it is received. Written request for
review of any denied claim should be sent directly to the Plan
Administrator-Severance Pay Plan, c/o Employee Benefits, Con Edison, Office E, 4
Irving Place, New York, New York 10003.
The Plan Administrator serves as the final review committee under the Severance
Pay Plan for all Participants. Unless the Plan Administrator sends notice in
writing that the claim is a special case needing more time, the Plan
Administrator will conduct a review and decide on the appeal of the denied claim
within 60 days after receipt of the written request for review. If more time is
required to make a decision, the Plan Administrator will send notice in writing
that there will be a delay and give the reasons for the delay. In such cases,
the Plan Administrator may have 60 days more, or a total of 120 days, to make a
decision.
If the claimant sends a written request for review of a denied claim, the person
sending the request has the right to:
(i) review pertinent Severance Pay Plan documents which may be obtained by
writing to the to the Plan Administrator and
(ii) send to the Plan Administrator a written statement of the issues and any
other documents in support of the claim for benefits or other matters under
review.
The Plan Administrator's decision shall be given to the claimant in writing
within 60 days or, if extended, 120 days, and shall include specific reasons for
the decision. If the Plan Administrator does not give his decision on review
within the appropriate time span, the claimant may consider the claim denied.
The decision of the Plan Administrator is final and binding on all parties.
A Participant in the Severance Pay Plan may have further rights under ERISA, as
described in Section 20 entitled "Rights of a Plan Participant."
14. Legal Service
Process can be served on the Severance Pay Plan Administrator by directing such
service to Vice President-Employee Relations, Con Edison, 4 Irving Place, New
York, New York 10003.
15. Benefits Not Assigned or Alienated
Assignment or alienation of any benefits provided by the Severance Pay Plan will
not be permitted or recognized except as otherwise authorized by applicable law.
This means that, except as required by applicable law, benefits provided under
the Severance Pay Plan may not be sold, assigned, or otherwise transferred by or
on behalf of a Participant.
16. Plan Records
The Severance Pay Plan and all of its records are kept on a calendar year basis
beginning January 1 and ending December 31 of each year.
17. Plan Identification Numbers
This Severance Pay Plan is identified by the following numbers under the
Internal Revenue Service (IRS) Rules.
Number 13-5009340 assigned by the IRS. Number 557 assigned by the
Company.
18. Plan Continuance
The Company may amend or terminate this Severance Pay Plan at any time. Any
amendments or the termination of the Severance Pay Plan shall not result in the
forfeiture of the benefits previously awarded under the Severance Pay Plan.
19. Plan Documents
This document is both the Severance Pay Plan and a Summary Plan Description as
such terms are defined in ERISA.
20. Rights of a Plan Participant
As a Participant in this Severance Pay Plan, you are entitled to certain rights
and protection under the Employee Retirement Income Security Act of 1974
(ERISA). ERISA provides that all Severance Pay Plan Participants shall be
entitled to:
(i) Examine, without charge, all Severance Pay Plan documents and copies of all
documents filed by the Severance Pay Plan with the U.S. Department of Labor, if
any;
(ii) Obtain copies of all Severance Pay Plan documents and other Plan
information upon written request to the Severance Pay Plan Administrator.
There may be a reasonable charge for such copies.
In addition to creating rights for Severance Pay Plan Participants, ERISA
imposes duties upon these who are responsible for the operation of employee
benefit plans. The people who operate your Severance Pay Plan, called
"Fiduciaries" of the Plan, have a duty to do so prudently and in the interest of
you and other Severance Pay Plan Participants. No one, including your employer,
or any other person, may terminate your employment or otherwise discriminate
against you in any way to prevent you from obtaining a benefit or exercising
your right under ERISA. If your claim for benefits is denied, in whole or in
part, you have certain rights of review as described under Claims and Procedure
to Appeal Claim Denial Sections 12 and 13, respectively, of this Plan.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan Administrator and do not
receive them within 30 days, you may file suit in a federal court. In such case,
the court may require the Plan Administrator to provide the materials and pay up
to $100 a day until you receive the materials, unless the materials were not
sent because of reasons beyond the control of the Plan Administrator. If you
have a claim for benefits which is denied or ignored, in whole or in part, you
may file suit in a state or federal court. If you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of Labor
or you may file suit in a federal court. The court will decide who will pay
court costs and legal fees. If you are successful, the court may order the
person you have sued to pay these costs and fees. If you lose, the court may
order you to pay these costs and fees if, for example, it finds your claim is
frivolous.
If you have any questions about the Severance Pay Plan, you should contact the
Severance Pay Plan Fiduciary. If you have any questions about this statement of
your rights, or about your rights under ERISA, you should contact your nearest
Area Office of the U. S. Labor Management Services Administration, Department of
Labor.
21. Statement of Employer's Rights
A Participant's eligibility for benefits under this Severance Pay Plan shall not
be considered a guarantee of continued or lifetime employment with the Company
and shall not change the fact that a Participant shall be considered an employee
at will. A Participant's employment by the Company may be terminated by the
Company whenever the Company in its sole discretion considers that to be in its
best interest, subject to applicable law.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
Ratio of Earnings to Fixed Charges
Twelve Months Ended
(Thousands of Dollars)
SEPTEMBER SEPTEMBER
1997 1996
Earnings
Net Income $689,359 $687,062
Federal Income Tax 325,970 350,300
Federal Income Tax Deferred 54,820 46,170
Investment Tax Credits Deferred (8,730) (9,170)
Total Earnings Before Federal Income 1,061,419 1,074,362
Fixed Charges* 348,199 347,934
Total Earnings Before Federal Income Tax
and Fixed Charges $1,409,618 $1,422,296
* Fixed Charges
Interest on Long-Term Debt $304,299 $293,262
Amortization of Debt Discount, Premium and Ex 11,364 14,389
Interest on Component of Rentals 18,301 19,589
Other Interest 14,235 20,694
Total Fixed Charges $348,199 $347,934
Ratio of Earnings to Fixed Charges 4.05 4.09
UT
