-----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, JYmKaWGm4VKcgrw1P+nFftmtJI4QWCJtIPnenSfxkFZCtI52h9Z+xXyIQ0Wg+k8/ Avemkw3CSWXZB5vbikfk/w== 0000043704-94-000015.txt : 19940823 0000043704-94-000015.hdr.sgml : 19940823 ACCESSION NUMBER: 0000043704-94-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREEN MOUNTAIN POWER CORP CENTRAL INDEX KEY: 0000043704 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 030127430 STATE OF INCORPORATION: VT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08291 FILM NUMBER: 94543232 BUSINESS ADDRESS: STREET 1: 25 GREEN MOUNTAIN DR STREET 2: P.O.BOX 850 CITY: SOUTH BURLINGTON STATE: VT ZIP: 05402-0850 BUSINESS PHONE: 8028645731 MAIL ADDRESS: STREET 1: 25 GREEN MOUNTAIN DR STREET 2: P O BOX 850 CITY: SOUTH BURLINGTON STATE: VT ZIP: 05402-0850 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1994 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1994 or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 1-8291 GREEN MOUNTAIN POWER CORPORATION (Exact name of registrant as specified in its charter) Vermont 03-0127430 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 25 Green Mountain Drive South Burlington, VT 05402 Address of principal executive offices (Zip Code) Registrant's telephone number, including area code (802) 864-5731 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class - Common Stock Outstanding June 30, 1994 $3.33 1/3 Par Value 4,579,577 GREEN MOUNTAIN POWER CORPORATION Consolidated Comparative Balance Sheets (Unaudited) Part 1 - - - ------ A.1
June 30 December 31 ----------------------------------- ---------------- 1994 1993 1993 ---------------- ---------------- ---------------- (In thousands) (In thousands) ASSETS ELECTRIC UTILITY C> Utility Plant Utility plant, at original cost.................... $221,782 $204,722 $214,977 Less accumulated depreciation...................... 67,617 62,175 64,226 ---------------- ---------------- ---------------- Net utility plant................................ 154,165 142,547 150,751 Property under capital lease....................... 11,029 11,950 11,029 Construction work in progress...................... 8,425 12,371 9,631 ---------------- ---------------- ---------------- Total utility plant, net......................... 173,619 166,868 171,411 ---------------- ---------------- ---------------- Other Investments Associated companies, at equity (Note 2)........... 16,711 17,138 16,886 Non-utility property............................... 3,835 3,186 3,521 Other investments.................................. -- 2,093 2,121 ---------------- ---------------- ---------------- Total other investments.......................... 20,546 22,417 22,528 ---------------- ---------------- ---------------- Current Assets Cash............................................... 413 82 50 Accounts receivable, customers and others, less allowance for doubtful accounts............. 10,871 12,760 14,814 Accrued utility revenues (Note 1).................. 4,939 4,439 6,138 Fuel, materials and supplies, at average cost...... 2,860 2,923 2,841 Prepayments........................................ 558 635 1,984 Current revenue due to income taxes................ 394 396 729 Other.............................................. 237 204 388 ---------------- ---------------- ---------------- Total current assets............................. 20,272 21,439 26,944 ---------------- ---------------- ---------------- Deferred Charges Future revenue due to income taxes................. 4,179 4,908 4,179 Unfunded future federal income taxes............... 4,487 4,713 4,590 Demand side management programs.................... 14,322 8,802 12,809 Environmental proceedings costs.................... 7,345 3,879 5,356 Purchased power costs.............................. 1,911 (47) 4,134 Other.............................................. 11,255 9,328 11,277 ---------------- ---------------- ---------------- Total deferred charges........................... 43,499 31,583 42,345 ---------------- ---------------- ---------------- NON-UTILITY Cash and cash equivalents.......................... 631 328 177 Other current assets............................... 2,778 2,496 3,479 Property and equipment............................. 11,138 10,945 11,331 Intangible assets.................................. 3,247 3,758 3,484 Other assets....................................... 11,622 5,429 10,155 ---------------- ---------------- ---------------- Total non-utility assets......................... 29,416 22,956 28,626 ---------------- ---------------- ---------------- Total Assets........................................... $287,352 $265,263 $291,854 ================ ================ ================ CAPITALIZATION AND LIABILITIES ELECTRIC UTILITY Capitalization Common Stock Equity Common stock,$3.33 1/3 par value, authorized 10,000,000 shares (issued 4,595,433, 4,452,344, and 4,536,042).......... $15,318 $14,894 $15,120 Additional paid-in capital....................... 58,625 55,177 57,178 Retained earnings................................ 25,289 25,017 25,229 Treasury stock, at cost (15,856 shares).......... (378) (378) (378) ---------------- ---------------- ---------------- Total common stock equity...................... 98,854 94,710 97,149 Redeemable cumulative preferred stock.............. 9,385 9,575 9,385 Long-term debt, less current maturities............ 78,000 67,644 79,800 ---------------- ---------------- ---------------- Total capitalization........................... 186,239 171,929 186,334 ---------------- ---------------- ---------------- Capital lease obligation............................... 11,029 11,950 11,029 ---------------- ---------------- ---------------- Current Liabilities Current maturuties of long-term debt............... 1,800 2,486 1,800 Short-term debt.................................... 5,415 7,756 19,015 Accounts payable, trade, and accrued liabilities... 6,895 5,903 8,373 Accounts payable to associated companies........... 3,781 3,484 4,302 Dividends declared................................. 199 203 199 Customer deposits.................................. 1,127 1,052 1,197 Taxes accrued...................................... 1,476 1,746 397 Interest accrued................................... 1,257 2,128 2,070 Deferred revenues (Note 1)......................... 3,823 3,668 -- Current revenue reduction due to income taxes...... 122 122 225 Unfunded future federal income taxes............... 394 395 729 Other.............................................. 498 442 572 ---------------- ---------------- ---------------- Total current liabilities...................... 26,787 29,385 38,879 ---------------- ---------------- ---------------- Deferred Credits Accumulated deferred income taxes.................. 19,768 16,515 20,683 Unamortized investment tax credits................. 5,542 5,825 5,672 Future revenue reduction due to income taxes....... 4,366 4,590 4,366 Unfunded future federal income taxes............... 4,179 4,908 4,179 Other.............................................. 21,786 12,543 13,541 ---------------- ---------------- ---------------- Total deferred credits......................... 55,641 44,381 48,441 ---------------- ---------------- ---------------- NON-UTILITY Current liabilities................................ -- 432 666 Other liabilities.................................. 7,656 7,186 6,505 ---------------- ---------------- ---------------- Total non-utility liabilities.................. 7,656 7,618 7,171 ---------------- ---------------- ---------------- Total Capitalization and Liabilities................... $287,352 $265,263 $291,854 ================ ================ ================ The accompanying notes are an integral part of the consolidated financial statements.
GREEN MOUNTAIN POWER CORPORATION Consolidated Comparative Income Statements (Unaudited) Part 1 - - - ------ A.2
Three Months Ended Six Months Ended June 30 June 30 ------------------------------- ------------------------------- 1994 1993 1994 1993 ------------ ------------ ------------ ------------ (In thousands, except amounts per share) Operating Revenues (Note 1)................................... $33,603 $33,427 $74,214 $74,177 ------------ ------------ ------------ ------------ Operating Expenses Power Supply Vermont Yankee Nuclear Power Corporation ................ 7,063 7,522 14,442 14,994 Company-owned generation................................. 658 724 1,837 1,473 Purchases from others.................................... 11,097 10,834 23,870 23,302 Other operating............................................. 4,681 4,476 9,450 8,979 Transmission................................................ 2,623 2,626 5,201 5,442 Maintenance................................................. 1,266 1,140 2,512 2,155 Depreciation and amortization............................... 2,244 2,143 4,549 4,286 Taxes other than income..................................... 1,521 1,467 3,247 3,102 Income taxes................................................ 578 402 2,341 3,191 ------------ ------------ ------------ ------------ Total operating expenses................................. 31,731 31,334 67,449 66,924 ------------ ------------ ------------ ------------ Operating Income....................................... 1,872 2,093 6,765 7,253 ------------ ------------ ------------ ------------ Other Income Equity in earnings of affiliates and non-utility operations. 944 365 1,692 1,225 Allowance for equity funds used during construction......... 122 116 210 168 Other income and deductions, net............................ 45 34 190 (8) ------------ ------------ ------------ ------------ Total other income........................................ 1,111 515 2,092 1,385 ------------ ------------ ------------ ------------ Income before interest charges.......................... 2,983 2,608 8,857 8,638 ------------ ------------ ------------ ------------ Interest Charges Long-term debt.............................................. 1,739 1,642 3,481 3,270 Other....................................................... 163 91 393 241 Allowance for borrowed funds used during construction...... (156) (91) (294) (140) ------------ ------------ ------------ ------------ Total interest charges.................................... 1,746 1,642 3,580 3,371 ------------ ------------ ------------ ------------ Net Income.................................................... 1,237 966 5,277 5,267 Dividends on preferred stock.................................. 199 203 398 406 ------------ ------------ ------------ ------------ Net Income Applicable to Common Stock......................... $1,038 $763 $4,879 $4,861 ============ ============ ============ ============ Common Stock Data Earnings per share.......................................... $0.23 $0.17 $1.07 $1.10 Cash dividends declared per share........................... $0.53 $0.525 $1.06 $1.05 Weighted average shares outstanding......................... 4,564 4,442 4,550 4,428 Consolidated Comparative Statements of Retained Earnings (Unaudited) Balance - beginning of period................................. $26,668 $26,585 $25,229 $24,801 Net Income.................................................... 1,237 966 5,277 5,267 ------------ ------------ ------------ ------------ 27,905 27,551 30,506 30,068 ------------ ------------ ------------ ------------ Cash Dividends - redeemable cumulative preferred stock........ 199 203 398 406 - common stock................................. 2,417 2,331 4,819 4,645 ------------ ------------ ------------ ------------ 2,616 2,534 5,217 5,051 ------------ ------------ ------------ ------------ Balance - end of period....................................... $25,289 $25,017 $25,289 $25,017 ============ ============ ============ ============ The accompanying notes are an integral part of the consolidated financial statements.
GREEN MOUNTAIN POWER CORPORATION Consolidated Statements of Cash Flows (Unaudited) Part 1 - - - ------ A.3
Six Months Ended June 30 --------------------------------------- 1994 1993 ----------------- ----------------- (In thousands) Operating Activities: Net Income........................................................... $5,277 $5,268 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................... 4,549 4,286 Dividends from associated companies less equity income........... 175 1 Allowance for funds used during construction..................... (504) (308) Amortization of purchased power costs............................ 2,290 1,774 Deferred income taxes............................................ (915) 1,011 Deferred revenues (Note 1)....................................... 3,823 3,668 Amortization of gain on sale of property......................... (26) (26) Deferred purchased power costs................................... (66) (282) Amortization of investment tax credits........................... (130) (131) Environmental proceedings costs, net............................. 7,960 (953) Changes in: Accounts receivable............................................ 3,942 4,439 Accrued utility revenues....................................... 1,199 1,161 Fuel, materials, and supplies.................................. (19) (29) Prepayments and other current assets........................... 2,290 3,293 Accounts payable............................................... (2,000) (4,192) Taxes accrued.................................................. 1,078 931 Interest accrued............................................... (813) 961 Other current liabilities...................................... (821) (2,855) Other............................................................ 504 (1,391) ----------------- ----------------- Net cash provided by operating activities.......................... 27,793 16,626 ----------------- ----------------- Investing Activities: Construction expenditures.......................................... (6,194) (6,370) Conservation expenditures.......................................... (1,971) (2,892) Investment in non-utility property................................. 162 200 Special fund for postretirement benefits........................... -- (573) ----------------- ----------------- Net cash used in investing activities............................ (8,003) (9,635) ----------------- ----------------- Financing Activities: Issuance of common stock........................................... 1,645 1,849 Short-term debt, net............................................... (13,601) (3,858) Cash dividends..................................................... (5,217) (5,052) Reduction in long-term debt........................................ (1,800) -- ----------------- ----------------- Net cash used in financing activities............................ (18,973) (7,061) ----------------- ----------------- Net increase (decrease) in cash and cash equivalents............... 817 (70) Cash and cash equivalents at beginning of period................... 227 480 ----------------- ----------------- Cash and Cash Equivalents at End of Period............................. $1,044 $410 ================= ================= Supplemental Disclosure of Cash Flow Information: Cash paid year-to-date: Interest (net of amounts capitalized)........................... $4,626 $2,500 Income taxes.................................................... 1,880 932 The accompanying notes are an integral part of the consolidated financial statements.
GREEN MOUNTAIN POWER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1994 Part 1 - - - ------ A.4 1. SIGNIFICANT ACCOUNTING POLICIES Pursuant to an order of the Vermont Public Service Board (VPSB), the Company's rate structure is seasonally differentiated, with higher rates billed during the four winter months and lower rates billed during the remaining eight months of the year. In order to match revenues with related costs more accurately on an interim basis, the Company recognizes revenue in a manner that seeks to eliminate the impact of such seasonally differentiated rates. At June 30, 1994 and 1993, the Company had recorded deferred revenues of $2.3 million and $2.5 million, respectively, in accordance with this policy. These deferred revenues are recognized in subsequent interim periods. Included in equity in earnings of affiliates and non-utility operations in the Other Income section of the Consolidated Comparative Income Statements are the results of operations of the Company's rental water heater program, which is not regulated by the VPSB, and four of the Company's wholly-owned subsidiaries, Green Mountain Propane Gas Company, Mountain Energy, Inc., GMP Real Estate Corporation, and Lease-Elec, Inc. (also unregulated). Summarized financial information is as follows: Three Months Ended Six Months Ended June 30 June 30 --------------------- ------------------ 1994 1993 1994 1993 ---- ---- ---- ---- (In Thousands) (In Thousands) Revenue . . . . . . . . . $2,787 $2,018 $6,621 $6,210 Expenses . . . . . . . . . 2,360 2,271 5,958 6,238 ------ ------- ------ ------- Net Income . . . . . . . . $ 427 $ (253) $ 663 $ (28) ====== ======= ====== ======= 2. INVESTMENT IN ASSOCIATED COMPANIES The Company accounts for its investment in the companies listed below using the equity method. Summarized financial information is as follows: Three Months Ended Six Months Ended June 30 June 30 ------------------- ----------------- 1994 1993 1994 1993 ---- ---- ---- ---- (In Thousands) Vermont Yankee Nuclear Power Corporation Gross Revenue . . . . . $37,093 $40,919 $76,262 $80,568 Net Income Applicable to Common Stock . . . 1,595 2,148 3,278 4,285 Company's Equity in Net Income . . . . . 280 386 587 765 Vermont Electric Power Company, Inc. Gross Revenue . . . . . $10,782 $11,333 $23,046 $23,563 Net Income Before Dividends . . 370 365 684 718 Company's Equity in Net Income (Includes preferred equity) . . 114 105 199 206 3. ENVIRONMENTAL MATTERS In 1982, the United States Environmental Protection Agency (EPA) notified the Company that the EPA, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), was considering spending public funds to investigate and take corrective action involving claimed releases of allegedly hazardous substances at a site identified as the Pine Street Marsh in Burlington, Vermont. On part of this site was located a manufactured-gas facility owned and operated by a number of separate enterprises, including the Company, from the late 19th century to 1967. In its notice, the EPA stated that the Company may be a "potentially responsible party" (PRP) under CERCLA from which reimbursement of costs of investigation and of corrective action may be sought. On February 23, 1988, the Company received a Special Notice letter from the EPA stating that the letter constituted a formal demand for reimbursement of costs, including interest thereon, that were incurred and were expected to be incurred in response to the environmental problems at the site. On December 5, 1988, the EPA brought suit against the Company, New England Electric System, and Vermont Gas Systems, Inc. in the United States District Court for the District of Vermont seeking reimbursement for costs it incurred in conducting activities in 1985 to remove allegedly hazardous substances from the site, and requested a declaratory judgment that the Company and the other defendants are liable for all costs that have been incurred since the removal and that continue to be incurred in responding to claims of releases or threatened releases from the Maltex Pond Area -- the portion of the site where the removal action occurred. The complaint specifically alleged that the EPA expended at least $741,000 during the 1985 removal action and sought interest on this amount from the date the funds were expended and costs of litigation, including attorneys' fees. The Company entered a cross-claim against New England Electric System and third-party claims against UGI Corporation, Southern Union Corporation, the State of Vermont, and an individual property owner at the site for recovery of its response costs and for contribution. Fourth-party defendants subsequently were joined. In July 1990, the Company and other parties signed a proposed Consent Decree settling the removal action litigation. All 14 settling defendants contributed to the aggregate settlement amount of $945,000. Individual contributions were treated as confidential under the proposed Consent Decree. On December 26, 1990, upon the unopposed motion of the United States, the Consent Decree was entered by the Court. During the summer and fall of 1989, the EPA conducted the initial phase of the Remedial Investigation (RI) and commenced the Feasibility Study (FS) relating to the site. In the fall of 1990 and in 1991, the EPA conducted a second phase of RI work and studied the treatability of soils and groundwater at the site. In the fall of 1991, the EPA responded favorably to a request from the Company and other PRPs to participate in informal discussions on the EPA's ongoing investigation and evaluation of the site, and invited the Company and other interested parties to share technical information and resources with the EPA that might assist it in evaluating remedial options. Thereafter, the Company and other PRPs held several meetings with the EPA to discuss technical issues and received copies of the EPA's Supplemental Remedial Investigation Final Report, and its Baseline Risk Assessment Final Report. On November 6, 1992, the EPA released its final RI/FS and announced a proposed remedy with an estimated total cost of approximately $49.5 million, including 30 years' operation and maintenance costs, with a net present value of approximately $26.4 million. The EPA's preferred remedy called for construction of a Containment/Disposal Facility (CDF) over a portion of the site. The CDF would have consisted of subsurface vertical barriers and a low permeability cap, with collection trenches and hydraulic control system to capture groundwater and prevent its migration outside of the CDF. Collected groundwater would have been treated and discharged or stored and disposed of off-site. The proposed remedy also would have required construction of new wetlands to replace those that would be destroyed by construction of the CDF and a long-term monitoring program. On May 15, 1993, the PRP group in which the Company participated submitted extensive comments to the EPA opposing the proposed remedy. In response to an earlier request from the EPA, the PRP group also submitted a detailed analysis of an alternative remedy anticipated to cost approximately $20 million. In early June 1993, in response to overwhelming negative comment, the EPA withdrew its proposed remedy and announced that it would work with all interested parties in developing a new proposal. Since then, the EPA has established a coordinating council, with representatives of PRPs, environmental groups, and government agencies, and presided over by a neutral mediator. The Company is represented on the council, which is charged with determining what additional studies may be appropriate for the site and may also eventually address additional response activities. In July 1994, the Company, New England Electric Systems, and Vermont Gas Systems, Inc. entered into an Administrative Order by Consent, with the EPA, pursuant to which these PRPs will conduct certain additional studies that have been agreed to by the coordinating council. These studies constitute the first phase of action the council has decided on to fill data gaps at the site. A second phase is expected to begin next year unless the coordinating council finds that the first phase provided sufficient data to decide on a remedy. The EPA is not requiring reimbursement for its past RI/FS study costs as a condition to allowing the PRPs to conduct these additional studies. The EPA has previously advised the Company that ultimately it will seek to hold the Company and the PRPs liable for such costs. In September 1993, the Company, New England Electric System and Vermont Gas Systems, Inc. entered into confidential negotiations with most other PRPs concerning allocation of unresolved liabilities concerning the site. Those negotiations are continuing. In December 1991, the Company brought suit against several previous insurers seeking recovery of unrecovered past costs and indemnity against future liabilities associated with environmental problems at the site. The parties to this action are engaged in discovery and motions practice. The Company has reached confidential settlements with two of the defendants in its insurance litigation. One of these defendants provided the Company with comprehensive general liability insurance between 1976 and 1982, and with environmental impairment liability insurance from 1981 to 1984. These policies were in place in 1982 when the EPA first notified the Company that it might be a potentially responsible party at the Pine Street Marsh site. The other defendant provided the Company with second layer excess liability coverage for a seven-month period in 1976. The Company has deferred amounts received from third parties pending further resolution of the Company's ultimate liability with respect to the site and rate recognition of that liability. The Company is unable to predict at this time the magnitude of any liability resulting from potential claims for the costs of the RI/FS or the performance of any remedial action, or the likely disposition or magnitude of claims the Company may have against others, including its insurers, except to the extent described above. Through rate cases filed in 1991 and 1993, the Company has sought and received recovery for ongoing expenses associated with the Pine Street Marsh site. Specifically, the Company proposed rate recognition of its unrecovered expenditures between January 1991 and July 31, 1993 (in the total of approximately $4.6 million) for technical consultants and legal assistance in connection with the EPA's enforcement actions at the site and insurance litigation. While reserving the right to argue in the future about the appropriateness of rate recovery for Pine Street Marsh related costs, the Company and the Vermont Department of Public Service (Department) reached agreements in both cases that the full amount of Pine Street Marsh costs reflected in those rate cases should be recovered in rates. The Company's rates approved by the Vermont Public Service Board (VPSB) on April 2, 1992, and on May 13, 1994, reflected the Pine Street Marsh related expenditures referred to above. As of June 30, 1994, the Company had reserved approximately $680,000 for costs attributable to the site, other than those costs that are the subject of the agreements between the Department and the Company mentioned above. Management expects to seek and receive ratemaking treatment for other costs incurred beyond the amounts that have been reserved. As of June 30, 1994, such other costs are approximately $6,941,000, which includes the $4.6 million in costs that were approved by the VPSB referred to above. 4. 1993 RETAIL RATE CASE On October 1, 1993, the Company filed a request with the VPSB to increase retail rates by 8.6 percent. The increase was needed primarily to cover the cost of buying power from independent power producers, the cost of energy conservation programs, the cost of plant additions made in the past two years, and costs incurred in 1992 and 1993 associated with the Company's response to the EPA's RI/FS and proposed remedy at the Pine Street Marsh site and with the Company's litigation against its previous insurers seeking recovery of past costs incurred and indemnity against future liabilities in connection with the site. On January 28, 1994, the Company and the other parties in the proceeding reached a settlement agreement providing for a 2.9 percent retail rate increase effective June 15, 1994, and a target return on equity for utility operations of 10.5 percent. The settlement agreement also provided for the Company's recovery in rates of $4.2 million in costs associated with the Pine Street Marsh site, as described herein above. The agreement was approved by the VPSB on May 13, 1994. 5. 1991 RETAIL RATE CASE On July 19, 1991, the Company filed a request with the VPSB to increase retail rates by 9.96 percent to cover power supply cost increases expected in 1992, the costs of upgrading and maintaining the Company's generation, transmission and distribution facilities; expenditures associated with the Company's conservation programs; and higher employee pension and health care costs. In orders dated April 2, 1992 and May 21, 1992, the VPSB approved an increase of 5.6 percent, or approximately $6.6 million, effective April 2, 1992. The Department appealed the VPSB orders challenging, among other rulings, the VPSB's acceptance of the Company's method of treating accumulated depreciation and certain Vermont Yankee-related power costs. The Company filed a cross-appeal contending, among other things, that the VPSB had erred in reducing ratebase relating to certain demand-side management (DSM) program cost projections that had been made in the Company's prior rate case. On April 22, 1994, the Vermont Supreme Court affirmed in part and reversed in part the VPSB orders. The Court overturned the VPSB's decision disallowing certain DSM costs. The impact of this portion of the Court's ruling resulted in the Company's other income since April 1992 being increased by $162,000. On the other hand, the Court overturned the VPSB decision in the Company's favor on an issue involving the method of treating accumulated depreciation, and on the inclusion of one item of Vermont Yankee's capital projections in power costs. The overall impact of the Court's ruling resulted in a reduction of $840,000 in the Company's revenues. The Consolidated Financial Statements are unaudited and, in the opinion of the Company, reflect the adjustments necessary to a fair statement of the results of the interim periods. All such adjustments, except as specifically noted in the Consolidated Financial Statements, are of a normal, recurring nature. GREEN MOUNTAIN POWER CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS JUNE 30, 1994 Part 1 - - - ------ A.5 RESULTS OF OPERATIONS EARNINGS SUMMARY Earnings per share of common stock in the second quarter of 1994 were $0.23 compared to $0.17 in the second quarter of 1993. The increase in earnings was primarily due to a $560,000 increase in earnings of Mountain Energy, Inc., a wholly-owned subsidiary that makes investments in energy-related development projects. For the second quarter of 1994, the Company's unregulated operations contributed a total of nine cents to the per-share earnings, compared to a loss of six cents per share in the second quarter of 1993. (See Note 1 to Notes to Consolidated Financial Statements.) For the six months ended June 30, 1994 and 1993, earnings were $1.07 and $1.10, respectively. OPERATING REVENUES AND MWH SALES Operating revenues, megawatthour (MWh) sales and average number of customers are summarized as follows: Three Months Ended Six Months Ended June 30 June 30 -------------------- ------------------ 1994 1993 1994 1993 ---- ---- ---- ---- Operating Revenues (In thousands) Retail* . . . . . $ 30,241 $ 29,397 $ 66,133 $ 65,663 Sales for Resale . 2,661 3,340 6,270 7,144 Other . . . . . . 701 690 1,811 1,370 -------- -------- -------- --------- Total Operating Revenues . . . . $ 33,603 $ 33,427 $ 74,214 $ 74,177 ========= ========= ========= ========= MWh Sales Retail* . . . . . 388,882 380,230 866,051 847,120 Sales for Resale . 66,537 84,957 166,098 168,031 ------- ------- --------- --------- Total MWh Sales . 455,419 465,187 1,032,149 1,015,151 ======= ======= ========= ========= Average Number of Customers Residential . . . 68,620 67,854 68,599 67,823 Commercial & Industrial . . . 11,630 11,435 11,624 11,424 Other . . . . . . . 74 74 74 74 ------ ------ ------ ------ Total Customers . . 80,324 79,363 80,297 79,321 ====== ====== ====== ====== *Includes lease transmissions. Total operating revenues were virtually unchanged in the second quarter of 1994 as compared to the second quarter of 1993. Retail revenues increased 2.9 percent in the second quarter of 1994 as compared to the same period in 1993 due primarily to a 1.4 percent increase in sales to commercial and industrial customers and a 2.3 percent increase in sales to residential customers, attributable to warmer weather in 1994. The increase in retail revenues was almost entirely offset by a 20.3 percent decrease in wholesale revenues in the second quarter of 1994 as compared to the same period in 1993 primarily due to the greater availability of low-cost energy in New England which drove down wholesale electricity prices. For the six months ended June 30, 1994, total operating revenues were virtually unchanged as compared to the same period in 1993. Retail revenues increased nearly 1 percent primarily due to a 3.4 percent increase in sales to small commercial and industrial customers (reflecting increased economic activity in this sector in 1994) and a 3.2 percent increase in sales to residential customers (reflecting colder than normal winter weather and warmer than normal summer weather in 1994.) This increase in sales was partially offset by a Vermont Supreme Court decision that caused a reduction in revenues of approximately $840,000. (See Note 5 of Notes to Consolidated Financial Statements). Wholesale revenues decreased 12.2 percent, principally as a result of the regional electricity market conditions mentioned above. OPERATING EXPENSES Power supply expenses decreased 1.4 percent in the second quarter of 1994 compared to the same period in 1993 caused primarily by a 6.1 percent decrease in electricity purchases from Vermont Yankee Nuclear Power Corporation due to the absence of a scheduled refueling outage in 1994 and a 10-day unplanned outage that increased 1993 costs. This decrease in power supply expenses was partially offset by a 2.4 percent increase in purchases from independent power producers mandated by federal legislation. Power supply expenses increased 1 percent for the six months ended June 30,1994 over the same period in 1993 due primarily to such purchases from independent power producers. Transmission expenses were essentially unchanged in the second quarter of 1994 as compared to the same period in 1993. Transmission expenses decreased 4.4 percent for the six months ended June 30, 1994 compared to the same period in 1993 primarily due to the restructuring of a series of transmission contracts. Other operating expenses increased 4.6 percent in the second quarter of 1994 over the same period in 1993 primarily due to a settlement with a former insurance carrier which resulted in a one-time offset of $359,000 to such expenses in 1993. Other operating expenses increased 5.3 percent for the six months ended June 30, 1994 over the same period in 1993 for the same reason. Maintenance expenses increased 11.1 percent in the second quarter of 1994 over the same period in 1993 primarily due to a scheduled increase in plant maintenance. Maintenance expenses increased 16.5 percent for the six months ended June 30, 1994 over the same period in 1993 for the same reason. Depreciation and amortization expenses increased 4.7 percent in the second quarter of 1994 over the same period in 1993, due to an increase in utility plant additions. Depreciation and amortization expenses increased 6.1 percent for the six months ended June 30, 1994 over the same period in 1993 for the same reason. Taxes other than income taxes increased 3.7 percent in the second quarter of 1994 over the same period in 1993, primarily due to an increase in property taxes. Taxes other than income taxes increased 4.7 percent for the six months ended June 30, 1994 over the same period in 1993 for the same reason. INCOME TAXES Income taxes were higher in the second quarter of 1994 compared to the same period in 1993, primarily due to greater taxable income. Income taxes were lower for the six months ended June 30, 1994, compared to the same period in 1993, primarily due to lower taxable income resulting from the Supreme Court decision reducing income in the first quarter of 1994. OTHER INCOME Other income more than doubled in the second quarter of 1994 as compared to the same period in 1993, primarily due to a $560,000 increase in earnings generated by Mountain Energy, Inc. Other income increased 51.1 percent for the six months ended June 30, 1994 over the same period in 1993 due primarily to increases in earnings generated by Green Mountain Propane Gas Company and Mountain Energy, Inc. of $420,000 and $300,000, respectively. INTEREST CHARGES Interest charges increased 6.3 percent in the second quarter of 1994 over the same period in 1993 primarily due to interest charges related to the sale of $20 million of the Company's first mortgage bonds in November 1993 and an increase in short-term debt outstanding during the period. Interest charges increased 6.2 percent for the six months ended June 30, 1994 over the same period in 1993 for the same reasons. LIQUIDITY AND CAPITAL RESOURCES For the six months ended June 30, 1994, construction and conservation expenditures totaled $8.2 million. Such expenditures in 1994 are expected to be approximately $20.0 million, principally for expansion and improvements of the Company's transmission and distribution plant and for conservation measures. The Company anticipates issuing additional shares of common stock in 1995. The Company has not determined the date or the amount of the stock issuance. GREEN MOUNTAIN POWER CORPORATION June 30, 1994 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings See Notes 3, 4 and 5 of Notes to Consolidated Financial Statements ITEM 2. Changes in Securities NONE ITEM 3. Defaults Upon Senior Securities NONE ITEM 4. Submission of Matters to a Vote of Security Holders At the Annual Shareholder's Meeting held May 19, 1994, shareholders elected the nominees listed below as Directors of the Company. The voting results are set forth below. Election of Directions Total Votes Total Votes Nominee For Withheld - - - -------- ----------- ----------- Robert E. Boardman 3,797,994 38,432 Nordahl L. Brue 3,796,458 39,968 William H. Bruett 3,799,203 37,223 Merrill O. Burns 3,799,229 37,197 Lorraine E. Chickering 3,783,356 53,070 John V. Cleary 3,799,787 36,639 Richard I. Fricke 3,790,578 45,848 Douglas G. Hyde 3,800,372 36,054 Euclid A. Irving 3,786,912 49,514 Martin L. Johnson 3,789,687 46,739 Ruth W. Page 3,787,412 49,014 Thomas P. Salmon 3,794,764 41,662 ITEM 5. Other Information NONE ITEM 6. (a) EXHIBITS 10-d-1e Amendment No. 94-1 to the Amended and Restated Deferred Compensation Plan for Officers. 10-d-12 Green Mountain Power Corporation Officer Compensation Program, Highlights Brochure / Program Document. (b) REPORTS ON FORM 8-K Form 8-K was not required to be filed during the current quarter GREEN MOUNTAIN POWER CORPORATION 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. GREEN MOUNTAIN POWER CORPORATION (Registrant) Date: August 11, 1994 /s/ E. M. Norse E. M. Norse, Vice President, Chief Financial Officer and Treasurer Date: August 11, 1994 /s/ G. J. Purcell G. J. Purcell, Controller EX-1 2 EXHIBIT 10-D-1E TO FORM 10-Q FOR QUARTER ENDED JUNE 30, 1994 EXHIBIT 10-d-1e Amendment No. 94-1 To The Deferred Compensation Plan For Certain Officers As Amended and Restated Effective July 16, 1993 ______________________________________________________ Effective May 19, 1994, Paragraph 3(a) of said Plan shall be amended to read as follows: ******************** 3. Participant's Election "For the purpose of this plan, "compensation" shall mean the salary paid by the Company to said Participant as an officer of the Company, including base salary and the cash amount of any variable compensation (including any amounts thereof, which a Participant elects to defer under this Plan, but not including amounts credited to gross pay, if any, under the Company's automobile policy)." ******************** In witness whereof, the Company has caused this Amendment to be executed by its duly elected officer this 1st day of June 1994. GREEN MOUNTAIN POWER CORPORATION By: /s/ Douglas G. Hyde _________________________________ Its CEO and President Attest: /s/ Donna S. Laffan _______________________ Witness (seal) (Board of Directors: 5/19/94) EX-2 3 EXHIBIT 10-D-12 TO FORM 10-Q FOR QUARTER ENDED JUNE 30, 1994 EXHIBIT 10-d-12 Green Mountain Power Corporation Officer Compensation Program Highlights Brochure/Program Document Plan Year 1994 Table of Contents Page Preamble 1 Purpose of Program 1 Participants 1 Effective Date 1 Definitions 2 Program Components 3 Base Salary 3 Variable Compensation 5 Determination of Award 7 Variable Compensation Award Payment 7 Program Administration 8 Appendix 9 Preamble This document describes the Officer Compensation Program for Green Mountain Power Corporation ("GMP" or "the Company"). The program is intended to assure that total compensation is competitive in the marketplace and promotes the Company's strategic objectives. Purpose of Program The purpose of GMP's Officer Compensation Program is to: o ensure that base compensation compares favorably with regard to organizations competing for similar talent; o provide an opportunity for officers to share in the success of GMP by linking a portion of compensation (variable compensation) to corporate performance results; o encourage a longer-term view by paying part of an earned variable compensation award in deferred/restricted stock; and o foster and reinforce teamwork among officers. Participants All senior officers of GMP are eligible to participate in this program Effective Date The stock award provisions contained herein shall be effective upon shareholder and other required regulatory approval. The program is otherwise effective January 1, 1994. Definitions The following definitions pertain to the program. Circuit Breaker - a performance level below which no variable compensation will be paid regardless of performance against the corporate measures. For this program, no awards will be paid unless earnings, less provision for awards, are greater than dividends paid in the year for which variable compensation is to be awarded. Compensation Committee - the Compensation Committee of the Board of Directors. Market Average - the average of salaries paid in the marketplace for positions similar to those at GMP. Market Range - a range running from 10% below to 10% above the market average. Marketplace - Companies that are determined by GMP to be those competing for similar talent. Depending on the position within GMP, marketplace companies can be utilities, general industry -- local, regional, national, or any combination thereof. Maximum - the maximum or optimal level of corporate performance with respect to a corporate performance measure. This determination will be applied separately to each performance measure. No variable compensation with respect to a performance measure will be paid in excess of the maximum level indicated. Officer Compensation Program - the compensation program, which consists of base salary and the opportunity to earn variable compensation. Organization Bands - tiers within which officer positions are clustered, to reflect the nature and scope of the jobs, reporting relationships, and the like. Peer Companies - a select group of utilities against which GMP's performance will be measured. Performance Measure - a critical factor used to measure the success of the business. Program Year - GMP's fiscal year. Restricted Stock Grants - the portion of the variable compensation award paid to officers in the form of GMP common stock that will be subject to two restrictions of a five (5) year duration: (1) no transferability; and (2) forfeiture of the stock upon termination of employment with the Company (except for retirement, death or disability). During the five- year restriction period, dividends will be paid and officers will have voting rights. The value of restricted stock is taxable when the restrictions lapse (after five years, or earlier in the case of the officer's retirement, disability or death). The restriction period begins on the date the awards are granted. Stock Grants - the portion of the variable compensation award paid to officers in the form of shares of GMP common stock. These shares are the property of the officer upon grant and may be retained or sold. Upon grant, shares are subject to current taxation. Target - the desired level of corporate performance with respect to a performance measure. This determination will be applied separately for each performance measure. Threshold - the acceptable level of corporate performance with respect to a performance measure. This determination will be applied separately to each performance measure. No variable compensation with respect to a performance measure will be paid unless the threshold level is attained. Total Compensation - an amount comprised of base salary and variable compensation. Variable Compensation - compensation that is earned based on the achievement of corporate performance objectives and that may be paid in cash, stock grants, or restricted stock grants. Program Components The Officer Compensation Program is comprised of two compensation components: o Base Salary o Variable Compensation Base Salary Each officer is paid a base salary intended to be competitive with base compensation paid for similar positions in the marketplace. Variable Compensation Each officer is eligible to earn additional compensation when GMP's performance meets or exceeds various performance objectives. Base Salary Base salaries are intended to provide a competitive rate of fixed compensation. Base salary levels will be assessed by compiling and analyzing salary information from various published survey sources on an annual basis. Survey sources include: o Mercer Finance, Accounting & Legal Compensation Survey o Wyatt Top Management Report o Edison Electric Executive Compensation Survey Within one year after the adoption of the program, base salaries are intended to be managed to the market average (in any event, within a plus or minus 10% range around the market average) as determined from the survey analysis. The average and the range may or may not change from year to year depending on movement in the market and, therefore, it is possible that base salaries may not be increased annually. Appropriate adjustments will be made in May of each year. Actual base compensation within the market range will depend on internal equity, overall scope of responsibilities of the position, recruitment needs, and significant individual performance variations. The market ranges have been incorporated into three organization bands (in lieu of job grades). These bands reflect the nature of the positions and their impact on the organization. Additionally, these bands signify varying levels of participation in the variable compensation component of the program. The band assignments are determined on the basis of survey data and the role of the position. Band Position Role _____ _________________________ _________________ A President and CEO Stragetic Senior VP & COO B VP Finance & CFO Strategic VP Law & Administration VP External Affairs & Customer Service VP Planning C Controller Strategic/Tactical AVP Engineering AVP Human Resources AVP Electric Operations Assistant General Counsel Assistant Treasurer Variable Compensation The purpose of the variable compensation component of this program is to tie compensation directly to the achievement of key corporate-wide objectives. Awards earned will be paid in cash, stock grants, and restricted stock as deemed appropriate by the Compensation Committee of the Board of Directors. The initial variable award payments will be made as set forth below. This award delivery feature is intended to motivate officers toward the annual attainment of critical corporate objectives consistent with the need to manage GMP to achieve longer-term success. Variable Compensation Award Opportunities Each band has a different variable compensation opportunity as noted in the following table. Award Table (AT) ___________________________________________________ Band Variable Cash Opportunities as a % of Base Salary ___________________________________________________ Threshold Target Maximum ___________________________________________________ A 25% 50% 75% B 17.5% 35% 52.5% C 12.5% 25% 37.5% ___________________________________________________ Performance Measures - Establishment At the beginning of each year, appropriate corporate performance measures will be determined for purposes of generating the variable compensation award. These measures are expected to remain in substantially the same form year-to-year. They may change, however, as GMP revisits its strategic and operational plans. The measures are: o Return on Equity o Total Shareholder Return o Rates o Customer Satisfaction; and o Reliability Performance objectives associated with these measures are established for each fiscal year by the Compensation Committee and reviewed by the Board of Directors. (See appendix for measures and specific objectives for 1994.) After the close of each year, the Compensation Committee, with input from the CEO, will determine the degree to which these performance objectives were accomplished to determine if variable cash awards are to be paid. If the threshold level of performance is not met, an award will not be paid with respect to that specific performance measure. In addition, the program incorporates a circuit breaker to protect shareholder investment. The circuit breaker ensures that awards will not be paid unless earnings, after subtracting the variable awards, are greater than dividends paid in the year for which variable compensation is to be awarded. Performance Measures - Individual Performance Assessment Individual performance may, on an exceptions basis, be taken into consideration in determining the final award. However, the maximum shown in Table AT cannot be exceeded. Performance Measures - Weighting The performance measures will be weighted each year to reflect the strategic plan and the impact each organization band/officer position has on performance. The number of measures used will be limited to ensure that the significance of the measures will not be diluted (weights less than 10% cannot be used). The performance measures will be weighted as noted in the Appendix. Determination of Award An award will be determined in accordance with the following example. Assume: o Participant = Officer in Band B o Base Salary = $100,000 o Individual Performance = meets expectations o Circuit Breaker = achieved required level Performance Performance Award % Adjusted Award % Measure Weight Results (Table AT) Weight Time % ____________ ______ __________ __________ _______________ ROE 30% 75% ile 35% 10.5% TSR oD&P 15% Threshold 17.5% 2.625% oSelect 15% Threshold 17.5% 2.625% Rates 20% 80% ile 35% 7.0% Customer Satisfaction 10% 80% 35% 3.5% Reliability oSAII 3.3% Threshold 17.5% .583% oSAIFI 3.3% Threshold 17.5% .583% oCAIDI 3.3% Threshold 17.5% .583% _____________________________________________________ Total Award % = 28% Award = $28,000 _____________________________________________________________ Variable Compensation Award Payment An award earned will be paid in cash and, subject to shareholder and required regulatory approval, stock grant and restricted stock grant in accordance with the following schedule: Band Cash Stock Grant Restricted Stock A 1/4 1/4 1/2 B&C 1/3 1/3 1/3 The Compensation Committee may make changes in this schedule, subject to review by the Board. Cash The cash portion of the award will be paid in a separate check. Stock Grants The stock grant portion of the award will be paid in shares of GMP common stock. The number of shares will be determined by dividing the portion of the award to be paid in stock by the closing stock price on the day the Board authorizes variable compensation payments (i.e., the annual meeting). The number of shares so determined will be rounded up to the nearest full share. Relevant taxes (e.g., federal, FICA, State), based on the cash and stock grant portions of the award, will be withheld from the payment. Restricted Stock The grant of restricted stock will be made upon execution of an agreement between the officer and the Company that will provide, for a period of five (5) years from the date of the grant, that: (a) the shares will not be transferable; and (b) the shares will be forfeited by the officer upon termination of employment with GMP, except where the termination of employment results from retirement, disability or death. The number of restricted stock shares to be awarded will be determined as described immediately above with respect to stock grants. Program Administration The program will be administered by the Chief Executive Officer with approval of the Compensation Committee. The Compensation Committee will review the operation of the program no less frequently than annually and, as it deems necessary, recommend appropriate actions to the Board of Directors. The Board of Directors will have the full power and authority to: o Interpret the program o Approve participants o Act on the CEO's recommendations o Amend or terminate the Program, subject to required shareholder and regulatory approval o Approve the CEO's award Participation in the program does not confer any right or privilege regarding continued employment with GMP upon an officer . Payment of the cash and, subject to required shareholder and regulatory approval, the stock grant portions, will be made during the second quarter following the end of the program year. Participants must be employed on the date the award is paid in order to receive an award unless the participant has retired, is disabled or is deceased, or the Compensation Committee determines that the circumstances under which the participant terminated employment warrant special consideration. Payments of variable compensation awards will not affect an officer's levels of entitlement to participate in other benefit plans unless expressly stated in documentation for such plans existing as of January 1, 1994. The program will be administered in accordance with the laws of the State of Vermont. Appendix Performance Measures -- Weights o Return on Equity 30% o Total Shareholder Return 30% o Rates 20% o Customer Satisfaction 10% o Reliability 10% Performance Measures -- Objectives The objectives for 1994 for each of the performance measures are: o Return on Equity -- The peer group is the Duff & Phelps 90 -- To achieve threshold performance, GMP's ROE for electric operations must be equal to or greater than the allowed ROE level, or equal to or greater than 60% of the peer group -- Target level is equal to or greater than 75% of the peer group -- Maximum performance is equal to or greater than 90% of the peer group o Total Shareholder Return -- Performance is measured using two different peer groups: the Duff & Phelps 90, and a select peer group. The select group includes: __ Atlantic Energy __ Bangor-Hydro __ Black Hills __ Central Hudson __ Central Vermont Public Service __ Eastern Utilities Associates __ Empire District __ Idaho Power __ Minnesota Power & Light __ Otter Tail Power -- Total Shareholder Return (TSR) is defined as dividends plus capital appreciation using a three-year rolling average -- To achieve threshold performance, GMP's TSR must be in the top half of the peer group -- Target performance is equal to or greater than 60% of the peer group -- Maximum performance is equal to or greater than 70% of the peer group o Rates -- Performance is measured against 10 New England utilities. They are: __ Central Maine Power __ Bangor-Hydro __ Public Service of New Hampshire __ Central Vermont __ Boston Edison __ Commonwealth Energy __ Massachusetts Electric __ Connecticut Power & Light __ United Illuminating __ Narragansett Electric -- To achieve threshold performance, GMP's rates must be equal to or lower than 70% of the peer group -- Target performance is achieved when GMP's rates are equal to or lower than 80% of peer group -- Maximum performance is reached when GMP's rates are lowest or second lowest among the peer group o Customer Satisfaction -- Performance is measured using two surveys (i.e., Commercial/Industrial, Residential) with respect to the following aspects of customer satisfaction: reliability of service, responsiveness to trouble calls, responsiveness to customer inquiries, accuracy of customers' bills, effectiveness of telephone communications, effective delivery of DSM services. -- To achieve threshold performance, 70% or more of customers must indicate satisfaction -- Target performance is achieved when 80% or more of customers indicate satisfaction -- Maximum performance is reached when 90% or more indicate satisfaction o Reliability -- Performance is measured using three indices: __ System average interruption index __ System average interruption frequency index __ Customer average interruption duration index -- To reach threshold performance, GMP's performance must improve 5% or more from that achieved in the previous year -- Target performance is 10% or greater improvement from the previous year -- Maximum performance is 12% or greater improvement from the previous year -----END PRIVACY-ENHANCED MESSAGE-----