- 1 -
CONSOLIDATED BALANCE SHEET
Consolidated Edison Company of New York, Inc.
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
At December 31 (Thousands of Dollars) 1995 1994
- --------------------------------------------------------------------------------
Utility plant, at original cost (Notes A and B)
Electric $11,319,622 $10,956,187
Gas 1,537,296 1,437,071
Steam 462,975 430,848
General 1,085,795 1,083,705
- --------------------------------------------------------------------------------
Total 14,405,688 13,907,811
Less: Accumulated depreciation 4,036,954 3,828,646
- --------------------------------------------------------------------------------
Net 10,368,734 10,079,165
Construction work in progress 360,457 389,630
Nuclear fuel assemblies and components, less
accumulated amortization 85,212 92,413
- --------------------------------------------------------------------------------
Net utility plant 10,814,403 10,561,208
================================================================================
Current assets
Cash and temporary cash investments (Note A) 342,292 245,221
Accounts receivable--customers, less allowance for
uncollectible accounts of $21,600 in 1995 and 1994 497,215 440,496
Other receivables 45,558 61,853
Regulatory accounts receivable (Note A) (6,481) 26,346
Fuel, at average cost 40,506 50,883
Gas in storage, at average cost 26,452 50,698
Materials and supplies, at average cost 221,026 229,744
Prepayments 66,148 56,283
Other current assets 15,126 13,262
- --------------------------------------------------------------------------------
Total current assets 1,247,842 1,174,786
================================================================================
Investments and nonutility property 145,646 111,523
================================================================================
Deferred charges (Note A)
Enlightened Energy program costs 144,282 170,201
Unamortized debt expense 133,812 138,428
Power contract termination costs 105,408 180,506
Other deferred charges 316,237 285,721
- --------------------------------------------------------------------------------
Total deferred charges 699,739 774,856
================================================================================
Regulatory asset -- future federal income taxes
(Notes A and H) 1,042,260 1,105,991
================================================================================
Total $13,949,890 $13,728,364
================================================================================
- 2 -
================================================================================
Capitalization and Liabilities
- --------------------------------------------------------------------------------
At December 31 (Thousands of Dollars) 1995 1994
- --------------------------------------------------------------------------------
Capitalization (see Consolidated Statement of
Capitalization)
Common shareholders' equity $ 5,522,734 $ 5,312,997
Preferred stock subject to mandatory redemption
(Note B) 100,000 100,000
Other preferred stock 539,917 540,310
Long-term debt 3,917,244 4,030,464
- --------------------------------------------------------------------------------
Total capitalization 10,079,895 9,983,771
================================================================================
Noncurrent liabilities
Obligations under capital leases 45,250 47,805
Other noncurrent liabilities 75,907 72,561
- --------------------------------------------------------------------------------
Total noncurrent liabilities 121,157 120,366
================================================================================
Current liabilities
Long-term debt due within one year (Note B) 183,524 10,889
Accounts payable 420,852 374,469
Customer deposits 158,366 161,455
Accrued taxes 24,374 9,821
Accrued interest 89,374 84,544
Accrued wages 76,459 73,611
Other current liabilities 168,477 179,611
- --------------------------------------------------------------------------------
Total current liabilities 1,121,426 894,400
================================================================================
Provisions related to future federal income taxes
and other deferred credits (Notes A and H)
Accumulated deferred federal income tax 2,296,284 2,266,458
Accumulated deferred investment tax credits 181,420 191,524
Other deferred credits 149,708 271,845
- --------------------------------------------------------------------------------
Total deferred credits 2,627,412 2,729,827
================================================================================
Contingencies (Note F)
================================================================================
Total $13,949,890 $13,728,364
================================================================================
The accompanying notes are an integral part of these financial statements.
- 3 -
CONSOLIDATED INCOME STATEMENT
Consolidated Edison Company of New York, Inc.
===============================================================================
Year Ended December 31 (Thousands of Dollars) 1995 1994 1993
- --------------------------------------------- ---- ---- ----
Operating revenues (Note A)
Electric $5,389,408 $5,140,472 $5,131,665
Gas 813,356 890,107 808,389
Steam 334,133 342,507 325,340
- -------------------------------------------------------------------------------
Total operating revenues 6,536,897 6,373,086 6,265,394
===============================================================================
Operating expenses
Fuel 504,104 567,764 605,213
Purchased power 1,107,223 787,455 812,616
Gas purchased for resale 259,789 341,204 289,708
Other operations 1,139,732 1,146,094 1,106,966
Maintenance 512,102 506,179 570,794
Depreciation and amortization (Note A) 455,776 422,356 403,730
Taxes, other than federal income tax 1,120,232 1,127,691 1,159,283
Federal income tax (Notes A and H) 396,560 438,160 366,020
- -------------------------------------------------------------------------------
Total operating expenses 5,495,518 5,336,903 5,314,330
===============================================================================
Operating income 1,041,379 1,036,183 951,064
- -------------------------------------------------------------------------------
Other income (deductions)
Investment income (Note A) 16,966 10,601 4,934
Allowance for equity funds used during
construction (Note A) 3,763 8,354 7,222
Other income less miscellaneous deductions (8,149) (15,201) (7,565)
Federal income tax (Notes A and H) (1,060) (430) 1,010
- --------------------------------------------------------------------------------
Total other income 11,520 3,324 5,601
================================================================================
Income before interest charges 1,052,899 1,039,507 956,665
- --------------------------------------------------------------------------------
Interest on long-term debt 301,917 289,060 281,756
Other interest 28,954 19,853 19,721
Allowance for borrowed funds used during
construction (Note A) (1,822) (3,676) (3,334)
- --------------------------------------------------------------------------------
Net interest charges 329,049 305,237 298,143
================================================================================
Net income 723,850 734,270 658,522
Preferred stock dividend requirements 35,565 35,587 35,617
- -------------------------------------------------------------------------------
Net income for common stock $ 688,285 $ 698,683 $ 622,905
================================================================================
Earnings per common share based on average
number of shares outstanding during each
year (234,930,301; 234,753,901; and
233,981,369) $2.93 $2.98 $2.66
================================================================================
The accompanying notes are an integral part of these financial statements.
- 4 -
CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Edison Company of New York, Inc.
====================================================================================
Year Ended December 31 (Thousands of Dollars) 1995 1994 1993
Operating activities
Net income $ 723,850 $ 734,270 $ 658,522
Principal non-cash charges (credits) to
income
Depreciation and amortization 455,776 422,356 403,730
Federal income tax deferred 69,020 64,090 94,210
Common equity component of allowance for
funds used during construction (3,546) (7,876) (6,795)
Other non-cash charges (47,555) 65,669 (20,578)
Changes in assets and liabilities
Accounts receivable--customers, less allowance
for uncollectibles (56,719) 18,765 (34,912)
Regulatory accounts receivable 32,827 70,771 70,814
Materials and supplies, including fuel and gas
in storage 43,341 17,306 60,554
Prepayments, other receivables and other
current assets 4,566 21,317 (32,236)
Enlightened Energy program costs 25,919 (30,144) (59,297)
Power contract termination costs 55,387 (62,376) (68,380)
Accounts payable 46,383 (18,074) 19,007
Other--net (72,791) (46,175) (59,374)
- ------------------------------------------------------------------------------------
Net cash flows from operating activities 1,276,458 1,249,899 1,025,265
====================================================================================
Investing activities including construction
Construction expenditures (692,803) (757,530) (789,068)
Nuclear fuel expenditures (12,840) (47,071) (14,092)
Contributions to nuclear decommissioning trust (18,893) (14,586) (19,247)
Common equity component of allowance for
funds used during construction 3,546 7,876 6,795
- ------------------------------------------------------------------------------------
Net cash flows from investing activities
including construction (720,990) (811,311) (815,612)
====================================================================================
Financing activities including dividends
Issuance of common stock -- 14,650 11,881
Issuance of long-term debt 228,285 400,000 1,378,475
Retirement of long-term debt (10,889) (133,639) (177,897)
Advance refunding of long-term debt (155,699) -- (1,069,732)
Issuance and refunding costs (5,269) (5,988) (108,562)
Common stock dividends (479,262) (469,561) (453,902)
Preferred stock dividends (35,563) (35,585) (35,614)
- ------------------------------------------------------------------------------------
Net cash flows from financing activities
including dividends (458,397) (230,123) (455,351)
====================================================================================
Net increase (decrease) in cash and temporary
cash investments 97,071 208,465 (245,698)
====================================================================================
Cash and temporary cash investments at
January 1 245,221 36,756 282,454
====================================================================================
Cash and temporary cash investments at
December 31 $ 342,292 $ 245,221 $ 36,756
====================================================================================
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest $ 309,953 $ 269,839 $ 265,475
Income taxes 344,754 385,355 280,122
====================================================================================
The accompanying notes are an integral part of these financial statements.
- 5 -
CONSOLIDATED STATEMENT OF CAPITALIZATION
Consolidated Edison Company of New York, Inc.
=======================================================================================================
At December 31 (Thousands of Dollars) 1995 1994
Shares outstanding
-----------------------------------
December 31, 1995 December 31, 1994
-----------------------------------
Common shareholders' equity (Note B)
Common stock, $2.50 par value,
authorized 340,000,000 shares 234,956,299 234,905,235 $1,464,305 $1,463,913
Retained earnings 4,097,035 3,888,010
Capital stock expense (38,606) (38,926)
- ------------------------------------------------------------------------------------------------------
Total common shareholders' equity 5,522,734 5,312,997
======================================================================================================
Preferred stock (Note B)
Subject to mandatory redemption
Cumulative Preferred, $100 par value,
7.20% Series I 500,000 500,000 50,000 50,000
6 1/8% Series J 500,000 500,000 50,000 50,000
- ------------------------------------------------------------------------------------------------------
Total subject to mandatory redemption 100,000 100,000
- ------------------------------------------------------------------------------------------------------
Other preferred stock
$5 Cumulative Preferred, without par value,
authorized 1,915,319 shares 1,915,319 1,915,319 175,000 175,000
Cumulative Preferred, $100 par value,
authorized 6,000,000 shares*
5 3/4% Series A 600,000 600,000 60,000 60,000
5 1/4% Series B 750,000 750,000 75,000 75,000
4.65% Series C 600,000 600,000 60,000 60,000
4.65% Series D 750,000 750,000 75,000 75,000
5 3/4% Series E 500,000 500,000 50,000 50,000
6.20% Series F 400,000 400,000 40,000 40,000
Cumulative Preference, $100 par value,
authorized 2,250,000 shares
6% Convertible Series B 49,174 53,102 4,917 5,310
- ------------------------------------------------------------------------------------------------------
Total other preferred stock 539,917 540,310
- ------------------------------------------------------------------------------------------------------
Total preferred stock $ 639,917 $ 640,310
======================================================================================================
*Represents total authorized shares of cumulative preferred stock, $100 par
value, including preferred stock subject to mandatory redemption.
- 6 -
=======================================================================================================
At December 31 (Thousands of Dollars) 1995 1994
Long-term debt (Note B)
Maturity Interest Rate Series
First and Refunding Mortgage Bonds (open-end mortgage):
1996 5% CC $ 100,000 $ 100,000
1996 5.90 DD 75,000 75,000
- ---------------------------------------------------------------------------------------------------------
Total mortgage bonds 175,000 175,000
Debentures:
1997 5.30% 1993 E 100,000 100,000
1998 6 1/4 1993 A 100,000 100,000
1998 5.70 1993 F 100,000 100,000
1999 6 1/2 1992 D 75,000 75,000
1999 * 1994 B 150,000 150,000
2000 7 3/8 1992 A 150,000 150,000
2000 7.60 1992 C 125,000 125,000
2001 6 1/2 1993 B 150,000 150,000
2002 6 5/8 1993 C 150,000 150,000
2003 6 3/8 1993 D 150,000 150,000
2004 7 5/8 1992 B 150,000 150,000
2005 7 3/8 1992 E 75,000 75,000
2005 6 5/8 1995 A 100,000 --
2023 7 1/2 1993 G 380,000 380,000
2025 9.70 1990 A -- 27,414
2026 9 3/8 1991 A 95,329 95,329
2027 8.05 1992 F 100,000 100,000
2029 7 1/8 1994 A 150,000 150,000
- ---------------------------------------------------------------------------------------------------------
Total debentures 2,300,329 2,227,743
- ---------------------------------------------------------------------------------------------------------
Tax-exempt debt--notes issued to New York State Energy Research and
Development Authority for Facilities Revenue Bonds:
2020 9 % 1985 A -- 128,285
2020 6.10 1995 A 128,285 --
2020 5 1/4 1993 B 127,715 127,715
2021 7 1/2 1986 A 150,000 150,000
2022 7 1/8 1987 A 100,855 100,855
2022 9 1/4 1987 B 29,385 29,385
2022 5 3/8 1993 C 19,760 19,760
2024 7 3/4 1989 A 150,000 150,000
2024 7 3/8 1989 B 100,000 100,000
2024 7 1/4 1989 C 150,000 150,000
2025 7 1/2 1990 A 150,000 150,000
2026 7 1/2 1991 A 128,150 128,150
2027 6 3/4 1992 A 100,000 100,000
2027 6 3/8 1992 B 100,000 100,000
2028 6 1993 A 101,000 101,000
2029 7 1/8 1994 A 100,000 100,000
- ---------------------------------------------------------------------------------------------------------
Total tax-exempt debt 1,635,150 1,635,150
- ---------------------------------------------------------------------------------------------------------
Other long-term debt:
Liens on purchased gas turbines 13,327 22,779
Other long-term debt 5,836 9,007
Unamortized debt discount (28,874) (28,326)
- ---------------------------------------------------------------------------------------------------------
Total 4,100,768 4,041,353
Less: Long-term debt due within one year 183,524 10,889
- ---------------------------------------------------------------------------------------------------------
Total long-term debt 3,917,244 4,030,464
- ---------------------------------------------------------------------------------------------------------
Total capitalization $10,079,895 $9,983,771
- ---------------------------------------------------------------------------------------------------------
* This rate is reset quarterly. For the fourth quarter of 1995 it was 6.125%.
The accompanying notes are an integral part of these financial statements.
- 7 -
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Consolidated Edison Company of New York, Inc.
- ----------------------------------------------------------------------------------------------------------
Year Ended December 31 (Thousands of Dollars) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
Balance, January 1 $3,888,010 $3,658,886 $3,489,880
Net income for the year 723,850 734,270 658,522
- ----------------------------------------------------------------------------------------------------------
Total 4,611,860 4,393,156 4,148,402
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Dividends declared on capital stock
Cumulative Preferred, at required annual rates 35,259 35,259 35,259
Cumulative Preference, 6% Convertible Series B 304 326 355
Common, $2.04, $2.00 and $1.94 per share 479,262 469,561 453,902
- ----------------------------------------------------------------------------------------------------------
Total dividends declared 514,825 505,146 489,516
- ----------------------------------------------------------------------------------------------------------
Balance, December 31 $4,097,035 $3,888,010 $3,658,886
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
- 8 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
Note A Summary of Significant Accounting Policies
- -----------------------------------------------------------------
Regulation. The Company is subject to regulation by the New York
Public Service Commission (PSC) and the Federal Energy Regulatory
Commission (FERC). The Company's accounting policies conform to
generally accepted accounting principles, as applied in the case
of regulated public utilities, and to the accounting requirements
and rate-making practices of these regulatory authorities.
The PSC is conducting a generic "competitive opportunities"
proceeding to investigate whether and how to introduce increased
competition into the electric utility industry in the State. It
is not possible to predict the outcome of the proceeding or its
impact upon the Company. The outcome could adversely affect the
Company's eligibility to apply Statement of Financial Accounting
Standards ("SFAS") No. 71, "Accounting for the Effects of Certain
Types of Regulation," which could then require a material
write-down of assets, the amount of which is not presently
determinable. SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
requires long-lived and certain other assets to be reviewed for
impairment if the carrying amount of an asset may not be
recoverable. SFAS No. 121 also amends SFAS No. 71 to require that
regulatory assets (which include certain deferred charges) be
charged to earnings if such assets are no longer considered
probable of recovery. The Company will implement SFAS No. 121 in
1996. Absent a change in regulation as a result of competition as
discussed above, the Company does not expect that the application
of SFAS No. 121, with respect to either its long-lived assets or
its regulatory assets, will have a material adverse effect on the
Company's financial position and results of operations.
Principles of Consolidation. The accompanying consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiaries. Intercompany transactions have been
eliminated.
Utility Plant and Depreciation. The capitalized cost of
additions to utility plant includes indirect costs such as
engineering, supervision, payroll taxes, pensions, other benefits
and an allowance for funds used during construction (AFDC). The
original cost of property, together with removal cost, less
salvage, is charged to accumulated depreciation as property is
retired. The cost of repairs and maintenance is charged to
expense, and the cost of betterments is capitalized.
- 9 -
Rates used for AFDC include the cost of borrowed funds used
for construction purposes and a reasonable rate on the Company's
own funds when so used, determined in accordance with PSC and
FERC regulations. The AFDC rate was 9.1 percent in 1995, 9.4
percent in 1994 and 9.5 percent in 1993. The rate was compounded
semiannually, and the amounts applicable to borrowed funds were
treated as a reduction of interest charges.
The annual charge for depreciation is computed on the
straight-line method for financial statement purposes using rates
based on average lives and net salvage factors, with the
exception of the Indian Point 2 nuclear unit, the Company's share
of the Roseton generating station, certain leaseholds and
certain general equipment, which are depreciated on a remaining
life amortization method. Depreciation rates averaged
approximately 3.3 percent in 1995, 3.2 percent in 1994 and 3.1
percent in 1993. Depreciation expense includes the amortization
of certain deferred charges authorized by the PSC.
The Company is a joint owner of two 1,200-megawatt electric
generating stations: (1) Bowline Point, operated by Orange and
Rockland Utilities, Inc. with the Company owning a two-thirds
interest and (2) Roseton, operated by Central Hudson Gas &
Electric Corp. with the Company owning a 40 percent interest.
Central Hudson has the option to acquire the Company's interest
in the Roseton station in 2004. The Company's share of the
investment in these stations at original cost and as included in
its balance sheet at December 31, 1995 and 1994 was:
- ----------------------------------------------------------------
(Thousands of Dollars) 1995 1994
- ----------------------------------------------------------------
Bowline Point: Plant in service $203,360 $196,065
Construction work in progress 2,340 10,351
Roseton: Plant in service 145,207 141,487
Construction work in progress 2,089 4,283
- -----------------------------------------------------------------
The Company's share of accumulated depreciation for the
Roseton station at December 31, 1995 and 1994 was $64.8 million
and $61.6 million, respectively. A separate depreciation account
is not maintained for the Company's share of the Bowline Point
station. The Company's share of operating expenses for these
stations is included in its income statement.
- 10 -
Nuclear Decommissioning. Depreciation charges include a
provision for decommissioning both the Indian Point 2 and the
retired Indian Point 1 nuclear units. Decommissioning costs are
being accrued ratably over the Indian Point 2 license period
which extends to the year 2013. The Company has been accruing for
the costs of decommissioning within the internal depreciation
reserve since 1975. In 1989 the PSC permitted the Company to
establish an external trust fund for the costs of decommissioning
the nuclear portions of the plants pursuant to NRC regulations.
Accordingly, beginning in 1989 the Company has made contributions
to such a trust. The external trust fund is discussed below under
"Investments" in this Note A.
Accumulated decommissioning provisions at December 31, 1995
and 1994, which include earnings on funds externally invested,
were as follows:
- ----------------------------------------------------------------
Amounts Included in
Accumulated Depreciation
------------------------
(Millions of Dollars) 1995 1994
- -----------------------------------------------------------------
Nuclear $134.4 $102.2
Non-Nuclear 55.3 53.7
---------------------------
Total $189.7 $155.9
- -----------------------------------------------------------------
Prior to April 1995 the Company was providing annual expense
allowances of $11.7 million and $3.1 million, respectively, for
decommissioning the nuclear and non-nuclear portions of the
plants. These amounts, which were recovered from customers
through billings, were approved by the PSC in the 1992 electric
rate agreement, and were designed to fund decommissioning costs
which had been estimated at approximately $300 million in 1993
dollars. In 1994 a site-specific decommissioning study was
prepared for both the Indian Point 2 and the retired Indian Point
1 nuclear units. Based upon this study, the estimated
decommissioning cost in 1993 dollars is approximately $657
million, of which $252 million is for extended on-site storage of
spent nuclear fuel. Using a 3.25 percent annual escalation
factor, the estimated cost in 2016, the assumed midpoint for
decommissioning expenditures, is approximately $1,372 million.
Under the 1995 electric rate agreement, effective April 1995, the
Company revised the annual decommissioning expense allowance for
the nuclear and non-nuclear portions of the plants to $21.3
million and $1.8 million, respectively, to fund the future
estimated costs of decommissioning. The annual expense allowance
assumes a 6 percent after-tax annual return on fund assets.
- 11 -
The Financial Accounting Standards Board (FASB) is currently
reviewing the utility industry's accounting treatment of nuclear
and certain other plant decommissioning costs. The FASB has
preliminarily concluded that decommissioning costs should be
accounted for at present value as a liability, with a
corresponding asset in utility plant, rather than as a component
of depreciation. An exposure draft regarding this matter was
issued in February 1996.
Nuclear Fuel. Nuclear fuel assemblies and components are
amortized to operating expenses based on the quantity of heat
produced for the generation of electricity. Fuel costs also
include a provision for payments to the U.S. Department of Energy
for the future off-site storage of the spent fuel, based on the
kilowatt-hours of electricity generated. Nuclear fuel costs are
recovered in revenues through base rates or through the fuel
adjustment clause.
Leases. In accordance with SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation," those leases that meet
the criteria for capitalization are capitalized for accounting
purposes. For rate-making purposes, all leases have been treated
as operating leases.
Revenues. Revenues for electric and steam service are recognized
on a monthly billing cycle basis. Pursuant to the three-year
electric rate agreements, effective April 1, 1992 and 1995,
actual electric net revenues (operating revenues less fuel and
purchased power costs and revenue taxes) are adjusted by accrual
to target levels established under the agreements in accordance
with the electric revenue adjustment mechanism (ERAM). The 1995
agreement introduced the revenue per customer mechanism (RPC)
which modified the ERAM. Under the RPC, revenues are increased
(or decreased) to reflect variations from target levels in the
numbers of customers in the various service classes. Revenues are
also increased (or decreased) each month to reflect incentives
(or penalties) earned for the Enlightened Energy program and for
customer service activities. The agreements provide that the net
regulatory asset (or liability) thus accrued in each rate year is
to be reflected in customers' bills in the following rate year.
The October 1994 gas rate agreement provides for revenues to
be increased (or decreased) each month to reflect incentives (or
penalties) earned for meeting gas customer service and system
improvement targets.
- 12 -
In accordance with a PSC rate order, the Company began phasing
in recognition of unbilled gas revenues over a 4 1/4 year period
effective October 1989. Pursuant to the gas rate decision in
October 1991, this recognition of unbilled gas revenues was
modified so as to be fully phased in by September 30, 1994 to the
extent provided in rates.
Revenues from the fuel adjustment clauses are not recorded
until billed.
Recoverable Fuel Costs. Fuel and purchased power costs that are
above the levels included in base rates are recoverable under
electric, gas and steam fuel adjustment clauses. If costs fall
below these levels, the difference is credited to customers. For
electric and steam, such costs are deferred until the period in
which they are billed or credited to customers (40 days for
electric, 30 days for steam). For gas, the excess or deficiency
is accumulated for refund or surcharge to customers on an annual
basis.
Effective April 1992 a partial pass-through fuel adjustment
clause (PPFAC) was implemented with monthly targets for electric
fuel and purchased power costs. The Company retains for
stockholders 30 percent of any savings in actual costs below the
target amount, but must bear 30 percent of any excess of actual
costs over the target. For each rate year of the 1995 electric
rate agreement there is a $35 million cap on the maximum increase
or decrease in fuel billings, with a limit (within the $35
million) of $10 million for costs associated with generation at
the Company's Indian Point 2 nuclear unit.
The PSC has allowed the Company to recover in rates certain
deferred recoverable fuel costs that were affected by shortening
the billing lag period or changing the cost of fuel in base
rates. If there were any further such revisions, the Company
believes that deferred recoverable fuel costs affected thereby
would be recovered.
- 13 -
Regulatory Accounts Receivable. Regulatory accounts receivable
at December 31, 1995 amounted to a net credit to be refunded to
customers of $6.5 million, reflecting accruals under the 1992 and
1995 electric rate agreements and 1994 gas rate agreement for
incentives related to the Company's Enlightened Energy program
($19.7 million), for incentives related to electric customer
service activities ($4.0 million), for the amounts to be billed
under the PPFAC ($1.9 million), for incentives related to gas
system improvement ($4.6 million), for incentives related to gas
customer service ($1.0 million) and for net electric sales
revenues in accordance with the ERAM and Modified ERAM (a refund
of $37.7 million). The revenues accrued in a given twelve-month
period under the ERAM and Modified ERAM and for incentives
related to the Enlightened Energy program, electric customer
service activities and the Company's gas business are being
recovered from or refunded to customers over an ensuing
twelve-month period. The amounts accrued under the PPFAC are
billed to customers on a monthly basis through the electric fuel
adjustment clause.
Enlightened Energy Program Costs. In accordance with PSC
directives, the Company defers the costs for its Enlightened
Energy (demand side management) program for future recovery from
ratepayers. Such deferrals amounted to $144.3 million at December
31, 1995 and $170.2 million at December 31, 1994. In accordance
with the 1992 and 1995 electric rate agreements, the Company is
generally recovering its Enlightened Energy program costs over a
five-year period.
Temporary Cash Investments. Temporary cash investments are
short-term, highly liquid investments which generally have
maturities of three months or less. They are stated at cost which
approximates market. The Company considers temporary cash
investments to be cash equivalents.
Investments. Investments consist primarily of an external
nuclear decommissioning trust fund. At December 31, 1995 and 1994
the trust fund amounted to $134.4 million and $102.2 million,
respectively. Investments are stated at market. Earnings on the
trust fund are not recognized in income but are included in the
accumulated depreciation reserve. See "Nuclear Decommissioning"
in this Note A.
Federal Income Tax. The Company provides for deferred federal
income taxes with respect to certain benefits realized from
depreciation deductions utilized for tax purposes, deferred fuel
accounting, unbilled revenues (electricity, gas and steam)
included in taxable income, deferrals arising from the rate
agreements, and certain other specific items, when approved by
the PSC.
- 14 -
For rate-making purposes, accumulated deferred federal
income taxes previously collected from customers are deducted
from rate base and amortized or otherwise applied as a reduction
in federal income tax expense in future years. Accumulated
deferred investment tax credits are amortized ratably over the
lives of the related properties and applied as a reduction in
future federal income tax expense.
In accordance with SFAS 109, "Accounting for Income Taxes,"
the Company is required to record a deferred income tax liability
for substantially all temporary differences between book and tax
bases of assets and liabilities at current tax rates, including
differences for which deferred taxes have not previously been
provided. For regulated enterprises, a regulatory asset is
recognized for the latter if the criteria of SFAS 71 are met,
that is, it is probable that future revenues will be allowed
sufficient in amount to recover the costs for which deferred
taxes have not previously been provided. The regulatory asset,
stated at the revenue requirement level, amounted to $1,042.3
million and $1,106.0 million at December 31, 1995 and 1994,
respectively. These amounts which are included in accumulated
deferred federal income tax (see Note H), are not reflected in
rate base for rate-making purposes. In 1993 the PSC
issued an interim policy statement proposing accounting
procedures consistent with SFAS 109 and providing assurances that
these future increases in taxes will be recoverable in rates. The
final policy statement is not expected to differ materially from
the interim policy statement.
The Company and its subsidiaries file a consolidated federal
income tax return. Income taxes are allocated to each company
based on its taxable income.
Research and Development Costs. Research and development costs
relating to specific construction projects are capitalized. All
other such costs are charged to operating expenses as incurred.
Research and development costs in 1995, 1994 and 1993, amounting
to $45.0 million, $46.8 million and $48.0 million, respectively,
were charged to operating expenses. No research and development
costs were capitalized in these years.
Estimates. The accompanying consolidated financial statements
reflect judgments and estimates made in the application of the
above accounting policies.
- 15 -
- --------------------------------------------------------------
Note B Capitalization
- --------------------------------------------------------------
Common Stock and Preferred Stock Not Subject to Mandatory
Redemption. Each share of Series B preference stock is
convertible into 13 shares of common stock at a conversion price
of $7.69 per share. During 1995, 1994 and 1993, 3,928 shares,
4,176 shares and 5,208 shares of Series B preference stock were
converted into 51,064 shares, 54,288 shares and 67,704 shares of
common stock, respectively.
At December 31, 1995, 639,262 shares of unissued common
stock were reserved for conversion of preference stock. The
preference stock is subordinate to the $5 Cumulative Preferred
Stock and Cumulative Preferred Stock with respect to dividends
and liquidation rights.
Redemption prices of preferred stock other than Series I and
Series J (in each case, plus accrued dividends) are as follows:
- ----------------------------------------------------------------
$5 Cumulative Preferred Stock $105.00
- ----------------------------------------------------------------
Cumulative Preferred Stock:
Series A $102.00
Series B 102.00
Series C 101.00
Series D 101.00
Series E 101.00
Series F 102.50
- -----------------------------------------------------------------
Cumulative Preference Stock:
6% Convertible Series B $100.00
- -----------------------------------------------------------------
Preferred Stock Subject to Mandatory Redemption. The Company is
required to redeem 25,000 of the Series I shares on May 1 of each
year in the five-year period commencing with the year 2002 and to
redeem the remaining Series I shares on May 1, 2007. The Company
is required to redeem the Series J shares on August 1, 2002. In
each case, the redemption price is $100 per share plus accrued
and unpaid dividends to the redemption date. In addition, the
Company may redeem Series I shares at a redemption price of
$105.04 per share, plus accrued dividends, if redeemed prior to
May 1, 1996 (and thereafter at prices declining annually to $100
per share, plus accrued dividends, after April 30, 2002);
provided, however, that prior to May 1, 1997, the Company may not
redeem any Series I shares with borrowed funds or proceeds from
certain securities issuances having a cost to the Company of less
than 7.20 percent per annum.
- 16 -
Neither Series I nor Series J shares may be called for
redemption while dividends are in arrears on outstanding shares
of $5 Cumulative Preferred Stock or Cumulative Preferred Stock.
Nevertheless, the mandatory redemption obligation of the Company
with respect to such shares is cumulative and if the redemption
requirement is in arrears the Company may not purchase or redeem
or pay any dividends on the common stock or any other stock
ranking junior as to dividends or assets to the Cumulative
Preferred Stock, except for payments or distributions in common
stock or such junior stock.
Preferred Stock Refunding. In January 1996 the Company commenced
a tender offer for all of its preferred stock except for the
Series E and F and the 6% convertible Series B. On February 27,
1996 the tender offer expired (except as to the $5 Cumulative
Preferred for which the offer had been terminated) and the
Company's Board of Trustees authorized the redemption of the
Series E and F. Pursuant to the tender offer, approximately $227
million of preferred stock was tendered. The Company intends to
fund the purchase and the redemption by issuing subordinated
debentures.
Long-Term Debt. Total long-term debt maturing in the period
1996-2000 is as follows:
- ----------------------------------------
1996 $183,524,000
1997 106,256,000
1998 200,000,000
1999 225,000,000
2000 275,000,000
- ----------------------------------------
Substantially all properties and franchises of the Company,
other than expressly excepted property, are subject to the liens
securing the Company's First and Refunding Mortgage Bonds and the
mortgage bonds of acquired companies.
- -----------------------------------------------------------------
Note C Lines of Credit
- -----------------------------------------------------------------
The Company has bank lines of credit for 1996 amounting to $150
million. The credit lines require average compensating balances
of 2.5 percent of the credit lines, with interest on any
borrowings to be at prevailing market rates. There are no legal
restrictions applicable to the Company's cash balances resulting
from its obligation to maintain compensating balances.
- 17 -
- ----------------------------------------------------------------
Note D Pension Plans
- ----------------------------------------------------------------
The pension plans for management and bargaining unit employees
cover substantially all employees of the Company and are designed
to comply with the Employee Retirement Income Security Act of
1974 (ERISA). Contributions are made solely by the Company based
on an actuarial valuation, and are not less than the minimum
amount required by ERISA. The Company's policy is to fund the
actuarially computed net pension cost as such cost accrues.
Benefits for management and bargaining unit employees are
generally based on a final five-year average pay formula.
In accordance with SFAS 87, "Employers' Accounting for
Pensions," the Company uses the projected unit credit method for
determining pension cost. Pension costs for 1995, 1994 and 1993
amounted to $11.4 million, $38.7 million and $46.8 million,
respectively, of which $8.9 million for 1995, $30.3 million for
1994 and $37.1 million for 1993 was charged to operating expense.
In accordance with SFAS 88, "Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits," as modified by SFAS 71, pension cost
for 1993 included $4.4 million in connection with the special
retirement program discussed below. Pension cost for 1995
includes $2.2 million for the amortization of the special
retirement program regulatory asset also discussed below, and an
actuarially determined credit of $7.3 million representing a
prepayment on one of the plans.
Effective January 1, 1993 the Company adopted the PSC's
"Statement of Policy and Order Concerning the Accounting and
Ratemaking Treatment for Pensions and Postretirement Benefits
Other Than Pensions" (the PSC Policy). The PSC Policy requires
certain departures from SFAS 87, including actuarial recognition
of investment gains and losses over five years and a 10-year
period for amortization of recognized actuarial gains and losses.
The Company offered a special retirement program in 1993
providing enhanced pension benefits for those employees who met
certain eligibility requirements and retired within specific time
limits. The incentives offered by the Company fall within the
category of special termination benefits as described in SFAS 88.
The increase in pension obligations as a result of this program
amounted to $33.3 million. In accordance with SFAS 71, the
Company charged the equivalent of the first two years of the
amortization ($4.4 million) to pension expense in 1993 and
established a liability and offsetting regulatory asset for the
$28.9 million allocable to future periods. Under an agreement
with the PSC, the Company is amortizing the remaining liability
over a 13-year period. This is reflected in current rates.
- 18 -
The components of net periodic pension cost for 1995, 1994
and 1993 were as follows:
- -----------------------------------------------------------------
(Millions of Dollars) 1995 1994 1993
- -----------------------------------------------------------------
Service cost--benefits earned
during the period $ 98.2 $ 103.9 $ 103.2
Interest cost on projected
benefit obligation 296.7 278.2 252.7
Actual return on plan assets (865.8) (3.4) (500.0)
Unrecognized investment
gain (loss) deferred 521.6 (322.6) 201.5
Net amortization (41.5) (17.4) (15.0)
----------------------------------
Net periodic pension cost 9.2* 38.7 42.4
----------------------------------
Special retirement program cost -- -- 33.3
Decrease (increase) in
regulatory asset 2.2 -- (28.9)
---------------------------------
Net special retirement program
cost 2.2 -- 4.4
---------------------------------
Total pension cost $ 11.4 $ 38.7 $ 46.8
- -----------------------------------------------------------------
* Includes a prepayment credit of $7.3 million.
- 19 -
The funded status of the pension plans as of December 31,
1995, 1994 and 1993 was as follows:
- -----------------------------------------------------------------
(Millions of Dollars) 1995 1994 1993
- -----------------------------------------------------------------
Actuarial present value of
benefit obligation:
Vested $3,319.2 $2,813.0 $2,731.9
Nonvested 267.9 189.6 212.6
-----------------------------------
Accumulated to date 3,587.1 3,002.6 2,944.5
Effect of projected future
compensation levels 1,070.3 786.0 841.5
----------------------------------
Total projected obligation 4,657.4 3,788.6 3,786.0
Plan assets at fair value 4,775.8 4,046.7 4,154.3
----------------------------------
Plan assets less projected
benefit obligation 118.4 258.1 368.3
Unrecognized net gain (240.3) (401.1) (522.9)
Unrecognized prior service cost* 85.3 93.9 102.5
Unrecognized net transition
liability at January 1, 1987* 17.2 20.2 23.2
---------------------------------
Accrued pension cost** $ (19.4) $ (28.9 ) $ (28.9)
- -----------------------------------------------------------------
* Being amortized over approximately 15 years.
** Accrued liability for special retirement program less
prepayment credit in 1995.
To determine the present value of the projected benefit
obligation in 1995, 1994 and 1993, discount rates of 7 percent,
8 percent and 7.5 percent, respectively, were assumed. A weighted
average rate of increase in future compensation levels of 5.8
percent and a long-term rate of return on plan assets of 8.5
percent were assumed for all years.
The pension plan assets consist primarily of corporate
common stock and bonds, group annuity contracts and debt of the
United States government and its agencies.
- 20 -
- -----------------------------------------------------------------
Note E Postretirement Benefits Other Than Pensions (OPEB)
- -----------------------------------------------------------------
The Company has a contributory comprehensive hospital, medical
and prescription drug program for all retirees, their dependents
and surviving spouses. The Company also provides life insurance
benefits for approximately 6,400 retired employees. All of the
Company's employees become eligible for these benefits upon
retirement except that the amount of life insurance is limited
and is available only to management employees and to those
bargaining unit employees who participated in the optional
program prior to retirement. The Company has reserved the right
to amend or terminate these programs.
The Company adopted the provisions of SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions",
effective January 1, 1993. It contains specific rules for
determining the cost of postretirement health and life insurance
benefits. These rules require accrual of the obligation for
previously unrecognized retiree benefit cost over a shorter
period than previous methods.
The Company's policy is to fund in external trusts the
actuarially determined annual costs for retiree health and life
insurance subject to statutory maximum (and minimum) limits. Rate
allowances that are not funded to an external trust accrue
interest at the pre-tax rate of return. As of December 31, 1993
the Company had accrued $6.9 million in interest on an unfunded
liability of $28.5 million. In 1994 the Company funded both
amounts in addition to $0.9 million of interest accrued in 1994.
The retiree health and life insurance expense for 1995, 1994
and 1993 was determined in accordance with the PSC Policy (see
Note D) which requires the Company to defer the difference
between the rate allowance for OPEB expense and the OPEB expense
determined in accordance with SFAS 106, amortize the transition
obligation over 20 years and recognize all gains and losses over
a 10-year period in determining the SFAS 106 expense. Current
electric, gas and steam rates reflect the increase in expense
resulting from the adoption of SFAS 106.
- 21 -
The cost to the Company for retiree health benefits for
1995, 1994 and 1993 amounted to $65.5 million, $67.1 million and
$66.3 million, respectively, of which $51.6 million for 1995,
$52.7 million for 1994 and $52.5 million for 1993 was charged to
operating expense. The cost of the retiree life insurance plan
for 1995, 1994 and 1993 amounted to $18.0 million, $21.6 million
and $22.3 million, respectively, of which $14.2 million for 1995,
$17.0 million for 1994 and $17.7 million for 1993 was charged to
operating expense.
The components of postretirement benefit (health and life
insurance) costs for years 1995, 1994 and 1993 were as follows:
- ----------------------------------------------------------------
(Millions of Dollars) 1995 1994 1993
- ----------------------------------------------------------------
Service cost--benefits earned
during the period $ 10.7 $11.5 $11.1
Interest cost on accumulated
postretirement benefit
obligation 61.2 56.9 52.2
Actual return on plan assets (60.8) (8.4) (8.5)
Unrecognized investment gain
(loss) deferred 40.4 (5.7) 2.9
Amortization of transition
obligation and unrecognized
net loss 32.0 34.4 30.9
---------------------------------
Net periodic postretirement
benefit cost $ 83.5 $88.7 $88.6
- -----------------------------------------------------------------
- 22 -
The following table sets forth the program's funded status
at December 31, 1995, 1994 and 1993:
- ----------------------------------------------------------------
(Millions of Dollars) 1995 1994 1993
- -----------------------------------------------------------------
Accumulated postretirement
benefit obligation:
Retirees $ 447.7 $ 413.9 $ 413.2
Employees eligible to retire 250.7 167.2 144.2
Employees not eligible to
retire 305.6 204.5 221.5
-----------------------------------
Total projected obligation 1,004.0 785.6 778.9
Plan assets at fair value 322.2 219.1 130.8
-----------------------------------
Plan assets less accumulated
postretirement benefit
obligation (681.8) (566.5) (648.1)
Unrecognized net loss 240.8 11.1 33.4
Unrecognized net transition
liability at January 1, 1993* 441.0 555.4 586.2
----------------------------------
Accrued postretirement
benefit cost $ 0 $ 0 $ (28.5)
- -----------------------------------------------------------------
* Being amortized over a period of 20 years.
To determine the accumulated postretirement benefit
obligation in 1995, 1994 and 1993, discount rates of 7 percent, 8
percent and 7.5 percent, respectively, were assumed. The assumed
long-term rate of return on plan assets was 8.5 percent for these
years. The health cost trend rate assumed for year 1995 was 10
percent, for the year 1996, 9 percent, and then declining
one-half percent per year to 5 percent for year 2004 and
thereafter. If the assumed health care cost trend rate were to be
increased by one percentage point each year, the accumulated
postretirement benefit obligation would increase by approximately
$130.9 million and the service cost and interest component of the
net periodic postretirement benefit cost would increase by $9.8
million.
Postretirement plan assets consist of corporate common
stock and bonds, group annuity contracts, debt of the United
States government and its agencies and short-term securities.
- 23 -
- ----------------------------------------------------------------
Note F Contingencies
- ----------------------------------------------------------------
Indian Point. Nuclear generating units similar in design to the
Company's Indian Point 2 unit have experienced problems of
varying severity in their steam generators, which in a number of
instances have required steam generator replacement. Inspections
of the Indian Point 2 steam generators since 1976 have revealed
various problems, some of which appear to have been arrested, but
the remaining service life of the steam generators is uncertain
and may be shorter than the unit's life. The projected service
life of the steam generators is reassessed periodically in the
light of the inspections made during scheduled outages of the
unit. Based on the latest available data, the Company estimates
that steam generator replacement will not be required before
1999, and possibly not until some years later. To avoid
procurement delays in the event replacement is necessary, the
Company purchased replacement steam generators, which are stored
at the site. If replacement of the steam generators is required,
such replacement is presently estimated (in 1995 dollars) to
require additional expenditures of approximately $107 million
(exclusive of replacement power costs) and an outage of
approximately six months. However, securing necessary permits and
approvals or other factors could require a substantially longer
outage if steam generator replacement is required on short
notice.
Nuclear Insurance. The insurance policies covering the Company's
nuclear facilities for property damage, excess property damage,
and outage costs permit assessments under certain conditions to
cover insurers' losses. As of December 31, 1995 the highest
amount which could be assessed for losses during the current
policy year under all of the policies was $31.5 million. While
assessments may also be made for losses in certain prior years,
the Company is not aware of any losses in such years which it
believes are likely to result in an assessment.
Under certain circumstances, in the event of nuclear
incidents at facilities covered by the federal government's
third-party liability indemnification program, the Company could
be assessed up to $79.3 million per incident of which not more
than $10 million may be assessed in any one year. The
per-incident limit is to be adjusted for inflation not later than
1998 and not less than once every five years thereafter.
The Company participates in an insurance program covering
liabilities for injuries to certain workers in the nuclear power
industry. In the event of such injuries, the Company is subject
to assessment up to an estimated maximum of approximately $3.1
million.
- 24 -
Environmental Matters. The normal course of the Company's
operations necessarily involves activities and substances that
expose the Company to potential liabilities under federal, state
and local laws protecting the environment. Such liabilities can
be material and in some instances may be imposed without regard
to fault, or may be imposed for past acts, even though such past
acts may have been lawful at the time they occurred. Sources of
such potential liabilities include (but are not limited to) the
Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (Superfund), a 1994 settlement with the New
York State Department of Environmental Conservation (DEC),
asbestos, and electric and magnetic fields (EMF).
Superfund. By its terms, Superfund imposes joint and several
strict liability, regardless of fault, upon generators of
hazardous substances for resulting removal and remedial costs and
environmental damages. The Company has received process or notice
concerning possible claims under Superfund or similar state
statutes relating to a number of sites at which it is alleged
that hazardous substances generated by the Company (and, in most
instances, a large number of other potentially responsible
parties) were deposited.
Estimates of the investigative, removal, remedial and
environmental damage costs (if any) the Company will be obligated
to pay with respect to each of these sites range from extremely
preliminary to highly refined. Based on these estimates, the
Company had accrued a liability at December 31, 1995 of
approximately $14.7 million. However, it is possible that
material additional costs in amounts not presently determinable
may be incurred with respect to these and other sites.
DEC Settlement. In November 1994 the Company agreed to a consent
order settling a civil administrative proceeding instituted by
the DEC in 1992, alleging environmental violations by the
Company. Pursuant to the consent order, the Company has conducted
an environmental management systems evaluation and is conducting
an environmental compliance audit. The Company also must
implement "best management practices" plans for certain
facilities and undertake a remediation program at certain sites.
At December 31, 1995 the Company had an accrued liability of
$19.3 million for these sites. Expenditures for
environment-related projects in the five years 1996-2000,
including expenditures to comply with the consent order, are
currently estimated at $155 million. There will be additional
costs, including costs arising out of the compliance audit, the
materiality of which is not presently determinable.
- 25 -
Asbestos Claims. Suits have been brought in New York State and
federal courts against the Company and many other defendants,
wherein several thousand plaintiffs sought large amounts of
compensatory and punitive damages for deaths and injuries
allegedly caused by exposure to asbestos at various premises of
the Company. Many of these suits have been disposed of without
any payment by the Company, or for immaterial amounts. The
amounts specified in all the remaining suits total billions of
dollars but the Company believes that these amounts are greatly
exaggerated, as were the claims already disposed of. Based on the
information and relevant circumstances known to the Company at
this time, it is the opinion of the Company that these suits will
not have a material adverse effect on the Company's financial
position.
EMF. Electric and magnetic fields are found wherever electricity
is used. Several scientific studies have raised concerns that EMF
surrounding electric equipment and wires, including power lines,
may present health risks. The Company is the defendant in several
suits claiming property damage or personal injury allegedly
resulting from EMF. In the event that a causal relationship
between EMF and adverse health effects is established, or
independently of any such causal determination, in the event of
adverse developments in related legal or public policy doctrines,
there could be a material adverse effect on the electric utility
industry, including the Company.
- -----------------------------------------------------------------
Note G Independent Power Producers (IPPs)
- -----------------------------------------------------------------
The Company has contracts with IPPs for 1,798 MW of electric
generating capacity already in commercial operation, and
commitments for 186 MW of capacity expected to commence operation
in 1996 and about 70 MW of capacity expected to commence
operation after 1996. Under the three-year electric rate
agreement effective April 1, 1995, payments by the Company under
these contracts are reflected in rates. Assuming performance by
the IPPs, the Company is obligated over the terms of these
contracts (which extend for various periods, up to 2034) to make
capacity and other fixed (non-energy) payments. In addition, for
energy delivered under certain of these contracts, the Company is
obligated to pay variable prices that will exceed market prices
for energy.
For the 1,798 MW of capacity in commercial operation,
capacity and other fixed (non-energy) payments are estimated for
the years 1996-2000 to be $282 million, $287 million, $293
million, $309 million and $432 million. Such payments gradually
increase to approximately $500 million in 2013, and thereafter
decline significantly.
- 26 -
Energy payments under the contracts for the years 1996-1999
(assuming performance by the IPPs) will exceed market prices by
an average estimated $200 million each year. Beginning in the
year 2000, the prices that the Company will be obligated to pay
for energy will approximate market levels.
- -----------------------------------------------------------------
Note H Federal Income Tax
- -----------------------------------------------------------------
In the case of regulated utilities, SFAS 109 requires recognition
in the balance sheet of the revenue requirements to meet the
costs of future federal income taxes for temporary differences
for which deferred taxes had not previously been provided. The
net revenue requirements related to future federal income taxes
at December 31, 1995 and 1994 are shown on the following table.
- -----------------------------------------------------------------
(Millions of Dollars) 1995 1994
- -----------------------------------------------------------------
Future federal income tax liability
Temporary differences between the book
and tax bases of assets and liabilities:
Property related $5,513.3 $5,389.1
Reserve for injuries and damages (49.2) (43.9)
Other 54.5 24.4
----------------------
Total 5,518.6 5,369.6
----------------------
Future federal income tax computed
at statutory rate - 35% 1,931.5 1,879.4
Less: Accumulated deferred federal income
taxes previously provided 1,254.0 1,160.5
--------------------
Net future federal income tax expense for
which deferred taxes have not been provided 677.5 718.9
-------------------
Net revenue requirements for above
(Regulatory asset--future federal
income taxes)* 1,042.3 1,106.0
Add: Accumulated deferred federal
income taxes previously provided 1,254.0 1,160.5
-------------------
Total accumulated deferred
federal income tax $2,296.3 $2,266.5
- -----------------------------------------------------------------
* Net revenue requirements will be offset by the amortization to
federal income tax expense of accumulated deferred investment tax
credits. Including the full effect therefrom, the net revenue
requirements related to future federal income taxes at December
31, 1995 and 1994 are $860.8 million and $914.5 million,
respectively.
- 27 -
- ------------------------------------------------------------------------------------------------------------------
Note H Federal Income Tax, continued
- ------------------------------------------------------------------------------------------------------------------
Year Ended December 31 (Thousands of Dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
Charged to: Operations $ 396,560 $ 438,160 $ 366,020
Other income 1,060 430 (1,010)
- ------------------------------------------------------------------------------------------------------------------
Total federal income tax 397,620 438,590 365,010
- ------------------------------------------------------------------------------------------------------------------
Reconciliation of reported net income with taxable income
Federal income tax--current 328,600 374,500 270,800
Federal income tax--deferred 78,330 73,710 106,470
Investment tax credits deferred (9,310) (9,620) (12,260)
- ------------------------------------------------------------------------------------------------------------------
Total federal income tax 397,620 438,590 365,010
Net income 723,850 734,270 658,522
- ------------------------------------------------------------------------------------------------------------------
Income before federal income tax 1,121,470 1,172,860 1,023,532
- ------------------------------------------------------------------------------------------------------------------
Effective federal income tax rate 35.5% 37.4% 35.7%
- ------------------------------------------------------------------------------------------------------------------
Adjustments decreasing (increasing) taxable income
Tax depreciation in excess of book depreciation:
Amounts subject to normalization 202,230 218,181 226,442
Other (85,538) (94,813) (90,428)
Deferred recoverable fuel costs 61,937 (20,132) (3,873)
Regulatory accounts receivable (32,827) (70,771) (70,814)
Enlightened Energy program costs (25,880) 29,677 59,297
Advance refunding of long-term debt (4,268) (6,814) 86,346
Other--net 34,240 44,263 34,155
- ------------------------------------------------------------------------------------------------------------------
Total 149,894 99,591 241,125
- ------------------------------------------------------------------------------------------------------------------
Taxable income 971,576 1,073,269 782,407
- ------------------------------------------------------------------------------------------------------------------
Federal income tax--current
Amount computed at statutory rate--35%* 340,052 375,644 273,842
Tax credits (11,452) (1,144) (3,042)
- ------------------------------------------------------------------------------------------------------------------
Total 328,600 374,500 270,800
- ------------------------------------------------------------------------------------------------------------------
Charged to: Operations 328,200 374,160 271,140
Other income 400 340 (340)
- ------------------------------------------------------------------------------------------------------------------
Total 328,600 374,500 270,800
- ------------------------------------------------------------------------------------------------------------------
Federal income tax--deferred
Provisions for deferred federal income taxes consist of the
following tax effects of timing differences between tax
and book income:
Tax depreciation in excess of book depreciation 66,133 72,597 76,193
Deferred recoverable fuel costs 21,678 (7,046) (1,356)
Regulatory accounts receivable (11,489) (24,770) (24,785)
Enlightened Energy program costs (9,058) 10,387 20,754
Advance refunding of long-term debt (1,494) (2,385) 30,221
Other--net 12,560 24,927 5,443
- ------------------------------------------------------------------------------------------------------------------
Total 78,330 73,710 106,470
- ------------------------------------------------------------------------------------------------------------------
Charged to: Operations 77,670 73,620 107,140
Other income 660 90 (670)
- ------------------------------------------------------------------------------------------------------------------
Total $ 78,330 $ 73,710 $ 106,470
- ------------------------------------------------------------------------------------------------------------------
* Under rate agreements, the effect of the increase in the statutory rate from 34% to 35% effective January 1, 1993
was deferred until such effect could next be reflected in rates. The deferrals applicable to gas and steam operations
were amortized over a twelve-month period which began October 1, 1993 when new rates became effective. For electric
operations, deferrals for the year 1993 and the first three months of 1994 were amortized over a twelve-month period
which began April 1, 1994 when new electric rates became effective.
- 28 -
- --------------------------------------------------------------------------------
Note I Financial Information by Business Segments(a) (Thousands of Dollars)
- --------------------------------------------------------------------------------
Electric Steam
---------------------------------------- -----------------------------------------
1995 1994 1993 1995 1994 1993
- -------------------------------------------------------------------------------- -----------------------------------------
Operating revenues* $5,401,524 $5,152,351 $5,145,010 $ 335,694 $ 343,916 $ 326,888
- -------------------------------------------------------------------------------- -----------------------------------------
Operating expenses
Fuel 354,086 410,173 446,578 150,018 157,591 158,635
Purchased power 1,107,223 787,455 812,616 -- -- --
Other operations and maintenance* 1,372,715 1,372,865 1,403,022 79,929 80,035 78,787
Depreciation and amortization 393,382 364,988 350,590 13,064 10,961 9,909
Taxes, other than federal income 951,095 955,850 994,174 45,788 46,178 46,090
Federal income tax 339,863 379,584 322,076 12,598 11,577 4,966
- -------------------------------------------------------------------------------- -----------------------------------------
Total operating expenses* 4,518,364 4,270,915 4,329,056 301,397 306,342 298,387
- -------------------------------------------------------------------------------- -----------------------------------------
Operating income 883,160 881,436 815,954 34,297 37,574 28,501
- -------------------------------------------------------------------------------- -----------------------------------------
Construction expenditures 538,454 587,189 626,494 27,559 44,957 36,612
- -------------------------------------------------------------------------------- -----------------------------------------
Net utility plant** 9,027,031 8,874,341 8,592,187 399,028 378,748 337,713
Fuel 40,444 50,821 53,681 62 62 74
Other identifiable assets 1,724,005 1,899,182 1,970,998 51,969 48,141 50,555
- -------------------------------------------------------------------------------- -----------------------------------------
*Intersegment rentals included in segments' income but eliminated for total Company
Operating revenues $12,116 $11,879 $13,345 $ 1,561 $ 1,409 $ 1,548
Operating expenses 2,513 2,331 2,726 13,102 12,733 14,139
- -----------------------------------------------------------------------------------------------------------------------------------
Gas Total Company
---------------------------------------- -----------------------------------------
1995 1994 1993 1995 1994 1993
- -------------------------------------------------------------------------------- -----------------------------------------
Operating revenues* $ 815,307 $ 891,897 $ 810,377 $ 6,536,897 $ 6,373,086 $ 6,265,394
- -------------------------------------------------------------------------------- -----------------------------------------
Operating expenses
Fuel -- -- -- 504,104 567,764 605,213
Purchased power -- -- -- 1,107,223 787,455 812,616
Gas purchased for resale 259,789 341,204 289,708 259,789 341,204 289,708
Other operations and maintenance* 214,818 214,451 212,832 1,651,834 1,652,273 1,677,760
Depreciation and amortization 49,330 46,407 43,231 455,776 422,356 403,730
Taxes, other than federal income 123,349 125,663 119,019 1,120,232 1,127,691 1,159,283
Federal income tax 44,099 46,999 38,978 396,560 438,160 366,020
- -------------------------------------------------------------------------------- -----------------------------------------
Total operating expenses* 691,385 774,724 703,768 5,495,518 5,336,903 5,314,330
- -------------------------------------------------------------------------------- -----------------------------------------
Operating income 123,922 117,173 106,609 1,041,379 1,036,183 951,064
- -------------------------------------------------------------------------------- -----------------------------------------
Construction expenditures 126,790 125,384 125,962 692,803 757,530 789,068
- -------------------------------------------------------------------------------- -----------------------------------------
Net utility plant** 1,388,344 1,308,119 1,226,256 10,814,403 10,561,208 10,156,156
Fuel and gas in storage 26,452 50,698 49,091 66,958 101,581 102,846
Other identifiable assets 177,374 151,628 172,790 1,953,348 2,098,951 2,194,343
Other corporate assets 1,115,181 966,624 804,020
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Total assets $13,949,890 $13,728,364 $13,257,365
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*Intersegment rentals included in segments' income but eliminated for total Company
Operating revenues $ 1,951 $ 1,790 $ 1,988 $15,628 $15,078 $16,881
Operating expenses 13 14 16 15,628 15,078 16,881
** General Utility Plant was allocated to Electric and Gas on the basis of the
departmental use of such plant. Pursuant to PSC requirements the Steam
department is charged an interdepartmental rent for General Plant used in
Steam operations which is credited to the Electric and Gas departments.
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(a) The Company supplies electric service in all of New York City (except part
of Queens) and most of Westchester County. It also supplies gas in
Manhattan, The Bronx and parts of Queens and Westchester, and steam in
part of Manhattan.