UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8369
CONNECTICUT ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Connecticut 06-0869582
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
855 Main Street
Bridgeport, Connecticut 06604
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(203) 579-1732
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock ($1 par value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing price of such stock as of November 22, 1996:
$192,735,190
Class Outstanding at November 22, 1996
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Common Stock, $1 par value 9,016,851
An index of exhibits to this Annual Report on Form 10-K begins on page 15
hereof.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
1. Portions of Connecticut Energy Corporation's 1996 Annual Report to
Shareholders are incorporated into Part II.
2. Portions of Connecticut Energy Corporation's Definitive Proxy Statement
dated December 13, 1996 are incorporated into Part III.
PART I
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CONNECTICUT ENERGY CORPORATION
------------------------------
Item 1. Business
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General
Connecticut Energy Corporation ("Company") is a public utility holding
company primarily engaged in the retail distribution of natural gas for
residential, commercial and industrial uses through its principal subsidiary,
The Southern Connecticut Gas Company ("Southern"), a Connecticut public service
company. Southern's predecessor companies, New Haven Gas Company and The
Bridgeport Gas Company, were originally incorporated in Connecticut in 1847 and
1849, respectively. The Company is exempt from registration under the Public
Utility Holding Company Act of 1935.
Southern serves approximately 156,000 customers in Connecticut, primarily
in twenty-two towns along the southern Connecticut coast from Westport to Old
Saybrook, which include the urban communities of Bridgeport and New Haven.
Southern is also authorized to lay mains and sell gas in an additional ten towns
in its service area, but does not currently provide any service to these towns.
The percentage of Southern's revenues contributed by each class of
customers for the last three fiscal years was as follows:
Years ended September 30, 1996 1995 1994
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Residential 58.0% 58.2% 60.6%
Commercial firm 21.4 20.5 21.1
Industrial firm 6.5 7.8 8.9
Interruptible and other 14.1 13.5 9.4
----- ----- -----
100.0% 100.0% 100.0%
Southern is the sole distributor of natural gas, other than bottled gas,
in its service area. Oil and electricity compete with gas in most industrial
and commercial markets and for residential space and water heating. In general,
Southern's firm rates are currently lower than electric rates for heating and,
on average, are generally competitive with fuel oil. Southern's gas sales are
affected by seasonal factors, and it experiences higher revenues during the
winter months.
In fiscal 1995, the Company formed two nonutility subsidiaries, CNE Energy
Services Group, Inc. ("CNE Energy") and CNE Development Corporation ("CNE
Development"). CNE Energy engages in activities relating to the selling,
planning, purchasing and management of various energy services to commercial and
industrial end users. CNE Development is an equity holder in an entity formed
to purchase and market natural gas and may potentially participate in other
nonregulated activities.
In October 1996, the Company formed a new nonutility subsidiary, CNE
Venture-Tech, Inc. ("CNE Venture-Tech"). CNE Venture-Tech is expected to
participate or invest in information technology ventures including, but not
limited to, providing related services. It is anticipated that CNE Venture-Tech
will enter into strategic alliances with other vendors in the information
technology business to provide services to utilities and other businesses.
As of September 30, 1996, the Company, through its subsidiaries, had 509
full-time employees, the majority of whom were employees of Southern.
Customers
General From 1992 through 1996, the average number of on-system customers
served by Southern grew from approximately 152,100 to 156,100. Southern
provides three types of gas service to its on-system customers--firm sales, firm
transportation and interruptible. Firm service is provided to residential,
commercial and industrial customers who require a continuous gas supply
throughout the year. Southern serves approximately 175,000 firm residential
units. Interruptible service is available to those commercial and industrial
customers and multi-family residential dwellings that have dual fuel
capabilities which allow them to alternate between natural gas and another fuel
source. Firm service for residential use includes service to multi-family
units. Firm transportation is available to commercial and industrial customers
who have secured their own gas supply and require that Southern transport this
supply on its distribution system. Southern also provides transportation
service to certain commercial and industrial customers on an interruptible
basis, where the gas transported is owned by those customers.
Additionally, Southern has the approval of the Connecticut Department of
Public Utility Control ("DPUC") to participate in the off-system sales market.
If gas supplies are available after meeting on-system loads, Southern sells to
customers within Connecticut or in out-of-state markets. The customers to whom
these sales are made are not permanent customers of Southern.
Firm Sales and Transportation In 1996, firm services represented
approximately 86% of operating revenues and approximately 55% of total gas
throughput. Firm sales to industrial customers are likely to constitute a
smaller percentage of Southern's future total sales due to the changing
character of the local economy and continuing regulatory developments
affecting the natural gas industry. See "Rates and Regulation" for further
detail.
Southern concentrates on customer additions that are the most cost-
effective to achieve. During the mid-1980s, when many residential family
developments were being constructed, Southern extended mains to those
developments, thereby adding groups of customers for heating as well as
appliance loads at a relatively low capital cost per customer. Over the past
several years, Southern has focused on adding load along its existing mains,
which generally requires a lower capital outlay. Approximately 50% of the
residences along Southern's mains heat with natural gas. The conversion of
these homes from an alternate fuel to natural gas heat has been a major factor
in increased load growth.
Interruptible Sales, Transportation and Special Contract Services
Interruptible sales and transportation services are priced flexibly and
competitively compared to the price paid for alternate fuels by larger
commercial and industrial customers. Southern's interruptible sales
fluctuate primarily due to the relative price differentials between alternate
fuels and natural gas as well as the availability of gas not needed to serve
firm customers.
In addition to interruptible sales, Southern transports gas, on an
interruptible basis, for delivery to certain large commercial and industrial
consumers. Because of recent regulatory developments, end users can contract
more easily than in the past for transportation service on interstate pipelines
to transport natural gas supplies purchased from producers/suppliers, rather
than purchase gas solely from the local gas distribution company ("LDC"). In
Southern's service area, gas is transported to customers using interstate
pipeline transportation and Southern's distribution system.
Interruptible transportation revenues are considerably less than revenues
from gas sales because customers pay only a fee for the transportation service.
Gas sales revenues include the cost of gas sold.
Southern provides service to The Connecticut Light and Power Company's
Devon generating station in accordance with rates specified in a Special
Contract for the Transportation of Gas ("Special Contract").
In 1996, interruptible sales, transportation and Special Contract services
represented approximately 13% of operating revenues and approximately 42% of
total gas throughput.
Southern's average margins on interruptible transportation service are
less than its average margins on firm sales and are usually less than
its average margins on interruptible sales. To the extent Southern
negotiates its monthly prices for interruptible services below its monthly
standard offering price, lower margins may result.
The Company does not believe that the loss of any single customer or a few
customers would have a long-term, material, adverse effect upon Southern's
business.
Marketing
General Southern focuses its marketing efforts on three objectives: (1) to
increase the number of households using natural gas for heating and hot water,
(2) to improve system load factor by promoting additional interruptible sales
and (3) to add new sales and retain existing sales to commercial and industrial
customers through the use of both traditional and interruptible applications for
natural gas.
Marketing programs emphasize growth from within the existing distribution
system and the addition of high load factor usage of natural gas such as water
heating, air conditioning and electric power generation.
Residential Market In the residential heating market, 1,866 customers were
added in 1996 compared to 2,366 customers in 1995 and 2,504 in 1994.
Residential conversions accounted for 52% of these additions in 1996 as compared
to 68% in 1995 and 61% in 1994. Southern's residential marketing programs
include (1) a conversion burner program, (2) a high-efficiency heating program,
(3) a trade ally program and (4) service contracts for natural gas heating
equipment. Southern also uses employee incentives to promote heating
conversions.
Commercial and Industrial Markets In the commercial and industrial markets,
emphasis is on adding new firm and interruptible sales while retaining existing
load. Marketing programs for commercial and industrial customers include (1) a
program to promote the use of high efficiency equipment, (2) a program offering
customers the option of financing new equipment through Southern, (3) a
conversion burner leasing program which provides customers with a low cost
opportunity to switch to natural gas and (4) a major customer retention
program.
Effective April 1, 1996, firm transportation service became available to
commercial and industrial customers. Thus far, some customers have opted for
the service, choosing to purchase their natural gas directly from marketers.
In these cases, Southern offers customers the opportunity to purchase additional
services such as balancing or stand-by services.
Sales to cooling and cogeneration markets represent the potential for
increasing natural gas usage. Advances in natural gas cooling technology, along
with environmental and operational advantages, continue to increase the
competitiveness of natural gas cooling in commercial buildings and for
industrial process applications. During 1996, Southern added 510 tons of
natural gas cooling. This represents almost 8,400 Mcf of new interruptible
load. Since 1991, Southern has added 9,912 tons of natural gas cooling.
Natural Gas Vehicles
Natural gas vehicles ("NGV") represent a significant opportunity to
increase the base load usage of natural gas. Southern has been actively
developing projects in this market, primarily to serve centrally-fueled fleets
with on-site fueling. Thus far, almost one hundred natural gas vehicles are in
use by customers in Southern's service area. These customers include the U.S.
Postal Service, The Southern New England Telephone Company, R. R. Donnelley and
Sons, South Central Regional Water Authority, Bridgeport Hydraulic Company and
the town of Westport, Connecticut.
During fiscal 1996, Southern's NGV marketing emphasis shifted to
developing NGV projects that serve multiple customers from a single site. This
approach improves the attractiveness of NGV projects for fleet customers and
potential station developers. Fleet owners can avoid constructing an on-site
NGV fueling station by purchasing fuel at an off-site facility. Station
developers can take advantage of economies of scale to improve profitability by
pooling volumes to serve multiple customers. Also, these stations can serve
customers phasing-in NGVs and small fleets.
CNE Development is in the preliminary stages of forming a joint venture
with Trillium-U.S.A., a unit of Westcoast Energy, to develop NGV service
oriented projects within and outside Southern's service area. The venture's
first proposed project is to construct an NGV fueling station on a site in
Stratford, Connecticut to initially serve Prime Time Shuttle ("Prime Time"), a
major airport shuttle service. A Memorandum of Understanding between CNE
Development, Trillium-U.S.A. and Prime Time establishes that Prime Time has
agreed to have up to 120 Dodge maxi-vans converted to use only compressed
natural gas as fuel and to purchase a minimum of 500,000 gasoline gallon
equivalents, or almost 61,000 Mcf of natural gas fuel, from the station during
its first five years of operation to fuel these vehicles. During years two
through five, minimum fuel usage is expected to rise to accomodate additional
stations near Danbury, Connecticut, and Bradley Airport as may be required as
Prime Time's operations expand. The initial station will also provide natural
gas fueling for other Stratford area fleets and for vehicles traveling through
the area on I-95.
Gas Supply
General Southern's long-term supply sources include (1) Canadian supplies
purchased from Alberta Northeast Gas Limited ("Alberta Northeast") with
transportation on Iroquois Gas Transmission System, L.P. ("Iroquois"), (2)
transportation and storage services from Tennessee Gas Pipeline Company
("Tennessee") with direct purchase of supply from producers and marketers, (3)
transportation and storage services from Texas Eastern Transmission Corporation
("Texas Eastern") with direct purchase of supply from producers and marketers,
(4) transportation services from Algonquin Gas Transmission Company
("Algonquin"), (5) transportation and storage services from CNG Transmission
Corporation ("CNG Transmission"), (6) transportation service from
Transcontinental Gas Pipeline Corporation ("Transco"), (7) transportation
service from National Fuel Gas Supply Corporation ("National Fuel") and
(8) liquid and vapor supplies from Distrigas of Massachusetts Corporation
("Distrigas"). These arrangements result in gas deliveries into Southern's
service territory through interconnections with three interstate pipelines:
Algonquin, Iroquois and Tennessee.
In addition to Southern's long-term firm supply arrangements, Southern
purchases spot supplies and utilizes interruptible transportation services from
interstate pipeline companies.
Southern's supply, transportation and storage agreements require Southern
to pay a fixed demand charge regardless of the amount of gas transported or
stored. The Federal Energy Regulatory Commission ("FERC") regulates interstate
pipeline companies in connection with the rates charged to Southern for
transportation and storage of natural gas.
Domestic Supply Southern's domestic supply arrangements consist mainly of
purchasing storage and transportation services from interstate pipelines.
Producers and marketers provide the gas supply to support these services.
Southern has firm transportation and firm storage contracts with
Tennessee. Under the transportation contract, Southern has 13,336,000 Mcf of
pipeline capacity available on an annual basis. Southern's storage contract
with Tennessee provides 1,195,000 Mcf of storage capacity. These contracts
expire in the year 2000. Two other transportation contracts with Tennessee
provide 516,000 Mcf of firm transportation service annually and expire in the
year 2000.
A transportation contract with Texas Eastern provides 5,972,000 Mcf of
capacity on an annual basis. Additional contracts with Texas Eastern provide
1,383,000 Mcf of storage service and 12,108,000 Mcf of transportation service on
an annual basis. Contracts with Texas Eastern expire in the year 2012.
Southern has storage service contracts with CNG Transmission. One
contract provides one hundred days of storage service with 648,000 Mcf of annual
delivery. The remaining term of this contract is sixteen years. Under other
contracts which have remaining terms of seven to eleven years, CNG Transmission
provides 773,000 Mcf of annual firm storage service and 1,028,000 Mcf of annual
transportation service. The gas is stored by CNG Transmission and delivered to
Southern under transportation contracts with Texas Eastern and Algonquin.
Algonquin furnishes only transportation services to Southern. The
deliveries which Algonquin makes to Southern are gas supplies transported by
other interstate pipelines interconnected to Algonquin.
Southern has multiple, diverse purchase agreements with producers and
marketers for firm supply behind its storage and transportation agreements.
These agreements vary in terms of delivery obligations and the contract terms
range from one month to five years. Southern pays a monthly reservation charge,
but has no monthly purchase obligation under these agreements. Commodity prices
are based on price indexes by supply area or are negotiated.
Canadian Supply Southern receives Canadian supply under its long-term
contracts with Alberta Northeast with firm transportation provided by Iroquois.
These supply contracts with Alberta Northeast provide Southern with 12,775,000
Mcf of firm Canadian supply annually. Supply agreements with Alberta Northeast
have remaining terms of six to ten years, and the transportation agreement with
Iroquois has a remaining term of fifteen years.
Supplemental Supply Southern has an agreement with Distrigas to purchase
328,000 Mcf annually on a firm basis. This contract continues for six years and
includes a provision for either vapor or liquid delivery, with an option to
increase maximum daily delivery over the term of the contract. Additionally,
Southern has interruptible purchase contracts with Distrigas.
Supplemental gas supplies from on-site liquefied natural gas ("LNG") and
liquefied propane air storage facilities are available to meet peak and winter
demand requirements. Southern is in the process of obtaining necessary
approvals to sublease its LNG facility. Under new agreements, Southern would be
able to purchase peaking supply without supporting the entire cost of the LNG
facility, positioning Southern to lower the cost of peaking supply. See section
entitled "Connecticut Regulation" for the Decision in Docket No. 96-04-30.
FERC Order No. 636
In FERC Order No. 636, the FERC took the latest step in its decade-long
restructuring of the natural gas industry, gradually withdrawing from direct
regulation of certain industry sectors in favor of a policy of "light-handed
regulation" when market forces make that possible.
Effective November 1, 1993, FERC Order No 636 mandated the unbundling of
interstate pipeline services, thereby fostering a competitive natural gas market
through equal and open access to pipeline transportation capacity by all
suppliers and users. Through the issuance of Order No. 636, FERC removed the
pipelines' competitive advantage of bundling sales of gas supplies with all
related transportation and storage services and required pipelines to sell
transportation and storage services separately.
FERC Order No. 636 resulted in costs being incurred by Southern's
interstate pipeline suppliers as they unbundled their services. FERC has
allowed transition costs to be recovered by pipelines from their customers.
Southern has recovered transition costs through the various recovery mechanisms
authorized by the DPUC in Docket No. 94-01-12. Included in the recovery are
Tennessee transition costs, which are still being litigated, subject to refund
of any overbilling at the time of a FERC decision or settlement.
Straight-fixed-variable ("SFV") rates are in effect on the pipelines
serving Southern as a result of FERC Order No. 636. Pipeline demand charges
increased under SFV rate design, while pipeline usage charges decreased. The
change in gas costs due to SFV rates were incorporated in Southern's base cost
of gas approved by the DPUC.
Although the initial implementation of FERC Order No. 636 increased gas
costs, the resultant market competition, increased throughput, capacity release
and recovery of transition costs have continued to decrease average gas costs.
On July 16, 1996, the U.S. Court of Appeals for the District of Columbia
("Court"), Circuit in UNITED DISTRIBUTION COMPANIES V. FERC, 88 F.3d 1105 (D.C.
Cir. 1996), upheld FERC Order No. 636, "in its broad contours and in most of its
specifics." The Court remanded a number of issues to FERC for further
explanation. No portion of FERC Order No. 636 was vacated as the Court awaits
FERC's response. Until the FERC takes final action on remand, FERC Order No.
636 will be left in place as currently formulated.
Post-FERC Order No. 636 Opportunities
Southern's off-system sales program maximizes the use of its gas supply
contracts, improves the usage of Southern's capacity on pipeline systems and
lowers gas costs to firm customers through established margin sharing
mechanisms. Pursuant to the DPUC Decision regarding FERC Order No. 636,
Southern is allowed to enter into off-system sales for periods of less than one
year without prior approval of the DPUC.
Capacity release programs are available on all interstate pipelines
serving Southern, and Southern actively participates in these programs. Demand
charges recovered from a replacement shipper flow back as a reduction on the
pipeline's monthly invoice. These demand reductions are used to lower gas costs
to firm customers through established margin sharing mechanisms approved by the
DPUC.
CNE Development has joined six other eastern U.S. natural gas
distribution companies or their affiliates to form the East Coast Natural Gas
Cooperative, L.L.C. to access competitively priced gas supplies. Southern has
experienced reduced gas costs as a result of the activities of this cooperative.
Rates and Regulation
Connecticut Regulation Southern is subject to the jurisdiction of the DPUC
as to accounting, rates, charges, operating matters and the issuance of
securities, both equity and debt, other than borrowings maturing in twelve
months or less. Southern's firm sales rates change monthly pursuant to a DPUC-
approved Purchased Gas Adjustment clause ("PGA"), under which purchased gas
costs above or below a specified base cost are charged or credited to customers.
In setting authorized rates for Southern, the DPUC allows prospective
adjustments to a historical test year. Forward-looking adjustments to the mid-
point of the rate year (the first year that rates will be in effect) for rate
base, revenues, expenses and capital structure are allowed. The DPUC has found
that these refinements provide for better synchronization of the ratemaking
components. Costs used by the DPUC in determining Southern's rates may not be
the same as actual costs incurred by Southern during the period rates are in
effect. The sales used in establishing rates are based on "normal" weather
patterns. Actual rates of return realized may not necessarily equal the
authorized rates of return.
On April 23, 1993, Southern filed an application with the DPUC for an
increase in rates designed to produce additional revenues of approximately
$27,900,000, or 13.67%, over test year revenues. Southern's base rates had not
been increased since April 1990.
On December 1, 1993, the DPUC issued a final Decision on Southern's latest
rate request. The Decision incorporated the Partial Settlement of Certain
Issues ("Partial Settlement") which was previously approved by the DPUC in
September 1993 and resolved most of the significant financial aspects of
Southern's original rate request, including an increase in base rates of
$13,400,000 based upon Southern's sales forecast as originally filed, an allowed
return on equity of 11.45% and the implementation of a Weather Normalization
Adjustment. In addition, Southern was permitted to recover previously deferred
costs over amortization periods from three to five years associated with
shortfalls in energy assistance, the certified hardship arrearage forgiveness
program, environmental remediation expenditures, economic development programs
and undepreciated gas holder costs.
The Partial Settlement also provided for current recovery of
postretirement health care expenses accrued under Statement of Financial
Accounting Standards No. 106 and the establishment of a target margin, net of
gross earnings tax, for on-system sales and transportation to Southern's
interruptible customers with excess margins shared between firm customers and
shareholders on an 80%/20% split.
As part of the Partial Settlement, Southern agreed that, except for
certain adverse events, it would not file a general application to increase
rates which would become effective on or before November 30, 1995.
In January 1996, Southern requested a reopening of the 1993 rate
proceeding to propose a plan to redirect excess on-system margins to be returned
to ratepayers for calendar years 1996, 1997 and 1998 to fund certain economic
development initiatives in Bridgeport ("BEDI") and to provide grants to
customers to reduce Southern's current hardship assistance balances ("HAB").
Southern estimated that margins to be earned over the proposed three-year period
would be approximately $14,000,000, which would be divided equally between BEDI
and HAB.
Southern's proposal related to the BEDI included job training and
services, certain loan subsidies and health promotion outreach services.
Redirection of ratepayer margins for HAB would benefit Southern's hardship
customers by reducing their accounts receivable arrearages and would benefit
Southern by reducing its provision for uncollectibles for such accounts.
On April 26, 1996, the DPUC issued a final Decision regarding Southern's
proposal. The DPUC effectively approved Southern's proposal with certain
modifications in the direction of BEDI funding initiatives, the imposition of a
cap of $6,000,000 per year of ratepayer margins to be split between BEDI and HAB
and certain implementation and status reporting requirements.
On August 2, 1995, the DPUC issued a final Decision in Docket No.
94-11-12, DPUC REVIEW OF CONNECTICUT LOCAL DISTRIBUTION COMPANIES' COST OF
SERVICE STUDY METHODOLOGIES. In this docket, the DPUC investigated the issues
surrounding the development of firm transportation rates at the state level in
response to FERC Order No. 636. Effective April 1, 1996, commercial and
industrial gas customers in Connecticut can contract for their gas supplies from
sources other than the LDCs and pay the LDCs only for the transportation of that
gas through their distribution systems at DPUC approved rates. The new firm
transportation rates are designed to provide Southern with the same margins
provided by bundled services.
On August 21, 1996, the DPUC issued a final Decision in Docket No.
96-04-30, APPLICATION OF THE SOUTHERN CONNECTICUT GAS COMPANY TO DISPOSE OF A
PORTION OF ITS PLANT AND EQUIPMENT. The DPUC approved certain proposals made by
Southern regarding the operation of its LNG tank and related facilities, which
include the sublease of the LNG tank and related facilities from Southern to its
nonregulated affiliate, CNE Energy, which would, in turn, sublease the LNG
facility to Total Peaking Services, L.L.C. ("TPS"). The members of TPS are CNE
Energy and PanEnergy Plus Milford Ventures Company, a wholly-owned subsidiary of
EnergyPlus Ventures Company which, in turn, is a wholly-owned subsidiary of
PanEnergy Corp.
Under an agreement with TPS, Southern will purchase peaking service at a
pre-established price structure for five years. After that, Southern will have
the right, but not the obligation, to continue purchasing peaking service from
TPS at the then prevailing market prices. This arrangement will give Southern
the benefit of available peaking service without the burden of supporting the
entire cost of the LNG facilities. TPS will assume responsibility for paying
the rent due under the LNG tank lease. Accordingly, Southern will benefit from
revenues received from TPS and from reductions to be realized in carrying costs,
depreciation expense, operations expense and gross earnings taxes.
Due to differences between the ratemaking recognition of such savings
compared to the additional demand charges from the peaking services agreement,
Southern provided a mitigation plan to delay including the demand charges in the
PGA mechanism to better match the rate treatment of the costs and benefits of
Southern's application.
While this transaction has been approved by the DPUC, it will also require
approval by the FERC. The transaction will not be effective unless all
necessary regulatory approvals are received on terms and conditions acceptable
to the parties.
Federal Regulation Southern is affected by various federal regulations,
including regulations which (1) provide for emergency authority and curtailment
allocations under the Natural Gas Policy Act of 1978 when pipeline supplies are
limited and (2) establish certain retail policies for natural gas utilities
under the Public Utility Regulatory Policies Act of 1978. Southern is also
subject to the Natural Gas Pipeline Safety Act of 1968 with respect to the
construction, operation and maintenance of its mains, services and LNG
facilities as well as other federal regulations pertaining to safety standards
concerning such facilities. Currently, these federal regulations have a minimal
impact on Southern's day-to-day operations. Southern must comply with various
federal, state and local regulation with respect to environmental matters
(including hazardous waste regulation), local zoning and other regulations. To
date, such regulations have not materially impacted Southern's capital
expenditures, earnings or operations.
Regulations promulgated under the Clean Air Act Amendments of 1990 and the
Energy Policy Act of 1992, which require reduced pollution levels and certain
energy efficiency standards, have begun to affect Southern. Among other things,
the Clean Air Act Amendments (1) impose stringent vehicle emissions standards
beginning in 1994, (2) mandate the gradual phase-in of alternative fuel vehicles
for fleets of more than ten vehicles beginning in 1998 and (3) require power
plants to phase-in significant emission reductions of sulfur dioxide and
nitrogen oxide by the year 2000. Similarly, the Energy Policy Act of 1992
(1) requires that federal agencies begin phasing-in the use of alternative fuels
in vehicles in 1993, (2) offers tax incentives to private parties who use or
facilitate the use of alternative fuel vehicles and (3) requires a lessening
reliance on foreign fuels. Over time, these regulations will likely lead to an
increasing demand for natural gas. Southern already has begun to participate in
the expanded markets for natural gas emerging due to these regulatory mandates.
Since 1986, FERC has effected major changes in the regulations governing
the natural gas industry, especially FERC Order No. 636. Although the Company
is not subject to FERC jurisdiction, FERC's actions increase competition in the
natural gas industry by requiring interstate pipeline companies to provide gas
transportation to others on a nondiscriminatory basis. This increased
competition may assist Southern, at least in the short-term, by replacing some
higher cost gas supplies with less costly supplies. Refer to the section
entitled "FERC Order No. 636" for further detail.
Environmental Matters
Southern has identified coal tar residue at three sites in Connecticut
resulting from coal gasification operations conducted at those sites by
Southern's predecessors from the late 1800s through the first part of this
century. Many gas distribution companies throughout the country carried on such
gas manufacturing operations during the same period. The coal tar residue is
not designated a hazardous material by any federal or Connecticut agency, but
some of its constituents are classified as hazardous.
On April 27, 1992, Southern notified the Connecticut Department of
Environmental Protection ("DEP") and the United States Environmental Protection
Agency of the presence of coal tar residue at the sites. On November 9, 1994,
the DEP informed Southern that it had performed a preliminary review of the
information provided to it by Southern and had determined that, based on current
priorities and limited staff resources, a comprehensive review of site
conditions and subsequent participation by the DEP "are not possible at this
time." Until the DEP conducts a comprehensive review, no discussions with it
addressing the extent, timing and type of remedial action, if any, can occur.
Given the DEP's response, management cannot at this time predict the costs
of any future site analysis and remediation, if any, nor can it estimate when
any such costs, if any, would be incurred. While such future analytical and
cleanup costs could possibly be significant, management believes, based upon the
provisions of the Partial Settlement in Southern's latest rate order, that
Southern will be able to recover these costs through its customer rates.
Although the method, timing and extent of any recovery remain uncertain,
management currently does not expect that the incurrence of such costs will
materially adversely impact the Company's financial condition or results of
operations.
Item 2. Properties
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The Company's physical plant and properties consist primarily of
Southern's gas distribution facilities. Southern had 2,099 miles of main and
121,679 service units as of September 30, 1996. It leases office space in
Bridgeport, New Haven, Orange and Madison, owns properties in Bridgeport and
New Haven that were formerly manufacturing sites and owns a propane air facility
in Trumbull.
In 1995, the LNG plant lease agreement was renewed for two consecutive
terms of twelve years. The lease contains an option to purchase the plant for
a purchase price based on the then fair market sales value of the unit as
defined therein.
Substantially all of Southern's utility properties and plant are subject
to the lien of the indenture and supplemental indentures securing its first
mortgage bonds. It is management's opinion that the physical plant and
properties as described herein are suitable and adequate for the purpose of
delivering gas for customer use.
Item 3. Legal Proceedings
- --------------------------
In a class action styled CONNECTICUT HEATING & COOLING CONTRACTORS
ASSOCIATION, INC. V. CONNECTICUT NATURAL GAS CORP., CONNECTICUT SUPERIOR COURT -
MIDDLESEX, two trade associations and two plumbing and heating contractors in
November 1995 sued Southern as well as the other Connecticut LDCs for violations
of the Connecticut Unfair Trade Practices Act and tortious interference with
business expectancies in connection with the LDCs provision of service and
maintenance to heating, cooling and ventilating systems and appliances. An
Amended Complaint was filed in response to motions filed by the defendants in
which one of the two contractor plaintiffs was removed from the case. The
plaintiffs seek declaratory and injunctive relief. The plaintiffs seek treble
damages in excess of $15,000, punitive damages and attorneys' fees. Southern
and one of the other defendants have filed a Motion to Strike the Complaint on
the grounds of misjoinder of causes of action. These motions are expected to be
argued and decided before the end of the year. Southern intends to vigorously
defend itself in this suit, which management believes is without merit. In the
opinion of management, resolution of this lawsuit is not expected to have a
material adverse impact on the Company's financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None.
PART II
-------
Item 5. Market for Common Stock and Related Stockholder Matters
- ----------------------------------------------------------------
Common Stock Data
The Company's common stock is listed for trading on the New York Stock
Exchange. The Company's common stock symbol is CNE.
The following table shows the quarterly high and low price ranges of the
Company's common stock and quarterly dividends paid during the years ended
September 30, 1996 and 1995.
Market Price and Dividend Data
1996 Quarter ended High Low Dividend
- ------------------ ---- --- --------
December 31, 1995 $22 1/2 $19 $0.325
March 31, 1996 $22 1/4 $18 5/8 $0.325
June 30, 1996 $20 7/8 $18 7/8 $0.33
September 30, 1996 $20 3/8 $19 $0.33
1995 Quarter ended High Low Dividend
- ------------------ ---- --- --------
December 31, 1994 $22 $18 5/8 $0.325
March 31, 1995 $20 1/4 $18 1/2 $0.325
June 30, 1995 $20 5/8 $18 5/8 $0.325
September 30, 1995 $20 1/2 $18 7/8 $0.325
As of September 1996, the Company and its predecessors have paid 347
consecutive quarterly cash dividends. Cash dividends have been paid since 1850,
and the Company currently expects that dividends will continue to be paid in the
future.
The major source of funds for payment of the Company's dividends are the
dividends received on the shares of Southern's common stock owned by the
Company. Southern's indentures relating to long-term debt contain restrictions
as to the declaration or payment of cash dividends on, or the reacquisition of,
capital stock. Under the most restrictive of such provisions, $25,492,000 of
retained earnings at September 30, 1996 was available for such purposes.
The approximate number of shareholders of record of the Company's common
stock as of November 22, 1996 was 11,162.
Item 6. Selected Financial Data
- --------------------------------
The presentation under the "Eleven Year Financial Summary" for the five-
year period ended September 30, 1996 on pages 34 and 35 of the Company's 1996
Annual Report to Shareholders is incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations
- -------------------------
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 11 to 17 of the Company's 1996 Annual Report to
Shareholders is incorporated by reference herein.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Consolidated Statements of Income, Consolidated Balance Sheets,
Consolidated Statements of Changes in Common Shareholders' Equity, Consolidated
Statements of Cash Flows and Notes to Consolidated Financial Statements on pages
18 to 31 and the Report of Independent Accountants on page 33 of the Company's
1996 Annual Report to Shareholders are incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
None.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information required in this item regarding directors is contained in the
Company's definitive Proxy Statement at pages 2 to 4, which will be mailed to
shareholders on or about December 13, 1996, and is incorporated by reference
herein. A list of executive officers of the registrant and Southern follows:
Executive Officers of Connecticut Energy Corporation
----------------------------------------------------
and
---
The Southern Connecticut Gas Company
------------------------------------
Position and
Business Experience for the
Name and Age Past 5 Years
- ------------ -----------------------------------------------
J. R. Crespo, 54 Chairman, President and Chief Executive Officer
of the Company and Southern (1990).
Thomas A. Trotta, 59 Senior Vice President of the Company and
Executive Vice President and Chief Operating
Officer of Southern (1996), Executive Vice
President and Chief Operating Officer of Southern
(1995), Senior Vice President and Chief Operating
Officer of Southern (1992), Senior Vice
President, Operations of Southern (1991).
Vincent L. Ammann, Jr., 37 Vice President and Chief Accounting Officer of
the Company (1996), Vice President and Chief
Accounting Officer of the Company and Group Vice
President of Southern (1994), Vice President and
Chief Accounting Officer of the Company and
Southern (1991).
Carol A. Forest, 48 Vice President, Finance, Chief Financial Officer
and Treasurer of the Company and Southern (1991).
Michael H. Pinto, 69 Vice President, Government Affairs of the Company
(1991), Director, Governmental Relations of
Southern (1990).
J. Richard Tiano, 52 Vice President, General Counsel and Secretary of
the Company and Southern (1988).
Salvatore A. Ardigliano, 47 Vice President, Marketing and Gas Supply Services
of Southern (1995), Vice President, Gas Supply
Services of Southern (1995), Group Director, Gas
Supply Services of Southern (1993), Director, Gas
Control of Southern (1992), Director, Marketing
and Energy Services of Southern (1991).
Frank L. Esposito, 64* Vice President, Human Resources of Southern
(1995), Vice President, Human Resources and
Corporate Services of Southern (1992), Vice
President, Human Resources of Southern (1991).
James P. Healy, 54 Vice President, Energy Services Planning of
Southern (1995), Vice President, Information
Technology of Southern (1992), Senior Vice
President, Corporate Development of Southern
(1986).
Ernest W. Karkut, 54 Vice President, Purchasing and Plant Services of
Southern (1994), Vice President, Customer
Relations (1993), Vice President, Customer
Support Services of Southern (1992), Assistant
Vice President, Customer Support Services of
Southern (1991), Assistant Vice President,
Financial Planning and Treasurer of Southern
(1991).
Peter D. Loomis, 48 Group Vice President, Customer and Operating
Services of Southern (1995), Vice President,
Distribution and Customer Service of Southern
(1992), Group Director, Customer Services (1991).
Phyllis A. O'Brien, 51 Group Vice President, Accounting, Regulatory and
Customer Relations of Southern (1996), Vice
President, Accounting and Regulatory Services of
Southern (1994), Vice President, Corporate and
Regulatory Planning of Southern (1993), Group
Director, Corporate Regulatory and Supply
Planning of Southern (1991), Group Director,
Planning, Rates and Regulatory Affairs of
Southern (1991).
Patricia A. Younger, 54 Vice President, Customer Relations of Southern
(1995), Group Director, Customer Relations of
Southern (1994), Director, Customer Information
and Collections of Southern (1994), Director,
Credit and Collections of Southern (1993),
Manager, Credit and Collections of Southern
(1986).
*Retired effective November 1, 1996.
Item 11. Executive Compensation
- --------------------------------
Information required in this Item is contained in the Company's definitive
Proxy Statement on pages 9 to 10, which will be mailed to shareholders on or
about December 13, 1996, and is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Information required in this Item is contained in the Company's definitive
Proxy Statement on pages 4 to 5, which will be mailed to shareholders on or
about December 13, 1996, and is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information required in this Item is contained in the Company's definitive
Proxy Statement on page 11, which will be mailed to shareholders on or about
December 13, 1996, and is incorporated by reference herein.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
(a) List of documents filed as part of this Report:
1. Financial Statements
--------------------
Among the responses to this Item 14(a) are the following financial
statements which are incorporated by reference herein in Item 8 above:
(i) Consolidated Statements of Income for the years ended September 30,
1996, 1995 and 1994.
(ii) Consolidated Balance Sheets for the years ended September 30, 1996
and 1995.
(iii) Consolidated Statements of Changes in Common Shareholders' Equity
for the years ended September 30, 1996, 1995 and 1994.
(iv) Consolidated Statements of Cash Flows for the years ended September
30, 1996, 1995 and 1994.
(v) Notes to Consolidated Financial Statements.
(vi) Report of Independent Accountants.
2. Financial Statements and Supplementary Data Required by Item 8
--------------------------------------------------------------
(A) Schedule Description Page
-------- ----------- ----
Report of Independent Accountants on
Financial Statement Schedules 20
II Valuation and Qualifying Accounts 21
All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the financial statements
or notes thereto.
3. Exhibits Required by Item 601 of Securities and Exchange Commission
-------------------------------------------------------------------
Regulation S-K
--------------
(A) The following such exhibits are filed as a separate section of this
report.
Exhibits
--------
(3) Certificate of Incorporation and By-Laws
----------------------------------------
The Amended and Restated Certificate of Incorporation of Connecticut
Energy Corporation is incorporated herein by reference to Item 6 of the
Company's Form 10-Q filed for the quarter ended March 31, 1991 at pages 14
through 22. The Amended and Restated By-Laws of Connecticut Energy Corporation
are incorporated herein by reference to Item 6 of the Company's Form 10-Q filed
for the quarter ended March 31, 1995 at pages 20 through 31.
The Amended and Restated Certificate of Incorporation of The Southern
Connecticut Gas Company is incorporated herein by reference to Item 6 of Form
10-Q filed for the quarter ended June 30, 1990 at pages 40 through 51. The
Amended and Restated By-Laws of The Southern Connecticut Gas Company are
incorporated herein by reference to Item 6 of the Company's Form 10-Q filed for
the quarter ended March 31, 1995 at pages 32 through 41.
(4) Instruments Defining Rights of Security Holders, Including Indentures
---------------------------------------------------------------------
(i) Indenture between The Bridgeport Gas Light Company and The
Bridgeport City Trust Company, as Trustee, dated as of March 1, 1948.
Incorporated herein by reference in Exhibit 4(b) (1) to Registration Statement
2-10566.
(ii) In addition to the Indenture referred to in 4 (i) hereof,
there have been twenty-seven indentures supplemental thereto, copies of all of
which the Company agrees to furnish to the Commission upon request.
(10) Material Contracts
------------------
(i) Gas Transportation Contract between Tennessee Gas Pipeline
Company and The Southern Connecticut Gas Company, Contract No. 10783, dated June
1, 1995, is filed herewith at pages 24 to 32.
(ii) Interruptible Gas Transportation Contract and Amendment No.
1, thereto, among Tenngasco Corporation, The Southern Connecticut Gas Company
and The United Illuminating Company, dated May 14, 1987 and August 1, 1989,
respectively, incorporated by reference to Form 10-K for the fiscal year ended
December 31, 1989 at pages 238 to 258.
(iii) Amendment No. 2 to Interruptible Gas Transportation Contract
and Amendment No. 1, thereto, among Tenngasco Corporation, The Southern
Connecticut Gas Company and The United Illuminating Company, dated November 1,
1990, incorporated by reference to Form 10-K for the transition period from
January 1, 1990 to September 30, 1990 at pages 90 to 91.
(iv) Gas Transportation Contract between Iroquois Gas Transmission
System, L.P. and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.32 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(v) Gas Sales Agreement No. 1 by and between Alberta Northeast
Gas Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.33 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(vi) Gas Sales Agreement No. 2 by and between Alberta Northeast
Gas Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.34 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(vii) Gas Sales Agreement by and between Alberta Northeast Gas
Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.35 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(viii) Gas Sales Agreement by and between Alberta Northeast Gas
Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.36 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(ix) Gas Sales Agreement by and between Alberta Northeast Gas
Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.37 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(x) Storage Service Transportation Contract between Tennessee Gas
Pipeline Company and The Southern Connecticut Gas Company, Contract No. 542,
dated September 1, 1993, is filed herewith at pages 33 to 42.
(xi) Storage Service Agreement (GSS) between CNG Transmission
Corporation and The Southern Connecticut Gas Company, dated October 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 130 to 137.
(xii) Storage Service Agreement (GSS-TE) between CNG Transmission
Corporation and The Southern Connecticut Gas Company, dated October 1, 1993, is
filed herewith at pages 43 to 50.
(xiii) Storage Service Agreement (GSS-II) between CNG Transmission
Corporation and The Southern Connecticut Gas Company, dated September 1,
1993, is filed herewith at pages 51 to 56.
(xiv) Gas Storage Contract and Amendment No. 1, thereto, between
Tennessee Gas Pipeline Company and The Southern Connecticut Gas Company, dated
December 1, 1994, and July 1, 1995, respectively, are filed herewith at pages 57
to 63.
(xv) Gas Transportation Agreement between Tennessee Gas Pipeline
Company and The Southern Connecticut Gas Company, dated August 19, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 143 to 151.
(xvi) Gas Transportation Agreement between Tennessee Gas Pipeline
Company and The Southern Connecticut Gas Company, dated August 19, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 152 to 159.
(xvii) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 160 to 170.
(xviii) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 171 to 180.
(xix) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 181 to 192.
(xx) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 193 to 204.
(xxi) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 214 to 220.
(xxii) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 221
to 227.
(xxiii) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 228
to 235.
(xxiv) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 236
to 243.
(xxv) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 244
to 251.
(xxvi) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 252
to 257.
(xxvii) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated October 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 258
to 277.
Executive Compensation Plans and Arrangements
---------------------------------------------
(xxviii) Employment Agreement between The Southern Connecticut Gas
Company and J. R. Crespo, dated March 24, 1992, incorporated by reference to
Form 10-K for the fiscal year ended September 30, 1992 at pages 213 to 229.
(xxix) Amended and Restated Deferred Compensation Agreement between
The Southern Connecticut Gas Company and Connecticut Energy Corporation and
J. R. Crespo, dated November 8, 1996, is filed herewith at pages 64 to 73.
(xxx) The Southern Connecticut Gas Company Board of Directors
Retirement Plan, dated October 1, 1992, is incorporated by reference to Form
10-K for the fiscal year ended September 30, 1994 at pages 27 to 30.
(xxxi) The Southern Connecticut Gas Company, Management Compensation
Plan, dated October 1, 1992, incorporated by reference to Form 10-K for the
fiscal year ended September 30, 1992 at pages 251 to 253.
(xxxii) Agreements between The Southern Connecticut Gas Company and
Philip R. Marsilius and Henry Chauncey, Jr. related to deferred compensation as
directors, dated December 27, 1988 and December 31, 1988, incorporated by
reference to Form 10-K for the fiscal year ended December 31, 1988 at pages 58
to 62 and pages 63 to 67.
(xxxiii) Supplemental Retirement Benefits Plan dated October 1, 1993,
incorporated by reference to Form 10-Q for the quarter ended December 31, 1993
at pages 25 to 28.
(xxxiv) Agreement between The Southern Connecticut Gas Company and
Helen B. Wasserman related to deferred compensation as a director, dated
December 31, 1994, incorporated by reference to Form 10-K for the fiscal year
ended September 30, 1995 at pages 25 to 29.
(xxxv) Agreement between The Southern Connecticut Gas Company and
Connecticut Energy Corporation and Carol A. Forest related to change in control,
dated October 1, 1996, is filed herewith at pages 74 to 83.
(xxxvi) Agreement between The Southern Connecticut Gas Company and
Connecticut Energy Corporation and J. Richard Tiano related to change in
control, dated October 1, 1996, is filed herewith at pages 84 to 93.
(xxxvii) Agreement between The Southern Connecticut Gas Company and
Connecticut Energy Corporation and Thomas A. Trotta related to change in
control, dated October 1, 1996, is filed herewith at pages 94 to 104.
(13) Annual Report to Security Holders
---------------------------------
The Company's 1996 Annual Report to Shareholders is filed herewith at
pages 105 to 150.
(21) Subsidiaries of the Registrant
------------------------------
A list of the Company's subsidiaries is filed herewith at page 151.
(27) Financial Data Schedule
-----------------------
Financial Data Schedule UT is submitted only in electronic format to the
Securities and Exchange Commission.
(B) No reports on Form 8-K were filed during the last quarter of 1996.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
of Connecticut Energy Corporation:
Our report on the consolidated financial statements of Connecticut Energy
Corporation has been incorporated by reference in this Form 10-K from page 33 of
the 1996 Annual Report to Shareholders of Connecticut Energy Corporation. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in Item 14(a)2 of this Form
10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.
New York, New York
October 31, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting part
of the Registration Statements on Form S-3 (No. 33-47684-3) and Form S-8 (No.
33-39245 and 33-51763) of Connecticut Energy Corporation of our report dated
October 31, 1996, on our audits of the consolidated financial statements and
financial statement schedule of Connecticut Energy Corporation as of
September 30, 1996 and 1995, and for the years ended September 30, 1996, 1995
and 1994, appearing on page 33 of the 1996 Annual Report to Shareholders of
Connecticut Energy Corporation which is incorporated by reference in this Annual
Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.
New York, New York
December 6, 1996
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CONNECTICUT ENERGY CORPORATION
Years Ended September 30, 1996, 1995 and 1994
(in thousands)
Col. A Col. B Col. C Col. D Col. E
- ------ ------ ----------------------- ------ ------
Additions
---------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Period Expenses Accounts Deductions Period
- ----------- ---------- ---------- ---------- ---------- ------
Allowance for
Doubtful Accounts
1996 (1) $3,553 $6,549 $1,826 (2) $9,186 (3) $2,742
1995 (1) $3,747 $6,548 $2,235 (2) $8,977 (3) $3,553
1994 (1) $4,251 $6,962 $1,482 (2) $8,948 (3) $3,747
Notes:
- -----
(1) Reserve deducted in the Consolidated Balance Sheet from the asset to which
it applies
(2) Recoveries on accounts previously charged off
(3) Accounts charged off as uncollectible
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(Registrant) CONNECTICUT ENERGY CORPORATION
------------------------------
/s/ J. R. Crespo
- ----------------
by: J. R. Crespo, Chairman,
President and Chief Executive Officer
Dated: November 26, 1996
- -------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Henry Chauncey, Jr. /s/ Samuel M. Sugden
- ----------------------- --------------------
by: Henry Chauncey, Jr., Director by: Samuel M. Sugden, Director
Dated: November 26, 1996 Dated: November 26, 1996
/s/ James P. Comer /s/ Christopher D. Turner
- ------------------ -------------------------
by: James P. Comer, M.D., Director by: Christopher D. Turner, Director
Dated: November 26, 1996 Dated: November 22, 1996
/s/ J. R. Crespo /s/ Helen B. Wasserman
- ---------------- ----------------------
by: J. R. Crespo, Chairman, by: Helen B. Wasserman, Director
President and Chief Executive Officer Dated: November 26, 1996
Dated: November 26, 1996
/s/ Richard F. Freeman /s/ Vincent L. Ammann, Jr.
- ---------------------- --------------------------
by: Richard F. Freeman, Director by: Vincent L. Ammann, Jr.
Dated: November 26, 1996 Vice President and
Chief Accounting Officer,
(Principal Accounting Officer)
Dated: November 26, 1996
/s/ Richard M. Hoyt /s/ Carol A. Forest
- ------------------- -------------------
by: Richard M. Hoyt, Director by: Carol A. Forest, Vice President,
Dated: November 26, 1996 Finance, Chief Financial Officer and
Treasurer, (Principal Financial
Officer)
Dated: November 26, 1996
/s/ Paul H. Johnson /s/ J. Richard Tiano
- ------------------- --------------------
by: Paul H. Johnson, Director by: J. Richard Tiano, Vice President,
Dated: November 26, 1996 General Counsel and Secretary
Dated: November 26, 1996
/s/ Newman M. Marsilius, III
- ----------------------------
by: Newman M. Marsilius, III, Director
Dated: November 26, 1996