FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
[x] Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
_________________________
Commission File No. 1-1217
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
(Name of Registrant)
NEW YORK 13-5009340
(State of Incorporation) (IRS Employer Identification No.)
4 IRVING PLACE, NEW YORK, NEW YORK 10003 - (212) 460-4600
(Address and Telephone Number)
The Registrant has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and has been subject to such filing
requirements for the past 90 days.
Yes ___X___ No _______
As of the close of business on April 30, 1996, the Registrant had
outstanding 234,973,914 shares of Common Stock ($2.50 par value).
- 2 -
PART I. - FINANCIAL INFORMATION
CONTENTS PAGE NO.
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheet 3-4
Consolidated Income Statements 5-6
Consolidated Statements of Cash Flows 7-8
Note to Financial Statements 9-11
ITEM 2. Management's Discussion and Analysis of 12-22
Financial Condition and Results of
Operations
_________________________
The following consolidated financial statements are unaudited
but, in the opinion of management, reflect all adjustments (which
include only normal recurring adjustments) necessary to a fair
statement of the results for the interim periods presented. These
condensed unaudited interim financial statements do not contain
the detail, or footnote disclosure concerning accounting policies
and other matters, which would be included in full-year financial
statements and, accordingly, should be read in conjunction with
the Company's audited financial statements (including the notes
thereto) included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 (File No. 1-1217).
- 3 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 1996, DECEMBER 31, 1995 AND MARCH 31, 1995
As At
March 31, 1996 Dec. 31, 1995 March 31, 1995
(Thousands of Dollars)
ASSETS
Utility plant, at original cost
Electric $ 11,344,951 $ 11,319,622 $ 11,047,944
Gas 1,560,433 1,537,296 1,453,102
Steam 513,345 462,975 436,679
General 1,108,114 1,085,795 1,037,752
Total 14,526,843 14,405,688 13,975,477
Less: Accumulated depreciation 4,125,708 4,036,954 3,826,672
Net 10,401,135 10,368,734 10,148,805
Construction work in progress 338,666 360,457 362,694
Nuclear fuel assemblies and components,
less accumulated amortization 78,896 85,212 92,945
Net utility plant 10,818,697 10,814,403 10,604,444
Current assets
Cash and temporary cash investments 103,232 342,292 111,385
Accounts receivable - customers, less
allowance for uncollectible accounts
of $22,128, $21,600 and $22,102 586,578 497,215 471,825
Other receivables 44,789 45,558 62,295
Regulatory accounts receivable (883) (6,481) 33,631
Fuel, at average cost 41,533 40,506 59,456
Gas in storage, at average cost 8,453 26,452 32,443
Materials and supplies, at average cost 219,421 221,026 229,681
Prepayments 171,808 66,148 173,265
Other current assets 14,619 15,126 13,922
Total current assets 1,189,550 1,247,842 1,187,903
Investments and nonutility property 157,422 145,646 118,206
Deferred charges
Enlightened Energy program costs 134,261 144,282 170,748
Unamortized debt expense 131,244 133,812 136,071
Power contract termination costs 93,696 105,408 170,361
Other deferred charges 328,253 316,237 324,678
Total deferred charges 687,454 699,739 801,858
Regulatory asset-future federal
income taxes 1,029,062 1,042,260 1,085,014
Total $ 13,882,185 $ 13,949,890 $ 13,797,425
The accompanying note is an integral part of these financial statements.
- 4 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 1996, DECEMBER 31, 1995 AND MARCH 31, 1995
As At
March 31, 1996 Dec. 31, 1995 March 31, 1995
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock, authorized 340,000,000 shares;
outstanding 234,968,376 shares, 234,956,299
shares and 234,914,842 shares $ 1,478,341 $ 1,464,305 $ 1,463,986
Capital stock expense (35,036) (38,606) (38,846)
Retained earnings 4,144,779 4,097,035 3,960,340
Total common equity 5,588,084 5,522,734 5,385,480
Preferred stock
Subject to mandatory redemption
7.20% Series I 47,500 50,000 50,000
6-1/8% Series J 37,050 50,000 50,000
Total subject to mandatory
redemption 84,550 100,000 100,000
Other preferred stock
$ 5 Cumulative Preferred 175,000 175,000 175,000
5-3/4% Series A 7,061 60,000 60,000
5-1/4% Series B 13,844 75,000 75,000
4.65% Series C 15,330 60,000 60,000
4.65% Series D 22,233 75,000 75,000
5-3/4% Series E - 50,000 50,000
6.20% Series F - 40,000 40,000
6% Convertible Series B 4,824 4,917 5,236
Total other preferred stock 238,292 539,917 540,236
Total preferred stock 322,842 639,917 640,236
Long-term debt 4,189,242 3,917,244 3,926,754
Total capitalization 10,100,168 10,079,895 9,952,470
Noncurrent liabilities
Obligations under capital leases 44,610 45,250 47,167
Other noncurrent liabilities 78,941 75,907 72,322
Total noncurrent liabilities 123,551 121,157 119,489
Current liabilities
Long-term debt due within one year 82,812 183,524 111,171
Accounts payable 384,561 420,852 328,061
Customer deposits 157,856 158,366 161,435
Accrued taxes 94,035 24,374 69,146
Accrued interest 71,544 89,374 71,370
Accrued wages 75,602 76,459 85,463
Other current liabilities 163,695 168,477 158,753
Total current liabilities 1,030,105 1,121,426 985,399
Provisions related to future federal income
taxes and other deferred credits
Accumulated deferred federal income tax 2,330,716 2,296,284 2,331,508
Accumulated deferred investment tax credits 179,140 181,420 189,184
Other deferred credits 118,505 149,708 219,375
Total deferred credits 2,628,361 2,627,412 2,740,067
Total $ 13,882,185 $ 13,949,890 $ 13,797,425
The accompanying note is an integral part of these financial statements.
- 5 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
(Thousands of Dollars)
Operating revenues
Electric $ 1,286,268 $ 1,223,308
Gas 406,864 318,956
Steam 174,233 126,521
Total operating revenues 1,867,365 1,668,785
Operating expenses
Fuel 183,888 113,846
Purchased power 303,999 247,684
Gas purchased for resale 180,840 111,038
Other operations 277,311 282,109
Maintenance 125,025 131,489
Depreciation and amortization (A) 132,565 109,157
Taxes, other than federal income tax 306,036 275,766
Federal income tax 105,040 117,640
Total operating expenses 1,614,704 1,388,729
Operating income 252,661 280,056
Other income (deductions)
Investment income 1,438 1,355
Allowance for equity funds used during construction 513 1,513
Other income less miscellaneous deductions (677) (402)
Federal income tax (420) (470)
Total other income 854 1,996
Income before interest charges 253,515 282,052
Interest on long-term debt 74,369 74,556
Other interest 4,852 7,203
Allowance for borrowed funds used during construction (241) (736)
Net interest charges 78,980 81,023
Net income 174,535 201,029
Preferred stock dividend requirements 6,035 8,893
Gain on refunding of preferred stock (A) 13,943 -
Net income for common stock $ 182,443 $ 192,136
Common shares outstanding - average (000) 234,963 234,910
Earnings per share $ .78 $ .82
Dividends declared per share of common stock $ .52 $ .51
Sales
Electric (Thousands of Kwhrs.)
Con Edison Customers 9,173,421 8,838,301
Deliveries for NYPA and Other Customers 2,319,834 2,256,464
Service for Municipal Agencies 107,455 107,163
Total Sales in Service Territory 11,600,710 11,201,928
Off-System Sales 160,703 852,449(B)
Gas (Dekatherms)
Firm 44,842,439 38,820,824
Off-Peak Firm/Interruptible 6,854,310 5,329,281
Total Sales to Con Edison Customers 51,696,749 44,150,105
Transportation of Customer-Owned Gas 638,990 5,646,612
Off-System Sales 3,848,951 89,487
Total Sales and Transportation 56,184,690 49,886,204
Steam (Thousands of Pounds) 11,864,687 10,310,693
(A) The gain resulting from the preferred stock refunding in the first quarter of 1996
was applied to reduce net utility plant by an additional provision for depreciation.
(B) Includes 423,376 thousands of Kwhrs. subsequently purchased by the Company for sale
to its customers.
The accompanying note is an integral part of these financial statements.
- 6 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
(Thousands of Dollars)
Operating revenues
Electric $ 5,452,368 $ 5,215,989
Gas 901,264 815,000
Steam 381,844 313,122
Total operating revenues 6,735,476 6,344,111
Operating expenses
Fuel 574,146 527,547
Purchased power 1,163,538 847,092
Gas purchased for resale 329,591 273,695
Other operations 1,134,934 1,149,992
Maintenance 505,638 504,086
Depreciation and amortization (A) 479,182 427,747
Taxes, other than federal income tax 1,150,502 1,112,489
Federal income tax 383,960 450,350
Total operating expenses 5,721,491 5,292,998
Operating income 1,013,985 1,051,113
Other income (deductions)
Investment income 17,049 11,548
Allowance for equity funds used during construction 2,763 7,795
Other income less miscellaneous deductions (8,424) (13,653)
Federal income tax (1,010) (20)
Total other income 10,378 5,670
Income before interest charges 1,024,363 1,056,783
Interest on long-term debt 301,729 293,143
Other interest 26,604 21,151
Allowance for borrowed funds used during construction (1,326) (3,500)
Net interest charges 327,007 310,794
Net income 697,356 745,989
Preferred stock dividend requirements 32,706 35,581
Gain on refunding of preferred stock (A) 13,943 -
Net income for common stock $ 678,593 $ 710,408
Common shares outstanding - average (000) 234,943 234,879
Earnings per share $ 2.89 $ 3.02
Dividends declared per share of common stock $ 2.05 $ 2.01
Sales
Electric (Thousands of Kwhrs.)
Con Edison Customers 37,293,488 36,618,521
Deliveries for NYPA and Other Customers 8,919,160 8,759,400
Service for Municipal Agencies 457,020 424,473
Total Sales in Service Territory 46,669,668 45,802,394
Off-System Sales (B) 4,343,726 2,313,886
Gas (Dekatherms)
Firm 96,745,941 87,006,114
Off-Peak Firm/Interruptible 16,997,841 15,217,022
Total Sales to Con Edison Customers 113,743,782 102,223,136
Transportation of Customer-Owned Gas 25,353,567 23,490,160
Off-System Sales 7,135,839 89,487
Total Sales and Transportation 146,233,188 125,802,783
Steam (Thousands of Pounds) 30,979,774 27,881,815
(A) The gain resulting from the preferred stock refunding in the first quarter of 1996
was applied to reduce net utility plant by an additional provision for depreciation.
(B) Includes 2,243,461 and 423,376 thousands of Kwhrs., respectively, subsequently
purchased by the Company for sale to its customers.
The accompanying note is an integral part of these financial statements.
- 7 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
(Thousands of Dollars)
Operating activities
Net income $ 174,535 $ 201,029
Principal non-cash charges (credits) to income
Depreciation and amortization 132,565 109,157
Federal income tax deferred 44,890 86,410
Common equity component of allowance
for funds used during construction (485) (1,426)
Other non-cash charges (18,173) (16,128)
Changes in assets and liabilities
Accounts receivable - customers, less
allowance for uncollectibles (89,363) (31,329)
Regulatory accounts receivable (5,598) (7,285)
Materials and supplies, including fuel
and gas in storage 18,577 9,745
Prepayments, other receivables and
other current assets (104,384) (118,084)
Enlightened Energy program costs 10,021 (547)
Power contract termination costs (2,601) (5,178)
Accounts payable (36,291) (46,408)
Accrued income taxes 61,054 31,819
Other - net 9 (65,733)
Net cash flows from operating activities 184,756 146,042
Investing activities including construction
Construction expenditures (130,888) (144,057)
Nuclear fuel expenditures (655) (2,573)
Contributions to nuclear decommissioning trust (12,127) (2,917)
Common equity component of allowance
for funds used during construction 485 1,426
Net cash flows from investing activities
including construction (143,185) (148,121)
Financing activities including dividends
Issuance of long-term debt 275,000 -
Retirement of long-term debt (103,206) (2,924)
Advance refunding of preferred stock (316,982) -
Issuance and refunding costs (8,652) (135)
Common stock dividends (122,182) (119,805)
Preferred stock dividends (4,609) (8,893)
Net cash flows from financing activities
including dividends (280,631) (131,757)
Net decrease in cash and temporary
cash investments (239,060) (133,836)
Cash and temporary cash investments
at January 1 342,292 245,221
Cash and temporary cash investments
at March 31 $ 103,232 $ 111,385
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 93,854 $ 85,499
Income taxes - -
The accompanying note is an integral part of these financial statements.
- 8 -
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
(Thousands of Dollars)
Operating activities
Net income $ 697,356 $ 745,989
Principal non-cash charges (credits) to income
Depreciation and amortization 479,182 427,747
Federal income tax deferred 27,500 162,890
Common equity component of allowance
for funds used during construction (2,605) (7,348)
Other non-cash charges (49,600) 23,621
Changes in assets and liabilities
Accounts receivable - customers, less
allowance for uncollectibles (114,753) 56,136
Regulatory accounts receivable 34,514 29,379
Materials and supplies, including fuel
and gas in storage 52,173 (2,387)
Prepayments, other receivables and
other current assets 18,266 (4,692)
Enlightened Energy program costs 36,487 (25,774)
Power contract termination costs 57,964 (67,554)
Federal income tax refund (52,937) (9,643)
Accounts payable 56,500 5,093
Accrued income taxes 20,685 (87,843)
Other - net 54,440 (120,921)
Net cash flows from operating activities 1,315,172 1,124,693
Investing activities including construction
Construction expenditures (679,634) (772,424)
Nuclear fuel expenditures (10,922) (46,269)
Contributions to nuclear decommissioning trust (28,103) (11,669)
Common equity component of allowance
for funds used during construction 2,605 7,348
Net cash flows from investing activities
including construction (716,054) (823,014)
Financing activities including dividends
Issuance of long-term debt 503,285 250,000
Retirement of long-term debt and preferred stock (111,171) (133,896)
Advance refunding of long-term debt (155,699) -
Advance refunding of preferred stock (316,982) -
Issuance and refunding costs (13,786) (3,781)
Common stock dividends (481,639) (472,141)
Preferred stock dividends (31,279) (35,581)
Net cash flows from financing activities
including dividends (607,271) (395,399)
Net decrease in cash and temporary
cash investments (8,153) (93,720)
Cash and temporary cash investments
at beginning of period 111,385 205,105
Cash and temporary cash investments
at March 31 $ 103,232 $ 111,385
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 318,308 $ 278,681
Income taxes 344,754 375,533
The accompanying note is an integral part of these financial statements.
- 9 -
- ----------------------------------------------------------------
Contingency Note
- ----------------------------------------------------------------
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 March 31, 1996 the highest amount
which could be assessed for losses during the current policy year
under all of the policies was $31.1 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.
- 10 -
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
March 31, 1996 of approximately $14.1 million. There will be
additional costs with respect to these and possibly other sites,
the materiality of which is not presently determinable.
DEC Settlement. In 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 March 31, 1996 the Company had an accrued liability of $18.7
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.
- 11 -
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.
- 12 -
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis relates to the
interim financial statements appearing in this report and should
be read in conjunction with Management's Discussion and Analysis
appearing in Item 7 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 (File No. 1-1217). Reference
is made to the note to the financial statements in Item 1 of this
report, which note is incorporated herein by reference.
LIQUIDITY AND CAPITAL RESOURCES
Cash and temporary cash investments were $103.2
million at March 31, 1996 compared with $342.3 million at
December 31, 1995 and $111.4 million at March 31, 1995. The
Company's cash balances reflect the timing and amounts of
external financing.
In January 1996 the Company commenced a tender offer
for certain series of its preferred stock. Shareholders tendered
approximately $227 million of such preferred stock pursuant to
the offer, which expired on February 27, 1996. In addition, the
Company called $90 million of its preferred stock for redemption
on March 30, 1996. These retirements and related expenses were
funded with proceeds from $275 million of 7-3/4 percent
subordinated debentures issued on March 6, 1996 and due on March
31, 2031 and cash of $25 million. The present value revenue-
equivalent savings of these transactions was approximately $42
million. The net gain on these transactions of $13.9 million
(after write-off of capital stock expense on redeemed stock) did
not affect earnings per share due to an equivalent amount of
provision for depreciation of utility plant recorded in the first
quarter of 1996. The increases in depreciation expense for the
three and twelve-month periods ending March 31, 1996 compared
with the corresponding 1995 periods reflect this additional
depreciation expense.
On May 1, 1996 the Company issued $100 million of
7-3/4 percent Debentures Series 1996 A, due June 1, 2026, at a
price to the public of 98.002 percent and a yield of 7.924
percent. The proceeds will be used to redeem, on June 1, 1996,
the $95.3 million outstanding balance of the Company's 9-3/8
percent Debentures, Series 1991 A, due June 1, 2026. The other
$79.7 million of the original $175 million Series 1991 A
Debentures had been retired through a tender offer in 1993.
- 13 -
The Company expects to finance the balance of its
capital requirements for the remainder of 1996 and 1997,
including $187 million for securities maturing during this
period, from internally generated funds and external financings
of about $150 million, most, if not all, of which will be debt
issues.
Customer accounts receivable, less allowance for
uncollectible accounts, amounted to $586.6 million at March 31,
1996 compared with $497.2 million at December 31, 1995 and $471.8
million at March 31, 1995. In terms of equivalent days of revenue
outstanding (ENDRO), these amounts represented 28.7, 27.6 and
27.2 days, respectively. The increase in amount and in ENDRO in
1996 reflects increases in sales revenues and timing differences
in billing and collection schedules.
The regulatory accounts receivable negative balances
of $.9 million at March 31, 1996 and $6.5 million at December 31,
1995 represent amounts to be refunded to customers. The
regulatory accounts receivable of $33.6 million at March 31, 1995
represented amounts to be recovered from customers. These
balances include amounts accrued under the electric revenue
adjustment mechanisms (ERAM), modified ERAM and incentive
provisions of the Company's electric and gas rate agreements
referred to below.
The changes in regulatory accounts receivable during
the first three months of 1996 were as follows:
1996
Balance Recoveries Balance
Dec. 31, 1996 from March 31,
(Millions of Dollars) 1995* Accruals*Customers** 1996*
ERAM/Modified ERAM $(37.7) $ .4 $ - $(37.3)
Electric Incentives
Enlightened Energy
program 19.7 6.2 - 25.9
Customer service 4.0 2.1 - 6.1
Fuel and purchased
power 1.9 2.1 (3.3) .7
Gas Incentives
System improvement 4.6 - (1.5) 3.1
Customer service 1.0 - (.4) .6
Total $ (6.5) $ 10.8 $ (5.2) $ (.9)
* Negative amounts are refundable; positive amounts are
recoverable.
**Negative amounts have been recovered.
- 14 -
Gas in storage decreased $18.0 million in the first
quarter of 1996, reflecting high levels of gas sendout as a
result of colder than normal winter weather.
In January 1996 the Company made a $224 million semi-
annual payment to New York City for property taxes. Prepayments
and other current assets at March 31, 1996 include the
unamortized portion ($111.8 million) of this payment.
Enlightened Energy program costs are generally
recoverable over a five-year period. Program costs have declined
and are expected to continue to decline in future periods,
resulting in lower deferred balances as recoveries exceed new
expenditures.
Interest coverage under the SEC formula for the
twelve months ended March 31, 1996 was 4.11 times compared with
4.20 times for the year 1995 and 4.59 times for the twelve months
ended March 31, 1995. The decline in interest coverage reflects a
lower level of pre-tax earnings.
1995 Electric Rate Agreement
In April 1995 the New York Public Service Commission
(PSC) approved a three-year electric rate agreement effective
April 1, 1995. The agreement provided for no increase in base
electric revenues in the first rate year and possible, but
limited, increases in years two and three. For details of the
agreement, see the Management's Discussion and Analysis appearing
in Item 7 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, under the heading "Liquidity and
Capital Resources - 1995 Electric Rate Agreement."
The agreement provides that the Company will retain
50 percent of earnings (excluding incentive earnings) in excess
of 50 basis points above the allowed return on equity but not
more than 150 basis points above the allowed return, and will
defer the balance for customer benefit. For the first rate year
of the electric rate agreement, the twelve months ended March 31,
1996, the Company's actual rate of return on electric common
equity, excluding incentives, exceeded the sharing threshold of
11.6 percent, principally due to increased productivity, and a
provision for excess earnings of $8.4 million was set aside for
the future benefit of customers.
- 15 -
In March 1996 the PSC approved a $19 million
reduction to base electric rates for the second year of the rate
agreement, effective April 1, 1996. The decrease reflects a lower
allowed rate of return on common equity (10.31 percent excluding
incentives) and a refund to customers under the modified ERAM
mechanism, offset in part by increases in pension and retiree
health benefit expenses and IPP capacity costs.
1995 Gas and Steam Rate Increases
Effective October 1, 1995 (the beginning of the
second year of the October 1994 three-year gas and steam rate
settlements) gas and steam rates were increased by $20.9 million
(2.5 percent) and $4.6 million (1.3 percent), respectively. The
primary reasons for the gas rate increase were escalation in
certain operation and maintenance expenses, return and
depreciation on higher plant balances, and recovery of earnings
under the incentive provisions of the settlement. The steam rate
increase was primarily to cover escalation in operation and
maintenance expenses, and return and depreciation on higher plant
balances.
For details of the October 1994 three-year gas and
steam rate agreements, see Management's Discussion and Analysis
appearing in Item 7 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 under the heading "Liquidity
and Capital Resources - Gas and Steam Rate Agreements."
Credit Ratings
The Company's senior debt (first mortgage bonds) is
rated Aa3, A+ and AA- by Moody's Investors Service (Moody's),
Standard & Poor's (S&P) and Duff and Phelps, Inc., respectively.
The Company has not issued first mortgage bonds since 1974. As of
March 31, 1996, one $75 million issue of first mortgage bonds
remains outstanding, which will mature in December 1996. The
Company's unsecured debentures and tax-exempt debt are rated A1,
A+ and A+ by Moody's, S&P and Duff and Phelps, respectively. The
Company's subordinated debentures are rated A2, A and A+ by
Moody's, S&P and Duff and Phelps, respectively.
Competition - New York State and Federal Initiatives
The PSC is expected to issue an order in the second
quarter of 1996 in its generic "competitive opportunities"
proceeding to investigate whether and how to introduce increased
competition in the electric utility industry in the State. The
order is not expected to conclude the PSC's review of competition
and related issues.
- 16 -
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, pursuant to SFAS
No. 101, "Accounting for Discontinuation of Application of FASB
Statement No. 71," and SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," could then require a material write-down of assets,
the amount of which is not yet determinable.
On April 24, 1996 the Federal Energy Regulatory
Commission (FERC) issued its final order requiring electric
utilities to file non-discriminatory open access transmission
tariffs that would be available to wholesale sellers and buyers
of electric energy and to allow utilities to recover related
legitimate and verifiable stranded costs.
The Company is currently analyzing the final order to
determine its impact. The Company participates in the wholesale
electric market primarily as a buyer, and in this regard should
benefit if the rules adopted result in lower wholesale prices for
its purchases of electricity for its retail customers.
For details of the New York State and FERC
initiatives towards competition, see the Management's Discussion
and Analysis appearing in Item 7 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 under the
heading "Liquidity and Capital Resources - Competition."
Environmental Claims and Other Contingencies
Reference is made to the note to the financial
statements included in this report for information concerning
potential liabilities of the Company arising from the Federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (Superfund), from claims relating to alleged exposure
to asbestos, and from certain other contingencies to which the
Company is subject.
- 17 -
RESULTS OF OPERATIONS
Net income for common stock for the first quarter and
twelve months ended March 31, 1996 was lower than in the
corresponding 1995 periods by $9.7 million ($.04 a share) and
$31.8 million ($.13 a share), respectively. These results reflect
the three-year electric rate agreement effective April 1, 1995,
which provides for generally more limited opportunities for
earning incentives.
In reviewing period-to-period comparisons, it should
be noted that not all changes in sales volume affected operating
revenues. Under the ERAM and the modified ERAM, discussed below,
except for the variation attributed to a change in number of
customers under the modified ERAM, most increases (or decreases)
in electric sales revenues compared with revenues forecast
pursuant to the electric rate agreement are deferred for
subsequent credit (or billing) to customers. Under the weather
normalization clause in the Company's gas tariff, most weather-
related variations in gas sales do not affect gas revenues.
Increases (Decreases)
Three Months Ended Twelve Months Ended
March 31, 1996 March 31, 1996
Compared With Compared With
Three Months Ended Twelve Months Ended
March 31, 1995 March 31, 1995
Amount Percent Amount Percent
(Amounts in Millions)
Operating revenues $ 198.6 11.9% $ 391.4 6.2%
Fuel - electric and steam 70.1 61.5 46.6 8.8
Purchased power - electric 56.3 22.7 316.5 37.4
Gas purchased for resale 69.8 62.9 55.9 20.4
Operating revenues less
fuel and purchased power
and gas purchased for resale
(Net revenues) 2.4 0.2 (27.6) (0.6)
Other operations and
maintenance (11.3) (2.7) (13.5) (0.8)
Depreciation and amortization (A) 23.4 21.4 51.4 12.0
Taxes, other than federal
income tax 30.3 11.0 38.0 3.4
Federal income tax (12.6) (10.7) (66.4) (14.7)
Operating income (27.4) (9.8) (37.1) (3.5)
Other income less deductions
and related federal income tax (1.1) 57.2 4.7 83.0
Interest charges (2.0) (2.5) 16.2 5.2
Net income (26.5) (13.2) (48.6) (6.5)
Preferred stock dividend
requirement (2.9) (32.1) (2.9) (8.1)
Gain on refunding of
preferred stock (A) 13.9 - 13.9 -
Net income for common stock $ (9.7) (5.0)% $ (31.8) (4.5)%
(A) See discussion above under Liquidity and Capital Resources.
- 18 -
First Quarter 1996 Compared with
First Quarter 1995
Net revenues (operating revenues less fuel, purchased
power and gas purchased for resale) increased $2.4 million in the
first quarter of 1996 compared with the 1995 period. Electric net
revenues decreased $35.2 million and gas and steam net revenues
increased $18.1 million and $19.5 million, respectively.
Total electric revenues in the 1996 period were
higher than in the corresponding 1995 period, largely reflecting
recovery of higher fuel and purchased power costs. Net electric
revenues for the first quarter of 1996 reflect an accrual of $.4
million under the modified ERAM, reflecting net revenues below
the forecast level, compared with an accrual of $7.1 million in
the 1995 period. The 1995 electric rate agreement added to the
ERAM a revenue per customer (RPC) mechanism (modified ERAM) which
excludes from adjustment those variances in the Company's
electric revenues which result from changes in the number of
customers in each electric service classification. Net electric
revenues for the first quarter of 1996 include $6.8 million
earned under the RPC mechanism.
Electric net revenues for the first quarter of 1996
include $10.4 million, compared with $21.2 million for the 1995
period, for incentives earned under the provisions of the 1995
and 1992 electric rate agreements, respectively.
The accounting provisions of the 1992 and 1995
electric rate agreements for Indian Point Unit 2 refueling and
maintenance outages decreased electric net revenues for the first
quarter of 1996 compared with the 1995 period by $19.9 million;
related expenses decreased in like amount.
- 19 -
Electric sales, excluding off-system sales, in the
first quarter of 1996 compared with the 1995 period were:
Millions of Kwhrs.
1st Quarter 1st Quarter Percent
Description 1996 1995 Variation Variation
Residential/Religious 2,710 2,570 140 5.4%
Commercial/Industrial 6,311 6,119 192 3.1%
Other 153 149 4 2.7%
Total Con Edison Customers 9,174 8,838 336 3.8%
NYPA, Municipal Agency
and Other Sales 2,427 2,364 63 2.7%
Total Service Area 11,601 11,202 399 3.6%
Gas and steam revenues in the 1996 period reflect
rate increases effective October 1995. Gas net revenues for the
first quarter of 1996 also reflect an increase in non-weather
related firm sales compared with the 1995 period.
For the first quarter of 1996 firm gas sales volume
increased 15.5 percent and steam sales volume increased 15.1
percent compared with the 1995 period due to colder than normal
1996 winter weather compared with warmer than normal 1995 winter
weather. Steam net revenues for the period reflect the effect of
this weather variation because there is no weather normalization
provision for steam revenues.
After adjustment for comparability in both periods,
primarily for variations in weather, electric sales volume in the
Company's service territory increased 1.6 percent in the first
quarter of 1996, firm gas sales volume increased 3.3 percent and
steam sales volume increased 1.7 percent.
Electric fuel costs increased $41.9 million in the
1996 period, largely because of increased sendout and higher unit
cost of fuel. Purchased power costs increased in the first
quarter of 1996 by $56.3 million over the 1995 period due to the
relatively high cost that the Company is required to pay under
its IPP contracts and the increased cost of short-term power
purchases, partially offset by reduced unit purchases. The
variations in fuel and purchased power costs also reflect the
availability of the Company's Indian Point Unit 2 nuclear
generating station, which was operating during most of the 1996
period but was out of service for refueling and maintenance for a
large part of the 1995 period. Steam fuel costs increased $28.2
million due to increased sendout and higher unit cost of fuel.
Gas purchased for resale increased $69.8 million, reflecting
increased sendout and higher unit cost of purchased gas.
- 20 -
Other operations and maintenance expenses decreased
$11.3 million for the first quarter of 1996 compared with the
1995 period, due primarily to lower production expenses, since
there was a refueling and maintenance outage of Indian Point Unit
2 in the 1995 period but none in 1996, offset in part by
increased distribution costs related to the inclement winter
weather.
Depreciation and amortization increased $23.4 million
in the first quarter of 1996 due to higher plant balances and the
provision for depreciation expense of $13.9 million corresponding
to the amount of the gain on the refunding of preferred stock,
discussed above.
Taxes other than federal income tax increased $30.3
million in the first quarter of 1996 compared with the 1995
period due principally to increased property taxes ($10.5
million) and revenue taxes ($14.4 million).
Federal income tax decreased $12.6 million for the
quarter reflecting lower pre-tax income.
Twelve Months Ended March 31, 1996 Compared with
Twelve Months Ended March 31, 1995
Net revenues (operating revenues less fuel, purchased
power and gas purchased for resale) decreased $27.6 million in
the twelve months ended March 31, 1996 compared with the 1995
period. Electric net revenues decreased $92.0 million and gas and
steam net revenues increased $30.3 million and $34.1 million,
respectively.
Total electric revenues in the 1996 period were
higher than in the corresponding 1995 period, largely reflecting
recovery of higher purchased power costs. However, under the 1995
electric rate agreement, recovery of increased IPP capacity costs
in the 1996 period was offset by revenue reductions reflecting a
generally lower level of operation and maintenance expenses. The
1996 period also includes rate agreement reconciliations that
increased electric revenues by $26.3 million and purchased power
costs by $31.7 million.
Under the modified ERAM, net electric revenues for
the twelve months ended March 31, 1996 have been reduced for a
credit due customers of $42.1 million, net of $20.1 million
earned under the RPC mechanism, reflecting higher sales revenues
than forecast, compared with a credit due customers of $33.5
million in the 1995 period.
- 21 -
Net electric revenues for the twelve months ended
March 31, 1996 include $46.8 million, compared with $95.3 million
for the 1995 period, for incentives earned under the 1995 and
1992 electric rate agreements, respectively.
Electric sales, excluding off-system sales, for the
twelve months ended March 31, 1996 compared with the twelve
months ended March 31, 1995 were:
Millions of Kwhrs.
Twelve Months Twelve Months
Ended Ended Percent
Description March 31, 1996 March 31, 1995 Variation Variation
Residential/Religious 10,988 10,601 387 3.7%
Commercial/Industrial 25,685 25,412 273 1.1%
Other 621 605 16 2.6%
Total Con Edison Customers 37,294 36,618 676 1.8%
NYPA and Municipal Agency
Sales 9,376 9,184 192 2.1%
Total Service Area 46,670 45,802 868 1.9%
Off-system electricity sales increased to 4,344
millions of Kwhrs in the 1996 period compared with 2,314 millions
of Kwhrs in the 1995 period. The increase in such sales was due
largely to arrangements in which the Company produced electricity
for others using gas they provided as fuel. The Company purchased
a substantial portion of this electricity for sale to its own
customers.
Gas and steam revenues in the 1996 period reflect
rate increases in October 1995 and higher fuel-related revenues
due to increased sales volumes and higher steam unit cost of
fuel.
For the twelve months ended March 31, 1996, firm gas
sales volume increased 11.2 percent and steam sales volume
increased 11.1 percent due to colder than normal 1996 winter
weather compared to warmer than normal 1995 winter weather. Under
the weather normalization clause in the Company's gas tariff,
most weather-related variations in gas sales do not
affect gas revenues.
After adjustment for comparability in both periods,
primarily for variations in weather, electric sales volume in the
Company's service territory in the twelve months ended March 31,
1996 increased 2.0 percent. Similarly adjusted, firm gas sales
volume increased 2.4 percent and steam sales volume increased 0.7
percent.
- 22 -
Electric fuel costs increased $12.0 million in the
1996 period due to higher unit cost of fuel; steam fuel costs
increased $34.6 million due to higher sendout and higher unit
cost of fuel. During the 1996 period the Company purchased 58
percent of its electric energy requirements compared with 54
percent for the prior period. Reflecting this increase and the
relatively high cost that the Company is required to pay under
its IPP contracts, purchased power costs increased in the 1996
period by $316.4 million over the 1995 period. Gas purchased for
resale increased $55.9 million, reflecting principally higher
sendout.
Other operations and maintenance expenses decreased
$13.5 million in the twelve months ended March 31, 1996 compared
with the 1995 period, due to decreased electric production and
administrative and general expenses, offset in part by higher
distribution and transmission expenses and amortization of
previously deferred Enlightened Energy program costs.
Depreciation and amortization increased $51.4 million
in the 1996 period due principally to higher plant balances and
the provision for depreciation expense of $13.9 million
corresponding to the amount of the gain on the refunding of
preferred stock.
Taxes, other than federal income tax, increased $38.0
million in the twelve months ended March 31, 1996 compared with
the 1995 period primarily due to increased revenue taxes ($21.6
million), property taxes ($6.5 million) and other taxes ($8.3
million).
Federal income tax decreased $66.4 million for the
twelve months ended March 31, 1996 compared with the 1995 period
principally due to lower pre-tax income and adjustments
associated with the 1995 electric rate agreement.
Other income less miscellaneous deductions increased
$4.7 million for the twelve-month period primarily due to
increases in investment income.
Interest on long-term debt for the twelve-month
period increased $8.6 million principally as a result of the
issuance of new debt. Other interest charges increased $5.4
million due to interest expense associated with certain tax
settlements.
- 23 -
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 4.1 Form of the Company's 7 3/4% Quarterly Income
Capital Securities (Series A Subordinated
Deferrable Interest Debentures). (Incorporated
by reference to Exhibit 4 to the Company's
Current Report on Form 8-K, dated February 29,
1996, in Commission File No. 1-1217.)
Exhibit 4.2 Form of the Company's 7 3/4% Debentures,
Series 1996 A. (Incorporated by reference
to Exhibit 4 to the Company's Current
Report on Form 8-K, dated April 24, 1996, in
Commission File No. 1-1217.)
Exhibit 12 Statement of computation of ratio of earnings to
fixed charges for the twelve-month periods ended
March 31, 1996 and 1995.
Exhibit 27 Financial Data Schedule for the three-month period
ended March 31, 1996. (To the extent
provided in Rule 402 of Regulation S-T, this
exhibit shall not be deemed "filed", or otherwise
subject to liabilities, or be deemed part of a
registration statement.)
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated
February 29, 1996, reporting (under Item 5) the sale of $275
million aggregate principal amount of its 7 3/4% Quarterly Income
Capital Securities (Series A Subordinated Deferrable Interest
Debentures), and the expected use of the net proceeds of the sale
thereof to refund certain preferred stock of the Company. The
Company filed no other Current Reports on Form 8-K during the
quarter ended March 31, 1996.
The Company filed a Current Report on Form 8-K, dated April
24, 1996, reporting (under Item 5) the sale of $100 million
aggregate principal amount of its 7 3/4% Debentures, Series 1996
A, and the expected use of the net proceeds of the sale thereof
to refund certain debentures of the Company.
- 24 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.
DATE: May 13, 1996 Raymond J. McCann
Raymond J. McCann
Executive Vice President,
Chief Financial Officer and
Duly Authorized Officer
DATE: May 13, 1996 Joan S. Freilich
Joan S. Freilich
Vice President, Controller and
Chief Accounting Officer
INDEX TO EXHIBITS
SEQUENTIAL PAGE
EXHIBIT NUMBER AT WHICH
NO. DESCRIPTION EXHIBIT BEGINS
4.1 Form of the Company's 7 3/4% Quarterly Income
Capital Securities (Series A Subordinated
Deferrable Interest Debentures). (Incorporated
by reference to Exhibit 4 to the Company's
Current Report on Form 8-K, dated February 29,
1996, in Commission File No. 1-1217.)
4.2 Form of the Company's 7 3/4% Debentures,
Series 1996 A. (Incorporated by reference
to Exhibit 4 to the Company's Current
Report on Form 8-K, dated April 24, 1996, in
Commission File No. 1-1217.)
12 Statement of computation of ratio of earnings to
fixed charges for the twelve-month periods ended
March 31, 1996 and 1995.
27 Financial Data Schedule for the three-month period
ended March 31, 1996. (To the extent
provided in Rule 402 of Regulation S-T, this
exhibit shall not be deemed "filed", or otherwise
subject to liabilities, or be deemed part of a
registration statement.)