-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, W+p/J7XFHvlEjrow87lBTq9p0qb0KKiBDIkd3csoiutrrMWaIGrnfc9/rpjWKnXw tseLlLNHsLS0Z7FxzjsYgw== 0000023632-94-000015.txt : 19941111 0000023632-94-000015.hdr.sgml : 19941111 ACCESSION NUMBER: 0000023632-94-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: MSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED EDISON CO OF NEW YORK INC CENTRAL INDEX KEY: 0000023632 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 135009340 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01217 FILM NUMBER: 94558727 BUSINESS ADDRESS: STREET 1: 4 IRVING PL CITY: NEW YORK STATE: NY ZIP: 10003 BUSINESS PHONE: 2124604600 10-Q 1 QUARTERLY REPORT 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, 1994 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 October 31, 1994, the Registrant had outstanding 234,898,683 shares of Common Stock ($2.50 par value). - 2 - 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 10-13 ITEM 2. Management's Discussion and Analysis of 14-27 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, 1993 (File No. 1-1217). - 3 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED BALANCE SHEET AS AT SEPTEMBER 30, 1994, DECEMBER 31, 1993 AND SEPTEMBER 30, 1993 As At Sept. 30, 1994 Dec. 31, 1993 Sept. 30, 1993 (Thousands of Dollars) ASSETS Utility plant, at original cost Electric $ 10,819,169 $ 10,530,193 $ 10,500,636 Gas 1,398,780 1,341,704 1,307,205 Steam 416,878 403,411 389,956 General 1,075,428 1,015,947 986,303 Total 13,710,255 13,291,255 13,184,100 Less: Accumulated depreciation 3,790,758 3,594,784 3,639,179 Net 9,919,497 9,696,471 9,544,921 Construction work in progress 383,425 389,244 390,835 Nuclear fuel assemblies and components, less accumulated amortization 90,666 70,441 72,217 Net utility plant 10,393,588 10,156,156 10,007,973 Current assets Cash and temporary cash investments 360,737 36,756 203,963 Accounts receivable - customers, less allowance for uncollectible accounts of $21,509, $21,600 and $19,928 492,486 459,261 500,072 Other receivables 62,417 84,955 72,989 Regulatory accounts receivable 16,994 97,117 99,328 Fuel, at average cost 54,505 53,755 43,077 Gas in storage, at average cost 48,831 49,091 45,407 Materials and supplies, at average cost 238,930 245,785 260,235 Prepayments 169,929 56,274 163,532 Other current assets 14,289 11,486 11,131 Total current assets 1,459,118 1,094,480 1,399,734 Investments and nonutility property Investments 109,183 92,108 89,142 Nonutility property 1,207 1,791 1,722 Total investments and nonutility property 110,390 93,899 90,864 Deferred charges Recoverable fuel costs (15,722) 17,649 23,989 Enlightened Energy program costs 161,152 140,057 123,456 Unamortized debt expense 139,305 144,928 119,518 Power contract termination costs 148,751 121,740 121,740 Other deferred charges 316,444 337,826 333,314 Total deferred charges 749,930 762,200 722,017 Regulatory asset-future federal income taxes 1,335,932 1,376,759 1,358,274 Total $ 14,048,958 $ 13,483,494 $ 13,578,862
The accompanying notes are an integral part of these financial statements. - 4 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED BALANCE SHEET AS AT SEPTEMBER 30, 1994, DECEMBER 31, 1993 AND SEPTEMBER 30, 1993 As At Sept. 30, 1994 Dec. 31, 1993 Sept. 30, 1993 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization Common stock, authorized 340,000,000 shares; outstanding 234,895,212 shares, 234,372,931 shares and 233,978,202 shares $ 1,463,835 $ 1,448,845 $ 1,436,799 Capital stock expense (39,005) (39,201) (39,205) Retained earnings 3,896,475 3,658,886 3,663,980 Total common equity 5,321,305 5,068,530 5,061,574 Preferred stock Subject to mandatory redemption 7.20% Series I 50,000 50,000 50,000 6-1/8% Series J 50,000 50,000 50,000 Total preferred stock subject to mandatory redemption 100,000 100,000 100,000 Other preferred stock $ 5 Cumulative Preferred 175,000 175,000 175,000 5-3/4% Series A 60,000 60,000 60,000 5-1/4% Series B 75,000 75,000 75,000 4.65% Series C 60,000 60,000 60,000 4.65% Series D 75,000 75,000 75,000 5-3/4% Series E 50,000 50,000 50,000 6.20% Series F 40,000 40,000 40,000 6% Convertible Series B 5,387 5,728 5,893 Total other preferred stock 540,387 540,728 540,893 Total preferred stock 640,387 640,728 640,893 Long-term debt 3,932,799 3,643,891 3,785,624 Total capitalization 9,894,491 9,353,149 9,488,091 Noncurrent liabilities Obligations under capital leases 48,443 50,355 50,992 Other noncurrent liabilities 82,897 125,369 162,360 Total noncurrent liabilities 131,340 175,724 213,352 Current liabilities Long-term debt due within one year 135,743 133,639 13,505 Accounts payable 315,857 399,543 309,766 Customer deposits 160,964 157,380 156,963 Accrued income taxes 147,586 28,410 204,713 Other accrued taxes 23,415 30,896 43,130 Accrued interest 70,555 82,002 70,266 Accrued wages 83,480 81,174 79,405 Other current liabilities 146,690 172,876 176,440 Total current liabilities 1,084,290 1,085,920 1,054,188 Deferred credits Accumulated deferred federal income tax 1,114,882 1,083,720 1,052,117 Accumulated deferred investment tax credits 193,944 201,144 204,124 Other deferred credits 294,079 207,078 208,716 Total deferred credits 1,602,905 1,491,942 1,464,957 Deferred tax liability-future federal income taxes 1,335,932 1,376,759 1,358,274 Total $ 14,048,958 $ 13,483,494 $ 13,578,862
The accompanying notes are an integral part of these financial statements. - 5 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 1994 1993 (Thousands of Dollars) Operating revenues Electric $ 1,642,823 $ 1,629,464 Gas 115,239 107,375 Steam 63,929 62,846 Total operating revenues 1,821,991 1,799,685 Operating expenses Fuel and purchased power 375,679 389,893 Gas purchased for resale 30,940 28,781 Other operations 279,654 272,049 Maintenance 110,674 125,766 Depreciation and amortization 106,098 101,806 Taxes, other than federal income tax 303,631 304,929 Federal income tax 196,940 176,360 Total operating expenses 1,403,616 1,399,584 Operating income 418,375 400,101 Other income (deductions) Investment income 2,930 830 Allowance for equity funds used during construction 1,781 1,160 Other income less miscellaneous deductions (6,328) (1,815) Federal income tax 500 990 Total other income (1,117) 1,165 Income before interest charges 417,258 401,266 Interest on long-term debt 73,628 71,315 Other interest 4,545 5,649 Allowance for borrowed funds used during construction (784) (535) Net interest charges 77,389 76,429 Net income 339,869 324,837 Preferred stock dividend requirements 8,896 8,904 Net income for common stock $ 330,973 $ 315,933 Common shares outstanding - average (000) 234,889 233,974 Earnings per share $ 1.41 $ 1.35 Dividends declared per share of common stock $ .50 $ .485 Sales Electric (Thousands of Kwhrs.) Con Edison Customers 10,867,000 10,778,674 Deliveries for NYPA Customers 2,286,314 2,217,908 Service for Municipal Agencies 112,704 95,729 Total Sales in Service Territory 13,266,018 13,092,311 Other Electric Utilities (a) 402,300 138,670 Gas - Firm Customers (Dekatherms) 10,056,613 9,660,688 Steam (Thousands of Lbs.) 6,768,672 6,854,430 (a) The 1993 period includes 192 thousands of kwhrs. which were sold to the New York Power Authority ("NYPA") and are also included in the deliveries for NYPA. There were no such sales in the 1994 period.
The accompanying notes are an integral part of these financial statements. - 6 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 1994 1993 (Thousands of Dollars) Operating revenues Electric $ 3,936,365 $ 3,934,127 Gas 698,801 593,776 Steam 276,672 253,877 Total operating revenues 4,911,838 4,781,780 Operating expenses Fuel and purchased power 1,038,234 1,101,035 Gas purchased for resale 283,070 209,414 Other operations 834,778 818,633 Maintenance 384,964 406,504 Depreciation and amortization 314,418 300,723 Taxes, other than federal income tax 857,733 888,422 Federal income tax 357,100 300,130 Total operating expenses 4,070,297 4,024,861 Operating income 841,541 756,919 Other income (deductions) Investment income 5,615 2,843 Allowance for equity funds used during construction 6,432 5,897 Other income less miscellaneous deductions (9,544) (586) Federal income tax (670) (150) Total other income 1,833 8,004 Income before interest charges 843,374 764,923 Interest on long-term debt 215,954 211,839 Other interest 13,860 14,578 Allowance for borrowed funds used during construction (2,831) (2,722) Net interest charges 226,983 223,695 Net income 616,391 541,228 Preferred stock dividend requirements 26,692 26,715 Net income for common stock $ 589,699 $ 514,513 Common shares outstanding - average (000) 234,710 233,959 Earnings per share $ 2.51 $ 2.20 Dividends declared per share of common stock $ 1.50 $ 1.455 Sales Electric (Thousands of Kwhrs.) Con Edison Customers 28,151,349 27,672,575 Deliveries for NYPA Customers 6,590,006 6,318,137 Service for Municipal Agencies 305,061 270,067 Total Sales in Service Territory 35,046,416 34,260,779 Other Electric Utilities (a) 1,129,809 465,381 Gas - Firm Customers (Dekatherms) 73,158,618 67,572,516 Steam (Thousands of Lbs.) 25,055,697 23,248,249 (a) The 1993 period includes 192 thousands of kwhrs. which were sold to the New York Power Authority ("NYPA") and are also included in the deliveries for NYPA. There were no such sales in the 1994 period.
The accompanying notes are an integral part of these financial statements. - 7 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED INCOME STATEMENT FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 1994 1993 (Thousands of Dollars) Operating revenues Electric $ 5,133,903 $ 5,134,720 Gas 913,414 790,986 Steam 348,135 334,884 Total operating revenues 6,395,452 6,260,590 Operating expenses Fuel and purchased power 1,355,029 1,451,565 Gas purchased for resale 363,363 282,508 Other operations 1,123,111 1,104,796 Maintenance 549,254 565,320 Depreciation and amortization 417,424 397,832 Taxes, other than federal income tax 1,128,595 1,178,595 Federal income tax 422,990 351,810 Total operating expenses 5,359,766 5,332,426 Operating income 1,035,686 928,164 Other income (deductions) Investment income 7,706 5,187 Allowance for equity funds used during construction 7,758 8,729 Other income less miscellaneous deductions (16,524) (3,335) Federal income tax 490 (970) Total other income (570) 9,611 Income before interest charges 1,035,116 937,775 Interest on long-term debt 285,870 279,091 Other interest 19,004 20,923 Allowance for borrowed funds used during construction (3,443) (4,100) Net interest charges 301,431 295,914 Net income 733,685 641,861 Preferred stock dividend requirements 35,594 35,537 Net income for common stock $ 698,091 $ 606,324 Common shares outstanding - average (000) 234,543 233,950 Earnings per share $ 2.98 $ 2.59 Dividends declared per share of common stock $ 1.985 $ 1.93 Sales Electric (Thousands of Kwhrs.) Con Edison Customers 36,719,773 36,254,221 Deliveries for NYPA Customers 8,713,494 8,385,445 Service for Municipal Agencies 396,848 377,268 Total Sales in Service Territory 45,830,115 45,016,934 Other Electric Utilities (a) 1,269,273 523,968 Gas - Firm Customers (Dekatherms) 95,425,428 90,744,373 Steam (Thousands of Lbs.) 31,201,783 30,137,121 (a) The 1994 and 1993 periods include 1,950 and 192 thousands of Kwhrs. respectively, which were sold to the New York Power Authority ("NYPA") and are also included in the deliveries for NYPA.
The accompanying notes are an integral part of these financial statements. - 8 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 1994 1993 (Thousands of Dollars) Operating activities Net income $ 616,391 $ 541,228 Principal non-cash charges (credits) to income Depreciation and amortization 314,418 300,723 Deferred recoverable fuel costs 33,371 (2,468) Federal income tax deferred 17,920 67,750 Common equity component of allowance for funds used during construction (6,065) (5,548) Other non-cash charges 41,388 (23,342) Changes in assets and liabilities Accounts receivable - customers, less allowance for uncollectibles (33,225) (75,723) Regulatory accounts receivable 80,123 68,603 Materials and supplies, including fuel and gas in storage 6,365 60,466 Prepayments, other receivables and other current assets (93,920) (127,173) Enlightened Energy program costs (21,095) (42,696) Federal income tax refund 52,937 - Power contract termination costs (63,480) (60,870) Accounts payable (83,686) (66,770) Accrued income taxes 119,176 167,214 Other - net (39,020) (12,824) Net cash flows from operating activities 941,598 788,570 Investing activities including construction Construction expenditures (498,233) (552,323) Nuclear fuel expenditures (39,191) (9,005) Contributions to nuclear decommissioning trust (11,669) (16,330) Common equity component of allowance for funds used during construction 6,065 5,548 Net cash flows from investing activities including construction (543,028) (572,110) Financing activities including dividends Issuance of common stock 14,650 - Issuance of long-term debt 300,000 1,231,000 Retirement of long-term debt (7,015) (156,406) Advance refunding of long-term debt - (922,257) Issuance and refunding costs (3,423) (80,160) Common stock dividends (352,111) (340,415) Preferred stock dividends (26,690) (26,713) Net cash flows from financing activities including dividends (74,589) (294,951) Net increase (decrease) in cash and temporary cash investments 323,981 (78,491) Cash and temporary cash investments at January 1 36,756 282,454 Cash and temporary cash investments at September 30 $ 360,737 $ 203,963 Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 215,586 $ 210,864 Income taxes 206,186 65,491 The accompanying notes are an integral part of these financial statements.
- 9 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 1994 1993 (Thousands of Dollars) Operating activities Net income $ 733,685 $ 641,861 Principal non-cash charges (credits) to income Depreciation and amortization 417,424 397,832 Deferred recoverable fuel costs 39,711 (3,339) Federal income tax deferred 44,380 64,850 Common equity component of allowance for funds used during construction (7,312) (8,197) Other non-cash charges 40,281 (25,930) Changes in assets and liabilities Accounts receivable - customers, less allowance for uncollectibles 7,586 (81,786) Regulatory accounts receivable 82,334 36,433 Materials and supplies, including fuel and gas in storage 6,453 38,259 Prepayments, other receivables and other current assets 1,017 (3,193) Enlightened Energy program costs (37,696) (56,726) Federal income tax refund 52,937 - Power contract termination costs (70,990) (60,870) Accounts payable 6,091 (22,393) Accrued income taxes (57,127) 99,110 Other - net (80,481) 45,657 Net cash flows from operating activities 1,178,293 1,061,568 Investing activities including construction Construction expenditures (734,978) (808,227) Nuclear fuel expenditures (44,278) (13,045) Contributions to nuclear decommissioning trust (14,586) (16,330) Common equity component of allowance for funds used during construction 7,312 8,197 Net cash flows from investing activities including construction (786,530) (829,405) Financing activities including dividends Issuance of common stock 26,530 - Issuance of long-term debt 447,475 1,431,000 Retirement of long-term debt (28,506) (307,273) Advance refunding of long-term debt and preferred stock (147,475) (1,072,257) Funds held for redemption of mortgage bonds - 148,099 Issuance and refunding costs (31,824) (90,589) Common stock dividends (465,598) (451,529) Preferred stock dividends (35,591) (35,314) Net cash flows from financing activities including dividends (234,989) (377,863) Net increase (decrease) in cash and temporary cash investments 156,774 (145,700) Cash and temporary cash investments at beginning of period 203,963 349,663 Cash and temporary cash investments at September 30 $ 360,737 $ 203,963 Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 270,197 $ 270,134 Income taxes 420,817 184,957 The accompanying notes are an integral part of these financial statements.
- 10 - NOTES TO FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For purposes of these interim financial statements, the information in this note supplements the information under the same headings in Note A to the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-1217). NUCLEAR DECOMMISSIONING. In the first quarter of 1994 a site-specific study was prepared for both the Indian Point 2 and the retired Indian Point 1 nuclear units. The estimated decommissioning cost in 1993 dollars is $657 million, comprised of $609 million for nuclear and $48 million for non-nuclear portions of the units. Assuming the expenditures will be made in 2016, on a dollar-weighted average basis, and assuming an average annual escalation rate of five percent, the estimated decommissioning cost in future dollars is $2,019 million, comprised of $1,870 million for nuclear and $149 million for non-nuclear portions. Based on the study, the Company is seeking in its electric rate filing submitted to the Public Service Commission in April 1994 an increase of $27.6 million in the annual decommissioning allowance for the nuclear portion of the plant. INVESTMENTS. In the first quarter of 1994 the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Pursuant to the Statement, the securities held in the Company's nuclear decommissioning trust fund at September 30, 1994 are reported at fair value. Pursuant to the accounting requirements of the Federal Energy Regulatory Commission, gains or losses are included in nuclear decommissioning trust assets and added to accumulated decommissioning included within Accumulated Depreciation. Accordingly, the $1.2 million net unrealized gain resulting from reporting the securities at fair value at September 30, 1994 has been included in the accumulated depreciation reserve. - 11 - NOTE B - CONTINGENCIES INDIAN POINT. Nuclear generating units similar in design to the Company's Indian Point 2 unit have experienced problems of varying severity in their steam generators, which in a number of instances have required steam generator replacement. Inspections of the Indian Point 2 steam generators since 1976 have revealed various problems, some of which appear to have been arrested, but the remaining service life of the steam generators is uncertain and may be shorter than the unit's life. The projected service life of the steam generators is reassessed periodically in the light of the inspections made during scheduled outages of the unit. Based on data from the latest inspection (1993) and other sources, the Company estimates that steam generator replacement will not be required before 1997, and possibly not until some years later. To avoid procurement delays in the event replacement is necessary, the Company purchased, and has stored at the site, replacement steam generators. If replacement of the steam generators is required, such replacement is presently estimated (in 1993 dollars) to require additional expenditures of approximately $135 million (exclusive of replacement power costs) and an outage of approximately six 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 polices 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, 1994, the highest amount which could be assessed for losses during the current policy year under all of the policies was $24.5 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 $3.2 million. - 12 - SUPERFUND CLAIMS. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) by its terms imposes joint and several strict liability, regardless of fault, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Complex technical and factual determinations must be made prior to the ultimate disposition of these claims. Accordingly, estimates of removal, remedial and environmental damage costs for these sites may not be accurate. Moreover, the Company at appropriate times seeks recovery of its share of these costs under any applicable insurance coverage and through inclusion of such costs in allowable costs for rate-making purposes. The Company has received process or notice concerning possible claims under Superfund or similar state statutes relating to 15 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. For most, but not all, of these sites, the Company has developed estimates of investigative, removal, remedial and environmental damage costs it will be obligated to pay. These estimates aggregate approximately $12 million and the Company has accrued a liability in this amount. It is possible that substantial additional costs may be incurred with respect to the 15 sites and other sites. The Company evaluates its potential Superfund liability on an ongoing basis. Based on the information and relevant circumstances known to the Company at this time, it is the opinion of the Company that the amounts it will be obligated to pay for the 15 sites will not have a material adverse effect on the Company's financial position. DEC PROCEEDING. In June 1992 the Staff of the New York State Department of Environmental Conservation (DEC) instituted a civil administrative proceeding against the Company before the DEC, alleging environmental violations. The complaint sought approximately $20 million in civil penalties, and injunctive measures. The Company settled this complaint with the DEC under a consent order signed in November 1994. Under the consent order, the Company is assessed a $9 million penalty and will contribute $5 million to a fund to support programs designed to benefit the environment. The Company must also conduct an environmental compliance audit and an environmental management review, develop and implement a "best management practices plan" for certain facilities and undertake a remediation program for certain sites. The Company presently estimates the cost of the remediation program to be approximately $13.8 million. A $1 million suspended penalty could be assessed in the event of material or substantive violations of the consent order. - 13 - ASBESTOS CLAIMS. Suits have been brought in New York State and federal courts against the Company and many other defendants, wherein several thousand 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. ELECTRIC AND MAGNETIC FIELDS. Electric and magnetic fields (EMF) are found wherever electricity is used. Several scientific studies have raised concerns that EMF surrounding electric equipment and wires, including power lines, may present health risks. In the event that a causal relationship between EMF and adverse health effects is established, there could be a material adverse effect on the electric utility industry, including the Company. - 14 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis relates to the interim financial statements appearing in this report and should be read in conjunction with Management's Discussion and Analysis appearing in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-1217). Reference is made to the notes to the financial statements in Item 1 of this report, which notes are incorporated herein by reference. LIQUIDITY AND CAPITAL RESOURCES Cash and temporary investments were $360.7 million at September 30, 1994 compared with $36.8 million at December 31, 1993 and $204.0 million at September 30, 1993. The Company's cash balances reflect the timing and amounts of external financing. As discussed below, in March 1994 the Company received approximately $60 million of federal income tax refunds and related interest. In February 1994 the Company issued $150 million of 35-year debentures. The debentures bear an interest rate of 7-1/8 percent. Pursuant to its amended dividend reinvestment plan, in the first quarter of 1994 the Company issued new shares of common stock for $14.6 million. In July 1994 the Company issued $150 million of five-year floating rate debentures due July 1, 1999 which were offered to the public at 99.9452 percent. The initial interest rate of 5-1/8 percent was based on a spread of 0.1875 percent over the three-month LIBOR (London Interbank Offered Rate), and will be reset quarterly. The rate for the fourth quarter of 1994 has been reset at 5-5/8 percent. In October 1994 the Company redeemed at maturity the $125 million 4.60 percent Series BB mortgage bonds. The Company expects to finance the balance of its capital requirements for the remainder of 1994 and 1995 from internally generated funds and external financing of about $250 million. Most, if not all, of this financing will be debt issues. - 15 - Customer accounts receivable, less allowance for uncollectible accounts, amounted to $492.5 million at September 30, 1994 compared with $459.3 million at December 31, 1993 and $500.1 million at September 30, 1993. In terms of equivalent days of revenue outstanding, these amounts represented 25.8, 27.6 and 24.6 days, respectively. Regulatory accounts receivable, amounting to $17.0 million at September 30, 1994, $97.1 million at December 31, 1993 and $99.3 million at September 30, 1993, represents accruals under the three-year electric rate settlement agreement effective April 1, 1992. It includes the "ERAM" accrual (differences in actual electric sales revenues from the levels forecast in the agreement), incentives and "lost revenues" related to the Company's Enlightened Energy program, incentives for customer service, and savings achieved in fuel and purchased power costs relative to target levels. Regulatory accounts receivable were reduced in 1993 and the first nine months of 1994 by billings to customers of prior period incentive accruals and by negative ERAM accruals for the first nine months of the year (reflecting sales in excess of estimated levels). In July 1994 the Company made a semi-annual payment of $207.3 million to New York City for property taxes. Prepayments and other current assets at September 30, 1994 include the unamortized portion (approximately $108.7 million) of this payment. Deferred charges include Enlightened Energy program costs of $161.2 million at September 30, 1994, $140.1 million at December 31, 1993 and $123.5 at September 30, 1993. Under the provisions of the 1992 electric rate settlement agreement, these costs are generally recoverable over a five-year period. In March 1994 the Company received federal income tax refunds and related interest for years 1980 through 1986 amounting to approximately $60 million, $53 million of which is currently deferred and included in other deferred credits pending future rate treatment. - 16 - As a result of 1993 tax law changes, the Company will generally be required, beginning in 1994, to pay a larger portion of its current year federal income tax during the first three quarters of each year, than had been required in prior years. Largely because of this change (as well as higher pre-tax income), income taxes paid during the first nine months of 1994 were $140.7 million higher than in the corresponding 1993 period, while accrued income taxes at September 30, 1994 were $57.1 million lower than at September 30, 1993. Interest coverage under the SEC formula for the twelve months ended September 30, 1994 was 4.57 times compared with 4.19 times for the year 1993 and 4.12 times for the twelve months ended September 30, 1993. Gas and Steam Rate Agreements In October 1994 the Public Service Commission ("PSC") approved three-year rate agreements for gas and steam services. The agreements provide for gas and steam rate increases in the first rate year of $7.7 million (0.9 percent) and $9.9 million (3.0 percent), respectively, and a methodology for rate changes in the second and third rate years. For both services, the October 1994 increases reflect a 10.9 percent rate of return on common equity and a 52.0 percent common equity ratio. The agreements contain "excess earnings" provisions giving stockholders the benefit of 100 percent retention of any earnings between 10.90 percent and 11.65 percent, and 50 percent sharing with customers above 11.65 percent. The gas agreement contains incentive/penalty mechanisms (not subject to the "excess earnings" provisions), equivalent to approximately 85 basis points of return on common equity. Under two-year gas and steam rate agreements approved by the PSC in October 1992, earnings above 11.95 percent were to be shared with customers. The Company's rate of return on steam common equity for the second rate year was above the sharing threshold and as a result the Company recorded in 1994 a provision for refund to steam customers of 50 percent of the excess, or $3.3 million. Gas equity earnings did not exceed the threshold during the agreement period. - 17 - 1992 Electric Rate Agreement In March 1994 the PSC approved an electric rate increase of $55.2 million (1.1 percent), which became effective April 1, 1994 for the third and final year of the 1992 electric rate agreement, the twelve months ended March 31, 1995. Effective April 1, 1994, the Company's electric rates reflect the increase in the federal income tax rate from 34 percent to 35 percent which had previously been deferred. For the second rate year, the twelve months ended March 31, 1994, the Company's rate of return on electric common equity, calculated in accordance with the provisions of the agreement which excludes incentives earned and labor productivity in excess of amounts reflected in rates, was approximately 11.2 percent, which was below the 11.85 percent threshold for sharing earnings with ratepayers. 1994 Electric Rate Increase Filing In April 1994 the Company filed for a $191.3 million (3.6 percent) electric rate increase to become effective April 1, 1995. This consists of an increase of $168.7 million for Con Edison customers and a $22.6 million increase for delivery services to the New York Power Authority ("NYPA") and its Economic Development customers. The rate increase request was premised upon an allowed equity return of 11.75 percent and a common equity ratio of 52.0 percent of total capitalization. The major reasons for the requested increase are power purchases required from independent power producers ("IPPs"), increased taxes and infrastructure investment. The filing includes measures to distribute more equitably the Company's costs of providing service and better position the Company in the increasingly competitive electric utility industry. The Company has proposed tariff changes for back-up and supplemental service to customers that install on-site generation, so as to reflect more accurately the cost of these services, and charges to reimburse the Company for the costs incurred to serve present Company customers that currently are eligible for, and in the future elect to take, service from NYPA. The Company has also requested additional depreciation allowances for retired generation facilities and acceleration of recovery of other production plant. - 18 - The filing includes a proposal for a three-year rate agreement, with estimated increases in the second and third years averaging 1.5 percent a year. These estimated increases do not reflect the possible effect of any incentives earned (or penalties) or other reconciliations. On September 9, 1994, the PSC trial staff and intervenors filed their recommendations applicable to the electric filing. PSC trial staff recommended a first-year rate reduction of $199 million, reflecting the proposed disallowance of certain costs of the Company's contract for energy from Sithe Energies' Independence power plant, an equity return of 11.1%, rejection of the Company's proposals for accelerated recovery of retired generation facilities and other production plant, and various other expense adjustments. PSC trial staff also proposed to substantially reduce incentives, and limit future rate changes so as to reduce the difference between the Company's rates and national average electric rates by one-half over a ten-year period. In addition, the staff proposed to eliminate the fuel adjustment clause and to reconcile sales revenues annually to a target that reflects the average forecasted revenue per customer for each service classification. If adopted, the trial staff's position could have serious adverse effects on the Company's future financial position and results of operations. In particular, elimination of the fuel adjustment clause could expose the Company to substantial risks of non-recovery of fuel price increases. However, the trial staff's recommendations are but one interim step in a year-long rate-setting process which will end with a decision by the Commission itself, which may differ significantly. On September 23, 1994, the Company revised its total rate increase request to $223 million, based on updated projections, including a cost of equity of 12.25 percent. The Administrative Law Judges are expected to issue a recommended decision in January 1995 and a PSC decision is expected in March 1995. In the interim the Company, PSC staff and intervenors have opened discussions on a possible multi-year settlement agreement. - 19 - Credit Ratings The Company's senior debt securities (first mortgage bonds) are rated Aa2 by Moody's Investors Service, Inc. ("Moody's"), AA- by Standard & Poor's Corporation ("S&P") and AA- by Duff and Phelps, Inc. In September 1994, following the filing by the PSC's trial staff of its recommendations with respect to the Company's 1994 electric rate increase filing, Moody's placed its rating of the Company under review for possible downgrade and S&P placed its ratings of the Company on CreditWatch with negative implications. Possible Accounting Effects of Competition Regulatory proceedings are pending in numerous states, including New York, and before the Federal Energy Regulatory Commission, relating to increasing competition in the electric utility industry, and the regulatory response to such competition. Among the issues being considered is the extent to which, in a competitive environment, rate regulation should provide for recovery of all costs prudently incurred. These proceedings could affect the eligibility of electric utilities to apply Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS No. 71"). If the Company were to be rendered ineligible to rely on SFAS No. 71, significant write-downs of assets could be required. Electric Generating Capacity In May 1994 the Company terminated a power purchase arrangement with NYPA under which it would have received substantial amounts of electricity from Hydro-Quebec during a 20 year period beginning in 1999. This arrangement no longer represented an economical power purchase for the Company's electric customers. The Company is exploring with Hydro-Quebec an extension of the existing summer diversity contract, set to expire in 1998, for a period of up to five years. Under the current contract, the Company purchases 780 MW of capacity and associated energy from Hydro-Quebec during the summer months. - 20 - The Company has terminated IPP contracts involving approximately 585 MW of capacity and related energy for $169 million (exclusive of interest) to be paid over a period of several years. The Company's electric customers will save substantially more than this amount, based on current estimates of future market prices for power. Termination costs for approximately 440 MW are being recovered in rates over a three-year period beginning April 1, 1994; recovery of the rest has been proposed in the Company's current electric rate case. The Company continues to explore economic opportunities to terminate additional IPP contracts. Nuclear Decommissioning Reference is made to Note A to the financial statements in this report for information concerning new estimates of decommissioning costs and proposed rate treatment of such costs. Nuclear Fuel Disposal Reference is made to the heading, "Fuel Supply - Nuclear Fuel" in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1993. The Company has a contract with the United States Department of Energy (DOE), under the Federal Nuclear Waste Policy Act of 1982, which provides that, in return for payments being made by the Company to the DOE pursuant to the contract, the DOE starting in 1998 will take title to the Company's spent nuclear fuel (SNF), transport it to a Federal repository and store it permanently. Although the contract has not been changed, the DOE has announced that it will probably not take possession of SNF before 2010. Recently, the DOE has also taken the position that it is not obligated to begin accepting SNF until it has an appropriate facility for such purpose. In June 1994 the Company and a number of other utilities petitioned the United States Court of Appeals for the District of Columbia for a declaratory judgment that the DOE is unconditionally obligated to begin accepting SNF by 1998, an order directing the DOE to implement a program enabling it to begin acceptance of SNF by 1998, and, if warranted, appropriate relief for the financial burden to the utilities resulting from the DOE's delay. The Company estimates that it will incur substantial additional costs for interim storage of SNF after 2005 if the DOE facility is not available by then. These additional costs are included in the estimated decommissioning costs for which the Company is seeking an allowance in its pending electric rate increase filing. - 21 - Uranium Enrichment Decontamination and Decommissioning Fund Under the Energy Policy Act of 1992, the DOE is to collect a special annual assessment, for a period of 15 years, from utilities that have purchased enriched uranium from the DOE. The Company has paid $5.0 million for the 1993 and 1994 assessments attributable to Indian Point Units 1 and 2. The 1995 assessment, which is payable in October 1994, is approximately $2.5 million, with similar amounts due annually thereafter. Future amounts are subject to review and adjustment for inflation. The Company's liability at September 30, 1994 for future installments of this assessment is $32.7 million, of which $30.2 million is classified as non-current. The Company is recovering these costs through its electric fuel adjustment clause. Clean Air Act Amendments Reference is made to the heading "Clean Air Act Amendments" in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 1993. New York and nine other member states of the Ozone Transport Commission have entered into a Memorandum of Understanding (MOU) concerning the establishment of Phase II nitrogen oxide emissions limits set by the New York State Department of Environmental Conservation under the Reasonably Available Control Technology provisions of the Clean Air Act. Based on the MOU, the Company's current estimate of the cost of post-Phase I compliance is $180 million, substantially less than previously estimated. Superfund and Asbestos Claims and Other Contingencies Reference is made to Note B 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. - 22 - RESULTS OF OPERATIONS Net income for common stock for the third quarter of 1994 was $15.0 million ($.06 a share) higher than the third quarter of 1993. Net income for common stock for the nine and twelve months ended September 30, 1994 exceeded the corresponding 1993 periods by $75.2 million ($.31 a share) and $91.8 million ($.39 a share), respectively. Increases (Decreases) Three Months Ended Nine Months Ended Twelve Months Ended Sept. 30, 1994 Sept. 30, 1994 Sept. 30, 1994 Compared With Compared With Compared with Three Months Ended Nine Months Ended Twelve Months Ended Sept. 30, 1993 Sept. 30, 1993 Sept. 30, 1993 Amount Percent Amount Percent Amount Percent (Amounts in Millions) Operating revenues $ 22.3 1.2 % $ 130.1 2.7 % $ 134.9 2.2 % Fuel and purchased power (14.2) (3.6) (62.8) (5.7) (96.5) (6.7) Gas purchased for resale 2.1 7.5 73.7 35.2 80.9 28.6 Operating revenues less fuel and purchased power and gas purchased for resale (Net revenues) 34.4 2.5 119.2 3.4 150.5 3.3 Other operations and maintenance (7.5) (1.9) (5.4) (0.4) 2.2 0.1 Depreciation and amortization 4.3 4.2 13.7 4.6 19.6 4.9 Taxes, other than federal income tax (1.3) (0.4) (30.7) (3.5) (50.0) (4.2) Federal income tax 20.6 11.7 57.0 19.0 71.2 20.2 Operating income 18.3 4.6 84.6 11.2 107.5 11.6 Other income less deductions, less related federal income tax (2.3) Large (6.2) (77.1) (10.2) Large Interest charges and preferred stock dividend requirements 1.0 1.1 3.2 1.3 5.5 1.7 Net income for common stock $ 15.0 4.8 % $ 75.2 14.6 % $ 91.8 15.1 %
In reviewing the following period-to-period comparisons, it should be noted that not all changes in sales volume affect operating revenues. Under the ERAM, increases (or decreases) in electric sales revenues compared with revenues forecast pursuant to the electric rate agreement are deferred for subsequent credit (or billing) to customers. Under the weather stabilization clause in the Company's gas tariff, most weather-related variations in gas sales do not affect gas revenues. - 23 - Third Quarter of 1994 Compared with the Third Quarter of 1993 Net revenues (operating revenues less fuel and purchased power and gas purchased for resale) increased $34.4 million in the third quarter of 1994 compared with the 1993 period, primarily as a result of electric and gas rate increases, higher electric and gas sales volume due to weather and economic conditions and increased incentives accrued under the electric rate agreement. Electric, gas and steam net revenues increased $25.9 million, $5.7 million and $2.8 million, respectively. Under the ERAM, net electric revenues for the third quarter of 1994 have been reduced for a credit due customers of $42.1 million, compared with a reduction in the 1993 period for a credit due customers of $32.7 million. Net electric revenues for the third quarter of 1994 include $26.3 million compared with $20.8 million for the 1993 period for incentives earned by achieving goals for the Company's Enlightened Energy program, customer service and fuel costs. Electric sales, excluding sales to other utilities, in the third quarter of 1994 compared with the 1993 period were: Millions of Kwhrs. 3rd Quarter 3rd Quarter Percent Description 1994 1993 Variation Variation Residential/Religious 3,368 3,352 16 0.5 % Commercial/Industrial 7,328 7,252 76 1.0 % Other 171 175 (4) (2.3)% Total Con Edison Customers 10,867 10,779 88 0.8 % NYPA & Municipal Agency Sales 2,399 2,313 86 3.7 % Total Service Area 13,266 13,092 174 1.3 %
For the third quarter of 1994 firm gas sales volume increased 4.1 percent and steam sales volume decreased 1.3 percent compared with the 1993 period. After adjustment for comparability in both periods, primarily for variations in weather, electric sales volume in the Company's service territory in the third quarter of 1994 increased 1.8 percent. Similarly adjusted, firm gas sales volume increased 4.1 percent and steam sales volume increased 2.2 percent. - 24 - Electric fuel and purchased power costs for the third quarter of 1994 decreased $12.6 million, primarily due to lower unit purchased power cost. Gas purchased for resale increased $2.1 million due to higher sendout for the period offset in part by lower unit gas cost, and steam fuel cost decreased $1.6 million reflecting principally lower unit fuel costs. Other operations and maintenance expenses decreased $7.5 million in the third quarter of 1994 compared with the 1993 period due principally to lower production and distribution expenses offset in part by higher administrative and general expenses. Depreciation and amortization increased $4.3 million due principally to higher plant balances. Federal income taxes increased $20.6 million for the third quarter reflecting higher pre-tax income. First Nine Months of 1994 Compared with the First Nine Months of 1993 Net revenues (operating revenues less fuel and purchased power and gas purchased for resale) increased $119.2 million in the first nine months of 1994 compared with the first nine months of 1993 principally as a result of electric and gas rate increases, higher electric, gas and steam sales volume, lower electric fuel and purchased power costs and increased incentives accrued under the electric rate agreement. Electric, gas and steam net revenues increased $70.0 million, $31.4 million and $17.8 million, respectively. Under the ERAM, net electric revenues for the first nine months of 1994 have been reduced for a credit due customers of $71.3 million, compared with a reduction in the 1993 period for a credit due customers of $9.1 million. Net electric revenues for the first nine months of 1994 also include $91.5 million compared with $43.2 million for the 1993 period for incentives earned under the provisions of the electric rate agreement. Electric sales, excluding sales to other utilities, in the first nine months of 1994 compared with the 1993 period were: - 25 - Millions of Kwhrs. Nine Months Nine Months Ended Ended Percent Description Sept. 30, 1994 Sept. 30, 1993 Variation Variation Residential/Religious 8,271 8,102 169 2.1 % Commercial/Industrial 19,425 19,102 323 1.7 % Other 455 469 (14) (3.0)% Total Con Edison Customers 28,151 27,673 478 1.7 % NYPA & Municipal Agency Sales 6,895 6,588 307 4.7 % Total Service Area 35,046 34,261 785 2.3 %
For the first nine months of 1994 firm gas sales volume increased 8.3 percent and steam sales volume increased 7.8 percent over the 1993 period. After adjustment for comparability in both periods, primarily for variations in weather, electric sales volume in the Company's service territory in the first nine months of 1994 increased 1.7 percent. Similarly adjusted, firm gas sales volume increased 2.3 percent and steam sales volume increased 2.7 percent. Electric fuel and purchased power costs decreased $67.8 million primarily due to lower unit fuel and purchased power cost, offset in part by increased sendout. Electric fuel costs were also impacted by a lower level of nuclear generation in the 1993 period due to the scheduled refueling and maintenance outage in 1993 at the Indian Point 2 nuclear unit. Steam fuel cost increased $5.0 million due to increased sendout. Gas purchased for resale increased $73.7 million reflecting a higher unit cost and higher sendout. Other operations and maintenance expenses decreased $5.4 million in the first nine months of 1994 compared with the 1993 period principally due to expenses related to the Indian Point 2 refueling and maintenance outage in the 1993 period (there was no such outage in the 1994 period) and cost containment measures, offset in part by increases in labor and labor related expenses, administrative and general expenses and distribution expenses. Depreciation and amortization increased $13.7 million due principally to higher plant balances. Taxes, other than federal income tax, decreased $30.7 million in the first nine months of 1994 compared with the 1993 period due primarily to reduced property taxes. - 26 - Federal income tax increased $57.0 million in the first nine months of 1994 compared with the 1993 period, principally due to higher pre-tax income. Twelve Months Ended September 30, 1994 Compared with the Twelve Months Ended September 30, 1993 Net revenues (operating revenues less fuel and purchased power and gas purchased for resale) increased $150.5 million principally as a result of electric and gas rate increases, higher steam sales and increased incentives accrued under the electric rate agreement. Electric, gas and steam net revenues increased $97.6 million, $41.5 million and $11.4 million, respectively. Under the ERAM, net electric revenues for the twelve months ended September 30, 1994 have been reduced for a credit due customers of $51.3 million, compared with an increase in the 1993 period for a charge to be billed to customers of $8.1 million. Net electric revenues for the twelve months ended September 30, 1994 also include $117.9 million for incentives earned under the provisions of the electric rate agreement, compared with $66.6 million for the 1993 period. Electric sales, excluding sales to other utilities, for the twelve months ended September 30, 1994 compared with the twelve months ended September 30, 1993 were: Millions of Kwhrs. Twelve Months Twelve Months Ended Ended Percent Description Sept. 30, 1994 Sept. 30, 1993 Variation Variation Residential/Religious 10,681 10,519 162 1.5 % Commercial/Industrial 25,442 25,123 319 1.3 % Other 597 612 (15) (2.5)% Total Con Edison Customers 36,720 36,254 466 1.3 % NYPA and Municipal Agency Sales 9,110 8,763 347 4.0 % Total Service Area 45,830 45,017 813 1.8 %
- 27 - For the twelve months ended September 30, 1994 firm gas sales volume increased 5.2 percent and steam sales volume increased 3.5 percent over the 1993 period. After adjustment for comparability in both periods, primarily for variations in weather, electric sales volume in the Company's service territory in the twelve months ended September 30, 1994 increased 1.7 percent. Similarly adjusted, firm gas sales volume increased 3.0 percent and steam sales volume increased 2.2 percent. Electric fuel and purchased power costs decreased by $98.4 million, gas purchased for resale increased by $80.9 million and steam fuel costs increased by $1.9 million. Electric fuel and purchased power costs decreased as a result of lower unit fuel and purchased power costs, offset in part by increased sendout. Electric fuel cost was also impacted significantly by a lower level of nuclear generation in the 1993 period due to the scheduled refueling and maintenance outage at the Indian Point 2 nuclear unit. Gas purchased for resale reflects the higher unit cost of purchased gas and higher sendout in the 1994 period. Steam fuel cost increased as a result of increased steam sendout, offset in part by lower unit fuel cost. Other operations and maintenance expenses increased $2.2 million in the twelve months ended September 30, 1994 compared with the 1993 period due to increased distribution expenses, increased labor and labor related expenses, offset in part by lower production cost principally due to the Indian Point 2 refueling and maintenance outage in the 1993 period and cost containment measures. Depreciation and amortization increased $19.6 million due principally to higher plant balances. Taxes, other than federal income tax, decreased $50.0 million in the twelve months ended September 30, 1994 compared with the 1993 period due primarily to reduced property taxes ($55.0 million), offset in part by increased revenue taxes ($4.7 million). Federal income taxes increased $71.2 million for the twelve months ended September 30, 1994 compared with the 1993 period, principally due to higher pre-tax income. - 28 - PART II. - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS GRAMERCY PARK The following information supersedes the information contained under the caption "Gramercy Park" in Part I, Item 3, Legal Proceedings, in the Company's Annual Report on Form 10-K for the year ended December 31, 1993, and in Part II, Item 1, Legal Proceedings, in the Company's Quarterly Reports on Form 10- Q for the quarterly periods ended March 31, 1994 and June 30, 1994. On August 19, 1989, a Company steam main exploded in the Gramercy Park area of Manhattan, releasing debris containing asbestos into that area. The Company took responsibility for the asbestos cleanup and most of the cost of that cleanup was covered by the Company's insurance. A federal Grand Jury in the Southern District of New York issued an indictment in December 1993, which was superseded by an indictment issued in April 1994, charging the Company and two of its retired employees with criminal acts relating to the reporting of the release of asbestos from the steam main explosion. The April 1994 indictment contained eight counts. On October 31, 1994, the Company pled guilty to four counts of the eight count indictment. Sentencing is expected in January, 1995, at which time a fine of up to $500,000 on each of the four counts, and up to five years probation, could be imposed. - 29 - SUPERFUND- HUNTS POINT SITE Reference is made to the information under the caption "Superfund Claims" in Note B - Contingencies in the Notes to Financial Statements in Part I, Item 1 of this report and under the caption "Superfund", in Part I, Item 3, Legal Proceedings, in the Company's Annual Report on Form 10-K, for the year ended December 31, 1993. In September 1994, the City of New York notified the Company that it had discovered coal tar on the site of a former Company manufactured gas plant in the Hunts Point section of the Bronx. The Company had manufactured gas at that location prior to its sale of the site to the City in the 1960s. The Company has agreed to conduct a site study and to develop and implement a remediation program. However, the Company has not agreed to pay costs not associated with the Company's use of the site or to a remediation program that includes soil removal. The Company is unable at this time to estimate its exposure to liability with respect to this site. DEC PROCEEDING 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, 1993 and under the caption "DEC Proceeding" in Note B to the financial statements included herein in Part I, Item 1, Financial Statements. NUCLEAR FUEL DISPOSAL Reference is made to the information under the caption, "Liquidity and Capital Resources -- Nuclear Fuel Disposal" in Item 2 of Part I of this report, for information concerning a suit brought by the Company and a number of other utilities against the United States Department of Energy. The suit is entitled Northern States Power Co., et al. v. Department of Energy, et al. - 30 - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit 3.1 Resolution adopted July 26, 1994 by the Board of Trustees of the Company amending the Company's By-Laws. (Incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994 in Commission File No. 1-1217.) Exhibit 3.2 By-laws of the Company, effective as of July 26, 1994. (Incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994 in Commission File No. 1-1217.) Exhibit 4 The form of the Company's Floating Rate Debentures, Series 1994 B. (Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, dated June 29, 1994, in Commission File No. 1-1217.) Exhibit 10.1 Amendment, dated August 24, 1994, to Employment Contract, dated May 22, 1990, between the Company and Eugene R. McGrath. Exhibit 10.2 Amendment No. 18, dated October 31, 1994, to the Consolidated Edison Retirement Plan for Management Employees. Exhibit 10.3 Amendment No. 1, dated October 31, 1994, to the Consolidated Edison Retiree Health Program for Management Employees. Exhibit 12 Statement of computation of ratio of earnings to fixed charges for the twelve-month periods ended September 30, 1994 and 1993. Exhibit 27 Financial Data Schedule. (b) REPORTS ON FORM 8-K During the quarter ended September 30, 1994, the Company filed no Current Reports on Form 8-K. - 31 - 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: November 10, 1994 Raymond J. McCann Raymond J. McCann Executive Vice President, Chief Financial Officer and Duly Authorized Officer DATE: November 10, 1994 Joan S. Freilich Joan S. Freilich Vice President, Controller and Chief Accounting Officer INDEX TO EXHIBITS SEQUENTIAL PAGE EXHIBIT NUMBER AT WHICH NO. DESCRIPTION EXHIBIT BEGINS 3.1 Resolution adopted July 26, 1994 by the Board of Trustees of the Company amending the Company's By-Laws. (Incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994 in Commission File No. 1-1217.) 3.2 By-laws of the Company, effective as of July 26, 1994. (Incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994 in Commission File No. 1-1217.) 4 The form of the Company's Floating Rate Debentures, Series 1994 B. (Incorporated by reference to Exhibit 4 to the Current Report on Form 8-K, dated June 29, 1994, in Commission File No. 1-1217.) 10.1 Amendment, dated August 24, 1994, to Employment Contract, dated May 22, 1990, between the Company and Eugene R. McGrath. 10.2 Amendment No. 18, dated October 31, 1994, to the Consolidated Edison Retirement Plan for Management Employees. 10.3 Amendment No. 1, dated October 31, 1994, to the Consolidated Edison Retiree Health Program for Management Employees. 12 Statement of computation of ratio of earnings to fixed charges for the twelve-month periods ended September 30, 1994 and 1993. 27 Financial Data Schedule EX-10.1 2 EXHIBIT 10.1 TO FORM 10-Q Amendment No. 5 to Eugene R. McGrath Employment Agreement WHEREAS, Eugene R. McGrath (the "Employee") and Consolidated Edison Company of New York, Inc. (the "Company") entered into an Employment Agreement effective September 1, l990 (the "Agreement"); WHEREAS, the parties to the Agreement desire to amend the Agreement to increase the basic salary payable to the Employee; and WHEREAS, paragraph 12 of the Agreement provides that the Agreement may be amended from time to time by a written instrument executed by the Company and the Employee; NOW, THEREFORE, in consideration of the foregoing the parties hereto agree as follows: 1. The Agreement is amended, effective September 1, l994, to increase the Employee's basic salary set forth in clause (i) of paragraph 3(a) of the Agreement from $560,000 per annum to $615,000 per annum, subject to all the terms and conditions set forth in the Agreement relating to the basic salary. 2. In all other respects, the Agreement remains in full force and effect as amended hereby. IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer and its Corporate seal to be affixed hereto, and the Employee has hereto set his hand the day and year set forth below. CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. By: Thomas J. Galvin Senior Vice President Eugene R. McGrath Eugene R. McGrath Dated: August 24, 1994 Attest: Approved by the Board of Trustees the 23rd day of August, 1994. Archie M. Bankston Secretary EX-10.2 3 EXHIBIT 10.2 TO FORM 10-Q AMENDMENT NO. 18 TO THE CONSOLIDATED EDISON RETIREMENT PLAN FOR MANAGEMENT EMPLOYEES ______________________________ Dated: October 31, 1994 Pursuant to resolutions adopted on August 23, 1994 by the Board of Trustees of Consolidated Edison Company of New York, Inc., the undersigned hereby approves the amendments to the Retiree Health Program (included in the Consolidated Edison Retirement Plan for Management Employees), set forth below, effective as of October 1, 1994: Section Amendment Appendix I, Part B All the material under the heading "Retiree Monthly Contribution for Medical/Hospital Benefits" is deleted and replaced with the following: "Effective October 1, 1994 the following amounts for each participating eligible individual shall be deducted from the monthly Pension or Annuity payments to the retiree or surviving spouse: A. Where Employee Retired Before June 1, 1988: Not Eligible Eligible for Medicare for Medicare Retiree $ 48 $ 19 One or more Dependents $ 72 $ 29 Surviving Spouse $ 48 $ 19 B. Where Employee Retired After May 31, 1988: Not Eligible Eligible for Medicare for Medicare Retiree $ 72 $ 19 One or more Dependents $ 108 $ 29 Surviving Spouse $ 72 $ 19." IN WITNESS WHEREOF, the undersigned has executed this instrument this 31st day of October, 1994. Thomas J. Galvin Senior Vice President-Central Services Consolidated Edison Company of New York, Inc. EX-10.3 4 EXHIBIT 10.3 TO FORM 10-Q AMENDMENT NO. 1 TO THE CONSOLIDATED EDISON RETIREE HEALTH PROGRAM FOR MANAGEMENT EMPLOYEES ___________________________ Dated: October 31, 1994 Effective as of October 1, 1994 Pursuant to resolutions adopted on August 23, 1994 by the Board of Trustees of Consolidated Edison Company of New York, Inc., the undersigned hereby approves the amendments to The Consolidated Edison Retiree Health Program for Management Employees set forth below, effective as of October 1, 1994: A. Subdivisions 1 and 2 of Section 5.01 are hereby amended to read as follows: "1. Where Employee Retired Before June 1, 1988: Eligible for Not Eligible Medicare for Medicare Retiree $ 48 $ 19 One or more Dependents $ 72 $ 29 Surviving Spouse $ 48 $ 19 2. Where Employee Retired After May 31, 1988: Eligible for Not Eligible Medicare for Medicare Retiree $ 72 $ 19 One or more Dependents $ 108 $ 29 Surviving Spouse $ 72 $ 19." IN WITNESS WHEREOF, the undersigned has executed this instrument this 31st day of October, 1994. Thomas J. Galvin Senior Vice President-Central Services Consolidated Edison Company of New York, Inc. EX-12 5 EXHIBIT 12 TO FORM 10-Q CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. RATIO OF EARNINGS TO FIXED CHARGES TWELVE MONTHS ENDED (Thousands of Dollars) SEPTEMBER SEPTEMBER 1994 1993 Earnings Net Income $ 733,685 $ 641,861 Federal Income Tax 378,120 287,930 Federal Income Tax Deferred 54,560 77,580 Investment Tax Credits Deferred (10,180) (12,730) Total Earnings Before Federal Income Tax 1,156,185 994,641 Fixed Charges* 323,414 318,695 Total Earnings Before Federal Income Tax and Fixed Charges $1,479,599 $1,313,336 *Fixed Charges Interest on Long-Term Debt $ 274,462 $ 271,773 Amortization of Debt Discount, Premium and Expenses 11,408 7,318 Interest Component of Rentals 18,540 18,681 Other Interest 19,004 20,923 Total Fixed Charges $ 323,414 $ 318,695 Ratio of Earnings to Fixed Charges 4.57 4.12
EX-27 6 EXHIBIT 27 TO FORM 10-Q
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET, INCOME STATEMENT AND STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO 1,000 DEC-31-1994 SEP-30-1994 9-MOS PER-BOOK 10,393,588 110,390 1,459,118 749,930 1,335,932 14,048,958 587,238 837,592 3,896,475 5,321,305 100,000 540,387 3,932,799 0 0 0 135,743 0 48,443 2,549 3,967,732 14,048,958 4,911,838 357,100 3,713,197 4,070,297 841,541 1,833 843,374 226,983 616,391 26,692 589,699 352,111 288,854 941,598 2.51 2.51
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