-----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, RTeXSaWUEE16/N4Rwa2r2zSt38J1ZWHOoREq3pk47C2GIDEy66Ct0J8AbTgeunOZ 5ztAuXgCvYcPyzsySppq0w== 0000074778-95-000002.txt : 19950615 0000074778-95-000002.hdr.sgml : 19950615 ACCESSION NUMBER: 0000074778-95-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950317 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORANGE & ROCKLAND UTILITIES INC CENTRAL INDEX KEY: 0000074778 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 131727729 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04315 FILM NUMBER: 95521655 BUSINESS ADDRESS: STREET 1: ONE BLUE HILL PLZ CITY: PEARL RIVER STATE: NY ZIP: 10965 BUSINESS PHONE: 9143526000 MAIL ADDRESS: STREET 1: ONE BLUE HILL PLAZA CITY: PEARL RIVER STATE: NY ZIP: 10965 FORMER COMPANY: FORMER CONFORMED NAME: ROCKLAND LIGHT & POWER CO DATE OF NAME CHANGE: 19681202 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required) For the fiscal year ended December 31, 1994 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from to Commission file number 1-4315 ORANGE AND ROCKLAND UTILITIES, INC. (Exact name of registrant as specified in its charter) New York 13-1727729 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Blue Hill Plaza, Pearl River, New York 10965 (Address of principal executive offices) (Zip Code) (914) 352-6000 (Registrant's telephone number, including area code) Common Stock, $5 Par Value -- New York Stock Exchange, Inc. (Securities registered pursuant to Section 12(b) of the Act) Preference Stock, No Par Value (Securities registered pursuant to Section 12(g) of the Act) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 At February 28, 1995, the approximate aggregate market value of the voting stock held by nonaffiliates of the registrant was $434,547,731* At February 28, 1995, the registrant had 13,632,870 shares of Common Stock ($5 par value) outstanding. (Continued) UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Continued from first page) ORANGE AND ROCKLAND UTILITIES, INC. (Exact name of registrant as specified in its charter) Documents incorporated by reference: Annual Report to Shareholders for the year ended December 31, 1994 incorporated in Part I, Part II and Part IV to the extent described therein. The Company's definitive Proxy Statement in connection with the 1995 Annual Meeting of Common Shareholders incorporated in Part III to the extent described therein. * For purposes of this calculation, it is assumed that only directors and officers of the registrant are affiliates of the registrant. 0064O.wp TABLE OF CONTENTS Page PART I Item 1. Business General Development of Business 1 Financial Information about Industry Segments 1 Narrative Description of Business: 1 Principal Business 1 Events Affecting the Company 2 Electric Operations 3 Gas Operations 9 Diversified Activities 11 Construction Program and Financing 13 Regulatory Matters 16 Utility Industry Risk Factors 19 Competition 20 Marketing 21 Environmental Matters 21 Research and Development 24 Franchises 24 Employee Relations 25 Item 2. Properties 26 Item 3. Legal Proceedings 28 Item 4. Submission of Matters to a Vote of Security Holders 37 Executive Officers of the Registrant 38 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 39 Item 6. Selected Financial Data 39 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Item 8. Financial Statements and Supplementary Data 40 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 40 PART III Item 10. Directors and Executive Officers of the Registrant 40 Item 11. Executive Compensation 40 Item 12. Security Ownership of Certain Beneficial Owners and Management 40 Item 13. Certain Relationships and Related Transactions 40 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 41 Signatures 47 Report of Independent Public Accountants on Financial Statement Schedules 49 Consent of Independent Public Accountants 49 -i- PART I Item 1. Business General Development of Business: Orange and Rockland Utilities, Inc. (the "Company") is a New York corporation, with its principal office at One Blue Hill Plaza, Pearl River, New York 10965 (telephone number 914-352-6000), which was formed originally under the name Rockland Light and Power Company on May 21, 1926 through the consolidation of a company having the latter name (organized in 1899), Catskill Power Corporation and Orange County Public Service Company, Inc. Its present name was adopted on February 28, 1958, when The Orange and Rockland Electric Company was consolidated with Rockland Light and Power Company. The Company has two wholly owned utility subsidiaries, Rockland Electric Company ("RECO"), a New Jersey corporation, and Pike County Light & Power Company ("Pike"), a Pennsylvania corporation. The Company has three wholly owned non-utility subsidiaries, O&R Energy Development, Inc. ("ORED"), a Delaware corporation, Clove Development Corporation ("Clove"), a New York corporation and O&R Development, Inc. ("ORD"), a Delaware corporation. RECO has a wholly owned non-utility subsidiary, Saddle River Holdings Corp. ("SRH"), a Delaware corporation. SRH has two wholly owned non-utility subsidiaries, NORSTAR Holdings, Inc. ("NHI") (formerly O&R Energy, Inc.) and Atlantic Morris Broadcasting, Inc., both Delaware corporations. NHI has two wholly owned non-utility subsidiaries, Millbrook Holdings, Inc. and NORSTAR Management, Inc. ("NMI"), both Delaware corporations. NMI is the sole general partner of a Delaware limited partnership, NORSTAR Energy Limited Partnership. The businesses of the non-utility subsidiaries are described under the subheading "Diversified Activities" in this Item 1. Financial Information about Industry Segments: Consolidated financial information regarding the Company's principal business segments, Electric Operations, Gas Operations and Diversified Activities is contained in Note 13 of the Notes to Consolidated Financial Statements - "Segments of Business" on page 32 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Narrative Description of Business: Principal Business The Company and its utility subsidiaries supply electricity and gas to a territory covering approximately 1,350 square miles. The eastern boundary of the Company's service territory extends along the west bank of the Hudson River from a point in New Jersey six miles north of the George Washington Bridge northerly for approximately 37 miles to a point in New York a short distance north of the United States Military Academy at West Point. From the Hudson River, the Company's territory in New York State extends westward to the Delaware River, embracing all of Rockland County, most of Orange County and a part of Sullivan County. In New Jersey, RECO supplies electricity to the northern parts of Bergen and Passaic Counties and small areas in the northeastern and northwestern parts of Sussex County. Pike supplies electricity and gas to the northeastern corner of Pike County, Pennsylvania. As of December 31, 1994, the Company and its utility subsidiaries furnished electric service to approximately 260,000 customers in 96 communities with an estimated population of 666,000 and gas service to approximately 111,000 customers in 57 communities with an estimated population of 470,000. There have been no significant changes in either the population of the Company's service territory or in the number of customers served since December 31, 1993. At that time, electric service was provided to approximately 257,000 customers in 96 communities with an estimated population of 656,000 and gas service was provided to approximately 109,000 customers in 57 communities with an estimated population of 463,000. At December 31, 1994 and 1993, 95% of the Company's residential gas customers used gas as their major source of space heating fuel. While the territory served is predominantly residential, the Company and its utility subsidiaries also serve a number of commercial and industrial customers in diversified lines of business activities from which significant electric and gas revenues are derived. No customer accounts for more than 10% of either gas or electric sales. The business of the Company and its utility subsidiaries is seasonal to the extent that sales of electricity are higher during the summer, mainly due to air conditioning requirements, and sales of gas are greater in the winter months, primarily as a result of space heating requirements. Events Affecting the Company On August 16, 1993, the Rockland County, New York District Attorney (the "District Attorney") charged a then Vice President of the Company with grand larceny, commercial bribery and making illegal political contributions and commenced a related investigation of the Company. Two other former employees who had reported to the Vice President were also charged with grand larceny. The events which followed these actions include the formation of a special committee of the Company's Board of Directors and the conduct of an independent investigation under the supervision of that Committee, investigations conducted by both the District Attorney and various utility regulatory agencies, various legal actions brought both by and against the Company, the refund of misappropriated funds to the Company's customers and the effects on the Company's rate filings. Details concerning these events, including the cost incurred for legal counsel, accounting services, and other professional and consultative services related to the investigations and their effect on the Company's results of operations, are contained in the "Review of the Company's Results of Operations and Financial Condition" under the captions "Results of Operations", "Events Affecting the Company", "Rate Activities" and "Other Income and Deductions and Interest Charges" and in Note 12 of the Notes to Consolidated Financial Statements under the caption "Legal Proceedings" beginning on pages 9 and 28, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Reference is also made to Item 3, "Legal Proceedings", of this Form 10-K Annual Report. Electric Operations Generating Capacity and Purchased Power. As described more fully in Item 2 of this Form 10-K Annual Report under the subheading "Electric Generating Facilities", the capacity of the Company's plants provides the Company with a net generating capacity of 1,032 megawatts ("Mw") in the winter and 1,020 Mw in the summer. Additionally, the Company purchases capacity, as more fully described below, to satisfy its reserve requirements, as well as any demand in excess of its installed capacity. The electric energy which RECO and Pike distribute to their customers is supplied by the Company. The maximum historical one-hour demand for the Company and its utility subsidiaries occurred on July 8, 1993 and was 1,037 Mw. Additional statistics regarding electric operations are contained under the caption "Operating Statistics- Electric" on page 34 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. In addition to the energy produced at its generating facilities, the Company, through various transmission interconnections, purchases both capacity and energy from other utilities when needed to meet load and reserve requirements and also when such power is available at a price lower than the cost of production. The Company maintains transmission interconnections with Central Hudson Gas and Electric Corporation ("Central Hudson"), Public Service Electric and Gas Company ("PSE&G") and Consolidated Edison Company of New York, Inc. ("Con Ed"). Through these interconnections, and as a member of the New York Power Pool ("NYPP"), the Company can exchange power directly with the above utilities and, through the facilities of other members of the NYPP, the Company can exchange power with all members of the NYPP and with utilities in pools in neighboring states. In addition, members of the NYPP are able to coordinate inter-utility transfers of bulk power in order to achieve economy and efficiency, cooperate in long range planning of generation and transmission facilities, coordinate inter- utility operating and emergency procedures to assure reliable, adequate and economic electric service throughout the state and provide for the equitable sharing of the resulting benefits and costs. Through the NYPP control center, the Company is able to purchase power in order to optimize its generation-interchange mix, using the lowest cost energy available to the Company in the interconnected system. By agreement with the NYPP, the Company must maintain capacity reserves including firm capacity purchases of not less than 18% of its peak load. During 1994, the Company had agreements in place for both capacity and energy purchases. Capacity purchases included an agreement with PSE&G which provided between 75 Mw and 150 Mw of capacity, an agreement with Pennsylvania Power & Light Company ("PP&L") which provided between 50 Mw and 125 Mw of capacity, an agreement with the New York Power Authority (the "NYPA") for 25 Mw of year-round capacity from the Blenheim-Gilboa pumped storage facility (the "Gilboa Facility") and an agreement with Central Hudson for 50 Mw of capacity which expired at the end of April 1994. During 1994 the Company met approximately 32% of its overall power requirements by aggressively pursuing economic power purchases. These purchases, which were made pursuant to short-term purchase agreements and interchange agreements, resulted in lower costs to the Company's customers. During 1994, the Company could have generated all of its customers requirements more than 99% of the time. At the time of the 1994 peak demand, the Company's installed capacity could have satisfied 98% of its power requirements. The use of purchased power under these circumstances reflects the Company's policy of supplementing it's electric generation with purchased power not only when needed to meet load requirements but also when such power is available at a cost lower than the cost of production. Details regarding the power purchases during 1994 are as follows: 1994 PURCHASED POWER Purchased From Megawatt hours(Mwh) Central Hudson Gas & Electric Corp. 67,485 Consolidated Edison Co. of N.Y. 18,250 Philadelphia Electric Co. 47,405 New York State Electric & Gas Corp. 222,559 General Public Utilities 87 New York Power Authority (1) 288,688 New York Power Pool 331,792 Niagara Mohawk Power Corp. 97,405 Public Service Electric & Gas Corp. 141,997 Pennsylvania Power & Light Company 96,671 Cogeneration and Small Power Producers 196,915 North American Energy Conservation 64,761 Total 1,574,015 ========= (1) The Company is party to an agreement with the NYPA regarding the purchase of peaking power from the Gilboa Facility. Pursuant to the agreement, the Company must replace the energy purchased from the Gilboa Facility at a ratio of three-to-two. During 1994, the Company purchased 33,576 Mwh from the Gilboa Facility and replaced 50,950 Mwh, for the net amount of (17,374) Mwh, which is included in the amount shown above. With regard to future purchases of capacity, contracts are in place with the NYPA, PP&L and PSE&G. The NYPA agreement for firm purchases from the Gilboa Facility, which provides for 25 Mw of year-round capacity, will be in effect through April 2015. The agreement with PP&L will provide capacity ranging between 10 Mw and 50 Mw through October 1995. In addition, a firm purchased power agreement with PSE&G will provide between 75 Mw and 300 Mw of capacity during the base contract term which extends through April 1998, with an additional 100 Mw available throughout the base contract term at the option of the Company. The contract also provides that at the option of the Company 400 Mw of additional capacity will be available from May 1998 through October 2000. Regarding future purchases of energy, the Company anticipates that agreements will continue to be in effect which will enable it to take advantage of economic power purchases on an as available, as-needed basis. Additional information regarding future power supply, particularly the status of capacity purchase contracts with Independent Power Producers and Qualifying Facilities, is contained under the caption "Future Energy Supply and Demand" in this Item 1. Information regarding future payments under capacity purchase contracts is contained in Note 12 of the Notes to Consolidated Financial Statements under the caption "Power Purchase Agreements" on page 29 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Fuel Supply. The Company's 1,032 Mw winter generating capacity is available from the following fuel sources: Coal, Oil Oil Gas Plant* & Gas & Gas Hydro Turbine Total (Megawatts) Lovett Plant Units 1, 2 & 3 102.0 102.0 Units 4 & 5 399.6 399.6 Hydro Plants Swinging Bridge, Mongaup, Rio and Grahamsville 43.8 43.8 Gas Turbine Plants Hillburn and Shoemaker 86.0 86.0 Bowline Point Plant Units 1 & 2 400.6 400.6 502.6 399.6 43.8 86.0 1,032.0 ===== ===== ==== ==== ======= *For a description of the Company's generating plants, see "Electric Generating Facilities" in Item 2 of this Form 10-K Annual Report. The availability and cost of fuels and the Company's choice of fuel in any particular circumstance are affected by a number of factors, the majority of which are beyond the control of the Company. These factors include the domestic and international fuel supply situation, environmental regulations, conservation measures and the availability of alternative fuels. The Company's principal generating plants use natural gas, coal or oil as their primary fuels. The Company has, however, reduced its dependence on oil through the use of coal as the primary fuel for the Lovett Plant's two largest generating units, the burning of increased volumes of natural gas in its boilers and the purchase of power from other systems. Electricity available for sale is a mix of Company generation by various fuel types, supplemented by purchased power when such power is available at a price lower than the price of generation or is needed to meet load requirements. Details for the years 1990 through 1994 are as follows: 1990 1991 1992 1993 1994 Gas 27% 22% 21% 16% 23% Coal 32 36 33 33 36 Oil 19 14 10 5 6 Hydro 4 3 13 4 3 Purchased Power 18 25 33 42 32 Total 100% 100% 100% 100% 100% ==== ==== ==== ==== ==== Gas - During 1994, the Company was able to use significant volumes of natural gas for boiler fuel at both its Lovett Plant and the Bowline Point Plant. It also expects to be able to use natural gas in the Lovett Plant and the Bowline Point Plant during 1995, whenever such gas is more economical than alternative fuels. In 1994, the Company used 2.8 billion cubic feet ("Bcf") and 8.5 Bcf of gas, respectively, at the Lovett Plant and the Bowline Point Plant. The annual average cost per thousand cubic feet ("Mcf") of natural gas burned in the Company's generating plants during each of the years ended December 31, 1990 through 1994 was $2.78, $2.64, $2.82, $3.01 and $2.53, respectively. This is equivalent to $2.69, $2.56, $2.74, $2.92 and $2.44, respectively, per million British Thermal Unit ("MMBTU"). Coal - The low sulfur coal (1.0 lbs. SO2 per MMBTU) used in Lovett Plant Units 4 and 5 is supplied to the Company primarily through a long term contract with Massey Coal Sales, Inc. ("Massey"), a short-term contract with Blue Crystal Coal Sales Co. ("Blue Crystal") and through spot market purchases, which accounted for approximately 50% of the Company's 1994 coal requirements. The Company has the right, under the coal purchase contracts, to suspend the purchase of coal if alternative fuel sources become less expensive. The coal is washed and, as such, is low in ash (typically 7%) and high in BTU content (26 MMBTU's per ton). The annual average cost per ton of coal, including delivery charges, consumed at the Lovett Plant during each of the years ended December 31, 1990 through 1994 was $58.40, $56.57, $55.95, $55.25 and $53.15, respectively. This is equivalent to $2.25, $2.18, $2.16, $2.14 and $2.07, respectively, per MMBTU. During 1994 coal was the predominant fuel burned at the Lovett Plant, and the Company expects it to be the predominant fuel burned during 1995. Information regarding the Company's coal supply contracts is contained in Note 12 of the Notes to Consolidated Financial Statements under the caption "Coal Supply Contracts" on page 29 of the 1994 Annual Report to Shareholders which material is incorporated by reference in this Form 10-K Annual Report. Oil - The Company does not anticipate purchasing any significant quantity of fuel oil for its Lovett Plant. Con Ed has undertaken the supply of #6 fuel oil (0.37% maximum sulfur content by weight) to the Bowline Point Plant, which is supplied under a contract between Con Ed and the Company. Pursuant to that contract, Con Ed has also undertaken to provide a backup oil supply for the Company's Lovett Plant under certain conditions. The Company believes that it will be able to secure sufficient oil supplies to meet the total requirements of #6 fuel oil for the calendar year 1995. The annual average cost per barrel of oil burned in the Company's generating plants during each of the years ended December 31, 1990 through 1994 was $23.73, $21.23, $20.43, $21.27 and $19.99, respectively. This is equivalent to $3.81, $3.40, $3.26, $3.39 and $3.20, respectively, per MMBTU. Hydro - Water for the operation of the Company's Mongaup River Hydro Plants is controlled by the Company through the ownership of the necessary land in fee or through easements. In the case of the Grahamsville Plant, water is obtained under contract with the City of New York Board of Water Supply. This contract, which expires in 2005, entitles the Company to 8.1 Bcf of free water each year. Water in excess of 8.1 Bcf, which amounted to 8.8 Bcf during 1994, is billed at varying rates based on an average cost of all fuels used in power generation. Purchased Power - The Company's practice regarding purchased power is to supplement the Company's electric generation by purchasing both capacity and energy when needed to meet load and reserve requirements and also when such power is available at a price lower than the cost of production. Details regarding purchased power are contained under the captions "Generating Capacity and Purchased Power" and "Future Energy Supply and Demand" in this Item 1. In addition, information regarding the cost of electric energy is contained under the caption "Electric Energy Costs" in the "Review of the Company's Results of Operations and Financial Condition" on page 11 in the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Future Energy Supply and Demand. The Company continues to be committed to meeting customer energy needs by providing reliable energy service at the lowest prudent cost and in an environmentally sound manner. Through its Integrated Resource Plan the Company has responded to the changes that have occurred in the utility industry and has incorporated a significant number of conservation and demand reduction alternatives as well as purchased power into its energy strategy. The Demand Side Management ("DSM") program involves efforts to control electric peak demand and energy usage, and addresses the need to improve plant utilization by making customer demand more complementary over time to the available capacity. DSM programs are available to all market segments. Through December 31, 1994, DSM efforts have reduced the annual need for increased generating capacity and energy by 123.9 Mw and 193,864 Mwh, respectively, both through programs administered by the Company and by RECO as well as through contracts with outside energy service companies pursuant to the competitive bidding program. The New York State Public Service Commission ("NYPSC") has consistently authorized the recovery of DSM costs, and in New Jersey, RECO's DSM costs are recoverable on a current basis. Additional information regarding the recovery of DSM costs, including the Company's achievement of certain DSM related goals and their impact on the 1994 results of operations is contained under the captions "Electric Operating Revenues and Sales" and "Rate Activities" in the "Review of the Company's Results of Operations and Financial Condition" on pages 10 and 14, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. The Company's Supply-Side Management program involves the acquisition of future increments of capacity and energy as needed to meet anticipated load and reserve requirements and, in particular, to reduce the cost of electricity to the Company's customers. The firm capacity agreements which are currently in place provide the Company with between 135 Mw and 375 Mw of capacity through 1998 with an additional 400 Mw of capacity available at the option of the Company through the year 2000. Regarding future purchases of energy, the Company will continue to take an aggressive posture in securing economic increments of purchased power, particularly through interchange transactions, short-term firm contracts and spot purchases. The status of the long-term power supply agreements between the Company and certain independent power producers has been affected by the abundance of economic power supply which has become available and by general economic conditions. A summary of the status of these agreements is as follows: In 1990, the Company entered into a long-term power supply agreement ("Wallkill Agreement") with Wallkill Generating, L.P. ("Wallkill Generating"). The Wallkill Agreement was approved by the New Jersey Board of Regulatory Commissioners ("NJBRC"), now called the New Jersey Board of Public Utilities ("NJBPU"), in October 1991, and in July 1991 the Federal Energy Regulatory Commission ("FERC") approved the rates contained in the Wallkill Agreement. Pursuant to the agreement, Wallkill Generating, a limited partnership formed by PG&E and Bechtel Generating Company (now U.S. Generating Company), contracted to construct and operate a gas-fired combined cycle generating facility in the Town of Wallkill, N.Y. and sell 95 Mw of capacity and associated energy to the Company. The original target date for commercial operation of this project as set forth in the Wallkill Agreement was April 1994. Changing economic conditions, however, have rendered the contract prices increasingly uneconomic. Therefore, on November 25, 1994, the Company notified Wallkill Generating to stop work on the proposed generating facility and to commence buyout negotiations. These buyout negotiations are continuing. In 1990, the Company also entered into a long-term power supply agreement ("State Line Agreement") with State Line Power Associates Limited Partnership ("State Line"). Under the terms of the State Line Agreement, State Line contracted to construct and operate a gas-fired combined cycle generating facility in the Borough of Ringwood, New Jersey and sell 100 Mw of capacity and associated energy to the Company. In July 1992, the State Line Agreement was terminated by the Company for, among others things, State Line's failure to make a required milestone payment pursuant to specified contract terms. On August 3, 1992, State Line filed suit against the Company in the United States District Court for the Southern District of New York claiming that the Company had wrongfully terminated the State Line Agreement. On January 7, 1994, State Line and the Company settled all litigation relating to the State Line Agreement. In 1991, the Company entered into a long-term power supply agreement ("Harriman Energy Agreement") with Harriman Energy Partners, Ltd. ("Harriman Energy"), a limited partnership, the general partner of which is Destec Holdings, Inc. (formerly PSE, Inc.). Pursuant to the terms of the Harriman Energy Agreement, Harriman Energy contracted to construct and operate a gas-fired combined cycle generating facility in Harriman, New York and sell approximately 57 Mw of capacity and associated energy to the Company. Due to changing economic conditions which rendered the contract prices increasingly uneconomic, in November 1993 the Company entered into negotiations to terminate the Harriman Energy Agreement. On June 15, 1994, the parties reached agreement to terminate the Harriman Energy Agreement through a buyout. Information regarding the cost of terminating the State Line Agreement and the Harriman Energy Agreement is contained in Note 1 of the Notes to Consolidated Financial Statements under the caption "IPP Settlement Agreements" and information regarding future payments under capacity purchase contracts is contained in Note 12 of the Notes to Consolidated Financial Statements under the caption "Power Purchase Agreements" on pages 22 and 29, respectively of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Gas Operations The Company distributes purchased natural gas, supplemented at times of peak load by gas produced in its propane air gas plants. As of December 31, 1994, the gas distribution system included 1,697 miles of mains. The highest historical maximum daily gas sendout of 206,038 Mcf occurred on January 19, 1994. Additional statistics regarding gas operations are contained under the caption "Operating Statistics - Gas" on page 35 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Supply, Transportation and Storage. The Company has firm, long-term gas supply contracts with seven gas producers. Together these contracts account for all of the Company's base load gas requirements and include a contract with a Canadian producer which accounts for approximately 28% of firm contracted supply and expires in the year 2002. Contracts for the remaining 72% of the Company's required gas supply have been executed with six domestic producers. Three of these contracts are scheduled to expire between March 31 and October 31, 1995. The remainder have expiration dates ranging between 1996 and 2010. All of the gas supply contracts contain options for renewal and certain of the agreements contain "re- opener" provisions which allow the Company to modify price and operating terms under certain conditions. This flexibility will ensure the reliability of the Company's gas supply while allowing the Company to enhance its supply portfolio as market opportunities arise. In addition to its long-term contracted supply sources, the Company purchases spot gas from producers primarily for use in electric generation. During 1994, the Company made spot purchases of approximately 19.8 million Mcf of gas or 42% of the total gas supply. In addition to purchased gas, the Company manufactures gas at its propane air gas plants located in Middletown, Orangeburg and Suffern, New York which have a combined capacity of 30,600 Mcf per day of natural gas equivalent. This capacity, together with gas purchases under contracts between the Company and its suppliers, is expected to provide adequate peak day supplies to serve existing and projected new customers through the year 1998. Additional increments of new supply beyond this point are being negotiated. In addition to the gas supply contracts, the Company has provided for the transportation of gas through firm, long-term transportation agreements with four major pipeline companies: Tennessee Gas Pipeline Company ("Tennessee"), Columbia Gas Transmission Corporation ("Columbia"), Algonquin Gas Transmission Corporation ("Algonquin") and Texas Eastern Transmission Corporation ("Texas Eastern"). The earliest expiration date of any of these contracts is in the year 1996. The Company also has entered into interruptible transportation agreements with the same pipeline companies. All transportation contracts contain options for renewal. With regard to gas storage, the Company also has long-term gas storage contract arrangements with Tennessee, Columbia, Texas Eastern and National Fuel Gas Supply Corporation ("National Fuel"). The Tennessee, Columbia and Texas Eastern agreements include a provision for the transportation of the gas held in storage by these companies, and separate agreements with Tennessee and Columbia provide for firm transportation services for gas held in storage by National Fuel. The earliest expiration date of any of these storage contracts is 1996 and all storage contracts contain options for renewal. During 1993 the Company elected to secure capacity in an innovative gas storage project operated by Avoca Natural Gas Storage. The storage facility, which will be available in late 1997, uses leached-out caverns in underground salt beds to create a storage reservoir and is designed for fast withdrawal and refill capacity which will enhance the Company's ability to meet incremental peak day gas requirements. Columbia, which provides the Company with both transportation and gas storage services, filed for protection under Chapter 11 of the bankruptcy code during 1991. This action has not affected Columbia's ability to provide services under existing contracts while bankruptcy proceedings are in progress. As noted earlier, the Company's maximum daily sendout of gas occurred during January 1994 and amounted to 206,038 Mcf. This compares to the maximum daily gas delivery capacity of the Company's system of 225,839 Mcf which is available from the following sources: direct purchases - 119,567 Mcf; storage withdrawals - 75,672 Mcf; and Company manufactured gas - 30,600 Mcf. Additional information regarding gas supply and gas storage contracts is contained in Note 12 of the Notes to Consolidated Financial Statements under the caption "Gas Supply and Storage Contracts" on page 28 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Transportation for Others. The Company, through the provisions of FERC Order No. 436 concerning the transportation of natural gas, provides gas transportation services for end users in the Company's service territory who elect to obtain their own direct gas supplies. During 1994, approximately 5.6 million Mcf of gas were transported for such end users. Take-or-Pay Surcharge Costs and FERC Order No. 636 Transition Costs. As a result of a 1987 FERC order, as well as other legal and regulatory actions since that time regarding the pass-through of certain "take-or- pay" costs by gas suppliers, the Company has deferred approximately $2.8 million of gas surcharges through December 31, 1994. In addition, certain costs incurred by the gas pipeline companies in complying with FERC Order No. 636 have been approved by the FERC for allocation to distribution companies including the Company. It is currently estimated that the Company's obligation related to Order No. 636 transition costs will amount to $24.6 million. It is anticipated that transition costs incurred by the Company will be recoverable in gas rates to the extent such costs are deemed by the NYPSC to have been prudently incurred. Information regarding take-or-pay charges and FERC Order No. 636 transition costs is contained under the caption "Gas Energy Costs" in the "Review of the Company's Results of Operations and Financial Condition", in Note 1 of the Notes to the Consolidated Financial Statements under the caption "Rate Regulation" and in Note 12 of the Notes to Consolidated Financial Statements under the caption "Gas Supply and Storage Contracts" on pages 12, 21 and 28, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Reference is also made to Item 3, "Legal Proceedings" of this Form 10-K Annual Report. Diversified Activities Both the Company and RECO have certain non-utility subsidiaries which engage in the following diversified, non-regulated business activities: gas marketing, real estate development and oil and gas production. The Company's Consolidated Financial Statements, which are incorporated in this Form 10-K Annual Report by reference to the Company's 1994 Annual Report to Shareholders, include the results of operations of all diversified activities. In addition, the diversified activities are considered to be a reportable business segment, due to the fact that the gross operating revenues of the non-regulated business activities, which are primarily attributable to the gas marketing activities, account for more than 10 percent of the Company's total consolidated gross revenue. The nature of the gas marketing business is such, however, that the net earnings realized from this activity, and from all non-regulated activities combined, are not considered to be material. In addition, neither the assets of the non-regulated businesses nor the continued operation of the non-regulated business lines are material to the operations of the Company. For these reasons, the disclosure related to the Company's diversified activities, as prescribed by Regulation S-K, has, with few exceptions, been omitted from other sections of this Form 10-K Annual Report. Capital contributions to the non-utility subsidiaries by the Company and RECO are borne by the shareholders. Any losses, profits, or tax savings from investments in non-utility subsidiaries accrue to the shareholders and are not included in the cost of service for ratemaking purposes. A description of the non-utility subsidiaries of the Company and RECO follows. Saddle River Holdings Corp. ("SRH"). SRH, a wholly owned subsidiary of RECO, was established for the purpose of investing in non-utility business ventures and, through subsidiaries, is currently engaged in natural gas marketing and radio broadcasting. During 1994, gas marketing activities were conducted through a subsidiary, O&R Energy, Inc., which provided natural gas to industrial, commercial and institutional end users, gas distribution companies, gas marketing companies and electric generating facilities in 38 states, the District of Columbia and Canada. Effective February 28, 1995, O&R Energy, Inc.'s (now NORSTAR Holdings, Inc. ("NHI")) gas marketing activities were transferred to NORSTAR Energy Limited Partnership ("NORSTAR Partnership"), a Delaware limited partnership of which a subsidiary of NHI, NORSTAR Management, Inc., a Delaware corporation, is the general partner and Shell NORSTAR Inc. is the limited partner. Additional information regarding the NORSTAR partnership is contained in the "Review of the Company's Results of Operations and Financial Condition" under the caption "Diversified Activities" on page 12 of the 1994 Annual Report to Shareholders, which information is incorporated by reference in this Form 10-K Annual Report. A subsidiary of NHI, Millbrook Holdings, Inc., holds approximately twelve acres of non-utility real estate in Morris County, New Jersey. Broadcasting activities are conducted through Atlantic Morris Broadcasting, Inc., a subsidiary of SRH which owns radio stations WKTU (FM) in Ocean City, New Jersey, WABT (FM) in Dundee, Illinois, WALL (AM) and WKOJ (FM) in Middletown, New York and WCSO (FM) and WLPZ (AM) in Portland, Maine. During September 1994, the Company adopted a formal plan to sell the broadcasting properties. Additional information regarding the sale, which is expected to be completed during the second quarter of 1995, is contained in the "Review of the Company's Results of Operations and Financial Condition" under the caption "Diversified Activities", and in Note 1 of the Notes to Consolidated Financial Statements under the caption "Sale of Broadcast Properties" on pages 12 and 23 of the 1994 Annual Report to Shareholders, which information is incorporated by reference in this Form 10-K Annual Report. O&R Development, Inc. ("ORD"). ORD, a wholly owned subsidiary of the Company, was established to promote industrial and corporate development within the Company's service territory by providing improved sites and buildings. ORD's activities are aimed at attracting new business and industry to the Company's service territory, which would spread fixed costs for electricity and gas over a wider customer base. ORD owns the Interchange Commerce Center ("ICC Project"), a 300 acre tract of land in Orange County, New York. The ICC Project has governmental approvals for the development of 2.7 million square feet of light industrial, office, warehouse and retail space. Approximately 2,000 lineal feet of street and utilities have been installed, and two buildings totaling over 200,000 square feet have been completed and fully leased. During October 1994, ORD sold a twelve acre parcel of land to Metroplex Distributors which has begun construction of a 145,000 sq. ft. warehouse and bakery on the site. In addition, ORD has entered into a contract of sale with K-Mart Corporation for the sale of sixty eight acres of land. Clove Development Corporation ("Clove"). Clove, a wholly owned subsidiary of the Company, holds approximately 5,500 acres of real estate, located primarily in the Mongaup Valley region of Sullivan County, New York. Historically, Clove's revenues have been derived primarily from the sale of timber and sand, property rentals and periodic sales of land. Certain portions of Clove's property lend themselves to recreational development. Two small subdivisions have been developed and substantially sold off. A third development, Lakeside Forest at Swinging Bridge, is actively being marketed, with eight lots having been sold through 1994. O&R Energy Development, Inc. ("ORED"). ORED, a wholly owned subsidiary of the Company, is engaged in oil and gas production. Production activities are carried on through ownership interests in producing wells in Texas, Mississippi, Ohio and Pennsylvania. At December 31, 1994, ORED's net investment in producing properties was $390,000. Additional information regarding the non-utility subsidiaries of the Company and of RECO is contained in the "Review of the Company's Results of Operations and Financial Condition" under the caption "Diversified Activities", and in Note 1 of the Notes to Consolidated Financial Statements under the caption "Principles of Consolidation" and Note 13 - "Segments of Business", on pages 12, 21 and 32 respectively, of the 1994 Annual Report to Shareholders, which information is incorporated by reference in this Form 10-K Annual Report. Construction Program and Financing Construction Program. The construction expenditures, excluding allowance for funds used during construction ("AFDC"), of the Company and its utility subsidiaries for the period 1995 through 1999 are presently estimated at approximately $229.4 million, as set forth in the table below. The Company's construction program is under continuous review and the estimated construction expenditures are, therefore, subject to periodic revision to reflect, among other things, changes in energy demands, economic conditions, environmental regulations, construction delays, the level of internally generated funds and other modifications to the construction program. Forecasted Construction Expenditures (000's) 1995 1996 1997 1998 1999 Electric Production $22,900 $13,400 $ 8,200 $11,900 $10,500 Electric Transmission and Substation 5,000 1,700 1,300 2,100 1,600 Electric Distribution 20,600 20,600 16,300 15,400 16,400 Gas Plant 10,800 10,300 8,200 7,900 8,200 General Plant 2,200 1,900 6,000 2,700 3,300 Total Construction $61,500 $47,900 $40,000 $40,000 $40,000 The Company's forecasted construction expenditures for the five year period 1995 through 1999 consist primarily of routine production, transmission and distribution projects for capital replacements or system betterments and do not include any additions to generating capacity. The 1995 forecast does, however, contain forecasted environmental protection expenditures of $13.5 million which will be required in order to comply with regulations regarding reductions in nitrogen oxide emissions resulting from the Clean Air Act Amendments of 1990. Information regarding the Company's construction program is contained under the caption "Liquidity and Capital Resources" in the "Review of the Company's Results of Operations and Financial Condition" and under the caption "Construction Program" in Note 12 of the Notes to Consolidated Financial Statements on pages 13 and 28, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Financing. The Company has historically used short-term borrowings in the form of commercial paper to finance construction expenditures when such expenditures exceeded internally generated funds and to finance short-term working capital requirements. Short-term borrowings undertaken for construction expenditures are periodically repaid with internally generated funds and the proceeds of long-term debt and equity offerings. At December 31, 1994, the Company and its utility subsidiaries had unsecured bank lines of credit totaling $59 million. Commercial paper borrowings, which are supported by such credit lines, amounted to $29.4 million at year end. Additional information regarding the Company's short-term debt position is contained under the caption "Liquidity and Capital Resources" in the "Review of the Company's Results of Operations and Financial Condition" and in Note 8 of the Notes to Consolidated Financial Statements - "Cash and Short-Term Debt" on pages 13 and 25, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. The external financing activities of the Company and its utility subsidiaries during 1994 were limited to refinancing of certain pollution control revenue bonds and the issuance of approximately $3.9 million of common stock under the Company's Dividend Reinvestment and Stock Purchase Plan ("DRP") and Employee Stock Purchase and Dividend Reinvestment Plan ("ESPP"). Information regarding these items, as well as a description of the interest rate swap agreement which become effective during 1994 in connection with the pollution control revenue bond refinancing, is contained under the caption "Liquidity and Capital Resources" in the "Review of the Company's Results of Operations and Financial Condition" and in Note 7 of the Notes to Consolidated Financial Statements - "Long- Term Debt" on pages 13 and 24, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. The Company currently has no plans for the issuance of additional debt or equity securities and it is expected that capital requirements will be met primarily with funds from operations, supplemented with short term debt as required. However, the refinancing of the 9% Pollution Control Revenue Bonds, 1985 Series, which will become subject to call on August 1, 1995 is being evaluated. In addition, the Company has certain series of debt which will mature during 1997 and which may be refinanced at maturity. The non-utility subsidiaries of the Company and RECO also maintain certain lines of credit and undertake long and short-term borrowings or make investments from time to time. The non-utility long-term notes outstanding are borrowings made pursuant to several loan arrangements. At December 31, 1994, Atlantic Morris Broadcasting, Inc., a subsidiary of SRH had debt outstanding aggregating $267,000, the proceeds of which were used to make investments in broadcasting properties, and ORD had an intermediate term mortgage outstanding which amounted to $5.3 million. O&R Energy, Inc. (now NHI) had an available line of credit and standby letters of credit which together amounted to $15 million under which there were no borrowings at December 31, 1994. As of March 1, 1995, the available line of credit and standby letters of credit for O&R Energy, Inc. (now NHI) were terminated and all amounts owing thereunder were paid in full. In addition, on March 1, 1995, NORSTAR Partnership received an available line of credit of up to $25 million. Non-utility temporary cash investments amounted to $1.8 million at December 31, 1994. For a description of the non-utility subsidiaries of the Company and of RECO, see "Diversified Activities" in Item 1 of this Form 10-K Annual Report. Information regarding certain financial statistics of the Company is contained under the caption "Financial Statistics" on page 36 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Credit Ratings. The current ratings of the Company's principal securities and its commercial paper are as follows: Duff and Phelps Moody's Standard Credit Fitch Investors & Poor's Rating Investors Service,Inc. Corporation Company Service,Inc. First Mortgage Bonds A3 A- A+ A- Unsecured Debt Baa1 A- A A- Preferred Stock baa- BBB+ A- A- Commercial Paper P-2 A-2 D-1 F-2 The Company's credit ratings are not fixed, but rather are subject to periodic revision or withdrawal by the particular rating agency, and each rating should be evaluated independently of any other rating. The ratings assigned to the Company's securities by the rating agencies are not a recommendation to buy, sell or hold the Company's securities, but rather are assessments of the respective credit-worthiness of the Company's various securities by the rating agencies. The Company's bonds have an upper medium grade credit rating, its preferred stock has a lower medium grade credit rating and its commercial paper has an upper medium grade credit rating. Information regarding changes in the Company's credit ratings during 1994 is contained under the caption "Liquidity and Capital Resources" in the "Review of the Company's Results of Operations and Financial Condition" on page 13 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Regulatory Matters A description of the general character of rate regulation and its effect on the financial statements of the Company and its utility subsidiaries, including a disclosure of the Company's regulatory assets is contained in Note 1 of Notes to Consolidated Financial Statements under the caption "Rate Regulation" on page 21 of the 1994 Annual Report to Shareholders, which information is incorporated by reference in this Form 10-K Annual Report. State Regulation. The Company and its utility subsidiaries are subject to the jurisdiction of state commissions in their respective states of incorporation. The state commissions have the authority to regulate, among other things, rates, services, the issuance of securities and accounting and depreciation procedures. The Company is subject to the jurisdiction of the NYPSC, which covers approximately 77% of consolidated energy sales. RECO is subject to the jurisdiction of the NJBPU, which covers approximately 21% of consolidated energy sales. Pike is subject to the jurisdiction of the Pennsylvania Public Utility Commission (the "PAPUC") which covers approximately 1% of consolidated energy sales. Sales for resale, which are subject to regulation by the FERC, account for the remaining 1% of consolidated energy sales. Federal Regulation. The Company, pursuant to an order of the Securities and Exchange Commission, has been exempted from all of the provisions of the Public Utility Holding Company Act of 1935, except Section 9(a)(2) thereof relating to the acquisition of securities of other public utility companies. The Company and its utility subsidiaries are subject to the jurisdiction of the FERC as "public utilities". This regulation primarily relates to sales and exchanges of electricity for resale, certain transportation, sales and exchanges of natural gas under the Natural Gas Act, Company sales to its utility subsidiaries and certain other matters including accounting, recordkeeping and reporting. Other Regulation. The Company and its utility subsidiaries are also subject to regulation by various other Federal, state, county and local agencies under numerous regulations dealing with, among other things, environmental matters, energy conservation, long-range planning, fuel use, plant siting and gas pricing. Current Rate Activities. Information regarding the current rate filings of the Company and its utility subsidiaries, including the impact which the recent events affecting the Company had on the rate proceedings of the Company and its utility subsidiaries, is contained under the captions "Events Affecting the Company" and "Rate Activities" in the "Review of the Company's Results of Operations and Financial Condition" on pages 9 and 14, respectively of the 1994 Annual Report to Shareholders, which information is incorporated by reference in this Form 10-K Annual Report, as well as in Item 3, "Legal Proceedings" of this Form 10-K Annual Report. Information regarding NYPSC proceedings dealing with certain "take-or-pay" gas contract costs is also contained under Item 3, "Legal Proceedings" of this Form 10-K Annual Report, and in the 1994 Annual Report to Shareholders in the "Review of the Company's Results of Operations and Financial Condition" under the caption "Gas Energy Costs" beginning on page 12 and in Note 12 of the Notes to Consolidated Financial Statements under the caption "Gas Supply and Storage Contracts" on page 28, which information is incorporated by reference in this Form 10-K Annual Report. Rate Relief. During the five year period ending December 31, 1994, the Company and its utility subsidiaries have sought rate relief to cover the impact of increased costs. The amounts of rate relief approved by the NYPSC, NJBPU and PAPUC are set forth in the following table. Historical Rate Relief 1990 - 1994 Annual Amount Overall Rate Return on Class of ($000's) of Return Equity Service Effective Date Requested Granted Granted (%) Granted (%) Electric - N.Y. 01/01/90 (a) 6,800 - - Gas - Pa. 06/16/90 100 55 (b) (b) Electric - Pa. 10/01/90 210 105 (b) (b) Gas - N.Y. 12/01/90 (c) 2,500 (c) (c) Electric - N.Y. 01/01/91 22,483 10,450 11.45(d) 9.87(d) Gas - N.Y. 12/29/91 3,570 554 9.42 10.3 Electric - N.J. 01/24/92 12,863 5,100 10.17 12.0 Electric - N.Y. 05/01/92 (e) 7,417 (e) (e) Gas - N.Y. 12/15/92 7,962 3,776 10.04(f) 11.65(f) Electric - N.J. 01/01/93 (g) 1,685 - - Electric - N.Y. 05/08/93 (h) 11,308 - - Electric - Pa. 06/11/93 498 270 (i) (i) Gas - Pa. 06/25/93 36 12 (i) (i) Electric - N.Y. 07/01/94 (j) (6,028) (k) (k) Gas - N.Y. 11/04/94 (l) (l) (l) (l) (a) Recovery of DSM costs pursuant to a cost recovery mechanism, Least Cost Annual Power Supply ("LCAPS"), as approved by the NYPSC. Beginning in January 1991, DSM cost recovery is accomplished through the RDM procedures as approved by the NYPSC in Case 89-E-175. (b) No redetermination of the rate of return on common equity was made under a stipulated agreement. The implied return on common equity is 12.50%, and the implied overall rate of return is 10.33%. (c) A third stage filing made pursuant to the NYPSC Order in the Company's 1988 gas base rate case provided for the recovery of wages, employee welfare expenses, property taxes, inflation on non-fuel operation and maintenance expenses and gas rate base additions. (d) The Company was provided with an opportunity to earn a return on common equity of 12.51%, and an overall rate of return of 10.32%, through the achievement of incentives related to certain DSM and customer service goals. For 1993, the value of the incentive related to DSM goals increased the total opportunity to earn a return on common equity to 12.61%. However, effective January 1994, the DSM incentive was reduced and the customer service incentive was eliminated. (e) The first post rate year filing made in accordance with the NYPSC Order in the Company's 1989 electric base rate case provided for the recovery of inflation on non-fuel operation and maintenance expenses, rate base additions and cost of capital. In addition, the Company was permitted to recover a net under collection resulting from the reconciliation of revenue and expenses as provided in the 1989 Order. (f) Under a multi-year gas rate agreement (1993-1996), the Company was provided with an opportunity to earn a return on common equity of 12.15% through the achievement of incentives related to its main replacement program, gas efficiency programs and gas marketing programs. (g) Rate increase as ordered by the NJBPU to reflect the effect of revised legislation regarding gross receipts and franchise taxes. Rate recovery with interest is permitted over a ten year period. (h) The second post rate year filing made in accordance with the NYPSC Order in the Company's 1989 electric base rate case provided for the recovery of inflation on non-fuel operation and maintenance expenses, rate base additions and cost of capital. In addition, the Company was permitted to recover a net under collection resulting from the reconciliation of revenue and expenses as provided in the 1989 Order. (i) No redetermination of the rate of return on common equity was made under a stipulated agreement. The implied return on common equity is 12.00%, and the implied overall rate of return is 9.98%. (j) The third post rate year filing made in accordance with the NYPSC Order in the Company's 1989 electric base rate case provided for the recovery of an under collection resulting from the recalculation of revenue and expenses. The change in rates was scheduled to become effective on May 1, 1994. However, due to the investigation of misappropriated funds, the NYPSC postponed the adjustment until July 1, 1994. (k) By means of its Order dated June 10, 1994, the NYPSC, among other things, continued the Revenue Decoupling Mechanism ("RDM") and reduced the return on equity threshold for measuring excess earnings from 12.0% to 10.6%. (l) On November 4, 1994, the NYPSC issued an order terminating the multi- year gas rate agreement. The order denied the Company the opportunity for rate adjustments in the third and fourth years (1995 and 1996) of the agreement. On February 7, 1995, the Accounting and Finance Division of the NYPSC issued an interpretation of the November 4, 1994 termination order which stated that the gas incentive mechanism related to the attainment of certain goals are no longer available. The Company will not contest this interpretation. Utility Industry Risk Factors The electric and gas utility industry is exposed to risks relating to, among other things, increases in fuel costs, numerous regulatory and environmental restrictions, delays in obtaining adequate rate relief, increases in the costs of construction and construction delays, the effects of energy conservation, the effect of weather-related sales and revenue fluctuations and meeting the growth of energy sales. The Company and its utility subsidiaries are, to some extent, experiencing all of these challenges. However, the impact on the Company and its utility subsidiaries has been less than for the utility industry in general, principally due to the Company's relatively low construction expenditures, low external financing requirements, and, in particular, due to rate procedures in effect for the Company's New York electric and gas operations. Under an electric RDM rate mechanism, the cost of conservation programs is recoverable on a current basis and, because of the decoupling of sales volume fluctuations from revenues, any decrease in earnings which would otherwise result from customer conservation is also recoverable. This decoupling of sales level fluctuations from revenue, although reconciled in subsequent periods, also mitigates the risk of loss of earnings due to abnormal weather conditions. In addition, the NYPSC has approved certain incentives based on a percent of net resource savings attained under the Company's DSM programs. Capacity costs associated with purchased power are recoverable under the RDM. Pursuant to an Order of the NYPSC dated June 10, 1994, the RDM has been extended. Information regarding such June 10, 1994 Order and its effect is contained in Item 3, "Legal Proceedings" of this Form 10-K Annual Report. With regard to future power supply, the Company will continue to utilize competitive bidding to mitigate the risks associated with the Company's purchase of both electric energy and capacity, particularly with regard to prudency determinations and cost recovery. Additional information concerning the DSM program and the RDM rate procedure is contained under the captions "Electric Operating Revenues and Sales", "Gas Operating Revenues and Sales" and "Rate Activities" in the "Review of the Company's Results of Operations and Financial Condition" on pages 10, 11 and 14, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Reference is also made to the caption "Future Energy Supply and Demand" in this Item 1. The problems associated with nuclear energy have not affected the Company as it has no operating nuclear plants nor any under construction, and has no plans for future participation in nuclear projects. For further information on the recovery by the Company of its investment in the cancelled Sterling Nuclear Project, see Note 3 of the Notes to Consolidated Financial Statements - "Sterling Nuclear Project" on page 23 of the 1994 Annual Report to Shareholders, which information is incorporated by reference in this Form 10-K Annual Report. Competition There are competitive factors present in the electric and gas industry which affect utility companies in varying degrees. Among these are the use by interruptible or dual-fuel customers of lower priced alternative fuels; the establishment of municipal distribution agencies; the ability of gas producers to sell gas directly to end users, usually through an independent gas marketer; the presence of cogenerating systems, small power producers and independent power producers; and the increasing interest in, and research on, the development of energy sources other than those now in use. In recent years, changing laws and governmental regulation, combined with a growing interest in self-generation and an increase in nonregulated energy suppliers has served to intensify the level of competition experi- enced by regulated utilities. The National Energy Policy Act of 1992 ("Energy Policy Act") is expected to bring major changes to the electric utility industry, including increased competition from a new category of wholesale electric generators which are exempt from the Public Utility Holding Company Act of 1935. The Energy Policy Act also empowers the FERC to require utilities, under certain circumstances, to provide open access to electric wholesalers for use of the utility's transmission systems. With regard to the natural gas industry, FERC Order No. 636 was designed to increase competition by allowing more flexible utilization of inter- state pipeline capacity by local distribution companies and end-users. Additional information regarding competition in the utility industry and the Company's strategy for meeting the challenges of increased competition is contained in the "Review of the Company's Results of Operation and Financial Condition" under the caption "Competition" on page 16 of the 1994 Annual Report to Shareholders, which information is incorporated by reference in this Form 10-K Annual Report. Marketing In response to increasing competition in the utility industry, the Company has enhanced its marketing activities, and is developing a market strategy that will be responsive to customer needs. A major program was initiated to identify and address commercial and industrial customers needs, recognizing these customers may have multiple energy supply choices. The Company is also working with state regulators to promote flexible ratemaking. The Company continues to promote the efficient use of energy by residential, commercial and industrial customers. Existing programs being marketed include all state approved DSM programs. Environmental Matters The Company is subject to regulation by Federal, state, county and, to some extent, local authorities with respect to the environmental effects of its operations, including regulations relating to air and water quality, aesthetics, levels of noise, hazardous wastes, toxic substances, protection of vegetation and wildlife and limitations on land use. In connection with such regulation, various permits are required with respect to the Company's facilities. Generally, the principal environmental areas and requirements to which the Company is subject are as follows: Water Quality. The Company is required to comply with Federal and state water quality statutes and regulations, including the Federal Clean Water Act ("Clean Water Act"). The Clean Water Act requires that Company generating stations be in compliance with state issued State Pollutant Discharge Elimination System Permits ("SPDES permits"), which prescribe applicable conditions to protect water quality. Effective July 1, 1994, the State of New York Department of Environmental Conservation (the "NYDEC") issued a new SPDES permit for the Company's Lovett Coal Ash Management Facility. The Company also has a SPDES permit, effective October 1, 1991 for its Lovett generating station. Additional information concerning the Lovett SPDES permit is contained in Item 3, "Legal Proceedings" of this Form 10-K Annual Report. The Bowline Point generating station currently operates under a SPDES permit which expired on October 1, 1992. This permit remains in effect since a permit renewal application was filed on April 3, 1992, which was within the statutory deadline for renewal application. The Company is now proceeding with the State Environmental Quality Review Act ("SEQUA") process as part of the permit renewal procedure. The SEQUA process, and the resulting delay in issuance of a new permit to the Company, has had no practical impact on the operation of the Bowline Point generating station. The Company entered into a settlement with the United States Environmental Protection Agency (the "EPA") and others that relieved the Company for at least 10 years from a regulatory agency requirement that, in effect, would have required that cooling towers be installed at the Bowline Point generating station. In return, the Company agreed to certain plant modifications, operating restrictions and other measures. This settlement expired in May 1991. On May 15, 1991, the Company and others entered into an Interim Agreement with the NYDEC to continue specific operating conditions and other measures for a period from May 15, 1991 to September 30, 1992. Several intervenors to the original settlement filed a civil action challenging the Interim Agreement's legality. On March 23, 1992, the parties to the Interim Agreement and intervenors signed a Consent Order terminating litigation and agreeing to certain operating limitations and biological monitoring requirements. The Consent Order was due to expire on September 1, 1993. On August 5, 1993, the parties executed the First Amended Consent Order which extended the agreement until September 1, 1994. On September 1, 1994, the parties executed a Second Amended Consent Order which extends the agreement until September 1, 1995. Air Quality. Under the Federal Clean Air Act, the EPA has promulgated national primary and secondary air quality standards for certain pollutants, including sulfur oxides, particulate matter and nitrogen oxides. The NYDEC has adopted, and the EPA has approved, the New York State Implementation Plan ("SIP") for the attainment, maintenance and enforcement of these standards. In order to comply with the SIP, the Company burns #6 fuel oil at its Lovett and Bowline Point generating stations with a 0.37% maximum sulfur content by weight. Pursuant to the SIP, the Company is governed by the following limitations when it is burning coal at Lovett Units 4 and 5: if one unit is burning, the Company may emit sulfur dioxide at a rate not to exceed 1.5 lb/MMBTU, and if two units are burning, the Company may emit sulfur dioxide at a rate not to exceed 1.0 lb/MMBTU per unit. The NYDEC has requested EPA approval of revisions to the SIP to meet ozone attainment standards and to provide a mechanism for Title V emissions fee billing as defined under the Clear Air Act. Beginning with calendar year 1994, the owners of Title V sources in New York State, which sources include the Company's Lovett Plant and Bowline Point Plant, are required to pay an emission fee based upon actual air emissions reported to NYDEC at a rate of approximately $25 per ton of air emissions. In 1994, the Company paid approximately $468,000 in such emission fees, approximately $107,000 of which was recovered from Con Ed pursuant to the Bowline Point Plant operating agreement. In 1995, this emission fee will be based on 1994 air emissions at a rate established by the NYDEC not to exceed $50 per ton. The Clean Air Act Amendments of 1990, which became law on November 15, 1990, could restrict the Company's ability to meet increased electric energy demand after the year 2000 or could substantially increase the cost to meet such demand. Regulations pertaining to nitrogen oxide reduction and continuous emissions monitoring systems will require capital expenditures totalling approximately $28.7 million thru 1995, $13.5 million of which will be spent during 1995. The Company will continue to assess the impact of the Clean Air Act Amendments of 1990 on its power generating operations as additional regulations implementing these Amendments are promulgated. The NYPSC has commenced a proceeding to consider the implications of compliance with the Clean Air Act Amendments of 1990 by electric utilities in New York State. Toxic Substances and Hazardous Wastes. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("Superfund"), provides that both the owners and operators of facilities where releases of hazardous substances into the environment have occurred or are imminent, and the generators and transporters of hazardous substances disposed of at the facilities, are, regardless of fault, jointly and severally liable for all response, removal and remedial action costs and also for damages to natural resources. As part of its operations, the Company generates materials which are deemed to be hazardous substances under Superfund. These materials include asbestos and dielectric fluids containing polychlorinated biphenyls ("PCBs"), both of which are disposed of at licensed, off-site locations not owned by the Company. Other hazardous substances may be generated in the course of the Company's operations or may be present at Company-owned locations. The Company has from time to time, received process or notice of claims under Superfund or similar state statutes relating to sites at which it is alleged that hazardous substances generated by the Company (and, in most instances, by a large number of other potentially responsible parties) were disposed of. Similar claims may be asserted from time to time hereafter, involving additional sites. Typically, many months, and sometimes years, are required to fully determine the probable magnitude of the cleanup costs for a site, the extent, if any, of the Company's responsibility, the number and responsibility of other parties involved, the financial ability of the other parties to pay their proportionate share of any costs, and the probable ultimate liability exposure, if any, of the Company. This process is still under way at most of the sites of which the Company has notice, and the costs at some of these sites may be substantial. However, based on the information and relevant circumstances known to the Company at this time, the Company's share of these costs is not expected to have a material effect on the financial condition of the Company. Information concerning certain Superfund claims involving the Company is included in Item 3, "Legal Proceedings" of this Form 10-K Annual Report. Environmental Expenditures. The Company estimates that expenditures attributable, in whole or in substantial part, to environmental considerations totaled $21.4 million in 1994. Compliance with Federal, state and local laws and regulations which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment is not anticipated to have a material effect on the financial condition of the Company. The Company's projected environmental expenditures are under continuous review and are revised periodically to reflect changes in environmental regulations, inflation, technology and other factors which are beyond the control of the Company. Although the Company is unable to predict the ultimate impact of environmental regulations on existing or proposed facilities or on the operations of the Company, the Company believes that its expenditures for compliance with environmental regulations will be given appropriate rate treatment by the respective regulatory commissions. Information concerning environmental issues and their potential effect on the Company's operations is included in Note 12 of the Notes to Consolidated Financial Statements under the captions "Construction Program", "Other Legal Proceedings" and "Environmental", beginning on page 28 of the 1994 Annual Report to Shareholders, which information is incorporated by reference in this Form 10-K Annual Report, as well as in Item 3 "Legal Proceedings" of this Form 10-K Annual Report. Research and Development The Company supports research and development agencies involved in utility research, provides funds for joint utility research projects and conducts its own internal program. Research and development expenditures amounted to approximately $3.8 million in 1994, $5.0 million in 1993, and $3.7 million in 1992. The Company provides support to national agencies such as the Electric Power Research Institute and the Gas Research Institute. At the state level, the Company supports the Empire State Electric Energy Research Corporation, the New York State Energy Research and Development Authority and the New York Gas Group Research, Development and Demonstration Committee. Generally, the Company's internal research and development program concentrates on projects which uphold the corporate goal of providing safe and reliable electric and gas service to customers at a minimum price and in an environmentally acceptable manner. The program includes projects which seek improvement of generation and distribution systems, mitigation of environmental impacts of electric power generation, and enhancement of the value of electric energy for customers. Current projects include a demonstration of a technology which should provide a low-cost option to reduce power plant NOx emissions to comply with the Clean Air Act Amendments; an evaluation of the performance characteristics of underground distribution cable; and an investigation of the efficient use of electrotechnologies at a municipal wastewater treatment plant. Franchises The Company's and its utility subsidiaries, RECO and Pike, each have municipal consents or franchises, together with their corporate or charter powers, which give each of them the right to carry on their respective operations in the territories served. The municipal consents or franchises held by the Company and its utility subsidiaries are not exclusive. In certain municipalities, the areas served by the Company, RECO and Pike are limited either by the terms of the consents or franchises or by order of the NYPSC, the NJBPU, or the Pennsylvania Public Utility Commission, respectively. Under the present provisions of the State laws of New York, New Jersey and Pennsylvania, no other private corporation can commence public utility operations in any part of the territories now served by the Company, RECO or Pike, respectively, without obtaining a certificate of public convenience and necessity from the applicable State utility commission. A certificate of public convenience and necessity would not be required with respect to a municipality furnishing electric or gas service within its borders under the present provisions of the State laws of New York, New Jersey or Pennsylvania. Municipal corporations, upon compliance with the State laws of New York, New Jersey or Pennsylvania, as applicable, are authorized to acquire the public utility service of any public utility company by purchase or by condemnation. The Company does not reasonably expect any municipal corporation to acquire the public utility service of the Company or its utility subsidiaries through either purchase or condemnation. The municipal consents or franchises of the Company and its utility subsidiaries are not uniform and contain, in certain instances, provisions relating to, among other things, the time of commencing operations, the furnishing of service to the particular municipality, the approval by the municipal authorities of the location and construction of distribution facilities, indemnification of the municipality against liabilities and damages in consequence of construction, and administrative matters. Such provisions are not considered by the Company to be unduly burdensome. Employee Relations At December 31, 1994, the Company had 1,640 employees of whom 37 were part-time employees. The Company considers its relationship with its employees to be satisfactory. The current contract with Local 503 of the International Brotherhood of Electrical Workers ("IBEW") representing 955 production, maintenance, commercial and service employees of the Company became effective June 1, 1994 and expires June 1, 1997. This contract does not include supervisory employees. The Company's utility subsidiaries, RECO and Pike, have no employees other than officers. All services are performed for the utility subsidiaries by employees of the Company pursuant to Joint Operating Agreements approved by the NJBPU and the PAPUC, through which the Company is reimbursed for these services. Several employees of the Company provide managerial and clerical services for the non-utility subsidiaries of the Company and of RECO, the cost of which are either paid directly by the subsidiaries or are reimbursed to the Company through periodic billings. In addition, the non-utility subsidiaries, at December 31, 1994, had 157 full-time and 56 part-time employees, none of whom were participants in the Company's various employee benefit plans or were covered by the Company's contract with the IBEW. Item 2. Properties The Company's property consists primarily of electric generation, transmission and distribution facilities and gas distribution facilities. This property is required for the continued operation of the Company's major business segments. In addition, the Company maintains certain miscellaneous utility and non-utility property. The Company's facilities are in satisfactory condition, are suitable for the particular purpose for which they were acquired, and are adequate for the Company's present operations. Electric Generating Facilities. The Company's generating plants, all of which are located in New York State, are as follows: Maximum Summer Percent Net Mwh Net Mw of Total Generated Plant Name Units Energy Source Capacity Capacity in 1994 Swinging Bridge, 8 Mongaup & Rio Hydroelectric 25.8 2.5% 62,103 Grahamsville 1 Hydroelectric 18.0 1.8 106,046 Hillburn 1 Jet Fuel/Gas 37.0 3.6 1,063 Shoemaker 1 Jet Fuel/Gas 37.0 3.6 9,385 Lovett 5 Coal/Oil/Gas 501.7 49.2 2,098,547 Bowline Point 2 Oil/Gas 400.6(1) 39.3 1,183,869 1,020.1 100.0% 3,461,013 (1) Company's share of maximum summer net megawatt capability. Electric Transmission and Distribution Facilities. The Company owns, in whole or in part, and operates 512 miles of transmission lines, 67 substations, 67,901 in-service line transformers and 4,930 miles of distribution lines. With the exception of the Grahamsville Substation, the electric transmission and distribution facilities of the Company and its utility subsidiaries are located within the Company's New York, New Jersey and Pennsylvania service territory, which is described under the caption "Principal Business" in Item 1 of this Form 10-K. The Bowline Substation and the related transmission facilities are jointly owned by the Company and Con Ed and are operated by the Company. The Ramapo Substation and certain related transmission facilities consist of property which is either owned by the Company, owned by Con Ed or jointly owned by the Company and Con Ed and which is operated and maintained by the Company except for the 500/345 Kv section of the Ramapo substation and a 500 Kv transmission line now operated and maintained by Con Ed effective January, 1995. Gas Facilities. The Company owns and operates three propane air gas plants at Middletown, Orangeburg and Suffern, New York and its gas distribution system, which is located within its gas franchise territory in New York and Pennsylvania, includes 1,697 miles of mains. Miscellaneous Properties. The Company owns office buildings and operating facilities in Middletown, Spring Valley, Blooming Grove and West Nyack, New York, and other structures at different locations within the Company's service territory which are used as offices, service buildings, store houses and garages. The Company leases its corporate headquarters in Pearl River, New York, as well as office space at other locations. In addition, the Company has lease agreements covering certain of its data processing equipment, office equipment and vehicle fleet. Character of Ownership. The Company's electric and gas plants and its major electric substations are located on land owned by the Company in fee, except for the Grahamsville Plant and the Bowline Point Plant. The greater portion of the Grahamsville Plant is located on land leased from the City of New York and the Bowline Point Plant is located on land in which the Company has a one-third undivided interest, with the remainder being owned by Con Ed. Water power and flowage rights for the operation of its Mongaup River Hydro Plants are controlled by the Company either through ownership of the necessary land in fee or through easements which are, in practically all cases, perpetual. In the case of the Grahamsville Plant, however, water is obtained under contract with the City of New York. Electric transmission facilities of the Company and its utility subsidiaries (including substations) are, with minor exceptions, located on land owned in fee or occupied pursuant to perpetual easements. Electric distribution lines and gas mains are located in, on or under public highways or private lands pursuant to lease, easement, permit, municipal consent, agreement or license, express or implied through use by the Company or its utility subsidiaries without objection by the owners. In the case of distribution lines, the Company owns approximately 60% of the poles upon which its wires are installed and has a joint right of use in the remaining poles on which its wires are installed, which poles are owned, in most cases, by telephone companies. The Company's electric and gas plants are owned by the Company except for the gas turbines at Hillburn and Shoemaker which are leased and the Bowline Point Plant which is jointly owned with Con Ed and operated by the Company. Additional information regarding the investment in the Bowline Point Plant by the Company and Con Ed is included in Note 1 of the Notes to Consolidated Financial Statements under the caption "Jointly Owned Utility Plant" on page 22 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Substantially all of the utility plant and other physical property owned by the Company and its utility subsidiaries is subject to the liens of the respective indentures securing the first mortgage bonds of the Company and its utility subsidiaries. Investments in securities of the utility subsidiaries costing $11.8 million which have been eliminated from the Consolidated Balance Sheet are pledged under the Company's First Mortgage Indenture, as amended and supplemented. Item 3. Legal Proceedings Investigation and Related Litigation: On August 26, 1993, the Company filed Orange and Rockland Utilities, Inc. v. Winikow in the United States District Court, Southern District of New York, against Linda Winikow, a former Vice President of the Company, three other former Company employees and two vendors. In its suit, filed under the Federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Company alleges that the defendants had engaged in a conspiracy to divert monies from the Company through the submission of false and fraudulent invoices in order to pay personal expenses of and/or to provide personal services to the defendants. In addition, the Company alleges that the defendants made various contributions to political candidates consisting of money and services diverted from the Company. Accordingly, the Company seeks treble damages as called for by the RICO statute, punitive damages, attorney's fees, interest and court costs. On December 19, 1994, the Company filed a notice dismissing the action against three former Company employees, two of whom had paid restitution to the Company, and one vendor. The Company is continuing to pursue its claims against Ms. Winikow and one vendor. The Company has been directed to report to Judge Brieant on March 29, 1995 as to whether a settlement can be reached in this case. Settlement negotiations are ongoing. On October 6, 1993, Ms. Winikow pleaded guilty in the Supreme Court of the State of New York, County of Rockland, to grand larceny (a class D felony), commercial bribery (a class A misdemeanor), and making a campaign contribution under a false name (an unclassified misdemeanor) and, on November 10, 1993, the two former employees pleaded guilty to grand larceny (a class D felony). Ms. Winikow's sentencing on these pleas is currently scheduled to take place during March 1995. On October 5, 1993, the independent Directors determined to terminate for cause the employment of James F. Smith as Chief Executive Officer of the Company and to remove him as Chairman of the Board. On October 7, 1993, notice of such termination was delivered to Mr. Smith and he was suspended from all duties effective immediately. Mr. Smith had certain rights under his employment agreement with the Company to take corrective action with respect to his termination for cause which lapsed, without such action being taken, on December 6, 1993. On February 7, 1994, the Company commenced Orange and Rockland Utilities, Inc. v. James F. Smith, in New York State Supreme Court, County of Rockland, by the filing of a Summons with Notice. The Summons put Mr. Smith on notice of claims for breach of his fiduciary duties of loyalty and care, waste, conversion, fraud, and unjust enrichment based on allegations that Mr. Smith misused Company assets and personnel and misappropriated Company funds for his own benefit or for other improper purposes, and failed to maintain proper management controls or to properly supervise corporate affairs and subordinate employees. The Company seeks an accounting by Mr. Smith of certain Company funds and property, restitution of all amounts misappropriated, misused, or unaccounted for, forfeiture of compensation paid or awarded by the Company to Mr. Smith during the period in which breaches of fiduciary duties occurred, and compensatory and punitive damages. The Company seeks recovery in an amount not less than $5,000,000. Under the terms of his employment agreement, Mr. Smith had the right to contest his termination for cause in an arbitration proceeding. On May 5, 1994, Mr. Smith filed a motion demanding arbitration of his termination for cause and the Company's claims asserted against him in Orange and Rockland Utilities, Inc. v. Smith. On June 17, 1994, the Court issued an Order granting Mr. Smith's motion to compel arbitration. Pursuant to a second Court Order dated August 10, 1994, the parties filed their demands for arbitration with the American Arbitration Association. Hearings in this matter are currently scheduled to begin on May 15, 1995. On March 22, 1994, a Rockland County Grand Jury indictment was returned charging Mr. Smith with eight felony counts of grand larceny and two misdemeanor counts of petit larceny. A superseding indictment on 22 counts was brought against Mr. Smith in June 1994. Mr. Smith has entered a plea of not guilty. The trial in this matter is scheduled to begin in March 1995. On August 18, 1993, Feiner v. Orange and Rockland Utilities, Inc., et al. ("Feiner"), a purported ratepayer class action complaint against the Company, RECO, Ms. Winikow and others, was filed in the United States District Court, Southern District of New York. The Feiner complaint alleged that the defendants violated RICO and New York common law by using false and misleading information to obtain rate increases from the NYPSC and used funds obtained from ratepayers in furtherance of an alleged scheme to make illegal campaign contributions and other illegal payments. On February 18, 1994, the Company filed a motion to dismiss this case, which motion was granted on September 8, 1994 and the case was dismissed. Plaintiff then filed a Notice of Appeal with the United States Court of Appeals for the Second Circuit (the "Second Circuit") appealing the District Court's decision. Thereafter, the parties signed a Stipulation of Settlement dismissing the appeal, which was approved by the Second Circuit on December 7, 1994. The settlement recognizes the remedial measures already taken by the Company, pays $75,000 toward the plaintiffs' attorneys fees and leaves the District Court decision dismissing the case in effect. On August 31, 1993, Patents Management Corporation v. Orange and Rockland Utilities, Inc., et al. ("Patents Management"), a purported shareholder derivative complaint, was filed in the Supreme Court of the State of New York, County of New York, against the Company, all but one of the Directors and several other named defendants by an alleged shareholder of the Company. Plaintiff claimed that the named Directors breached their fiduciary duties by failing to exercise appropriate supervisory control over Ms. Winikow and others. Plaintiff requested that the Court require each Director to indemnify the Company against all losses sustained by the Company as a result of these alleged wrongful acts. On February 23, 1995, the Court approved a settlement agreement entered into by the Directors, the plaintiff and the Company resolving all issues in this case. Under the approved settlement terms, the Company agrees to implement remedial measures and provision is made for payment of the plaintiff's attorneys fees and expenses totaling $155,000. On November 23, 1993, Gross v. Orange and Rockland Utilities, Inc. ("Gross"), a purported shareholder class action complaint, was filed in the United States District Court, Southern District of New York. Plaintiff alleged that various Securities and Exchange Commission ("SEC") filings of the Company during the period between March 2, and November 4, 1993 contained false and misleading information, and thereby violated Sections 11 and 12(2) of the Securities Act of 1933, by failing to disclose what the plaintiff alleged was a "scheme" by the Company to make illegal political payments and campaign contributions to various public officials and politicians. As a result, plaintiff claimed, during such period persons who purchased the Company's stock through the Company's Dividend Reinvestment and Stock Purchase Plan did so at artificially inflated prices. The complaint sought unspecified money damages. On March 31, 1994, Bernstein v. Orange and Rockland Utilities, Inc. and James F. Smith ("Bernstein"), a purported shareholder class action complaint, was filed in the United States District Court, Southern District of New York. Plaintiff alleged that various SEC filings of the Company during the period between March 2 and August 18, 1993 contained false and misleading information or omitted to state material facts necessary to make the statements therein not misleading, and thereby violated Section 10 of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, by failing to disclose what the plaintiff alleged was a "scheme" by the Company to make illegal political payments and campaign contributions to various public officials and politicians. As a result, plaintiff claimed, during such period persons who purchased the Company's stock did so at artificially inflated prices. The Bernstein complaint sought unspecified money damages. On November 3, 1994, the Company signed a settlement agreement in the Gross and Bernstein actions. On November 21, 1994, the Court consolidated the two cases, approved a notice, and conditionally certified a class action for settlement purposes only. Notice to the class was mailed and published at the end of November. The settlement was approved by the Court on January 27, 1995. Pursuant to the settlement agreement, the Company has created a settlement fund of $1.85 million, to be distributed on a pro rata basis to members of the settlement class, and all claims in both cases have been deemed resolved. Other Litigation: On May 11, 1993, an action was commenced against the Company by Hudson Riverkeeper Fund, Inc. ("Riverkeeper") in the United States District Court for the Southern District of New York. In its complaint, Riverkeeper alleged that the Company violated and continues to violate its SPDES permit for its Lovett Generating Station ("Lovett") by failing to maintain cooling water intake structures that reflect the best technology available for minimizing adverse environmental impact. In addition, the complaint alleged that the Company failed to submit a scope of work for entrainment studies required by its SPDES permit (the "entrainment studies"). The original complaint requested that the Court assess civil penalties aggregating $22 million and order the Company to take steps to insure that the cooling water intake structures at Lovett reflect the best technology available for minimizing adverse environmental impact. On May 18, 1992, Riverkeeper amended its complaint against the Company by withdrawing its entrainment studies allegation and reducing the amount of civil penalties sought to approximately $11 million. On June 30, 1993, the Company filed its answer to Riverkeeper's amended complaint. In its answer the Company denied Riverkeeper's allegations and thereafter, reflecting the Company's belief that Riverkeeper's allegations have no legal merit, on July 20, 1993 the Company filed a Motion for Summary Judgment seeking the dismissal of this action. On October 21, 1993, the Court issued a Memorandum and Order denying the Company's Motion for Summary Judgment and ruling that the New York State Department of Environmental Conservation ("DEC") should be included as a party to this action. On January 14, 1994, a conference was held before Judge Brieant during which the DEC intervened in this litigation as a designated plaintiff. On April 8, 1994, the parties agreed to have engineers enter into discussions regarding modifications to the Lovett plant's cooling water intake structures. These discussions are continuing. Additional information regarding the Company's SPDES Permits is contained under the caption "Water Quality" of "Environmental Matters" in Item 1 of this Form 10-K. On January 15, 1993, the Company was served with a complaint naming the Company as one of several defendants in Warwick Administrative Group, et al. v. Avon Products, Inc. et al. ("Warwick"), which case was filed in the United States District Court for the Southern District of New York. The allegations in this case stem from an Administrative Order for Remedial Design and Remedial Action issued on February 28, 1992 by the United States Environmental Protection Agency pursuant to Superfund laws which impose liabilities on entities who are identified as having contributed hazardous wastes to a particular site requiring clean-up, including generators and transporters of such wastes. The Order directs certain members of the Warwick plaintiff group to implement a plan for the clean-up of the Warwick Landfill site in Greenwood Lake, New York. The Warwick plaintiff group now alleges that some defendants, including the Company, arranged to have hazardous substances disposed of at the Warwick site and thus seeks to recover from the defendants costs incurred and damages suffered in connection with the clean-up of the Warwick Landfill site. An answer to the complaint, as amended, was filed by the Company on February 23, 1993, denying all of the allegations in the amended complaint and setting forth a number of affirmative defenses. On May 3, 1993, Judge Goettel of the United States District Court, Southern District of New York, dismissed the plaintiffs' amended complaint for failure to state a claim for which relief could be granted and granted plaintiffs leave to replead. Thereafter, the plaintiffs filed a second amended complaint which was superseded by a third amended complaint served on June 3, 1993. On June 23, 1993, the Company filed an answer to the third amended complaint, denying all of the plaintiffs' allegations and setting forth a number of affirmative defenses. As it is presently unclear if any hazardous waste generated by the Company was transported to the Warwick Landfill site, and because the nature and quantities of hazardous waste sent by others to such site are undetermined, the Company is unable to determine its liability, if any, with regard to this proceeding. On September 25, 1991, the Company was named as one of several hundred third party defendants in the United States v. Kramer, et al. and State of New Jersey Dep't of Environmental Protection v. Almo Anti-Pollution Services, et al., which cases have been consolidated in the United States District Court for the District of New Jersey, Camden Vicinage. The allegations in this action concern the Helen Kramer Landfill site in Mantua, New Jersey, which operated from 1963 to 1981. Suit in this case was brought under Superfund laws. Additional information concerning Superfund laws is contained under the subheading "Environmental Matters" in Item 1 of this Form 10-K Annual Report. While it is presently unclear if any hazardous waste generated by the Company was transported to the Helen Kramer Landfill site, the total cost of remediation and damages at the site, while not clearly established, is reportedly estimated at $100 million or more, and the Company is monitoring the situation. It appears reasonable to expect the Company's relative contribution to the Helen Kramer site, if any, to have been less than 1% of the total volume sent to the site. At this time, the Company does not believe this action will have a material effect on the financial condition of the Company. On March 29, 1994, the Company received a third party summons and complaint naming it as one of 22 third party defendants in Carpenters Local No. 964 Pension Fund v. DiGiacinto et al. ("DiGiacinto"), filed in the Supreme Court of the State of New York, County of Rockland. This complaint stems from an underlying action, Guarino et al. v. Carpenters Local No. 964 Pension Fund ("Guarino"), brought by residents of a subdivision who allege that homes developed and sold by the Carpenters Local No. 964 Pension Fund (the "Pension Fund") were constructed on the site of a former landfill. Plaintiffs claim that the deterioration of wallboard materials buried at the site has resulted in a continuous release of hydrogen sulfide gas which has rendered the houses unfit for dwelling. Plaintiffs seek damages in excess of $25,000,000. The third party complaint alleges that (1) the Company owned land that ultimately became part of the subdivision; (2) the Company permitted the dumping of wallboard materials on its former property; and (3) certain improvements constructed by the Company on property adjacent to the subdivision altered the flow of ground and surface water, contributing to the production of hydrogen sulfide gas. The third party complaint seeks to hold the Company responsible for any liability incurred by the Pension Fund as a result of the Guarino action. On April 26, 1994, the Company filed its answer denying all of the plaintiff's allegations and setting forth a number of affirmative defenses. On June 8, 1994, the New York State Attorney General's office commenced an action in the Supreme Court of the State of New York, County of Rockland, entitled State of New York v. Carpenters Local No. 964 Pension Fund, et al. against the Pension Fund and five other defendants, not including the Company, alleging that the subdivision site constituted a public nuisance. On August 8, 1994, the Company was served with United States Gypsum Company v. Broadhaver Realty Corp. ("U.S. Gypsum"), a third-party complaint brought by the United States Gypsum Company, a defendant in the action brought by the Attorney General's office. The Company has concluded that its liability, if any, in the DiGiacinto and U.S. Gypsum litigations, individually or in the aggregate, will not have a material effect on the financial condition of the Company. On January 17, 1995, the Company was served with a summons in Payran v. Orange and Rockland Utilities, Inc. and James Donnery, a purported personal injury action commenced in the Supreme Court of the State of New York. Plaintiff seeks compensatory damages of $50 million as a result of injuries allegedly resulting from actions by the defendants at the Company's Lovett Power Plant. Since the Company has not been served with the complaint in this action, it cannot evaluate plaintiff's claims. Regulatory Matters: On January 29, 1993, the Company filed an electric rate increase application with the NYPSC (Case 93-E-0082) requesting a $17.1 million (4.8%) annual increase in electric revenues to be effective January 1, 1994. As a result of the ongoing investigation of alleged financial improprieties, the NYPSC issued an Order on December 21, 1993 which resulted in the postponement of the effective date of new electric rates from January 1, 1994 until June 30, 1994. On June 10, 1994, the NYPSC issued an Order terminating Case 93-E-0082 due to the Company's failure to meet its burden of proof. The NYPSC stated that various improprieties uncovered at the Company negated the credibility of the record developed in this rate proceeding. In this Order, the NYPSC reduced the Company's targeted rate of return on equity from 11.45% to 10.6% retroactive to January 1, 1994. All earnings above 10.6% will be deferred for later disposition pending the outcome of the investigations in Case 93-M- 0849 discussed below. Additional information regarding the termination of Case 93-E-0082 is contained under the caption "Current Rate Activities" of "Regulatory Matters" in Item 1 of this Form 10-K. On September 19, 1994, the Company filed an Article 78 action against the NYPSC in New York State Supreme Court, County of Albany appealing the NYPSC's June 10, 1994 Order reducing the Company's targeted rate of return on equity to 10.6% (from 11.45%) and making such reduction retroactive to January 1, 1994. The appeal contests the retroactivity of the NYPSC Order. The Company and the NYPSC have agreed to stay the briefings in this appeal until after the NYPSC has issued its final report on its investigation of the Company. On September 30, 1992, the NYPSC approved a four-year settlement agreement ("Settlement Agreement") in the Company's gas rate case (Case 92-G- 0050). The Settlement Agreement contains a weather adjustment clause which automatically adjusts rates to offset the effects of variations in weather from that assumed for setting rates. The Settlement Agreement provides for an overall rate of return of 10.26%, with a return on common equity of 12.15% including incentives of 50 basis points. On September 1, 1993, the Company filed with the NYPSC the second stage adjustment to gas rates pursuant to the Settlement Agreement. The requested increase in annual gas revenues as a result of the second-stage adjustment is $3.8 million or 2.5%. Although the Settlement Agreement provided for an effective date for this adjustment of January 1, 1994, the Company agreed to extend the effective date until June 30, 1994, in connection with the ongoing investigations of alleged financial improprieties. The effective date of this adjustment was further extended until December 30, 1994 by NYPSC Order issued June 3, 1994. On September 1, 1994, the Company filed a plan to implement the second- stage rate adjustment on January 1, 1995 and to postpone the next adjustment to gas rates to January 1, 1996. On September 19, 1994, the Company subsequently requested the further postponement of the second-stage gas rate adjustment until the NYPSC's investigation of alleged financial improprieties is concluded. The purpose of the request was to combine the results of the investigation and staged filings into a single rate change. On November 4, 1994, the NYPSC issued an Order terminating the Settlement Agreement effective December 31, 1994. The Order denies the Company the opportunity for rate adjustments in the third and fourth years (1995 and 1996) of the Settlement Agreement. However, the Order authorizes the Company to defer the second-stage rate adjustment and all previously authorized reconciliations through the end of 1994, pending review and audit by the NYPSC Staff and the conclusion of the NYPSC's investigation of alleged financial improprieties. On October 4, 1993, the NYPSC issued an order instituting a proceeding (Case 93-M-0849) to investigate the operations and management of the Company. On November 10, 1994, the Company filed with the NYPSC a quantification of the rate making effects of its ongoing investigation into prior financial improprieties. The Company requested that the NYPSC approve a refund of approximately $3.4 million to its New York gas and electric customers. This refund would be in addition to the $369,000 which previously had been refunded to the Company's New York gas and electric customers. The NYPSC has not yet acted on this proposal or issued its report of its investigation of the Company. The Company is unable to predict the final results of this proceeding and what modifications, if any, will be made to the amount proposed to be refunded to New York ratepayers. On November 3, 1993, the New Jersey Board of Regulatory Commissioners, now the New Jersey Board of Public Utilities ("NJBPU") commenced its periodic management audit of RECO. As a result of the events and investigations described above, the NJBPU audit included, in addition to a standard review of operating procedures, policies and practices, a review of the posture of RECO management regarding business ethics and a determination regarding the effect of such events on RECO ratepayers. The NJBPU has not yet issued its report. In December 1994, a filing was made with the NJBPU to refund approximately $.7 million to the Company's New Jersey customers based upon the Company's ongoing investigation into prior financial improprieties. By order dated January 27, 1995, the NJBPU accepted this proposal. The Company is unable to predict the final results of any NJBPU proceedings in this area and what modifications, if any, will be made to the amount proposed to be refunded in New Jersey. On December 30, 1992, in connection with RECO's 1991 electric rate case (Docket No. ER910303565), the NJBRC issued a Decision and Order dealing with the appropriateness of additional tax liability placed on New Jersey utilities pursuant to New Jersey's June 1, 1991 tax legislation. Pursuant to this legislation, RECO was required to pay a combined additional amount of approximately $16 million of gross receipts and franchise taxes in 1993 and 1994. In its Decision and Order the NJBRC allowed RECO to recover this amount over a ten year period with interest on the unamortized balance at an annual rate of 7.5%. On February 26, 1993, Rate Counsel filed a Notice of Appeal from the NJBRC Decision and Order with the Superior Court of New Jersey, Appellate Division, stating as grounds for the appeal that the Decision was arbitrary and capricious and would result in unjust and unreasonable rates. On March 21, 1994, the Superior Court of New Jersey, Appellate Division, upheld the NJBRC Decision and Order. On March 29, 1989, the New Jersey Department of Environmental Protection ("NJDEP") issued a directive under the New Jersey Spill and Control Act to various potentially responsible parties ("PRPs") including the Company, with respect to a site formerly owned and operated by Borne Chemical Company in Elizabeth, Union County, New Jersey, ordering certain interim actions directed at both site security and the off-site removal of certain hazardous substances. Certain PRPs, including the Company, signed an administrative consent order with the NJDEP requiring them to perform a removal action at the site, which action was completed on June 22, 1992. The PRPs have entered into negotiations with the NJDEP regarding the terms of the additional administrative consent order which will obligate the PRPs, including the Company, to perform a remedial investigation and feasibility study at the site. The results of this study will determine what, if any, subsurface remediation at the Borne site is required. The Company does not believe that this matter will have a material effect on the financial condition of the Company. On August 2, 1994 the Company entered into a Consent Order with the New York State Department of Environmental Conservation ("NYSDEC") in which the Company agreed to conduct a remedial investigation of certain property it owns in West Nyack, New York. Polychlorinated biphenyls ("PCBs") have been discovered at the West Nyack site. The results of this investigation will determine what, if any, remediation at the West Nyack site will be required. The Company does not believe that this matter will have a material effect on the financial condition of the Company. On May 29, 1991 a group of ten electric utilities (the "Metal Bank Group") entered into an Administrative Consent Order with the United States Environmental Protection Agency ("EPA") to perform a remedial investigation and feasibility study ("RIFS") at the Cottman Avenue/Metal Bank Superfund site in Philadelphia, Pennsylvania. PCBs have been discharged at the Cottman Avenue site from an underground storage tank and the handling of transformers and other electrical equipment at the site. On May 25, 1994, the Company entered into a tolling agreement pursuant to which the Metal Bank Group reserved its right to file suit against the Company while the Metal Bank Group and the Company entered into discussions to determine the extent of the Company's involvement with the Cottman Avenue site. These discussions continue. The RIFS has been completed and submitted to the EPA for determination of what remedial measures will be required at the Cottman Avenue site. The Company is unable at this time to estimate its share, if any, of past or future costs at this site. Information regarding the Company's involvement in, and the effect on the Company of, pipeline take-or-pay proceedings before the FERC is contained under the caption "Gas Energy Costs" in the "Review of the Company's Results of Operations and Financial Condition" and in Note 12 of the Notes to Consolidated Financial Statements - "Gas Supply and Storage Contracts" on pages 12 and 28, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Reference is also made to the information contained under the caption "Take- or-Pay Surcharge Costs and FERC Order No. 636 Transition Costs" of "Gas Operations" in Item 1 of this Form 10-K Annual Report. The Company's gas operations were not materially affected by take-or-pay charges in 1994. However, as required by the NYPSC in Case No. 88-G-062, the Company has deferred a portion of these costs. As of December 31, 1994, $2.8 million of deferred take-or-pay charges and accrued interest remain on the books of the Company. The Company is negotiating with the Staff of the Commission to recover the remainder of the take-or-pay liability. On April 8, 1992, the FERC issued Order No. 636 requiring interstate natural gas pipelines to unbundle their sales and transportation services and to offer each of these services on a stand alone basis. It is currently estimated that the Company's obligation related to Order No. 636 transition costs will amount to $24.6 million. It is anticipated that transition costs incurred by the Company will be recoverable in gas rates to the extent such costs were prudently incurred. Information regarding the Company's involvement in, and effect on the Company of, Order No. 636 and its related proceedings is contained under the caption "Gas Energy Costs" in the "Review of the Company's Results of Operations and Financial Condition" and in Note 12 of the Notes to Consolidated Financial Statements under the caption "Gas Supply and Storage Contracts" on pages 12 and 28, respectively, of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Reference is also made to the information contained under the caption "Take-or-Pay Surcharge Costs and FERC Order 636 Transition Costs" of "Gas Operations" in Item 1 of this Form 10-K Annual Report. The Company has been named as a defendant or third-party defendant in a number of proceedings involving alleged personal injuries, primarily to construction workers, as a result of exposure to asbestos at facilities owned and operated by the Company. Discovery with regard to these cases will determine, among other things, if the plaintiffs in each of these cases worked at Company facilities. The Company anticipates that similar asbestos- related claims may be asserted against the Company from time to time in the future. However, at this time the Company does not believe that the asbestos-related lawsuits currently outstanding, nor those which may be brought in the future, will, individually or in the aggregate, have a material effect on the financial condition of the Company. The Company is a party to a number of administrative proceedings involving potential impact to the environment. Such proceedings arise out of the operation and maintenance of facilities for the generation, transmission and distribution of electricity and natural gas. Information regarding the Company's involvement in these various proceedings is included in Note 12 of the Notes to Consolidated Financial Statements under the caption "Environmental" on page 31 of the 1994 Annual Report to Shareholders, which information is incorporated by reference in Item 1 of this Form 10-K Annual Report, as well as under the subheading, "Environmental Matters" of this Form 10-K Annual Report. Such proceedings are not, in the aggregate, material to the financial condition of the Company. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 1994. EXECUTIVE OFFICERS OF THE REGISTRANT All of the officers of the Company are appointed on an annual basis at the first Board of Directors' meeting following the annual meeting. The following list includes two Company employees who, due to the policy making functions they perform for the Company, are considered executive officers under SEC criteria, but who are not officers of the Company and who are not appointed on an annual basis. Officers, Age, and Title Business Experience Past Five Years D. Louis Peoples, 54 Vice Chairman of the Board and Chief Vice Chairman of the Executive Officer since July 14, 1994. Board of Directors and Executive Vice President, and a member Chief Executive Officer of the Board of Directors, Madison Gas and Electric Company from 1992 to 1993. Senior Vice President, RCG/Hagler, Bailly Inc. from 1991 to 1992. Senior Vice President, and a member of the Board of the Directors, Nuclear Services Division, Tenera, L.P. from 1990 to 1991; R. Lee Haney, 55 Vice President and Chief Financial Vice President and Officer since September 8, 1994. Chief Financial Officer Senior Vice President from January 1993 until September 1994, and Vice President and Chief Financial Officer until January 1993, San Diego Gas & Electric Company. G. D. Caliendo, 54 Vice President, General Counsel and Vice President - Secretary since March 2, 1995. General Counsel Senior Vice President, General and Secretary Counsel and Secretary of Pennsylvania Power and Light Company from 1989 to 1994. Robert J. Biederman, Jr., 42 Vice President since April 1990. Vice President, Operations Director of Operations from 1986 until April 1990. Robert J. McBennett, 52 Treasurer since 1984. Treasurer George V. Bubolo, Jr., 50 Director, Engineering and System Director, Engineering and Operations since November 1, 1994. System Operations Director, Electric Operations from 1983 until November 1, 1994. Vincent R. Tummarello, 44 Division Vice President - Electric Division Vice President, Production since November 1, 1994. Electric Production Director, Electric Production from April 1, 1985 until November 1, 1994. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Common Stock of the Company is listed on the New York Stock Exchange under the ticker symbol ORU. The stock is listed in published stock tables as "OranRk". At December 31 1994, there were 23,299 holders of record of the Company's common stock, $5.00 par value. During 1994 dividend payments were made to holders of the Company's common stock on February 1, May 1, August 1 and November 1. Quarterly market price and dividend information on the Company's Common Stock is as follows: Quarter High Low Dividend 1993 1 $45 7/8 $40 1/4 $.615 2 47 1/2 43 3/8 .615 3 47 1/2 44 3/8 .63 4 45 3/8 38 5/8 .63 1994 1 41 1/4 32 1/8 .63 2 35 7/8 30 1/2 .63 3 31 7/8 29 1/2 .64 4 32 1/2 28 3/8 .64 Information regarding the restriction of retained earnings for dividend payment is contained in Note 4 of the Notes to Consolidated Financial Statements - "Retained Earnings" on page 24 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Item 6. Selected Financial Data The information required by this Item is contained under the captions "Financial Statistics - Common Stock Data", and "Financial Statistics - Selected Financial Data" on page 36 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required by this Item is contained under the caption "Review of the Company's Results of Operations and Financial Condition" on pages 8 through 16 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary financial information required by this Item are contained on pages 17 through 33 of the 1994 Annual Report to Shareholders, which material is incorporated by reference in this Form 10-K Annual Report. Such information is listed in Item l4(a)(1) "Financial Statements" of this Form 10-K Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure On February 10, 1994, the Executive Committee of the Board of Directors of the Company appointed the accounting firm of Arthur Andersen LLP to audit the books, records and accounts of the Company and its subsidiaries for the 1994 fiscal year. The appointment of Arthur Andersen LLP was approved by the shareholders at the Annual Meeting held on May 11, 1994. The accounting firm of Grant Thornton LLP audited the Company's consolidated financial statements for 1993 and prior years. Upon recommendation of the Audit Committee, the Board of Directors decided to solicit bids for the performance of auditing services for the Company for 1994. Bids were received from six public accounting firms, including Grant Thornton LLP. Based on a review of the competing bids, the Audit Committee believe that the selection of Arthur Andersen LLP would be in the best interests of the Company and recommended such selection to the Board of Directors. The reports of Grant Thornton LLP on the Company's consolidated financial statements for the fiscal years ended December 31, 1992 and 1993 did not contain an adverse opinion or a disclaimer of opinion and the reports were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the report for 1993 was modified by inclusion of an explanatory paragraph regarding the uncertainty of the pending investigations of the Company and related litigation described in the Company's Current Reports on Form 8-K dated August 16, October 6, November 23 and December 16, 1993 and Quarterly Report on Form 10-Q for the quarter ended September 30, 1993. Since January 1, 1992, there have been no disagreements with Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Grant Thornton LLP, would have caused Grant Thornton LLP to make reference to the subject matter of such disagreements in connection with its report. PART III The information required by Item 10 - Directors and Executive Officers of the Registrant is contained on page 38 of this Form 10-K Annual Report and in the Company's definitive Proxy Statement in connection with the 1995 Annual Meeting of Common Shareholders (the "Proxy Statement"), which material is incorporated by reference in this Form 10-K Annual Report. The information required by Item 11 - Executive Compensation, Item 12 - Security Ownership of Certain Beneficial Owners and Management and Item 13 - Certain Relationships and Related Transactions is contained in Section 1, "Election of Directors," of the Proxy Statement which material is incorporated by reference in this Form 10-K Annual Report. With the exception of this information, the Proxy Statement is not deemed filed as part of this Form 10-K Annual Report. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1) Financial Statements The following consolidated financial statements of the Company and its subsidiaries appearing on pages 17 through 33 of the 1994 Annual Report to Shareholders are incorporated by reference in this Form 10-K Annual Report. With the exception of these consolidated financial statements and the information incorporated in Items 1, 3, 5, 6, 7 and 8, herein, the 1994 Annual Report to Shareholders is not deemed filed as part of this Form 10-K Annual Report. Page* Consolidated Statements of Income and Retained Earnings for the years ended December 31, 1994, 1993 and 1992. 17 Consolidated Balance Sheets as of December 31, 1994 and 1993. 18 Consolidated Cash Flow Statements for the years ended December 31, 1994, 1993 and 1992. 20 Notes to Consolidated Financial Statements. 21 Report of Independent Public Accountants. 33 *Page number reference is to the 1994 Annual Report to Shareholders (a)(2) Financial Statement Schedules Page** Valuation and Qualifying Accounts and Reserves for the years ended December 31, 1994, 1993 and 1992 (Schedule II). 51 **Page number reference is to this Form 10-K Annual Report All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. The information required by Rule 5-04, Schedule I - Condensed Financial Information of Registrant has been omitted since Consolidated Financial State- ments of the Registrant and its subsidiaries are contained in the Company's 1994 Annual Report to Shareholders and the test prescribed was not met. (a)(3) Exhibits * 3.1 Restated Certificate of Incorporation, as amended through April 14, 1988. (Exhibit 4.1 to Registration Statement 33-25359). 3.2 By-Laws, as amended through November 3, 1994. * 4.1 Composite First Mortgage of the Company as Supplemented and Modified by Twenty-six Supplemental Indentures. (Exhibit 4.1 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.2 Twenty-seventh Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1980. (Exhibit 4.2 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.3 Mortgage Trust Indenture of Rockland Electric Company, dated as of July 1, 1954. (Exhibit 2.16 to Registration Statement No. 2-14159). * 4.6 Third Supplemental Indenture of Rockland Electric Company, dated as of August 15, 1965. (Exhibit 4.23 to Registration Statement No. 2-24682). * 4.11 Mortgage Trust Indenture of Pike County Light & Power Company, dated as of July 15, 1971. (Exhibit 4.31 to Registration Statement No. 2-45632). * 4.12 Twenty-eighth Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1982. (Exhibit 4.12 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). * 4.17 Twenty-ninth Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1984. (Exhibit 4.17 to Form 10-K for the fiscal year ended December 31, 1989, File No. 1-4315). * 4.20 Thirtieth Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1986. (Exhibit 4.20 to Form 10-K for the fiscal year ended December 31, 1991, File No. 1-4315). * 4.21 Thirty-first Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1988. (Exhibit 4.21 to Form 10-K for the fiscal year ended December 31, 1988, File No. 1-4315). * 4.22 Thirty-second Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1990. (Exhibit 4.22 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.25 Indenture between the Company and The Bank of New York as Trustee regarding unsecured debt, dated March 1, 1990. (Exhibit 4.25 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.26 First Supplemental Indenture between the Company and The Bank of New York as Trustee regarding unsecured debt, dated March 7, 1990. (Exhibit 4.26 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.27 Second Supplemental Indenture between the Company and the Bank of New York as Trustee regarding unsecured debt, dated October 15, 1992. (Exhibit 4.27 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). * 4.28 Thirty-third Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1992. (Exhibit 4.28 to Form 10-K for the fiscal year ended December 3, 1992, File No. 1-4315). * 4.29 Third Supplemental Indenture between the Company and The Bank of New York as Trustee regarding unsecured debt, dated as of March 1, 1993. (Exhibit 4.29 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). * 4.30 Ninth Supplemental Indenture of Rockland Electric Company, dated as of March 1, 1993. (Exhibit 4.30 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). 4.31 Thirty-fourth Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1994. *10.1 General Agreement: Bowline Point Generating Plant, dated as of October 10, 1969. (Exhibit 5(b) to Registration Statement No. 2-42156). *10.2 Financing Agreements, dated as of February 1, 1971. (Exhibit 5(a) to Registration Statement No. 2-42156). *10.7 New York Power Pool Agreement, dated July 16, 1985. (Exhibit 10.7 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). *10.8 Agreement governing the supply of residual fuel oil by Con Edison to Bowline Point Generating Station dated August 31, 1983. (Exhibit 10.18 to Form 10-K for fiscal year ended December 31, 1991, File No. 1-4315). *10.10 PJM Facilities Agreement, dated May 1, 1970, as amended December 12, 1972. (Exhibit 10.10 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). +*10.11 Officers' Supplemental Retirement Plan, as amended April 1, 1993. *10.12 Incentive Compensation Plan, amended January 3, 1991. (Exhibit 10.12 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). *10.13 Severance Pay Plan, as amended January 3, 1991. (Exhibit 10.13 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). *10.14 Management Long-Term Disability Plan. (Exhibit 10.14 to Form 10-K for the fiscal year ended December 31, 1991, File No. 1-4315). *10.15 New York Power Authority Firm Purchase Contract, dated July 28, 1975. (Exhibit 10.15 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). 10.17 Coal Purchase and Sale Agreement among Orange and Rockland Utilities, Inc., Rawl Sales and Processing Company, and Massey Coal Sales, Inc., dated March 9, 1984, as amended through July 1, 1994. *10.18 Agreement between Orange and Rockland Utilities, Inc., and Pittston Coal Sales Company, dated March 14, 1984 as amended through December 1, 1986. (Exhibit 10.18 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). *10.18A Amendment to the Agreement between Orange and Rockland Utilities, Inc., and Pittston Coal Sales Company, dated July 1, 1991 and executed May 5, 1993. (Exhibit 10.18A to Form 10-K for the fiscal year ended December 31, 1993, File No. 1-4315). +*10.19 Employment contract between Orange and Rockland Utilities, Inc. and James F. Smith as amended December 1, 1990. (Exhibit 10.19 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). 10.20 Orange and Rockland Utilities, Inc. Post Director Service Retainer Continuation Program, as amended March 2, 1995. *10.21 Electric Contract for the Sale of Firm Power and Energy by the Power Authority of the State of New York to Orange and Rockland Utilities, Inc., dated April 26, 1989, including Application dated April 20, 1989. (Exhibit 10.21 to Form 10-K for the fiscal year ended December 31, 1989, File No. 1-4315). +*10.22 Form of Severance Agreement for Company Officers effective January 3, 1991. (Exhibit 10.22 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). +*10.23 Performance Unit Incentive Plan effective December 3, 1992. (Exhibit 10.23 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). +*10.24 Award Agreement under the Performance Unit Incentive Plan applicable to P. J. Chambers, Jr., dated December 3, 1992. (Exhibit 10.24 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). +*10.25 Award Agreement under the Performance Unit Incentive Plan applicable to J. F. Smith dated December 3, 1992. (Exhibit 10.25 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). +*10.26 Letter agreement dated September 29, 1994 between Orange and Rockland Utilities, Inc. and R. Lee Haney regarding participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. (Exhibit 10.26 to Form 10-Q for the period ended September 30, 1994, File No. 1-4315). +*10.27 Letter agreement dated September 29, 1994 between Orange and Rockland Utilities, Inc. and D. Louis Peoples regarding participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. (Exhibit 10.27 to Form 10-Q for the period ended September 30, 1994, File No. 1-4315). +10.28 Agreement between Orange and Rockland Utilities, Inc. and Victor J. Blanchet, Jr. dated March 1, 1995. +10.29 Deferred Compensation Plan for Non Employee Directors as amended through October 6, 1994. 13 The Company's 1994 Annual Report to Shareholders to the extent identified in this Form 10-K Annual Report for the fiscal year ended December 31, 1994. *16 Letter from Grant Thornton (Exhibit 16 to Form 8-K/A dated February 22, 1994, File No. 1-4315). 21 Subsidiaries of the Company. 24 Powers of Attorney. 27 Financial Data Schedule. *99.1 Joint Cooperation Agreement between the Office of the Rockland County District Attorney and Orange and Rockland Utilities, Inc., dated November 3, 1993 (Exhibit 99.1 to Form 10-Q for the quarter ended September 30, 1993, File No. 1-4315). *99.2 Complaint against James F. Smith dated March 16, 1994. (Exhibit 99.2 to Form 10-K for the year ended December 31, 1993, File No. 1-4315). *99.5 Agreement Between Orange and Rockland Utilities, Inc. and Kroll Associates, Inc. dated as of November 1, 1994. (Exhibit 99.5 to Form 10-Q for the period ended September 30, 1994, File No. 1-4315). + Denotes executive compensation plans and arrangements. * Incorporated by reference to the indicated filings. The securities issued relevant to each of the following agreements were not registered with the Securities and Exchange Commission and the total amount of securities authorized under each agreement does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Therefore, as provided in Item 601 of Regulation S-K, the following agreements are not filed as exhibits. The Company agrees, however, to furnish to the Commission a copy of each agreement upon request: - Participation Agreement between NYSERDA and Orange and Rockland Utilities, Inc., dated as of July 1, 1982. - Indenture of Trust between NYSERDA and The Bank of New York, as Trustee, relating to the Pollution Control Revenue Bonds (Orange and Rockland Utilities, Inc. Project) dated as of July 1, 1982. - Second Supplemental Indenture of Trust between NYSERDA and the Bank of New York, as Trustee, relating to the 9% Pollution Control Revenue Bonds (Orange and Rockland Utilities, Inc. Projects), 1985 Series. - Second Supplemental Participation Agreement between NYSERDA and Orange and Rockland Utilities, Inc., dated as of August 1, 1985. - First Supplemental Indenture, dated August 15, 1990, to the Indenture of Mortgage and Deed of Trust of Pike County Light & Power Company. - Eighth Supplemental Indenture of Rockland Electric Company, dated as of August 15, 1990. - Indenture of Trust between NYSERDA and the Bank of New York, as Trustee, relating to the Pollution Control Revenue Bonds (Orange and Rockland Utilities, Inc. Project) dated as of August 15, 1994. - Participation Agreement between NYSERDA and Orange and Rockland Utilities, Inc., dated as of August 15, 1994. (b) Reports on Form 8-K The Company has not filed any reports on Form 8-K current report covering an event during the fourth quarter of 1994. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. ORANGE AND ROCKLAND UTILITIES, INC. (Registrant) By D. LOUIS PEOPLES (D. Louis Peoples Vice Chairman of the Board of Directors and Chief Executive Officer) Date: March 17, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature and Title Capacity in Which Signing D. LOUIS PEOPLES* Chief Executive (D. Louis Peoples, Officer, Director Vice Chairman of the Board of Directors and Chief Executive Officer) R. LEE HANEY* Chief Financial Officer (R. Lee Haney, Vice President and Chief Financial Officer) TERRY L. DITTRICH* Acting Principal (Terry L. Dittrich, Acting Accounting Officer Controller) H. KENT VANDERHOEF* Chairman of the (H. Kent Vanderhoef) Board of Directors RALPH M. BARUCH* Director (Ralph M. Baruch) J. FLETCHER CREAMER* Director (J. Fletcher Creamer) Signature and Title Capacity in Which Signing MICHAEL J. DEL GIUDICE* Director (Michael J. Del Giudice) FRANK A. McDERMOTT, JR.* Director (Frank A. McDermott, Jr.) KENNETH D. McPHERSON* Director (Kenneth D. McPherson) JAMES F. O'GRADY, JR.* Director (James F. O'Grady, Jr.) FREDERIC V. SALERNO* Director (Frederic V. Salerno) LINDA C. TALIAFERRO* Director (Linda C. Taliaferro) *By G. D. CALIENDO (G. D. Caliendo, Attorney-in-fact) Date: March 17, 1995 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES We have audited in accordance with generally accepted auditing standards, the 1994 consolidated financial statements included in Orange and Rockland Utilities, Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 2, 1995. Our audit was made for the purpose of forming an opinion on those consolidated financial statements taken as a whole. Supplemental Schedule II, Valuation and Qualifying Accounts and Reserves for the year ended December 31, 1994 (see index of financial statements) is presented for purposes of complying with the Securities and Exchange Commissions rules and is not part of the basic consolidated statements and, in our opinion, fairly states in all material respects the financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP New York, New York February 2, 1995 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included or incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (File Nos. 33-25358, 33-25359 and 33-22129) and on Form S-3 (File No. 33-63872). ARTHUR ANDERSEN LLP New York, New York March 17, 1995 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES Board of Directors and Shareholders of Orange and Rockland Utilities, Inc. In connection with our audit of the consolidated financial statements of Orange and Rockland Utilities, Inc. and Subsidiaries referred to in our report dated February 16, 1994, which report included an explanatory paragraph that described the investigations and litigation discussed in Note 12 (Legal Proceedings) of those statements, which is included in the 1993 Annual Report to Shareholders and incorporated by reference in this Form 10-K, we have also audited the schedule listed in the Index at Item 14(a)(2). In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. GRANT THORNTON LLP New York, New York February 16, 1994 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our reports dated February 16, 1994, accompanying the consolidated financial statements and schedule incorporated by reference or included in the Annual Report of Orange and Rockland Utilities, inc. and Subsidiaries on Form 10-K for the year ended December 31, 1993. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Orange and Rockland Utilities, Inc. and Subsidiaries on Forms S-8 (No. 33-25358, No. 33-25359 and No. 33-22129) and on Forms S-3 (No. 33-63872). GRANT THORNTON LLP New York, New York March 17, 1995 SCHEDULE II ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts and Reserves Years Ended December 31, 1994, 1993 and 1992 (Thousands of Dollars)
Column A Column B Column C Column D Column E Additions (1) (2) Balance Balance at Charged to Charged at beginning costs and to other end of Description of period expenses accounts Deductions period December 31, 1994 Allowance for Uncollect- ible accounts: Customer accounts $2,026 $2,493 $391 $2,710 $2,200 Other accounts 102 544 8 445 209 Gas marketing accounts 471 287 2 433 327 $2,599 $3,324 $401(A) $3,588(B) $2,736 Reserve for Claims and Damages $3,830 $2,474 $140 $1,731(C) $4,713 Gas Turbine Maintenance Reserve $(1,375) $1,367 $ - $ 250(C) $ (258) December 31, 1993 Allowance for Uncollect- ible accounts: Customer accounts $1,651 $2,428 $400 $2,453 $ 2,026 Other accounts 86 207 4 195 102 Gas marketing accounts 75 548 - 152 471 $1,812 $3,183 $404(A) $2,800(B) $ 2,599 Reserve for Claims and Damages $3,521 $1,895 $146 $1,732(C) $ 3,830 Gas Turbine Maintenance Reserve $(2,532) $1,367 $ - $ 210(C) $(1,375)
(Continued) SCHEDULE II ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts and Reserves Years Ended December 31, 1994, 1993 and 1992 (Thousands of Dollars)
Column A Column B Column C Column D Column E Additions (1) (2) Balance Balance at Charged to Charged at beginning costs and to other end of Description of period expenses accounts Deductions period December 31, 1992 Allowance for Uncollect- ible accounts: Customer accounts $1,670 $2,019 $393 $2,431 $1,651 Other accounts 110 132 1 157 86 Gas marketing accounts 40 43 - 8 75 $1,820 $2,194 $394(A) $2,596(B) $1,812 Reserve for Claims and Damages $3,427 $2,043 $523 $2,472(C) $3,521 Gas Turbine Maintenance Reserve $(2,889) $ 622 $ - $ 265(C) $(2,532) (A) Includes collection of accounts previously written off of $401 in 1994, $404 in 1993, and $394 in 1992. (B) Accounts considered uncollectible and charged off of $3,588 in 1994, $2,800 in 1993 and $2,596 in 1992. (C) Payments of damage claims of $1,731 in 1994, $1,732 in 1993 and $2,472 in 1992 and maintenance expenses of $250 in 1994, $210 in 1993 and $265 in 1992.
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ________________________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 ________________________ Fiscal Year Ended December 31, 1994 Commission File Number 1-4315 ORANGE AND ROCKLAND UTILITIES, INC. (Exact name of Registrant as Specified in its Charter) EXHIBITS Orange and Rockland Utilities, Inc. Index of Exhibits 1994 Form 10-K * 3.1 Restated Certificate of Incorporation, as amended through April 14, 1988. (Exhibit 4.1 to Registration Statement 33-25359). 3.2 By-Laws, as amended through November 3, 1994. * 4.1 Composite First Mortgage of the Company as Supplemented and Modified by Twenty-six Supplemental Indentures. (Exhibit 4.1 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.2 Twenty-seventh Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1980. (Exhibit 4.2 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.3 Mortgage Trust Indenture of Rockland Electric Company, dated as of July 1, 1954. (Exhibit 2.16 to Registration Statement No. 2-14159). * 4.6 Third Supplemental Indenture of Rockland Electric Company, dated as of August 15, 1965. (Exhibit 4.23 to Registration Statement No. 2-24682). * 4.11 Mortgage Trust Indenture of Pike County Light & Power Company, dated as of July 15, 1971. (Exhibit 4.31 to Registration Statement No. 2-45632). * 4.12 Twenty-eighth Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1982. (Exhibit 4.12 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). * 4.17 Twenty-ninth Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1984. (Exhibit 4.17 to Form 10-K for the fiscal year ended December 31, 1989, File No. 1-4315). * 4.20 Thirtieth Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1986. (Exhibit 4.20 to Form 10-K for the fiscal year ended December 31, 1991, File No. 1-4315). * 4.21 Thirty-first Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1988. (Exhibit 4.21 to Form 10-K for the fiscal year ended December 31, 1988, File No. 1-4315). * 4.22 Thirty-second Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1990. (Exhibit 4.22 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.25 Indenture between the Company and The Bank of New York as Trustee regarding unsecured debt, dated March 1, 1990. (Exhibit 4.25 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.26 First Supplemental Indenture between the Company and The Bank of New York as Trustee regarding unsecured debt, dated March 7, 1990. (Exhibit 4.26 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). * 4.27 Second Supplemental Indenture between the Company and the Bank of New York as Trustee regarding unsecured debt, dated October 15, 1992. (Exhibit 4.27 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). * 4.28 Thirty-third Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1992. (Exhibit 4.28 to Form 10-K for the fiscal year ended December 3, 1992, File No. 1-4315). * 4.29 Third Supplemental Indenture between the Company and The Bank of New York as Trustee regarding unsecured debt, dated as of March 1, 1993. (Exhibit 4.29 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). * 4.30 Ninth Supplemental Indenture of Rockland Electric Company, dated as of March 1, 1993. (Exhibit 4.30 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). 4.31 Thirty-fourth Supplemental Indenture to the First Mortgage of the Company, dated as of April 1, 1994. *10.1 General Agreement: Bowline Point Generating Plant, dated as of October 10, 1969. (Exhibit 5(b) to Registration Statement No. 2-42156). *10.2 Financing Agreements, dated as of February 1, 1971. (Exhibit 5(a) to Registration Statement No. 2-42156). *10.7 New York Power Pool Agreement, dated July 16, 1985. (Exhibit 10.7 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). *10.8 Agreement governing the supply of residual fuel oil by Con Edison to Bowline Point Generating Station dated August 31, 1983. (Exhibit 10.18 to Form 10-K for fiscal year ended December 31, 1991, File No. 1-4315). *10.10 PJM Facilities Agreement, dated May 1, 1970, as amended December 12, 1972. (Exhibit 10.10 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). +*10.11 Officers' Supplemental Retirement Plan, as amended April 1, 1993. *10.12 Incentive Compensation Plan, amended January 3, 1991. (Exhibit 10.12 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). *10.13 Severance Pay Plan, as amended January 3, 1991. (Exhibit 10.13 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). *10.14 Management Long-Term Disability Plan. (Exhibit 10.14 to Form 10-K for the fiscal year ended December 31, 1991, File No. 1-4315). *10.15 New York Power Authority Firm Purchase Contract, dated July 28, 1975. (Exhibit 10.15 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). 10.17 Coal Purchase and Sale Agreement among Orange and Rockland Utilities, Inc., Rawl Sales and Processing Company, and Massey Coal Sales, Inc., dated March 9, 1984, as amended through July 1, 1994. *10.18 Agreement between Orange and Rockland Utilities, Inc., and Pittston Coal Sales Company, dated March 14, 1984 as amended through December 1, 1986. (Exhibit 10.18 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). *10.18A Amendment to the Agreement between Orange and Rockland Utilities, Inc., and Pittston Coal Sales Company, dated July 1, 1991 and executed May 5, 1993. (Exhibit 10.18A to Form 10-K for the fiscal year ended December 31, 1993, File No. 1-4315). +*10.19 Employment contract between Orange and Rockland Utilities, Inc. and James F. Smith as amended December 1, 1990. (Exhibit 10.19 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). 10.20 Orange and Rockland Utilities, Inc. Post Director Service Retainer Continuation Program, as amended March 2, 1995. *10.21 Electric Contract for the Sale of Firm Power and Energy by the Power Authority of the State of New York to Orange and Rockland Utilities, Inc., dated April 26, 1989, including Application dated April 20, 1989. (Exhibit 10.21 to Form 10-K for the fiscal year ended December 31, 1989, File No. 1-4315). +*10.22 Form of Severance Agreement for Company Officers effective January 3, 1991. (Exhibit 10.22 to Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4315). +*10.23 Performance Unit Incentive Plan effective December 3, 1992. (Exhibit 10.23 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). +*10.24 Award Agreement under the Performance Unit Incentive Plan applicable to P. J. Chambers, Jr., dated December 3, 1992. (Exhibit 10.24 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). +*10.25 Award Agreement under the Performance Unit Incentive Plan applicable to J. F. Smith dated December 3, 1992. (Exhibit 10.25 to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-4315). +*10.26 Letter agreement dated September 29, 1994 between Orange and Rockland Utilities, Inc. and R. Lee Haney regarding participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. (Exhibit 10.26 to Form 10-Q for the period ended September 30, 1994, File No. 1-4315). +*10.27 Letter agreement dated September 29, 1994 between Orange and Rockland Utilities, Inc. and D. Louis Peoples regarding participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. (Exhibit 10.27 to Form 10-Q for the period ended September 30, 1994, File No. 1-4315). +10.28 Agreement between Orange and Rockland Utilities, Inc. and Victor J. Blanchet, Jr. dated March 1, 1995. +10.29 Deferred Compensation Plan for Non Employee Directors as amended through October 6, 1994. 13 The Company's 1994 Annual Report to Shareholders to the extent identified in this Form 10-K Annual Report for the fiscal year ended December 31, 1994. *16 Letter from Grant Thornton (Exhibit 16 to Form 8-K/A dated February 22, 1994, File No. 1-4315). 21 Subsidiaries of the Company. 24 Powers of Attorney. 27 Financial Data Schedule. *99.1 Joint Cooperation Agreement between the Office of the Rockland County District Attorney and Orange and Rockland Utilities, Inc., dated November 3, 1993 (Exhibit 99.1 to Form 10-Q for the quarter ended September 30, 1993, File No. 1-4315). *99.2 Complaint against James F. Smith dated March 16, 1994. (Exhibit 99.2 to Form 10-K for the year ended December 31, 1993, File No. 1-4315). *99.5 Agreement Between Orange and Rockland Utilities, Inc. and Kroll Associates, Inc. dated as of November 1, 1994. (Exhibit 99.5 to Form 10-Q for the period ended September 30, 1994, File No. 1-4315). + Denotes executive compensation plans and arrangements. * Incorporated by reference to the indicated filings. The securities issued relevant to each of the following agreements were not registered with the Securities and Exchange Commission and the total amount of securities authorized under each agreement does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Therefore, as provided in Item 601 of Regulation S-K, the following agreements are not filed as exhibits. The Company agrees, however, to furnish to the Commission a copy of each agreement upon request: - Participation Agreement between NYSERDA and Orange and Rockland Utilities, Inc., dated as of July 1, 1982. - Indenture of Trust between NYSERDA and The Bank of New York, as Trustee, relating to the Pollution Control Revenue Bonds (Orange and Rockland Utilities, Inc. Project) dated as of July 1, 1982. - Second Supplemental Indenture of Trust between NYSERDA and the Bank of New York, as Trustee, relating to the 9% Pollution Control Revenue Bonds (Orange and Rockland Utilities, Inc. Projects), 1985 Series. - Second Supplemental Participation Agreement between NYSERDA and Orange and Rockland Utilities, Inc., dated as of August 1, 1985. - First Supplemental Indenture, dated August 15, 1990, to the Indenture of Mortgage and Deed of Trust of Pike County Light & Power Company. - Eighth Supplemental Indenture of Rockland Electric Company, dated as of August 15, 1990. - Indenture of Trust between NYSERDA and the Bank of New York, as Trustee, relating to the Pollution Control Revenue Bonds (Orange and Rockland Utilities, Inc. Project) dated as of August 15, 1994. - Participation Agreement between NYSERDA and Orange and Rockland Utilities, Inc., dated as of August 15, 1994. EX-3.2 2 As amended through 11/03/94 ORANGE AND ROCKLAND UTILITIES, INC. (New York) BY-LAWS ARTICLE ONE OFFICES SECTION 1.1. Corporation's Office in New York; Mailing Address for Service of Process. The location of the Corporation's office within the State of New York, and the post office address to which the Secretary of State of the State of New York shall mail a copy of process in any action or proceeding against the Corporation that may be served upon him, shall be in each case as stated in the Certificate of Incorporation. ARTICLE TWO SHAREHOLDERS MEETINGS SECTION 2.1. Annual Meetings. An annual meeting of shareholders to elect directors and transact such other business as may properly be presented to the meeting shall be held on the second Wednesday in April of each year or if that day is a legal holiday in the jurisdiction in which the meeting is to be held then on the next following day not a legal holiday. SECTION 2.2. Special Meetings. A special meeting of shareholders may be called at any time and for any purpose by the Board of Directors, its Chairman or the President and shall be called by the Secretary upon receipt of a written request to do so specifying the matter or matters, appropriate for action at a special meeting, proposed to be presented to the meeting and signed by holders of record of an aggregate of not less than one-fourth of the shares outstanding and entitled to act on such matter or matters on the date of receipt of such request. At any such special meeting only such business may be transacted as is related to the purpose or purposes set forth in the notice required by Section 2.4. SECTION 2.3. Place of Meetings. Each annual meeting shall be held at such place, within or without the State of New York, as the Board of Directors, its Chairman or the President shall fix. Each special meeting shall be held at such place, within or without the State of New York, as the person or persons calling the meeting shall fix. If no place shall be so fixed, the meeting shall be held at the offices of the Corporation in the State of New York. SECTION 2.4. Notice of Meetings. (a) Written notice of a meeting of shareholders shall be given, personally or by mail, not less than ten nor more than fifty days before the meeting to each shareholder entitled to vote at such meeting; such notice shall state the date, place and hour of the meeting and, unless it is the annual meeting, shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called. If mailed, such notice is given when deposited in the United States mail, with postage thereon prepaid, directed to each shareholder at his address as it appears on the record of shareholders, or, if he shall have duly filed with the Secretary a written request that notices to him be mailed to some other address, then directed to him at such other address. (b) When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. However, if after adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date who is entitled to notice under paragraph (a) of this Section 2.4. SECTION 2.5. Waiver of Notice. Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. SECTION 2.6. Quorum. Except as otherwise required by law or the Certificate of Incorporation, the holders of record of a majority of the shares entitled to be voted present in person or represented by proxy at a meeting shall be necessary and sufficient to constitute a quorum for the transaction of business at the meeting, but in the absence of a quorum the holders of record present or represented by proxy at such meeting may vote to adjourn the meeting from time to time. A quorum once present to organize a meeting is not broken by the subsequent withdrawal of any shareholders. SECTION 2.7. Presiding Officer and Secretary at Meetings. Each shareholders' meeting shall be presided over by the Chairman of the Board of Directors or in his absence by the Vice Chairman of the Board of Directors, if any, or in the absence of both of them by the President, or if none of them is present by the person designated in writing by the Chairman of the Board of Directors, or if no person is so designated, then a chairman of the meeting shall be chosen by the meeting by a plurality vote. The Secretary or in his absence an Assistant Secretary shall act as secretary of the meeting, or if no such officer is present a secretary of the meeting shall be designated by the person presiding at the meeting. SECTION 2.8. Voting. Except as otherwise required by law or the Certificate of Incorporation: (a) each shareholder of record shall be entitled at every meeting of shareholders to one vote in person or by proxy for each share standing in his name on the record of shareholders; (b) directors shall be elected by a plurality vote; (c) each other matter properly presented to any meeting shall be decided by a majority of the votes cast on the matter. SECTION 2.9. Proxies. Every proxy must be executed in writing by the shareholder or by his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where an irrevocable proxy is expressly stated to be given and is permitted by law. Section 2.10. Inspectors of Election. At any meeting for the election of directors, the presiding officer shall appoint two inspectors of election to serve at such meeting. The inspectors shall be sworn to execute their duties with strict impartiality and according to the best of their ability. Section 2.11. Record Date. (a) For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders. Such date shall not be more than fifty nor less than ten days before the date of the meeting, nor more than fifty days prior to any other action. (b) When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board of Directors shall fix a new record date under this section for the adjourned meeting. ARTICLE THREE DIRECTORS SECTION 3.1. Number; Term of Office. The business of the Corporation shall be managed under the direction of the Board of Directors. The Board of Directors shall consist of not less than 7(1) or more than 15 persons, the exact number (i) to be 12 persons upon adoption of this Section 3.1, subject to change exclusively by the Board of Directors as provided in this Section 3.1, and (ii) if to be changed from 12 persons to some other number not less than 7 or more than 15 persons subsequent to the adoption of this Section 3.1, to be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors from time to time (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). At the annual meeting of the shareholders of the Corporation at which this Section 3.1 is adopted, the directors shall be classified into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1988 annual meeting of shareholders, the term of office of the second class to expire at the 1989 annual meeting of shareholders and the term of office of the third class to expire at the 1990 annual meeting of shareholders. At each annual meeting of the shareholders of the Corporation following the annual meeting of the shareholders at which this Section 3.1 is adopted, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election. SECTION 3.2. Resignation; Removal. Any director of the Corporation may resign at any time either by oral tender of resignation at any meeting of the Board of Directors or by giving written notice thereof to the Corporation. Such resignation shall take effect at the time specified therefor, and unless otherwise specified with respect thereto the acceptance of such resignation shall not be necessary to make it effective. Subject to the rights of the holders of any class or series of Preferred Stock having preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director or directors, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the combined voting power of all of the then-outstanding shares of stock of all classes and series of the Corporation entitled to vote generally (the "Voting Stock"), voting together as a single class (it being understood that, for all purposes of these By-Laws, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article SECOND of the Certificate of Incorporation or any designation of the rights, powers and preferences of any class or series of the Preferred Stock of the Corporation made pursuant to said Article SECOND (a "Preferred Stock Designation")). The Corporation must notify the director of the grounds of his impending removal and the director shall have an opportunity, at the expense of the Corporation, to present his defense to the shareholders by a __________ (1) Section 704(a) of the NYBCL requires a minimum of three Directors per class on a staggered board. The minimum number of Directors for O&R is nine. statement which accompanies or precedes the Corporation's solicitation of proxies to remove him. The term "entire Board of Directors" as used in these By-Laws means the total number of directors which the Corporation would have if there were no vacancies. SECTION 3.3. Vacancies. Except as otherwise fixed pursuant to the provisions of Article SECOND of the Certificate of Incorporation elating to the rights of the holders of any class or series of Preferred Stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the directors then in office, even though less than a quorum of the Board of Directors, acting at a regular or special meeting. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of shareholders at which the election of directors is in the regular order of business and until his successor has been elected and qualified. No decrease in the authorized number of directors constituting the entire Board of Directors shall shorten the term of any incumbent director. SECTION 3.4 Qualifications. Each of the directors shall be at least 18 years of age. Each director elected to the Board of Directors pursuant to the provisions of Section 3.1 or Section 3.3 shall not be 70 years of age or older upon election, except those directors elected on or before April 11, 1990 and who are 60 years of age or older on such date shall not be 75 years of age or older upon election. The directors need not be shareholders of the Corporation. SECTION 3.5. Regular and Annual Meetings; Notice. Regular meetings of the Board of Directors shall be held at such time and at such place, within or without the State of New York, as the Board of Directors may from time to time prescribe. No notice need be given of any regular meeting and a notice, if given, need not specify the purposes thereof. A meeting of the Board of Directors may be held without notice immediately after an annual meeting of shareholders at the same place as that at which such meeting was held. SECTION 3.6. Special Meetings; Notice. A special meeting of the Board of Directors may be called at any time by the Board of Directors or its Chairman and shall be called by the Board of Directors, its Chairman or the Secretary upon receipt of a written request to do so specifying the matter or matters, appropriate for action at such a meeting, proposed to be presented at the meeting and signed by at least two directors. Any such meeting shall be held at such time and at such place, within the State of New York (or without the State of New York if the Chairman of the Board of Directors shall so direct), as shall be stated in the request or as shall be determined by the body or person calling such meeting. Notice of such meeting stating the time and place thereof shall be given (a) by deposit of the notice in the mails (first class, postage prepaid) at least two days before the day fixed for the meeting addressed to each director at his address as it appears on the Corporation's records or at such other address as the director may have furnished the Corporation for that purpose, or (b) by dispatch of the notice similarly addressed by telegraph, telex, cable or other electronic means of communication or by delivery of such notice by telephone or in person, in each case at least 24 hours before the time fixed for the meeting. SECTION 3.7. Waiver of Notice. Notice of a meeting of the Board of Directors or of any committee thereof need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. *SECTION 3.8. Chairman of the Board; Presiding Officer and Secretary at Meetings. The Board of Directors at its first meeting following the annual meeting of shareholders in each year may elect one of its members to serve at its pleasure as Chairman of the Board. The Chairman of the Board may but need not be an officer of or employed in an executive or any other capacity by the corporation. Each meeting of the Board of Directors shall be presided over by the Chairman of the Board or in his absence by the Vice Chairman of the Board, if any, or if neither is present by such member of the Board of Directors as shall be chosen by the meeting. The Secretary or in his absence an Assistant Secretary shall act as secretary of the meeting, or if no such officer is present, a secretary of the meeting shall be designated by the person presiding at the meeting. The Chairman of the Board of Directors shall preside at all meetings of the shareholders, and shall have such further powers and duties as may be conferred by the Board of Directors. SECTION 3.9. Quorum; Voting. A majority of the whole Board of Directors shall constitute a quorum for the transaction of business, but in the absence of a quorum a majority of those present (or if only one be present, then that one) may adjourn the meeting, without notice other than announcement at the meeting, until such time as a quorum is present. In the absence of any such announcement notice of any adjournment shall be given in accordance with the provisions of Section 3.6. SECTION 3.10. Meeting by Telephone. At the direction of the Chairman of the Board of Directors, members of the Board of Directors or of any committee thereof may participate in meetings of the Board of Directors or of such committee by means of conference telephone or __________ * Amended 7/14/94 similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. SECTION 3.11. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors or of such committee. SECTION 3.12. Compensation. A director shall receive such compensation, if any, for his services as a director or as a member of any committee of the Board of Directors as may from time to time be fixed by the Board of Directors, which compensation may be based, in whole or in part, upon his attendance at meetings of the Board of Directors or of its committees. He may also be reimbursed for his expenses in attending any meeting. SECTION 3.13. Executive Committee. (a) The Board of Directors, at its first meeting following the annual meeting of shareholders in each year, may, by resolution adopted by a majority of the entire Board of Directors, appoint an Executive Committee of the Board of Directors to consist of the Chairman of the Board of Directors and two or more additional directors as the Board of Directors may from time to time determine. The Executive Committee shall have, and may exercise during the intervals between the meetings of the Board of Directors, all the powers vested in the Board of Directors, except that the Executive Committee shall not have authority as to any of the following matters: the declaration of dividends; the submission to shareholders of any action as to which shareholder action is required by law; the filling of vacancies on the Board of Directors or on any committee thereof; the fixing of compensation of any director for serving on the Board of Directors or on any committee thereof; the amendment or repeal of these By-Laws or the adoption of new By-Laws; and the amendment or repeal of any resolution of the Board of Directors which by its terms shall not be so amendable or repealable. (b) The members of the Executive Committee shall serve at the pleasure of the Board of Directors. The Board of Directors shall designate the Chairman of the Executive Committee and fix the compensation, if any, for his service in such capacity. (c) Three members of the Executive Committee shall constitute a quorum. (d) Meetings of the Executive Committee may be called by the Chairman of the Executive Committee and shall be called by the Chairman of the Executive Committee upon receipt of a written request to do so specifying the matter or matters, appropriate for action at such a meeting, proposed to be presented at the meeting and signed by at least two members of the Executive Committee. (e) The Executive Committee shall serve as the Nominating Committee of the Board of Directors and, in such capacity, when vacancies in the Board of Directors occur, shall evaluate candidates and aid the Board of Directors in attracting qualified candidates to fill such vacancies. * SECTION 3.14. Audit Committee. (a) The Board of Directors at its first meeting following the annual meeting of shareholders in each year, may, by resolution adopted by a majority of the entire Board of Directors, appoint an Audit Committee of the Board of Directors to consist of three or more directors (none of whom shall be officers of the Corporation) as the Board of Directors may from time to time determine. In order to bring a fresh perspective to the Audit Committee, members should be rotated periodically. The Board of Directors will select a member to be chairperson. (b) The Audit Committee as a committee of the Board of Directors is primarily responsible to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information which will be provided to the shareholders and others, the systems of internal controls which management and the Board of Directors has established, and the audit process. The Audit Committee shall have adequate resources to discharge its responsibilities. The Audit Committee shall have the following specific duties and functions and such other duties and functions as from time to time may be prescribed by the Board of Directors: (i) Provide an open avenue of communication between the internal auditors, the independent accountant, and the Board of Directors. (ii) Periodically review and update the Audit Committee's charter and the charter of the internal audit department. (iii) Review management's plans for engaging the independent accountant to perform management advisory services, and projected fees, to satisfy itself that the independence of the auditor is protected. (iv) Recommend to the Board of Directors the independent accountants to be nominated, approve the compensation of the independent accountant, and review and approve the discharge of the independent accountant. (v) Review and concur in the appointment, replacement, reassignment, or dismissal of the manager of internal auditing. (vi) Confirm and assure the independence of the internal auditors and the independent accountant. __________ * Amended 6/23/94 (vii) Inquire of management, the manager of internal auditing, and the independent accountant about the process each performs to assess significant risks or exposures and evaluate the steps management has taken to minimize such risks to the Corporation. (viii) Consider, in consultation with the independent accountant and the manager of internal auditing, the audit scope and plan of the internal auditors and the independent accountant to ensure coverage is appropriate and the extent to which such plans can be relied upon to detect fraud or weaknesses in controls. The Audit Committee shall formally approve the audit plan of the internal audit department. (ix) Review with the manager of internal auditing and independent accountant the coordination of the audit effort to assure completeness of coverage, reduction of redundant efforts, and the effective use of the audit resources. (x) Consider and review with the independent accountant and the manager of internal auditing: 1. Their assessment of the adequacy of the Corporation's internal controls, including computerized information system controls and security. 2. Any related significant findings and recommendations of the independent accountant and internal auditing, together with management's responses thereto. (xi) Review with management and the independent accountant at the completion of the annual examination: 1. The Corporation's annual financial statements, related footnotes for completeness and appropriateness of accounting principles. 2. The independent accountant's audit of the Corporation's various financial statements and the reports thereon. 3. Any significant changes required in the independent accountant's audit plan. 4. Any serious difficulties or disputes with management encountered during the course of the audit and how they were resolved. 5. Other matters related to the conduct of the audit which are to be communicated to the Audit Committee under generally accepted auditing standards. (xii) Consider and review with management and the manager of internal auditing: 1. Significant findings resulting from internal audits. 2. Any difficulties encountered by the internal audit department in the course of its audits, including any restrictions on the scope of work or access to required information. 3. The internal audit department budget and staffing. 4. The internal audit department charter. (xiii) Review interim filings with the Securities and Exchange Commission and other published documents containing the Corporation's financial statements. (xiv) Review policies and procedures with respect to officers' expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by internal auditing or the independent accountant. (xv) Review with the manager of internal auditing and the independent accountant the results of their review of the Corporation's monitoring of compliance with the Corporation's code of conduct. The Audit Committee shall ensure that appropriate action is taken in cases of significant violations of such code. (xvi) Meet with the manager of internal auditing, the independent accountant, and management in separate executive sessions to discuss any matters that the Audit Committee or these groups believe should be discussed privately with the Audit Committee. The Audit Committee should also meet periodically in executive session to assess management's effectiveness and to assess the performance of the internal audit department. (xvii) Report Audit Committee actions to the Board of Directors with such recommendations as the Audit Committee may deem appropriate. (xviii) The Audit Committee shall have the power to conduct or authorize investigations into any matters within the Audit Committee's scope of responsibilities. The Audit Committee shall be empowered to retain independent counsel, accountants, or others to assist it in the conduct of any investigation. (xix) The Audit Committee shall meet at least four times a year, or more frequently as circumstances require. The Audit Committee shall meet separately in executive session with the independent accountant and the manager of internal auditing at each meeting. Minutes of the meetings shall be prepared and filed with the records of the Corporation. Three or more members shall constitute a quorum for the purpose of conducting Audit Committee functions. *(c) The Audit Committee shall have the following responsibilities and duties with regard to the Company's ethics program, as approved and endorsed by the Board of Directors (the "Ethics Program"): (i) Provide oversight and direction with regard to the Company's Ethics Program and to the ethics officer (the "Ethics Officer") appointed pursuant thereto in a manner that insures that the Company will operate in accordance with ethical principles; (ii) Receive reports at least quarterly from the Ethics Officer detailing the status of ethics initiatives, investigations, disciplinary procedures, compliance efforts and other related activities; (iii) Report to the entire Board of Directors on a periodic basis regarding the operation of the Company's Ethics Program and on matters related thereto deemed by the Committee to be of interest and significance to the Board; (iv) Review, determine and recommend to the entire Board of Directors, the action(s), if any, beyond those undertaken by the Ethics Officer, that are necessary to satisfactorily resolve any reported violations of the Company's Ethics Program; (v) Be available, through the Ethics Officer, as an avenue for employees, vendors and others to express concerns regarding possible ethical transgressions involving senior management of the Company. SECTION 3.15. Other Committees. The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint such committees, in addition to the committees specified in this ARTICLE THREE, as it may deem appropriate. Each such committee shall consist of three or more members of the Board of Directors and shall have such powers of the Board of Directors as _______________ * Added 11/03/94 shall be conferred or authorized by such resolution and as permitted by law. Each such committee shall have such name as may be determined by the resolution appointing it. Each such committee shall serve at the pleasure of the Board of Directors. ARTICLE FOUR OFFICES *SECTION 4.1. Appointment; Qualification. The officers of the Corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers, each of whom shall be appointed by the Board of Directors. The Board of Directors may appoint a Vice Chairman of the Board of Directors and such other officers as it may from time to time determine. Two or more offices may be held by the same person, except the offices of President and Secretary. SECTION 4.2. Term of Office. The term of office of the officers of the Corporation shall be until the first meeting of the Board of Directors following the next annual meeting of shareholders. Subject to Sections 4.3 and 4.4, each officer shall hold office until the expiration of the term for which he is appointed and until his successor is appointed and qualified. Any vacancy in any office shall be filled for the unexpired portion of the term by the Board of Directors. *SECTION 4.3. Resignation. Any officer of the Corporation may resign at any time by giving written notice of such resignation to the Board of Directors, its Chairman, the Chief Executive Officer, the President or the Secretary of the Corporation. SECTION 4.4. Removal. Any officer of the Corporation appointed by the Board of Directors may be removed at any time, with or without cause, by the Board of Directors. SECTION 4.5. Compensation. The compensation of each officer shall be such as the Board of Directors may from time to time determine. ________________ * Amended 7/14/94 *SECTION 4.6. Vice Chairman of the Board of Directors. The Vice Chairman of the Board of Directors, if one be appointed, shall preside in the absence of the Chairman of the Board of Directors at all meetings of the shareholders and the Board of Directors. In the absence or disability of the Chairman of the Board of Directors, he shall exercise the powers and perform the duties of the Chairman of the Board of Directors, subject to the direction of the Board of Directors. He shall have such further powers and duties as may be conferred upon him by the Board of Directors. **SECTION 4.7. Chief Executive Officer. The Chief Executive Officer shall act as the general manager and chief executive officer of the Corporation and, subject to the direction of the Board of Directors, shall have general supervision of the business and affairs of the Corporation. The Chief Executive Officer shall have such further powers and duties as may be conferred by the Board of Directors. ***SECTION 4.8. President. The President, subject to the direction of the Board of Directors, shall have charge of the business of the Corporation relating to general operation, and shall perform all the duties of his office prescribed by law or the Board of Directors. In the absence or disability of the Chairman of the Board of Directors and the Vice Chairman of the Board of Directors, if any, the President shall exercise the powers and perform the duties of the Chairman of the Board of Directors, subject to the direction of the Board of Directors. SECTION 4.9. Vice President. Each Vice President shall have such duties and powers as are usually incident to such office and as the Board of Directors shall from time to time prescribe. In the absence or disability of the President, the Vice President, or if there shall be more than one Vice President, then the one designated by the Board of Directors, shall exercise the powers and perform the duties of the President, subject to the direction of the Board of Directors. SECTION 4.10. Secretary. The Secretary shall be the Secretary both of the Board of Directors and of the Corporation. The Secretary shall attend all meetings of shareholders and of the Board of Directors and keep accurate records thereof. The Secretary shall be custodian of the corporate seal and shall perform the other duties incident to the office of Secretary, subject to the direction of the Board of Directors. ________________ * Former SECTION 4.7, renumbered 7/14/94 ** Added 7/14/94 *** Amended 7/14/94 SECTION 4.11. Assistant Secretary. In the absence or disability of the Secretary, each Assistant Secretary shall have the powers and perform the duties of the Secretary, subject to the direction of the Board of Directors. SECTION 4.12. Treasurer. The Treasurer shall have care of all funds and securities of the Corporation and shall exercise the powers and shall perform the duties incident to the office of Treasurer, subject to the direction of the Board of Directors. SECTION 4.13. Assistant Treasurer. In the absence or disability of the Treasurer, each Assistant Treasurer shall have the power and perform the duties of the Treasurer, subject to the direction of the Board of Directors. SECTION 4.14. Other Officers. Each other officer of the Corporation shall exercise the powers and shall perform the duties incident to his office, subject to the direction of the Board of Directors. SECTION 4.15. Bond. Any officer of the Corporation, if so required by the Board of Directors, shall give to the Corporation such bond or other security for the faithful performance of his duties as may be satisfactory to the Board of Directors. ARTICLE FIVE INDEMNIFICATION AND INSURANCE SECTION 5.1. Indemnification. (a) The Corporation shall indemnify to the fullest extent now or hereafter provided for or permitted by law each person involved in, or made or threatened to be made a party to, any action, suit, claim or proceeding, arbitration, alternative dispute resolution mechanism, investigation, administrative or legislative hearing or any other actual, threatened, pending or completed proceeding, whether civil or criminal, or whether formal or informal, and including an action by or in the right of the Corporation or any other corporation, or any partnership, joint venture, trust, employee benefit plan or other enterprise, whether profit or non-profit (any such entity, other than the Corporation, being hereinafter referred to as an "Enterprise"), and including appeals therein (any such process being hereinafter referred to as a "Proceeding"), by reason of the fact that such person, such person's testator or intestate (i) is or was a director or officer of the Corporation, or (ii) while serving as a director or officer of the Corporation, is or was serving, at the request of the Corporation, as a director, officer, or in any other capacity, any other Enterprise, against any and all judgments, fines, penalties, amounts paid in settlement, and expenses, including attorneys' fees, actually and reasonably incurred as a result of or in connection with any Proceeding, or any appeal therein, except as provided in Section 5.1(b). (b) No indemnification shall be made to or on behalf of any such person if a judgment or other final adjudication adverse to such person establishes that such person's acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that such person personally gained in fact a financial profit or other advantage to which such person was not legally entitled. In addition, no indemnification shall be made with respect to any Proceeding initiated by any such person against the Corporation, or a director or officer of the Corporation, other than to enforce the terms of this ARTICLE FIVE, unless such Proceeding was authorized by the Board of Directors. Further, no indemnification shall be made with respect to any settlement or compromise of any Proceeding unless and until the Corporation has consented to such settlement or compromise. (c) Written notice of any Proceeding for which indemnification may be sought by any person shall be given to the Corporation as soon as practicable. The Corporation shall then be permitted to participate in the defense of any such proceeding or, unless conflicts of interest or position exist between such person and the Corporation in the conduct of such defense, to assume such defense. In the event that the Corporation assumes the defense of any such Proceeding, legal counsel selected by the Corporation shall be acceptable to such person. After such an assumption, the Corporation shall not be liable to such person for any legal or other expenses subsequently incurred unless such expenses have been expressly authorized by the Corporation. In the event that the Corporation participates in the defense of any such Proceeding, such person may select counsel to represent such person in regard to such a Proceeding; however, such person shall cooperate in good faith with any request that common counsel be utilized by the parties to any Proceeding who are similarly situated, unless to do so would be inappropriate due to actual or potential differing interests between or among such parties. (d) In making any determination regarding any person's entitlement to indemnification hereunder, it shall be presumed that such person is entitled to indemnification, and the Corporation shall have the burden of proving the contrary. SECTION 5.2. Advancement of Expenses. Except in the case of a Proceeding against a director or officer specifically approved by the Board of Directors, the Corporation shall, subject to Section 5.1 above, pay expenses actually and reasonably incurred by or on behalf of a director or officer in defending any Proceeding in advance of the final disposition of such Proceeding. Such payments shall be made promptly upon receipt by the Corporation, from time to time, of a written demand of such person for such advancement, together with an undertaking by or on behalf of such person to repay any expenses so advanced to the extent that the person receiving the advancement is ultimately found not to be entitled to indemnification for part or all of such expenses. SECTION 5.3. Rights Not Exclusive. The rights to indemnification and advancement of expenses granted by or pursuant to this ARTICLE FIVE (i) shall not limit or exclude, but shall be in addition to, any other rights which may be granted by or pursuant to any statute, corporate charter, by-law, resolution of shareholders or directors or agreement, (ii) shall be deemed to constitute contractual obligations of the Corporation to any director or officer who serves in a capacity referred to in Section 5.1 at any time while this ARTICLE FIVE is in effect, (iii) shall continue to exist after the repeal or modification of this ARTICLE FIVE with respect to events occurring prior thereto, and (iv) shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the estate, spouse, heirs, executors, administrators or assigns of such person. It is the intent of this ARTICLE FIVE to require the Corporation to indemnify the persons referred to herein for the aforementioned judgments, fines, penalties, amounts paid in settlement, and expenses, including attorney's fees, in each and every circumstance in which such indemnification could lawfully be permitted by express provisions of by-laws, and the indemnification required by this ARTICLE FIVE shall not be limited by the absence of an express recital of such circumstances. SECTION 5.4. Indemnification of Employees and Others. The Corporation may, from time to time, with the approval of the Board of Directors, and to the extent authorized, grant rights to indemnification, and to the advancement of expenses, to any employee or agent of the Corporation or to any person serving at the request of the Corporation as a director or officer, or in any other capacity, any other Enterprise, to the fullest extent of the provisions of this ARTICLE FIVE with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. SECTION 5.5. Authorization of Contracts. The Corporation may, with the approval of the Board of Directors, enter into an agreement with any person who is, or is about to become, a director, officer, employee or agent of the Corporation, or who is serving, or is about to serve, at the request of the Corporation, as a director, officer, or in any other capacity, any other Enterprise, which agreement may provide for indemnification of such person and advancement of expenses to such person upon terms, and to the extent, not prohibited by law. The failure to enter into any such agreement shall not affect or limit the rights of any such person under this ARTICLE FIVE. SECTION 5.6. Insurance. The Corporation may purchase and maintain insurance to indemnify the Corporation and any person eligible to be indemnified under this ARTICLE FIVE within the limits permitted by law. ARTICLE SIX SHARES *SECTION 6.1. Certificates Representing Shares. The shares of the Corporation shall be represented by certificates in such form consistent with law and the Certificate of Incorporation as the Board of Directors may from time to time prescribe, and may be signed by the Chairman of the Board of Directors, or the Vice Chairman of the Board of Directors, if any, or the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or any of its employees. Such certificates shall also bear the seal of the Corporation or a facsimile thereof. SECTION 6.2. Transfer of Shares. Shares of the Corporation shall be transferable on the books of the Corporation by the holder of record thereof or by his attorney upon surrender of the certificate representing such shares with an assignment endorsed thereon or attached thereto duly executed and with such proof of authenticity of signatures as the Corporation may reasonably require. Prior to the transfer of shares of stock on the books of the Corporation and issuance of a new certificate to the transferee, the Corporation may treat the holder of record of a share as the complete owner thereof exclusively entitled to receive dividends thereon and to vote such share and otherwise entitled to all the rights and powers of a complete owner thereof, notwithstanding notice to the contrary. SECTION 6.3. Lost Certificates. The Corporation shall issue a new certificate for shares to replace a certificate theretofore issued by it alleged to have been lost on such reasonable terms and conditions as the Board of Directors may from time to time prescribe. ARTICLE SEVEN MISCELLANEOUS SECTION 7.1. Inspection of Records. The Board of Directors shall have authority, except as otherwise provided by law, to determine the extent to which the books and records of account of the Corporation shall be open to inspection by a shareholder. SECTION 7.2. Waiver of Notice and Lapse of Time. Any action that is authorized to be taken after notice or after the lapse of a prescribed period of time may be taken without notice and without the lapse of such period of time, if at any time before or after such action is completed the person entitled to such notice or entitled to participate in the action to be taken, or in the case of a ______________ * Amended 7/14/94 shareholder, his attorney-in-fact, submits a signed waiver of notice or of such time requirement. SECTION 7.3. Fiscal Year. The fiscal year of the Corporation shall end on December 31 in each year. SECTION 7.4. Corporate Seal. The corporate seal shall be in such form as the Board of Directors may from time to time prescribe. ARTICLE EIGHT AMENDMENT OF BY-LAWS SECTION 8.1. Amendment of By-Laws. These By-Laws may be amended, added to, rescinded or repealed at any meeting of the Board of Directors or of the shareholders, provided notice of the proposed change was given in the notice of the meeting or, in the case of a meeting of the Board of Directors, in a notice given not less than two days prior to the meeting; provided, however, that, notwithstanding any other provisions of these By-Laws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, the Certificate of Incorporation, any Preferred Stock Designation or these By-Laws, the affirmative vote of the holders of at least 80 percent of the combined voting power of all the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal any provision of Section 3.1, 3.2 or 3.3 of these By-Laws or any provision of these By-Laws pertaining to the alteration, amendment or repeal of Section 3.1, 3.2 or 3.3 of these By-Laws. DMG\BY-LAWS.ORU 11/3/94 EX-4.31 3 [CONFORMED COPY] ORANGE AND ROCKLAND UTILITIES, INC. TO BANKERS TRUST COMPANY Trustee ________________________ Thirty-fourth Supplemental Indenture Dated as of April 1, 1994 _________________________ Under the First Refunding Mortgage (now First Mortgage) Originally Made by Rockland Light and Power Company to Bankers Trust Company, Trustee, Dated as of May 1, 1928 ________________________________________________________________ ________________________________________________________________ Recorded in the Office of the Clerk of the County of Orange on May 31, 1994 at 12:30 p.m. in Liber 5125 of Mortgages at Page 264; in the Office of the Clerk of the County of Rockland on May 31, 1994 at 10:20 a.m. in Liber 710 of Land Records at Page 1048; in the Office of the Clerk of the County of Sullivan on May 31, 1994 at 1:09 p.m. in Liber 1748 of Land Records at Page 096; in the Office of the Clerk of the County of Ulster on May 31, 1994 at 3:08 p.m. in Liber 2402 of Deeds at Page 0119. TABLE OF CONTENTS Page Parties and Recitals .................................... 1 Granting Clauses......................................... 8 Habendum and Trust Declaration........................... 14 ARTICLE I SUNDRY PROVISIONS. Section 1. Covenant of seizin, warranty, etc............ 15 Section 2. Supplementing, confirming and incorporating certain provisions of the Indenture without waiver of default................. 15 Section 3. Acceptance by and protection of the Trustee................................... 16 Section 4. Cover, table of contents and article and description headings, and marginal notes and headings, if any, not to affect construction....................... 16 Section 5. Execution in counterparts.................... 17 Section 6. Formal and actual and effective date hereof.................................... 17 Testimonium Clause and Execution......................... 17 ___________________ Appendix Schedule A. Properties in Rockland County, New York Schedule B. Properties in Orange County, New York Schedule C. Properties in Sullivan County, New York THIRTY-FOURTH SUPPLEMENTAL INDENTURE dated as of the 1st day of April, 1994 between Orange and Rockland Utilities, Inc. (formerly named Rockland Light and Power Company), a corporation duly organized and existing under and by virtue of the laws of the State of New York (hereinafter called the "Company"), having its principal office at One Blue Hill Plaza, Pearl River, in the County of Rockland and State of New York, party of the first part, and Bankers Trust Company, a corporation duly organized and existing under and by virtue of the laws of the State of New York (hereinafter called the "Trustee"), having an office at Four Albany Street, in the Borough of Manhattan, City, County and State of New York, party of the second part, WHEREAS, the Company heretofore executed and delivered to the Trustee an Indenture of Mortgage (to which this instrument is supplemental), dated as of the first day of May, 1928, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 277 of Mortgages at page 232, and in the office of the County Clerk of Orange County, New York, in Liber 616 of Mortgages at page 3, and in the office of the County Clerk of Sullivan County, New York, in Liber 227 of Mortgages at page 181, and in the office of the County Clerk of Ulster County, New York, in Liber 579 of Mortgages at page 16, and has also executed and delivered to the Trustee the following thirty-three supplemental indentures (said Indenture of Mortgage as amended and supplemented by such thirty-three supplemental indentures is hereinafter called the "Indenture"): First Supplemental Indenture, dated as of February 6, 1933, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 308 of Mortgages at page 398, and in the office of the County Clerk of Orange County, New York, in Liber 661 of Mortgages at page 113, and in the office of the County Clerk of Sullivan County, New York, in Liber 258 of Mortgages at page 58, and in the office of the County Clerk of Ulster County, New York, in Liber 579 of Mortgages at page 289; and Second Supplemental Indenture, dated as of November 1, 1935, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 326 of Mortgages at page 35, and in the office of the County Clerk of Orange County, New York, in Liber 688 of Mortgages at page 219, and in the office of the County Clerk of Sullivan County, New York, in Liber 278 of Mortgages at page 603, and in the office of the County Clerk of Ulster County, New York, in Liber 579 of Mortgages at page 400; and Third Supplemental Indenture, dated as of October 31, 1940, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 356 of Mortgages at page 159, and in the office of the County Clerk of Orange County, New York, in Liber 755 of Mortgages at page 58, and in the office of the County Clerk of Sullivan County, New York, in Liber 310 of Mortgages at page 569, and in the office of the County Clerk of Ulster County, New York, in Liber 579 of Mortgages at page 428; and Fourth Supplemental Indenture, dated as of October 31, 1942, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 372 of Mortgages at page 148, and in the office of the County Clerk of Orange County, New York, in Liber 785 of Mortgages at page 509, and in the office of the County Clerk of Sullivan County, New York, in Liber 323 of Mortgages at page 498, and in the office of the County Clerk of Ulster County, New York, in Liber 579 of Mortgages at page 468; and Fifth Supplemental Indenture, dated as of October 31, 1944, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 386 of Mortgages at page 191, and in the office of the County Clerk of Orange County, New York, in Liber 819 of Mortgages at page 460, and in the office of the County Clerk of Sullivan County, New York, in Liber 335 of Mortgages at page 78, and in the office of the County Clerk of Ulster County, New York, in Liber 579 of Mortgages at page 503; and Sixth Supplemental Indenture, dated as of October 31, 1946, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 409 of Mortgages at page 497, and in the office of the County Clerk of Orange County, New York, in Liber 873 of Mortgages at page 584, and in the office of the County Clerk of Sullivan County, New York, in Liber 355 of Mortgages at page 481, and in the office of the County Clerk of Ulster County, New York, in Liber 579 of Mortgages at page 527; and Seventh Supplemental Indenture, dated as of December 1, 1948, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 441 of Mortgages at page 227, and in the office of the County Clerk of Orange County, New York, in Liber 953 of Mortgages at page 401, and in the office of the County Clerk of Sullivan County, New York, in Liber 383 of Mortgages at page 436, and in the office of the County Clerk of Ulster County, New York, in Liber 579 of Mortgages at page 549; and Eighth Supplemental Indenture, dated as of September 28, 1950, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 464 of Mortgages at page 366, and in the office of the County Clerk of Orange County, New York, in Liber 1006 of Mortgages at page 77, and in the office of the County Clerk of Sullivan County, New York, in Liber 406 of Mortgages at page 315, and in the office of the County Clerk of Ulster County, New York, in Liber 599 of Mortgages at page 332; and Ninth Supplemental Indenture, dated as of April 24, 1951, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 473 of Mortgages at page 571, and in the office of the County Clerk of Orange County, New York, in Liber 1025 of Mortgages at page 203, and in the office of the County Clerk of Ulster County, New York, in Liber 615 of Mortgages at page 103, and in the office of the County Clerk of Sullivan County, New York, in Liber 415 of Mortgages at page 510; and Tenth Supplemental Indenture, dated as of October 1, 1951, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 483 of Mortgages at page 597, and in the office of the County Clerk of Orange County, New York, in Liber 1039 of Mortgages at page 288, and in the office of the County Clerk of Ulster County, New York, in Liber 629 of Mortgages at page 256, and in the office of the County Clerk of Sullivan County, New York, in Liber 426 of Mortgages at page 90; and Eleventh Supplemental Indenture, dated as of October 1, 1953, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 522 of Mortgages at page 214, and in the office of the County Clerk of Orange County, New York, in Liber 1095 of Mortgages at page 202, and in the office of the County Clerk of Ulster County, New York, in Liber 678 of Mortgages at page 567, and in the office of the County Clerk of Sullivan County, New York, in Liber 460 of Mortgages at page 193; and Twelfth Supplemental Indenture, dated as of June 15, 1958, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 660 of Mortgages at page 269, and in the office of the County Clerk of Orange County, New York, in Liber 1255 of Mortgages at page 317, and in the office of the County Clerk of Ulster County, New York, in Liber 828 of Mortgages at page 509, and in the office of the County Clerk of Sullivan County, New York, in Liber 554 of Mortgages at page 110; and Thirteenth Supplemental Indenture, dated as of April 15, 1961, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 744 of Mortgages at page 972, and in the office of the County Clerk of Orange County, New York, in Liber 1351 of Mortgages at page 415, and in the office of the County Clerk of Sullivan County, New York, in Liber 616 of Mortgages at page 179, and in the office of the County Clerk of Ulster County, New York, in Liber 893 of Mortgages at page 499; and Fourteenth Supplemental Indenture, dated as of June 1, 1963, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 796 of Mortgages at page 510, and in the office of the County Clerk of Orange County, New York, in Liber 1392 of Mortgages at page 680, and in the office of the County Clerk of Sullivan County, New York, in Liber 670 of Mortgages at page 51, and in the office of the County Clerk of Ulster County, New York, in Liber 923 of Mortgages at page 249; and Fifteenth Supplemental Indenture, dated as of August 15, 1965, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 853 of Mortgages at page 115, and in the office of the County Clerk of Orange County, New York, in Liber 1457 of Mortgages at page 600, and in the office of the County Clerk of Sullivan County, New York, in Liber 715 of Mortgages at page 985, and in the office of the County Clerk of Ulster County, New York, in Liber 952 of Mortgages at page 762; and Sixteenth Supplemental Indenture, dated as of October 1, 1967, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 910 of Mortgages at page 533, and in the office of the County Clerk of Orange County, New York, in Liber 1501 of Mortgages at page 1059, and in the office of the County Clerk of Sullivan County, New York, in Liber 733 of Mortgages at page 763, and in the office of the County Clerk of Ulster County, New York, in Liber 980 of Mortgages at page 865; and Seventeenth Supplemental Indenture, dated as of February 1, 1970, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 963 of Mortgages at page 53, and in the office of the County Clerk of Orange County, New York, in Liber 1547 of Mortgages at page 228, and in the office of the County Clerk of Sullivan County, New York, in Liber 753 of Mortgages at page 521, and in the office of the County Clerk of Ulster County, New York, in Liber 1009 of Mortgages at page 112; and Eighteenth Supplemental Indenture, dated as of July 1, 1970, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 977 of Mortgages at page 931, and in the office of the County Clerk of Orange County, New York, in Liber 1561 of Mortgages at page 328, and in the office of the County Clerk of Sullivan County, New York, in Liber 761 of Mortgages at page 479, and in the office of the County Clerk of Ulster County, New York, in Liber 1018 of Mortgages at page 327; and Nineteenth Supplemental Indenture, dated as of April 1, 1971, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 982 of Mortgages at page 632, and in the office of the County Clerk of Orange County, New York, in Liber 1566 of Mortgages at page 924, and in the office of the County Clerk of Sullivan County, New York, in Liber 763 of Mortgages at page 886, and in the office of the County Clerk of Ulster County, New York, in Liber 1021 of Mortgages at page 45; and Twentieth Supplemental Indenture, dated as of December 1, 1971, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1002 of Mortgages at page 805, and in the office of the County Clerk of Orange County, New York, in Liber 1583 of Mortgages at page 503, and in the office of the County Clerk of Sullivan County, New York, in Liber 772 of Mortgages at page 1034, and in the office of the County Clerk of Ulster County, New York, in Liber 1032 of Mortgages at page 882; and Twenty-first Supplemental Indenture, dated as of May 15, 1973, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1043 of Mortgages at page 922, and in the office of the County Clerk of Orange County, New York, in Liber 1625 of Mortgages at page 393, and in the office of the County Clerk of Sullivan County, New York, in Liber 793 of Mortgages at page 517, and in the office of the County Clerk of Ulster County, New York, in Liber 1057 of Mortgages at page 1117; and Twenty-second Supplemental Indenture, dated as of March 1, 1974, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1068 of Mortgages at page 236, and in the office of the County Clerk of Orange County, New York, in Liber 1648 of Mortgages at page 439, and in the office of the County Clerk of Sullivan County, New York, in Liber 805 of Mortgages at page 88, and in the office of the County Clerk of Ulster County, New York, in Liber 1070 of Mortgages at page 997; and Twenty-third Supplemental Indenture, dated as of January 15, 1975, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1089 of Mortgages at page 831, and in the office of the County Clerk of Orange County, New York, in Liber 1667 of Mortgages at page 369, and in the office of the County Clerk of Sullivan County, New York, in Liber 817 of Mortgages at page 243, and in the office of the County Clerk of Ulster County, New York, in Liber 1084 of Mortgages at page 009; and Twenty-fourth Supplemental Indenture, dated as of September 1, 1978, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1183 of Mortgages at page 928, and in the office of the County Clerk of Orange County, New York, in Liber 1761 of Mortgages at page 931, and in the office of the County Clerk of Sullivan County, New York, in Liber 925 of Mortgages at page 188, and in the office of the County Clerk of Ulster County, New York, in Liber 1144 of Mortgages at page 806; and Twenty-fifth Supplemental Indenture, dated as of September 15, 1978, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1183 of Mortgages at page 994, and in the office of the County Clerk of Orange County, New York, in Liber 1761 of Mortgages at page 920, and in the office of the County Clerk of Sullivan County, New York, in Liber 925 of Mortgages at page 230, and in the office of the County Clerk of Ulster County, New York, in Liber 1144 of Mortgages at page 831; and Twenty-sixth Supplemental Indenture, dated as of April 1, 1979, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1192 of Mortgages at page 582, and in the office of the County Clerk of Orange County, New York, in Liber 1768 of Mortgages at page 975, and in the office of the County Clerk of Sullivan County, New York, in Liber 932 of Mortgages at page 327, and in the office of the County Clerk of Ulster County, New York, in Liber 1149 of Mortgages at page 150; and Twenty-seventh Supplemental Indenture, dated as of April 1, 1980, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1224 of Mortgages at page 690, and in the office of the County Clerk of Orange County, New York, in Liber 1796 of Mortgages at page 775, and in the office of the County Clerk of Sullivan County, New York, in Liber 963 of Mortgages at page 139, and in the office of the County Clerk of Ulster County, New York, in Liber 1165 of Mortgages at page 418; and Twenty-eighth Supplemental Indenture, dated as of April 1, 1982, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 1273 of Mortgages at page 761, and in the office of the County Clerk of Orange County, New York, in Liber 1842 of Mortgages at page 731, and in the office of the County Clerk of Sullivan County, New York, in Liber 1022 of Mortgages at page 148, and in the office of the County Clerk of Ulster County, New York, in Liber 1195 of Mortgages at page 356; and Twenty-ninth Supplemental Indenture, dated as of April 1, 1984, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 51 of Land Records at page 1977, and in the office of the County Clerk of Orange County, New York, in Liber 1909 of Mortgages at page 689, and in the office of the County Clerk of Sullivan County, New York, in Liber 1093 of Mortgages at page 53, and in the office of the County Clerk of Ulster County, New York, in Liber 1245 of Mortgages at page 647; and Thirtieth Supplemental Indenture, dated as of April 1, 1986, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 144 of Land Records at page 2856, and in the office of the County Clerk of Orange County, New York, in Liber 2251 of Mortgages at page 166, and in the office of the County Clerk of Sullivan County, New York, in Liber 1197 of Mortgages at page 28, and in the office of the County Clerk of Ulster County, New York, in Liber 1381 of Mortgages at page 197; and Thirty-first Supplemental Indenture, dated as of April 1, 1988, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 289 of Land Records at page 2296, and in the office of the County Clerk of Orange County, New York, in Liber 3037 of Mortgages at page 196, and in the office of the County Clerk of Sullivan County, New York, in Liber 1363 of Mortgages at page 368, and in the office of the County Clerk of Ulster County, New York, in Liber 1792 of Mortgages at page 132; and Thirty-second Supplemental Indenture, dated as of April 1, 1990, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 406 of Land Records at page 1166, and in the office of the County Clerk of Orange County, New York, in Liber 3705 of Mortgages at page 1, and in the office of the County Clerk of Sullivan County, New York, in Liber 1455 of Land Records at page 319, and in the office of the County Clerk of Ulster County, New York, in Liber 2161 of Mortgages at page 272; and Thirty-third Supplemental Indenture, dated as of April 1, 1992, which is recorded in the office of the County Clerk of Rockland County, New York, in Liber 0518 of Land Records at page 1418, and in the office of the County Clerk of Orange County, New York, in Liber 4269 of Mortgages at page 258, and in the office of the County Clerk of Sullivan County, New York, in Liber 1584 of Land Records at page 314, and in the office of the County Clerk of Ulster County, New York, in Liber 2503 of Mortgages at page 0046; and WHEREAS, there were included among the properties mortgaged under the general granting clauses of the Indenture, but without specific mention, the properties hereinafter in this Thirty-fourth Supplemental Indenture specifically described; and WHEREAS, it is, among other things, provided by Section 6 of Article V of the Indenture that the Company will, from time to time, whenever reasonably requested by the Trustee, make, do, execute, acknowledge and deliver, at its own expense, any and all such further and other acts, deeds, conveyances, mortgages, transfers and assurances as may be necessary or proper for the better assuring and confirming unto the Trustee of all or any part of the trust estate whether at the date of the Indenture or thereafter owned or acquired by the Company, or to facilitate the execution of the trust established by the Indenture or to secure the rights and remedies of the holders of the bonds thereby secured, and the Trustee has requested the Company to execute, acknowledge and deliver this Thirty-fourth Supplemental Indenture; and WHEREAS, it is among other things, provided by Article XV of the Indenture that the Company, when authorized by vote or resolution of its Board of Directors, and the Trustee, from time to time and at any time, subject to the restrictions in the Indenture contained, may, and when so required by the Indenture shall, enter into such indentures supplemental thereto as may or shall by them be deemed necessary or desirable, in order, among other purposes, to assign, convey, mortgage, pledge, transfer and set over unto the Trustee additional property or properties of the Company for the equal and proportionate benefit and security of the holders and owners of all bonds at any time issued and outstanding under the Indenture, which supplemental indentures shall thereafter form a part of the Indenture; and WHEREAS, the Company desires, pursuant to said provisions and as hereinafter provided, to assign, convey, mortgage, pledge, transfer and set over unto the Trustee certain properties hereinafter specified to be held subject to the lien of and upon the trust established by the Indenture; and WHEREAS, the Board of Directors of the Company has duly authorized this Thirty-fourth Supplemental Indenture; and WHEREAS, all requirements of the Indenture, as heretofore and hereby supplemented and modified, in respect of the form of this Thirty-fourth Supplemental Indenture have been duly complied with and all other conditions, acts and things have been duly complied with, have been performed and have happened to make this Thirty-fourth Supplemental Indenture a valid, legal and binding instrument supplemental to and confirmatory of the Indenture, and enforceable in accordance with its terms, and the execution, acknowledgment and delivery of this Thirty-fourth Supplemental Indenture have been in all respects duly authorized; NOW, THEREFORE, THIS THIRTY-FOURTH SUPPLEMENTAL INDENTURE WITNESSETH that, in consideration of the premises and of the mutual covenants herein contained, of the sum of one dollar, lawful money of the United States of America, to the Company duly paid by the Trustee at and before the ensealing and delivery hereof and for other valuable consideration, the receipt whereof is hereby acknowledged, and for the purpose of confirming the Indenture, and in order better to secure equally and proportionately the payment of the principal of and interest on all bonds at any time issued and outstanding, under and secured by the Indenture according to their tenor, purport and effect and the provisions thereof, of the Indenture, and hereof, and to secure the performance and observance of all the covenants and conditions in the bonds, in the Indenture and herein contained, and for the purpose of better assuring and confirming the trust estate unto the Trustee pursuant to the provisions of Section 6 of Article V of the Indenture, the Company does hereby confirm the pledge, mortgage, conveyance, assignment and transfer of the property set forth and described in the Indenture, except such properties or interests therein as may have been released by the Trustee or sold or disposed of in whole or in part as permitted by the provisions of the Indenture, and has executed and delivered this Thirty-fourth Supplemental Indenture and has granted, bargained, sold, aliened, remised, released, enfeoffed, conveyed, confirmed, assigned, transferred, mortgaged, pledged, set over and delivered, and by these presents does grant, bargain, sell, alien, remise, release, enfeoff, convey, confirm, assign, transfer, mortgage, pledge, set over and deliver unto the Trustee, its successors in the trust of the Indenture as supplemented and amended by this Thirty-fourth Supplemental Indenture and its and their assigns, forever, upon and for the uses and trusts thereby and hereby established and confirmed, all and singular the following properties: All of the lands (including all buildings and improvements thereon erected), properties, rights, easements, franchises, licenses, permits and privileges identified, enumerated or referred to in the schedules hereto annexed and marked, respectively, Schedules "A", "B" and "C", including and intended to include all items appearing of record under the name of the Company as having been recorded from March 1, 1990 through February 29, 1992 in the respective Grantee Indices in the offices of the Clerks of the Counties of Rockland, Orange and Sullivan in the State of New York. Schedules A, B and C are hereby incorporated herein by reference with the same force and effect as though the same were set forth herein at length. And also all other real property, interests in real property, lands, lands under water, dams, towpaths, embankments, dug banks, locks, gates, feeders, water rights, rights to divert water, riparian rights, rights to remove timber, brush and other materials for lands, rights to store and impound waters, flowage rights, rights of way, easements, licenses, privileges, consents, leases, permits and rights of every name, nature and description, plants, power houses, stations, offices, buildings, tanks, retorts, structures, improvements, machinery, turbines, engines, pumps, dynamos, generators, boilers, penstocks, fixtures, equipment, poles, pole lines, transmission lines, transmission systems, distribution lines, distribution systems, street lighting lines, street lighting systems, transformers, switch- boards, pipes, mains, services, meters and other appurtenances now owned or hereafter acquired or possessed by the Company. Also all tools, implements, appliances, apparatus, equipment, accessories, supplies, material, furniture and other chattels and personal property of every kind, description and character now owned or hereafter acquired or possessed by the Company. Also all franchises (except the Company's franchise to be a corporation), permits, ordinances, consents, privileges, immunities, licenses, and rights of every kind, description and character, and all contracts, trade marks, trade names, letters patent, patent applications and patent rights, processes, options, good will, records, surveys, documents and maps now owned or controlled or that may hereafter be owned or controlled by the Company. Also all other properties, real, personal and mixed, tangible or intangible, of every kind, description or character, and wheresoever situate, now owned or hereafter acquired or possessed by the Company. Together with all and singular the buildings, improvements, additions, accretions, ways, alleys, passages, rights of way, waters, water-courses, water power sites and water rights, riparian rights and all rights to inundate, submerge, flood and cover with water and to keep under water and to impound and store water in, upon, across and over so much of said premises and lands as shall be flooded or covered by the waters impounded or held back by any dam constructed or to be constructed, easements, rights, liberties, privileges, licenses, franchises, tenements, hereditaments and appurtenances whatsoever, belonging or in any wise appertaining, or hereafter to belong or appertain, unto any and all of the premises hereby granted or mentioned and intended so to be; and the reversion and reversions, remainder and remainders, incomes, rents, issues and profits thereof, and of every part and parcel thereof; and all of the estate, right, title, interest, property, claim and demand of every nature and kind whatsoever of the Company in law, equity or otherwise howsoever, of, in and to the same and every part and parcel thereof. Provided, however, that there are excepted from the property and property rights by this Thirty-fourth Supplemental Indenture granted, bargained, sold, aliened, remised, released, enfeoffed, conveyed, confirmed, assigned, transferred, mortgaged, pledged, set over and delivered: (i) all properties or interests therein heretofore released by the Trustee or sold or disposed of in whole or in part as permitted by the provisions of the Indenture; (ii) the last day of the term of each leasehold estate (oral or written, or any agreement therefor) enjoyed by the Company at the time of the execution of this Thirty-fourth Supplemental Indenture or hereafter, and whether falling within a general or particular description of property herein; (iii) all leasehold interests, permits, licenses, franchises and rights, whether owned at the time of the execution of this Thirty-fourth Supplemental Indenture or hereafter acquired by the Company, which were and are intended to be hereby granted, conveyed, mortgaged, pledged, transferred and assigned, but which could not and cannot be so granted, conveyed, mortgaged, pledged, transferred and assigned without the consent of other parties whose consent is not, after reasonable effort, secured, or without subjecting the Trustee to a liability not otherwise contemplated by the provisions of the Indenture; and (iv) all of the following properties and rights, whether owned at the time of the execution of this Thirty-fourth Supplemental Indenture or hereafter acquired by the Company: (a) materials, fuel, supplies, store-room contents and other similar property stored, generated, manufactured, produced or acquired by the Company for use and consumption in the ordinary course of operating the mortgaged property, (b) cash on hand and in banks (except proceeds of the mortgaged property, and insurance and other moneys held by the Trustee or required by the provisions of the Indenture to be paid to the Trustee or subjected to the lien thereof), (c) lamps and supplies, machinery, appliances, goods, wares, merchandise, equipment, stores, apparatus and other movable property at any time handled by the Company for sale or resale in the usual course of business, whether or not they constitute fixtures, (d) timber and the right to cut and remove the same, (e) gas in pipes, tanks or other reservoirs, (f) minerals, together with the right to mine and drill and remove the same, (g) trade acceptances, bills, notes and accounts receivable, contracts, demands, choses in action and judgments (other than choses in action and judgments for the recovery of real property or establishing a lien, charge or right therein), (h) books and documents, and (i) shares of stock, notes, debentures, bonds and other certificates or evidences of interest or indebtedness, and the interest and indebtedness represented thereby all unless specifically embraced in the Indenture, this Thirty- fourth Supplemental Indenture, or in some indenture supplemental thereto, or actually pledged, or required by some provision hereof or of some indenture supplemental thereto to be pledged with the Trustee; provided, however, that if and so long as the Trustee after an event of default shall have entered upon and remain in possession of the mortgaged property, or if a receiver, trustee or other official shall be designated by a court having jurisdiction to have, and so long as any such official shall have, possession, custody or control of the mortgaged property, then the property and rights expressly excepted by this subclause (iv) from the lien and operation of the Indenture and this Thirty-fourth Supplemental Indenture shall (to the extent permitted by law) cease to be so excepted, and the Trustee or such official, as the case may be, may (to the extent permitted by law) take possession of any and all of the property described in this subclause (iv) then on hand, subject to any lien thereon then existing, and possess, use and administer the same to the same extent as if such property were part of the mortgaged property, unless and until possession of the mortgaged property shall be restored, subject to any liens then existing thereon, to the Company, its successors or assigns; and upon the taking of such possession, until such possession shall be restored as aforesaid, the Indenture and this Thirty-fourth Supplemental Indenture, shall (to the extent permitted by law) become and be a lien upon all of the property and rights specified in this subclause (iv) as to which the Trustee or such official shall take possession. Subject, however, as to the properties and rights described in the Indenture and in this Thirty-fourth Supplemental Indenture, in so far as affected thereby, (i) to the liens, encumbrances, reservations, restrictions, conditions, limitations, covenants, interests and exceptions, if any, set forth or referred to in said descriptions and in the deeds or grants referred to in said descriptions, and, as to any property acquired by the Company after the execution of the original indenture and becoming subject, or intended to become subject, to the lien of the Indenture, to any mortgages, encumbrances or liens thereon existing at the time of the acquisition thereof, (ii) to liens or charges permitted by the provisions of Paragraph B of Section 8 of Article II of the Indenture, and (iii) to existing easements for streets, alleys, highways, railroad purposes and other rights of way in, over or under certain of the properties so described, and to any and all existing leases for camp sites, fishing rights, rights of others to cut wood and other similar rights and privileges given or granted by the Company relating to any of the properties so described, none of which rights and privileges substantially interferes with the free use and enjoyment by the Company of the properties and rights so described for the general purposes of the Company's business. And subject, further, as to any property acquired by the Company after the execution of the original indenture and the supplements thereto including this Thirty-fourth Supplemental Indenture and becoming subject, or intended to become subject, to the lien of the Indenture, to any mortgages, encumbrances or liens thereon existing at the time of the acquisition thereof. All of the real estate, plants, franchises, rights and other properties above described, and all other property at any time held by the Trustee under the trusts of the Indenture and this Thirty-fourth Supplemental Indenture, including the income, rents, issues and profits thereof, together with the appurtenances, as aforesaid, at any time subject to the lien of the Indenture, and this Thirty-fourth Supplemental Indenture, are hereinafter sometimes collectively referred to as the "trust estate." No words of particular description of property contained in this Thirty-fourth Supplemental Indenture shall in any way limit, curtail or detract from, or be deemed, held or construed to limit, curtail, or detract from, the effect of the words of general description of property herein contained. TO HAVE AND TO HOLD the trust estate unto the Trustee, its successors and assigns, to and for the only proper use, benefit and behalf of the Trustee, its successors and assigns forever. IN TRUST NEVERTHELESS, under and subject to the provisions and conditions herein and in the Indenture set forth for the purposes aforesaid and for the equal and proportionate use, benefit and security of all present and future holders of the bonds and coupons issued and to be issued under the Indenture as supplemented and amended by this Thirty-fourth Supplemental Indenture and for the enforcement of the payment of said bonds and coupons, if any, when payable according to their tenor, purport and effect, and to secure the performance of and compliance with the covenants and conditions of said bonds and coupons, if any, and of the Indenture as supplemented and amended by this Thirty-fourth Supplemental Indenture without preference, priority or distinction as to lien or otherwise of any one bond over any other bond by reason of priority in the time of issue, sale or negotiation thereof or by reason of the purpose of its issue or otherwise howsoever, so that, except as in the Indenture as supplemented and amended by this Thirty-fourth Supplemental Indenture otherwise provided, each and every bond issued and to be issued thereunder shall have the same right, lien and privilege under and by virtue of the Indenture as supplemented and amended by this Thirty-fourth Supplemental Indenture and so that the principal of and interest on every bond shall, subject to the terms of the Indenture as supplemented and amended by this Thirty-fourth Supplemental Indenture be equally and proportionately secured thereby, as if all such bonds at any time outstanding had been duly issued, sold and negotiated simultaneously with the execution and delivery of the Indenture of Mortgage, dated as of the first day of May, 1928, and for the same consideration; it being intended that the lien and security of the Indenture as supplemented and amended by this Thirty- fourth Supplemental Indenture and all of the bonds and coupons, if any, issued and to be issued under the Indenture shall take effect from the day of the execution and delivery of the Indenture, without regard to the time of the actual issue, sale or disposition of said bonds, and with the same force and effect for all intents and purposes as though upon said date all of said bonds had been actually sold and delivered to and were in the hands of innocent holders thereof for value, and as though all and singular the properties aforesaid, and all properties which shall hereafter become subject to the Indenture as supplemented and amended by this Thirty-fourth Supplemental Indenture had been in existence and owned by the Company at the time of the execution and delivery of, and had been specifically included in, the aforesaid Indenture of Mortgage and specifically pledged, mortgaged, conveyed, assigned and transferred thereby. The Company hereby declares that it holds and will hold and apply all property, described in subclauses (ii) and (iii) above as specifically reserved and excepted, upon the trusts set forth in the Indenture and as the Trustee (or any purchaser upon any sale of the trust estate hereunder) shall for such purpose direct from time to time, to the fullest extent permitted by law or in equity and by any instruments securing the same, as fully as if the same could be and had been hereby granted, conveyed, mortgaged, pledged, transferred and assigned to and vested in the Trustee. ARTICLE I SUNDRY PROVISIONS Section 1. The Company covenants and agrees that except as to after-acquired property, it is lawfully seized and possessed of the trust estate, free and clear of liens, charges and encumbrances except those specified in the granting clauses hereof, and in the deeds referred to in said granting clauses, except liens and charges specified in paragraph B of Section 8 of Article II of the Indenture; that it has a good right and lawful authority to sell, convey, mortgage and pledge the trust estate; and that it will warrant and defend unto the Trustee, its successors and assigns, for the benefit of the holders for the time being of the bonds, the trust estate and the lien and interest of the Trustee thereon and therein under the Indenture and this Thirty-fourth Supplemental Indenture against all claims and demands whatsoever of any and all persons; provided, however, that nothing in the Indenture or in this Thirty-fourth Supplemental Indenture contained shall prevent the Company from hereafter acquiring any property or interest in property subject to an existing mortgage or other encumbrance thereon and holding the same subject to such mortgage or other encumbrance. Section 2. This Thirty-fourth Supplemental Indenture is expressly made supplemental to and in confirmation of the Indenture, and the pledge, mortgage, conveyance, assignment and transfer hereby made are subject to all the provisions, conditions, covenants and warranties contained in the Indenture as hereby supplemented and modified, all of which are hereby, mutatis mutandis, adopted and confirmed as so supplemented and modified, all as if expressly incorporated herein at length. The use of terms and expressions herein is in accordance with the definitions and constructions contained in the Indenture. Without limitation of the generality of the foregoing, the remedies and provisions of the Indenture, applicable in case of any default by the Company thereunder, are hereby adopted and made applicable, in case of any such default, with respect to the properties described and included herein; the Trustee shall be entitled to, may exercise, and shall be protected by, where and to the full extent that the same are applicable, all the rights, powers, privileges, immunities and exemptions provided in the Indenture and there are hereby conferred upon the Trustee the same powers of sale and other powers over the properties described and included herein as are by the Indenture expressed to be conferred; all as if the provisions concerning the same were incorporated herein at length. It is, however, mutually understood and agreed that neither the execution of this Thirty-fourth Supplemental Indenture nor anything herein contained shall, or shall be construed to in any way, waive any default or event of default now or hereafter existing under the bonds or coupons secured or intended to be secured by or under the Indenture, or in any way impair any right or remedy now or hereafter existing in respect thereof. Section 3. The Trustee, for itself and its successors, accepts the trusts of this Thirty-fourth Supplemental Indenture and agrees to execute them, but only upon the following additional terms and conditions, to wit: The Trustee shall be under no obligation to see to the filing, registration or recording of this Thirty-fourth Supplemental Indenture, but the Company covenants and agrees that it will, with all convenient speed, cause this Thirty-fourth Supplemental Indenture to be duly filed, registered or recorded, and will do all other things requisite to preserve, protect and continue the lien of the Indenture and this Thirty-fourth Supplemental Indenture. The Trustee shall not be responsible for the due execution hereof by the Company, nor for the lien or security purported or intended to be created hereby, nor for the validity hereof or of the bonds issued hereunder, nor for or in respect of the title or value of the trust estate, nor for or in respect of the recitals contained herein or in the bonds, all of which recitals are made by the Company solely, and shall not be construed as made by or imposing any obligation or liability upon the Trustee. The Trustee shall be entitled to, may exercise and shall be protected by, where and to the full extent that the same are applicable, all the rights, powers, privileges, immunities and exemptions provided in the Indenture as fully as if the provisions concerning the same, as so supplemented and modified, were incorporated herein at length. It is hereby stipulated that the Trustee shall not be taken impliedly to waive hereby any right it would otherwise have. Section 4. The cover of this Thirty-fourth Supplemental Indenture, and all article and description headings, and the table of contents and marginal notes and headings, if any, are inserted for convenience only, and shall not control or affect the meaning, construction or effect hereof. Section 5. This Thirty-fourth Supplemental Indenture may be executed in any number of counterparts, each of which shall be deemed an original; and all said counterparts shall constitute but one and the same instrument, which shall for all purposes be sufficiently evidenced by any such original counterpart. Section 6. The date of this Thirty-fourth Supplemental Indenture is intended as and for a date for reference and for identification, the actual time of the execution hereof being the date of the acknowledgment hereof by the officer executing this instrument on behalf of the Trustee; and this Thirty-fourth Supplemental Indenture, and all modifications herein contained, shall be effective from and after the date of said acknowledgment. IN WITNESS WHEREOF, Orange and Rockland Utilities, Inc. has caused this Thirty-fourth Supplemental Indenture to be signed in its name and on its behalf by its President or one of its Vice Presidents and its corporate seal to be hereunto affixed, duly attested by its Secretary or Assistant Secretary, and Bankers Trust Company, to evidence its acceptance of the provisions herein, has caused this Thirty-fourth Supplemental Indenture to be signed in its name and behalf by one of its Vice Presidents or Assistant Vice Presidents and its Secretary or one of its Assistant Secretaries, as of the day and year first above written. ORANGE AND ROCKLAND UTILITIES, INC. By /s/ Victor J. Blanchet, Jr. Title: President Attest: /s/ Victor A. Roque Title: Secretary BANKERS TRUST COMPANY By /s/ Robert Caporale Title: Vice President Attest: /s/ M. Lisa Morrone Title: Assistant Treasurer STATE OF NEW YORK ) ) ss.: COUNTY OF ROCKLAND ) On the 16th day of May, in the year 1994, before me personally came Victor J. Blanchet, Jr. to me known, who, being by me duly sworn, did depose and say that he resides at Woodlands Drive, Tuxedo, New York; that he is President of Orange and Rockland Utilities, Inc., the corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/ Todd M. Lieval Notary Public Todd M. Lieval Notary Public, State of New York No. 4954004 Qualified in Rockland County Commission Expires July 31, 1995 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 25th day of May, in the year 1994, before me personally came Robert Caporale, to me known, who, being by me duly sworn, did depose and say that he resides at 35 Meadowbrook Lane, Mt. Kisco, New York 10549 ; that he is Vice President of Bankers Trust Company, the corporation described in and which executed the above instrument; that (s)he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/ John Florio Notary Public John Florio NOTARY PUBLIC, State of New York No. 01FL5021631 Qualified in New York County Commission Expires 12/20/95 SCHEDULE A Listing of all properties acquired by Orange and Rockland Utilities, Inc. located in Rockland County, New York, appearing of record in the General Index of Land Records of the Clerk of the County of Rockland from March 1, 1992 through February 28, 1994. [The text of this schedule has been omitted from the counterpart originals of this Thirty-fourth Supplemental Indenture filed in offices of county clerks other than the County of Rockland.] ROCKLAND COUNTY SCHEDULE A
Grantee Grantor Liber Page Year Orange and Rockland Utilities, Inc. Jaytree Partners 0505 2248 Mar. 05, 1992 Same RUR, Inc. 0505 2252 Mar. 05, 1992 Same Fairgrounds, Inc. 0508 0694 Mar. 18, 1992 Same Fairgrounds, Inc. 0508 0698 Mar. 18, 1992 Same Exit 12 Associates, Inc. 0509 1342 Mar. 23, 1992 Same GSI A Partnership 0509 1346 Mar. 23, 1992 Same Clarkstown, Town of 0509 1348 Mar. 23, 1992 Same Thiells Development Corp. 0511 2891 Apr. 01, 1992 Same Edmund McHale 0511 2895 Apr. 01, 1992 Same George Nicholson 0515 2528 Apr. 16, 1992 Same Ponce De Leon Federal Savings Bank 0515 2529 Apr. 16, 1992 Same Gaetano Ragusa 0515 2534 Apr. 16, 1992 Same Eliezer Herskowitz 0515 2536 Apr. 16, 1992 Same Tolstoy Foundation, Inc. 0515 2540 Apr. 16, 1992 Same David E. Owens 0517 2787 Apr. 27, 1992 Same Alice Gerard 0517 2790 Apr. 27, 1992 Same Rolf Greibesland 0517 2792 Apr. 27, 1992 Same Broad Sky Properties, Inc. 0517 2796 Apr. 27, 1992 Same Broad Sky Properties, Inc. 0517 2799 Apr. 27, 1992 Same Broad Sky Properties, Inc. 0517 2802 Apr. 27, 1992 Same FAB Construction Corp. 0519 0040 Apr. 30, 1992 Same Rockhill Bldg. Corp. 0519 0043 Apr. 30, 1992 Same FAB Construction Corp. 0519 0046 Apr. 30, 1992 ROCKLAND COUNTY SCHEDULE A Same FAB Construction Corp. 0519 0049 Apr. 30, 1992 Same James F. Metress 0522 1025 May 14, 1992 Same Timothy D. Phillips 0522 1027 May 14, 1992 Same Wayne A. Robertson 0522 1030 May 14, 1992 Same Edward Roff 0522 1032 May 14, 1992 Same Robert M. Murphy 0522 1035 May 14, 1992 Same Wilhelm Tomasits 0522 1038 May 14, 1992 Same Mailbox N More, Inc. 0528 2631 June 11, 1992 Same Mar Feld Building Corp. 0530 1110 June 18, 1992 Same Homsum Corp. 0530 1113 June 18, 1992 Same Wide World Realty, Inc. 0530 1116 June 18, 1992 Same Chestnut Hollow Estates, Inc. 0530 1120 June 18, 1992 Same Gregory W. Miller 0532 2818 June 29, 1992 Same Parker Nanuet Associates 0537 1844 July 17, 1992 Same Costco Wholesale Corp. Washington Corp. 0537 1848 July 17, 1992 Same Bernard Gollomp 0537 1852 July 17, 1992 Same Michael Mazzucca 0537 1855 July 17, 1992 Same Victor Ostreicher 0537 1858 July 17, 1992 Same Cong Bnai Yakov Barditochov, Inc. 0537 1861 July 17, 1992 Same Mary Lane 0537 1864 July 17, 1992 Same Nicholas Kalogeras 0539 1221 July 27, 1992 Same Big G. Realty Corp. 0539 1224 July 27, 1992 Same Narlan Develoment Corp. 0542 2370 Aug. 11, 1992 Same Robert E. Barrett 0542 2373 Aug. 11, 1992 Same GHAT Associates 0547 1458 Sep. 01, 1992 Same Eric Bergstol 0547 1461 Sep. 01, 1992 ROCKLAND COUNTY SCHEDULE A Same Nick Lotito 0547 1464 Sep. 01, 1992 Same Thomas M. Esmond 0548 0321 Sep. 02, 1992 Same Robert D. Gerard 0550 0906 Sep. 15, 1992 Same Cam Am Developement Corp. 0550 0909 Sep. 15, 1992 Same Ralph DeMaio 0550 0913 Sep. 15, 1992 Same Montebello Village of 0550 0916 Sep. 15, 1992 Same Rockland County 0553 1200 Sep. 25, 1992 Same Robert Champeau 0557 2416 Oct. 14, 1992 Same Robert J. Miller 0557 2420 Oct. 14, 1992 Same Camp Venture, Inc. 0557 2423 Oct. 14, 1992 Same John Andriello 0557 2426 Oct. 14, 1992 Same William Quirk 0557 2429 Oct. 14, 1992 Same Douglas J. Cole Hatchard, Jr. 0557 2432 Oct. 14, 1992 Same AGPN Industries, Inc. 0557 2435 Oct. 14, 1992 Same Celtic Construction Corp. 0557 2438 Oct. 14, 1992 Same Clarkstown, Town of 0557 2441 Oct. 14, 1992 Same Thruway Paper Recycling Center 0557 2444 Oct. 14, 1992 Same Behner Developers, Inc. 0559 1707 Oct. 20, 1992 Same Behner Developers, Inc. 0559 1710 Oct. 20, 1992 Same Behner Developers, Inc. 0559 1713 Oct. 20, 1992 Same George Steward 0559 1716 Oct. 20, 1992 Same Newhaus Corp. 0562 0237 Oct. 28, 1992 Same Celtic Construction Corp. 0562 0240 Oct. 28, 1992 Same George Sikorsky 0562 0243 Oct. 28, 1992 Same Etta Hillson 0564 1948 Nov. 06, 1992 Same New York State Association for Retarded 0564 1953 Nov. 06, 1992 Same Richard Mills 0564 1956 Nov. 06, 1992 ROCKLAND COUNTY SCHEDULE A Same Producto Electric Corp. 0564 1959 Nov. 06, 1992 Same Carl Jones 0567 1121 Nov. 17, 1992 Same Cedar Pond Estates Corp. 0567 1124 Nov. 17, 1992 Same Homsum Corp. 0567 1128 Nov. 17, 1992 Same Willow Tree Development Corp. 0567 1131 Nov. 17, 1992 Same Eric Bergstol 0579 2995 Jan. 04, 1993 Same Veterans Memorial Associa- tion of Piermont, Inc. 0579 2998 Jan. 04, 1993 Same Annies Snack Shack, Inc. 0580 0001 Jan. 04, 1993 Same Dominick Marangi 0580 0004 Jan. 04, 1993 Same George Wald 0580 0007 Jan. 04, 1993 Same Armand Miele 0580 0010 Jan. 04, 1993 Same Mountain Shadows, Inc. 0580 0014 Jan. 04, 1993 Same Sky Les Homes 0583 2451 Jan. 20, 1993 Same Alfonso Guggenti 0583 2454 Jan. 20, 1993 Same Saehill Realty, Inc. 0583 2457 Jan. 20, 1993 Same Henry F. Tew 0583 2460 Jan. 20, 1993 Same Morris Wexler 0583 2463 Jan. 20, 1993 Same Louis Pakosynski 0583 2466 Jan. 20, 1993 Same Wheel Inn Realty, Inc. 0585 0412 Jan. 26, 1993 Same Pat Nazzaro Disposal, Inc. 0585 0415 Jan. 26, 1993 Same USA Construction Corp. 0585 0418 Jan. 26, 1993 Same Barry Pomerantz 0589 0338 Feb. 11, 1993 Same Ramapo Land Co., Inc. 0591 0852 Feb. 23, 1993 Same Presidential Life Insurance Co. 0591 0855 Feb. 23, 1993 Same Marco Taddeo 0591 0859 Feb. 23, 1993 Same Ronstean Const. Corp. 0591 0862 Feb. 23, 1993 Same Sloatsburg, Village of 0591 0865 Feb. 23, 1993 ROCKLAND COUNTY SCHEDULE A Same Ruth P. Collazo 0591 0868 Feb. 23, 1993 Same Milton Lieberman 0591 0871 Feb. 23, 1993 Same Roadway Express, Inc. 0591 2451 Feb. 25, 1993 Same Frank A. Kline 0595 1485 Mar. 15, 1993 Same ZD Square Realty Corp. 0595 1488 Mar. 15, 1993 Same Mathew Lonberg 0595 1492 Mar. 15, 1993 Same County of Rockland Industrial Devel. Agency 0595 1495 Mar. 15, 1993 Same Wayne Tanchak 0595 1502 Mar. 15, 1993 Same MTA Development Corp., Inc. 0595 1506 Mar. 15, 1993 Same Pomona Fields, Inc. 0595 1510 Mar. 15, 1993 Same David Braun 0598 0358 Mar. 29, 1993 Same Nanjappa Ravi 0599 1938 Apr. 05, 1993 Same Anthony Savoca 0599 1942 Apr. 05, 1993 Same Hae A. Kim 0599 1945 Apr. 05, 1993 Same Thomas Aquinas College 0599 1949 Apr. 05, 1993 Same Harvey Houtkin 0599 1952 Apr. 05, 1993 Same Marvin Sontag 0599 1955 Apr. 05, 1993 Same Loupko Todoric 0601 1889 Apr. 15, 1993 Same Vincent Zito 0601 1893 Apr. 15, 1993 Same Stuart M. Kirschner 0601 1894 Apr. 15, 1993 Same Joy Acres, Inc. 0606 0871 May 05, 1993 Same Sidney Edelman 0606 1696 May 06, 1993 Same Kevin Michella 0606 1698 May 06, 1993 Same Timberline Associates 0606 1700 May 06, 1993 Same Walter J. Harrington 0606 2512 May 07, 1993 Same Seymour Selig 0606 2515 May 07, 1993 Same Frank Tucci 0606 2518 May 07, 1993 ROCKLAND COUNTY SCHEDULE A Same Z. V. Zakarian 0606 2521 May 07, 1993 Same Derek Vidler 0611 1699 May 27, 1993 Same Tomkins Ridge, Inc. 0614 0112 June 07, 1993 Same John F. Walsh 0614 0114 June 07, 1993 Same Clara Calamari 0616 2961 June 17, 1993 Same USA Construction Corp. 0616 2963 June 17, 1993 Same Marshall Davis 0616 2967 June 17, 1993 Same Timothy Gulla 0620 1584 June 30, 1993 Same James H. C. Hu 0624 0673 July 15, 1993 Same Robet M. Kotin 0624 0676 July 15, 1993 Same Myrna Frazin 0624 0679 July 15, 1993 Same Brian Moore 0624 0682 July 15, 1993 Same Broad Sky, Inc. 0628 2478 Aug. 02, 1993 Same Myung Chun Choi 0628 2481 Aug. 02, 1993 Same SGW Construction, Inc. 0628 2483 Aug. 02, 1993 Same Brookvelt, Inc. 0635 0419 Aug. 25, 1993 Same Mar Feld Building Corp. 0635 0422 Aug. 25, 1993 Same Philip M. Scala 0635 0426 Aug. 25, 1993 Same KDJ Realty, Inc. 0635 0428 Aug. 25, 1993 Same Israel Herskowitz 0635 0432 Aug. 25, 1993 Same Dolores A. James 0635 0435 Aug. 25, 1993 Same Rockland County 0635 0437 Aug. 25, 1993 Same Rockland Central Plaza, Inc. 0638 2358 Sep. 09, 1993 Same United Rockland Stairs 0644 0494 Sep. 29, 1993 Same Shimon Mendlowitz 0644 0497 Sep. 29, 1993 Same Martin Feldi 0644 0499 Sep. 29, 1993 ROCKLAND COUNTY SCHEDULE A Same Barbara Monteith 0644 0503 Sep. 29, 1993 Same William Brodsky 0644 0505 Sep. 29, 1993 Same Mount Crest Development Corp. 0648 2739 Oct. 18, 1993 Same Maureen O. Roberts 0648 2743 Oct. 18, 1993 Same New City Fire Engine Co. No. 1, Inc. 0648 2745 Oct. 18, 1993 Same Dominican College of Blauvelt 0648 2748 Oct. 18, 1993 Same Nanuet Garage, Inc. 0650 0959 Oct. 21, 1993 Same Wilbur George 0650 1022 Oct. 21, 1993 Same William Helmke 0650 1025 Nov. 21, 1993 Same Marathon Development Corp. 0654 1962 Nov. 05, 1993 Same Israel Herskowitz 0654 1965 Nov. 05, 1993 Same Hegarty Homes, Inc. 0654 1969 Nov. 05, 1993 Same Hegarty Homes, Inc. 0654 1973 Nov. 05, 1993 Same Suffern Hills Subdivision, Inc. 0657 0310 Nov. 15, 1993 Same Shaul Rosenblum 0657 0314 Nov. 15, 1993 Same Patrick Durkin 0665 0236 Dec. 09, 1993 Same Brian Nelson 0676 0790 Jan. 14, 1994 Same Congregation Khal Torath Chaim 0676 0791 Jan. 14, 1994 Same Joy Builders, Inc. 0676 0794 Jan. 14, 1994 Same Christopher Walter 0676 0797 Jan. 14, 1994 Same RR Construction 0681 0850 Feb. 02, 1994 Same Tolstoy Foundation, Inc. 0681 0853 Feb. 02, 1994 Same Nellie M. Knorr 0681 0856 Feb. 02, 1994 Same Mates Friesel 0687 2421 Feb. 25, 1994 Same Bradley Industrial Park 0687 2425 Feb. 25, 1994 ROCKLAND COUNTY SCHEDULE A Same Nyack College 0687 2429 Feb. 25, 1994 Same John Walsh 0687 2432 Feb. 25, 1994
SCHEDULE B Listing of all properties acquired by Orange and Rockland Utilities, Inc. located in Orange County, New York, appearing of record in the Grantee Index of the Clerk of the County of Orange from March 1, 1992 through February 28, 1994. [The text of this schedule has been omitted from the counterpart originals of this Thirty-fourth Supplemental Indenture filed in offices of county clerks other than the County of Orange.]
GRANTEE GRANTOR LIBER PAGE DATE TOWN SEC.BL.LOT Orange and Rockland Utilities, Inc. (Right of Way) Horowitz, Jeffrey & Anna 3620 28 June 23, 1992 54 18-1-55 Same ( " " ") Monroe-Woodbury Jewish 3620 31 June 23, 1992 40 2-1-4.31 Community Center, Inc. Same ( " " ") Avery, Alan & Nancy L. 3620 34 June 23, 1992 32 6-1-3 Same ( " " ") Van De Weert, Cornelius & Ruth 3620 37 June 23, 1992 22 17-1-p/o 31.2 Same ( " " ") Holodinski, Michael, Jr., Michael S., & Gwendolyn 3620 40 June 23, 1992 54 26-1-26 Same ( " " ") Quality Home Builders of Orange 3620 43 June 23, 1992 20 101-1-3.2 County, Inc. Same ( " " ") Smith, Howard 3620 46 June 23, 1992 54 8-2-27 Same ( " " ") Ernst, John & Patricia 3620 49 June 23, 1992 44 12-1-7 Same ( " " ") Rossi, Wayne 3620 52 June 23, 1992 54 207-2-2.2 Same ( " " ") Krueger, Gary 3620 55 June 23, 1992 54 10-1-66.4 Same ( " " ") Hernandez, Charles L. & Barbara 3622 151 June 25, 1992 44 12-1-58 Same ( " " ") McGough, Michael & Robin 3622 154 June 25, 1992 54 213-2-19 Same ( " " ") Zabriskie, Glen & Kristi 3622 157 June 25, 1992 32 10-1-124 Same ( " " ") Dolson, Joseph & Margaret 3622 160 June 25, 1992 20 40-1-68.2 Same ( " " ") Woodruff, Homer W. & Lois E. 3622 164 June 25, 1992 28 24-2-2 Same ( " " ") Sterling Forest Corporation 3622 167 June 25, 1992 54 83-1-5.22 Same ( " " ") K & S Development Corp. 3622 170 June 25, 1992 40 232-1-25 & 26 Same ( " " ") Henninger, Alma D. 3622 173 June 25, 1992 20 101-1-1 Same ( " " ") Ross, Bernard & Lillian 3622 176 June 25, 1992 40 207-1-11 Same ( " " ") Dougherty, Raea 3622 179 June 25, 1992 54 66-1-41 Same ( " " ") Ardler, Edmund & Diane 3630 231 July 10, 1992 32 6-1-4 Same ( " " ") Middletown and New Jersey 3630 234 July 10, 1992 9 45-4-14.2 Railway Company, Inc. Same ( " " ") Faulkner, Robert & Eileen 3630 237 July 10, 1992 54 58-1-18.11 Same ( " " ") Ross, Donald 3630 240 July 10, 1992 44 12-1-8 Same ( " " ") Riccio, Antonio & Maria 3630 243 July 10, 1992 56 4-1-77 Same ( " " ") Petrizzo, Pasquale & Michelina 3630 246 July 10, 1992 52 36-2-11 Same ( " " ") Sickmiller, Daniel & Helen 3630 249 July 10, 1992 38 12-1-46.22 Same ( " " ") Scholz, Helmut 3630 252 July 10, 1992 28 51-4-41 Same ( " " ") Heffner, Todd 3630 255 July 10, 1992 28 24-2-54 Same ( " " ") Ten Eyck, Paul W. & Susan 3630 258 July 10, 1992 54 31-2-34.3 Same ( " " ") R.F.F. Corporation 3644 185 August 5, 1992 54 41-1-72 Same ( " " ") R.F.F. Corporation 3644 188 August 5, 1992 54 41-1-82 Same ( " " ") Vogel, Richard and Davidson, Deborah 3644 191 August 5, 1992 26 21-1-64.2 Same ( " " ") United Talmudical Academy, Inc. 3644 194 August 5, 1992 40 302-2-13.1 Same ( " " ") Dachrisly Realty Corp. 3644 197 August 5, 1992 40 302-2-23.1 Same ( " " ") Westervelt, Joseph 3644 200 August 5, 1992 58 26-1-51.22 Same ( " " ") Mendez, Daniel 3644 203 August 5, 1992 26 17-1-47 Same ( " " ") Stoddard, Jeffrey & Luann 3644 206 August 5, 1992 26 21-1-102 Same ( " " ") Keesler, Harrison 3644 209 August 5, 1992 44 14-1-82.11 14-1-82.12 Same ( " " ") Perino, Robert F. & Ingrid S. 3644 212 August 5, 1992 32 10-1-121 Same ( " " ") Orlando, Anthony & Elizabeth 3647 22 August 11, 1992 13 17-4-5.3 Same ( " " ") Nolan, William & Mary Lou 3647 25 August 11, 1992 54 49-1-41.2 Same ( " " ") ERAR Operating Corp. 3647 28 August 11, 1992 54 101-4-12 Same ( " " ") Williams, Trevor R. & Patricia D. 3647 31 August 11, 1992 22 1-1-3.222 Same ( " " ") 11 Achdus Summer Homes, Inc. 3647 34 August 11, 1992 58 13-1-1.1 Same ( " " ") Peruso, John R. & Lynn A. 3647 37 August 11, 1992 54 49-1-62.1 Same ( " " ") Thompson Ridge Realty Corp. 3647 40 August 11, 1992 26 24-1-54.22 Same ( " " ") Neuhaus, Ralph K. & Heidi 3647 43 August 11, 1992 22 5-1-27.14 Same ( " " ") Bisky, Thomas and Bookey, Catherine 3647 46 August 11, 1992 54 27-1-1.12 Same ( " " ") Konopka, Lawrence and Skoogfors, Madelon 3647 49 August 11, 1992 54 27-1-1.13 Same ( " " ") Ishihara, Naoka 3652 304 August 19, 1992 54 47-1-97.1 Same ( " " ") Pernice, John & Wendie Feman 3652 307 August 19, 1992 52 7-1-46.12 Same ( " " ") Vitucci, Frank & Mary 3652 310 August 19, 1992 28 23-1-23 Same ( " " ") McGee, Charles J. & Doreen P. 3652 313 August 19, 1992 54 29-1-107 Same ( " " ") Warwick Valley Central School Dist. 3652 316 August 19, 1992 54 42-1-35.1 Same ( " " ") Kamalian, Michael 3652 319 August 19, 1992 38 1-1-14.6 Same ( " " ") Miller, Bruce A. & Phylliss M. 3652 322 August 19, 1992 54 17-1-Var. Lots Same ( " " ") Gauss, Russell & Catherine M. 3652 325 August 19, 1992 52 7-2-47 Same ( " " ") Mendez, Daniel 3652 328 August 19, 1992 26 17-1-47 Same ( " " ") Wenman, Richard & Patricia 3652 331 August 19, 1992 54 11-1-66 Same ( " " ") Capra, Anthony & Maria 3665 38 September 15, 1992 28 50-1-10.1 Same ( " " ") Sinsabaugh, Theodore & Jane M. 3665 41 September 15, 1992 56 25-1-37.12 Same ( " " ") Cerullo, Henry M. 3665 44 September 15, 1992 30 13-1-74 & 75 Same ( " " ") Strang, Robert & Marie 3665 47 September 15, 1992 54 47-1-Var. Lots Same ( " " ") O'Brien, Joseph 3665 51 September 15, 1992 32 5-1-16 Same ( " " ") Class, Luis A. & Maureen A. 3665 54 September 15, 1992 38 102-6-1.13 Same ( " " ") Blumenthal, Liviu 3665 57 September 15, 1992 54 73-3-21 Same ( " " ") Hamling, Bernard 3665 60 September 15, 1992 54 8-1-5 Same ( " " ") Gag, Robert W. & Roberta B. 3665 63 September 15, 1992 56 10-1-29.31 Same ( " " ") Michalek, Stephen J. 3665 66 September 15, 1992 32 2-1-23.2 Same ( " " ") Van Der Molen, Kenneth & Dawn 3667 17 September 16, 1992 56 23-1-72 Same ( " " ") Angel, Warren A. & Jean J. 3667 20 September 16, 1992 40 22-1-30.1 Same ( " " ") Young, Roger & Julie 3667 23 September 16, 1992 40 22-1-29 Same ( " " ") Colabella, Emanuel & Mary 3667 26 September 16, 1992 40 29-1-28.25 Same ( " " ") Bollenbach, William H. & Lillian B. 3667 29 September 16, 1992 40 7-1-23 Same ( " " ") Powderly, James; Bradley, John; 3667 32 September 16, 1992 58 1-1-p/o 26.2 Schutzman, Benjamin & Santos, Jose Same ( " " ") Hudson Highlands Realty Restoration 3667 36 September 16, 1992 36 14-4-7 Same ( " " ") Schiff, Robert Lloyd & Kimberle 3667 39 September 16, 1992 32 4-1-2 Same ( " " ") Corr, Debra B. 3667 42 September 16, 1992 30 3-1-Var. Lots 34 15-1-48.1 Same ( " " ") Marcolini, Carl 3667 45 September 16, 1992 38 14-1-75.41 Same ( " " ") Scheriff, Joseph 3670 182 September 21, 1992 54 8-2-25.23 Same ( " " ") Kamalian, Michael 3670 185 September 21, 1992 30 2-1-40 Same ( " " ") Healey, James, Margaret, John & Martha 3670 188 September 21, 1992 54 27-1-40.3 Same ( " " ") Kruger, Gary 3670 191 September 21, 1992 54 10-1-66.4 Same ( " " ") Bucek, John 3670 194 September 21, 1992 40 25-3-14 Same ( " " ") Wal-Mart Stores, Inc. 3701 238 November 12, 1992 52 78-2-5.1 Same ( " " ") Andrews, Charles & Susan 3701 242 November 12, 1992 22 18-1-37.11 Same ( " " ") Hedge, Barrie, Newman, Jane D., 3701 245 November 12, 1992 54 52-1-Var. Lots Jones, Peter & Helen Same ( " " ") Valentin, Edwin & Debra 3701 249 November 12, 1992 26 31-1-3 &5.2 Same ( " " ") Curry, Robert L. & Diane C. 3701 252 November 12, 1992 50 106-1-11 Same ( " " ") Premerano, Joseph and Ciappina, Marcello 3701 255 November 12, 1992 30 22-1-117 Same ( " " ") Bartolucci, Edgar & Vivienne D. 3701 258 November 12, 1992 50 106-1-Var. Lots Same ( " " ") Berger, William J. & Susan C. 3701 262 November 12, 1992 44 14-1-101 Same ( " " ") Paul P. Benz, Trust 3701 265 November 12, 1992 54 31-2-22.21 Same ( " " ") Lambros, Kyriacos 3701 269 November 12, 1992 40 33-1-Var. Lots Same ( " " ") McCann, Daniel T. & Muriel J. 3703 224 November 17, 1992 26 14-1-29.21 Same ( " " ") McCann, Daniel T. & Muriel J. 3703 227 November 17, 1992 26 14-1-29.21 Same ( " " ") Ruben Irrevocable Trust 3703 230 November 17, 1992 52 7-1-73.3 Same ( " " ") Soutar, Dean & Patricia 3703 233 November 17, 1992 52 7-2-28 Same ( " " ") Clarke, Thomas & June 3703 236 November 17, 1992 56 17-1-74.5 Same ( " " ") Trails Pointe 5, Inc. 3703 239 November 17, 1992 56 23-1-63 Same ( " " ") First Sugar Loaf Development, Inc. 3703 242 November 17, 1992 22 13-3-6 Same ( " " ") Delaney, Thomas F. & Janet M. 3703 245 November 17, 1992 54 11-1-63 Same ( " " ") Pinkney, Wilford 3703 248 November 17, 1992 54 67-4-1.12 Same ( " " ") Babcock, Claude E. 3703 251 November 17, 1992 26 14.1.96 Same ( " " ") Schadt, Norma 3707 195 November 23, 1992 28 19-1-9.9 Same ( " " ") Belsten, Kevin 3707 198 November 23, 1992 28 19-1-9.4 Same ( " " ") S.L. Cottages, Inc. 3707 201 November 23, 1992 20 41-1-8.1 Same ( " " ") Rix, Albert 3707 204 November 23, 1992 52 32-1-45 Same ( " " ") Lycian Center, Ltd. 3707 207 November 23, 1992 22 13-3-5 Same ( " " ") Northrup, Thomas F. & Patricia 3707 210 November 23, 1992 52 78-1-24 Same ( " " ") Dickman, William & Linda 3707 231 November 23, 1992 28 19-1-9.3 Same ( " " ") Van Pelt, Thomas 3711 290 November 30, 1992 28 21-1-2 Same ( " " ") Ross, Don & Gabrielle 3711 293 November 30, 1992 44 14-1-64 Same ( " " ") Ferrante, Angelo 3711 296 November 30, 1992 30 2-1-56 & 57 Same ( " " ") Isomedix Operations, Inc. 3711 299 November 30, 1992 22 119-1-1.2 Same ( " " ") Mead, Chad E. & Jennifer and 3711 302 November 30, 1992 52 6-1-17 Bach, Edward & Jean Same ( " " ") Savaglio, Laurie Anne 3711 305 November 30, 1992 54 17-1-8.12 Same ( " " ") Gratch, Ariel 3711 308 November 30, 1992 22 7-1-Var. Lots Same ( " " ") Kohler, Michael & Marianna 3711 311 November 30, 1992 38 1-1-69 Same ( " " ") Dream Homes of Orange County, Inc. 3721 235 December 15, 1992 22 13-2-7 Same ( " " ") Mari, James and Palmer, Andrew L. 3721 238 December 15, 1992 22 1-1-83.22 Same ( " " ") Eretz Land Co., Inc. 3721 241 December 15, 1992 22 16-1-37.11 Same ( " " ") Hub II Housing Development Fund Co. 3721 244 December 15, 1992 20 108-1-2.12 Same ( " " ") Town of Wallkill Industrial 3723 32 December 16, 1992 52 60-1-75 & 77 Development Agency Same ( " " ") Town of Wallkill Industrial 3723 40 December 16, 1992 52 78-1-Var. Lots Development Agency 60-1-Var. lots 41-1-Var. Lots Same ( " " ") PCM Development Company and 3723 49 December 16, 1992 52 78-1-Var. Lots Town of Wallkill Industrial Development Agency Same ( " " ") Drapala, Stanley and Reiner, Jeanette 3723 248 December 17, 1992 32 6-1-16.32 Same ( " " ") Drapala, David M. & Bernetta A. 3723 250 December 17, 1992 32 6-1-16.32 Same ( " " ") Schaffer, Allen H. & Christine L. 3723 253 December 17, 1992 32 7-1-36.212 Same ( " " ") Reiss, Ronald 3723 255 December 17, 1992 22 6-1-33.1 Same ( " " ") Alders, Cornelius & Judith and 3723 257 December 17, 1992 30 24-1-1 Jansen, Jan & Elizabeth Same ( " " ") R.F.F. Corporation 3723 260 December 17, 1992 54 41-1-72 Same ( " " ") Hui, Raymond C. 3723 263 December 17, 1992 52 74-8-18.2 Same ( " " ") Conway, Francis 3741 80 January 12, 1993 54 67-13-3 Same ( " " ") Lockard, Arthur 3759 295 February 8, 1993 54 49-1-90 Same ( " " ") Felter, Ronald 3759 298 February 8, 1993 20 115-5-18.1 115-5-18.2 Same ( " " ") Willis, John T., Jr. & Linda L. 3759 301 February 8, 1993 44 13-1-4 Same ( " " ") Stephens, John & Nancy Crosier 3759 304 February 8, 1993 32 4-1-60 Same ( " " ") Ford, Thomas & Virginia A. 3759 307 February 8, 1993 44 19-1-9.3 Same ( " " ") Dispigna, Gaetano 3759 310 February 8, 1993 20 38-1-41.122 Same ( " " ") Rogers, James 3759 313 February 8, 1993 32 7-1-73 Same ( " " ") Straub & Sons Excavating, Inc. 3759 316 February 8, 1993 32 7-1-78 Same ( " " ") Stack, John 3759 319 February 8, 1993 40 41-2-5.2 Same ( " " ") Ace Farm, Inc., Etzel, Tyler & Lorraine 3759 322 February 8, 1993 40 1-3-14.2 58 13-1-28.2 & 29 Same ( " " ") Hyrnda, Daniel & Gainsbury, Julia 3767 147 February 23, 1993 52 6-1-47.21 Same ( " " ") Mullins, Daniel M. 3767 150 February 23, 1993 38 6-1-24.2 Same ( " " ") Baty, Lee 3767 153 February 23, 1993 26 17-1-37.32 Same ( " " ") Kocot, Alexander & Rosalinda 3767 156 February 23, 1993 54 6-1-34 Same ( " " ") Pennings, John G. 3767 159 February 23, 1993 54 49-1-36.3 Same ( " " ") DiRaffaele, Alan & Elaine 3767 162 February 23, 1993 32 7-1-75 Same ( " " ") Katz, Lynn 3767 165 February 23, 1993 20 3-1-6 Same ( " " ") Byrne, Garrett & Cynthia 3767 168 February 23, 1993 52 6-1-47 Same ( " " ") Horton, Leslie W., III 3767 171 February 23, 1993 26 22-1-73.2 Same ( " " ") Garry, Keith 3767 174 February 23, 1993 26 27-1-41.32 Same ( " " ") Cuomo, Anthony & Doreen 3770 160 February 25, 1993 20 44-1-147 Same ( " " ") Euser, Joseph & Theresa 3770 162 February 25, 1993 32 2-1-7.1 Same ( " " ") Koeller, Kenneth B. 3770 164 February 25, 1993 30 20-2-12 Same ( " " ") Busch, William & Yvette 3770 166 February 25, 1993 54 16-1-55 Same ( " " ") Sheedy, George W. and 3770 168 February 25, 1993 54 47-1-113.2 Montuori, Patrick A. Same ( " " ") Sweeney, Charlene 3770 171 February 25, 1993 58 16-7-Var. Lots Same ( " " ") Monroe-Woodbury Jewish 3770 173 February 25, 1993 40 2-1-4.31 Community Center, Inc. Same ( " " ") Marasco, Mark 3770 176 February 25, 1993 44 10-1-1.23 Same ( " " ") Stein, Michael P. & Laura 3770 178 February 25, 1993 20 44-1-12.21 Same ( " " ") Middletown Plaza Associates 3777 154 March 11, 1993 52 50-2-2.2 Limited Partnership Same ( " " ") Leentjes, Brian & Alison 3777 161 March 11, 1993 22 107-2-4.1 Same ( " " ") McLellan, David 3777 164 March 11, 1993 36 11-1-7 Same ( " " ") Sarnowski, Alan 3777 167 March 11, 1993 56 22-1-49 Same ( " " ") Malkan, Paul & Judith 3777 170 March 11, 1993 54 26-1-18.21 Same ( " " ") Sztyndor, Ronald 3777 173 March 11, 1993 54 3-1-10 Same ( " " ") Drake, Herbert, Jr. 3777 176 March 11, 1993 26 18-1-41.63 Same ( " " ") Schaffer, Allen H. & Christine 3777 179 March 11, 1993 32 7-1-36.212 Same ( " " ") Higby, Gary & Linda 3777 182 March 11, 1993 26 19-1-50 Same ( " " ") Mahan, Patrick A. 3778 53 March 11, 1993 36 102-1-11 Same ( " " ") State of New York - Executive Dept. 3786 36 March 29, 1993 9 20-1-11.22 Office of General Services Same ( " " ") Big V Supermarkets, Inc. 3786 39 March 29, 1993 54 51-1-5.5 & 6.2 Same ( " " ") Woodbury, Town of 3786 42 March 29, 1993 58 19-5-20 Same ( " " ") Danielson, Scott & June 3786 45 March 29, 1993 58 4-1-27.2 Same ( " " ") Tripodi, Denise 3786 48 March 29, 1993 22 18-1-11.2 Same ( " " ") Ketchum, George & Pamela 3786 51 March 29, 1993 22 114-1-10.1 Same ( " " ") Howell, William Harry 3793 215 April 9, 1993 56 23-1-28.23 Same ( " " ") Owen, James C. 3793 217 April 9, 1993 52 61-1-5.225 Same ( " " ") Rometo, Vito Peter 3793 219 April 9, 1993 52 75-2-14 Same ( " " ") Viswakumar, Palanisamy & Jayanthi 3793 221 April 9, 1993 56 18-1-13.21 Same ( " " ") Nixon Road Developers, Inc. 3793 224 April 9, 1993 40 305-1-36.2 Same ( " " ") Senese, Vincent 3793 227 April 9, 1993 56 1-1-61 Same ( " " ") Emmerich, Suzanne B. 3793 229 April 9, 1993 54 49-1-82 Same ( " " ") Fletcher, Robert A. & Elizabeth A. 3793 231 April 9, 1993 54 63-1-13.5 Same ( " " ") Leone, Raffaele 3810 8 May 10, 1993 58 26-1-9.3 Same ( " " ") Foote, Harry & Sharon 3810 11 May 10, 1993 52 61-1-34 Same ( " " ") Williams, Drew 3810 14 May 10, 1993 54 64-1-62.1 Same ( " " ") Cassel, James 3810 17 May 10, 1993 30 103-4-12.2 & 13 Same ( " " ") Aronson, James 3810 20 May 10, 1993 20 52-1-56.1 Same ( " " ") Metzger, John F. & Ellen B. 3810 23 May 10, 1993 54 40-1-67 Same ( " " ") Kiryas Center for Developmental 3826 332 June 8, 1993 40 310-1-3 Disabilities, Inc. Same ( " " ") Lagakos, Satirios & Alexandros 3826 335 June 8, 1993 40 203-2-3 Same ( " " ") Strack, Robert & Madelaine 3826 338 June 8, 1993 50 12-2-4.11 Same ( " " ") Ferrante, Alvaro 3826 341 June 8, 1993 30 10-1-26 Same ( " " ") Rusaul J. Homes, Ltd. 3826 344 June 8, 1993 56 14-1-48.1 Same ( " " ") Harriman, Village of 3826 347 June 8, 1993 40 51-1-76 Same ( " " ") Hudson Region Enterprises, Inc. 3827 1 June 8, 1993 22 15-1-77 Same ( " " ") Badami, Angela V. and Mancino, Samuel 3827 4 June 8, 1993 40 24-1-99 Same ( " " ") Brooks, James S. & Natalie F. 3828 1 June 10, 1993 22 15-1-74 Same ( " " ") Cavallaro, John A. & Salvatore C. 3828 166 June 10, 1993 30 24-1-51 Same ( " " ") Kocot, Alexander & Rosalinda 3828 169 June 10, 1993 54 6-1-34 Same ( " " ") Moro, Hector A. & Yvonne 3828 172 June 10, 1993 26 20-1-24.122 Same ( " " ") Zwart, Raymond J. 3828 175 June 10, 1993 26 26-7-1.1 Same ( " " ") Tuthill, Scott and Dykstra, Gayle 3828 178 June 10, 1993 54 22-1-30 Same ( " " ") Mead, Joseph S., Jr. 3828 181 June 10, 1993 32 6-1-1.2 Same ( " " ") Decker, Harry F. & Charlotte A. 3828 184 June 10, 1993 54 21-1-21 Same ( " " ") Hunt, Patricia J. 3828 187 June 10, 1993 44 19-1-49 Same ( " " ") Andersen, John R. & Marie 3828 190 June 10, 1993 54 44-1-71.1 Same ( " " ") Segrich, Thomas A. 3828 193 June 10, 1993 54 58-2-1.21 Same ( " " ") Strong, William H. & Jean S. 3828 196 June 10, 1993 30 10-1-11.2 Same ( " " ") Dapra, George D. & Elaine M. 3849 22 July 14, 1993 36 106-6-5 Same ( " " ") Catania, James 3849 26 July 14, 1993 20 9-1-57.41 Same ( " " ") Indig, Moses 3849 29 July 14, 1993 40 1-1-10.22 Same ( " " ") Tedesco, Thomas & Elaine 3849 32 July 14, 1993 13 8-13-11 Same ( " " ") H. Reynolds & Son, Inc. 3849 35 July 14, 1993 58 30-9-4 Same ( " " ") Big V Supermarkets, Inc. 3849 38 July 14, 1993 54 51-1-5.5 & 6 Same ( " " ") Rose, H. Sidney 3849 43 July 14, 1993 13 8-13-8 Same ( " " ") Kovacs, Stefan, Jr. & Anneliese 3849 46 July 14, 1993 26 22-1-20.34 Same ( " " ") Porter, Kenneth & Jacinda 3849 49 July 14, 1993 54 10-1-56.11 Same ( " " ") Gordon, Shirley D. 3849 52 July 14, 1993 52 17-1-11 Same ( " " ") Ridge Associates 3853 70 July 21, 1993 38 5-1-10.1 Same ( " " ") Kings Estates Limited Partnership 3853 73 July 21, 1993 54 35-1-61 Warwick Water Corp. Same ( " " ") Kosuga, Vincent & Pauline 3853 77 July 21, 1993 44 2-1-16.2 Same ( " " ") DeAngelis, Louis & Holland, Debby 3853 80 July 21, 1993 38 6-1-13.3 Same ( " " ") Callahan Equities, Inc., Posner, 3853 83 July 21, 1993 58 39-1-Var Lots Barbara & Maltzman, Jen 39-2-Var Lots Same ( " " ") Roeper, Louis W. & Marguerite 3853 87 July 21, 1993 32 3-2-6 Same ( " " ") Mancuso, Raymond D. 3853 90 July 21, 1993 22 15-1-50.4 Same ( " " ") LaBelle, Jim & Toni 3853 93 July 21, 1993 56 22-1-48 Same ( " " ") DeJong, James & Melanie 3853 96 July 21, 1993 50 106-1-30 Same ( " " ") Bach, John E., Sr. & Carol 3863 318 August 6, 1993 30 10-1-Var Lots Same ( " " ") Dembek, Barney S. 3863 321 August 6, 1993 30 10-1-61 Same ( " " ") Chester, Village of 3863 324 August 6, 1993 22 104-4-Adj. to 7 Same ( " " ") Briller, Phyllis 3863 327 August 6, 1993 54 66-1-Var Lots Same ( " " ") Blake, Maximo Brian 3863 330 August 6, 1993 54 66-1-21.2 Same ( " " ") E & E Carpentry, Inc. 3863 333 August 6, 1993 22 5-1-91.3 Same ( " " ") Hempstead Gardens, Inc. 3863 336 August 6, 1993 54 109-2-Var Lots 9-1-19 Same ( " " ") Zwick, John 3863 339 August 6, 1993 38 2-4-2.21 Same ( " " ") Warwick Valley Central School Dist. 3863 342 August 6, 1993 54 42-1-35.1 No. 1 Towns of Warwick & Chester Same ( " " ") Pittari, Dominick & Grace 3863 345 August 6, 1993 30 18-1-23.23 Same ( " " ") Gaspar, Jose & Maria 3866 184 August 11, 1993 26 18-2-42 Same ( " " ") Whelan, Brendan & Theresa 3866 187 August 11, 1993 32 4-1-12 Same ( " " ") Lewis, Betty 3866 190 August 11, 1993 26 18-2-40 Same ( " " ") United Talmudical Academy of 3866 193 August 11, 1993 40 305-1-28 Kiryas Joel, Inc. Same ( " " ") Moulton, Keith & Ruth 3866 196 August 11, 1993 56 22-1-97.2 Same ( " " ") Mastracola, Rose Marie and Marino, Lisa 3866 199 August 11, 1993 44 10-1-13.1 101-2-7 Same ( " " ") Pentacosa Land Corp. 3866 202 August 11, 1993 32 13-1-20.1 Same ( " " ") Damia, Mark C. & Patricia G. 3866 205 August 11, 1993 54 11-1-9.11 Same ( " " ") Leach, Richard W. & Patricia A. 3866 208 August 11, 1993 56 17-1-75.21 Same ( " " ") Miller, Naomi and Kollisch, Eva B. 3866 211 August 11, 1993 56 10-1-2 Same ( " " ") Saint Mary's Roman Catholic Church 3877 243 August 27, 1993 20 108-1-1 Same ( " " ") Morgano, Dennis 3877 246 August 27, 1993 20 10-1-29.13 Same ( " " ") Russo, Alfonso & Felicita 3877 249 August 27, 1993 30 20-1-61 Same ( " " ") Vespo, Joseph 3877 252 August 27, 1993 26 18-2-Var Lots Same ( " " ") Goldsman, Suzanne 3877 255 August 27, 1993 26 18-2-Var Lots Same ( " " ") Congregation Yetev Len D'Satmar, Inc. 3877 258 August 27, 1993 40 305-1-1.11 Same ( " " ") Dumitru, Gelu 3877 261 August 27, 1993 20 14-1-29.2 Same ( " " ") Patenaude, Daniel & Dianne 3877 264 August 27, 1993 52 12-1-31.1 Same ( " " ") Sawyer's Peak Associates, L.P. 3877 267 August 27, 1993 30 17-1-31.11 Same ( " " ") Fournier, Anita 3877 270 August 27, 1993 32 11-1-7.1 Same ( " " ") Harold Finnegan, Inc. 3885 77 September 9, 1993 54 316-2-8 Same ( " " ") Joyce, Timothy J. & Christine M. 3885 80 September 9, 1993 54 58-1-112 Same ( " " ") Scheuerman, William; 3885 83 September 9, 1993 54 40-1-17.32 Lust, Henry, Jr.; Lopez, Alice Jane; & Rechner, Linda May Same ( " " ") N.S. Building Corp. 3885 87 September 9, 1993 26 18-2-Var Lots Same ( " " ") Greene, Thomas F. & Lorraine B. 3885 90 September 9, 1993 30 19-1-p/o 75.3 Same ( " " ") Ghedina, John & Patricia 3885 93 September 9, 1993 20 14-1-51 Same ( " " ") Kahan, Gerard & Cathy 3885 96 September 9, 1993 52 2-1-8 Same ( " " ") Kandel Associates Limited 3885 99 September 9, 1993 52 50-2-37.2 Same ( " " ") Freddolino, Mary Anne 3885 102 September 9, 1993 54 54-1-16.22 Same ( " " ") Hildenbrand, David & Lucy Ann 3885 105 September 9, 1993 38 6-1-13.2 Same ( " " ") Toumanidis, Sophia 3914 92 October 21, 1993 22 24-2-8.2 Same ( " " ") Wersebe, Scott V. 3914 95 October 21, 1993 54 43-1-42 Same ( " " ") Welsh, Paul 3914 98 October 21, 1993 54 11-1-21.4 Same ( " " ") Conklin, Donna J. 3914 101 October 21, 1993 58 18-2-50 Same ( " " ") American Lemko Park, Inc. 3914 104 October 21, 1993 20 53-1-1 Same ( " " ") U.S. Cablevision Corp. 3914 107 October 21, 1993 40 37-1-9.2 Same ( " " ") Dysinger, Larry & Jane 3914 110 October 21, 1993 22 12-1-73 Same ( " " ") Menna Building Corp. 3914 113 October 21, 1993 22 12-1-70 Same ( " " ") Robert Knebel General Contractor, Inc. 3914 116 October 21, 1993 22 17-1-54 Same ( " " ") Ketcherside, Michael J. & Lesa L. 3914 119 October 21, 1993 22 17-1-23.222 Same ( " " ") Javdan, Parviz & Shahla 3921 12 November 4, 1993 30 2-1-61 Same ( " " ") Laughlin, Stephen 3921 15 November 4, 1993 20 44-1-105 Same ( " " ") Isola, Joseph & Rosita 3921 18 November 4, 1993 54 16-1-56.1 Same ( " " ") Town of Tuxedo 3921 21 November 4, 1993 50 11-11-5.2 Same ( " " ") Ponikvar, Adolph & Helen L. 3921 24 November 4, 1993 22 111-2-6.1 Same ( " " ") Bell, Ruth Gasper 3921 27 November 4, 1993 40 31-1-8.3 Same ( " " ") Amendola, Samuel & Lynn 3921 30 November 4, 1993 20 54-1-15.58 Same ( " " ") Islandia Properties, L.P. 3921 33 November 4, 1993 52 44-1-35.1 Same ( " " ") Behrent, Harry W., Jr. 3921 36 November 4, 1993 30 20-1-44.2 Same ( " " ") Fourham Associates II 3921 39 November 4, 1993 22 1-1-Var Lots Same ( " " ") Westgate Goshen, Inc. 3924 114 November 9, 1993 30 126-1-1.2 Same ( " " ") Evans, Everett A., Jr. 3924 125 November 9, 1993 44 5-1-9 & 10.4 Same ( " " ") Curabba, Nicholas 3924 128 November 9, 1993 26 27-1-12.2 Same ( " " ") Kahn, George & Nancy 3924 131 November 9, 1993 40 222-1-9 Same ( " " ") Barron, Edward & Barbara 3924 134 November 9, 1993 54 63-2-21 Same ( " " ") DeBuck, Leonard M. & Valorie L. 3924 137 November 9, 1993 54 11-1-4 Same ( " " ") Eton Centers Co. 3924 140 November 9, 1993 36 105-5-1 Same ( " " ") Vidal, Glenn J. 3924 144 November 9, 1993 56 13-1-41 Same ( " " ") Perez, Robert P. & Lucy G. 3924 147 November 9, 1993 44 12-1-2.22 Same ( " " ") Kings Estates Limited Partnership 3924 150 November 9, 1993 22 32-1-29 54 Various Lots Same ( " " ") Jennings, Madison & Sylvia Garnier 3924 178 November 9, 1993 54 18-1-53 Same ( " " ") Ferrante, Lino 3944 9 December 7, 1993 40 18-6-Var. Lots Same ( " " ") Parry , Alice B. 3944 11 December 7, 1993 36 104-6-7 Same ( " " ") Gingold, Susan 3944 13 December 7, 1993 32 5-1-5.32 Same ( " " ") Dagele, Frank J., Jr. 3944 15 December 7, 1993 54 7-2-28 Same ( " " ") Petersen, Edward M. & Hanni 3944 17 December 7, 1993 52 12-1-2 Same ( " " ") Ford, Dean C., Sr. & Barbara J. 3944 19 December 7, 1993 38 4-1-21.2 Same ( " " ") Sabini, Gerald S. 3944 21 December 7, 1993 20 52-1-14.2 Same ( " " ") Nature Conservancy, Inc. 3948 148 December 15, 1993 28 Various S-B-L Same ( " " ") United Talmudical Academy of 3948 151 December 15, 1993 40 306-1-4 Kiryas Joel, Inc. Same ( " " ") Bayer, Richard 3948 154 December 15, 1993 22 17-1-65 Same ( " " ") Sacco, Robert 3948 203 December 15, 1993 54 29-6-14.2 Same ( " " ") Woods, James N. 3948 206 December 15, 1993 56 25-1-31.1 Same ( " " ") Heads, David 3948 209 December 15, 1993 44 15-1-5 Same ( " " ") Slover, George 3948 212 December 15, 1993 44 12-2-1 Same ( " " ") Brandwein, Paul 3948 215 December 15, 1993 32 12-1-19.21 Same ( " " ") Greenville, Town of 3948 218 December 15, 1993 32 2-1-47 Same ( " " ") Leentjes, Brian 3948 221 December 15, 1993 22 6-1-17.32 Same ( " " ") Uckermark, Herbert, Jr. 3948 224 December 15, 1993 54 16-1-56.4 Same ( " " ") Brosnan, John D. 3948 227 December 15, 1993 54 1-1-34.2 Same ( " " ") Massaro, Allan P. 3948 230 December 15, 1993 22 17-1-64 Same ( " " ") Middletown Plaza Associates 3970 276 January 12, 1994 52 50-2-4.11 Limited Partnership Same ( " " ") Middletown Plaza Associates 3970 284 January 12, 1994 52 50-2-4.11 Limited Partnership Same ( " " ") Yoga Society of New York, Inc. 3970 292 January 12, 1994 40 24-1-74 Same ( " " ") Laubsch, Richard & Joan 3970 295 January 12, 1994 50 105-1-2 Same ( " " ") Weinert, Carl W. 3970 298 January 12, 1994 22 6-1-17.31 Same ( " " ") Monaghan, Jerome & Linda 3970 301 January 12, 1994 20 52-1-51 Same ( " " ") Murphy, Nicholas & Jane 3970 304 January 12, 1994 56 22-1-24 Same ( " " ") Baio, Decio 3970 307 January 12, 1994 26 18-1-58 Same ( " " ") Myruski, Lewis 3970 310 January 12, 1994 30 22-1-12.2 Same ( " " ") Poretto, Gregory J. & Deborah E. 3970 313 January 12, 1994 32 3-1-40.2 Same ( " " ") Olzeweski, John J. 3978 322 January 25, 1994 54 33-1-33.32 Same ( " " ") Grzegorzewski, Andrew P. 3978 325 January 25, 1994 54 33-1-33.222 Same ( " " ") Dillon, Christine 3978 328 January 25, 1994 52 13-1-24.5 Same ( " " ") Owney, Michael 3978 331 January 25, 1994 26 18-1-12.21 Same ( " " ") Orenstein, David 3978 334 January 25, 1994 32 4-1-23.1 Same ( " " ") Muhlrad, Elias 3978 337 January 25, 1994 30 20-1-34.1 Same ( " " ") Crescimanno, Stephen 3978 340 January 25, 1994 9 20-6-1 Same ( " " ") Kanans East Main Street, Inc. 3978 343 January 25, 1994 9 32-10-1 Same ( " " ") Leentjes, Brian 3985 147 January 25, 1994 22 6-1-17.32 Same ( " " ") Vogel, Steven H. 3985 149 January 25, 1994 56 23-1-54 Same ( " " ") Russiyan, Nicholas 3985 152 January 25, 1994 22 16-1-59.32 Same ( " " ") Enlarged Middletown City School District 3985 155 January 25, 1994 9 31-12-16.2 Same ( " " ") Middletown, City of 3985 158 January 25, 1994 9 31-12-16.4 Same ( " " ") Petersen, Edward M., Adm. 3985 161 January 25, 1994 52 12-1-47 Same ( " " ") Perna, Thomas 3985 164 February 4, 1994 52 13-1-3.2 Same ( " " ") Casimiro, Fernando 3990 296 February 16, 1994 26 12-1-31.2 Same ( " " ") Stevenson, Robert 3990 299 February 16, 1994 52 7-2-50 Same ( " " ") Lake, Debra Ann 3990 302 February 16, 1994 32 3-2-4 Same ( " " ") Hoehmann, John P. 3990 305 February 16, 1994 52 20-1-29 Same ( " " ") Wagner, James W. 3990 308 February 16, 1994 26 17-1-24.1 Same ( " " ") Weber, Mark 3990 311 February 16, 1994 20 52-1-76.1 Same ( " " ") Wander, Alexander 3990 314 February 16, 1994 22 13-2-2 Same ( " " ") Keegan, Joseph 3990 317 February 16, 1994 28 1-1-9.21 Same ( " " ") Running Brook Builders, Inc. 3991 129 February 16, 1994 30 18-1-120 Same ( " " ") Orange County 3992 197 February 18, 1994 Various T-S-B-L Same ( " " ") C&S Assocs Limited Partnership I 3992 327 February 18, 1994 40 203-2-5
SCHEDULE C Listing of all properties acquired by Orange and Rockland Utilities, Inc. located in Sullivan County, New York, appearing of record in the Grantee Index of the Clerk of the County of Sullivan from March 1, 1992 through February 28, 1994.
GRANTEE GRANTOR LIBER PAGE DATE Orange and Rockland Utilities, Inc. (Right of Way) Spangenberg, Stephen H. 1572 173 March 5, 1992 Same ( " " ") Kowalczik, John 1574 384 March 18, 1992 Same ( " " ") Tufano, Bernard A. 1577 192 March 31, 1992 Same ( " " ") Lopez, Abel J. 1577 195 March 31, 1992 Same ( " " ") Moore, Richard 1579 43 April 7, 1992 Same ( " " ") Sullivan, Robert N. 1579 46 April 7, 1992 Same ( " " ") DeGroat, Dennis, Jr. 1579 49 April 7, 1992 Same ( " " ") Gilson, Anna 1579 52 April 7, 1992 Same ( " " ") Russo, Vincent M. 1581 154 April 16, 1992 Same ( " " ") Geba, John 1584 114 April 29, 1992 Same ( " " ") Storms, Donald R. 1585 363 May 6, 1992 Same ( " " ") Costescu, Dorin 1589 54 May 21, 1992 Same ( " " ") Nature First Ltd. 1590 392 May 27, 1992 Same ( " " ") Scharffenberg, Lloyd 1613 131 September 3, 1992 Same ( " " ") Kotwica, Richard & Kathleen 1615 236 September 15, 1992 Same ( " " ") Ball, Edward A. 1615 238 September 15, 1992 Same ( " " ") DeVoe, Thomas & Nancy 1615 240 September 15, 1992 Same ( " " ") Levine, Harold 1615 242 September 15, 1992 Same ( " " ") Reich, Robert F. 1615 244 September 15, 1992 Same ( " " ") Barnes, John S. 1615 246 September 15, 1992 Same ( " " ") Roe, Duane B., Jr. 1615 248 September 15, 1992 Same ( " " ") Sullivan, Robert N. & Joan 1615 250 September 15, 1992 Same ( " " ") Han, Paul Un Suk 1615 252 September 15, 1992 Same ( " " ") DeVoe, Richard 1615 254 September 15, 1992 Same ( " " ") Murphy, John V., III and Stanley, Valerie A. 1615 256 September 15, 1992 Same ( " " ") Manville, Timothy 1615 258 September 15, 1992 Same ( " " ") Thiele, Anna, Individually and as Conservator of the 1624 33 October 28, 1992 Same ( " " ") Estate and property of Robert Thiele Same ( " " ") Monmouth Council, Inc. Boy Scouts of America 1624 35 October 28, 1992 Same ( " " ") Costeseu, Michael 1631 136 November 30, 1992 Same ( " " ") O'Malley Realty Corp. 1631 138 November 30, 1992 Same ( " " ") Garnder, Paul & Mary Ann 1631 140 November 30, 1992 Same ( " " ") Han, Un Suk 1631 142 November 30, 1992 Same ( " " ") Han, Un Suk 1631 144 November 30, 1992 Same ( " " ") Schmitt, R.P., Jr. & Julia Keniston 1631 146 November 30, 1992 Same ( " " ") Geba, John & Elizabeth C. 1631 148 November 30, 1992 Same ( " " ") Schlemmer, Aubrey 1631 150 November 30, 1992 Same ( " " ") Aniston, Stephen A. & Mathilde 1631 152 November 30, 1992 Same ( " " ") Cropley, William 1631 154 November 30, 1992 Same ( " " ") Storms, Donald & Linda M. 1631 156 November 30, 1992 Same ( " " ") Salovin, Martin 1631 158 November 30, 1992 Same ( " " ") Roth, David S. 1631 160 November 30, 1992 Same ( " " ") Benson, Glenn E., Karen L. & Anna 1631 162 November 30, 1992 Same ( " " ") Corrado, Karin and Conlon, Colleen 1631 164 November 30, 1992 Same ( " " ") Corrado, Karin and Conlon, Colleen 1631 166 November 30, 1992 Same ( " " ") Kershaw, John 1631 168 November 30, 1992 Same ( " " ") Karr, Lee 1631 170 November 30, 1992 Same ( " " ") Turek, Andrzej 1631 172 November 30, 1992 Same ( " " ") Horne, Kenneth A. 1631 174 November 30, 1992 Same ( " " ") Garofalo, Vincent R. 1631 176 November 30, 1992 Same ( " " ") Moore, Richard & Hanna S. 1631 178 November 30, 1992 Same ( " " ") Konikowski, Marion J. 1631 180 November 30, 1992 Same ( " " ") Markle, Daniel J. & Karen J. 1631 182 November 30, 1992 Same ( " " ") Tufano, Bernard & Carol J. 1631 184 November 30, 1992 Same ( " " ") Holmes, William C. & Julie Ashworth 1631 186 November 30, 1992 Same ( " " ") Cardillo, Oreste 1657 609 April 9, 1993 Same ( " " ") Van Keuren, Douglas R. & Ruby M. 1657 611 April 9, 1993 Same ( " " ") Applegate, Richard L. 1657 613 April 9, 1993 Same ( " " ") Toomey, Mary Ann 1657 615 April 9, 1993 Same ( " " ") Schultz, Edward S. & Mary 1657 617 April 9, 1993 Same ( " " ") Galbraith, Pauline, Estate of 1657 619 April 9, 1993 Same ( " " ") Sawchuk, Dymtro & Elizabeth 1657 621 April 9, 1993 Same ( " " ") Toomey, Joseph M. & Shirley 1657 623 April 9, 1993 Same ( " " ") Hermanowski, Henry & Wieslawa 1657 625 April 9, 1993 Same ( " " ") Flieger, Kenneth & Darla 1657 627 April 9, 1993 Same ( " " ") Wagers, Lawrence & Christina 1657 629 April 9, 1993 Same ( " " ") Van Patten, Jason B. & Cynthia L. 1657 631 April 9, 1993 Same ( " " ") LeRoux, David B. 1657 633 April 9, 1993 Same ( " " ") LeRoux, Jan E. 1657 635 April 9, 1993 Same ( " " ") Shue, William H. 1657 637 April 9, 1993 Same ( " " ") Daria, Patrick F. & Barbara J. 1657 639 April 9, 1993 Same ( " " ") Alpan Realty, Inc. 1657 641 April 9, 1993 Same ( " " ") Lovelace, Thomas R. 1657 643 April 9, 1993 Same ( " " ") Lake Altamont Association, Inc. 1657 645 April 9, 1993 Same ( " " ") Boniface, Kenneth 1657 647 April 9, 1993 Same ( " " ") Metauque Falls Sportsmen's Club, Inc. 1667 1 May 20, 1993 Same ( " " ") Vik, Joseph 1681 146 July 22, 1993 Same ( " " ") Sunbird Farms, Inc. 1681 148 July 22, 1993 Same ( " " ") Scharffenberg, Lloyd R. 1681 150 July 22, 1993 Same ( " " ") Julien, Serge 1681 152 July 22, 1993 Same ( " " ") Sudol, Stephen & Mary R. 1681 154 July 22, 1993 Same ( " " ") Gordon, Michael S. 1681 156 July 22, 1993 Same ( " " ") Thiele, Anna 1711 668 December 13, 1993 Same ( " " ") Gervasi, Richard M. & Theresa M. 1711 670 December 13, 1993 Same ( " " ") Smith, Morris 1711 672 December 13, 1993 Same ( " " ") Babcock, Charles E. & Patricia P. 1711 674 December 13, 1993 Same ( " " ") Donovan, Denise 1711 676 December 13, 1993 Same ( " " ") Moreau, Thomas & Gloria 1711 678 December 13, 1993 Same ( " " ") Tsoucalas, James 1711 680 December 13, 1993 Same ( " " ") Fanok, Max & Janina 1711 682 December 13, 1993
EX-10.17 4 SEVENTH AMENDMENT TO COAL PURCHASE AND SALES AGREEMENT This SEVENTH AMENDMENT is made and entered into as of July 1, 1994, between ORANGE AND ROCKLAND UTILITIES, INC., a New York corporation ("Buyer"), RAWL SALES AND PROCESSING COMPANY, INC. (withdrawing "Seller"), and MASSEY COAL SALES COMPANY, INC., a Virginia corporation (substituted "Seller"). RECITALS 1. Buyer and Seller, together with Rawl Sales & Processing Company, Inc. ("Rawl"), an affiliate of Seller, entered into a Coal Purchase and Sales Agreement on March 9, 1984 (the "Agreement"), and have amended the Agreement on six previous occasions, July 30, 1986, July 1986, September 1986, January 1987, January 1990, and July 1, 1991. 2. Buyer and Seller are mutually interested in continuing their relationship under the Agreement and agree to amend the Agreement to effect the amendments herein. 3. Buyer, Seller, and Rawl agree that Rawl no longer should be a party to the Agreement inasmuch as the coal supplied to Buyer hereunder is, pursuant to the Agreement, supplied by various affiliates of Seller. These affiliates of Seller and Seller shall, unless otherwise stated, be collectively referred to as the "Seller." 4. Buyer and Seller agree that the requirements of the Clean Act Amendments of 1990, effective May 15, 1995, and certain equipment installations attendant thereto, require new coal quality standards and strict future adherence thereto, including resourcing of coal if and when necessary to comply. AGREEMENT NOW, THEREFORE, in consideration of the mutual agreements contained herein, and for other good and valuable consideration, the parties hereto agree as follows: 1. The Agreement is amended to delete Rawl Sales & Processing Company, Inc. as a party and to substitute Massey Coal Sales Company, Inc. as the Seller. Rawl agrees to have Massey Coal Sales Company, Inc. substituted as Seller with respect to performance hereunder, and Buyer likewise agrees to such substitution. The Agreement shall be further amended to delete all references to the Seller's Agent wherever it appears throughout the Agreement. Seller agrees to perform all obligations of both the Seller and the Seller's Agent under the Agreement, as amended herein. Upon execution hereof, Rawl agrees to waive all rights and privileges it may have under the Agreement. 2. Article I of the Agreement is deleted in its entirety and in substitution thereof a new Article I is added to read as follows: ARTICLE I Amount of Coal - Term of Agreement 1.1 Seller agrees to sell, and Buyer agrees to purchase, coal of the quality and in quantities hereinafter stated and upon the terms and conditions herein set forth. Seller will deliver such coal to Buyer (f.o.b. cars at Seller's Mines (hereinafter defined)) for a period of twenty (20) years from the Initial Shipment Date (hereinafter defined), subject to earlier termination as hereinafter provided. 1.2 The quantity of coal to be sold by Seller to Buyer and purchased by Buyer from Seller hereunder shall be a base tonnage of 440,000 tons (hereinafter defined) per Contract Year (hereinafter defined). Buyer shall have the right to vary the actual annual tonnage from the base tonnage by no more than +/- fifteen percent (15%), or between 374,000 and 506,000 tons. At least ninety (90) days prior to the commencement of each Contract Year, Buyer shall give written notice to Seller of the quantity of coal to be shipped under this Agreement during the next succeeding Contract Year. In no event shall Buyer increase or reduce its annual tonnage declaration by more than fifteen percent (15%) of the preceding Contract Year's annual tonnage declaration. Buyer shall have the option to purchase an additional 100,000 tons per Contract Year. Buyer must exercise its option at the same time the annual declaration is made for tonnage to be shipped in the next succeeding Contract Year. The optional tonnage shall be shipped at the then-current contract price. 1.3 In the event that Buyer is required or elects to purchase some amount of coal from another supplier with whom it currently has a contractual dispute, Buyer's above- described annual purchase obligation shall, for the period that Buyer is required or elects to purchase coal from such supplier, be reduced by the amount Buyer is so required or elects to purchase, but in no event shall Buyer's purchase obligation hereunder be reduced to fewer than 300,000 tons per Contract Year. 1.4 As used in this Agreement, the following terms shall have the meaning indicated: (1) "Contract Year" shall mean each 12-month period beginning on July 1, 1994, and ending on June 30, 1995, and for every 12-month period thereafter during the term of this Agreement. (2) "F.O.B. cars" means coal free on board railroad cars at Seller's Mines. (3) "Initial Shipment Date" shall be July 31, 1987. (4) "Price per ton FOB cars" means the price of coal as loaded in railroad cars at Seller's Mines. (5) "Seller's Mines" means all coal mines located on the properties owned by or otherwise available to Seller in the vicinity of Mingo County, West Virginia (see Exhibit A) from which the coal to be shipped hereunder is to be produced at Seller's rail-loading site at La Voy, West Virginia. (6) "Shipment" means a trainload of coal, shipped from Seller's Mines in any single day. (7) "Ton" shall mean a net weight of 2,000 pounds avoir- dupois. 1.5 (a) Notwithstanding any other provision of this Agreement, if during any calendar month during the term of this Agreement the cost of the Alternative Fuel (as defined on Schedule A) available to Buyer is less than the cost of coal under this Agreement, then Buyer during the ensuing ten (10) days may elect to suspend further shipments of coal, on sixty (60) days' written notice, until the end of the first calendar month during which the price of such coal remains equal to or less than the price of the Alternative Fuel then supplied to Buyer. (b) Seller reserves the right upon the receipt of such notice of suspension or at any time during such suspension, on thirty (30) days' prior written notice either to (i) reduce the then-current price of coal under this Agreement to match on a month-to-month basis the cost of such Alternative Fuel, in which event Buyer shall be required to purchase coal from Seller under this Agreement in lieu of such Alternative Fuel so long as the price of coal continues to match the lower cost of such Alternative Fuel; or (ii) if Seller elects not to reduce the price of coal, Seller shall have the right to supply for such period No. 6 fuel oil at a price that matches Buyer's cost of such Alternative Fuel. (c) Whenever the cost of Alternative Fuel becomes higher than the cost of coal under this Agreement, and in the event Seller has not elected either option as provided in subsection (b), deficiencies in tonnage delivered shall be made up, subject to the next succeeding sentence, during the ensuing twenty-four (24) months by increasing the quantity of coal shipped by Seller above the quantity specified in Section 1.2 of this Agreement according to a shipment schedule mutually acceptable to Seller and Buyer. Buyer shall not purchase coal on the spot market or enter into contracts with new suppliers for additional contract coal unless it is willing to accept sufficient additional tonnage to make up such deficit tonnage during such period, provided that if Seller is not willing to ship additional tonnage requested by Buyer to satisfy such requirement, then the deficit tonnage shall be reduced by the tonnage requested but not shipped. Coal delivered in any calendar quarter shall be credited first against deliveries due to that quarter and then against any deficit tonnage. If during such twenty-four (24) month period, Buyer has not requested sufficient additional tonnage to make up such deficit tonnage, then, subject to the last sentence of this subsection (c), the then-current price of coal under this Agreement shall be increased by $2.00 per ton for each ton thereafter delivered under this Agreement until Buyer shall have accepted at such adjusted price up to an aggregate number of tons equal to the remaining deficit tonnage. Notwithstanding the foregoing, the price shall not be increased above an amount which would make the cost of coal higher than the cost of Alternative Fuel available to Buyer. (d) For purposes of this Section 1.5, the cost of oil, gas and coal shall each be determined in accordance with Schedule A attached to this Amendment. 3. Article III of the Agreement is deleted in its entirety and in substitution thereof a new Article III is added to read as follows: ARTICLE III Price and Price Adjustments 3.1 Unless and until it is adjusted solely in accordance with the provisions hereinafter set forth in this Article III, the price per ton F.O.B. cars at Seller's Mines for all coal sold hereunder shall be $32.00 effective as of July 1, 1994 (hereinafter referred to as the "initial price"), except as provided in Section 3.3(e) herein. After any such adjustments have been made, the price per ton f.o.b. cars at Seller's Mines shall be the initial price as so adjusted. The initial price includes all costs associated with compliance with all Federal, State, and local laws and regulations as of the effective date of this Amendment as they are now interpreted and enforced in Producing District 8, as defined in the Federal Bituminous Coal Act of 1937, as amended. 3.2 Seller shall give Buyer notice of any proposed adjustment hereunder of the initial price within thirty (30) days after Seller has determined the need for and extent of such adjustment, together with all documentation required to permit Buyer to substantiate the adjustment. 3.3 The initial price shall be subject to adjustment (without duplication) for changes in Seller's mining or other costs, as set forth below. Such adjustments shall be made using the methodology illustrated in Exhibit B. (a) Beginning January 1, 1995, the initial price shall be revised as of January 1, April 1, July 1, and October 1 of each year to reflect changes to the nearest mil per ton of coal arising out of changes occurring during the immediately preceding quarter in the following costs as they apply to coal sold by Seller. (1) Labor Costs (A) The amount included in the initial price as the cost for labor on January 1, 1995, is $9.60 per ton of coal. (B) Effective as of January 1, April 1, July 1, and October 1 of each year, Seller shall determine the percentage increase or decrease in the Average Hourly Earnings-Bituminous Coal & Lignite Mining Index (as first published by the United States Department of Labor, Bureau of Labor Statistics in the Employment and Earnings publication). The decimal equivalent of such percentage of increase or decrease shall be multiplied by $9.60, and the resultant amount shall be added to or subtracted from, as the case may be, the initial price (as adjusted pursuant to all other provisions of this Agreement) in substitution for and in lieu of all previous adjustments pursuant to this Subsection (1). The first-published (i.e. October published during December, January published during March, April published during June, and July published during September) index for the third month (i.e., October, January, April, and July) immediately preceding the month in which the adjustment date occurs shall be used to make such determination. The base index for adjustments hereunder shall be that for July, l994. (2) Capital Equipment (A) The amount included in the initial price as the cost for depreciation of capital equipment on January 1, 1995, is $6.40. (B) Effective as of January 1, April 1, July 1, and October 1 of each year, Seller shall determine the percentage increase or decrease in the Implicit Price Deflator of the United States Gross Domestic Product (as first published by the United States Department of Labor, Bureau of Labor Statistics, in the Economic Indicator publication) after January 1, 1995. The decimal equivalent of such percentage of increase or decrease shall be multiplied by $6.40, and the resultant amount shall be added to or subtracted from, as the case may be, the initial price (as adjusted pursuant to all other provisions of this Agreement) in substitution for and in lieu of all previous adjustments pursuant to this Subsection (2). The quarterly index for the calendar quarter two quarters prior to the quarter in which the adjustment date occurs and first published during the second month (i.e., November, February, May, and August) immediately preceding the month in which the adjustment date occurs shall be used to make such determination. The base index for adjustments hereunder shall be that for the second quarter l994 as published in the August Economic Indicator. E.g., effective January l, l995, the third quarter l994 index published in November, l994, shall be compared with the second quarter l994 index published in August, l994. (3) Materials and Supplies (A) The amount included in the initial price as the cost for materials and supplies is $12.80 per ton of coal, which amount has been calculated by allocating such costs to the categories as set forth in the Composite Index below, which Composite Index is composed of indexes from the Producer Prices and Price Indexes (as first published by the United States Department of Labor, Bureau of Labor Statistics): BLS Code No. Index Weight * - Industrial Commodities 62.5% *1192-03 Drills and other Mining 12.5% Machinery *1192-5301 Mining Machinery Parts, 12.5% Excluding Drills **498l-l32 Industrial Power, 500 KW 12.5% Demand, Mid-Atlantic Weighted Index Total 100% * These shall be taken from Table 6 - Producer Price Indexes and percent change for commodity groupings and individual items in the Producer Price Index publication. ** These shall be taken from Table 5 - Producer Price Indexes for the net output of selected industries and their products in the Producer Price Index publication. (B) Effective as of January 1, April 1, July 1, and October 1 of each year, Seller shall determine the percentage increase or decrease in the Weighted Index Total from the level thereof computed for the month of January, l995, as set forth in the Composite Index in Subsection 3(A). The decimal equivalent of such percentage of increase or decrease shall be multiplied by $12.80, and the resultant amount shall be added to or subtracted from, as the case may be, the initial price (as adjusted pursuant to all other provisions of this Agreement) in substitution for and in lieu of all previous adjustments pursuant to this Subsection (3). The first-published indexes for the second month (i.e., November, February, May, and August) immediately preceding the month in which the adjustment date occurs shall be used to make such determination. The base index for adjustments hereunder shall be that for August, l994. (4) Fixed Costs Seller has determined that the other indirect costs of producing and selling coal hereunder is $3.20 per ton of coal, and this amount is included in the initial price. This amount shall remain fixed during the term of this Agreement unless the parties mutually agree otherwise. (5) Cost of Complying with New Federal, State or Local Regulations (A) In the event of the imposition on or after July 1, 1994 by Federal, State, or local legislation or regulations, of any new requirements or change in the interpretation and enforcement of existing requirements that affect the cost of production of coal at Seller's Mines or otherwise, the party proposing a change shall compute the change in cost per ton of coal produced resulting therefrom. Seller and Buyer shall agree to an adjustment in the initial price (as adjusted pursuant to all other provisions of this Agreement) to reasonably reflect such change in cost. Seller and Buyer may agree to a tentative change in the initial price, subject to retroactive adjustment, to be utilized until the parties agree on a reasonable final adjustment. (B) The party proposing a change shall submit detailed documentation in support of its request for any such adjustment, and, in the event Seller and Buyer are unable to agree within ninety (90) days of receipt by the other party of the proposing party's documentation as to the amount the price per ton should be increased or decreased, then the matter shall be submitted to a firm of mining engineers or independent certified public accountants mutually agreeable to the parties for final determination of the amount of the increase or decrease, if any, which shall be binding upon the parties. The cost of any such study by an outside consultant shall be shared equally by Buyer and Seller. (C) Without limiting the foregoing, the parties acknowledge that the initial price includes Seller's costs incurred prior to July 1, 1994, under the Coal Industry Health Benefit Act of 1992 ("the Act") and the 1950 and 1974 UMWA Pension Plans (collectively, "the Plans"). The initial price shall be adjusted pursuant to the provisions of this Subsection (5) for further governmental imposition relating to the Act and the Plans only to the extent arising on or after July 1, 1994. (b) Should any of the indexes specified in Section 3.3(a) be discontinued, the parties hereto mutually determine that any of the indexes have become inappropriate, or the basis of the calculations of such indexes be modified, appropriate indexes shall be substituted or adjustments made by mutual agreement of the parties hereto. (c) Seller agrees that the production and delivery of coal under this Agreement shall, at all times, be conducted efficiently and economically and in such manner that the costs thereof will be kept to a minimum consistent with good operating practices within the limits set by governmental regulations and proper mining and engineering techniques. (d) In the event that a change in any of the above- enumerated costs occurs which affects the price of coal under this Agreement, the Seller shall promptly furnish to Buyer computations showing the effects of such change on the price of coal under this Agreement. (e)(1) The initial price, as adjusted according to the provisions of Section 3.3(a), shall be subject to review by Buyer and Seller as of July 1, 1996, and every two (2) years thereafter (each such review date being hereinafter referred to as a "Review Date"). Sixty (60) days prior to each Review Date, Buyer and Seller shall begin negotiations in good faith to reach agreement on a new initial price effective as of the Review Date for the next succeeding two (2) year period. If Buyer and Seller are unable to reach agreement by the applicable Review Date, this Agreement shall automatically terminate one hundred twenty (120) days after the applicable Review Date unless Buyer and Seller agree otherwise in writing. During such one hundred twenty (120) day period, Seller shall deliver and Buyer shall accept the quantity of coal provided for in this Agreement at the initial price prevailing on the last day immediately preceding the Review Date in question, subject to adjustment as provided for in Subsection 3.3(a) of this Agreement. (2) Notwithstanding Section 3.3(e)(1), if Buyer is willing to accept a ten percent (10%) increase in the initial price as adjusted in accordance with Section 3.3(a) of this Agreement, or Seller is willing to accept a ten percent (10%) decrease in the initial price as adjusted, the initial price effective as of the applicable Review Date shall be increased by ten percent (10%) if acceptable to Buyer or decreased by ten percent (10%) if acceptable to Seller. If Buyer is limited to a ten percent (10%) price decrease by Seller on any Review Date, or if Seller is limited to a ten percent (10%) price increase by Buyer on any Review Date, then the party so limited shall not be limited in like manner on any subsequent Review Date for the remaining term of this Agreement. 4. ARTICLE V of the Agreement is deleted in its entirety and in substitution thereof a new Article V is added to read as follows: ARTICLE V Quality of Coal 5.1 The coal to be purchased and sold hereunder shall conform to the following: (a) Preparation and Top-Size Said coal shall be washed coal, free of extraneous materials, produced by surface or deep mining methods and meeting the specifications set forth in Section 5.1(b) of this Article V and having a maximum top-size of two inches. (b) Quality Specifications (1) The quality of the coal delivered hereunder "as received" at Buyer's Lovett Plant, determined by sampling and analysis made in conformity with the provisions of Article VIII, shall be as follows: REPRESENTATIVE COAL SPECIFICATIONS (AS RECEIVED BASIS) Moisture 7.0% Fixed Carbon 52.0% Volatile Matter 33.0% Ash 8.0% Hardgrove Grind 46 Ash Softening Temp. (Initial Defor.) 2700o F Ash Fluid Temp. 2700o F Sulfur (SO2) 1.0 lbs. SO2/mm Btu max. Btu/lb. 13,000 (2) The level of sulfur dioxide in the coal (lbs. SO2/mm Btu) shall be calculated based on a 2.5% credit that Buyer is allowed for sulfur dioxide capture in ash by Buyer's environmental regulations. The formula to be used for calculating SO2 in the coal is: Lbs. SO2/mm Btu = 19.5 x % Sulfur x 1000 Btu/lb 5.2 (a) Buyer's ability to use the coal being dependent on the coal meeting the specifications set forth in Section 5.1 above, it is agreed that Buyer shall have the right to reject any and all shipments which, based on the procedures defined in Article VIII, fail to meet any of the individual shipment rejection limits shown below: Individual Shipment Rejection Limits (As Received) Volatile Matter 30.0% min. AST (Initial Deformation in reducing atmosphere 2500o min. Sulfur (SO2) 1.0 lbs. SO2/mmBtu max. Moisture 8% max. Btu/lb 12,800 min. Hardgrove Grind See below Moisture Above 7% 7% and below (maximum 8%) or and Heat Content Below 13,000 Btu/lb. 13,000 Btu/lb. (minimum 12,800 Btu/lb) and Above then then HGI 46 or Above 45 Minimum* * This limit is subject to the exception that one shipment during any 90-day period can have an HGI of 44 or above. The moisture associated with this shipment must be 7% or lower and the Btu content 13,000 Btu/lb. or higher. If a shipment having a 44 HGI is delivered, another shipment of 44 HGI may not be delivered for another 90 days. Seller shall pay all freight, diversion, demurrage, testing and other expenses in connection with any such rejected shipment, or shipment found by Seller to be non-conforming unless such shipment is accepted by Buyer. Furthermore, Seller certifies that it will not make any shipment shown by sampling to exceed the maximum allowable SO2 levels. (b) In addition to the limits for individual shipments shown above, the delivered coal must meet the following specifications over each thirty (30) and ninety (90) day period: 30-Day Suspension Limits (As Received): Ash 10% max. Volatile 30% min. AST 2500o min. 90-Day Suspension Limits (As Received): Moisture 7.0% max. Btu/lb. 12,800 min. HGI In accordance with following formula: Btu/lb. x HGI Index > OR = 600 1000 If the coal delivered hereunder, as determined by sampling and analysis made in conformity with Article VIII, does not meet the thirty (30) day limits on specifications on an average for a thirty (30) day period, or does not meet the ninety (90) day limits on specifications on average for a ninety (90) day period, Buyer shall thereupon have the right to suspend delivery under this Agreement until Seller furnishes reasonable assurance to Buyer in writing that the deviation from the specifications can and will be corrected. If Seller fails to promptly furnish reasonable assurance that such correction can and will be made within sixty (60) days after Buyer's suspension of deliveries (or within such longer period as shall be reasonably requested by Seller and agreed to by Buyer), or if corrections are not made within such sixty (60) day period (or such longer period agreed to by Buyer), Buyer shall have the right at any time thereafter to terminate this Agreement by giving written notice of such termination to Seller, and thereupon Buyer shall stand discharged of any and all further obligations or liability under the terms of this Agreement or as a result of such termination without waiver of any rights that Buyer may have under this Agreement. If Buyer, after having suspended shipments for a period of one hundred eighty (180) days, has not elected to terminate this Agreement, then Seller shall have the option of terminating this Agreement by giving written notice of such termination within sixty (60) days after the expiration of such 180-day period. Nothing in this Section 5.2(b) shall be construed to relieve Seller of its obligation to conduct its mining and coal cleaning operations in a competent manner, consistent with good coal industry practices, so as to produce a product which will meet the specifications set forth in Section 5.1 above. The thirty (30) day and ninety (90) day suspension limits shall be calculated by the Buyer on a weighted average. In addition, the ninety (90) day weighted averages shall be computed on a rolling tri-monthly basis. For example, the ninety (90) day weighted average for the month of May shall consist of the deliveries during the months of March, April, and May. In a similar fashion, the ninety (90) day weighted average for the month of June shall consist of the deliveries actually completed at Buyer's plant during the months of April, May and June. Exhibit C sets forth illustrations of how the weighted suspension limits shall be calculated hereunder. 5.3 Seller shall apply material of quality, in a quantity, and by method acceptable to Buyer, without delaying loading, to inhibit the freezing of coal in railroad cars during periods of cold weather, or for other purposes deemed necessary by Buyer. Buyer shall provide Seller reasonable advance notice of the dates for commencement and termination of such application(s) during each Contract Year. Only the cost of the freeze-inhibiting materials shall be for Buyer's account. Such costs shall be accounted for separately by Seller. Seller shall also invoice Buyer separately for the costs of these materials. 5. Article VI of the Agreement is deleted in its entirety and in substitution thereof a new Article VI is added to read as follows: ARTICLE VI Alternate Source Seller shall, at its sole option, have the right, but not the obligation, to supply all or a portion of the coal required under Article I hereof from other mines, provided that shipments from such mines shall (a) enable Seller to meet the quality specifications of this Agreement and in particular the environmental regulations of the Clean Air Act Amendments of 1990 (See Supplemental Agreement, dated July 1, 1994), (b) meet all the other requirements of this Agreement, (c) not result in higher cents/mm Btu delivered cost to Buyer of coal to be delivered to Buyer under this Agreement, (d) pass a burn test at the Lovett Plant to Buyer's satisfaction, and (e) not adversely affect Buyer's ability to meet tonnage requirements under its then-effective coal transportation agreements so as to increase the delivered price per ton of coal under such agreements or otherwise result in Buyer incurring penalties or other additional charges under such agreements. 6. Article VIII of the Agreement is deleted in its entirety and in substitution thereof a new Article VIII is added to read as follows: ARTICLE VIII Sampling and Analysis of Coal 8.1 Each shipment of coal shall be sampled by Seller. Seller shall determine, by proper analyses made in its laboratory and at its expense, the quality and characteristics of the coal. The sampling and analyses shall be performed in accordance with methods approved by the American Society for Testing and Materials (ASTM) and Buyer and Seller shall agree on alternates within the ASTM standards or on other methods. Buyer shall have the right to have a representative present at any and all times to observe the sampling and take check samples at the mine, and Buyer may also analyze the coal either from its own samples or from samples taken by Seller. Seller shall retain for a period of sixty (60) days a portion of each coal sample ("Referee Sample") taken so that Buyer or a commercial laboratory may analyze such samples. 8.2 The results of the sampling and analyses by Seller shall be accepted as the quality and characteristics of the coal delivered hereunder, provided, however, that if either Buyer or Seller questions the correctness of Seller's analysis, then Buyer or Seller shall have the right to have the Referee Sample analyzed by an independent testing laboratory selected by Buyer from an agreed-to list of such laboratories, not including a laboratory used by either party on the original sample. Said laboratory shall use methods approved by ASTM or such other procedures as may be accepted in writing by Buyer and Seller. The parameters for determining the acceptability of an analysis and use of the Referee Sample shall be in accordance with ASTM reproducibility standards, except for Btu and HGI specifications. The results of duplicate determinations carried out by different laboratories on representative samples taken from the same bulk sample after the last stage of reduction will be considered suspect if any of the analytical determinations differ by more than the reproducibility standards set by ASTM, except for Btu specifications where if the "as received" Btu differs more than 100 Btu's, the Referee sample shall be sent out. If the analysis obtained by the independent laboratory selected by Buyer meets the ASTM reproducibility standards and/or the "as received" Btu is within 100 Btu's, then Seller's original analysis shall be binding on the parties with regard to both coal quality and rejection and suspension limits. However, in the event that the analysis obtained by the independent laboratory selected by the parties does not meet the ASTM reproducibility standards and/or the "as received" Btu differs by more than 100 Btu's, then the analysis obtained by said independent laboratory shall be binding on the parties with regard to both coal quality and rejection and suspension limits. If the correctness of the grind (HGI) is questioned, the save split of the sample shall be divided three (3) ways and tested by three (3) independent laboratories to be selected from a previously established list of mutually acceptable laboratories. The average of the results shall govern. The results of such sampling and analyses shall be accepted as the quality and characteristics of the coal delivered hereunder in the period during which the sampling and analyses is thus performed by the commercial testing laboratory. No variations in the minimum standards for Hardgrove Grind are permitted due to error tolerances assumed by testing laboratories. However, if the standards used by ASTM for evaluating Hardgrove Grind are changed, the parties agree that the minimum specifications herein set forth shall be adjusted to maintain a comparable minimum specification using the new ASTM standards. The cost of the analysis made by the independent testing laboratory shall be borne by the Buyer if Seller's analysis is confirmed to meet ASTM reproducibility standards and/or the "as received" Btu is within 100 Btu's and by the Seller if it is not. 7. Article IX of the Agreement is deleted in its entirety and in substitution a new Article IX is added to read as follows: ARTICLE IX Compensation for Variations in Heating and Ash Values 9.1 Compensation for variations in heating value for coal purchased and sold hereunder shall be determined in accordance with the following: (a) The F.O.B. Seller's Mines price provided for in Article III ("Price and Price Adjustment") is based on coal with a heating value as shown in the quality specifications of Article V ("Quality of Coal"), namely 13,000 as received Btu per pound. In accordance with Article VIII ("Sampling and Analysis of Coal"), the average as received Btu per pound of coal shipped hereunder during each calendar quarter during the term of this Agreement shall be calculated. Compensation to either Buyer or Seller, as the case may be, for variation in the weighted average heating value of the coal delivered during each calendar quarter shall be determined as follows: (1) If the weighted average "as received Btu" for any calendar quarter is greater than 13,050 Btu per pound, the additional compensation to Seller shall be computed in accordance with the following formula: C = P x T x B - 1 S 13,000 (2) If the weighted average "as received Btu" for any calendar quarter is less than 12,950 Btu per pound, the compensation to Buyer shall be computed in accordance with the following formula: C = P x T x 1 - B B 13,000 (b) In the above formula: C = Total compensation to Seller. S C = Total compensation to Buyer. B P = The F.O.B. Seller's Mine price per ton including all adjustments provided in this Agreement for the applicable calendar quarter. B = The weighted average "as received Btu" for the applicable calendar quarter. T = The total tonnage shipped during the applicable calendar quarter. 9.2 Within thirty (30) days after the end of each calendar quarter, Seller shall calculate the three-month average "as received Btu" (subject to Buyer's verification) and the compensation to Seller or Buyer, as the case may be, in accordance with Section 9.1 and shall forward the calculation to Buyer. Seller shall issue an invoice for payment by Buyer if the compensation is to Seller or shall issue a credit memorandum (or cash payments with respect to the final quarter of this Agreement) to Buyer if the compensation is to Buyer. 9.3 The initial price is based upon Seller supplying coal with an ash content ("Ash Value") of eight percent (8%) by weight of the "as received" analysis for the coal in each shipment. The Ash Value of the coal sold hereunder may vary, and the initial price shall be adjusted in proportion to such variance as follows: For coal having an Ash Value greater than eight percent (8%), the price shall be reduced at a rate of $.30 per ton per one percent (1%) in excess of eight percent (8%). For coal having an Ash Value less than eight percent (8%), the price shall be increased at a rate of $.30 per ton per one percent (1%) below eight percent (8%). 9.4 Within thirty (30) days after the end of each calendar quarter, Seller shall calculate the three-month average Ash Value (subject to Buyer's verification) and the compensation to Seller or Buyer, as the case may be, in accordance with Section 9.3 and shall forward the calculation to Buyer. Seller shall issue an invoice for payment by Buyer if the compensation is to Seller or shall issue a credit memorandum (or cash payments with respect to the final quarter of this Agreement) to Buyer if the compensation is to Buyer. 8. Article XXV of the Agreement is deleted in its entirety and in substitution thereof a new Article XXV is added to read as follows: ARTICLE XXV Disputes If a dispute arises between the parties relating to this Agreement, the parties agree to use the following procedures prior to either party pursuing other available remedies. 25.1 (a) A meeting shall be held promptly between the parties, attended by individuals with decision-making authority regarding the dispute, to attempt in good faith to negotiate a resolution of the dispute. (b) If within thirty (30) days after such meeting, the parties have not succeeded in negotiating a resolution to the dispute, they agree to submit the dispute to mediation in accordance with the Commercial Mediation Rules of the American Arbitration Association. The parties shall bear equally the cost of the mediation. (c) The parties will jointly appoint a mutually acceptable Mediator, seeking assistance in such regard from the American Arbitration Association if they have been unable to agree upon such appointment within twenty (20) days from the conclusion of the negotiation period. (d) The parties agree to participate in good faith in the mediation of negotiations related thereto for a period of thirty (30) days. If the parties are not successful in resolving the dispute through mediation, then the parties MAY AGREE (i) to submit the matter to binding arbitration in accordance with the American Arbitration Association Rules or to a private adjudicator, or (ii) the parties may mutually agree to use any other alternative dispute resolution method, or (iii) any party may seek an adjudicated resolution through the appropriate court. 25.2 (a) During the term of this Agreement, if a dispute among the parties arises and such dispute cannot be resolved as provided for above, the parties may agree in writing that the dispute shall be submitted to binding or non-binding arbitration. If so submitted, except as provided for herein, the arbitration shall be held pursuant to the Commercial Rules or Arbitration of the American Arbitration Association. (b) For arbitration, the parties may agree upon a sole arbitrator, or if a sole arbitrator cannot be agreed upon, a panel of three arbitrators shall be named. One arbitrator shall be selected by the Buyer, and one shall be selected by the Seller. The other arbitrator shall be selected by the two arbitrators so appointed by the parties. If the arbitrators previously appointed by the Buyer and Seller cannot agree upon the third arbitrator within thirty (30) calendar days, then the parties may apply to the presiding judge in any court having jurisdiction in the matter for appointment of the third arbitrator. Each party shall select its own arbitrator within thirty (30) days of the date that the parties agree to arbitration hereunder. (c) The arbitrator(s) shall have no power to modify any of the provisions of this Agreement, and their jurisdiction is limited accordingly. The decision of the arbitrator(s) shall be rendered within one-hundred and eighty (180) days after the date of the selection of the arbitrator(s) or within such period as the parties may otherwise agree. (d) Each party shall be responsible for the expenses incurred by the arbitrator appointed by such party, and the expenses, fees and costs of the third arbitrator shall be borne equally by the parties. In the event that a single arbitrator is selected, the expenses of that arbitrator will be borne equally by the parties. (e) It is the intent of the parties that arbitrator(s), pursuant to arbitration proceedings described herein, will be precluded from awarding punitive and/or exemplary damages against any party to this Agreement. 9. Except as amended hereby, and as previously amended, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers as of the date first written above. ORANGE & ROCKLAND UTILITIES, INC. (BUYER) By Frank E. Fischer Title Vice President MASSEY COAL SALES COMPANY, INC. (SELLER) By Thomas A. McQuade Title Senior Vice President RAWL SALES & PROCESSING COMPANY, INC. By James S. Twigg Title Treasurer GUARANTY A. T. Massey Coal Company, its successors and/or permitted assigns, for sufficient and adequate consideration the receipt of which is hereby acknowledged, unconditionally and irrevocably guarantees and binds itself as surety to Buyer, Orange and Rockland Utilities, Inc., its successors and/or assigns, full and timely performance of Seller as that term is defined by the Seventh Amendment to Coal Purchase and Sales Agreement, effective July 1, 1994, incorporated herein by reference and made a part hereof, and assumes all obligations and liabilities of Seller under the terms of such Coal Purchase and Sales Agreement to the extent Seller fails to perform same. The undersigned stipulates that he is an officer of A. T. Massey Coal Company, Inc. and is authorized to execute same on its behalf. A. T. MASSEY COAL COMPANY, INC. By Wynston D. Holbrook Attest: Title Executive Vice President Thomas A. McQuade Date _____8/17/94_________________ ORANGE AND ROCKLAND UTILITIES, INC. By Frank E. Fischer Attest: Title Vice President Debra A. Bogin Date __9/29/94___________ SCHEDULE A COMPUTATION OF INTERIM COAL PRICE REDUCTION 1. All pricing, coal, oil and natural gas, will be on a fuel clause basis. 2. The price for oil or natural gas ("Alternative Fuels") for any month shall be the weighted average monthly fuel replacement cost of each fuel as reported to the New York Power Pool (cents per MMBtu) for that month. This price shall be used as the basis for calculating the per ton interim coal price adjustment ("ICPA") for the tons of coal purchased from Seller during the month. The weighted average monthly fuel replacement cost for each fuel shall be the sum of the price on each day divided by the number of days in the month. In no event shall the weighted average price of each fuel be adjusted to reflect the quantity purchased at a given price. 3. The BTU content of each fuel unit (Seller's coal, BTU per pound; oil, BTU per gallon; natural gas, BTU Per thousand cubic feet) for each month shall be the actual average monthly BTU content of each fuel unit as computed by Buyer from its purchase records for the prior month. 4. The full load heat rate (BTU/KWHR) for each month of oil, natural gas and Seller's coal shall be the most current rate as computed by Buyer and reported in its Plant Operating Report. 5. Cost per million BTU expressed in cents shall be computed for oil, natural gas and Seller's coal on a fuel clause basis using the weighted average monthly fuel replacement cost of each Alternative Fuel for the month and utilizing the following formulas: Coal: Fuel Clause Price Per Ton x 106 = Cost per MM/BTU BTU per pound x 2,000 Oil: Fuel Clause Price Per Barrel x 106 = Cost per MM/BTU BTU per gallon x 42 Natural Gas: Fuel Clause Price Per McF x 106 = Cost per MM/BTU BTU per McF 6. Cost per megawatt-hour for oil, natural gas, and Seller's coal expressed in dollars per megawatt-hour shall be computed utilizing the following formula: Cost per megawatt-hour = Cost per MM/BTU x Heat Rate 1,000 7. Cost per megawatt-hour for oil, natural gas, and Seller's coal shall be compared and if the cost for coal exceeds the cost for oil or natural gas the ICPA for the month shall be computed utilizing the following formula. (Coal Cost Per Megawatt-hour - Alternative Fuel Cost Per Megawatt-hour) x (BTU per pound x 2,000) = Coal Heat Rate x 1,000 Interim Coal Price Reduction Per Ton EXHIBIT A Seller's Mines Mingo County, West Virginia Properties Page 1 of 2 EXHIBIT B Base Price Adjustment Orange And Rockland/Massey Coal Sales January 1, 1995 * 1. Labor Cost Average Hourly Earnings - (Base) July 1994 18.20 Bituminous Coal & Lignite Mining (SIC 122) October 1994 18.25 Increase 0.27% Base Labor Cost 9.60 Increase ($9.60 x 0.27%) 0.03 Adjusted Labor Cost 9.63 2. Capital Equipment Cost Implicit Price Deflator - (Base) 2nd Quarter 1994 121.70 Gross Domestic Product (August Publication) 3rd Quarter 1994 122.50 (November Publication) Increase 0.65% Base Capital Equipment Cost 6.40 Increase ($6.40 x 0.65%) 0.04 Adjusted Capital Equipment Cost 6.44 3. Materials And Supplies BLS Nov. 1994 Weighted Code No. Index Weight Index Index Industrial Commodi 62.5% 118.3 73.94 1192-03 Drills & Other Min 12.5% 128.9 16.11 Machinery 1192-5301 Mining Machinery P 12.5% 117.8 14.73 Excluding Drills 4981-132 Industrial Power, 12.5% 103.5 12.94 Demand, Mid-Atlantic 117.72 Base Index - August, 1994 117.30 Weighted Index - November, 1994 117.72 Increase 0.36% Base Materials And Supplies Cost 12.80 Increase ($12.80 x 0.36%) 0.05 Adjusted Materials And Supplies Cost 12.85 4. Fixed Cost Base Fixed Cost 3.20 * indices shown are not actuals, used for illustration purposes only Page 2 of 2 Cost Components January 1, 1995 Base Adjusted Cost Adjustments Price 1. Labor Costs $9.60 $0.03 $9.63 2. Capital Equipment 6.40 0.04 6.44 3. Material And Supplies 12.80 0.05 12.85 4. Fixed Cost 3.20 0 3.20 Total $32.00 $0.12 $32.12 * indices shown are not actuals, used for illustration purposes only EXHIBIT C a) Illustration of 30 Day Weighted Average Calculation 30 Day Weighted Averages January 1994
Coal Train Arrival Ash Soft Ash Soft Vendor Number Mine Date Tonnage Ash Ash % Volatile Volatiles % Temperature Temperature % Massey UOR-2 Rawl 1/02/94 9325.45 6.52 60,801.93 33.63 313,614.88 2800 26,111,260.00 UOR-4 Rawl 1/08/94 9252.95 6.81 63,012.59 32.96 304,977.23 2800 25,908,260.00 UOR-6 Rawl 1/12/94 9119.05 6.43 58,635.49 33.42 304,758.65 2800 25,533,340.00 UOR-8 Rawl 1/25/94 8983.15 6.21 55,785.36 31.96 287,101.47 2800 25,152,820.00 Total 36,680.60 238,235.38 1,210,452.24 102,705,680.00
Total Weighted Average Tonnage 36,680.60 Ash 238,235.38 6.49 Volatiles 1,210,452.24 33.00 Ash Soft Temp. 102,705,680.00 2,800.00 *Figures shown are not actuals; used for illustration purposes only. b)Illustration Of 90 Day Weighted Average Calculation 90 Day Weighted Averages January 1994- March 1994
Coal Train Arrival Vendor Number Mine Date Tonnage Grind Grind % BTU BTU % Moisture Massey UOR-2 Rawl 1/02/94 9325.45 46 428,970.70 13,002 121,249,500.90 6.85 UOR-4 Rawl 1/08/94 9252.95 46 425,635.70 13,205 122,185,204.75 6.39 UOR-6 Rawl 1/12/94 9119.05 47 428,595.35 13,265 120,964,198.25 6.70 UOR-8 Rawl 1/25/94 8983.15 45 404,241.75 13,150 118,128,422.50 6.44 UOR-10 Rawl 2/06/94 9120.25 46 419,531.50 13,158 120,004,249.50 6.38 UOR-12 Rawl 2/11/94 9337.65 48 448,207.20 13,126 122,565,993.90 6.30 UOR-14 Rawl 2/16/94 9102.65 48 436,927.20 13,201 120,164,082.65 6.40 UOR-16 Rawl 2/22/94 8903.9 46 409,579.40 13,148 117,068,477.20 6.49 UOR-18 Rawl 3/02/94 9103.65 47 427,871.55 13,267 120,778,124.55 6.51 UOR-20 Rawl 3/12/94 9037.65 47 424,769.55 13,209 119,378,318.85 6.89 UOR-22 Rawl 3/20/94 9138.15 46 420,354.90 13,231 120,906,862.65 6.52 UOR-24 Rawl 3/30/94 9015.75 48 432,756.00 13,109 118,187,466.75 6.56 Total 109,440.25 5,107,440.80 1,441,580,902.45
Total Weighted Average Tonnage 109,440.25 Grindability 5,107,440.80 46.67 BTU 1,441,580,902.45 13,172.31 Moisture 715,270.69 6.54 Grind Matrix 614.74 * Figures shown are not actuals; used for illustration purposes only. [MAP ATTACHED HERETO] SUPPLEMENTAL AGREEMENT This Supplemental Agreement is made and entered into as of July 1, 1994, between Orange and Rockland Utilities, Inc. ("O&R") a New York corporation, and Massey Coal Sales Company, Inc. ("Massey"), a Virginia corporation. In anticipation of 1995 Clean Air Act requirements, specifically the NOx emission limits, O&R and Massey have amended their existing Coal Purchase and Sales Agreement, consisting of the original contract (dated March 9, 1984) and six subsequent amendments (dated July 30, 1986, July 1986, September 1986, January 1987, January 1990, and July 1, 1991) (the "Agreement"). Because of the forthcoming implementation of certain provisions of the Clean Air Act, the Seventh Amendment (dated July 1, 1994) provides for a higher quality coal then previously required under the Sixth Amendment. Specifically, the grind of the coal must be increased from 43 to 46 in order to ensure compliance with the 1995 requirements. O&R will be installing low NOx burners on Lovett Unit #4 in November 1994 and on Lovett Unit #5 in March 1995 in order to meet the NOx emission limits. The design of these low NOx burners is based on the knowledge that the Units will be burning a soft coal product, specifically a grind of generally at least 46. In the interest of purchasing the lowest cost fuel on behalf of its ratepayers, O&R will continue to accept the lower grind coal product from Massey's affiliate Sidney Coal Company up until the time the NOx emission limits go into effect on May 15, 1995. The price for this coal will be $30.25 per ton F.O.B. mine, effective July 1, 1994. All other provisions of the Agreement will be in effect, except the BTU deadband and ash penalty/premium. These items will become effective when the switch to Rawl Sales & Processing Company, another Massey affiliate, is made. O&R will provide Massey two (2) months' advanced notice of its decision to switch to the higher grind product from Rawl Sales & Processing Company, Inc. O&R must allow itself adequate time to change out the coal pile from the low grind product to the high grind product. ORANGE AND ROCKLAND UTILITIES, MASSEY COAL SALES COMPANY, INC. INC. By Frank E. Fischer By Thomas A. McQuade Title Vice President Title Senior Vice President EX-10.20 5 ORANGE AND ROCKLAND UTILITIES, INC. POST-DIRECTOR SERVICE RETAINER CONTINUATION PROGRAM Effective: April 8, 1987 Amended as of: April 12, 1989 June 1, 1989 April 5, 1990 April 14, 1993 March 2, 1995 ORANGE AND ROCKLAND UTILITIES, INC. POST-DIRECTOR SERVICE RETAINER CONTINUATION PROGRAM In recognition of the added value of the continued service of directors who are experienced with the operations Orange and Rockland Utilities, Inc. (the "Company") because of their length of service on the Board and to provide a benefit for such experience so as to encourage directors to continue to serve, the following Company Post-Director Service Retainer Continuation Program is hereby created: 1. Eligibility. Any director who is not otherwise covered by any retirement plan or program sponsored by the Company and who has served as a member of the Company's Board of Directors for a period of at least five continuous years shall be an "Eligible Director." 2. Retainer Continuation. Upon ceasing to be a member of the Board of Directors, an Eligible Director shall be entitled to the continuation of one hundred percent (100%) of the annual Board and Committee service retainers as in effect and being paid to such Eligible Director at the time the Eligible Director ceased to be a member of the Board of Directors, subject to the limitations contained in Paragraph 3 below. 3. Time and Manner of Payment. The retainer continuation payments shall commence (i) if the Eligible Director is living, as of the first day of the calendar month next following the later of the Eligible Director's attaining age 65 or ceasing to be a member of the Board of Directors or (ii) in the case of the death of an Eligible Director prior to commencement of payments, as of the first day of the calendar month next following the later of the 65th anniversary of the Eligible Director's birth or the Eligible Director's date of death; provided, however, if the Eligible Director has already received an installment of the annual retainer for a period extending beyond when the retainer continuation payments would otherwise begin as provided herein, the retainer continuation payments will not commence until the expiration of the period for which the retainer has been paid. The retainer continuation payments shall be made in nearly equal monthly installments equal to one-twelfth (l/12th) the annual retainer specified in Paragraph 2 above. Such payments shall be made as of the first day of each month and shall continue for a period equal to the Eligible Director's full years of service on the Board of Directors. In the event an Eligible Director dies, either while serving on the Board or after retiring from the Board, and where payments remain to be made, the remaining payments shall be made to the beneficiary last designated by the Eligible Director in writing to the Retirement Committee, or if none, to the Eligible Director's estate. In the event of the death of a beneficiary to whom payments are due, the remaining payments shall be made to such beneficiary's estate. In the event payments are to be made to a beneficiary or to the estate of an Eligible Director or a beneficiary, the Retirement Committee, at its sole discretion and at any time, may provide for the lump-sum payment of the present value of the remaining payments, such present value to be determined by using a discount factor equal to the interest rate assumption used to calculate the Company's contribution under the Employees' Retirement Plan of Orange and Rockland Utilities, Inc. Beginning as of July 1 of the year for which the cumulative percentage change in the CPI-U (as defined below) exceeds 20%, but not earlier than July 1, 1993, and as of each July 1 thereafter, the retainer continuation payments then being paid to or with respect to an Eligible Director shall be increased by an adjustment amount, not less than zero, determined by multiplying the original retainer continuation payment amount, by a percentage (rounded to the nearest 1/100 of 1%) equal to 75% of the cumulative percentage change in the CPI-U for the year in excess of 20%, but not more than the applicable cumulative maximum percentage (as each is defined below). The terms specified below which are used above shall have the following meanings unless the context clearly dictates another meaning: (x) "CPI-U" means the annual average figure under the Consumer Price Index for All Urban Consumers, U.S. City Average of All Items (1982-1984=100), or its successor, as published by the United States Bureau of Labor Statistics. (y) "cumulative percentage change in the CPI-U" for a year is calculated by dividing the difference between the CPI-U for the prior year and the CPI-U for the year prior to the year in which the retainer continuation payment originally commenced by the CPI-U for the year prior to the year in which the retainer continuation payment originally commenced, and rounding to the nearest 1/100 of 1% (e.g., for purposes of determining the cumulative percentage change in the CPI-U for 1993 for an Eligible Director whose retainer continuation payment commenced in 1990, subtract the CPI-U for 1989 from CPI-U for 1992, then divide the result by the CPI-U for 1989 and round to the nearest 1/100 of 1%). Notwithstanding any provisions herein to the contrary, in all cases when the retainer continuation payment commenced before January 1, 1989, the cumulative percentage change in the CPI-U for a year shall be calculated by dividing the difference between the CPI-U for the prior year and the CPI-U for 1991 by the CPI-U for 1991, rounding to the nearest 1/100 of 1%, and adding 20%. (z) "cumulative maximum percentage" is 3% for the first year in which an adjustment is first made hereunder and for each succeeding year is 3% plus 103% of the prior year's cumulative maximum percentage, rounded to the nearest 1/100 of 1% (e.g., 3% for the first year adjustment, 6.09% for the second year, 9.27% for the third year and so on). 4. Nature of Payment. The retainer continuation payments are purely personal to the Eligible Director and may not be assigned, alienated, anticipated or encumbered. Any attempt to assign, alienate, anticipate or encumber the payments shall result in the Eligible Director's forfeiture of all rights to any retainer continuation payments hereunder. 5. Source of Payments. All payments of awards provided for under the Program shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the director or his or her dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the director shall have no right, title, or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Program and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind between the Company and any persons. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. 6. Administration. This Program shall be administered by the Retirement Committee of the Company which shall have the full power and authority to construe, interpret and administer the Program. All decisions, actions or interpretations of the Retirement Committee shall be final, conclusive and binding on all parties. 7. Amendment. The Board of Directors reserves the right to amend the Program in whole or in part at any time without the specific consent of any Eligible Director; provided, however, that no such amendment shall adversely affect retainer continuation payments then being made or the rights of any then Eligible Directors or to receive retainer continuation payments earned prior to the amendment, calculated on the basis of such Eligible Director's continuous service as a director at the time of the amendment and the annual retainer than in effect. 8. Termination. The Board of Directors reserves the right to terminate the Program at any time. Termination of the Program shall not affect the retainer continuation payments then being made. Such payments shall be continued in accordance with the terms hereof. In addition, termination of the Program shall not affect the right of any Eligible Director as of the date of termination to receive retainer continuation payments which shall be calculated on the basis of the continuous service of the Eligible Director as of the time of termination of the Program and the annual retainer then in effect. Such retainer continuation payments shall commence and be paid in accordance with the otherwise applicable provisions of the Program (Paragraph 3). 9. Change in Control. Notwithstanding anything else herein to the contrary, in the event of the occurrence of a Change in Control, if any, each Eligible Director shall have the right to receive and shall be paid, as soon as practicable after such occurrence becomes reasonably certain, a lump sum cash amount equal to the present value of the retainer continuation payments that would otherwise have been paid pursuant to Paragraph 3, on the assumption that, (a) payments (including any payments already made) would be made for a period equal to the lesser of the Eligible Director's full years of service on the Board of Directors or 10 years, and (b) that, with respect to Eligible Directors who were not yet receiving retainer continuation payments, such payments would commence on the later of the Eligible Directors's attaining age 65 or the date of the Change in Control. Such present value shall be determined by using a discount factor equal to the interest rate assumption used to calculate the Company's contributions under the Employees' Retirement Plan of Orange and Rockland Utilities, Inc. as of the date of the Change in Control. As used in the Plan, "Change in Control" shall mean the happening of any of the following: (a) receipt by the Company of a report on Schedule 13D filed with the Securities and Exchange Commission pursuant to the Section 13(d) of the Securities Exchange Act of 1934 (the "1934 Act") disclosing that any person, group, corporation or other entity is the beneficial owner, directly or indirectly, of 20 percent or more of the outstanding stock of the Company; (b) purchase by any person (as defined in Section 13(d) of the 1934 Act), corporation or other entity, other than the Company or a wholly-owned subsidiary of the Company, of shares pursuant to a tender or exchange offer to acquire any stock of the Company (or securities convertible into stock) for cash, securities or any other consideration, provided that, after consummation of the offer, such person, group, corporation or other entity is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20 percent or more of the outstanding stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock); (c) approval by the stockholders of the Company of any (i) consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of stock of the Company would be converted into cash, securities or other property, other than a consolidation or merger of the Company in which holders of its common stock immediately prior to the consolidation or merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger as immediately before, or (ii) sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (d) a change in the majority of the members of the Board of Directors within a 12-month period unless the election or nomination for election by the Company's stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12-month period. 10. Effective Date. This Program shall be effective on April 8, 1987. f:\orlaw\bod\postdirp.bod EX-10.28 6 SEPARATION AGREEMENT WITH GENERAL RELEASE AND COVENANT NOT TO SUE Victor J. Blanchet, Jr. ("Employee") and Orange and Rockland Utilities, Inc. ("Employer") hereby knowingly and voluntarily agree to enter into this Separation Agreement with General Release and Covenant Not to Sue ("Agreement") in order to resolve any and all claims between them pertaining to outstanding issues and to set forth all obligations between the parties. Employee and Employer acknowledge and agree that this Agreement constitutes the sole obligation of each to the other and that no other promises, commitments or representations have been made with or by each of the parties to the other. First: In accordance with Employee's resignation letter attached as Exhibit A, Employee's active employment with the Employer (and its subsidiaries and affiliates) will cease effective March 1, 1995. At that time, Employer agrees to place Employee on a paid leave of absence commencing March 1, 1995 and ending August 31, 1996 ("Leave of Absence") as of which time the Employee hereby voluntarily retires. During the Leave of Absence, Employer agrees to pay Employee $25,000 per month, less applicable payroll withholdings and deductions ("Separation Amount") in accordance with its regular payroll procedures. However, the parties acknowledge that should Employee obtain full-time employment during the Leave of Absence, the Separation Amount shall be reduced by the monies Employee receives. Employee acknowledges and warrants that he will furnish to Employer the name of any subsequent full-time employers and the amount of monies received therefrom during the Leave of Absence. (Confidential material has been omitted and filed separately with the Securities and Exchange Commission) Employee agrees that during the Leave of Absence, he will not seek active employment with the Employer and that at the expiration of the Leave of Absence, he will no longer be an employee of, nor will he seek employment with, the Employer. Second: During the Leave of Absence, Employee shall be eligible for continued coverage under Employer's health plan benefits (comprehensive major medical, prescription drugs, vision care, dental, flexible reimbursement account plan), social security, management employees' savings plan (401(k) plan), life insurance, spouse life insurance, at Employee's cost, employees' retirement plan, officers' supplemental retirement plan ("SRP") and the 1994 and 1992-1994 executive incentive compensation plans to the same extent as if he remained an active employee. Except as provided above, all other Employer benefits shall cease on March 1, 1995. Third: On March 15, 1995 or as soon thereafter as administratively possible, Employer shall pay Employee ten (10) weeks of pay, consisting of his entire accrued but unused vacation. Employee acknowledges that he is not entitled to any other vacation benefits. Fourth: Employee shall be entitled to retain for his personal use the laptop computer, IBM 360C, that previously has been made available to him. Fifth: Employer will pay reasonable attorney's fees and expenses for legal advice and representation of Employee, consistent with Employer's indemnification policy for officers and New York law for legal advice and representation of Employee by (Confidential material has been omitted and filed separately with the Securities and Exchange Commission) Sixth: In exchange for the above stated consideration, Employee agrees to forever release and discharge Employer and all of its subsidiaries, parents and affiliates, its officers, directors, employees, agents, and attorneys from any and all liabilities arising directly or indirectly out of his employment and resignation including any claims asserted and non-asserted he may have under the laws of New York for torts, contract or employment agreements or under any federal, state or local statute, regulations, rule, ordinance or order including, but not limited to, discrimination based on race, sex, age, religion, national origin, sexual orientation, physical, mental or medical condition, marital status or retaliation. This waiver includes any and all claims Employee may have under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, The Civil Rights Act of 1991, The Americans with Disabilities Act and the Employee Retirement Income Security Act. Seventh: As a material inducement to Employer to enter into this Agreement, save and except for any right by Employee to seek indemnity or defense in accordance with existing Employer policy and New York law with respect to any and all claims against Employee or Employer based on any and all lawful acts or omissions which occurred in connection with Employee's employment by and/or serving as a director of officer of Employer, Employee hereby irrevocably and unconditionally releases, acquits, and forever discharges Employer and all directors, officers, employees, representatives, attorneys, and all persons acting by, through, under or in concert with any of them, ("Releasees"), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorney's fees and costs actually incurred), of any nature whatsoever, known or unknown, which Employee now has, owns, holds, or claims to have, own, or hold, or which Employee at any time heretofore had, owned, held, or claims to have, own, or hold against each of the Releasees. Eighth: Employee agrees not to directly or indirectly take, support, encourage or participate in any action or attempted action which in any way would damage the reputation or business relationships of Employer and/or any of its subsidiaries, parents or affiliates, except if and to the extent required by law. During the Leave of Absence, Employee will not directly or indirectly engage in any competitive activity adverse to the Employer's interests and/or any of its subsidiaries, parents or affiliates interests without the express consent of Employer. Employee shall not divulge any confidential or proprietary information gained from his employment with Employer, except if and to the extent required by law. Employee will not disparage the Employer in any way and will only speak about Employer in positive terms. Employee warrants that he has returned all Employer property, materials, credit cards, car, etc. Employee agrees that he will cooperate as reasonably necessary consistent with his business obligations in any legal disputes and/or administrative proceedings or functions relating to issues and/or incidents which took place during his term of employment. (Confidential material has been omitted and filed separately with the Securities and Exchange Commission) Tenth: Employee acknowledges that the terms of this agreement and all discussions leading up to it are confidential and agrees that he will not divulge the terms of this Agreement to any third party, except his immediate family and attorney. Employer agrees to pay Employee's reasonable attorney's fees incurred in reviewing this Agreement by (Confidential material has been omitted and filed separately with the Securities and Exchange Commission) up to $5,000. Eleventh: Employee warrants that he is fully competent to enter into this Agreement; he acknowledges that he has been afforded an opportunity to review this Agreement with independent counsel, that he has read and understands this Agreement; and that he has signed this Agreement freely and voluntarily. Twelfth: Should any provision of this Separation Agreement be declared or be determined by any court to be illegal or invalid, the validity of the remaining parts, terms or provisions shall not be affected thereby and said illegal or invalid part, term or provision shall not be deemed to be a part of this Separation Agreement. Thirteenth: This Agreement constitutes the entire agreement between the parties. Any amendments to or changes in the obligations created by this Agreement shall not be effective unless reduced to writing and signed by the parties. All prior written or oral agreements between Employer and Employee are hereby terminated and expressly disavowed including, but not limited to, the Orange and Rockland Utilities, Inc. Severance Pay Plan dated as of January 3, 1991. This Agreement shall be construed under New York law and any actions relating thereto must be brought within the State of New York. Fourteenth: This Agreement and the payment of any consideration hereunder shall not be construed as an admission of any kind whatsoever on the part of Employer, and/or any of its subsidiaries, parents or affiliates, their officers, agents, representatives or employees. Fifteenth: Employee acknowledges that he has been given at least 21 days to decide whether to sign this Agreement. Further, Employee understands that he has the opportunity to revoke such Agreement within 7 days of signing it and that he must return all amounts received hereunder in such event. PLEASE READ CAREFULLY. THIS SETTLEMENT AGREEMENT INCLUDES A WAIVER AND RELEASE. To signify their agreement to the terms of this Agreement, the parties have executed this Agreement on the date set forth opposite their signatures which appear below. February 28, 1995 /s/ Victor J. Blanchet, Jr. Date Victor J. Blanchet, Jr. March 1, 1995 /s/ D. L. Peoples Date Orange and Rockland Utilities, Inc. Vice Chairman & CEO EXHIBIT A February 28, 1995 Mr. D. Louis Peoples Chief Executive Officer Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Dear Lou: I hereby resign effective March 1, 1995 as a director, officer and/or active employee of Orange and Rockland Utilities, Inc., Rockland Electric Co., Pike County Light and Power Co., Clove Development Corporation, O&R Development, Inc., O&R Energy, Inc., O&R Energy Development, Inc., Millbrook Holdings, Inc., Saddle River Holdings Corp., and Atlantic Morris Broadcasting Inc. Further, I hereby elect to retire from employment effective August 31, 1996 and until that time agree and request to be placed on a leave of absence. Very truly yours, /s/ Victor J. Blanchet, Jr. Victor J. Blanchet, Jr. EX-10.29 7 ORANGE AND ROCKLAND UTILITIES, INC. DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS As Amended and Restated through October 6, 1994 ORANGE AND ROCKLAND UTILITIES, INC. DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS 1. Eligibility Each member of the Board of Directors of Orange and Rockland Utilities, Inc. (the "Company") who is not an employee of the Company, or of any of its subsidiaries (an "Eligible Director"), is eligible to participate in the Orange and Rockland Utilities, Inc. Deferred Compensation Plan for Non-Employee Directors (the "Plan"). 2. Participation (a) Prior to the beginning of any calendar quarter, commencing with the quarter beginning April 1, 1988, each Eligible Director may elect to participate in the Plan by directing that all or any part of the compensation (including fees payable for services as a member of a committee of the Board of Directors) which would otherwise have been payable currently for services as a Director during such calendar quarter and subsequent calendar quarters (the "Fees") shall be credited to a deferred compensation account (the "Director's Account") subject to the terms of the Plan. Any person who shall become an Eligible Director during any calendar quarter and who was not an Eligible Director of the Company prior to the beginning of such calendar quarter, may elect, within 30 days after becoming an Eligible Director, to defer payment of all or any part of the Fees for the remainder of such calendar quarter and for succeeding calendar quarters. (b) An election to participate in the Plan shall be made by written notice executed by the Eligible Director and filed with the Secretary of the Company within the time specified in paragraph 2(a) hereof. An election to participate, related to Fees otherwise payable with respect to services as an Eligible Director in subsequent calendar quarters, shall become irrevocable as of the end of the calendar quarter preceding such calendar quarter. An election shall continue until a Director ceases to be an Eligible Director or until the Eligible Director terminates or modifies such election to participate in the Plan by written notice filed with the Secretary of the Company. Any such termination or modification of an election to participate in the Plan shall become effective as of the end of the calendar quarter in which such notice is given and only with respect to Fees payable with respect to services as an Eligible Director in subsequent calendar quarters. Amounts credited to a Director's Account prior to the effective date of any termination or modification shall not be affected by such termination or modification of an election to participate in the Plan and shall be distributed only in accordance with the terms of the Plan, provided however that an Eligible Director may modify an election with respect to the distribution of amounts credited to a Director's Account as provided in Section 4(a) hereof. (c) An Eligible Director who has filed a termination of election to participate may thereafter file another written notice with the Secretary of the Company electing to participate for any calendar quarter commencing subsequent to the filing of such election and subsequent calendar quarters. 3. The Director's Account (a) All deferred Fees shall be credited to the Director's Account and shall bear interest as provided in paragraph 3(b) hereof. The establishment and maintenance of, or credits to, the Director's Account shall not vest in the Eligible Director or the Eligible Director's Beneficiary any right, title or interest in and to any specific assets of the Company. (b) Interest shall be credited on the deferred Fees credited to a Director's Account, commencing on the date such Fees would otherwise have been paid, at a rate per annum for each calendar quarter which prior to February 6, 1986 was a rate equal to the average quoted rate for three-month U.S. Treasury Bills for the last full week of the preceding calendar quarter and which beginning February 6, 1986 is a rate equivalent to the Company's allowable rate of return in effect from time to time as set by the Department of Public Service of the State of New York (the "New Rate"). Amounts so determined shall be compounded at the end of each calendar quarter and credited to the Director's Account. Amounts credited to a Director's Account shall continue to be credited with interest until distributed in accordance with the Plan, which interest beginning with February 6, 1986 shall be at the New Rate. 4. Distribution from Director's Account (a) At the time of election to participate in the Plan, an Eligible Director shall also make a written election with respect to the distribution of amounts credited to the Director's Account (an "Initial Election"). An Eligible Director may elect to receive such amount in one lump-sum payment or in some other number or ratable annual installments (not exceeding 10). The first installment (or the single lump-sum payment if the Director has so elected) shall be paid on the later of the first business day of the calendar year immediately following the year in which the Director ceases to be an Eligible Director of the Company, or the first business day of such later calendar year as the Director shall have elected in accordance with the terms hereof. Subsequent installments, if any, shall be paid on the first business day of each succeeding calendar year until the entire amount credited to the Director's Account shall have been paid. (1) An Eligible Director while an Eligible Director may modify any Initial Election or prior modification of an election with respect to the distribution of amounts credited to the Director's Account. Such modification may relate to either or both (i) Fees payable with respect to services as an Eligible Director in calendar quarters subsequent to the effective date of such modification, and/or (ii) all deferred Fees prior to the effective date of such modification, provided however that any such modification related to previously deferred Fees may only provide for the further deferral of such previously deferred Fees. In the event that the Eligible Director has made more than one modification of any election, the most recent modification shall control distribution of the amounts credited to the Director's Account. (2) With respect to any modification of an election related to Fees payable with respect to services as an Eligible Director in subsequent calendar quarters, any such modification shall become effective as of the end of the calendar quarter in which such notice of modification is given and only with respect to Fees payable for services as an Eligible Director in subsequent calendar quarters. (3) With respect to any modification of an election, or portion thereof, related to previously deferred Fees, any such modification shall become effective as of the first day of the calendar year following the calendar year in which such notice of modification is given. Amounts credited to a Director's Account prior to the effective date of any such modification related to previously deferred Fees may only be further deferred by such modification made while the Director is still an Eligible Director, shall be distributed only in accordance with the terms of the Plan, and shall not be affected by any modification purporting to accelerate payment of such deferred Fees. (b) The election with respect to the distribution of amounts credited to the Director's Account and/or the modification of any such election shall be made in the written notice provided for in paragraph 2(b) hereof. (c) Notwithstanding the provisions of paragraph 2(b) hereof or the terms of an election or modification thereof made pursuant to paragraph 4(a) hereof, if a Director ceases to be an Eligible Director of the Company and becomes employed by any governmental agency having jurisdiction over the activities of the Company or any of its subsidiaries, the termination of the Director's election to participate shall become effective immediately and the entire balance of the Director's Account shall be paid in a single lump-sum payment at the Company's earliest convenience. (d) If an Eligible Director should die before payment in full of all amounts credited to the Director's Account, the balance of the Director's Account shall be paid on the first business day of the calendar year following the year of death to the Eligible Director's Beneficiary. (e) Notwithstanding the terms of any election to defer or modification thereof made by an Eligible Director hereunder, the Secretary of the Company may, in his sole discretion, permit the withdrawal of all or a portion of the amounts credited to a Director's Account, upon the request of the Eligible Director or the Eligible Director's representative, or following the death of an Eligible Director upon the request of an Eligible Director's Beneficiary or such Beneficiary's representative, if the Secretary determines that the Eligible Director or Beneficiary, as the case may be, is confronted with an unforeseeable emergency. For this purpose, an unforeseeable emergency is an unanticipated emergency caused by an event that is beyond the control of the Eligible Director or Beneficiary and that would result in severe financial hardship to the Eligible Director or Beneficiary if an early hardship withdrawal were not permitted. The Eligible Director or Beneficiary shall provide to the Secretary such evidence as the Secretary may require to demonstrate that such emergency exists and financial hardship would occur if the withdrawal were not permitted. Any withdrawal under this paragraph shall be limited to the amount necessary to meet the emergency. (f) The Company shall deduct from the distributions to be made from a Director's Account any Federal, State or local withholding or other taxes or charge which the Company is from time to time required to deduct under applicable law. 5. Designation of Beneficiaries Each Eligible Director shall file with the Secretary of the Company a written designation of one or more persons as the Beneficiary who shall be entitled to receive the amount, if any, payable under the Plan upon the Eligible Director's death. An Eligible Director may from time to time revoke or change the Eligible Director's beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Secretary of the Company. The last such designation received by the Secretary of the Company shall be controlling; provided however, that no designation or change or renovation thereof shall be effective unless received by the Secretary of the Company prior to the Eligible Director's death, and in no event shall it be effective as of a date prior to such receipt. If no such beneficiary designation is in effect at the time of an Eligible Director's death, or if no designated Beneficiary survives the Eligible Director, or if such designation conflicts with law, the Eligible Director's estate shall be the Beneficiary entitled to receive the amount, if any, payable under the Plan upon the death of the Eligible Director. If the Secretary of the Company is in doubt as to the right of any person to receive such amount, the Company may retain such amount, without liability for any interest thereon, until the Secretary determines the rights thereto, or the Company may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Company therefor. 6. Miscellaneous (a) Neither the Eligible Director nor any Beneficiary designated by the Eligible Director shall have the right to, directly or indirectly, alienate, assign, transfer, pledge, anticipate or encumber (except by reason of death) any amount that is or may be payable hereunder, nor shall any such amount be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Eligible Director or the Eligible Director's Beneficiary or to the debts, contracts, liabilities, engagements, or torts of any Eligible Director or Beneficiary, or transfer by operation of law in the event of bankruptcy or insolvency of the Eligible Director or any Beneficiary, or any legal process. (b) All payments of awards provided for under the Plan shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Eligible Director or his or her dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the Eligible Director shall have no right, title, or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind between the Company and any persons. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. (c) Copies of the Plan and any and all amendments thereto shall be made available at all reasonable times at the office of the Secretary of the Company to all Eligible Directors. (d) The Plan shall be administered by the Secretary of the Company who shall have full power, discretion and authority to interpret, construe and administer the Plan and any part thereof. The Secretary's interpretations and constructions of the Plan, and the actions taken thereunder by the Secretary, shall, except as otherwise determined by the Board of Directors of the Company, be binding and conclusive on all persons for all purposes. (e) The Board of Directors may at any time amend or terminate the Plan. The Plan may also be amended by the Chief Executive Officer of the Company, provided that all such amendments shall be reported to the Board. No amendment or termination of the Plan shall impair the rights of any person with respect to amounts then in the Director's Account. (f) The Company, its officers and its Board of Directors shall have the right to rely upon a written opinion of legal counsel, which may be independent legal counsel or legal counsel regularly employed by the Company, if any question should arise as to any distribution from a Director's Account or any obligation under the Plan. (g) Each Eligible Director participating in the Plan shall receive an annual statement indicating the amount credited to the Director's Account as of the end of the preceding calendar year. (h) All elections, designations, requests, notices, instructions and other communications from an Eligible Director, Beneficiary or other person to the Secretary of the Board of Directors of the Company, required or permitted under the Plan shall be in such form as is prescribed from time to time by the Secretary and shall be mailed by first class mail or delivered to such location as shall be specified by the Secretary. (i) The terms of the Plan shall be binding upon the Company and its successors and assigns. (j) The Plan shall be governed by and construed in accordance with the laws of the State of New York, as from time to time in effect. (k) The Plan became effective upon adoption by the Board of Directors of the Company on September 8, 1983. 7. Change in Control. (a) Notwithstanding anything else herein to the contrary, in the event of the occurrence of a Change in Control, if any, each Eligible Director shall have the right to receive, and shall be paid, as soon as practicable after such occurrence becomes reasonably certain, a lump sum cash amount equal to the entire unpaid balance of the amount credited to a Director's Account, including interest, and any prior election of such Eligible Director to defer the payment of fees shall become null and void. (b) As used in the Plan, "Change in Control" shall mean the happening of any of the following: (i) receipt by the Company of a report on Schedule 13D filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "1934 Act") disclosing that any person, group, corporation or other entity is the beneficial owner, directly or indirectly, of 20 percent or more of the outstanding stock of the Company; (ii) purchase by any person (as defined in Section 13(d) of the 1934 Act), corporation or other entity, other than the Company or a wholly-owned subsidiary of the Company, of shares pursuant to a tender or exchange offer to acquire any stock of the Company (or securities convertible into stock) for cash, securities or any other consideration, and, after consummation of the offer, such person, group, corporation or other entity is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) directly or indirectly, of 20 percent or more of the outstanding stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock); (iii) approval by the stockholders of the Company of (a) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of stock of the Company would be converted into cash, securities or other property, other than a consolidation or merger of the Company in which holders of its stock immediately prior to the consolidation or merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger as immediately before, or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (iv) a change in the majority of the members of the Board of Directors within a 12-month period unless the election or nomination for election by the Company's stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12-month period. orlaw\bod\defcomp.bod EX-13 8 REVIEW OF THE COMPANY'S RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL PERFORMANCE Consolidated earnings per share were $2.50 for 1994, compared to $3.06 in 1993 and $3.15 in 1992. The decline in earnings in 1994, and to a lesser degree in 1993, reflects the impact of the costs associated with the investigation and litigation involving former officers and others, the establishment of a provision for the refunding of misappropriated funds to customers, and adverse regulatory actions related to these events, as well as a decline in non-utility subsidiary operating results. The investigation and related matters are more fully described below under "Events Affecting the Company." Despite this adverse effect on earnings for 1994 and 1993, the core utility business produced strong operating results. Electric revenues from retail customers increased in 1994 and 1993. Firm gas revenues remained stable in 1994 after increasing 15% in 1993. In addition, Orange and Rockland Utilities, Inc.'s (Company's) cost containment program reduced operating expenses. The decline in non-utility earnings is primarily a result of continuing competitive pressure in the gas marketing business, which substantially limited the subsidiary's gross profit margin. Consolidated earnings available for common stock were $34.0 million in 1994, $41.5 million in 1993 and $42.3 million in 1992. Earnings per average common share are summarized as follows:
1994 1993 1992 =========================================================================== Utility operations $ 3.14 $ 3.37 $ 3.12 Events Affecting the Company: Investigation & litigation costs (.42) (.29) -- Refunds of misappropriated funds (.20) -- -- Diversified activities (.02) (.02) .03 - --------------------------------------------------------------------------- Consolidated earnings per share $ 2.50 $ 3.06 $ 3.15 - ---------------------------------------------------------------------------
The earned return on common equity was 9.0% in 1994, compared to 11.2% in 1993, and 11.9% in 1992. Book value per share at year-end 1994 and 1993 was $27.79, compared to $27.22 in 1992. The Company continued to provide a fair and equitable return on shareholders' investments by increasing the dividend paid on common stock to $2.54 per share from the $2.49 paid in 1993 and the $2.43 paid in 1992. The Company has maintained a strong capital structure of 46% long-term debt, 6% preferred stock and 48% common equity. 8 Orange and Rockland Utilities, Inc. and Subsidiaries EVENTS AFFECTING THE COMPANY Following the arrest in August 1993 of a Company Vice President on charges of grand larceny, commercial bribery and making illegal campaign contributions, the Company's Board of Directors appointed a Special Committee of outside directors (Special Committee) on August 20, 1993, giving it a broad mandate to investigate all wrongdoing at the Company. In turn, the Special Committee retained counsel specializing in investigations of utility corporations. On August 23, 1994, the investigative firm completed its inquiries and issued a report documenting its findings. The Report of the Special Committee, which was made available to all shareholders, found a pattern of misconduct by James F. Smith, the Company's former Chief Executive Officer, including a subversion of the Company's system of internal controls to mask payment by the Company of personal expenses. As a result of the investigation, the Company has taken steps to correct the problems which were found, uncover any remaining problems, and reduce the likelihood of similar improprieties in the future. The investigation resulted in the dismissal of the Chairman of the Board and Chief Executive Officer, as well as the termination of three Vice Presidents, two of whom had been controllers during the period covered in the investigation, and the Manager of Internal Auditing. On May 11, 1994 the Company appointed Arthur Andersen LLP as its new outside auditors. The Company also has entered into a Joint Cooperation Agreement with the Rockland County (NY) District Attorney's Office, pursuant to which the Company has, among other things, appointed an independent Inspector General for a period of up to seven years, and discontinued for five years all political contributions and the activities of all political action committees. The New York Public Service Commission (NYPSC) and the New Jersey Board of Public Utilities (NJBPU) have undertaken investigations to determine the impact of these events on the Company's ratepayers. The Company is cooperating fully in the inquiries and has pledged to return to customers any funds that are determined to have been misappropriated. To date, the Company has refunded a total of $369,000 to New York ratepayers, $93,000 to New Jersey ratepayers and approximately $2,600 to Pennsylvania ratepayers, and has submitted plans to the NYPSC and NJBPU to refund an additional $4.1 million to ratepayers based on the findings of the Company's investigation. A similar refund proposal for approximately $26,000 has been accepted by the Pennsylvania Public Utility Commission (PPUC). The NYPSC and NJBPU have completed their investigations and have submitted reports to the Company for comment prior to final adoption and publication. Neither the NYPSC nor the NJBPU has yet quantified what it believes to be the impact of the wrongdoing and related investigation on ratepayers. The Company is pursuing lawsuits and an arbitration proceeding against certain former officers and employees to recover misappropriated funds and other costs attributable to the wrongdoing and related investigation. Four lawsuits were brought against the Company or its officers and directors, purportedly on behalf of shareholders or ratepayers, seeking damages resulting from these events. The ratepayer case has been dismissed, and the three shareholder suits have been settled, although one of these settlements still requires court approval. For more information on these legal proceedings, refer to Note 12 of Notes to Consolidated Financial Statements. NEW MANAGEMENT TEAM The Company has engaged in a major corporate restructuring. In addition to the appointment of D. Louis Peoples as Vice Chairman and Chief Executive Officer, R. Lee Haney has been appointed Vice President and Chief Financial Officer (CFO). With these key appointments, the Company's management has been reorganized to broaden spans of control in order to maximize performance and flexibility in a competitive environment. The Electric Production Department has been restructured as a newly-created Division to provide for the segregation of the Company's electric generation function, and the marketing function has been strengthened to take advantage of the Company's energy services expertise and opportunities in new markets. The Company has upgraded the organizational position of the Internal Auditing function to report directly to the Audit Committee of the Board of Directors and, in January 1995, appointed a new Director of Internal Auditing. Also reporting to the Audit Committee of the Board of Directors and the Chief Executive Officer is an Ethics Officer. The Ethics Officer, appointed in February 1995, is responsible for administering a strict set of ethical standards and creating an effective procedure for employees to report suspected violations of the Company's new comprehensive Code of Business Conduct. In order to complete its organizational restructuring, the Company is currently in the process of hiring a Vice President of Human Resources and a General Counsel. RESULTS OF OPERATIONS The discussion which follows identifies the principal causes of the significant changes in the amounts of revenues and expenses affecting income available for common stock by comparing 1994 to 1993 and 1993 to 1992. This discussion should be read in conjunction with the Notes to Consolidated Financial Statements and other financial and statistical information contained elsewhere 9 1994 Annual Report in this report. The following is a summary of the changes in earnings available for common stock:
Increase (Decrease) From Prior Year 1994 1993 ================================================================================== (Millions of Dollars) Utility Operations: Operating revenues $ (8.0) $ 39.8 Energy costs (4.9) 15.5 - ---------------------------------------------------------------------------------- Net revenues from utility operations (3.1) 24.3 Other utility operating expenses and taxes 3.6 20.4 Diversified revenues 57.8 87.3 Diversified operating expenses and taxes 58.1 88.1 - ---------------------------------------------------------------------------------- Income from operations (7.0) 3.1 Other income and deductions (.8) (5.4) Interest charges (.2) (1.3) - ---------------------------------------------------------------------------------- Net income (7.6) (1.0) Preferred dividends (.1) (.1) - ---------------------------------------------------------------------------------- Earnings available for common stock $ (7.5) $ (.9) - ----------------------------------------------------------------------------------
ELECTRIC OPERATING REVENUES AND SALES Electric operating revenues, net of fuel and purchased power costs, decreased by 1.4% or $4.7 million in 1994 after increasing by 6.1% or $20.0 million in 1993. The components of these changes are attributable to the following factors:
Increase (Decrease) From Prior Year 1994 1993 ================================================================================= (Millions of Dollars) Retail sales: Base rates including misc. surcharges and revenue tax recoveries $ (2.2) $ 17.7 Fuel cost recoveries (3.1) 2.0 Sales volume changes 8.7 12.0 - --------------------------------------------------------------------------------- Subtotal 3.4 31.7 Sales for resale 0.2 (.6) Other operating revenues: RDM revenue reconciliation and DSM incentives (8.2) (6.1) Other (3.3) (1.8) - --------------------------------------------------------------------------------- Total electric revenues (7.9) 23.2 Electric energy costs (3.2) 3.2 - --------------------------------------------------------------------------------- Net electric revenues $ (4.7) $ 20.0 - ---------------------------------------------------------------------------------
Actual total sales of electric energy to retail customers during 1994 were 4,464 Mmwh, compared with 4,358 Mmwh during 1993 and 4,212 Mmwh in 1992. Before reflecting the effects of the Revenue Decoupling Mechanism (RDM) in the Company's New York jurisdiction,electric revenues associated with these sales were $487.0 million, $483.6 million and $451.9 million in 1994, 1993 and 1992, respectively. Electric sales to customers for the last five years are shown in the accompanying table. [Graphics Chart, see Appendix A of Exhibit 13] The changes in electric sales by class of customer from the prior year are as follows:
1994 1993 ============================================================================= Residential 3.0% 5.1% Commercial 1.5% 1.6% Industrial 4.6% 5.6% Public street lighting .5% .6% Sales to public authorities (4.3%) 2.5% - -----------------------------------------------------------------------------
An increase in the number of customers compared to the previous year was the primary reason electric retail sales increased 2.4% and 3.5% in 1994 and 1993, respectively. The Company continues to meet the needs of its customers by pursuing least-cost strategies. Demand-Side Management (DSM) programs, which are designed to reduce peak load, encourage efficient energy usage and reduce the need for costly investments in new generating capacity, continue to be an integral component of the Company's resource plan. These efforts resulted in the Company achieving an energy-efficiency savings of approximately 193,864 Mwh in 1994, 166,697 Mwh in 1993 and 113,315 Mwh in 1992. Based on the energy efficiency savings in New York, the Company earned and filed to recover the maximum allowable incentives provided by the NYPSC approved rate agreement for the 1993 and 1992 calendar years. For 1994, the NYPSC significantly reduced the amount of DSM incentive available to the Company. However, as a result of greater than projected acquired demand and energy savings, the Company was able to earn an incentive of approximately $600,000 in 1994. In addition to DSM, the Company continues to actively seek cost-effective energy supply options, such as purchased power agreements with other utilities. An innovative rate-making procedure called RDM, which became effective January 1, 1991, requires among other things, the reconciliation of actual electric sales revenue based on usage in the Company's New York franchise territory to the level allowed in rates, thereby minimizing the impact of sales volume changes on earnings. The Company's earnings from New York electric operations under the RDM agreement are dependent on its success in achieving its DSM goals, as well as controlling operating and maintenance costs within levels provided for in rates. Under the agreement, New York electric revenue targets, net of fuel and taxes, amounted to $224.8 and $223.2 million, compared to actual sales revenues based upon usage of $237.1 and $230.1 million in 1994 and 1993, respectively, requiring the Company to record revenue reductions of $12.3 million in 1994 and $6.9 million in 1993. The Company's success in achieving its DSM and customer service goals allowed it to earn incentives amounting to $600,000 for DSM in 1994 and $3.4 million in 1993. Customer service incentives in 1994 were discontinued by the NYPSC's July 10, 1994 order terminating the Company's electric rate request. The Customer Service incentives provided $.5 million of additional earnings in 1993. Although the RDM agreement was scheduled to expire on December 31, 1993, the NYPSC's June 10, 1994 decision extended the provisions of the agreement with certain modifications more 10 Orange and Rockland Utilities, Inc. and Subsidiaries fully described under "Rate Activities." The RDM agreement will continue to affect future electric earnings from the Company's New York operations. Electric earnings from the Company's New Jersey and Pennsylvania operations will continue to be affected by changes in sales volumes resulting from the strength of the economy, weather conditions and the conservation efforts of customers. Sales for resale increased by 13.0% in 1994 after decreasing by 7.3% in 1993. Revenues from these sales are primarily a recovery of costs, under the applicable tariff regulations, and have a minimal impact on the Company's earnings. ELECTRIC ENERGY COSTS The cost of fuel used in electric generation and purchased power decreased 2.3% or $3.2 million in 1994 after increasing 2.4% or $3.2 million in 1993. The components of these changes in electric energy costs are as follows:
Increase (Decrease) From Prior Year 1994 1993 ========================================================================== (Millions of Dollars) Prices paid for fuel and purchased power $ (8.3) $ (1.8) Changes in Kwh generated or purchased 3.1 4.7 Deferred fuel charges 2.0 .3 - -------------------------------------------------------------------------- Total $ (3.2) $ 3.2 - --------------------------------------------------------------------------
The decrease in electric energy costs in 1994 is primarily a reflection of reduced prices paid for coal and natural gas used as boiler fuel, partially offset by an increase in kilowatt hour demand. The increase in 1993 was primarily due to the increase in kilowatt hour demand and coal prices, offset by decreased purchased power cost and cost of natural gas used as boiler fuel. The price paid for fuel and purchased power per kilowatt hour over the last five years is shown in the accompanying table.[Graphics Chart, see Appendix A of Exhibit 13] The Company's tariff schedules include adjustment clauses under which fuel and certain purchased power costs are recovered. In New York, an incentive-based mechanism associated with the electric fuel adjustment clause provides for the sharing of up to a 20% variation between actual costs and forecast fuel targets, to a maximum of $1,762,000. In 1994, 1993 and 1992, pre-tax earnings were enhanced by $1,241,000, $755,000 and $800,000, respectively, as a result of this mechanism. The Company maintains an aggressive program of managing its sources of fuel and energy purchases to provide its customers with the lowest cost of energy available at any given time. The Company's ability to burn coal and natural gas has enabled it to reduce its use of fuel oil significantly. Energy is purchased from other utilities whenever available, generally at a price lower than the cost of production at the Company's generating plants. The Company continues to use the least costly fuel available for generating electricity. The sources of electricity available for sale during the last three years are as follows:
1994 1993 1992 ======================================================== Source of Electricity Sold: Company generation: Oil 6% 5% 10% Natural gas 23 16 21 Coal 36 33 33 Hydro 3 4 3 Other supply: Purchased power 32 42 33 - -------------------------------------------------------- Total 100% 100% 100% - --------------------------------------------------------
GAS OPERATING REVENUES AND SALES Gas operating revenues, net of gas purchased for resale, increased by 2.4%, or $1.6 million, and 6.8%, or $4.3 million, for 1994 and 1993, respectively. These changes are attributable to the following factors:
Increase (Decrease) From Prior Year 1994 1993 ====================================================== (Millions of Dollars) Sales to firm customers: Base rates including misc. surcharges and revenue tax recoveries $ .2 $ 5.7 Gas cost recoveries (.2) 13.8 Sales volume changes (.4) .1 - ------------------------------------------------------ Subtotal (.4) 19.6 Sales to interruptible customers 1.4 (.8) Sales for resale .1 (1.8) Other operating revenues (1.2) (.4) - ------------------------------------------------------ Total gas revenues (.1) 16.6 Gas energy costs (1.7) 12.3 - ------------------------------------------------------ Net gas revenues $ 1.6 $ 4.3 - ------------------------------------------------------
Firm gas sales amounted to 20,421 million cubic feet (Mmcf) during 1994, a decrease of .7% from the 1993 level of 20,556 Mmcf. Firm gas sales for 1992 were 20,507 Mmcf. Gas revenues from firm customers were $149.4 million, $149.8 million and $130.2 million in 1994, 1993 and 1992, respectively. Gas sales to firm customers for the last five years are shown in the accompanying table.[Graphics Chart, see Appendix A of Exhibit 13] The changes in firm gas sales by class of customer from the prior year are as follows:
1994 1993 ====================================================== Residential (1.0%) .7% Commercial and industrial .5% (2.2%) - ------------------------------------------------------
Sales in 1994 were adversely affected by weather conditions in the fourth quarter of 1994. The increase in the number of customers in 1994 and 1993 somewhat offset the decrease in sales in 1994, and was the primary reason for the slight increase in sales in 1993. Effective December 15, 1992, under the terms of a multi-year gas rate agreement, the level of firm sales in New York is subject to a weather normalization adjustment. The Company adjusts firm 11 1994 Annual Report gas sales revenues to the extent actual degree days vary more than plus or minus 2.2% from the degree days utilized to project sales. Therefore, weather conditions will have a minimal impact on gas revenues. Revenues from interruptible gas customers (customers with alternative fuel sources) increased by 53.4% in 1994, after decreasing by 23.7% in 1993. These sales are dependent upon the availability and price competitiveness of alternative fuel sources. As a result of applicable tariff regulations, these sales do not have a substantial impact on earnings. GAS ENERGY COSTS Utility gas energy costs decreased by 1.9%, or $1.7 million in 1994, after increasing 15.8% or $12.3 million in 1993. The changes in utility gas energy costs for the years 1994 and 1993 are a result of the following:
Increase (Decrease) From Prior Year 1994 1993 =========================================================== (Millions of Dollars) Prices paid to gas suppliers* $(2.7) $ 2.7 Firm and interruptible Mcf sendout 3.2 (2.1) Deferred fuel charges (2.2) 11.7 - ----------------------------------------------------------- Total $(1.7) $12.3 - -----------------------------------------------------------
*Net of refunds received from gas suppliers. The Company continues its policy of the aggressive use of market purchases in order to provide price flexibility, while assuring an adequate supply of gas through a variety of long-term contracts with pipeline suppliers. The price paid for purchased gas per thousand cubic feet (Mcf) over the last five years is shown in the accompanying table.[Graphics Chart, see Appendix A of Exhibit 13] Gas costs from 1990-1993 were adversely affected by the actions of the Federal Energy Regulatory Commission (FERC), which had authorized pipeline suppliers to pass through take-or-pay costs. As required by the NYPSC in Case 88-G-062, the Company has deferred a portion of these costs. As of December 31, 1994, $2.8 million of deferred take-or-pay charges and accrued interest remain on the books of the Company. The Company is negotiating with the staff of the NYPSC to recover the remainder of its incurred take-or-pay costs. The Company's gas costs were not materially affected by take-or-pay charges in 1994. As a result of the FERC's objective to restructure the gas transportation industry to promote competition among gas suppliers and to ensure supply at the lowest reasonable costs, the FERC, pursuant to Order No. 636, has authorized pipelines to recover from their customers certain transition costs. The Company currently estimates that its obligations for Order No. 636 transition costs will total approximately $24.6 million. Approximately $11.1 million of these transition costs have been billed to the Company. The Company is presently in the process of recovering these costs from its customers. On December 20, 1994, the NYPSC issued an order establishing the regulatory and rate-making policies applicable to New York gas distribution utilities resulting from the restructuring of the interstate natural gas industry under FERC Order No. 636. The order provides mechanisms for recovery of transition costs which the Company believes will allow it to fully recover the costs imposed on it by the FERC's actions. OTHER UTILITY OPERATING EXPENSES AND TAXES A comparison of other operating expenses and taxes for utility operations is presented in the following table:
Increase (Decrease) From Prior Year 1994 1993 ====================================================== (Millions of Dollars) Other operating expenses $ (.2) $12.5 Maintenance 1.1 .4 Depreciation & amortization 1.7 (.1) Taxes 1.0 7.6 - ------------------------------------------------------ Total $ 3.6 $20.4 - ------------------------------------------------------
The costs of DSM programs, which decreased by $7.4 million in 1994, after increasing by $8.0 million in 1993, were the primary causes of the changes in other operating expenses in 1994 and 1993. These costs are recovered in revenues on a current basis. Additionally, 1994, as well as 1993, was impacted by higher operating expenses associated with increases in the cost of labor, materials and services. Maintenance costs increased 2.6% and 1.0% in 1994 and 1993, respectively. The 1994 increase was the result of increased maintenance of distribution plant, while the 1993 increase was the result of slightly higher maintenance costs in the production plants. Depreciation and amortization expenses increased $1.7 million in 1994 after decreasing $.1 million in 1993. The increase in 1994 was the result of normal plant additions. The prior year's decrease was the result of the amortization of certain excess depreciation reserves provided in the 1992 gas rate agreement. Taxes other than income taxes increased $2.6 million and $3.5 million in 1994 and 1993, respectively. The increase in each year was primarily the result of taxes associated with revenues and property taxes. Federal income tax expense decreased $1.6 million in 1994, after increasing $4.1 million in 1993. Both years are the result of changes in pre-tax book income. For a detailed analysis of income tax components, see Note 2 of Notes to Consolidated Financial Statements. DIVERSIFIED ACTIVITIES The Company's diversified activities consist of gas marketing, gas production and land development businesses conducted by its wholly owned non-utility subsidiaries. Revenues from diversified activities increased $57.8 million and $87.3 million in 1994 and 1993, respectively. The increases in revenues over the last two years are primarily the result of gas marketing revenues, which were favorably impacted by increases in the number of customers and higher sales volumes. Operating expenses, incurred by the non-utility subsidiaries, increased $58.1 million and $88.1 million in 1994 and 1993, respectively. These increases are directly related to gas marketing 12 Orange and Rockland Utilities, Inc. and Subsidiaries purchases which were $55.5 and $85.9 million higher in 1994 and 1993, respectively. Other expenses of operation, maintenance, depreciation and taxes increased $2.6 million and $2.2 million in 1994 and 1993, respectively. Operating income from diversified activities decreased by $.3 million and $1.0 million in 1994 and 1993, respectively. The declines were primarily a result of lower gross profit margins realized by the gas marketing subsidiary. On January 23, 1995, the Company's wholly owned gas marketing subsidiary, O&R Energy, Inc., signed a Letter of Intent with a wholly owned subsidiary of Shell Gas Trading Company (Shell) to create a new full service natural gas services and marketing company--NORSTAR Energy Limited Partnership--contingent upon certain governmental approvals. Under the terms of the agreement, Shell will contribute substantial firm gas supplies and other assets in exchange for approximately a 27 percent limited partnership interest. O&R Energy, Inc. will transfer its natural gas marketing business to the new venture in exchange for approximately a 73 percent general partnership interest. The alliance of O&R Energy, Inc.'s gas marketing and operations expertise with the commitment of firm gas supplies from Shell will assure NORSTAR a strong capital structure and increase the range of services available to support an aggressive expansion into new markets. In September 1994, the Company sharpened its focus on its core energy services business by adopting a plan to sell the six radio broadcast properties operated by one of its non-utility subsidiaries. The assets to be sold consist primarily of radio broadcast licenses and operating plant and equipment. A contract for the sale of two of the six broadcasting properties held by the subsidiary was signed in January 1995. Non-binding offers on the remaining stations have been received and are being evaluated. The sale of these assets is expected to be completed by June 1, 1995. Although the final gain or loss which will result from the sale of the properties cannot be determined at this time, the Company does not believe, based on the sales and offers received to date, that the disposition will have any material effect, either positive or negative, on the Company's financial statements. For more information on this sale, refer to Note 1 of Notes to Consolidated Financial Statements. OTHER INCOME AND DEDUCTIONS AND INTEREST CHARGES Other Income and Deductions and Interest Charges decreased by $.6 and $ 5.6 million in 1994 and 1993, respectively. The decrease in 1994 resulted from higher investigation and litigation expenses described under "Events Affecting the Company" which reduced Other Income by $1.7 million net of taxes as compared to the previous year. This decrease in income was somewhat offset by $.7 million reduction in political expenditures and charitable contributions and a $.4 million improvement in the operating results from the Company's radio broadcasting subsidiary. The decrease in Other Income in 1993 was primarily due to the cost of the investigation incurred in that year. Interest charges decreased $.2 million, or .7% in 1994, after decreasing $1.3 million, or 3.6%, in 1993. The 1994 and 1993 decreases are the result of refinancing certain of the Company's long-term debt issues, taking advantage of the lower interest rates available, somewhat offset by an increase in the cost of short-term debt in 1994, after a decrease in such costs in 1993. LIQUIDITY AND CAPITAL RESOURCES The Company's construction program is designed to maintain reliable electric and gas service, meet future customer service requirements and improve the Company's competitive position. The cost of the construction program and other capital requirements for the years 1992-1994 are as follows:
1994 1993 1992 ====================================================== (Millions of Dollars) Construction expenditures $60.0 $54.0 $56.0 Retirement of long-term debt & preferred stock-- net 4.1 1.5 (2.5) - ------------------------------------------------------ Total $64.1 $55.5 $53.5 - ------------------------------------------------------
At December 31, 1994, the Company estimated the cost of its construction program in 1995 to be $61.5 million and retirement of long-term debt and preferred stock to be $20.8 million. The Company's capital requirements for 1995 will be met primarily with funds from operations, supplemented by the issuance of short-term borrowings. On August 31, 1994, the New York State Energy Research and Development Authority (NYSERDA) issued, on behalf of the Company, $55 million of variable rate Pollution Control Refunding Revenue Bonds (Orange and Rockland Utilities, Inc. Projects), 1994 Series A due October 1, 2014 (1994 Bonds). The proceeds from the issuance of the 1994 Bonds were used to refund, on October 1, 1994, the $55 million NYSERDA 10 1/4% Pollution Control Revenue Bonds (Orange and Rockland Utilities, Inc. Projects), 1984 Series. In anticipation of issuing the 1994 Bonds, the Company entered into an interest rate swap agreement in 1992. Pursuant to the swap agreement, the Company will pay interest at a fixed rate of 6.09% to a swap counter party and will receive a variable rate of interest in return which is identical to the variable rate on the 1994 Bonds. The result is to effectively establish a fixed rate of interest on the 1994 Bonds of 6.09%. Effective May 1, 1994 through October 31, 1994, all shares of common stock purchased, under the Company's Dividend Reinvestment and Stock Purchase Plan (DRP) and the Employee Stock Purchase and Dividend Reinvestment Plan (ESPP), were original issue shares purchased from the Company. During that time, $3.9 million of common equity was generated through the issuance of approximately 120,000 shares of common stock under 13 1994 Annual Report the Company's DRP and ESPP. Effective November 1, 1994, common stock acquired under the DRP and ESPP is again being purchased on the open market. The Company has been authorized by the NYPSC to issue through December 31, 1995, up to 750,000 shares original issue common stock under the DRP and ESPP, of which 692,798 shares were unissued at year-end. The Company and its utility subsidiaries have available bank lines of credit of $59 million and O&R Energy, Inc., a non-utility subsidiary of RECO, has a $15 million line of credit. Information regarding short-term borrowings during the past three years is as follows:
1994 1993 1992 ======================================================================== (Millions of Dollars) Weighted average interest rate at year-end 6.4% 3.6% 3.7% Amount outstanding at year-end $29.4 $46.2 $41.5 Average amount outstanding for year $31.3 $35.3 $23.9 Daily weighted average interest rate during year 4.5% 3.3% 3.8% Maximum amount outstanding at any month-end $42.9 $46.2 $41.5 - ------------------------------------------------------------------------
The current credit ratings of the Company's principal securities and its commercial paper are as follows:
Duff & Phelps Fitch Moody's Standard & Credit Rating Investors Investors Poor's Company Service, Inc. Service Corp. =========================================================================== Commercial paper D-1 F-2 P-2 A-2 First mortgage bonds A+ A- A3 A- Unsecured debt A A- Baa1 A- Preferred stock A- A- baa1 BBB+ - ---------------------------------------------------------------------------
During June 1994, Standard & Poor's Corporation, Moody's Investors Service, and Fitch Investors Service, Inc. lowered their ratings on the Company's securities. The major reasons cited for the downgrades included uncertainties resulting from the ongoing investigations surrounding alleged financial improprieties and the termination by the NYPSC of the Company's electric rate proceeding which included a reduction in the targeted return on equity to 10.6%. RATE ACTIVITIES NEW YORK On September 30, 1992, the NYPSC approved a four-year settlement agreement (Settlement Agreement) in the Company's gas rate case (Case 92-G-0050). The Settlement Agreement contained a weather normalization clause which automatically adjusts rates to offset the effects of variations in gas sales volumes resulting from weather from the level assumed for setting rates. The Settlement Agreement provided for an overall rate of return of 10.26%, with a return on common equity of 12.15%, including incentives of 50 basis points. On September 1, 1993, the Company filed with the NYPSC the second stage adjustment to gas rates pursuant to the Settlement Agreement. The requested increase in annual gas revenues as a result of the second-stage adjustment was $3.8 million, or 2.5%. Although the Settlement Agreement provided for an effective date for this adjustment of January 1, 1994, the Company agreed to extend the effective date until June 30, 1994, in connection with the ongoing investigations of alleged financial improprieties. The effective date of this adjustment was further extended until December 30, 1994 by NYPSC Order issued June 3, 1994. On September 1, 1994, the Company filed a plan to implement the second-stage rate adjustment on January 1, 1995 and to postpone the next adjustment to gas rates to January 1, 1996. On September 19, 1994, the Company subsequently requested the further postponement of the second-stage gas rate adjustment until the Commission's investigation of alleged financial improprieties is concluded. The purpose of the request was to combine the results of the investigation and staged filings into a single rate change. On November 4, 1994, the NYPSC issued an Order terminating the Settlement Agreement effective December 31, 1994. The Order denied the Company the opportunity for rate adjustments in the third and fourth years (1995 and 1996) of the Settlement Agreement. However, the Order authorized the Company to continue to defer certain items under the second-stage rate adjustment until the adjustment becomes effective and to defer all previously authorized reconciliations through the end of 1994, pending review and audit by the NYPSC Staff and the conclusion of the NYPSC's investigation of alleged financial improprieties. On January 29, 1993, the Company filed, with the NYPSC, for an increase in electric rates of $17.1 million (4.8%) to be effective January 1, 1994. The NYPSC accepted the Company's proposal for a two-month (November and December 1993) temporary rate reduction of approximately $115,000 per month related to any misappropriation of funds identified as a result of the investigation. The Company voluntarily extended the temporary rate reduction for a third month, through January 1994. As a result of the ongoing investigation of alleged financial improprieties, the NYPSC issued an Order on December 21, 1993 which resulted in the postponement of the effective date of new electric rates from January 1, 1994 until June 30, 1994. By Order issued June 10, 1994 (June Order), the electric rate application was terminated by the NYPSC. The June Order provided for the continuation of the RDM revenue reconciliation and operating cost adjustment procedures and the continuation of other provisions of the December 16, 1993 Order, including up to $3.0 million of revenue made subject to refund, a 5% net resource savings DSM incentive, and elimination of a customer service incentive. The June Order also provided for a reduction in the RDM adjustment factor effective July 1, 1994, reflecting the new recovery level required for 1993 net RDM deferrals. Finally, the June Order reduced the return on equity threshold for measuring excess earnings from 12.0% to 10.6%, effective retroactively to January 1, 1994. All earnings in excess of 10.6% are to be deferred for future disposition pending the conclusion of the ongoing investigation. 14 Orange and Rockland Utilities, Inc. and Subsidiaries On September 19, 1994, the Company filed an appeal with the Supreme Court of New York challenging the legality of the June Order. The appeal argues that by changing the targeted return on common equity from 11.45% to 10.6% for the first six months of 1994, the Commission engaged in retroactive rate-making. The appeal also argues that there is no evidence in the record to support a determination that the cost of equity is 10.6%. The Company and the NYPSC have agreed to stay the briefings in this appeal until after the NYPSC has issued its final report on its investigation of the Company. On November 10, 1994, the Company filed, with the NYPSC, a quantification of the rate-making effects of its ongoing investigation into prior financial improprieties. The Company requested the NYPSC approve an additional refund of approximately $3.4 million to its New York electric and gas customers. Although the NYPSC has not acted on this request, this amount was charged to operations in the fourth quarter of 1994. The NYPSC has instituted a proceeding (Case 93-17-0849) to provide the opportunity for other parties, including NYPSC Staff who are conducting an independent investigation, to be heard on this matter. On November 18, 1994, NYPSC Staff submitted to the Company a draft report of its investigation of the Company for factual verification. This draft report does not include the NYPSC Staff's estimate of the inappropriate costs that have been borne by the Company's ratepayers. Such an estimate will be included in the final versions of the report. On January 11, 1995, the Company submitted its response to this draft report. The Company is unable to predict the final results of this proceeding and what modifications, if any, will be made to the amount proposed to be refunded. NEW JERSEY In January 1992, in response to RECO's March 18, 1991 petition requesting a $12.9 million increase in base rates, an increase in electric rates of $5.1 million was granted by the New Jersey Board of Regulatory Commissioners (NJBRC). The NJBRC was renamed effective July 5, 1994 and is now the New Jersey Board of Public Utilities (NJBPU). This increase included a 12% rate of return on common equity. In addition, the NJBRC initiated a Phase II proceeding in this case to address the effect of the State of New Jersey's June 1, 1991 tax legislation. That legislation changed the procedure under which certain taxes are collected from the State's utilities. Previously, utilities had been subject to a 12.5% gross receipts and franchise tax, which the utilities paid in lieu of property taxes. The new tax is based upon the number of units of energy (kwh or therms) delivered by a utility rather than revenues. The legislation also required that utilities accelerate payment to the State of the taxes collected. As a result, RECO was required to make additional tax payments of approximately $16 million during the period 1993-1994. On November 12, 1992, the NJBRC issued a Decision and Order approving the recovery of the additional tax over a ten-year period. A carrying charge of 7.5% on the unamortized balance was also approved. The amount of unamortized accelerated payments is included in Deferred Revenue Taxes. On February 26, 1993, the New Jersey Department of Public Advocate, Division of Rate Counsel (Rate Counsel) filed a Notice of Appeal from the NJBRC Decision and Order with the Superior Court of New Jersey, Appellate Division, stating as grounds for the appeal that the Decision is arbitrary and capricious and would result in unjust and unreasonable rates. On March 21, 1994, the Superior Court of New Jersey, Appellate Division, upheld the NJBRC Decision, stating the NJBRC used proper rate-making principles. Under an agreement with the NJBPU to return to customers any funds found to be misappropriated as a result of an ongoing investigation of certain former officers and employees, RECO has refunded to New Jersey ratepayers $93,000 through reductions in the applicable fuel adjustment charges in February and March 1994. In December 1994, RECO submitted a proposal to the NJBPU to refund an additional $.7 million. By order dated January 27, 1995, the NJBPU approved this proposal ordering the refund to be made in February 1995. The NJBPU investigation into these matters is continuing and the Company is unable to predict what modifications, if any, will be made to the amount to be refunded. On November 3, 1993, the NJBRC (now the NJBPU), commenced its periodic management audit of RECO. As a result of the events and investigations described above, the NJBPU audit included, in addition to a standard review of operating procedures, policies and practices, a review of the posture of RECO management regarding business ethics and a determination regarding the effect of such events on RECO ratepayers. The NJBPU's draft findings are contained in its "Final Report on An Ethics Review of Rockland Electric Company" (Docket No. EA 90030248) dated December 1, 1994, a copy of which was provided to the Company for comment. On January 11, 1995, the Company submitted its comments to this audit report to the NJBPU. The NJBPU has not yet issued its final report. PENNSYLVANIA On November 19, 1992, Pike County Light & Power Company (Pike) filed, with the PPUC, for a $497,000 increase in electric rates and a $36,300 increase in gas rates. During April 1993, Pike and the other parties involved in this proceeding signed a stipulated agreement providing for an increase of $270,000, or 6.6% for electric rates and $12,000, or 1.5% for gas rates. On June 10, 1993, the PPUC approved the electric rate settlement with rates effective June 11, 1993. On June 24, 1993, the PPUC approved the gas rate settlement with rates effective June 25, 1993. With regard to the ongoing investigation into the alleged financial improprieties, Pike has pledged to return to ratepayers any funds discovered to have been misappropriated due to the financial improprieties of certain former officers and employees who are the subject of an ongoing investigation. 15 1994 Annual Report COMPETITION The Company is operating in an increasingly competitive environment. In the electric industry, the Energy Policy Act of 1992 (Act) permitted unregulated non-utility generating companies to sell wholesale electric power in competition with regulated utilities. The Act also required utilities to provide access to others, under certain conditions, to the utilities' electric transmission systems. Although the Act does not require utilities to deliver their competitors' power directly to retail customers, state regulators retain the right to allow retail competition. Regulatory agencies in the three states in which the Company has retail electric franchises are currently evaluating possible changes in regulatory and ratemaking practices designed to promote increased competition consistent with safety, reliability and affordability standards. Depending on future developments in this area, the Company's market share and profit margins could become subject to competitive pressures in addition to traditional regulatory constraints. The Company recognizes that the regulated utility environment is changing and is committed to remaining competitive in its core energy services business and to capitalizing on new market opportunities. The Company's strategy for meeting the challenges of increased competition focuses on improving service while reducing costs. The Company has adopted an aggressive cost reduction program and is currently evaluating the pricing of services provided to customers. In addition, the Company's marketing function has been restructured to identify growth opportunities and strengthen customer relations by improving the value of energy services offered. Another component of the strategy is to actively participate, with regulators and others, in developing a transition to a more competitive environment which provides for an equitable sharing of environmental, social, regulatory and taxation obligations among all parties, as well as a reasonable opportunity for utilities to recover past investments and expenditures made pursuant to their obligation to provide service to the public. Competition in the Company's gas business has existed for several years, with interruptible customers and customers with alternative fuel usage capacity having the option to obtain their own gas supply and transport it through the Company's distribution system. In addition, FERC Order No. 636, which deregulated much of the interstate pipeline industry, has enabled the Company to contract directly with gas producers for supplies of natural gas. The Company is successfully meeting the challenge of competition in the gas business by taking advantage of the opportunities provided in this rapidly changing business environment to obtain greater access to reasonably priced natural gas supplies and storage. The Company has developed customized supply and flexible pricing arrangements to provide value-added service to its gas customers and is actively seeking new marketing opportunities. OTHER DEVELOPMENTS SFAS NO. 119 In October 1994, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 119 "Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments (SFAS No. 119), which requires various disclosures about financial instruments and related transactions. This statement revises previously issued statements related to disclosure of financial instruments, namely SFAS No. 105 and SFAS No. 107, to include disclosure of derivatives. For the Company, financial instruments consist principally of cash and cash equivalents, short-term debt, commercial paper, long-term debt and redeemable preferred stock. The disclosures required by SFAS No. 119 are contained in Note 9 of the Notes to Consolidated Financial Statements. EFFECTS OF INFLATION The Company's utility revenues are based on rate regulation, which provides for recovery of operating costs and a return on rate base. Inflation affects the Company's construction costs, operating expenses and interest charges and can impact the Company's financial performance if rate relief is not granted on a timely basis. Financial statements, which are prepared in accordance with generally accepted accounting principles, report operating results in terms of historic costs and do not recognize the impact of inflation. 16 Orange and Rockland Utilities, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Year Ended December 31, 1994 1993 1992 ================================================================================================== (Thousands of Dollars) OPERATING REVENUES: Electric (Note 1) $ 472,393 $480,553 $456,768 Gas (Note 1) 157,168 157,257 140,679 Electric sales to other utilities 6,636 6,414 6,965 - -------------------------------------------------------------------------------------------------- Total Utility Revenues 636,197 644,224 604,412 Diversified activities (Note 1) 380,705 322,925 235,660 - -------------------------------------------------------------------------------------------------- Total Operating Revenues 1,016,902 967,149 840,072 - -------------------------------------------------------------------------------------------------- OPERATING EXPENSES: Operations: Fuel used in electric production (Note 1) 84,860 74,480 85,005 Electricity purchased for resale (Note 1) 49,391 62,969 49,245 Gas purchased for resale (Note 1) 88,305 89,984 77,700 Non-utility gas marketing purchases 365,917 310,467 224,579 Other expenses of operation 152,200 149,604 134,253 Maintenance 44,011 42,861 42,474 Depreciation and amortization (Note 1) 35,862 34,056 34,014 Taxes other than income taxes 95,964 93,610 90,371 Federal income taxes (Notes 1 and 2) 24,540 26,225 22,679 - -------------------------------------------------------------------------------------------------- Total Operating Expenses 941,050 884,256 760,320 - -------------------------------------------------------------------------------------------------- INCOME FROM OPERATIONS 75,852 82,893 79,752 - -------------------------------------------------------------------------------------------------- OTHER INCOME AND DEDUCTIONS: Investigation and litigation costs (Note 12) (8,795) (6,139) -- Other-- net (Note 1) (530) (1,703) 200 Taxes other than income taxes (123) (94) (97) Federal income taxes (Notes 1 and 2) 4,250 3,525 895 - -------------------------------------------------------------------------------------------------- Total Other Income and Deductions (5,198) (4,411) 998 - -------------------------------------------------------------------------------------------------- INCOME BEFORE INTEREST CHARGES 70,654 78,482 80,750 - -------------------------------------------------------------------------------------------------- INTEREST CHARGES: Interest on long-term debt 29,105 30,147 32,158 Other interest 3,088 2,404 2,416 Amortization of debt premium and expense -- net 1,244 1,116 364 - -------------------------------------------------------------------------------------------------- Total Interest Charges 33,437 33,667 34,938 - -------------------------------------------------------------------------------------------------- NET INCOME 37,217 44,815 45,812 Dividends on preferred and preference stock, at required rates 3,251 3,364 3,478 - -------------------------------------------------------------------------------------------------- Earnings applicable to common stock 33,966 41,451 42,334 Cash dividends on common stock: $2.54, $2.49 and $2.43 34,486 33,694 32,589 - -------------------------------------------------------------------------------------------------- Balance to retained earnings (520) 7,757 9,745 Retained earnings, beginning of year 184,179 176,422 166,677 - -------------------------------------------------------------------------------------------------- Retained earnings, end of year $ 183,659 $184,179 $176,422 ================================================================================================== Average number of common shares outstanding (000's) 13,594 13,532 13,438 - -------------------------------------------------------------------------------------------------- EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING $ 2.50 $ 3.06 $ 3.15 ==================================================================================================
The accompanying notes are an integral part of these statements. 17 1994 Annual Report CONSOLIDATED BALANCE SHEETS
December 31, 1994 1993 ========================================================================================================= (Thousands of Dollars) ASSETS: UTILITY PLANT: Electric $ 951,019 $ 931,827 Gas 198,755 189,000 Common 55,445 52,525 - --------------------------------------------------------------------------------------------------------- Utility Plant in Service 1,205,219 1,173,352 Less accumulated depreciation 398,584 372,279 - --------------------------------------------------------------------------------------------------------- Net Utility Plant in Service 806,635 801,073 Construction work in progress 49,654 30,907 - --------------------------------------------------------------------------------------------------------- Net Utility Plant (Notes 1, 7, 11 and 12) 856,289 831,980 - --------------------------------------------------------------------------------------------------------- NON-UTILITY PROPERTY: Non-utility property 34,585 35,049 Less accumulated depreciation, depletion and amortization 13,977 13,041 - --------------------------------------------------------------------------------------------------------- Net Non-utility Property (Notes 1 and 7) 20,608 22,008 - --------------------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents (Notes 8 and 9) 16,081 14,256 Temporary cash investments (Note 9) 1,839 1,447 Customer accounts receivable, less allowance for uncollectible accounts of $2,200 and $2,026 44,105 60,289 Accrued utility revenue (Note 1) 27,273 23,017 Other accounts receivable, less allowance for uncollectible accounts of $209 and $102 17,384 11,577 Gas marketing accounts receivable, less allowance for uncollectible accounts of $327 and $471 58,470 49,248 Materials and supplies (at average cost): Fuel for electric generation 9,309 8,951 Gas in storage 11,544 13,413 Construction and other supplies 16,983 16,698 Prepaid property taxes 19,327 18,414 Prepayments and other current assets 28,877 22,212 - --------------------------------------------------------------------------------------------------------- Total Current Assets 251,192 239,522 - --------------------------------------------------------------------------------------------------------- DEFERRED DEBITS: Income tax recoverable in future rates (Notes 1 and 2) 73,261 75,468 Extraordinary property loss - Sterling Nuclear Project (Notes 1 and 3) 10,139 15,481 Deferred Order No. 636 transition costs (Notes 1 and 12) 13,480 21,500 Deferred revenue taxes (Note 1) 16,888 17,588 Deferred pension and other postretirement benefits (Notes 1 and 10) 10,505 7,277 IPPsettlement agreements (Notes 1 and 12) 17,821 4,300 Unamortized debt expense (amortized over term of securities) 10,493 8,565 Other deferred debits 32,328 37,284 - --------------------------------------------------------------------------------------------------------- Total Deferred Debits 184,915 187,463 - --------------------------------------------------------------------------------------------------------- TOTAL $1,313,004 $1,280,973 =========================================================================================================
18 Orange and Rockland Utilities, Inc. and Subsidiaries
December 31, 1994 1993 ========================================================================================================= (Thousands of Dollars) CAPITALIZATION AND LIABILITIES: CAPITALIZATION: Common stock (Note 5) $ 68,265 $ 67,660 Premium on capital stock (Note 5) 133,595 130,313 Capital stock expense (6,116) (6,108) Retained earnings (Note 4) 183,659 184,179 - --------------------------------------------------------------------------------------------------------- Total Common Stock Equity 379,403 376,044 - --------------------------------------------------------------------------------------------------------- Non-redeemable preferred stock 42,844 42,844 Non-redeemable cumulative preference stock 424 443 - --------------------------------------------------------------------------------------------------------- Total Non-redeemable Stock (Note 5) 43,268 43,287 - --------------------------------------------------------------------------------------------------------- Redeemable preferred stock (Note 6) 2,774 4,158 - --------------------------------------------------------------------------------------------------------- Long-term debt (Notes 7 and 9) 359,622 380,266 - --------------------------------------------------------------------------------------------------------- Total Capitalization 785,067 803,755 - --------------------------------------------------------------------------------------------------------- NON-CURRENT LIABILITIES: Reserve for claims and damages (Note 1) 4,713 3,830 Postretirement benefits (Note 10) 15,625 6,719 Pension costs (Note 10) 39,854 34,275 Obligation under capital leases (Note 11) 275 793 - --------------------------------------------------------------------------------------------------------- Total Non-current Liabilities 60,467 45,617 - --------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Long-term debt and lease obligation due within one year(Notes 7, 9 and 11) 19,910 1,463 Preferred stock to be redeemed within one year (Note 6) 1,384 1,384 Notes payable (Notes 8 and 9) -- 1,200 Commercial paper (Notes 8 and 9) 29,400 45,000 Accounts payable 63,855 57,359 Gas marketing accounts payable 71,913 54,247 Dividends payable 725 752 Customer deposits 5,669 5,807 Accrued Federal income and other taxes 5,949 9,586 Accrued interest 8,608 9,877 Refundable gas costs 7,554 8,967 Refunds to customers 10,265 793 Other current liabilities 16,127 16,321 - --------------------------------------------------------------------------------------------------------- Total Current Liabilities 241,359 212,756 - --------------------------------------------------------------------------------------------------------- DEFERRED TAXES AND OTHER: Deferred Federal income taxes (Notes 1 and 2) 173,317 172,672 Deferred investment tax credits (Notes 1 and 2) 17,109 18,004 Accrued Order No. 636 transition costs (Note 12) 13,480 21,500 Accrued IPP settlement agreements (Notes 1 and 12) 8,000 -- Refundable fuel costs (Note 1) 10,366 4,405 Other deferred credits 3,839 2,264 - --------------------------------------------------------------------------------------------------------- Total Deferred Taxes and Other 226,111 218,845 - --------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Note 12) -- -- - --------------------------------------------------------------------------------------------------------- TOTAL $1,313,004 $1,280,973 =========================================================================================================
The accompanying notes are an integral part of these statements. 19 1994 Annual Report CONSOLIDATED CASH FLOW STATEMENTS
Year Ended December 31, 1994 1993 1992 ================================================================================================== (Thousands of Dollars) CASH FLOW FROM OPERATIONS: Net Income $37,217 $44,815 $45,812 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 35,938 34,571 34,317 Deferred Federal income taxes (Note 2) (188) (39) 6,593 Deferred investment tax credit (Note 2) (895) (963) (1,132) Deferred and refundable fuel and gas costs 4,548 7,802 (6,388) Allowance for funds used during construction (517) (276) (430) Other non-cash changes 6,042 (8,055) 3,855 Changes in certain current assets and liabilities: Accounts and gas marketing receivables, net and accrued utility revenue (3,101) (17,286) (14,509) Materials and supplies 1,226 (737) 743 Prepaid property taxes (913) (1,066) (1,085) Prepayments and other current assets (6,665) (3,983) 2,453 Operating and gas marketing accounts payable 24,162 19,407 2,210 Accrued Federal income and other taxes (3,637) 4,911 1,506 Accrued interest (1,269) 779 (1,108) Refunds to customers 9,472 753 (114) Other current liabilities (332) 2,336 1,712 Other-- net 16,402 4,814 (5,687) - -------------------------------------------------------------------------------------------------- Net Cash Provided by Operations 117,490 87,783 68,748 - -------------------------------------------------------------------------------------------------- CASH FLOW FROM INVESTING ACTIVITIES: Additions to plant (60,542) (54,308) (56,438) Temporary cash investments (392) (569) (878) Allowance for funds used during construction 517 276 430 - -------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (60,417) (54,601) (56,886) - -------------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from: Issuance of common stock (Note 5) 3,868 -- 7,589 Issuance of long-term debt (Note 7) 55,000 75,000 55,000 Retirement of: Preference and preferred stock (Note 6) (1,384) (1,384) (1,384) Long-term debt (57,688) (75,091) (51,159) Capital lease obligations-- net (Note 11) (479) (443) (410) Net borrowings (repayments) under short-term debt arrangements (Note 8) (16,800) 4,700 11,500 Dividends on preferred and common stock (37,765) (37,086) (36,093) - -------------------------------------------------------------------------------------------------- Net Cash Used in Financing Activities (55,248) (34,304) (14,957) - -------------------------------------------------------------------------------------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 1,825 (1,122) (3,095) Cash and Cash Equivalents at Beginning of Year 14,256 15,378 18,473 - -------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $16,081 $14,256 $15,378 - -------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest, net of amounts capitalized $33,134 $32,012 $35,497 Federal income taxes $21,558 $27,020 $14,450 ==================================================================================================
The accompanying notes are an integral part of these statements. 20 Orange and Rockland Utilities, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. GENERAL Orange and Rockland Utilities, Inc. (Company) and its wholly owned utility subsidiaries, Rockland Electric Company (RECO) and Pike County Light & Power Company (Pike), are subject to regulation by the Federal Energy Regulatory Commission (FERC) and various state regulatory authorities with respect to their rates and accounting. Accounting policies conform to generally accepted accounting principles, as applied in the case of regulated public utilities, and are in accordance with the accounting requirements and rate-making practices of the regulatory authority having jurisdiction. A description of the significant accounting policies follows. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company, all subsidiaries and the Company's pro rata share of an unincorporated joint venture. All intercompany balances and transactions have been eliminated. The Company's non-utility subsidiaries are wholly owned land development, gas marketing and gas production companies. RATE REGULATION The Company's utility operations are subject to rate regulation by the New York Public Service Commission (NYPSC), the New Jersey Board of Public Utilities (NJBPU), the Pennsylvania Public Utility Commission (PPUC) and the FERC. The financial statements of the Company are based on generally accepted accounting principles, including the provisions of Statement of Financial Accounting Standards 71 (SFAS 71), "Accounting for the Effects of Certain Types of Regulation," which give recognition to the rate-making and accounting practices of these agencies. The principal effect of the rate-making process on the Company's financial statements is that of the timing of the recognition of incurred costs. If rate regulation provides reasonable assurance that an incurred cost will be recovered in a future period by inclusion of that cost in rates, SFAS 71 requires the capitalization of the cost. Regulatory assets represent probable future revenue associated with certain incurred costs, as these costs are recovered through the rate-making process. The following regulatory assets were reflected in the Consolidated Balance Sheets as of December 31, 1994 and 1993:
1994 1993 =============================================================================== (Thousands of Dollars) Deferred Income Taxes (Note 2) $ 73,261 $ 75,468 Extraordinary Property Loss (Note 3) 10,139 15,481 FERC Order No. 636 Costs (Note 12) 13,480 21,500 Deferred Revenue Taxes (Note 1) 16,888 17,588 Deferred Pension and Other Postretirement Benefits (Note 10) 10,505 7,277 Gas Take-or-Pay Costs (Note 12) 2,837 3,635 Revenue Decoupling Mechanism (Note 1) 1,295 10,293 Deferred Plant Maintenance Costs (Note 1) 4,699 3,488 Demand-Side Management Costs (Note 1) (96) 1,544 Deferred Fuel Costs (Note 1) (10,366) (4,405) IPP Settlement Agreements (Note 1) 17,821 4,300 Other 7,255 4,400 - ------------------------------------------------------------------------------- Total $147,718 $160,569 - -------------------------------------------------------------------------------
UTILITY REVENUES Utility revenues are recorded on the basis of cycle billings rendered to certain customers monthly and others bi-monthly. Unbilled revenues are accrued at the end of each month for estimated energy usage since the last meter reading. Under the Company's Revenue Decoupling Mechanism agreement (RDM), New York's electric revenues are recognized in the accompanying financial statements based on established targets. The RDM also provides for the reconciliation of Demand-Side Management (DSM) expenditures and the adjustment of certain operating costs. Any variation between actual results and the established targets are deferred and recovered from or returned to customers over a subsequent twelve-month period. Customer service performance incentives or penalties which were discontinued by the NYPSC in 1994 and demand-side management incentives, as detailed in the Agreement, are recognized as earned. Effective December 1, 1992, the level of revenues from gas sales in New York is subject to a weather normalization clause that requires recovery from or refund to firm customers of shortfalls or excesses of firm net revenues during a heating season due to variation from normal weather, which is the basis for projecting base tariff requirements. FUEL COSTS The tariff schedules for electric and gas services in New York include adjustment clauses under which fuel, purchased gas and certain purchased power costs, above or below levels allowed in approved rate schedules, are billed or credited to customers up to approximately 60 days after the costs are incurred. In accordance with regulatory commission policy, such costs, along with the related income tax effects, are deferred until billed to customers. A reconciliation of recoverable gas costs with billed gas revenues is done annually, as of August 31, and the excess or deficiency is refunded to or recovered from customers during a subsequent twelve-month period. The NYPSC provides for a modified electric fuel adjustment clause requiring an 80%/20% sharing between customers and shareholders of variations between actual and forecasted fuel costs annually. The 20% portion of fluctuations from forecasted costs is limited to a maximum of $1,762,000 annually. The fuel costs targets are approved by the NYPSC for each calendar year following the Company's filing of forecasted fuel costs. Tariffs for electric and gas service in Pennsylvania and electric service in New Jersey contain adjustment clauses which utilize estimated prospective energy costs on an annual basis. The recovery of such estimated costs is made through equal monthly charges over the year of projection. Any over or under recoveries are deferred and refunded or charged to customers during the subsequent twelve-month period. UTILITY PLANT Utility plant is stated at original cost. The cost of additions to, and replacements of, utility plant include contracted work, direct labor and material, allocable overhead, allowance for funds used during construction and indirect charges for engineering and supervision. Replacement of minor items of property and the cost of repairs are charged to maintenance expense. At the time depreciable plant is retired or otherwise disposed of, the original cost, together with removal cost less salvage, is charged to the accumulated provision for depreciation. 21 1994 Annual Report DEPRECIATION For financial reporting purposes, depreciation is computed on the straight-line method based on the estimated useful lives of the various classes of property. Provisions for depreciation are equivalent to the following composite rates based on the average depreciable plant balances at the beginning and end of the year:
Year Ended December 31, 1994 1993 1992 ===================================================== Plant Classification: Electric 3.05% 3.04% 3.04% Gas 2.80% 2.68% 3.59% Common 6.37% 6.07% 5.88% - -----------------------------------------------------
The composite gas depreciation rate, excluding the effect of adjustments provided for in a 1992 gas rate agreement with the NYPSC, amounted to 3.10% in 1994 and 3.01% in 1993. JOINTLY-OWNED UTILITY PLANT The Company has a one-third interest in the 1,200 megawatt Bowline Point generating facility, which it owns jointly with Consolidated Edison Company of New York, Inc. The Company is the operator of the joint venture. Each participant is entitled to its proportionate share of the energy produced. The operating and maintenance expenses of the facility are shared proportionately, based on the energy received from the plant by the partners. Under this agreement, each co-owner has an undivided interest in the facility and is responsible for its own financing. The Company's interest in this jointly-owned plant consists primarily of the following:
Year Ended December 31, 1994 1993 =========================================================== (Thousands of Dollars) Electric Utility Plant in Service $98,171 $97,753 Construction Work in Progress $ 2,984 $ 1,124 - -----------------------------------------------------------
FEDERAL INCOME TAXES The Company and its subsidiaries file a consolidated Federal income tax return, and income taxes are allocated to its subsidiaries based on the taxable income or loss of each. Investment tax credits, which were available prior to the Tax Reform Act of 1986, have been fully normalized and are being amortized over the remaining useful life of the related property for financial reporting purposes. The Company adopted Statement of Financial Accounting Standards No. 109 (SFAS No. 109) "Accounting for Income Taxes" on January 1, 1993, which requires a change from the deferred method to the asset and liability method of accounting for income taxes. SFAS No. 109 retains the requirement to record deferred income taxes for temporary differences that are reported in different years for financial reporting and tax purposes. The statement also requires that deferred tax liabilities or assets be adjusted for the future effects of any changes in tax laws or rates and that regulated enterprises recognize an offsetting regulatory asset representing the probable future rate recoveries for additional deferred tax liabilities. The probable future rate recoveries (revenues) to be recorded take into consideration the additional future taxes which will be generated by that revenue. Deferred taxes are also provided on temporary differences of the Company's non-regulated subsidiaries, which are charged to expense rather than offset by regulatory assets. The balance of deferred tax assets and liabilities as of January 1, 1993, the date of implementation of SFAS No. 109, was $69.6 million. The components of deferred tax assets and liabilities as of January 1, 1993, are as follows; Liabilities: Accelerated Depreciation -- $63.5 million, Other Liabilities -- $12.1 million; Assets: Employee Benefits -- $(6.4) million, and Deferred Fuel Costs -- $.4 million. DEFERRED REVENUE TAXES Deferred revenue taxes represent the unamortized balance of an accelerated payment of New Jersey Gross Receipts and Franchise Tax required by legislation enacted effective June 1, 1991. In accordance with an order by the NJBPU, the expenditure has been deferred and is being recovered in rates, with a carrying charge of 7.5% on the unamortized balance, over a ten-year period. In addition, certain New York State revenue taxes included in rate base are deferred and amortized over a twelve-month period following payment in accordance with the requirements of the NYPSC. IPP SETTLEMENT AGREEMENTS During 1994, the Company negotiated termination agreements with two of the three Independent Power Producers (IPP) scheduled to provide electric generating capacity and energy services to the Company in the late 1990's. The Company is presently negotiating for a similar arrangement with the remaining IPP, Wallkill Generating Company, L.P. (Wallkill Generating). As of December 31, 1994, $17.8 million of contract termination charges have been deferred in accordance with regulatory accounting orders pending a determination of the recoverability of the costs in rates. On January 24, 1995, the NJBPU authorized the recovery of $.9 million over a period of twelve months for the portion of one of the settlement agreements applicable to the Company's New Jersey electric operations. A decision on the recovery of the remaining $16.9 million, as well as any additional charges associated with the ongoing negotiation, will be addressed in future rate proceedings before the NYPSCand NJBPU. Management believes that these $16.9 million of termination costs were prudently incurred and therefore should be fully recoverable in rates. DEFERRED PLANT MAINTENANCE COSTS The Company utilizes a silicone injection procedure as part of its maintenance program for residential underground electric cable in order to prevent premature failures and ensure the realization of the expected useful life of the facilities. In 1992 the FERC issued an accounting order that required the cost of this procedure to be treated as maintenance expense rather than as a plant addition. The Company requested deferred accounting for these expenditures from the NYPSC and NJBPU in order to properly match the cost of the procedure with the periods benefited. In 1994 the NYPSC approved the deferred accounting request and authorized a ten-year amortization period. The NJBPU has not as yet acted on the Company's petition. RESERVE FOR CLAIMS AND DAMAGES Costs arising from workers' compensation claims, property damage, general liability and unusual production plant repair costs are partially self-funded. Provisions for the reserves are based on experience, risk of loss and the rate-making practices of regulatory authorities. 22 Orange and Rockland Utilities, Inc. and Subsidiaries SALE OF BROADCAST PROPERTIES On September 8, 1994, the Company adopted a formal plan to sell the six radio broadcast properties operated by a wholly owned indirect subsidiary, Atlantic Morris Broadcasting, Inc. In January 1995, a contract was signed for the sale of two of the six broadcasting properties. Non-binding offers have been received for the remaining stations. The sale of the properties is anticipated to be completed on or before June 1, 1995. Although the final gain or loss which will result from the sale of the properties cannot be determined at this time, the Company does not believe, based on the sales and offers received to date, that the disposition will have any material effect on the Company's financial statements. Operating results of $(484,000), $(804,000) and $(960,000) for the years ended December 31, 1994, 1993, and 1992, respectively, for the radio broadcast properties are included in Other Income and Deductions in the accompanying Consolidated Statements of Income and Retained Earnings. Net assets of $6.9 million consisting principally of radio broadcast licenses and operating plant and equipment are included at book value in the accompanying Consolidated Balance Sheets. RECLASSIFICATIONS Certain amounts from prior years have been reclassified to conform with the current year presentation. NOTE 2. FEDERAL INCOME TAXES. The Internal Revenue Service (IRS) concluded its audits of the Company's tax returns through 1989. All issues have been resolved, resulting in an immaterial effect on the Company's results of operations. Presently, the IRS is examining tax returns for 1990, 1991 and 1992; notification of their findings for these years has not yet been received. The components of Federal income taxes are as follows:
Year Ended December 31, 1994 1993 1992 ========================================================================================== (Thousands of Dollars) Charged to operations: Current $ 24,415 $26,332 $16,567 Deferred-net 262 86 6,384 Amortization of investment tax credit (137) (193) (272) - ------------------------------------------------------------------------------------------ 24,540 26,225 22,679 - ------------------------------------------------------------------------------------------ Charged to other income: Current (3,042) (2,630) (244) Deferred-net (450) (125) 209 Amortization of investment tax credit (758) (770) (860) - ------------------------------------------------------------------------------------------ (4,250) (3,525) (895) - ------------------------------------------------------------------------------------------ Total $ 20,290 $ 22,700 $ 21,784 - ------------------------------------------------------------------------------------------
Effective January 1, 1993, the Company adopted the provisions of SFAS No. 109. The adoption of SFAS No. 109 did not have a significant impact on the results of current operations because of the recording of offsetting regulatory assets for utility operations and the relatively minor impact from diversified operations. The resulting cumulative effect of the change in accounting principle of $(.1) million is included in 1993's results of operations. Fiscal year 1992 was not restated to apply the provisions of SFAS No. 109. The deferred tax expense for 1992 was the result of the following: Pollution Control Facilities -- $1.5 million, Abandonment Loss -- Sterling -- $(1.5 million), Accelerated Tax Depreciation --$6.4 million, Deferred Employee Benefits -- $(2.0 million), Deferred Fuel Costs -- $2.0 million and Other -- $.2 million. The tax effect of temporary differences which gave rise to deferred tax assets and liabilities are as follows:
As of December 31, 1994 1993 =============================================================== (Thousands of Dollars) Liabilities: Accelerated depreciation $177,362 $172,815 Other 30,111 30,216 - --------------------------------------------------------------- Total liabilities 207,473 203,031 - --------------------------------------------------------------- Assets: Employee benefits (15,269) (14,417) Deferred fuel costs (4,784) (2,707) Other (14,103) (13,235) - --------------------------------------------------------------- Total assets (34,156) (30,359) - --------------------------------------------------------------- Net Liability $173,317 $172,672 - ---------------------------------------------------------------
Reconciliation of the difference between Federal income tax expenses and the amount computed by applying the prevailing statutory income tax rate to income before income taxes is as follows:
Year Ended December 31, 1994 1993 1992 ===================================================================================== (% of Pre-tax Income) Statutory tax rate 35% 35% 34% Reduction in computed taxes resulting from: Amortization of investment tax credits (2) (1) (2) Cost of removal (1) (2) (3) Additional depreciation deducted for book purposes 5 4 3 Other (2) (3) -- - ------------------------------------------------------------------------------------ Effective Tax Rate 35% 33% 32% - ------------------------------------------------------------------------------------
On August 10, 1993, the Budget Reconciliation Act of 1993 was signed into law. Among other things, the Act increased the corporate Federal income tax rate to 35% from 34%, retroactive to January 1, 1993. Pursuant to the provisions of SFAS No. 109, the Company adjusted its deferred tax and regulatory asset balances during 1993 to reflect the higher rate. The impact of this rate change was to increase the deferred tax liability by $7.6 million; however, because of the recording of offsetting regulatory assets, the increase in income tax expense was $.1 million. NOTE 3. STERLING NUCLEAR PROJECT. Costs associated with the Sterling Nuclear Project, which was abandoned in 1980, and in which the Company was a 33% participant, are recorded in Deferred Debits -- Extraordinary Property Loss. The Company has been authorized by the NYPSC to recover all costs associated with the Sterling Nuclear Project. An annual amortization has been approved which includes a return on investment equal to the Company's current overall rate of return. Amortization of project costs applicable to New York operations will be completed in approximately 15 months. The NJBPU had approved a twenty-year amortization, which commenced June 23, 1982, of costs (excluding a return on the unamortized balance) attributable to the Company's subsidiary, RECO. At December 31, 1994 and 1993, the unamortized Sterling Project costs which have been approved for amortization and recovery, before reduction for deferred taxes, amounted to $10.8 million and $16.5 million, respectively. Approximately $4.7 million and $5.6 million of such recoverable costs at December 31, 1994 and December 31, 1993, respectively, are attributable to RECO and are not subject to an earned return on the unamortized balance. 23 1994 Annual Report NOTE 4. RETAINED EARNINGS. Various restrictions on the availability of retained earnings of RECO for cash dividends are contained in, or result from, covenants in indentures supplemental to that company's Mortgage Trust Indenture. Approximately $7,501,600 at December 31, 1994 and 1993 was so restricted. NOTE 5. CAPITAL STOCK OTHER THAN REDEEMABLE PREFERRED STOCK. The table below summarizes the changes in Capital Stock, issued and outstanding, for the years 1992, 1993 and 1994.
(B) (C) Non-Redeemable Non-Redeemable (A) Cumulative Cumulative Common Preferred Preference Capital Stock Stock Stock Stock ($5 par value) ($100 par value) (no par value) Premium ===================================================================================================== Shares Amount* Shares Amount* Shares Amount* Amount* - ----------------------------------------------------------------------------------------------------- Balance 1/1/92: 13,327,470 $66,637 428,443 $ 42,844 15,041 $490 $123,701 Sales 202,488 1,013 6,575 Conversions 1,233 6 (852) (28) 22 - ----------------------------------------------------------------------------------------------------- Balance 1/1/93: 13,531,191 67,656 428,443 42,844 14,189 462 130,298 Conversions 864 4 (599) (19) 15 - ----------------------------------------------------------------------------------------------------- Balance 1/1/94: 13,532,055 67,660 428,443 42,844 13,590 443 130,313 Sales 120,041 601 3,268 Conversions 817 4 (565) (19) 14 - ----------------------------------------------------------------------------------------------------- Balance 12/31/94: 13,652,913 $68,265 428,443 $ 42,844 13,025 $424 $133,595 - ----------------------------------------------------------------------------------------------------- Shares Authorized 15,000,000 820,000 1,500,000 - ----------------------------------------------------------------------------------------------------- *(in thousands)
(A) At December 31, 1994, 19,147 shares of common stock were reserved for conversion of preference stock. (B) Non-Redeemable Preferred Stock (cumulative):
Par Value ------------------- Callable Shares December 31, Redemption Series Outstanding 1992, 1993 and 1994 Price Per Share =================================================================== (Thousands of Dollars) A,4.65% 50,000 $ 5,000 $104.25 at any time. B,4.75% 40,000 4,000 $102.00 at any time. D,4.00% 3,443 344 $100.00 at any time. F,4.68% 75,000 7,500 $102.00 at any time. G,7.10% 110,000 11,000 $101.00 at any time. H,8.08% 150,000 15,000 $102.43 at any time. - ------------------------------------------------------------------- 428,443 $ 42,844 - -------------------------------------------------------------------
This stock is not subject to mandatory redemption, but rather is subject to redemption solely at the option of the Company on 30 days' minimum notice upon payment of the redemption price plus accrued and unpaid dividends to the date fixed for redemption. Furthermore, the preferred stock is superior to cumulative preference stock and common stock with respect to dividends and liquidation rights. (C) The Non-Redeemable $1.52 Convertible Cumulative Preference Stock, Series A, is redeemable at the option of the Company on 30 days' minimum notice upon payment of the redemption price, plus accrued and unpaid dividends. The redemption price per share is $32.50 plus accrued and unpaid dividends to the date fixed for redemption. This stock ranks junior to cumulative preferred stock and superior to common stock as to dividends and liquidation rights. Furthermore, this stock is convertible, at the option of the shareholder, into common stock at the ratio of 1.47 shares of common stock for each share of preference stock, subject to adjustment. NOTE 6. REDEEMABLE PREFERRED STOCK. The table below summarizes the changes in Redeemable Cumulative Preferred Stock, issued and outstanding, for the years 1992, 1993 and 1994.
($100 par value) - --------------------------------------------------------------- Shares Amount* - --------------------------------------------------------------- Balance 12/31/91: 83,106 $ 8,310 Redemptions (13,842) (1,384) - --------------------------------------------------------------- Balance 12/31/92: 69,264 6,926 Redemptions (13,842) (1,384) - --------------------------------------------------------------- Balance 12/31/93: 55,422 5,542 Redemptions (13,842) (1,384) - --------------------------------------------------------------- Balance 12/31/94: 41,580 $ 4,158 - --------------------------------------------------------------- Shares Authorized 180,000 - ---------------------------------------------------- *(in thousands)
The Redeemable Cumulative Preferred Stock, Series I, 8 1/8%, is redeemable in whole or in part at the option of the Company on 30 days' minimum notice at the redemption price plus accrued and unpaid dividends to the date fixed for redemption. The redemption price per share is $101 through January 1, 1997, and $100 thereafter. The preferred stock is superior to the cumulative preference stock and common stock with respect to dividends and liquidation rights. A sinking fund provision requires that the Company, on each December 31, call for the redemption and retirement of 13,842 shares at $100 per share, provided, however, that the Company will call for redemption and retire on December 31, 1997, the remaining shares outstanding at the redemption price of $100 per share plus accrued and unpaid dividends to the date fixed for redemption. The redemption requirement for each of the three years following 1994 is as follows: $1,384,200 annually in 1995 and 1996 and $1,389,600 at maturity in 1997. NOTE 7. LONG-TERM DEBT. Under the terms of the Company's First Mortgage Indenture and the indentures supplemental thereto, and relative to all series of First Mortgage Bonds, Orange and Rockland Utilities (ORU) on May 1 of each year is required to make annual sinking fund payments equal to 1% of the maximum amount of bonds outstanding during the preceding calendar year. ORU has satisfied such requirements through the year 1994 by allocating an amount of additional property and expects to continue such practice in succeeding years. Pike is required, pursuant to its First Mortgage Indenture, to make annual sinking fund payments in the amount of $9,500 on July 15 of each year, with respect to its Series "A" Bonds. The sinking fund requirements of Pike for 1994 were satisfied by the allocation of an amount of additional property and Pike expects to continue such practice in succeeding years. On August 31, 1994, the New York State Energy Research and Development Authority (NYSERDA) issued, on behalf of the Company, $55 million of variable rate Pollution Control Refunding Revenue Bonds (Orange and Rockland Utilities, Inc. Projects), 1994 Series A due October 1, 2014 (1994 Bonds). The proceeds from the issuance of the 1994 Bonds were used to refund, on October 1, 1994, the $55 million NYSERDA 10 1/4% Pollution Control Revenue Bonds (Orange and Rockland Utilities, Inc. Projects), 1984 Series issued on behalf of the Company. In anticipation of 24 Orange and Rockland Utilities, Inc. and Subsidiaries issuing the 1994 Bonds, the Company entered into an interest rate swap agreement in 1992. Pursuant to the swap agreement, the Company will pay interest at a fixed rate of 6.09% to a swap counter party and will receive a variable rate of interest in return which is identical to the variable rate payment made on the 1994 Bonds. The result is to effectively establish a fixed rate of interest on the 1994 Bonds of 6.09%. Details of long-term debt at December 31, 1994 and 1993 are as follows:
December 31, 1994 1993 =============================================================================== (Thousands of Dollars) Orange and Rockland Utilities, Inc.: First Mortgage Bonds: Series H, 4 7/8% due Aug. 15, 1995 $ 17,000 $ 17,000 Series I, 6 1/2% due Oct. 1, 1997 23,000 23,000 Promissory Notes (unsecured) 12.9% due through Feb. 15, 1996 25 42 10 1/4% due Oct. 1, 2014 -- 55,000 9% due Aug. 1, 2015 44,000 44,000 6.09% due Oct. 1, 2014 55,000 -- Debentures: Series A, 9 3/8% due Mar. 15, 2000 80,000 80,000 Series B, 6 1/2% due Oct. 15, 1997 55,000 55,000 Series C, 6.14% due Mar. 1, 2000 20,000 20,000 Series D, 6.56% due Mar. 1, 2003 35,000 35,000 Rockland Electric Company: First Mortgage Bonds: Series C, 4 5/8% due Aug. 15, 1995 2,000 2,000 Series H, 9.59 % due July 1, 2020 20,000 20,000 Series I, 6% due July 1, 2000 20,000 20,000 Pike County Light & Power Company: First Mortgage Bonds: Series A, 9% due July 15, 2001 884 884 Series B, 9.95% due Aug. 15, 2020 1,800 1,800 Diversified Operations: Mortgage (secured) 8 1/2% due through June 18, 1999 5,575 5,654 Secured Notes 8 1/2% due through Aug. 31, 1998 277 2,868 - ------------------------------------------------------------------------------- 379,561 382,248 Less: Amount due within one year 19,392 984 - ------------------------------------------------------------------------------- 360,169 381,264 Unamortized discount on long-term debt (547) (998) - ------------------------------------------------------------------------------- Total Long-Term Debt $359,622 $380,266 - -------------------------------------------------------------------------------
The aggregate amount of debt maturities--all of which will be satisfied by cash payments--and sinking fund requirements -- all of which will be satisfied by the allocation of additional property -- for each of the five years following 1994 is as follows: 1995 -- $19,631,200; 1996 -- $531,800; 1997 -- $78,194,500; 1998 -- $120,100; 1999--$4,905,500. Substantially all of the utility plant and other physical property is subject to the liens of the respective indentures securing the First Mortgage Bonds of the Company and its utility subsidiaries. Investments in the Company's wholly owned utility subsidiaries, costing $11,828,700, which have been eliminated from the consolidated balance sheet, are pledged under the Second Supplemental Indenture to the Company's First Mortgage Indenture. NOTE 8. CASH AND SHORT-TERM DEBT. The Company considers all cash and highly liquid debt instruments purchased with a maturity date of three months or less to be cash and cash equivalents for the purposes of the Consolidated Financial Statements. At December 31, 1994, the Company and its utility subsidiaries had unsecured bank lines of credit with ten commercial banks aggregating $59.0 million. In most cases the annual fees equal to one-eighth of 1% are paid to the banks for such lines of credit. The Company may borrow under the lines of credit through the issuance of promissory notes to the banks at their prevailing interest rate for prime commercial borrowers. The Company, however, utilizes such lines of credit to fully support commercial paper borrowings, which are issued through dealers at the prevailing interest rate for prime commercial paper. The aggregate amount of borrowings through the issuance of promissory notes and commercial paper cannot exceed the aggregate lines of credit. In addition, O&R Energy, Inc., a non-utility subsidiary of RECO, maintains a $15.0 million line of credit with one commercial bank under which there were no borrowings outstanding at December 31, 1994 and 1992. At December 31, 1993, there was $1.2 million outstanding under the O&R Energy, Inc. line of credit. There are no fees associated with this line, and borrowings, made under the line are at a rate of prime plus one-half percent. All borrowings for 1994, 1993 and 1992 had maturity dates of three months or less. Information regarding short-term borrowings during the past three years is as follows:
1994 1993 1992 ===================================================================== (Millions of Dollars) Weighted average interest rate at year-end 6.4% 3.6% 3.7% Amount outstanding at year-end $29.4 $46.2 $41.5 Average amount outstanding for the year $31.3 $35.3 $23.9 Daily weighted average interest rate during the year 4.5% 3.3% 3.8% Maximum amount outstanding at any month-end $42.9 $46.2 $41.5 - ---------------------------------------------------------------------
NOTE 9. FAIR VALUE OF FINANCIAL INSTRUMENTS. FINANCIAL ASSETS AND LIABILITIES For the Company, financial assets and liabilities consist principally of cash and cash equivalents, short-term debt, commercial paper, long-term debt and redeemable preferred stock. The methods and assumptions used to estimate the fair value of each class of financial assets and liabilities for which it is practicable to estimate that value is as follows: Cash and cash equivalents and temporary cash investments--The carrying amount reasonably approximates fair value because of the short maturity of those instruments. Long-term debt--The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues. 25 1994 Annual Report Notes payable and Commercial paper--The carrying amount reasonably approximates fair value because of the short maturity of those instruments. Redeemable preferred stock--The fair value of the Company's redeemable preferred stock is estimated based on the quoted market prices for the same or similar issues.
1994 1993 ===================================================================== Carrying Fair Carrying Fair Amount Amount Amount Amount - --------------------------------------------------------------------- (Thousands of Dollars) Cash and cash equivalents $ 16,081 $ 16,081 $ 14,256 $ 14,256 Temporary cash investments 1,839 1,839 1,447 1,447 Long-term debt 379,561 371,730 382,248 408,497 Notes payable and commercial paper 29,400 29,400 46,200 46,200 Redeemable preferred stock 4,158 4,136 5,542 5,732 - ---------------------------------------------------------------------
OFF BALANCE SHEET AND DERIVATIVE FINANCIAL INSTRUMENTS In addition, the Company utilizes certain off balance sheet, derivative financial instruments. Information regarding such instruments is as follows: Swap Agreement--In connection with the issuance of the 1994 Bonds, the Company entered into a single interest rate swap agreement during 1992. The purpose of the swap agreement, which became effective on October 1, 1994, was to take advantage of the favorable interest rates which existed during 1992. Under the terms of the interest rate swap agreement, the Company pays interest at a fixed rate of 6.09% to a swap counterparty and receives a variable rate of interest in return which is identical to the variable rate payment on the 1994 Bonds made pursuant to an indenture of trust dated August 15, 1994. The result is to effectively fix the interest rate on the 1994 Bonds at 6.09%. There were no gains or losses due to the execution of the Swap Agreement. The terms and conditions of the Swap Agreement are specific to the financing described. As a result, no market price is available. Under certain circumstances, although none are anticipated, the agreement may be terminated. The fair value of the agreement is the amount which one counterparty may be required to pay the other upon early termination. If the agreement had been terminated on December 31, 1994, the Company would have been required to make a payment of approximately $1,900,000 to the Swap counterparty. Gas Futures Contracts--The Company's natural gas marketing subsidiary, O&R Energy, Inc., enters into futures contracts and commodity price swap agreements and purchases options to reduce exposure to changes in the price of natural gas. These transactions are accounted for as hedges in accordance with SFAS No. 80 "Accounting for Futures Contracts." Gains and losses on futures contracts and purchased options, and payments or receipts under swap agreements, are included as part of revenue and recognized when the underlying gas is delivered to customers. Net futures contracts purchased and outstanding at December 31, 1994, amounted to 257 contracts and the related margin deposits with brokers amounted to $678,000. The underlying futures contracts are of varying durations, none of which extend beyond November 1995. The Company would be required to pay approximately $30,000 to settle these contracts at December 31, 1994. Deferred losses at December 31, 1994, were not significant. Swap transactions were entered into in order to eliminate the commodity price risk relating to long-term fixed price sales commitments and variable price purchase commitments. The swap agreements require payments to (or receipt from) the broker based on the differential between a fixed and variable price for natural gas. The swap agreements hedge 4.7 BCF of natural gas to be purchased and delivered over the five years ended October 1999. The related margin deposits at December 31, 1994, amounted to $1,600,000. Margin deposits consist of cash and letters of credit. The Company would be required to pay approximately $1,194,000 to settle these contracts at December 31, 1994. NOTE 10. PENSION AND POSTRETIREMENT BENEFITS. PENSION BENEFITS The Company maintains a non-contributory defined benefit retirement plan, covering substantially all employees. The plan calls for benefits, based primarily on years of service and average career compensation, to be paid to eligible employees at retirement. For financial reporting purposes, pension costs are accounted for in accordance with the requirements of Statement of Financial Accounting Standards No. 87 (SFAS No. 87), "Employers' Accounting for Pensions." SFAS No. 87 results in a difference in the method of determining pension costs for financial reporting and funding purposes. Plan valuation for funding and income tax purposes is prepared on the unit credit cost method, which makes no assumptions as to future compensation levels. In contrast, the projected unit credit cost method required for accounting purposes by SFAS No. 87 reflects assumptions as to future compensation levels. The Company's policy is to fund the pension costs determined by the unit credit cost method subject to the IRS funding limitation rules. For rate-making purposes, pension expense determined under SFAS No. 87 is reconciled with the amount provided in rates for pensions. Any difference is deferred for subsequent recovery or refund. Net periodic pension expense calculated pursuant to the requirements of SFAS No. 87 for the years 1994, 1993 and 1992 includes the following components:
December 31, 1994 1993 1992 ================================================================== (Thousands of Dollars) Service cost-benefits earned during year $ 6,250 $ 5,690 $ 5,896 Interest cost on projected benefit obligation 14,132 12,915 10,301 Actual return on plan assets 2,634 (19,383) (15,135) Net deferral and capitalized (18,426) 5,014 4,397 - ------------------------------------------------------------------ Net Pension Expense $ 4,590 $ 4,236 $ 5,459 - ------------------------------------------------------------------
The following table sets forth, pursuant to the requirements of SFAS No. 87, the plan's funded status and amounts recognized in the Consolidated Balance Sheets at December 31, 1994 and 1993. Plan assets are stated at fair market value and are composed primarily of common stocks and investment grade debt securities. 26 Orange And Rockland Utilities, Inc. And Subsidiaries
December 31, 1994 1993 ============================================================================== (Thousands of Dollars) Actuarial present value of benefit obligations: Vested $(154,980) $(153,730) Nonvested (13,644) (9,758) - ------------------------------------------------------------------------------ Accumulated benefit obligation $(168,624) $(163,488) - ------------------------------------------------------------------------------ Projected benefit obligation $(181,625) $(180,176) Plan assets at fair market value 172,835 182,810 - ------------------------------------------------------------------------------ Excess of plan assets over projected benefit obligation (8,790) 2,634 Unamortized net transition asset at adoption of SFAS No. 87 being amortized over 15 years (7,795) (8,909) Unrecognized prior service costs 35,425 28,528 Unrecognized net gain (49,137) (47,960) - ------------------------------------------------------------------------------ Accrued Pension Cost $ (30,297) $ (25,707) - ------------------------------------------------------------------------------
The expected long-term rate of return on plan assets, the weighted average discount rate and the annual rate of increase in future compensation assumed in determining the projected benefit obligation were 8%, 8.5% and 3.5%, respectively for 1994. For the year 1993, the expected long-term rate of return on plan assets, the discount rate and the annual rate of increase in future compensation assumed in determining the projected benefit obligation were 8%, 7.75% and 4%, respectively. POSTRETIREMENT BENEFITS In addition to providing pension benefits, the Company and its subsidiaries provide certain health care and life insurance benefits for retired employees. Employees retiring from the Company on or after having attained age 55 who have rendered at least 10 years of service are entitled to postretirement health care coverage. Effective January 1, 1994, the Company adopted the provisions of SFAS No. 112 "Employers' Accounting for Postretirement Benefits" which requires the recognition, on an accrual basis of disability benefits provided to former or inactive employees after employment, but before retirement. As a result, the Company recorded a liability and regulatory asset of $.9 million during 1994. Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106 (SFAS No. 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions," which established the accounting and financial reporting standards for postretirement benefits other than pensions. SFAS No. 106 requires the Company to accrue the estimated future cost of postretirement health and non-pension benefits during the years that the employee renders the necessary service, rather than recognizing the cost of such benefits after the employee has retired and when the benefits are actually paid. Deferred accounting for any difference between the expense charge required under SFAS No. 106 and the current rate allowance has been authorized by the NYPSC for the Company's New York electric and gas operations. A similar procedure has been adopted by the NJBPU for the operations in that state. In December 1994, the NYPSC allowed the Company to start recovering SFAS No. 106 costs applicable to New York electric operations. Rate recovery of SFAS No. 106 costs applicable to the Company's New York gas and New Jersey electric operations will be addressed in future rate filings. In order to provide funding for active employees' postretirement benefits, the Company has established Voluntary Employees' Beneficiary Association (VEBA) trusts for collectively bargained employees and management employees. Contributions to the VEBA trusts are tax deductible, subject to limitations contained in the Internal Revenue Code. The Company's policy is to fund postretirement health and life insurance costs to the extent recoveries are realized for these costs. In 1994, rate recoveries amounted to $3.5 million and billings to others totaled $.5 million. The Company will begin funding the VEBA trusts in 1995. As permitted by SFAS No. 106, the Company has elected to amortize the accumulated postretirement benefit obligation at the date of adoption of the accounting standard, January 1, 1993, over a 20-year period. This transition obligation totaled $57.2 million. The following table sets forth the plan's funded status, reconciled with amounts recognized in the Company's financial statements at December 31, 1994 and December 31, 1993:
1994 1993 ============================================================================== (Thousands of Dollars) Accumulated postretirement benefit obligation: Fully eligible active employees $(19,574) $(18,386) Other active employees (25,248) (27,073) Retirees (20,677) (20,337) - ------------------------------------------------------------------------------ Total benefit obligation (65,499) (65,796) Plan assets at fair value -0- -0- - ------------------------------------------------------------------------------ Accumulated postretirement obligation in excess of plan assets (65,499) (65,796) Unrecognized experience net (gain) loss (736) 4,694 Unrecognized transition obligation 51,522 54,383 - ------------------------------------------------------------------------------ Accrued Postretirement Benefit Cost $(14,713) $ (6,719) - ------------------------------------------------------------------------------
The components of net periodic postretirement benefit cost for the years ended December 31, 1994 and 1993 are as follows:
1994 1993 ============================================================================== (Thousands of Dollars) Service cost $ 1,817 $ 1,535 Interest cost 5,198 4,598 Return on plan assets -0- -0- Amortization of transition obligation 2,861 2,861 Net losses/(gains) 553 -0- Deferred and capitalized (4,480) (6,719) - ------------------------------------------------------------------------------ Net Expense $ 5,949 $ 2,275 - ------------------------------------------------------------------------------
The calculation of the actuarial present value of benefit obligations at December 31, 1994 assumes a discount rate of 8.5% and health care cost trend rates of 8.5% for medical costs and 12% for prescription drugs in 1995, decreasing through 2002 to a rate of 5.0%. If the health care trend rate assumptions were increased by 1 percent, the accumulated postretirement benefit obligation would be increased by approximately $6.6 million. The effect of this change on the sum of the service cost and interest cost would be an increase of $.9 million. 1993 assumed a discount rate of 7.75% and health care cost trend rates of 9.0% for medical costs and 14% for prescription drugs in 1994, decreasing through 2002 to a rate of 5.0%. 27 1994 Annual Report OTHER The Company and two of its wholly owned non-utility subsidiaries have established a Subsidiary Equity Incentive Plan in which plan participants are entitled to certain rights measured as Performance Units. Each Performance Unit gives the plan participant the opportunity to receive an incentive award of 3-5% of the net increase, subject to certain restrictions, in the value of the Company's investment in the participating subsidiaries over its initial investment. Incentive awards granted during 1994 amounted to $.6 million. No incentive awards were granted in 1993. As of December 31, 1994 and 1993, $1.1 million and $1.5 million was reserved for future award grants. NOTE 11. LEASES. The Company maintains leases for certain property and equipment which meet the accounting criteria for capitalization. As required by Statement of Financial Accounting Standards No. 71 (SFAS No. 71), "Accounting for the Effects of Certain Types of Regulation," the Company has recorded such leases on its balance sheets. The amount of leased property included in the accompanying Consolidated Balance Sheets, and the obligation associated with such leases at December 31, 1994 and 1993 are as follows:
DECEMBER 31, 1994 1993 =============================================================================== (Thousands of Dollars) Utility Plant--Electric $4,245 $4,245 Less accumulated amortization 3,452 2,973 - ------------------------------------------------------------------------------- Net Assets Under Capital Lease $ 793 $1,272 - ------------------------------------------------------------------------------- Noncurrent Liabilities $ 275 $ 793 Current Liabilities 518 479 - ------------------------------------------------------------------------------- Total Liabilities $ 793 $1,272 - -------------------------------------------------------------------------------
Although current rate-making practices treat all leases as operating leases, SFAS No. 71 provides that regulated utilities shall recognize as a charge against income an amount equal to the rental expense allowed for rate-making purposes. Therefore, the rental payments on these leases have no impact on the Company's Consolidated Statements of Income and Retained Earnings. The future minimum rental commitments under the Company's capital leases and noncancellable operating leases are as follows:
NONCANCELLABLE CAPITAL OPERATING LEASES LEASES =============================================================================== (Thousands of Dollars) 1995 $ 571 $ 6,238 1996 286 4,311 1997 -- 3,742 1998 -- 3,489 1999 -- 3,264 All years thereafter -- 28,841 - ------------------------------------------------------------------------------- Total 857 $ 49,885 -------------- Less amount representing interest 64 - ----------------------------------------------------------- Present value of net minimum lease payments $ 793 - -----------------------------------------------------------
Rental expense for 1994, 1993 and 1992 was $5.3 million, $6.0 million and $6.3 million, respectively. NOTE 12. COMMITMENTS AND CONTINGENCIES. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk, as defined by Statement of Financial Accounting Standards No. 105 "Financial Instruments with Concentrations of Credit Risk," consist principally of temporary cash investments, accounts receivables, gas marketing accounts receivables and an interest rate swap agreement. The Company places its temporary cash investments with high quality financial institutions. Concentrations of credit risk with respect to accounts receivable are limited due to the Company's large, diverse customer base within its service territory. With respect to gas marketing operations, the customer base consists of a large diverse group of users of natural gas across the United States, with the Company's credit risk being dependent on overall economic conditions. Regarding the interest rate swap agreement, the Company does not use derivative financial instruments for speculative purposes and is a counterparty in one swap agreement related to the refinancing of $55 million of pollution control bonds. Therefore, as of December 31, 1994, the Company had no significant concentrations of credit risk. CONSTRUCTION PROGRAM Under the construction program of the Company and its subsidiaries, it is estimated that expenditures (excluding AFUDC) of approximately $61.5 million will be incurred during 1995. As a requirement of the Clean Air Act of 1990, capital expenditures of $13.5 million are included in the above amount. GAS SUPPLY AND STORAGE CONTRACTS The Company has long-term contracts for firm supply, transportation and storage of gas. The Company's gas purchase obligation under these contracts for the five years following 1994 is as follows: 1995--$70,272,600; 1996--$72,406,800; 1997--$59,428,300; 1998--$61,193,200 and 1999--$63,043,300. On August 7, 1987, the FERC issued an order authorizing pipeline suppliers to pass through to local distribution companies (LDC's) take-or-pay costs resulting from contract renegotiations with gas producers. The Company's total take-or-pay liability is approximately $14.7 million. The Company has received refunds from pipeline suppliers of approximately $2.4 million which it has applied against this take-or-pay liability. The Company has been allowed by the NYPSC to pass through 65% of these costs to customers while deferring the remaining amount until the NYPSC concludes its review of each company in its jurisdiction. As of December 31, 1994, the Company has deferred $2.8 million of these costs. On April 8, 1992, the FERC issued Order No. 636. The Order required significant changes to the structure of the natural gas industry, and more specifically, to the manner in which pipelines provide service. Order No. 636 changed the manner in which the Company obtains its gas supplies by unbundling the transportation, storage and supply services offered by interstate gas pipelines into separate components. During 1993, the Company successfully completed the process of acquiring its own gas supply and assumed direct responsibility for its gas acquisition and transportation. While the FERC's objective is to restructure the industry to promote competition among gas suppliers to ensure supply at the lowest reasonable cost, there are significant initial costs associated with the implementation of the 28 Orange And Rockland Utilities, Inc. and Subsidiaries restructuring rule. Specifically, Order No. 636 authorizes pipelines to recover from their customers certain transition costs resulting from implementation of the rulemaking. The Company's four principal pipeline suppliers made filings with the FERC during 1993 for approval of a portion of their restructuring transition costs and allocation procedures to flow the approved costs through to their customers. Through December 31, 1994, the Company has paid $11.1 million of transition costs. The Company currently estimates that its remaining obligation for Order No. 636 transition costs will be approximately $13.5 million. This estimate was determined from information provided in Order No. 636 FERC compliance filings by the Company's pipeline suppliers and from subsequent transition cost filings. This estimate is subject to adjustment by the FERC in its deliberations on these filings and any future filings by the suppliers and the outcome of bankruptcy proceedings involving one of the Company's suppliers. The Company has provided for the unpaid liability as of December 31, 1994 with an offsetting charge to Deferred Transition Costs. On October 28, 1993, the NYPSC instituted a generic proceeding to review the issues associated with Order No. 636 restructuring. On December 20, 1994, the NYPSC issued Opinion No. 94-26 in this Proceeding. As a result, any transition costs resulting from FERC Order No. 636 will be fully recoverable in gas rates to the extent such costs were prudently incurred. COAL SUPPLY CONTRACTS The Company has one long-term contract and one short-term contract for the supply of coal and two long-term contracts for the transportation of coal. The Company has the right under the long-term coal purchase contract to suspend the purchase of coal if an alternative fuel source becomes less expensive. The Company's aggregate contract obligations for the supply and transportation of coal, for each of the five years following 1994 is as follows: 1995--$33,132,900; 1996--$31,942,400; 1997--$31,495,300; 1998--$32,406,400; 1999--$32,716,600. POWER PURCHASE AGREEMENTS The Company has three long-term contracts with other utilities for the purchase of electric generating capacity and energy. The contracts expire in 1995, 1998 and 2015. Total payments under these contracts were $5.0 million, $4.6 million and $3.2 million during 1994, 1993 and 1992, respectively. At December 31, 1994, the estimated future payments for capacity that the Company is obligated to buy under these contracts for the five years following 1994 are as follows:
Capacity Year (Mw) Amount ============================================================================= 1995 260 $4,152,500 1996 300 4,452,700 1997 325 5,048,000 1998 300 1,031,000 1999 25 690,000 - -----------------------------------------------------------------------------
The purchase capacities shown in the above table are based on contracts currently in effect and are exclusive of applicable energy charges. The Company has a power sales agreement with an independent power producer, (IPP) Wallkill Generating Company, L.P. (Wallkill Generating), to purchase 95 Mw of capacity and associated energy. Under the terms of this agreement, purchases were to commence by no later than January 1, 1997. In November 1994, the Company notified Wallkill Generating to stop work on the proposed generating facility and commenced buyout negotiations. Wallkill Generating has threatened to file a lawsuit against the Company, arguing that the Company had breached an implied duty of good faith and fair dealing in connection with the development and permitting of the Wallkill project. In support of this claim, Wallkill Generating cited, among other things, an alleged conflict of interest involving a former Company officer who prior to his retirement in October 1994 had directed the Company's activities with respect to the Wallkill project. Wallkill Generating alleged that this former officer had a financial and management interest in another IPP project. Based on investigations to date, the Company believes that this interest on his part had no effect on the Company's actions or decisions with respect to the Wallkill project which the Company has independently determined is an uneconomic source of power compared with other alternatives. LEGAL PROCEEDINGS INVESTIGATION AND RELATED LITIGATION On February 7, 1994, the Company commenced an action entitled Orange and Rockland Utilities, Inc. v. James F. Smith (Smith), in New York State Supreme Court against its former Chief Executive Officer and Chairman of the Board of Directors, who was terminated for cause by the Company's independent Directors in October 1993. The action asserts claims against Mr. Smith for breach of his fiduciary duties of loyalty and care, waste, conversion, fraud and unjust enrichment based on misuse of Company assets and personnel and misappropriation of Company funds for his own benefit or for other improper purposes, and failure to maintain proper management controls or to properly supervise corporate affairs and subordinate employees. Mr. Smith counterclaimed for benefits and filed a motion demanding arbitration under his employment agreement with the Company. On June 17, 1994, the court issued an Order granting Mr. Smith's motion to compel arbitration. Under a second order dated August 10, 1994, the parties have filed demands for arbitration of the claims asserted by the Company and by Mr. Smith with the American Arbitration Association. Hearings are scheduled to begin on May 15, 1995. On August 26, 1993 the Company filed an action entitled Orange and Rockland Utilities, Inc. v. Winikow et al., under the Federal Racketeer Influenced and Corrupt Organizations Act (RICO), in the United States District Court, Southern District of New York. The Company alleges that the defendants -- a former Company Vice President, three other former Company employees and two vendors -- engaged in a conspiracy to divert monies from the Company through the submission of false and fraudulent invoices in order to pay personal expenses of and/or to provide personal services to the defendants. In addition, the Company alleges that the defendants made various contributions to political candidates consisting of money and services diverted from the Company. Accordingly, the Company seeks treble damages as called for by the RICO statute, punitive damages, attorneys' fees, interest and court costs. On December 19, 1994, the Company filed a notice dismissing the action against three former Company employees, two of whom had paid restitution to the Company, and one vendor. The Company is continuing to pursue its claims against the former Vice President and one vendor. 29 1994 Annual Report On August 18, 1993, Feiner v. Orange and Rockland Utilities, Inc., a purported ratepayer class action complaint against the Company, RECO, a former Company Vice President and others, was filed in the United States District Court, Southern District of New York. Plaintiffs alleged that the defendants violated the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) and New York common law by using false and misleading information to obtain rate increases from the NYPSC and used funds obtained from ratepayers in furtherance of an alleged scheme to make illegal campaign contributions and other illegal payments. On February 18, 1994, the Company filed a motion to dismiss this case, which motion was granted on September 8, 1994, and the case was dismissed. Plaintiff then filed a Notice of Appeal with the United States Court of Appeals for the Second Circuit (the Second Circuit) appealing the District Court's decision. Thereafter, the parties signed a Stipulation of Settlement dismissing the appeal, which was approved by the Second Circuit on December 7, 1994. The settlement recognizes the remedial measures already taken by the Company, pays $75,000 towards the plaintiffs' attorneys fees and leaves the District Court decision dismissing the case in effect. On November 23, 1993, Gross v. Orange and Rockland Utilities, Inc. (Gross), a purported shareholder class action complaint, was filed in the United States District Court, Southern District of New York, and, on March 31, 1994, Bernstein v. Orange and Rockland Utilities, Inc. and James F. Smith (Bernstein), also a purported shareholder class action complaint, was filed in the same Court. Plaintiffs in both actions alleged that various Securities and Exchange Commission filings of the Company during certain periods in 1993 contained false and misleading information, and thereby violated certain sections of the Securities Act of 1933 (Gross) or the Securities Exchange Act of 1934 (Bernstein) by failing to disclose what the plaintiffs alleged was a "scheme" by the Company to make illegal political payments and campaign contributions. On November 3, 1994, the Company signed a settlement agreement in the Gross and Bernstein actions, which settlement was subject to Court approval. On November 21, 1994, the Court consolidated the two cases, approved a notice, and conditionally certified a class action for settlement purposes only. Notice to the class was mailed and published at the end of November. The settlement was approved by the Court on January 27, 1995. Pursuant to the settlement agreement, the Company will create a settlement fund of $1.85 million, to be distributed on a pro rata basis to members of the settlement class, and all claims of the plaintiffs in both cases will be deemed resolved. The cross-claims of the Company and James F. Smith in the Bernstein action were dismissed without prejudice. On August 31, 1993, Patents Management Corp. v. Orange and Rockland Utilities, Inc., et al., a purported shareholder derivative complaint, was filed in the Supreme Court of the State of New York, County of New York, against the Company, most of the Company's Directors and several other named defendants by an alleged shareholder of the Company. Plaintiff initially claimed that the named Directors breached their fiduciary duties by condoning the alleged wrongful acts of a former Vice President or failing to exercise appropriate supervisory control over such former Vice President and later amended the complaint to complain of other matters described in the Report of the Special Committee (see "Events Affecting the Company"). Plaintiff requested that the Court require the Directors to indemnify the Company against all losses sustained by the Company as a result of the alleged wrongful acts. A Stipulation of Settlement with regard to this case has been signed by the Company and the plaintiff. Under its terms, the Company agrees to implement remedial measures and provision is made for payment of plaintiff's attorneys fees. A hearing on the proposed settlement is scheduled before the Court on February 23, 1995. If approved by the Court, the Settlement will resolve all issues in this case. On November 10, 1994, the Company filed with the NYPSC a quantification of the rate-making effects of its ongoing investigation into prior financial improprieties. The Company requested the NYPSC approve an additional refund of approximately $3.4 million to its New York electric and gas customers. In December 1994, a filing was made with the NJBPU proposing to refund approximately $.7 million to the Company's New Jersey customers. By order dated January 27, 1995, the NJBPU approved this refund. These amounts were charged to operations in the fourth quarter of 1994. The NYPSC may conduct a proceeding to provide the opportunity for other parties, including NYPSC Staff, which is conducting an independent investigation, to be heard on this matter. The NJBPU also is conducting an investigation. The Company is unable to predict the final results of these proceedings and what modifications, if any, will be made to the amount proposed to be refunded in New York and New Jersey. OTHER LEGAL PROCEEDINGS On May 11, 1993, an action was commenced against the Company by Hudson Riverkeeper Fund, Inc. (Riverkeeper) in the United States District Court for the Southern District of New York. In its complaint, Riverkeeper alleged that the Company violated and continues to violate its SPDES Permit for its Lovett Generating Station (Lovett) by failing to maintain cooling water intake structures that reflect the best technology available for minimizing adverse environmental impact. In addition, the complaint alleged that the Company failed to submit a scope of work for entrainment studies required by its SPDES permit (entrainment studies). The original complaint requested that the Court assess civil penalties aggregating $22 million and order the Company to take steps to insure that the cooling water intake structures at Lovett reflect the best technology available for minimizing adverse environmental impact. On May 18, 1993, Riverkeeper amended its complaint against the Company by withdrawing its entrainment studies allegation and reducing the amount of civil penalties sought to approximately $11 million. On June 30, 1993, the Company filed its answer to Riverkeeper's allegations. Thereafter, reflecting the Company's belief that Riverkeeper's allegations have no legal merit, the Company filed a Motion for Summary Judgment seeking the dismissal of this action. On October 21, 1993, the Court issued a Memorandum and Order denying the Company's Motion for Summary Judgment and ruling that the New York State Department of Environmental Conservation (DEC) should be included as a party to this action. On January 14, 1994, a conference was held before Judge Brieant during which the DEC intervened in this litigation as a designated plaintiff. On April 8, 1994, the parties agreed to have engineers enter into discussions regarding modifications to the Lovett plant's cooling water intake structures. These discussions continued throughout 1994. On January 15, 1993, the Company was served with a complaint naming the Company as one of several defendants in Warwick Administrative Group, et al. v. Avon Products, Inc. et al., which case was filed in the United States District Court for the Southern District of New York. The allegations in this case stem from an 30 Orange And Rockland Utilities, Inc. and Subsidiaries Administrative Order for Remedial Design and Remedial Action issued on February 28, 1992 by the United States Environmental Protection Agency pursuant to Superfund laws which impose liability upon entities who are identified as having contributed hazardous wastes to a particular site requiring cleanup, including generators and transporters of such wastes. The Order directs certain members of the Warwick plaintiff group to implement a plan for the cleanup of the Warwick Landfill site in Greenwood Lake, New York. The Warwick plaintiff group now alleges that some defendants, including the Company, arranged to have hazardous substances disposed of at the Warwick site and thus seeks to recover from the defendants costs incurred and damages suffered in connection with the cleanup of the site. An answer to the complaint, as amended, was filed by the Company on February 23, 1993, denying all of the allegations in the amended complaint and setting forth a number of affirmative defenses. On September 25, 1991, the Company was named as one of several hundred third party defendants in the United States v. Kramer, et al. and State of New Jersey Department of Environmental Protection v. Almo Anti-Pollution Services, et al., which cases have been consolidated in the United States District Court for the District of New Jersey, Camden Vicinage. The allegations in this action concern the Helen Kramer Landfill site in Mantua, New Jersey, which operated from 1963 to 1981. Suit in this case was brought under Superfund laws. It is presently unclear if any hazardous waste generated by the Company was transported to the Helen Kramer Landfill site. At this time the Company does not believe this action will have a material effect on the business or financial condition of the Company. On March 29, 1989, the New Jersey Department of Environmental Protection (NJDEP) issued a directive under the New Jersey Spill and Control Act to various potentially responsible parties (PRPs) including the Company, with respect to a site formerly owned and operated by Borne Chemical Company in Elizabeth, Union County, New Jersey, ordering certain interim actions directed at both site security and the off-site removal of certain hazardous substances. Certain PRPs, including the Company, signed an administrative consent order with NJDEP requiring them to perform a removal action at the Borne site, which was completed on June 22, 1992. The PRPs have entered into negotiations with the NJDEP regarding the terms of an additional administrative consent order which will obligate the PRPs, including the Company, to perform a remedial investigation and feasibility study (RIFS) at the site. The results of this study will determine what, if any, subsurface remediation at the Borne site is required. The Company does not believe that this matter will have a material effect on the financial condition of the Company. On August 2, 1994, the Company entered into a Consent Order with the New York State Department of Environmental Conservation (NYSDEC) in which the Company agreed to conduct a remedial investigation of certain property it owns in West Nyack, New York. Polychlorinated biphenyls (PCBs) have been discovered at the West Nyack site. The results of this investigation will determine what, if any, remediation at the West Nyack site will be required. The Company does not believe that this matter will have a material effect on the financial condition of the Company. On May 29, 1991, a group of ten electric utilities (Metal Bank Group) entered into an Administrative Consent Order with the United States Environmental Protection Agency (EPA) to perform a RIFS at the Cottman Avenue/Metal Bank Superfund site in Philadelphia, Pennsylvania. PCBs have been discharged at the Cottman Avenue site from an underground storage tank and the handling of transformers and other electrical equipment. On May 25, 1994, the Company entered into a tolling agreement by which the Metal Bank Group reserved its right to file suit against the Company, while the Metal Bank Group and the Company entered into discussions to determine the Company's involvement with the Cottman Avenue site. These discussions continue. The RIFS has been completed and submitted to the EPA for determination of what remedial measures will be required at the Cottman Avenue site. The Company is unable at this time to estimate the Company's share, if any, of past or future costs at this site. On January 17, 1995, the Company was served with a summons in Michael Payran v. Orange and Rockland Utilities, Inc. and James Donnery, a purported personal injury action commenced in the Supreme Court of the State of New York. Plaintiff seeks compensatory and punitive damages of $50 million as a result of injuries sustained at the Company's Lovett power plant. Since the Company has not been served with the complaint in this action, it cannot evaluate plaintiff's claims. ENVIRONMENTAL The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and certain similar state statutes authorize various governmental authorities to issue orders compelling responsible parties to take cleanup action at sites determined to present an imminent and substantial danger to the public and to the environment because of an actual or threatened release of hazardous substances. The Company is a party to a number of administrative proceedings involving potential impact on the environment. Such proceedings arise out of, without limitation, the operation and maintenance of facilities for the generation, transmission and distribution of electricity and natural gas. Such proceedings are not, in the aggregate, material to the financial condition of the Company. Pursuant to the Clean Air Act Amendments of 1990, which became law on November 15, 1990, a permanent nationwide reduction of 10 million tons in sulfur dioxide emissions from 1980 levels, as well as a permanent nationwide reduction of 2 million tons of nitrogen oxide emissions from 1980 levels must be achieved by January 1, 2000. In addition, continuous emission monitoring systems are required at all affected facilities effective January 1, 1995. Pursuant to New York State attainment of ozone standards, nitrogen oxide (NOx) reductions must be achieved by May 31, 1995. The Company has two base load generating stations that burn fossil fuels that will be impacted by this legislation. These generating facilities already burn low sulfur fuels, so additional capital costs are not anticipated for compliance with the sulfur dioxide emission requirements. However, installation of low NOx burners at Lovett plant and operational modifications at Bowline plant are required to meet NOx reduction levels for ozone attainment. Additional emission monitoring systems have 31 1994 Annual Report been installed at both facilities. The Company's construction expenditures for this work are estimated to be approximately $28.7 million through 1995. Approximately $15.2 million has been expended through 1994. Beginning with calendar year 1994, Title V sources (Bowline Point and Lovett) are required to pay an emission fee. Each facility's fees are based upon actual air emissions reported to NYSDEC at a rate of approximately $25 per ton of air emissions for calendar year 1994. The emission fee will be reevaluated by New York State annually. The Company will continue to assess the impact of the Clean Air Act Amendments of 1990 on its power generating operations as additional regulations implementing these Amendments are promulgated. To date, the Company has identified six former manufactured gas plant sites which were owned and operated by the Company or its predecessors. The Company may be named as a potentially responsible party for these sites under relevant environmental laws, which may require the Company to clean up these sites. To date, no claims have been asserted against the Company or consent orders entered into by the Company regarding these sites. The NYPSC has commenced a proceeding to consider the most economical method of compliance with the Clean Air Act Amendments of 1990 by electric utilities in New York State. NOTE 13. SEGMENTS OF BUSINESS. The Company defines its principal business segments as utility (electric and gas) and diversified activities. The diversified segment includes the gas marketing, gas production and land development. Total utility revenue as reported in the Consolidated Statements of Income and Retained Earnings include both sales to unaffiliated customers and intersegment sales which are billed at tariff rates. Income from operations is total revenue less operating expenses. General corporate expenses were allocated in the manner used in the rate-making process. Identifiable assets by segment are those assets that are used in the production, distribution and sales operations in each segment. Allocations were made in a manner consistent with the rate-making process. Corporate assets are principally property, cash, sundry receivables and unamortized debt expense.
Segments of Business Year Ended December 31, 1994 1993 1992 ============================================================================== Operating Information: (Thousands of Dollars) Operating revenues: Sales to unaffiliated customers: Electric $ 478,909 $ 486,842 $ 463,601 Gas 157,045 157,185 140,630 Intersegment sales: Electric 120 125 132 Gas 123 72 49 - ------------------------------------------------------------------------------ Total Utility Operating Revenues 636,197 644,224 604,412 Diversified activities 380,705 322,925 235,660 - ------------------------------------------------------------------------------ Total Operating Revenues $1,016,902 $ 967,149 $ 840,072 - ------------------------------------------------------------------------------ Operating income before income taxes: Electric $ 80,355 $ 89,243 $ 83,824 Gas 19,724 19,147 16,539 Diversified activities 313 729 2,067 - ------------------------------------------------------------------------------ Total Operating Income Before Income Taxes 100,392 109,119 102,430 - ------------------------------------------------------------------------------ Income Taxes: Electric 19,894 21,380 18,596 Gas 4,644 4,679 3,403 Diversified activities 2 167 679 - ------------------------------------------------------------------------------ Total Income Taxes 24,540 26,226 22,678 - ------------------------------------------------------------------------------ Total Income From Operations $ 75,852 $ 82,893 $ 79,752 - ------------------------------------------------------------------------------ Other Information: Identifiable assets: Electric $ 960,143 $ 944,903 $ 839,122 Gas 214,933 219,508 182,943 Diversified activities 95,846 84,401 73,275 - ------------------------------------------------------------------------------ Total Identifiable Assets 1,270,922 1,248,812 1,095,340 Corporate assets 42,082 32,161 32,161 - ------------------------------------------------------------------------------ Total Assets $1,313,004 $1,280,973 $1,127,501 - ------------------------------------------------------------------------------ Depreciation expense: Electric $ 29,161 $ 28,049 $ 27,076 Gas 5,940 5,349 6,404 Diversified activities 761 658 534 - ------------------------------------------------------------------------------ Total $ 35,862 $ 34,056 $ 34,014 - ------------------------------------------------------------------------------ Capital expenditures: Electric $ 44,832 $ 39,441 $ 42,133 Gas 15,242 13,955 13,799 Diversified activities 468 912 506 - ------------------------------------------------------------------------------ Total $ 60,542 $ 54,308 $ 56,438 - ------------------------------------------------------------------------------
NOTE 14. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED).
Earnings Earnings Applicable Per Income To Average Operating From Net Common Common Revenues Operations Income Stock Share ============================================================================== QUARTER ENDED (Thousands of Dollars) 1994 March 31 $292,675 $24,165 $14,068 $13,255 $ .98 June 30 229,735 13,380 3,380 2,567 .19 September 30 239,214 25,615 16,382 15,570 1.14 December 31 255,278 12,692 3,387 2,574 .19 - ------------------------------------------------------------------------------ 1993 March 31 $263,189 $23,958 $15,084 $14,243 $1.05 June 30 213,988 15,044 6,601 5,760 .43 September 30 236,402 26,391 17,312 16,471 1.22 December 31 253,570 17,500 5,818 4,977 .36 - ------------------------------------------------------------------------------
32 Orange and Rockland Utilities, Inc. and Subsidiaries REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ARTHUR ANDERSEN LLP TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ORANGE AND ROCKLAND UTILITIES, INC.: We have audited the accompanying consolidated balance sheet of Orange and Rockland Utilities, Inc. and Subsidiaries (a New York corporation) as of December 31, 1994, and the related consolidated statements of income and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Orange and Rockland Utilities, Inc. and Subsidiaries as of December 31, 1994, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. As discussed in Note 12 to the Consolidated Financial Statements under the subheading Investigation and Related Litigation, the New York Public Service Commission (NYPSC) and the New Jersey Board of Public Utilities (NJBPU) are currently investigating, among other things, misappropriations of Company funds by certain former employees and the impact on ratepayers. Although the Company has completed its own investigation and has requested the NYPSC and the NJBPU to approve additional refunds of $3.4 million and $.7 million, respectively, the Company is unable to predict the final results of this proceeding and what modifications, if any, will be made to the amounts proposed to be refunded. Accordingly, no provision for any additional liability that may result from these investigations has been made in the accompanying consolidated financial statements. As discussed in Notes 2 and 10 of the Consolidated Financial Statements, the Company changed its method of accounting for income taxes and postretirement benefits in 1993. /s/ Arthur Andersen LLP New York, New York February 2, 1995 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS GRANT THORNTON LLP TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES We have audited the accompanying consolidated balance sheets of Orange and Rockland Utilities, Inc. and Subsidiaries as of December 31, 1993, and the related consolidated statements of income and retained earnings and cash flows for each of the two years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Orange and Rockland Utilities, Inc. and Subsidiaries as of December 31, 1993, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As more fully discussed in Note 12 (Legal Proceedings) to the Consolidated Financial Statements, the Company and various state regulatory authorities are currently investigating misappropriations of Company funds by certain former employees and the impact on ratepayers. As a result of these improprieties, several class action and derivative complaints have been filed against the Company and others. Although the Company has refunded certain amounts to ratepayers as of December 31, 1993, the ultimate outcome of the investigations and litigation cannot presently be determined. Accordingly, no provision for any additional liability that may result from these matters has been made in the accompanying 1993 financial statements. As discussed in Notes 2 and 10 of the Consolidated Financial Statements, the Company changed its method of accounting for income taxes and postretirement benefits in 1993. /s/ Grant Thornton LLP New York, New York February 16, 1994 33 1994 Annual Report OPERATING STATISTICS -- ELECTRIC
Year Ended December 31, 1994 1993 1992 ================================================================================================================= SOURCE OF ELECTRICITY (Mwh): Generation -- net Steam 3,282,416 2,720,897 3,083,852 Hydro 168,149 164,378 143,871 Gas Turbine 10,448 7,557 3,938 - ----------------------------------------------------------------------------------------------------------------- Total Net Generation 3,461,013 2,892,832 3,231,661 Purchases 1,574,015 2,054,253 1,532,105 Company Use and Unaccounted For (305,747) (354,806) (298,806) - ----------------------------------------------------------------------------------------------------------------- Net Energy Sold 4,729,281 4,592,279 4,464,960 - ----------------------------------------------------------------------------------------------------------------- SALES (Mwh): Residential 1,660,755 1,611,602 1,532,915 Commercial 2,049,265 2,018,240 1,986,048 Industrial 657,142 627,944 594,912 Public Street Lighting 27,836 27,705 27,538 Public Authorities 68,972 72,037 70,257 - ----------------------------------------------------------------------------------------------------------------- Total Sales to Customers 4,463,970 4,357,528 4,211,670 Other Utilities for Resale 265,311 234,751 253,290 - ----------------------------------------------------------------------------------------------------------------- Total Sales of Electricity 4,729,281 4,592,279 4,464,960 - ----------------------------------------------------------------------------------------------------------------- REVENUES (000's): Residential $ 214,439 $ 211,082 $ 193,124 Commercial 212,214 212,240 202,523 Industrial 51,316 50,983 47,128 Public Street Lighting 4,939 4,967 4,880 Public Authorities 4,051 4,344 4,212 - ----------------------------------------------------------------------------------------------------------------- Total Revenues from Sales to Customers 486,959 483,616 451,867 Other Utilities for Resale 6,636 6,414 6,965 - ----------------------------------------------------------------------------------------------------------------- Total Revenues from Sales of Electricity 493,595 490,030 458,832 Other Electric Operating Revenues (14,566) (3,063) 4,901 - ----------------------------------------------------------------------------------------------------------------- Total Electric Operating Revenues $ 479,029 $ 486,967 $ 463,733 - ----------------------------------------------------------------------------------------------------------------- SYSTEM NET CAPABILITY AND PEAK (Kw): Net Installed Capability at Time of Peak 1,013,500 1,013,500 1,011,000 Firm Purchases-- net 275,000 250,000 200,000 - ----------------------------------------------------------------------------------------------------------------- Total System Net Capability 1,288,500 1,263,500 1,211,000 - ----------------------------------------------------------------------------------------------------------------- NET PEAK LOAD 1,022,000 1,037,000 943,000 LOAD FACTOR .52 .51 .53 HEAT RATE -- Btu of Fuel per Kwh Generated 10,772 10,683 10,600 ELECTRIC CUSTOMERS -- Year End 259,708 256,897 254,192 RESIDENTIAL CUSTOMER STATISTICS: Average Annual Kwh Use 7,357 7,214 6,928 Average Annual Revenue per Kwh 12.91(cents) 13.10(cents) 12.60(cents) Average Annual Bill Including Fuel $ 949.89 $ 944.82 $ 872.77 Average Annual Fuel Cost Recovery $ 188.74 $ 194.90 $ 192.76 =================================================================================================================
Year Ended December 31, 1991 1990 ========================================================================================== SOURCE OF ELECTRICITY (Mwh): Generation -- net Steam 3,506,037 3,805,705 Hydro 172,752 201,115 Gas Turbine 15,217 23,446 - ------------------------------------------------------------------------------------------ Total Net Generation 3,694,006 4,030,266 Purchases 1,150,460 891,313 Company Use and Unaccounted For (316,748) (329,181) - ------------------------------------------------------------------------------------------ Net Energy Sold 4,527,718 4,592,398 - ------------------------------------------------------------------------------------------ SALES (Mwh): Residential 1,597,571 1,496,284 Commercial 1,955,851 1,885,221 Industrial 576,046 574,456 Public Street Lighting 26,780 26,488 Public Authorities 73,455 71,221 - ------------------------------------------------------------------------------------------ Total Sales to Customers 4,229,703 4,053,670 Other Utilities for Resale 298,015 538,728 - ------------------------------------------------------------------------------------------ Total Sales of Electricity 4,527,718 4,592,398 - ------------------------------------------------------------------------------------------ REVENUES (000's): Residential $ 196,031 $ 179,554 Commercial 196,409 186,423 Industrial 44,724 44,834 Public Street Lighting 4,732 4,686 Public Authorities 4,419 4,242 - ------------------------------------------------------------------------------------------ Total Revenues from Sales to Customers 446,315 419,739 Other Utilities for Resale 9,575 19,292 - ------------------------------------------------------------------------------------------ Total Revenues from Sales of Electricity 455,890 439,031 Other Electric Operating Revenues 1,265 2,506 - ------------------------------------------------------------------------------------------ Total Electric Operating Revenues $ 457,155 $ 441,537 - ------------------------------------------------------------------------------------------ SYSTEM NET CAPABILITY AND PEAK (Kw): Net Installed Capability at Time of Peak 1,008,700 1,005,000 Firm Purchases-- net 175,000 152,000 - ------------------------------------------------------------------------------------------ Total System Net Capability 1,183,700 1,157,000 - ------------------------------------------------------------------------------------------ NET PEAK LOAD 1,001,000 922,000 LOAD FACTOR .51 .54 HEAT RATE -- Btu of Fuel per Kwh Generated 10,441 10,486 ELECTRIC CUSTOMERS -- Year End 251,724 248,758 RESIDENTIAL CUSTOMER STATISTICS: Average Annual Kwh Use 7,286 6,893 Average Annual Revenue per Kwh 12.27(cents) 12.00(cents) Average Annual Bill Including Fuel $ 894.11 $ 827.20 Average Annual Fuel Cost Recovery $ 207.01 $ 209.92 ==========================================================================================
34 Orange And Rockland Utilities, Inc. and Subsidiaries OPERATING STATISTICS -- GAS
Year Ended December 31, 1994 1993 1992 1991 1990 ====================================================================================================================== SOURCE OF GAS (Mmcf): Purchased 47,618 41,983 47,070 46,438 52,013 Manufactured 38 21 22 15 14 Storage--net (906) 1,077 (450) 1,490 (565) Used in Electric Production (24,847) (21,234) (24,141) (26,444) (30,741) Company Use and Unaccounted For (432) (630) (549) (1,176) (634) - ---------------------------------------------------------------------------------------------------------------------- Net Energy Sold 21,471 21,217 21,952 20,323 20,087 - ---------------------------------------------------------------------------------------------------------------------- SALES (Mmcf): Residential 15,164 15,323 15,212 13,564 13,555 Commercial and Industrial 5,257 5,233 5,295 4,766 4,807 - ---------------------------------------------------------------------------------------------------------------------- Total Firm Sales 20,421 20,556 20,507 18,330 18,362 Interruptible 1,023 653 889 1,325 889 Other Utilities for Resale 27 8 556 668 836 - ---------------------------------------------------------------------------------------------------------------------- Total Sales of Gas 21,471 21,217 21,952 20,323 20,087 - ---------------------------------------------------------------------------------------------------------------------- REVENUES (000's): Residential $ 112,759 $ 113,116 $ 97,646 $ 82,198 $ 82,139 Commercial and Industrial 36,676 36,707 32,541 27,811 27,849 - ---------------------------------------------------------------------------------------------------------------------- Total Revenues from Firm Sales 149,435 149,823 130,187 110,009 109,988 Interruptible 3,996 2,605 3,414 5,536 3,683 Other Utilities for Resale 203 105 1,950 1,999 2,404 - ---------------------------------------------------------------------------------------------------------------------- Total Revenues from Sales of Gas 153,634 152,533 135,551 117,544 116,075 Other Gas Revenues 3,534 4,724 5,128 5,143 1,636 - ---------------------------------------------------------------------------------------------------------------------- Total Gas Operating Revenues $ 157,168 $ 157,257 $140,679 $122,687 $117,711 - ---------------------------------------------------------------------------------------------------------------------- MAXIMUM DAILY CAPACITY AT DEC. 31 (Mmcf): Pipeline Suppliers 195.2 194.6 195.9 195.9 194.7 Propane Plants 30.6 30.6 30.6 30.6 30.6 - ---------------------------------------------------------------------------------------------------------------------- Total Maximum Daily Capacity 225.8 225.2 226.5 226.5 225.3 - ---------------------------------------------------------------------------------------------------------------------- MAXIMUM 24-HOUR SENDOUT (Mmcf) 206.0 191.3 160.0 167.0 165.2 HEATING DEGREE DAYS 5,522 5,791 5,771 5,106 4,918 GAS CUSTOMERS -- YEAR END 110,631 109,464 108,168 106,854 105,528 RESIDENTIAL CUSTOMER STATISTICS: Average Annual Mcf Use 151.0 145.2 145.4 131.0 131.9 Average Annual Revenue per Mcf $ 7.44 $ 7.41 $ 6.44 $ 6.08 $ 6.09 Average Annual Bill Including Fuel $1,122.89 $1,075.86 $ 936.63 $ 797.09 $ 802.61 Average Annual Fuel Cost Recovery $ 622.72 $ 595.94 $ 500.42 $ 446.11 $ 458.11 ======================================================================================================================
35 1994 Annual Report FINANCIAL STATISTICS
Year Ended December 31, 1994 1993 1992 1991 1990 ============================================================================================================================ COMMON STOCK DATA: Earnings Per Average Common Share $ 2.50 $ 3.06 $ 3.15 $ 3.12 $ 3.54* Dividends Declared Per Share $ 2.54 $ 2.49 $ 2.43 $ 2.37 $ 2.32 Book Value Per Share (Year End) $ 27.79 $ 27.79 $ 27.22 $ 26.33 $ 25.46 Market Price Range Per Share: High $ 41 1/4 $ 47 1/2 $ 41 7/8 $ 39 $ 32 3/8 Low $ 28 3/8 $ 38 5/8 $ 32 3/8 $ 30 7/8 26 1/8 Year End $ 32 1/2 $ 40 5/8 $ 41 5/8 $ 38 5/8 $ 31 3/8 Price Earnings Ratio 13.00 13.28 13.21 12.38 8.86 Dividend Payout Ratio 101.60% 81.37% 77.14% 75.96% 65.54% Common Shareholders at Year-End 23,299 24,328 25,696 25,989 26,424 Average Number of Common Shares Outstanding (000's) 13,594 13,532 13,438 13,238 13,040 Total Common Shares Outstanding at Year-End (000's) 13,653 13,532 13,531 13,327 13,132 Return on Average Common Equity 9.01% 11.16% 11.88% 12.13% 14.49% - ---------------------------------------------------------------------------------------------------------------------------- CAPITALIZATION DATA (000'S): Common Stock Equity $ 379,403 $ 376,044 $ 368,321 $ 350,947 $ 334,317 Non-Redeemable Preferred Stock 43,268 43,287 43,306 43,334 43,365 Redeemable Preferred Stock 2,774 4,158 5,542 6,926 8,311 Long-Term Debt 359,622 380,266 380,202 376,839 371,660 - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization $ 785,067 $ 803,755 $ 797,371 $ 778,046 $ 757,653 - ---------------------------------------------------------------------------------------------------------------------------- CAPITALIZATION RATIOS: Common Equity 48.33% 46.79% 46.19% 45.11% 44.13% Non-Redeemable Preferred Stock 5.51% 5.38% 5.43% 5.57% 5.72% Redeemable Preferred Stock .35% .52% .70% .89% 1.10% Long-Term Debt 45.81% 47.31% 47.68% 48.43% 49.05% - ---------------------------------------------------------------------------------------------------------------------------- SELECTED FINANCIAL DATA (000'S): Operating Revenues $1,016,902 $ 967,149 $ 840,072 $ 727,783 $ 652,892 Operating Expenses $ 941,050 $ 884,256 $ 760,320 $ 650,707 $ 571,191 Operating Income $ 75,852 $ 82,893 $ 79,752 $ 77,076 $ 81,701 Net Income $ 37,217 $ 44,815 $ 45,812 $ 44,868 $ 49,839 Earnings Applicable to Common Stock $ 33,966 $ 41,451 $ 42,334 $ 41,277 $ 46,133 Net Utility Plant $ 856,289 $ 831,980 $ 814,686 $ 792,413 $ 765,287 Total Assets $1,313,004 $1,280,973 $1,127,501 $1,087,846 $1,039,006 Long-Term Debt Including Redeemable Preferred Stock $ 362,396 $ 384,424 $ 385,744 $ 383,765 $ 379,971 Ratio of Long-Term Debt to Net Plant 44.4% 46.0% 47.0% 48.0% 51.3% Ratio of Accumulated Depreciation to Utility Plant in Service 33.1% 31.7% 30.7% 30.0% 29.3% ============================================================================================================================
*Includes non-recurring gain on sale of non-utility land of $0.55 per share. 36 ORANGE AND ROCKLAND UTILITIES, INC. APPENDIX A TO EXHIBIT 13 FORM 10-K DECEMBER 31, 1994 The Review of the Company's Results of Operations and Financial Condition, which is included in the Company's Annual Report to Shareholders and is incorporated by reference in this Annual Report on Form 10-K, contains certain graphic presentations of financial data which are presented in tabular format as follows: 1. - Graph entitled "Electric Sales to Customers" Year Millions of Mwh 1990 405 1991 423 1992 421 1993 436 1994 446 2. - Graph entitled "Costs per Kwh" shows the price paid for fuel and purchased power on a per-kwh basis as follows: Cost per Kwh of Fuel Year and Purchased Power 1990 2.87 cents 1991 2.74 cents 1992 2.70 cents 1993 2.67 cents 1994 2.51 cents 3. - Graph entitled "Firm Gas Sales" shows firm gas sales to customers as follows: Year Millions of Mcf's 1990 18.4 1991 18.3 1992 20.5 1993 20.6 1994 20.4 4. - Graph entitled "Cost per Mcf" shows the price paid for purchased gas as follows: Cost per Mcf of Year Gas Purchased 1990 $3.17 1991 $2.90 1992 $3.52 1993 $3.63 1994 $3.52 02309.lfh EX-21 9 ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Subsidiaries Exhibit 21 State of Parent and Subsidiary* Incorporation Orange and Rockland Utilities, Inc. New York Rockland Electric Company New Jersey Saddle River Holdings Corp. Delaware Atlantic Morris Broadcasting, Inc.-- Delaware doing business under the names WKOJ (FM), WALL (FM), WKTU (FM), WABT (FM), WCSO (FM) and WLPZ (AM). NORSTAR Holdings, Inc. Delaware (Formerly O&R Energy, Inc.) NORSTAR Management, Inc. Delaware Millbrook Holdings, Inc. Delaware Pike County Light & Power Company Pennsylvania Clove Development Corporation New York O&R Energy Development, Inc. Delaware O&R Development, Inc. Delaware *Each level of indentation represents subsidiary status of the company under which it is immediately indented. 0718.wp EX-24 10 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ Ralph M. Baruch Ralph M. Baruch Office Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ Frederic V. Salerno Frederic V. Salerno Office Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ J. Fletcher Creamer J. Fletcher Creamer Office Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ Michael J. Del Giudice Michael J. Del Giudice Office Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ Frank A. McDermott, Jr. Frank A. McDermott, Jr. Office Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ Kenneth D. McPherson Kenneth D. McPherson Office Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ James F. O'Grady, Jr. James F. O'Grady, Jr. Office Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, her true and lawful attorney, for her and in her name, place and stead, and in her office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as she might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set her hand and seal this 2nd day of March 1995. Signature s/ Linda C. Taliaferro Linda C. Taliaferro Office Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ H. Kent Vanderhoef H. Kent Vanderhoef Office Chairman of the Board of Directors POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, the acting principal accounting officer of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ Terry L. Dittrich Terry L. Dittrich Office Acting Controller POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ R. Lee Haney R. Lee Haney Office Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and director of Orange and Rockland Utilities, Inc., which Company proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the Company's fiscal year ended December 31, 1994 pursuant to the provisions of the Securities Exchange Act of 1934, as amended, has made, constituted and appointed and by these presents does hereby make, constitute and appoint G. D. CALIENDO, his true and lawful attorney, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file said Form 10-K and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said G. D. CALIENDO, full power and authority to do and perform each and every act as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that G. D. CALIENDO, may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day of March 1995. Signature s/ D. Louis Peoples D. Louis Peoples Office Director, Vice Chairman of the Board and Chief Executive Officer EX-27 11
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORANGE AND ROCKLAND UTILITIES, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1994 DEC-31-1994 PER-BOOK 856,289 20,608 251,192 184,915 0 1,313,004 68,265 127,479 183,659 379,403 2,774 43,268 359,622 0 0 29,400 19,392 1,384 275 518 476,968 1,313,004 1,016,902 24,540 916,510 941,050 75,852 (5,198) 70,654 33,437 37,217 3,251 33,966 34,486 29,105 117,490 2.5 0
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