SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
March 31, 1994
For the quarterly period ended. . . . . . . .. . . . . . . . . .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from. . . . . . . .to. . . . . . . . .
1-3103-2
Commission file number. . . . . . . . . . . .. . . . . . . . . .
New York State Electric & Gas Corporation
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Exact name of registrant as specified in its charter)
New York 15-0398550
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 3287, Ithaca, New York 14852-3287
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Address of principal executive offices) (Zip Code)
607 347-4131
Registrant's telephone number, including area code . . . . . . .
N/A
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
The number of shares of common stock (par value $6.66 2/3
per share) outstanding as of April 30, 1994 was 71,040,706.
TABLE OF CONTENTS
PART I
Page
Item 1. Financial Statements . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(a) Results of Operations . . . . . . . . . . 9
(b) Liquidity and Capital Resources . . . . . 11
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. . . . . . . . . . . . . . . . . 14
(b) Report on Form 8-K. . . . . . . . . . . . 14
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 16
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
New York State Electric & Gas Corporation
Consolidated Statements of Income - (Unaudited)
(Thousands, except per share amounts)
Periods Ended March 31 Three Months
1994 1993
Operating Revenues
Electric . . . . . . . . . . . . . . . . $424,520 $403,558
Natural gas. . . . . . . . . . . . . . . 140,647 118,825
---------- ----------
Total Operating Revenues . . . . . . $565,167 $522,383
---------- ----------
Operating Expenses
Fuel used in electric generation . . . . 67,644 66,987
Electricity purchased. . . . . . . . . . 45,451 39,791
Natural gas purchased. . . . . . . . . . 80,282 68,099
Other operating expenses . . . . . . . . 75,994 80,963
Maintenance. . . . . . . . . . . . . . . 24,442 22,147
Depreciation and amortization. . . . . . 43,420 40,729
Federal income taxes . . . . . . . . . . 48,674 38,397
Other taxes. . . . . . . . . . . . . . . 59,270 55,377
---------- ----------
Total Operating Expenses. . . . . . . 445,177 412,490
---------- ----------
Operating Income. . . . . . . . . . . . . 119,990 109,893
Other Income and Deductions . . . . . . . (25) (51)
---------- ----------
Income Before Interest Charges. . . . . . 119,965 109,842
---------- ----------
Interest Charges
Interest on long-term debt . . . . . . . 33,132 34,245
Other interest . . . . . . . . . . . . . 2,804 2,781
Allowance for borrowed funds used
during construction . . . . . . . . (664) (1,223)
---------- ----------
Interest Charges - Net . . . . . . . . 35,272 35,803
---------- ----------
Net Income. . . . . . . . . . . . . . . . 84,693 74,039
Preferred Stock Dividends . . . . . . . . 4,859 5,201
---------- ----------
Earnings Available for Common Stock . . . $79,834 $68,838
========== ==========
Earnings Per Share. . . . . . . . . . . . $1.13 $.99
Dividends Per Share . . . . . . . . . . . .55 .54
Average Shares Outstanding. . . . . . . . 70,801 69,561
The notes on pages 6 through 8 are an integral part of the
financial statements.
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Balance Sheets - (Unaudited)
(Thousands)
March 31, Dec. 31,
1994 1993
Assets
Utility Plant, at Original Cost
Electric . . . . . . . . . . . . . . . . . . . . . . .$4,814,472 $4,777,368
Natural gas. . . . . . . . . . . . . . . . . . . . . . 388,457 381,389
Common . . . . . . . . . . . . . . . . . . . . . . . . 155,764 158,986
---------- ----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,358,693 5,317,743
Less accumulated depreciation . . . . . . . . . . . . . 1,570,498 1,535,307
---------- ----------
Net Utility Plant in Service . . . . . . . . . . . . 3,788,195 3,782,436
Construction work in progress . . . . . . . . . . . . . 150,440 143,859
---------- ----------
Total Utility Plant. . . . . . . . . . . . . . . . . 3,938,635 3,926,295
Other Property and Investments, net . . . . . . . . . . 75,742 73,537
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . . 16,929 4,264
Special deposits . . . . . . . . . . . . . . . . . . . 39,982 145,335
Accounts receivable, net . . . . . . . . . . . . . . . 221,153 181,586
Fuel, at average cost. . . . . . . . . . . . . . . . . 26,453 54,791
Materials and supplies, at average cost. . . . . . . . 47,911 48,910
Prepayments. . . . . . . . . . . . . . . . . . . . . . 51,316 30,092
Accumulated deferred federal income
tax benefits. . . . . . . . . . . . . . . . . . . . 5,719 -
---------- ----------
Total Current Assets. . . . . . . . . . . . . . . . 409,463 464,978
Deferred Charges
Unfunded future federal income taxes . . . . . . . . . 378,314 380,056
Unamortized debt expense . . . . . . . . . . . . . . . 111,002 112,059
Demand-side management program costs . . . . . . . . . 71,391 73,113
Other. . . . . . . . . . . . . . . . . . . . . . . . . 245,684 257,920
---------- ----------
Total Deferred Charges. . . . . . . . . . . . . . . 806,391 823,148
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . .$5,230,231 $5,287,958
========== ==========
The notes on pages 6 through 8 are an integral part of the financial
statements.
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Balance Sheets - (Unaudited)
(Thousands)
March 31, Dec. 31,
1994 1993
Capitalization and Liabilities
Capitalization
Common stock equity
Common stock . . . . . . . . . . . . . . . . . . $473,179 $470,640
Capital in excess of par value. . . . . . . . . . 831,657 824,943
Retained earnings . . . . . . . . . . . . . . . . 361,092 320,114
---------- ----------
Total common stock equity. . . . . . . . . . . . . . . 1,665,928 1,615,697
Preferred stock redeemable solely at the
option of the Company . . . . . . . . . . . . . . . 140,500 140,500
Preferred stock subject to mandatory
redemption requirements . . . . . . . . . . . . . . 125,000 125,000
Long-term debt . . . . . . . . . . . . . . . . . . . . 1,629,519 1,630,629
---------- ----------
Total Capitalization . . . . . . . . . . . . . . . 3,560,947 3,511,826
Current Liabilities
Current portion of long-term debt
and preferred stock . . . . . . . . . . . . . . . . 212,025 332,709
Notes payable. . . . . . . . . . . . . . . . . . . . . 20,400 50,200
Accounts payable and accrued liabilities . . . . . . . 95,448 111,481
Interest accrued . . . . . . . . . . . . . . . . . . . 41,076 31,348
Accumulated deferred federal income taxes. . . . . . . - 1,132
Other. . . . . . . . . . . . . . . . . . . . . . . . . 115,016 89,443
---------- ----------
Total Current Liabilities . . . . . . . . . . . . 483,965 616,313
Deferred Credits
Accumulated deferred investment tax credit . . . . . . 137,068 138,478
Excess deferred federal income taxes . . . . . . . . . 35,465 36,378
Other. . . . . . . . . . . . . . . . . . . . . . . . . 167,075 155,413
---------- ----------
Total Deferred Credits. . . . . . . . . . . . . . 339,608 330,269
Accumulated Deferred Federal Income Taxes
Unfunded future federal income taxes . . . . . . . . . 378,314 380,056
Other. . . . . . . . . . . . . . . . . . . . . . . . . 431,977 416,545
---------- ----------
Total Accumulated Deferred Federal
Income Taxes . . . . . . . . . . . . . . . . . . 810,291 796,601
Commitments and Contingencies (Note 3). . . . . . . . . 35,420 32,949
---------- ----------
Total Capitalization and Liabilities. . . . . . .$5,230,231 $5,287,958
========== ==========
The notes on pages 6 through 8 are an integral part of the financial
statements.
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Statements of Cash Flows - (Unaudited)
(Thousands)
Periods Ended March 31 Three Months
1994 1993
Operating Activities
Net Income . . . . . . . . . . . . . . . . . . . . $84,693 $74,039
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . 43,420 40,729
Deferred fuel and purchased gas. . . . . . . . . 12,148 8,996
Federal income taxes and investment tax credits
deferred - net . . . . . . . . . . . . . . . . 3,262 3,271
Unbilled revenue amortization. . . . . . . . . . (2,115) (2,229)
Changes in current operating assets and liabilities:
Accounts receivable excluding accounts
receivable sold. . . . . . . . . . . . . . . . (39,567) (43,070)
Accounts receivable sold . . . . . . . . . . . . - 13,800
Prepayments. . . . . . . . . . . . . . . . . . . (21,224) (13,318)
Inventory. . . . . . . . . . . . . . . . . . . . 29,337 15,199
Accounts payable and accrued liabilities . . . . (16,033) (12,550)
Taxes accrued. . . . . . . . . . . . . . . . . . 42,355 32,573
Interest accrued . . . . . . . . . . . . . . . . 9,728 3,746
Other-net. . . . . . . . . . . . . . . . . . . . . 499 816
------- -------
Net Cash Provided by Operating Activities . . . 146,503 122,002
------- -------
Investing Activities
Utility plant construction expenditures,
net of allowance for other funds
used during construction . . . . . . . . . . . . (53,557) (53,630)
Proceeds received from governmental and
other sources . . . . . . . . . . . . . . . . . 214 6,466
Expenditures for other property and investments. . (3,147) (10,767)
Funds set aside for construction expenditures. . . 10,929 -
------- -------
Net Cash Used in Investing Activities . . . . . (45,561) (57,931)
------- -------
Financing Activities
Issuance of pollution control notes. . . . . . . . 37,500 -
Sale of common stock . . . . . . . . . . . . . . . 10,558 7,896
First mortgage bonds and preferred stock
repayments, including premiums . . . . . . . . . (156,700) (108,596)
Decrease in funds set aside for first
mortgage bond and preferred stock repayments . . 95,000 86,096
Long-term notes - net. . . . . . . . . . . . . . . (500) 10,793
Notes payable - net. . . . . . . . . . . . . . . . (29,800) (11,200)
Dividends on common and preferred stock. . . . . . (44,335) (42,710)
------- -------
Net Cash Used in Financing Activities . . . . . (88,277) (57,721)
------- -------
Net Increase in Cash and Cash Equivalents . . . . . 12,665 6,350
Cash and Cash Equivalents, Beginning of Period. . . 4,264 3,968
------- -------
Cash and Cash Equivalents, End of Period. . . . . . $16,929 $10,318
======= =======
Supplemental Disclosure of Cash Flows Information
Cash paid during the period
Interest, net of amounts capitalized. . . . . . . $23,202 $29,142
Income taxes. . . . . . . . . . . . . . . . . . . $2,843 -
The notes on pages 6 through 8 are an integral part of the
financial statements.
4
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Statements of Retained Earnings - (Unaudited)
(Thousands)
Periods ended March 31 Three Months
1994 1993
Balance, beginning of period. . . . . . . . . . $320,114 $327,040
Add net income. . . . . . . . . . . . . . . . . 84,693 74,039
-------- --------
404,807 401,079
Deduct dividends on capital stock:
Preferred. . . . . . . . . . . . . . . . . . . 4,859 5,201
Common . . . . . . . . . . . . . . . . . . . . 38,856 37,510
-------- --------
43,715 42,711
-------- --------
Balance, end of period. . . . . . . . . . . . . $361,092 $358,368
======== ========
The notes on pages 6 through 8 are an integral part of the
financial statements.
Item 1. Financial Statements (Cont'd)
Note 1. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements
reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of New York State Electric &
Gas Corporation's (Company) consolidated results for the interim
periods. All such adjustments are of a normal recurring nature.
The unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
contained in the Company's annual report for the year ended
December 31, 1993. Due to the seasonal nature of the Company's
operations, financial results for interim periods are not neces-
sarily indicative of trends for a twelve-month period.
Note 2. Reclassification
Certain amounts have been reclassified on the consolidated
financial statements to conform to the 1994 presentation.
Note 3. Contingencies
Environmental Matters
The Company continually assesses actions that may need to be
taken to ensure compliance with changing environmental laws and
regulations. Compliance programs will increase the cost of
electric and natural gas service by requiring changes to the
Company's operations and facilities. Historically, rate recovery
has been authorized for the cost incurred for compliance with
environmental laws and regulations.
Due to existing and proposed legislation and regulations,
and legal proceedings commenced by governmental bodies and
others, the Company may also incur costs from the past disposal
of hazardous substances produced during the Company's operations
or those of its predecessors. The Company has been notified by
the U.S. Environmental Protection Agency (EPA) and the New York
State Department of Environmental Conservation (NYSDEC) that the
Company is among the potentially responsible parties (PRPs) who
may be liable to pay for costs incurred to remediate certain
hazardous substances at seven waste sites, not including the
Company's inactive gas manufacturing sites, which are discussed
below. With respect to the seven sites, five sites are included
in the New York State Registry of Inactive Hazardous Waste Sites
(New York State Registry).
Any liability may be joint and several for certain of these
sites. The ultimate cost to remediate these sites will be
dependent on such factors as the remedial action plan selected,
the extent of site contamination, and the portion attributed to
the Company. The Company has recorded a liability related to
four of these seven sites of $1.8 million, which is reflected in
the Company's Consolidated Balance Sheets at March 31, 1994 and
December 31, 1993. The Company has notified the NYSDEC that it
believes it has no responsibility at two sites and has already
incurred expenditures related to the remediation at the remaining
site. A deferred asset has also been recorded in the amount of
$2.6 million, of which $.8 million relates to costs that have
already been incurred. The Company believes it will recover
these costs, since the Public Service Commission of the State of
New York (PSC) has allowed other utilities to recover these types
of remediation costs and has allowed the Company to recover
similar costs in rates, such as investigation and cleanup costs
relating to inactive gas manufacturing sites. This $1.8 million
estimate was derived by multiplying the total estimated cost to
clean up a particular site by the related Company contribution
factor. Estimates of the total cleanup costs were determined by
using information related to a particular site, such as
investigations performed to date at a site or from the data
released by a regulatory agency. In addition, this estimate was
based upon currently available facts, existing technology, and
presently enacted laws and regulations. The contribution factor
is calculated using either the Company's percentage share of the
total PRPs named, which assumes all PRPs will contribute equally,
or the Company's estimated percentage share of the total
hazardous wastes disposed of at a particular site, or by using a
1% contribution factor for those sites at which it believes that
it has contributed a minimal amount of hazardous wastes. The
Company has notified its former and current insurance carriers
that it seeks to recover from them certain of these cleanup
costs. However, the Company is unable to predict the amount of
insurance recoveries, if any, that it may obtain.
A number of the Company's inactive gas manufacturing sites
have been listed in the New York State Registry. In late March
1994, the Company entered into an Order on Consent with the
NYSDEC requiring the Company to investigate and, where necessary,
remediate 33 of the Company's 38 known inactive gas manufacturing
sites. The schedule for investigating and remediating these 33
sites will be determined through further negotiations with the
NYSDEC. The Company has a program to investigate and initiate
remediation at its 38 known inactive gas manufacturing sites
through the year 2000. Expenditures over this time period are
estimated at $27 million, including the impact of the Order on
Consent. This estimate was determined by using the Company's
experience and knowledge related to these sites as a result of
the investigation and remediation that the Company has performed
to date. It is based upon currently available facts, existing
technology, and presently enacted laws and regulations. This
liability, to investigate and initiate remediation, as necessary,
at the known inactive gas manufacturing sites, is reflected in
the Company's Consolidated Balance Sheets at March 31, 1994 and
December 31, 1993, in the amount of $27 million and $25 million,
respectively. The Company also has recorded a corresponding
deferred asset, since it expects to recover such expenditures in
rates, as the Company has previously been allowed by the PSC to
recover such costs in rates. The Company has notified its former
and current insurance carriers that it seeks to recover from them
certain of these cleanup costs. However, the Company is unable
to predict the amount of insurance recoveries, if any, that it
may obtain.
Note 4. Restructuring
In the fourth quarter of 1993, the Company recorded a $26
million restructuring charge. The corporate restructuring
reorganized the way the Company delivers services to its electric
and natural gas customers beginning in March 1994. The
restructuring reduced 1993 earnings available for common stock by
approximately $17.2 million or 25 cents per share.
During the first quarter of 1994, the restructuring resulted
in a work force reduction totaling 642 persons throughout the
organization, the elimination of customer walk-in services at 28
locations, and the closing of seven electric and natural gas
operations facilities. Three additional electric and natural gas
operations facilities are scheduled to close later in 1994.
The work force reduction of 642 employees, which was greater
than the Company's target of 600, was accomplished through a
voluntary early retirement program and an involuntary severance
program. Of the 642 employees, 384 employees accepted the early
retirement program and 258 employees were involuntarily severed.
The Company estimates the savings, excluding fringe benefits,
related to the work force reduction to be approximately $31.5
million, on an annual basis. The Company experienced savings in
line with this estimate as the work force decreased in the first
quarter of 1994.
Item 2. Management's discussion and analysis of financial
condition and results of operations
(a) Results of Operations
Three months ended March 31, 1994 compared with three months
ended March 31, 1993:
1994 1993 % Change
(Thousands, except Per Share Amounts)
Operating revenues $565,167 $522,383 8%
Earnings available for
common stock $79,834 $68,838 16%
Average shares outstanding 70,801 69,561 2%
Earnings per share $1.13 $.99 14%
Dividends per share $.55 $.54 2%
Operating revenues for the first quarter of 1994 increased
$43 million, or 8%, compared to the first quarter of 1993.
Revenues rose $15 million because of increases in electric and
natural gas rates that became effective in September 1993. Also,
higher natural gas sales in 1994 increased revenues this year $12
million. The Company did not have a modified revenue decoupling
mechanism (RDM)last year (see the discussion in the next
paragraph regarding the RDM). The difference between last year's
electric sales and the electric sales levels forecasted for this
year accounted for $13 million of the increase in revenues
between 1993 and 1994.
As part of the three year rate settlement agreement reached
by the Company with the PSC in September 1993, the Company now
has a RDM for electric sales (see Form 10-K for fiscal year ended
December 31, 1993, Item 1., Rates and regulatory matters-Rate
Matters). Since actual sales may differ significantly from
forecasted sales for numerous reasons, revenues collected may be
more or less than forecast. The modified RDM, subject to limits
defined in the Company's rate settlement agreement, allows the
Company to adjust for most of the differences between forecasted
and actual sales.
Earnings per share increased 14 cents, or 14%, for the first
quarter of this year. Cost controls and an increase in natural
gas sales in 1994, and lower than forecasted electric sales in
1993 due to the sluggish economy in the Company's service
territory, were the primary reasons for the increase in earnings
as compared to the first quarter of last year.
Operating Results by Business Unit
Electric Three Months ended March 31,
1994 1993 % Change
(Thousands)
Retail sales-kilowatt-
hours(kwh) 3,752,617 3,628,642 3%
Operating revenues $424,520 $403,558 5%
Operating expenses $327,609 $311,560 5%
Electric retail sales increased 3% in the first quarter of
1994 compared to the prior year quarter as a result of colder
weather.
Electric operating revenues increased $21 million, or 5%,
for the quarter ended March 31, 1994. An increase in rates
effective September 1993, accounted for $11 million, of the
increase. The Company did not have a RDM last year. The
difference between last year's electric sales and the electric
sales levels forecasted for this year accounted for $13 million
of the increase in revenues between 1993 and 1994. These
increases were partially offset by a $4 million decrease in
revenues from sales of electricity to other utilities.
An increase of $16 million, or 5%, in electric operating
expenses for the quarter is primarily attributable to an increase
of $7 million in federal income taxes, the result of higher pre-
tax book income and an increase of $6 million in electricity
purchased, primarily from NUGs. In addition, gross receipts taxes
and local taxes increased electric operating expense $3 million.
These increases in operating expenses were partially offset by
savings related to the work force reduction.
Natural Gas Three Months ended March 31,
1994 1993 % Change
(Thousands)
Deliveries-
dekatherms(dth) 26,465 24,452 8%
Retail sales-(dth) 20,717 18,418 12%
Operating revenues $140,647 $118,825 18%
Operating expenses $117,568 $100,930 16%
Natural gas deliveries increased 8% and natural gas retail
sales increased 12% in 1994 compared to 1993. The 1994 increases
in deliveries, as well as retail sales, were largely because of
the colder weather.
For the quarter ended March 31, 1994, natural gas operating
revenues rose $22 million, or 18%, compared to the same quarter
in 1993. The increase was primarily due to higher retail sales,
the result of colder weather, which added $14 million in
revenues, and the increase in rates in September 1993, which
added $4 million. Since the Company has a natural gas weather
normalization mechanism, a portion of the revenues, net of
natural gas purchased, attributable to colder weather, about $2
million, was returned to customers. Amounts collected this year
through the gas adjustment clause for higher prices of natural
gas purchased increased revenues $6 million.
The increase in natural gas operating expenses of $17
million, or 16%, is primarily due to an increase in natural gas
purchased of $12 million, which is attributable to an increase in
retail sales and higher prices of natural gas purchased. Higher
federal income taxes, the result of higher pre-tax book income
increased operating expenses $3 million. These increases in
operating expenses were partially offset by savings related to
the work force reduction.
(b) Liquidity and Capital Resources (See Item 1. Financial
Statements- Note 4. Restructuring)
Regulatory Matters
Rate Matters (See Form 10-K for fiscal year ended December 31,
1993, Item 1., Rates and regulatory matters-Rate Matters.)
On May 1, 1994, the Company filed with the PSC for
adjustments to the second year electric and natural gas rate
increases in accordance with the terms of the three-year rate
settlement agreement. The Company estimates that the total
electric price increase for the second rate year, August 1, 1994
through July 31, 1995, will be 9.6%. This increase is primarily
due to mandated purchases of electricity from non-utility
generators, increases in taxes and sales shortfalls related to
mandated conservation programs and the weak economy in New York
State. Actual fuel, purchased power, and other costs could vary
from estimates causing the estimated total electric price
increase to change. The Company also filed for a natural gas
base rate increase of 2.3%. This increase does not include
changes in natural gas costs, which will be collected through the
Gas Adjustment Clause. PSC approval of these adjustments is
expected by July 31, 1994.
The three-year rate settlement agreement provides for
incentives for customer service, production cost, and demand-side
management (DSM), which could increase the Company's allowed
return to 12.3% or decrease it to 9.95% in year one, increase it
to 13.05% or decrease it to 10.4% in year two, and increase it to
13.25% or decrease it to 10.2% in year three. During the first
quarter of 1994, the Company recorded $.7 million of DSM rewards
but did not record any rewards or penalties for customer service
or production cost.
Diversification
Diversification will play an important role in the Company's
future. In April 1992, the PSC issued an order allowing the
Company to invest up to 5% of its consolidated capitalization
(approximately $178 million at March 31, 1994) in one or more
subsidiaries that may engage or invest in energy-related or
environmental services businesses and provide related services.
In May 1993, NGE Enterprises, Inc. (NGE), a wholly-owned
subsidiary of the Company, formed a computer software company,
EnerSoft Corporation (EnerSoft), to produce and market software
applications for natural gas utilities in the post-FERC Order 636
environment.
A natural gas storage project which NGE and ANR Storage,
Inc. planned to develop at a cost of approximately $44 million,
has been cancelled because NGE and ANR Storage were unable to
come to mutually acceptable terms with the owners of the caverns.
NGE continues to investigate other gas storage opportunities with
ANR Storage.
On April 28, 1994, NGE entered into a merger agreement with
a company that provides demand-side management and other energy-
related services pursuant to which NGE will acquire all of the
outstanding stock of that company. The closing is expected to
take place in the second quarter of 1994.
As of May 11, 1994, the Company has invested approximately
$39 million in NGE in order to finance the acquisition mentioned
in the prior paragraph and for its investment in EnerSoft.
Financing Activities
In February 1994, the Company issued a $37,500,000 multi-
mode pollution control note to secure a like amount of tax-exempt
multi-mode pollution control revenue bonds (Revenue Bonds) issued
by a governmental authority. The Revenue Bonds mature on
February 1, 2029 and have a structure which enables the Company
to optimize the use of short-term rates by allowing for the
interest rate to be based on a commercial paper rate, a daily
rate, a weekly rate, or an auction rate. The structure also
provides flexibility to convert the interest rate to a term rate
or a fixed rate, in the event that it is in the Company's best
interest to do so. The pollution control note bears interest at
the same rate as the Revenue Bonds. The Revenue Bonds currently
bear interest at a rate of 2.10% through May 15, 1994. The
Revenue Bonds are backed by an irrevocable letter of credit.
Proceeds from the Revenue Bonds were used to refund $37,500,000
of one-year adjustable rate pollution control revenue bonds which
were issued in 1985. This refunding will result in significant
annual interest savings. The maturity date of the Revenue Bonds
can be extended, subject to certain conditions, to a date not
later than February 1, 2034.
In February 1993, the Company priced $100 million of 6.05%
tax-exempt pollution control bonds, due April 1, 2034. Proceeds
from the sale were delivered in April 1994, and $60 million was
used in connection with the redemption on May 1, 1994 of $60
million of 12% pollution control bonds, due May 1, 2014. The
balance will be used in connection with the redemption on July 1,
1994 of $40 million of 12.3% pollution control bonds, due July 1,
2014. The refunding of those bonds will save approximately $5.3
million annually in interest costs.
Capital Expenditures
Construction expenditures for the first quarter of 1994 were
approximately $54 million and have been primarily for the
extension of service, improvements at existing facilities,
compliance with the Clean Air Act Amendments of 1990, and
environmental requirements.
The Company plans to develop a natural gas storage project.
This project, which will be regulated by the PSC, is expected to
cost approximately $16 million and will be used to supplement the
Company's natural gas supply. Construction of this project is
now scheduled to begin in 1995 and it is expected to be operating
for the 1996-97 heating season.
PART II - OTHER INFORM ATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index.
(b) Report on Form 8-K
No reports on Form 8-K were filed during the quarter for
which this report is filed.
Signature
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.
NEW YORK STATE ELECTRIC & GAS CORPORATION
(Registrant)
By EVERETT A. ROBINSON
EVERETT A. ROBINSON
Vice President and Controller
(Chief Accounting Officer)
Date: May 11, 1994
EXHIBIT INDEX
10-49 --Supplemental Executive Retirement Plan.