Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
---------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended......................December 31, 1999
Commission file number: 1-3268
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 14-0555980
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
284 South Avenue, Poughkeepsie, New York 12601-4879
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 452-2000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Cumulative Preferred Stock
4.5% Series
4.75% Series
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. [ ]
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the Registrant as of
March 1, 2000, was zero.
The number of shares outstanding of Registrant's Common
Stock, as of March 1, 2000 was 16,862,087. All shares are owned
by CH Energy Group, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Page
Table of Contents
PART I
ITEM 1 BUSINESS 1
ITEM 2 PROPERTIES 15
ITEM 3 LEGAL PROCEEDINGS 22
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 24
PART II
ITEM 5 MARKET FOR CENTRAL HUDSON'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 24
ITEM 6 SELECTED FINANCIAL DATA OF CENTRAL HUDSON AND
ITS SUBSIDIARIES 25
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 27
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK 45
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 46
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 99
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF CENTRAL HUDSON 99
ITEM 11 EXECUTIVE COMPENSATION 99
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 110
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 112
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K 112
SIGNATURES 114
(i)
PART I
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 ("Form 10-K Annual Report") and the documents
incorporated by reference may contain statements which, to the
extent they are not recitations of historical fact, constitute
"forward-looking statements" within the meaning of the Securities
Litigation Reform Act of 1995 ("Reform Act"). These statements
will contain words such as "believes," "expects," "intends,"
"plan," and other similar words. All such forward-looking
statements are intended to be subject to the safe harbor
protection provided by the Reform Act. A number of important
factors affecting Central Hudson Gas & Electric Corporation's
("Central Hudson") business and financial results could cause
actual results to differ materially from those stated in the
forward-looking statements. Those factors include weather,
energy supply and demand, developments in the legislative,
regulatory and competitive environment, electric and gas industry
restructuring and cost recovery, future market prices for energy,
capacity and ancillary services, nuclear industry regulation, the
outcome of pending litigation, and certain environmental matters,
particularly ongoing development of air quality regulations and
industrial waste remediation requirements.
ITEM 1 - BUSINESS
Holding Company
CH Energy Group, Inc. ("Energy Group") was formed in April
1998 as a wholly-owned subsidiary of Central Hudson. On
December 15, 1999, effective upon a one-for-one common stock
share exchange between Energy Group and the shareholders of
Central Hudson, Energy Group became the holding company parent
corporation of Central Hudson and its existing subsidiary
companies ("Holding Company Restructuring"). Central Hudson's
preferred stock and debt were not exchanged and remain securities
of Central Hudson. For further information regarding the Holding
Company Restructuring and/or the Amended and Restated Settlement
Agreement, dated January 2, 1998 (and thereafter amended), among
Central Hudson, the Staff of the Public Service Commission of the
State of New York ("PSC") and certain others ("Agreement")
entered into in the PSC's Competitive Opportunities Proceeding,
which Agreement permitted the Holding Company Restructuring and
which Agreement may affect future operations of Central Hudson,
see Item 7 hereof, under the caption "Competition/Deregulation"
and the caption "Competitive Opportunities Proceeding Settlement
Agreement" in Note 2 - "Regulatory Matters" of the Notes to the
Financial Statements referred to in Item 8 of this Form 10-K
1
Annual Report (each such Note being hereinafter called the
"Note").
Because of its ownership of Central Hudson, Energy Group is
a "public utility holding company" under the Public Utility
Holding Company Act of 1935 ("PUHCA"). However, Energy Group is
exempt from the provisions of PUHCA under the intrastate
exemption provisions of Section 3(a)(1) of PUHCA, except that, under
Section 9(a)(2) of such Act, the approval of the Securities and Exchange
Commission ("SEC") is required for a direct or indirect
acquisition by a public utility holding company of five percent
(5%) or more of the voting securities of any electric or gas
utility company subject to PUHCA.
Energy Group is not an operating company, but merely holds
stock in its affiliates.
Central Hudson
Generally: Central Hudson is the principal affiliate of
Energy Group. Central Hudson is a New York gas and electric
corporation formed on December 31, 1926, as a consolidation of
several operating utilities which had been accumulated under one
management during the previous 26 years. Central Hudson
generates, purchases, sells at wholesale and distributes
electricity, and purchases and distributes gas in New York State.
Central Hudson, in the opinion of its general counsel, has,
with minor exceptions, valid franchises, unlimited in duration,
to serve a territory extending about 85 miles along the Hudson
River and about 25 to 40 miles east and west from such River.
The southern end of the territory is about 25 miles north of New
York City, and the northern end is about 10 miles south of the
City of Albany. The territory, comprising approximately 2,600
square miles, has a population estimated at 623,500. Electric
service is available throughout the territory, and natural gas
service is provided in and about the cities of Poughkeepsie,
Beacon, Newburgh and Kingston and in certain outlying and
intervening territories. The number of Central Hudson employees,
at December 31, 1999, was 1,107.
Central Hudson's territory reflects a diversified economy,
including manufacturing industries, research firms, farms,
governmental agencies, public and private institutions, resorts
and wholesale and retail trade operations. For information
concerning revenues, certain expenses, earnings per share and
information regarding assets for the Electric, Gas, and Other
segments, which are currently the most significant industry
segments of Central Hudson, see Note 10 - "Segments and Related
Information."
In 1999, the competitive marketplace continued to develop
for electric utilities and certain Central Hudson electric
customers were given the opportunity to purchase energy and
2
related services from sources other than their local utility.
These opportunities also exist for Central Hudson natural gas
customers.
Rates
Generally: The electric and gas rates of Central Hudson
applicable to service supplied to retail customers within the
State of New York are regulated by the PSC. Transmission rates
and rates for electricity sold for resale in interstate commerce
by Central Hudson are regulated by the Federal Energy Regulatory
Commission ("FERC").
Central Hudson's present full-service retail rate structure
consists of various service classifications covering residential,
commercial and industrial customers. During 1999, the average
price of electricity to such customers was 8.51 cents per
kilowatthour ("kWh"), representing a 0.7% increase from the 1998
average price.
Rate Proceedings - Electric and Gas: For information
regarding Central Hudson's most recent electric and gas cases
filed with the PSC, see Item 7 hereof under the caption "Rate
Proceedings."
Cost Adjustment Clauses: For information with respect to
Central Hudson's electric and gas cost adjustment clauses, see
Note 1 - "Summary of Significant Accounting Policies" hereof
under the caption "Rates, Revenues and Cost Adjustment Clauses."
Regulation
Generally: Central Hudson is subject to regulation by the
PSC with respect to, among other things, service rendered
(including the rates charged), major transmission facility
siting, accounting procedures and issuance of securities. For
certain restrictions on Central Hudson's activities imposed by
the Agreement, see Note 2 hereof under the caption "Competitive
Opportunities Proceeding Settlement Agreement."
Certain of the Central Hudson activities are subject to
regulation by the FERC, under the Federal Power Act, by reason of
Central Hudson's transmission facilities and Central Hudson's
sales for resale of electric energy in interstate commerce.
Central Hudson is not subject to the provisions of the
Natural Gas Act.
3
In the opinion of general counsel, Central Hudson's major
hydroelectric facilities are not required to be licensed under
the Federal Power Act.
Construction Program and Financing
For estimates of construction expenditures, internal funds
available, mandatory and optional redemption of long-term
securities, and working capital requirements of Central Hudson
for the year 2000, see the subcaption "Construction Program" in
Item 7 hereof under the caption "Capital Resources and
Liquidity."
For a discussion of Central Hudson's capital structure,
financing program and short-term borrowing arrangements, see
Notes 5, 6 and 7 "Short-Term Borrowing Arrangements,"
"Capitalization - Capital Stock" and "Capitalization - Long-term
Debt," respectively, and Item 7 hereof under the subcaptions
"Capital Structure," "Financing Program" and "Short-Term Debt" of
the caption "Capital Resources and Liquidity."
Central Hudson's Certificate of Incorporation and its
various debt instruments do not contain any limitations upon the
issuance of authorized, but unissued, preferred stock or of
unsecured short-term debt.
Central Hudson's various debt instruments include
limitations as to the amount of additional funded indebtedness
which Central Hudson can issue. Central Hudson believes such
limitations will not impair Central Hudson's ability to issue any
or all of the debt described under the above-referenced
subcaption "Financing Program."
Fuel Supply and Cost
Central Hudson's two primary fossil fuel-fired electric
generating stations are the Roseton Steam Electric Generating
Plant ("Roseton Plant") (described in Item 2 hereof under the
subcaptions "Electric" and "Roseton Plant") and the Danskammer
Point Steam Electric Generating Station ("Danskammer Plant")
(referred to in Item 2 hereof under the subcaption "Electric").
Units 1 and 2 of the Roseton Plant are fully equipped to burn
both residual oil and natural gas. Units 1 and 2 of the
Danskammer Plant, which are equipped to burn residual oil or
natural gas, are operated when economical. Units 3 and 4 of the
Danskammer Plant, which are operated predominantly, are capable
of burning coal, natural gas, or residual oil. For a discussion
of Central Hudson's plan under the Agreement to sell, by auction,
its interests in the Roseton and Danskammer Plants, see Note 2
hereof under the caption "Competitive Opportunities Proceeding
Settlement Agreement."
4
For the 12 months ended December 31, 1999, the sources and
related costs of electric generation for Central Hudson were as
follows:
Aggregate
Sources of Percentage of Costs in 1999
Generation Energy Generatd ($000)
Purchased Power 25.7% $ 48,051
Coal 33.3 34,747
Gas 7.9 13,978
Nuclear 12.5 3,760
Oil 18.9 31,322
Hydroelectric 1.7 200
100.0%
Nitrogen Oxide ("NOx") Allowances 645
Fuel Handling Costs 1,438
Deferred Fuel Cost (2,562)
$131,579
Residual Oil: At December 31, 1999, there were 1,038,775
barrels of fuel oil in inventory in Central Hudson-owned tanks
for use in the Danskammer and Roseton Plants, which aggregate
amount represents an average daily supply for 42 days at an
average of 25,000 barrels per day. The total oil storage
capacity as of December 31, 1999, for these Plants was 16,251 and
1,079,000 barrels, respectively. Central Hudson's share of the
Roseton Plant's oil storage capacity is 377,650 barrels.
During 1999, Central Hudson purchased 6,185 barrels of fuel
oil for the Danskammer Plant.
During 1999, the Roseton Plant's fuel oil requirements were
supplied by spot market purchases. The prices under these spot
contracts were determined on the basis of published market
indices in effect at the time of delivery. During 1999 Central
Hudson purchased just over six million barrels of fuel oil for
the Roseton Plant.
Coal: In order to provide for its future requirements for
coal to be burned in Units 3 and 4 at the Danskammer Plant,
Central Hudson entered into three supply contracts for the
purchase of an aggregate of 720,000 tons per year of low sulfur
(0.7% maximum) coal.
Two contracts provide for the delivery of coal by water from
sources in Venezuela and Colombia, South America. The third
contract provides for the delivery of domestic coal by water.
The base price of purchases under all three contracts is
renegotiated by the parties on an annual basis. The contracts,
as last renegotiated, cover the term through December 31, 2001.
5
All three contracts can be terminated, effective December 31,
2000, with six-months written notice to the supplier.
In 1999 Central Hudson purchased 856,000 tons of coal which
arrived by water. Central Hudson purchased 36,000 tons of this
coal on the spot market, with the remainder being provided under
its three supply contracts.
Nuclear: For information regarding fuel reloading at Unit
No. 2 of the Nine Mile Point Nuclear Station ("Nine Mile 2
Plant"), of which Central Hudson owns a 9% interest, see Item 7
hereof under the subcaption "Nuclear Operations" of the caption
"Results of Operations."
Environmental Quality Regulation
Central Hudson is subject to regulation by federal, state
and, to some extent, local authorities with respect to the
environmental effects of its operations, including regulations
relating to air and water quality, aesthetics, levels of noise,
hazardous wastes, toxic substances, protection of vegetation and
wildlife and limitations on land use. In connection with such
regulation, certain permits are required with respect to Central
Hudson's facilities, which permits have been obtained and/or are
in the renewal process. Generally, the principal environmental
areas and requirements to which Central Hudson is subject are as
follows:
Air: State regulations affecting Central Hudson's existing
electric generating plants govern the sulfur content of fuel used
therein, the emission of particulate matter and certain other
pollutants therefrom and the visibility of such emissions. In
addition, federal and state ambient air quality standards for
sulfur dioxide ("SO2"), NOx and suspended particulates must be
complied with in the area surrounding Central Hudson's generating
plants. Based on the operation of continuous emission stack
monitoring systems, Central Hudson believes that present air
quality standards for NOx, SO2 and particulates are satisfied in
those areas.
Beginning in 1997 the New York State Department of
Environmental Conservation ("NYSDEC") began an initiative seeking
penalties from all New York electric utilities for past opacity
variances and requiring various opacity reduction measures and
stipulated penalties for future excursions after execution of a
consent order. Each New York State electric utility, including
Central Hudson, is in the process of negotiating, or has
negotiated, the various terms and conditions of a draft consent
order with the NYSDEC. Central Hudson and the NYSDEC entered
into an Order on Consent, effective April 26, 1999, pursuant to
which Central Hudson, in settlement of a claim by the NYSDEC that
6
emissions from the Roseton and Danskammer Plants exceeded
applicable opacity emissions standards, agreed to a civil penalty
of $1.5 million for both Plants, of which $500,000 was paid to
the NYSDEC, and the remaining $1.0 million of such penalty was
suspended upon Central Hudson causing certain environmentally
beneficial projects in Dutchess and Orange Counties, New York to
be implemented, as set forth in said Order. Said Order also
provides for (i) a new level of stipulated penalty provisions for
future opacity exceedences and (ii) an Opacity Reduction Program,
all with respect to said Plants.
The Danskammer Plant burns coal having a maximum sulfur
content of 0.7%, fuel oil having a maximum sulfur content of 1%
and natural gas. The sulfur content of the oil burned at the
Roseton Plant is limited by stipulation with, among others, the
NYSDEC, to an amount not exceeding 1.5% maximum and 1.3% weighted
annual average. Such sulfur content limitation at the Roseton
Plant can be modified by the NYSDEC in the event of technological
changes at such Plant, provided that the SO2 and NOx emissions
are limited to that which would have been generated by the use of
oil with a sulfur content of 1.3% on a weighted annual average.
Natural gas is also burned at the Roseton Plant.
For information on the impact of the (i) Clean Air Act
Amendments of 1990 ("CAA Amendments") on Central Hudson's efforts
to attain and maintain national ambient air quality standards for
emissions from its fossil-fueled electric power plants, (ii) the
proposal of the federal Environmental Protection Agency ("EPA")
to modify emission standards for NOx and suspended particulates,
(iii) the proposal of the NYSDEC to modify NOx standards for
generating facilities operating in New York State, (iv)
settlements with the NYSDEC by Central Hudson of alleged opacity
violations, (v) the New York State Governor's initiatives
relating to air quality standards and (vi) an investigation
started by the New York State Attorney General regarding air
emissions from coal-fired generating plants, see Note 9 -
"Commitments and Contingencies," hereof under the caption,
"Environmental Matters - Air."
Water: Central Hudson is required to comply with applicable
state and federal laws and regulations governing the discharge of
pollutants into receiving waters.
The discharge of any pollution into navigable waterways is
prohibited except in compliance with a permit issued by the EPA
under the National Pollutant Discharge Elimination System
("NPDES") established under the Clean Water Act. Likewise, under
the New York Environmental Conservation Law, pollutants cannot be
discharged into state waters without a State Pollutant Discharge
Elimination System ("SPDES") permit issued by the NYSDEC.
Issuance of a SPDES permit satisfies the NPDES permit
requirement.
7
Central Hudson has received SPDES permits for both the
Roseton Plant and the Danskammer Plant, its Eltings Corners
maintenance and warehouse facility, and its Rifton Recreation and
Training Center. The SPDES permits for the Roseton and
Danskammer Plants expired on October 1 and November 1, 1992,
respectively, and such permit renewal applications for such
permits are pending before the NYSDEC. It is Central Hudson's
belief that the expired SPDES permits continue in full force and
effect pending issuance of the new SPDES permits. Restriction on
use of water for cooling purposes at the Roseton Plant is being
considered as part of the Roseton Plant application (as referred
to in Item 3 hereof under the caption "Environmental
Litigation").
For further discussion of Central Hudson's compliance with
the Clean Water Act and Central Hudson's SPDES permit renewal
proceeding, see Note 9 - "Commitments and Contingencies," hereof
under the caption "Environmental Matters - Water."
For a description of litigation commenced against Central
Hudson for alleged violation of the Endangered Species Act with
respect to the Roseton and Danskammer Plants, see Item 3 hereof.
Toxic Substances and Hazardous Wastes: Central Hudson is
subject to state and federal laws and regulations relating to the
use, handling, storage, treatment, transportation and disposal of
industrial, hazardous and toxic wastes.
The NYSDEC, in 1986, added to the New York State Registry of
Inactive Hazardous Waste Disposal Sites ("Registry") six
locations at which gas manufacturing plants owned or operated by
Central Hudson or by predecessors to Central Hudson were once
located. Two other sites, which formerly contained gas
manufacturing plants, were identified by Central Hudson, but not
placed on the Registry. Central Hudson studied these eight sites
to determine whether they contain any hazardous wastes which
could pose a threat to the environment or public health and, if
such wastes were located at such sites, to determine the remedial
actions which may be appropriate.
All of these eight sites were studied using the Phase I
guidelines of the NYSDEC and five such sites were studied using
the more extensive Phase II guidelines of the NYSDEC. As a
result of these studies, Central Hudson concluded that no
remedial actions were required at any of these sites. In 1991,
the NYSDEC advised Central Hudson that four of the six sites,
which had been originally placed on the Registry, had been
deleted from the Registry. In 1992, the NYSDEC advised Central
Hudson that the two remaining sites listed on the Registry had
been deleted from the Registry. The NYSDEC also indicated that
such deletions of the sites were subject to reconsideration in
the future, at which time new analytical tests could be required
8
to determine whether or not wastes on site are hazardous. In
February 1999, Central Hudson was notified by the NYSDEC that it
suspected that hazardous waste has been disposed at three of the
previously identified sites, one located in Beacon, New York and
two located in Poughkeepsie, New York. Central Hudson expects
that it will perform preliminary site assessments itself under
consent orders reached with the NYSDEC. If the NYSDEC determines
that significant quantities of residues are not present or that
the residues pose no threat to public health or the environment
given the current uses of these three sites, NYSDEC will not
require additional investigations and/or remediation at such
sites. If, after its review of each such site assessment, NYSDEC
determines that significant residues are present, or the residues
pose a threat to public health or the environment at a site,
Central Hudson will likely be responsible for any required
remediation. Central Hudson can make no prediction as to the
outcome of this matter.
If, as a result of such potential new analytical tests, or
otherwise, remedial actions are ultimately required at any of
these eight sites by the NYSDEC, the cost thereof could have a
material adverse effect (the extent of which cannot be reasonably
estimated) on the financial condition of Central Hudson if
Central Hudson could not recover all, or a substantial portion
thereof, through insurance and rates. Central Hudson has put its
insurers on notice as to this matter and it intends to seek
reimbursement from such carriers for amounts for which it may
become liable.
For a discussion of litigation filed by the City of
Newburgh, New York against Central Hudson involving one of
Central Hudson's eight former manufactured gas sites and a court
ruling related thereto, see Note 9 - "Commitments and
Contingencies," hereof under the subcaption "Environmental
Matters - Former Manufactured Gas Plant Facilities."
In August 1992, the NYSDEC notified Central Hudson that the
NYSDEC suspected that Central Hudson's offices at Little Britain
Road in New Windsor, New York, may constitute an inactive
hazardous waste disposal site. As a result of the NYSDEC's
review of a site assessment report prepared by Central Hudson's
consultant and submitted to the NYSDEC in 1996, Central Hudson
agreed to perform additional testing, which testing detected a
limited amount of subsurface soil contamination near one corner
of the site and contaminants in the groundwater beneath the site.
Operations conducted on the site by Central Hudson since it
purchased the property in 1978 are not believed to have
contributed to either the soil or the groundwater contamination.
Central Hudson and the NYSDEC have reached an agreement in
principle that Central Hudson will conduct a voluntary clean-up
of the site on terms to be further negotiated between the
9
parties. Central Hudson believes that the cost of such site
assessment and remediation will not be material.
Other: Central Hudson expenditures attributable, in whole
or in substantial part, to environmental considerations totaled
$10.2 million in 1999, of which approximately $1.5 million
related to capital projects and $8.7 million were charged to
expense. It is estimated that in 2000 the total of such
expenditures will be approximately $10.6 million. Central Hudson
is not involved as a defendant in any court litigation with
respect to environmental matters and, to the best of its
knowledge, no litigation against it is threatened with respect
thereto, except with respect to the litigation described in Item
3 "Legal Proceedings" hereof under the subcaption "Environmental
Litigation - Roseton and Danskammer Plants," and as described in
Note 9 - "Commitments and Contingencies," hereof under the
subcaption "Environmental Matters - Former Manufactured Gas Plant
Facilities."
Other Matters
Labor Relations: Central Hudson has agreements with the
International Brotherhood of Electrical Workers ("IBEW") for its
779 unionized employees, representing production and maintenance
employees, customer representatives, service workers and clerical
employees (excluding persons in managerial, professional or
supervisory positions), which agreements were renegotiated
effective July 1, 1998. An agreement with each of Locals 2218
and 320 of the IBEW Non-Production Plant Workers continues
through April 30, 2003, and an agreement with IBEW Local 320
Production Plant Workers expires on August 31, 2003. The
agreements provide for an average annual general wage increase of
3.0% and certain additional fringe benefits. Effective August 1,
1999, Local 2218 merged with Local 320 and Local 320 assumed the
agreement between Central Hudson and Local 2218.
Phoenix Development Company, Inc.: Phoenix Development
Company, Inc. ("Phoenix"), a New York corporation, is a wholly-
owned subsidiary of Central Hudson. Phoenix was established to
hold or lease real property for the future use of Central Hudson,
or to participate in energy-related ventures. Currently, the
assets held by Phoenix are not material.
Other Affiliates of Energy Group
The following are also directly or indirectly owned
subsidiaries of Energy Group (herein collectively called
"competitive business affiliates".
10
Central Hudson Energy Services, Inc.: Central Hudson Energy
Services, Inc. ("Services") was formed for the purpose of
becoming, effective upon the Holding Company Restructuring, the
holding company parent for each of the following directly or
indirectly owned competitive business affiliates. Services is
not an operating company.
Central Hudson Enterprises Corporation: Central Hudson
Enterprises Corporation ("CHEC") is a wholly-owned subsidiary of
Services, and is engaged in the business of marketing
electricity, gas and oil and related services to retail and
wholesale customers; conducting energy audits; providing services
including, but not limited to, the design, financing,
installation and maintenance of energy conservation measures and
generation systems for private businesses, institutional
organizations and governmental entities; and participating in
cogeneration, small hydro, alternate fuel and energy production
projects and services.
Prime Industrial Energy Services, Inc.: In June 1999, CHEC
formed Prime Industrial Energy Services, Inc. ("Prime"), as a
wholly-owned subsidiary, to acquire the assets of an on-going
business engaged in project construction and providing services
with respect to electric generators installed on customers'
property, heating, ventilation and air conditioning.
SCASCO, Inc.: SCASCO, Inc. ("SCASCO") is a wholly-owned
subsidiary of CHEC. SCASCO conducts a fuel oil and natural gas
distribution business in Connecticut, Massachusetts and Rhode
Island.
CH Resources, Inc.: CH Resources, Inc. ("Resources") is a
wholly-owned subsidiary of Services established for the purpose
of acquiring, developing and operating electric generation
facilities, the output of which is sold at the wholesale level to
CHEC and other energy services companies, as well as through the
New York State Independent System Operator described in the
caption "New York Power Pool/Independent System Operator" of Item
2 herein.
CH Syracuse Properties, Inc. and CH Niagara Properties,
Inc.: CH Syracuse Properties, Inc. ("CH Syracuse") and CH
Niagara Properties, Inc. ("CH Niagara"), are wholly-owned
subsidiaries of Resources used to lease real property for the
certain electric generating facilities owned and operated by
Resources.
Greene Point Development Corporation: Greene Point
Development Corporation ("Greene Point") is a wholly-owned
subsidiary of Services, which develops and evaluates business
opportunities for the affiliate companies of Services. The
current assets held by this subsidiary are not material.
11
Directors and Executive Officers
The names of the current members of the Board of Directors
and the executive officers of Central Hudson, their positions
held and business experience during the past five (5) years and
ages (at December 31, 1999) are as follows:
Principal Occupation or Employment
Name, Age and and Positions and Offices
Position Held during the past five (5) years
Paul J. Ganci, 61, For Central Hudson, present
a director and Chairman directorship since 1994; present
of the Board and Chief position since April 1999;
Executive Officier President and Chief Executive
Officer, August 1998 - April 1999;
President and Chief Operating
Officier, December 1994 - August
1998. For Energy Group, a director
and Chairman of the Board,
President and Chief Executive
Officier of Energy Group since
November 2, 1999. For services, a
director and Chairman of the Board
and Chief Executive Officer since
November 1999.
Carl E. Meyer, 52 a For Central Hudson, present
director and President directorship since Decmeber 15,
and Chief Operating 1999; present position since April
Officier 1999; Executive Vice President,
April 1998 - April 1999; Senior
Vice President - Customer Services,
April 1996 - April 1998; Vice
President - Customer Services,
December 1994 - April 1996; for
Energy Group, Executive Vice
President since November 19, 1999.
13
Principal Occupation or Employment
Name, Age and and Positions and Offices
Position Held during the past five (5) years
Allan R. Page, 52, For Central Hudson, present
Vice President directorship since November 19,
1999; present position since
November 19, 1999; Executive Vice
President, April 1998 - November
1999; Senior Vice President -
Corporate Services, April 1996 -
April 1998; Vice President -
Corporate Services, December 1994 -
April 1996; For Energy Group,
Executive Vice President since
November 19, 1999; For Services - a
director since November 12, 1999,
and President and Chief Operating Officer
since December 3, 1999.
Arthur R. Upright, 56, a For Central Hudson, present
director and Senior directorship since December 15,
Vice President 1999; present position since
November 1998; Assistant Vice
President - Cost & Rate and
Financial Planning, December 1994 -
November 1998. For Energy Group,
Senior Vice President since
November 19, 1999.
Steven V. Lant, 42, a For Central Hudson, present
director and Chief directorship since December 15,
Financial Officier and 1999; present position since
Treasurer November 19, 1999; Chief Financial
Officer, Treasurer and Corporate
Secretary, November 1998 -
November 19, 1999; Treasurer and
Assistant Corporate Secretary,
December 1994 - November 1998. For
Energy Group, Chief Financial
Officer and Treasurer since
November 19, 1999; Chief Financial
Officer, Treasurer and Corporate
Secretary, November 2, 1999 -
November 19, 1999.
13
Principal Occupation or Employment
Name, Age and and Positions and Offices
Position Held during the past five (5) years
Ronald P. Brand, 61 Present position since November
Senior Vice President, 1998; Vice President - Engineering
Engineering, and Environmental Affairs, December
Environmental Affairs 1994 - November 1998.
Joseph J. DeVirgilio, Present position since November
Jr., 48, Senior Vice 1998; Vice President - Engineering
President - Corporate and Environmental Affairs, December
Services and 1994 - November 1998.
Administration
James P. Lovette, 50, Present position since November
Vice President - Fossil 1998; Assistant Vice President -
Production Fossil Production, October 1997 -
November 1998; Plant
Superintendant, December 1994 -
November 1997.
Donna S. Doyle, 51, Vice For Central Hudson, present
President - Accounting position since November 19, 1999;
and Controller Controller, April 1995 - November
1999; Assistant Controller and
Manager of Taxes, Budgets &
Customer Accounting, December 1994
- April 1995. For Energy Group,
Vice President - Accounting and
Controller since November 19, 1999;
Controller November 2, 1999 -
November 19, 1999.
14
Principal Occupation or Employment
Name, Age and and Positions and Offices
Position Held during the past five (5) years
Gladys L. Cooper, 48, For Central Hudson, present
Corporate Secretary and positions since November 19, 1999;
Assistant Vice Assistant Vice President -
President - Government Governmental Relations, September
Relations 1995 - November 1999; leave of
absence for educational purposes,
December 1994 - September 1995.
For Energy Group, Corporate
Secretary and Assistant Vice
President - Governmental Relations
since November 19, 1999, Assistant
Secretary, November 2, 1999 -
November 19, 1999.
John C. Checklick, 51, Present position since November
Assistant Vice 1998; Manager of Customer
President-Customer Services, December 1994 - November
Services 1998.
Denise D. VanBuren, 38, Present position since
Assistant Vice November 19, 1999; Manager,
President - Corporate Corporate Communications, October
Communications 1998 - November 19, 1999; Director -
Media Relations, December 1994 -
October 1998.
There are no family relationships existing among any of the
executive officers of Central Hudson.
Directors of Central Hudson hold office until the next
annual meeting of shareholders or until their successors are duly
elected and qualify. Each of the above executive officers is
elected or appointed annually by the Central Hudson Board of
Directors.
ITEM 2 - PROPERTIES
Electric: The net capability of Central Hudson's electric
generating plants as of December 31, 1999, the net output of each
plant for the year ended December 31, 1999, and the year each
plant was placed in service or rehabilitated are as set forth
below:
15
Megawatt ("MW")*
Electric Net Capability 1999 Unit
Generating Year Placed (99) (98-99) Net Output
Plant Type of Fuel In Service Summer Winter (MWh)
- ----- ------------ ---------- ------ ------ ----------
Danskammer Residual Oil, Natural 1951-1967 500 501 2,393,799
Plant ** Gas and Coal
Roseton Plan Residual Oil 1974 425 413 1,367,433
(35% share)** and Natural Gas
Neversink Water 1953 23 22 45,170
Hydro Station
Dashville Water 1920 5 5 10,527
Hydro Station
Sturgeon Pool Water 1924 16 16 46,916
Hydro Station
High Falls Water 1986 3 3 5,343
Hydro Station
Coxsackie Gas Kerosene or 1969 19 24 4,161
Turbine ("GT") Natural Gas
So. Cairo GT Kerosene 1970 18 22 2,856
Nine Mile 2 Nuclear 1988 103 105 786,507
Plant (9% ---- --- --- -------
Total 1,112 1,111 4,662,712
===== ===== =========
* Reflects maximum one-hour net capability of Central Hudson's ownership of generation
resources and, therefore, does not include firm purchases or sales.
** Plants subject to auction based on the Agreement as described in Item 7
hereof under the caption "Competition/Deregulation - Competitive Opportunities
Proceeding Settlement Agreement" and in Note 2 - "Regulatory Matters" hereof under the
caption "Competitive Opportunities Proceeding Settlement Agreement."
16
Central Hudson has a contract with the Power Authority of
the State of New York ("PASNY") which entitles Central Hudson to
49 MW net capability from the Blenheim-Gilboa Pumped Storage
Hydroelectric Plant through 2002.
Central Hudson owns 83 substations having an aggregate
transformer capacity of 4.9 million kVa. The transmission system
consists of 588 pole miles of line and the distribution system of
7,333 pole miles of overhead lines and 881 trench miles of
underground lines.
Load and Capacity: Central Hudson's maximum one-hour demand
within its own territory, for the year ended December 31, 1999,
occurred on July 6, 1999, and amounted to 1,015 MW. Central
Hudson's maximum one-hour demand within its own territory, for
that part of the 1999-2000 winter capability period, through
February 18, 2000, occurred on January 17, 2000 and amounted to
860 MW.
Based on current projections of peak one-hour demands for
the 2000 summer capability period, it is estimated that Central
Hudson will have capacity available to satisfy its projected peak
demands plus the estimated installed reserve generating capacity
requirements Central Hudson is required to maintain as a member
of the New York State Independent System Operator ("ISO").
See Note 2 under the caption "Independent System Operator"
for information regarding the termination of the New York Power
Pool ("NYPP") and the formation of the ISO and the New York State
Reliability Council ("Reliability Council") to coordinate
reliability and operation of New York State's bulk power
transmission systems.
Central Hudson plans to sell by auction its interests in the
Roseton and Danskammer Plants under the terms of the Agreement.
This sale is expected to occur by early 2001. For further
information regarding the Agreement and such auction and sale,
see Note 2 - "Regulatory Matters" and the caption thereunder of
"Competitive Opportunities Proceeding Settlement Agreement."
Following such sale, Central Hudson will no longer own sufficient
capacity to serve the peak demands of its transmission and
distribution customers and will need to rely on purchased
capacity from third party providers to meet such demands.
17
The following table sets forth the amounts of any excess capacity of Central Hudson by
summer and winter capability periods for 2000 and 2001:
Forecasted Forecasted
Peak - Peak - Peak Plus Excess of Capacity
Total Full Installed over Peak Plus NYSISO
Delivery Service Reserve of Available Installed Reserve
Capability Rqts. (MW) Rqts. Only 18% (MW) Capacity Requirements
Period (1) (2) (3) (MW) (MW)(3) Percent(3)
---------- ---------- ---------- --------- --------- -------- ----------
2000 Summer 985 935 1,103 1,178 75 6.2
2000-2001 Winter 840 800 1,103 1,177 74 6.7
* Summer period peak plus reserve requirements carry over to the following winter
period.
(1) Total delivery requirements include requirements for both full service (delivery and
energy) and retail access (delivery only) customers
(2) Excludes retail access customer requirements
(3) Based on full service requirements
18
Roseton Plant: The Roseton Plant is located in Central
Hudson's franchise area at Roseton, New York, and is owned by
Central Hudson, Consolidated Edison Company of New York, Inc.
("Con Edison") and Niagara Mohawk Power Corporation ("Niagara
Mohawk") as tenants-in-common. The Roseton Plant, placed in
commercial operation in 1974, has a generating capacity of 1,200
MW consisting of two 600 MW generating units, both of which are
capable of being fired either by residual oil or natural gas (see
subcaption below entitled "Gas - Sufficiency of Supply and Future
Gas Supply"). Central Hudson is acting as agent for the owners
with respect to operation of the Roseton Plant. Generally, the
owners share the costs and expenses of the operation of such
Plant in accordance with their respective ownership interests.
Central Hudson, under a 1968 agreement, has the option to
purchase the interests of Niagara Mohawk (25%) and of Con Edison
(40%) in the Roseton Plant in December 2004. The exercise of
this option is subject to PSC approval. In December 1999,
Central Hudson, in conjunction with the proposed auction and sale
of Central Hudson's interest in the Roseton Plant, notified Con
Edison of its intention to exercise its option, as defined in the
May 14, 1969 Option Agreement among the Roseton Plant cotenants,
to purchase the interest of Con Edison in the Roseton Plant on
December 31, 2004.
For information with respect to Central Hudson's PSC
obligation to sell its interest in the Roseton and Danskammer
Plants, see Note 2 - "Regulatory Matters," under the caption
"Competitive Opportunities Proceeding Settlement Agreement."
The 345 kV transmission lines and related facilities to
connect the Roseton Plant with other points in the system of
Central Hudson and with the systems of Con Edison and Niagara
Mohawk to the north and west of such Plant are 100%-owned by
Central Hudson. The share of each of the parties in the output
of the Roseton Plant is transmitted over these lines pursuant to
a certain transmission agreement relating to such Plant, which
provides, among other things, for compensation to Central Hudson
for such use by the other parties. In addition, Central Hudson
has contract rights which entitle Central Hudson to the lesser of
300 MW, or one quarter of the capacity in a 345 kV transmission
line owned by PASNY, which connects the Roseton Plant with a Con
Edison substation to the east of such Plant in East Fishkill, New
York. In exchange for these rights, Central Hudson agreed to
provide PASNY capacity in the 345 kV transmission lines Central
Hudson owns from the Roseton Plant, to the extent it can do so
after satisfying its obligations to Con Edison and Niagara
Mohawk.
Nine Mile 2 Plant: For a discussion of Central Hudson's
ownership interest in, costs for, proposals of certain other
owners to sell their interests in and certain operating matters
19
relating to the Nine Mile 2 Plant, see Item 7 hereof under the
subcaption "Nuclear Operations," Note 3 - "Nine Mile 2 Plant,"
and Note 1 - "Summary of Significant Accounting Policies," under
the subcaption "Jointly-Owned Facilities."
Gas: Central Hudson's gas system consists of 161 miles of
transmission pipelines and 996 miles of distribution pipelines.
During 1999, natural gas was available to firm gas customers
at a price competitive with that of alternative fuels. As
compared to 1998, in 1999 firm retail gas sales, normalized for
weather, decreased by 2% and the average number of firm gas
customers increased by 1%. Sales to interruptible sales and
transportation customers increased 5% in 1999 as compared to
1998. As compared to 1998, in 1999 firm retail transportation
sales, normalized for weather, increased by 116% due to the
average number of customers using firm retail transportation
service increasing to 190 customers. In total, as compared with
1998 normalized, firm gas sales plus firm transportation
increased by 1% in 1999.
For further information regarding Central Hudson's incentive
arrangements for interruptible gas sales, see Item 7 hereof under
the subcaption "Sales - Interruptible Gas Sales."
For the year ended December 31, 1999, the total amount of
gas purchased by Central Hudson from all sources was 20,812,937
thousand cubic feet ("Mcf."), which includes 2,145,478 Mcf.
purchased directly for use as a boiler fuel at the Roseton Plant.
Central Hudson also owns two propane-air mixing facilities
for emergency and peak shaving purposes located in Poughkeepsie
and in Newburgh, New York. Each facility is capable of supplying
8,000 Mcf. per day with propane storage capability adequate to
provide maximum facility sendout for up to three consecutive
days.
Sufficiency of Supply and Future Gas Supply: The peak daily
demand for natural gas by Central Hudson's customers for the year
ended December 31, 1999, occurred on January 14, 1999, and
amounted to 109,676 Mcf. Central Hudson's firm peak-day gas
capability in 1999 was 116,918 Mcf. The peak daily demand for
natural gas by Central Hudson's customers for that part of the
1999-2000 heating season through February 18, 2000, occurred on
January 27, 2000, and amounted to 107,964 Mcf.
Other Gas Matters: FERC permits non-discriminatory access
to the pipeline facilities of interstate gas pipeline
transmission companies subject to the jurisdiction of FERC under
the Natural Gas Act. This rule allows access to such pipelines
by the pipeline transmission company's customers enabling them to
transport gas purchased directly from third parties and spot
20
sources through such pipelines. Such access also permits
industrial customers of gas distribution utilities to connect
directly with the pipeline transmission company and to contract
directly with the pipeline transmission companies to transport
gas, thereby bypassing the distribution utility. None of Central
Hudson's customers have elected this bypass option.
The PSC has authorized New York State distribution gas
utilities to transport customer-owned gas through their
facilities upon request of a customer. Currently, interstate
pipeline transmission companies are located in certain areas
where Central Hudson provides retail gas service (the Towns of
Carmel, Pleasant Valley, Coxsackie, and LaGrange in New York
State).
For a discussion of the PSC proceeding relating to issues
associated with the restructuring of the natural gas market, see
Item 7 hereof under the subcaption "Natural Gas - PSC
Restructuring Policy Statement."
Other Matters: The Danskammer Plant and the Roseton Plant
and all of the other principal generating plants and important
property units of Central Hudson are held by it in fee simple,
except (1) certain rights-of-way, and (2) a portion of the
property used in connection with the hydroelectric plants of
Central Hudson consisting of flowage or other riparian rights.
Central Hudson's present interests in the Roseton Plant and the
Nine Mile 2 Plant are owned as undivided interests as a tenant-
in-common with the other utility owners thereof. Certain of the
properties of Central Hudson are subject to rights-of-way and
easements which do not interfere with Central Hudson's
operations. In the case of certain distribution lines, Central
Hudson owns only a part interest in the poles upon which its
wires are installed, the remaining interest being owned by
telephone companies. Certain electric transmission facilities
owned by others are used by Central Hudson pursuant to long-term
contractual arrangements.
All of the physical properties of Central Hudson, other than
property such as material and supplies excluded in Central
Hudson's First Mortgage Bond Indenture ("Mortgage") and its
franchises, are subject to the lien of the Mortgage under which
all of its Mortgage Bonds are outstanding. Such properties are
from time to time subject to liens for current taxes and
assessments which Central Hudson pays regularly as and when due.
During the three-year period ended December 31, 1999,
Central Hudson made gross property additions of $136.0 million
and property retirements and adjustments of $27.7 million,
resulting in a net increase (including Construction Work in
Progress) in utility plant of $108.3 million, or 7.3%.
21
ITEM 3 - LEGAL PROCEEDINGS
Asbestos Litigation
For a discussion of litigation against Central Hudson
involving asbestos, see Note 9 - "Commitments and Contingencies,"
hereof under the caption "Asbestos Litigation."
Environmental Litigation
Roseton Plant: On March 23, 1992, a Consent Order was
approved by the Supreme Court of the State of New York, Albany
County, in an action against the NYSDEC and Central Hudson
brought in 1991 by the Natural Resources Defense Council, Inc.,
the Hudson River Fisherman's Association and Scenic Hudson, Inc.
Such Consent Order provides for certain operating
restrictions at the Roseton Plant relating to the use of river
water for plant cooling purposes, which restrictions have not,
and are not expected to impose material additional costs on
Central Hudson. The Consent Order has since lapsed; however, both
the NYSDEC and Central Hudson continue to consider themselves
bound by its terms. For a description of the pending NYSDEC
proceeding involving the renewal of the SPDES permit for the
Roseton Plant, see Item 1 hereof under the subcaption
"Environmental Quality Regulation - Water," and Note 9 -
"Commitments and Contingencies," under the caption "Environmental
Matters - Water." For a description of Central Hudson's
negotiations with the NYSDEC on a consent order for alleged
opacity violations, see Item 1 hereof under the subcaption
"Environmental Quality Regulation - Air."
Roseton and Danskammer Plants: In 1999, Riverkeeper, Inc.,
commenced a citizen suit, in the United States District Court for
the Southern District of New York, against Central Hudson under
Section 11 of the Endangered Species Act, 16 U.S.C. Section 1540,
seeking injunctive relief from Central Hudson's alleged unpermitted
takings of the endangered shortnose sturgeon through the Roseton
and Danskammer Plants on the Hudson River.
Although Central Hudson believes it has not violated such
Act, if the court were to grant the relief requested by
plaintiffs, Central Hudson could be required temporarily to cease
operations of the Roseton and Danskammer Plants. If Central
Hudson were required to cease such operations for a substantial
period of time, it could have a material adverse effect on
Central Hudson's financial position and results of operations.
Newburgh Manufactured Gas Site: For a discussion of
litigation filed against Central Hudson by the City of Newburgh,
New York, on May 26, 1995, in the United States District Court,
22
Southern District of New York, and Central Hudson's response
thereto, see Note 9 - "Commitments and Contingencies," under the
subcaption "Environmental Matters - Former Manufactured Gas Plant
Facilities."
Catskill Incident
An explosion occurred in a dwelling in Central Hudson's gas
service territory in Catskill, New York in November, 1992 which
resulted in personal injuries, the death of an occupant and
property damage. Lawsuits were commenced against Central Hudson
arising out of such incident. All but one of these suits were
settled during 1999 on terms which will not have a material
effect on Central Hudson.
The remaining lawsuit was commenced by complaint, dated
October 18, 1993, and filed in the Supreme Court of the State of
New York, Greene County, by Frank Reyes for unspecified personal
injuries and property damage alleged to have been caused by the
Catskill explosion described above. The complaint seeks $2
million in compensatory damages and $2 million in punitive
damages from Central Hudson, based on theories of negligence and
gross negligence. In January 2000, the Court dismissed this suit
on the merits because of the plaintiff's failure to prosecute the
case.
Wappingers Falls Incident
Two consecutive fires and explosions occurred on
February 12, 1994, destroying a residence and commercial
establishment in the Village of Wappingers Falls, New York, in
Central Hudson's service territory. Lawsuits have been commenced
against Central Hudson arising out of such incident, including
the following:
On August 31, 1994, Central Hudson was served with a summons
and complaint in an action brought by John DeLorenzo against
Central Hudson and the Village of Wappingers Falls in the Supreme
Court of the State of New York, County of Dutchess. The
complaint seeks unspecified amounts of damages, based on a theory
of negligence, for personal injuries and property damage alleged
to have been caused by the incident.
On March 9, 1995, Central Hudson was served with a summons
and complaint in an action brought in the Supreme Court of the
State of New York, County of Dutchess, by Cengiz Ceng, indivi-
dually and as executor under the last will and testament of
Nizamettin Ceng, and Tarkan Thomas Ceng against Central Hudson
and the Village of Wappingers Falls. The complaint seeks
recovery of $250,000 from Central Hudson, based on the theory of
23
negligence, for property damages alleged to have been caused by
the incident.
The above lawsuits have been consolidated into one action
against Central Hudson; however, no trial date has been set.
Central Hudson continues to investigate the Wappingers Falls
claims and presently has insufficient information on which to
predict their outcome. Central Hudson believes that it has
adequate insurance with regard to the claims for compensatory
damages.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
By unanimous written consent, dated December 15, 1999, of
Energy Group as sole shareholder of Central Hudson, effective on
such date, Paul J. Ganci, Carl E. Meyer, Arthur R. Upright and
Steven V. Lant were appointed as directors of Central Hudson
until the first annual meeting of shareholders of the Corporation
or until his successor is elected and qualified.
PART II
ITEM 5 - MARKET FOR CENTRAL HUDSON'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Energy Group owns all of Central Hudson's Common Stock.
For information regarding dividends declared on Central
Hudson's Common Stock and related stockholder matters, see Item 7
hereof under the "Common Stock Dividends and Price Ranges" and
Note 6 - "Capitalization - Capital Stock."
Pursuant to applicable statutes and its Certificate of
Incorporation, Central Hudson may pay dividends on shares of its
Preferred Stock only out of surplus.
24
ITEM 6 - SELECTED FINANCIAL DATA OF CENTRAL HUDSON
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA
(In Thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Operating Revenues
Electric........................................ $ 427,809 $ 418,507 $ 416,429 $ 418,761 $ 409,445
Gas............................................. 94,131 84,962 103,848 95,210 102,770
------ ------ ------- ------ -------
Total......................................... 521,940 503,469 520,277 513,971 512,215
Operating Expenses
Operations...................................... 284,064 266,472 284,714 267,779 274,665
Maintenance..................................... 28,213 26,904 27,574 28,938 29,440
Depreciation and amortization................... 46,913 45,560 43,864 42,580 41,467
Taxes, other than income tax.................... 63,986 63,458 64,879 66,145 66,709
Federal income tax.............................. 27,852 29,775 29,190 32,700 29,040
------ ------ ------ ------ ------
Total......................................... 451,028 432,169 450,221 438,142 441,321
------- ------- ------- ------- -------
Operating Income.................................. 70,912 71,300 70,056 75,829 70,894
------ ------ ------ ------ ------
Other Income
Allowance for equity funds
used during construction....................... - 585 387 466 986
Federal income tax.............................. (292) 1,148 2,953 1,632 353
Other - net..................................... 10,875 6,865 8,079 4,815 8,886
------ ----- ----- ----- -----
Total......................................... 10,583 8,598 11,419 6,913 10,225
------ ----- ------ ----- ------
Income before Interest Charges.................... 81,495 79,898 81,475 82,742 81,119
Interest Charges.................................. 29,614 27,354 26,389 26,660 28,397
------ ------ ------ ------ ------
25
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA, (CONT'D)
(In Thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net Income........................................ $ 51,881 52,544 55,086 56,082 52,722
Premium on Preferred Stock Redemption - Net....... - - - 378 169
Dividends Declared on Cumulative Preferred Stock.. 3,230 3,230 3,230 3,230 4,903
----- ----- ----- ----- -----
Income Available for Common Stock................. 48,651 49,314 51,856 52,474 47,650
Dividends Declared on Common Stock................ 27,317 36,567 37,137 37,128 36,459
Dividends Declared to Parent-Energy Group......... 7,000 - - - -
------ ------ ------ ------ ------
Amount Retained in the Business................... 14,334 12,747 14,719 15,346 11,191
Common Stock Retirement........................... (12,642) - - - -
Transfer of Business Affiliates to Energy Group... (65,698) - - - -
Retained Earnings - beginning of year............. 133,287 120,540 105,821 90,475 79,284
------- ------- ------- ------ ------
Retained Earnings - end of year................... $ 69,281 $ 133,287 $ 120,540 $ 105,821 $ 90,475
========== ========== ========== ========== ==========
Total Assets...................................... $1,259,390 $1,316,038 $1,252,090 $1,249,106 $1,250,092
Long-term Debt.................................... 335,451 356,918 361,829 362,040 389,245
Cumulative Preferred Stock........................ 56,030 56,030 56,030 56,030 69,030
Common Equity..................................... 420,891 472,180 477,104 471,709 454,239
* This summary should be read in conjunction with the Consolidated Financial Statements and Notes
thereto included in Item 8 of this Form 10-K Annual Report.
26
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPETITION/DEREGULATION
Energy Group
As part of the Holding Company Restructuring, all of the
outstanding shares of Central Hudson common stock were exchanged
on a share-for-share basis for shares of Energy Group and Central
Hudson became a wholly-owned subsidiary of Energy Group.
The holding company structure was formed to permit quick
response to changes in the evolving competitive energy industry.
The new structure permits the use of financing techniques that
are better suited to the particular requirements, characteristics
and risks of competitive operations without affecting the capital
structure or creditworthiness of Central Hudson. This increases
Energy Group's financial flexibility by allowing it to establish
different capital structures for each of its individual lines of
business.
Energy Group is not an operating entity. Energy Group's
operations are being conducted through its principal affiliates,
Central Hudson and Services, as described under the captions
"Central Hudson" and "Other Affiliates of Energy Group" in Item 1
hereof.
Central Hudson remains subject to regulation of retail rates
by the PSC and wholesale rates by the FERC. However, as a result
of competition/deregulation initiatives and policy changes
instituted by these agencies, Central Hudson is experiencing
increased electric and gas competition.
Competitive Opportunities Proceeding Settlement Agreement
For a discussion of the Agreement approved by the PSC in its
Competitive Opportunities Proceeding and a discussion of the
impact of the Agreement on Central Hudson's Accounting Policies,
see the caption "Competitive Opportunities Proceeding Settlement
Agreement" in Note 2 - "Regulatory Matters" hereof.
27
FERC - Electric
For information with respect to the establishment of the ISO
and Reliability Council and termination of the NYPP, the caption
"Independent System Operator" of Note 2 herein.
Natural Gas-PSC Restructuring Policy Statement
In November 1998, the PSC, by Order, issued its "Policy
Statement Concerning the Future of the Natural Gas Industry in
New York State and Order Terminating Capacity Assignment" which
sets forth the PSC's view of how best to ensure a competitive
market for natural gas in New York State. That Order required
local distribution companies ("LDCs") to cease assigning capacity
to migrating customers no later than April 1, 1999, and indicated
LDCs will also be provided a reasonable opportunity to recover
strandable capacity costs. LDCs are also required to develop
individual plans to effectuate the changes required by the PSC
and each LDC must address gas supply and stranded cost
strategies, rates, and customer education. In such Order, the
PSC also identified several generic issues related to the gas
industry which must be addressed. The PSC has indicated a desire
to address these issues through collaborative sessions on a
state-wide basis.
The Year 2000 Issue
Certain computer systems and programs were designed to
identify the year with two digits. Concern existed prior to 2000
that such systems might read dates in the year 2000 and
thereafter as if those dates represent the year 1900 or
thereafter. As a result, errors would occur because computers
would not distinguish between 1900 and 2000. All mainframe and
personal computers, and related system, application code and
process control systems using embedded chip technology could have
been adversely affected by the use of two digit definitions for
the identification of the year component of date information. If
such adverse effects were not successfully remediated before
December 31, 1999, interruption to Central Hudson's electric
and/or natural gas service could have occurred, with attendant
lost revenues and adverse customer relations impacts.
Central Hudson, in 1998, began a project ("Project") to
remediate the year 2000 computer problems affecting all aspects
of its operations. As a result of the Project, Central Hudson
did not experience any interruptions to its critical operational
or customer systems on January 1, 2000 or thereafter as a result
of this year 2000 computer problem.
The total cost of the Project was estimated not to exceed
$3.0 million. The actual cost of the Project was approximately
28
$2.8 million, of which $1.3 million was expended in 1999 and $1.5
million was expended in 1998.
Rate Proceedings
Electric
See the caption "Competitive Opportunities Proceeding
Settlement Agreement" in Note 2 hereof.
Gas
Central Hudson currently does not have a gas rate case on
file with the PSC. Central Hudson will continue to monitor the
financial position of its gas business to determine the necessity
of filing a gas rate case in the future.
CAPITAL RESOURCES AND LIQUIDITY
Construction Program
As shown in the Consolidated Statement of Cash Flows, the
cash expenditures related to Central Hudson's construction
program amounted to $46.5 million in 1999, a $1.4 million
increase from the $45.1 million expended in 1998. As shown in
the table below, cash construction expenditures for 2000 are
estimated to be $59.1 million, an increase of $12.6 million
compared to 1999 expenditures.
In 2000, Central Hudson expects to satisfy its external
funding requirements, either through short-term borrowings or
issuances of Medium Term Notes.
29
Central Hudson's estimates of construction expenditures,
internal funds available, mandatory and optional redemption or
repurchase of long-term securities, and working capital
requirements for 2000 are set forth in the following table:
2000
(In Thousands)
Construction Expenditures*
Cash Construction Expenditures.................. $ 59,100
Internal Funds Available.......................... 55,200
------
Balance of Construction Requirements to be
Financed......................................... 3,900
-----
Mandatory Refunding of Long-Term Securities
Long-Term debt.................................. 35,100
Other Cash Requirements........................... 3,000
Equity Transfers to Energy Group for Competitive
Business Affiliates.............................. 38,000
------
Total Cash Requirements....................... $80,000
=======
* Excluding the equity portion of Allowance for Funds Used During
Construction ("AFDC"), a noncash item.
Estimates of construction expenditures are subject to
continuous review and adjustment, and actual expenditures may
vary from estimates. These construction expenditures include
capitalized overheads, nuclear fuel and the debt portion of AFDC
and assume that the planned divestiture of the Roseton and
Danskammer Plants occurs on or about January 1, 2001. The actual
date of divestiture is likely to occur in the first quarter of
2001 at the earliest.
As shown in the table above, it is presently estimated that
funds available from internal sources will finance 93% of Central
Hudson's cash construction expenditures in 2000. During this
same period, total external financing requirements of Central
Hudson are projected to amount to $80 million, of which $35.1
million is related to mandatory redemption of long-term
securities and $38.0 million is related to the equity transfers
to Energy Group for allocation to Energy Group's affiliates.
30
Capital Structure
Since 1996 Central Hudson maintained its common equity ratio
between 50-53%, which range was targeted in order to maintain a
solid A senior debt rating. Central Hudson's senior debt
ratings, all reaffirmed during 1999, are A2 by Moody's Investors
Service and A by Standard and Poor's Corporation, Duff & Phelps
Credit Rating Company and Fitch/IBCA.
Central Hudson, under the terms of the Agreement, will
divest its fossil generation assets no later than June 30, 2001.
A portion of the proceeds of such divestiture is planned to be
used to redeem a portion of the existing debt of Central Hudson.
While the total proceeds to be realized and portion of such
proceeds to be used for debt reduction cannot be accurately
predicted, Central Hudson intends to redeem sufficient debt to
maintain a strong investment grade rating post-divestiture. The
capital structure required to realize this goal will depend on
the still evolving policies of the credit rating agencies, the
perceived risk profile of Central Hudson post-divestiture, and
its prospective financial ratios.
Central Hudson's capital structure is set forth below at the
end of 1999, 1998 and 1997:
Year-end Capital Structure
1999 1998 1997
---- ---- ----
Long-term debt ................. 41.3% 41.0%(a) 40.5%
Short-term debt ................ 5.6 1.9 -
Preferred stock ................ 6.2 6.1 6.3
Common equity .................. 46.9 51.0 53.2
---- ---- ----
100.0% 100.0% 100.0%
===== ===== =====
(a) Excludes $16.7 million of bonds issued through the New York
Energy Research and Development Authority ("NYSERDA") on
December 2, 1998, see Note 7 - "Capitalization - Long-Term
Debt."
Financing Program
Central Hudson's Stock Purchase Plan, which can be either an
original issue plan or an open market purchase plan and is
currently an open-market purchase plan, was assumed by Energy
Group upon the Holding Company Restructuring.
The Agreement permits Central Hudson to transfer up to $100
million to its competitive business affiliates until the earlier
of (i) the receipt of proceeds from the auction of Central
Hudson's fossil generation assets or (ii) June 30, 2001.
Approximately $51.5 million has been transferred to such
affiliates as of December 31, 1999. Central Hudson may, pursuant
31
to this authorization, issue, not later than June 30, 2001, up to
$100 million of new securities, including up to one million
shares of common stock in furtherance of its business plan.
For a discussion of Central Hudson's refinancings on
August 3, 1999 of its 1984 7 3/8% Series and 1985 and 1987 Series
A and B Pollution Control Revenue Bonds, and the issuance and
sale of unsecured Medium Term Notes, Series C, on January 15,
1999 and January 31, 2000, see Note 7 hereof.
During 2000, two Central Hudson debt series totaling $35
million will mature. Additionally, Central Hudson will be
required to finance a portion of its planned construction
expenditures externally, as discussed above, along with potential
transfers of up to $50 million of additional equity to the
competitive business affiliates. These cash requirements will be
financed by a combination of temporary cash reserves, short-term
borrowing and the issuance of Medium Term Notes.
For more information with respect to Central Hudson's
financing program in general, see Note 6 - "Capitalization -
Capital Stock" and Note 7 - "Capitalization - Long-Term Debt."
Short-Term Debt
As more fully discussed in Note 5 - "Short-Term Borrowing
Arrangements" hereof, Central Hudson has a revolving credit
agreement with four commercial banks for borrowing up to $50
million through October 23, 2001. In addition, Central Hudson
has several committed and uncommitted bank facilities ranging
from $.5 million to $50 million from which it may obtain short-
term financing. Such agreements give Central Hudson competitive
options to minimize its cost of short-term borrowing.
Authorization from the PSC limits the amount Central Hudson may
have outstanding at any time under all of its short-term
borrowing arrangements to $52 million in the aggregate.
RESULTS OF OPERATIONS
The following discussion and analysis includes an
explanation of the significant changes in revenues and expenses
when comparing 1999 to 1998 and 1998 to 1997. Additional
information relating to changes between these years is provided
in the Notes.
Earnings in 1999, when compared to 1998, decreased primarily
from increased employee welfare costs due to a favorable premium
adjustment recorded in 1998 plus an increase in 1999 in labor
costs charged to operations expense instead of capital
32
construction costs. In addition, the decrease was due to
increased depreciation on Central Hudson's plant and equipment
and an increase in maintenance costs due largely to scheduled
maintenance performed on one of the electric generating plants.
The decreased earnings in 1999 were partially offset by the
net effect of various non-recurring items in 1998 and the write-
off of non-recoverable purchased power expenses. Additional
offsets include increases in electric net operating revenues from
an increase in own-territory sales due largely to warmer summer
weather (cooling degree days were 32% higher than last year) and
from sales of electricity for resale. These increases were
reduced, in accordance with the Agreement's return on equity cap
provision, by the deferral of revenues in excess of the cap. Gas
net operating revenues remained flat compared to last year. Firm
gas sales increased by 8%; however, the resulting increase in net
operating revenues in 1999 was offset by the effect of a
favorable reconciling gas cost adjustment recorded in 1998. A
further offsetting item is the favorable impact of Central
Hudson's common stock repurchase program of $.03.
Earnings 1998 when compared to 1997 decreased primarily
from the net effect of non-recurring items recorded in 1998 and
1997. The 1998 non-recurring items are the final provision for
the non-recoverable portion of a purchased power contract and the
gain on the sale of an investment. Non-recurring items in 1997
included the recording of tax adjustments from the favorable
settlement of various Internal Revenue Service ("IRS") audits and
the initial provision for the non-recoverable portion of a
purchased power contract. Also contributing to the decrease was
increased depreciation on Central Hudson's plant and equipment
and decreased net operating revenues. The reduction in net
operating revenues was primarily from a decrease in gas usage by
residential, commercial and industrial customers due to milder
weather. Heating billing degree days, as compared to 1997, were
11% lower in 1998.
These decreased earnings in 1998 were partially offset by
the favorable earnings impact of decreased operation and
maintenance expenses, including a reduction in employee
compensation due to fewer employees and associated employee
welfare costs.
33
Operating Revenues
Total operating revenues increased $18.5 million (4%) in 1999 as compared to 1998 and
decreased $16.8 million (3%) in 1998, as compared to 1997.
See the table below for details of the variations:
Increase or (Decrease) from Prior Year
1999 1998
Electric Gas Total Electric Gas Total
-------- --- ----- -------- --- -----
(In Thousands)
Customer sales............. $ 7,527 $ 8,432 $ 15,959 $ 770 $(12,797) $(12,027)
Sales to other utilities... 2,254 (436) 1,818 6,991 561 7,552
Fuel cost adjustment....... 8,473 2,727 11,200 1,743 8,172) (6,429)
Deferred revenues.......... (10,195) (1,844) (12,039) (7,013) 1,563 (5,450)
Miscellaneous.............. 1,243 290 1,533 (412) (42) (454)
----- --- ----- ---- --- ----
Total................ $ 9,302 $ 9,169 $ 18,471 $ 2,079 $(18,887) $ (16,808)
======== ======== ======== ======= ======== =========
34
Sales
Central Hudson's sales vary seasonally in response to
weather. Generally, electric revenues peak in the summer and gas
revenues peak in the winter.
Sales of electricity within Central Hudson's service
territory, including electricity supplied by others, increased 4%
in 1999 compared to 1998 primarily due to the hotter weather in
1999. Cooling degree days in 1999 were 32% higher than in 1998.
In 1998, electric sales to residential, commercial and industrial
customers increased 1%, 3% and 2%, respectively.
Sales of firm natural gas within Central Hudson's service
territory, including gas supplied by others, increased by 8% from
1998 to 1999 resulting, in part, from a 3% increase in heating
degree days due to colder weather experienced in 1999.
Firm sales of natural gas (which excludes interruptible and
transportation sales) decreased 10% in 1998 due primarily to a
decrease in usage by residential and commercial customers largely
due to the unseasonable weather conditions experienced in 1998.
Changes in sales from prior years by major customer
classification, including interruptible gas sales are set forth
below. Also included are the changes related to energy delivery
service.
% Increase (Decrease) from Prior Year
-------------------------------------
Electric (MWh) Gas (Mcf)
-------------- ---------
1999 1998 1999 1998
---- ---- ---- ----
Residential........... 6 1 6 (11)
Commercial............ 5 3 7 (7)
Industrial............ 1 2 11 (15)
Interruptible......... N/A N/A 14 (15)
Residential and Commercial Sales: Residential electric and
gas sales are primarily affected by the growth in the number of
customers and the change in customer usage. In 1999, sales of
electricity to residential customers increased 6% due to an
increase in usage per customer. Commercial sales increased 5%
resulting primarily from a 3% increase in usage per customer.
Hotter weather conditions (cooling degree days were 32% higher)
contributed to the increase in residential and commercial sales
of electricity. Sales of gas to residential customers increased
6% due primarily to a 5% increase in usage per customer.
Commercial sales increased 7% due to a 5% increase in usage per
customer and a 2% increase in the number of customers.
In 1998, sales of electricity to residential customers
increased 1% due primarily to an increase in usage per customer.
Commercial electric sales increased 3% which was largely the
35
result of an increase in the number of customers. Unseasonable
weather conditions (billing degree days were 11% lower) was a
significant factor in the decrease in residential and commercial
sales of gas. Sales of gas to residential customers decreased
11% due to the net effect of a 12% decrease in usage per customer
and a 1% increase in the number of customers. Commercial sales
decreased 7% due to the net effect of a 10% decrease in usage per
customer and a 3% increase in the number of customers.
Industrial Electric Sales: In 1999, as compared to 1998,
industrial electric sales increased 1%. In 1998, as compared to
1997, industrial electric sales increased 2% primarily due to
increases in usage by several large industrial customers.
Industrial Gas Sales: In 1999, firm gas sales to industrial
customers increased 11% primarily because of an increase in usage
by a large industrial customer. Firm gas sales to industrial
customers for 1998 decreased 15% primarily because of decreased
usage by a large industrial customer and conversion of several
customers to firm transportation service.
Interruptible Gas Sales: In 1999, interruptible gas sales,
including transportation and boiler fuel, increased 14% largely
due to an increase in boiler gas usage for electric generation.
Interruptible gas sales decreased 15% in 1998, due largely to a
decrease in natural gas sold for use as a boiler fuel for
electric generation. The use of gas as a boiler fuel at the
Roseton Plant is dependent upon its economic benefit as compared
to the use of oil for generation or the purchase of electricity
to meet Central Hudson's load requirements. Due to sharing
arrangements, as described in the caption "Incentive
Arrangements" of Item 7 hereof that are in place for
interruptible gas sales and interruptible transportation of
customer-owned gas, variations from year to year typically have a
minimal impact on earnings.
Incentive Arrangements
Pursuant to certain incentive formulas approved by the PSC,
Central Hudson either shares with its customers, certain revenues
and/or cost savings exceeding defined predetermined levels, or is
penalized in some cases for shortfalls from the targeted levels
or defined performance standards.
Incentive formulas are in place for fuel cost variations,
sales of electricity to other utilities, interruptible gas sales,
gas capacity release transactions and customer satisfaction,
electric reliability and keeping customer appointments.
36
The net results of these incentive formulas were to increase
pretax earnings by $2.3 million, $1.0 million and $700,000 during
1999, 1998, and 1997, respectively.
Operating Expenses
Changes from the prior year in the components of Central
Hudson's operating expenses are listed below:
Increase or (Decrease)
from Prior Year
---------------
1999 1998
------------ ------------
Amount % Amount %
------ - ------ -
(In Thousands)
Operating Expenses:
Fuel and purchased
electricity............... $ 6,318 5 $ 380 3
Purchased natural gas...... 8,993 20 (16,550) (27)
Other expenses of
operation................. 2,281 2 (4,972) (5)
Maintenance................ 1,309 5 (670) (2)
Depreciation and
amortization.............. 1,353 3 1,696 4
Taxes, other than
income tax................ 528 1 (1,421) (2)
Federal income tax......... (1,923) (6) 585 2
------ --- --- -
Total.............. $18,859 4% $(18,052) (4)%
======= = ======== ==
The most significant elements of operating expenses are fuel
and purchased electricity in Central Hudson's electric department
and purchased natural gas in Central Hudson's gas department.
Approximately 31% in 1999, and 30% in 1998 of every revenue
dollar billed by Central Hudson's electric department was
expended for the combined cost of fuel used in electric
generation and purchased electricity. The corresponding figures
in Central Hudson's gas department for the cost of purchased gas
were 57% and 53%, respectively.
In an effort to keep the cost of electricity at the lowest
reasonable level, Central Hudson purchases energy from sources
such as the ISO, Canadian hydro sources and energy marketers
whenever energy can be purchased at a unit cost lower than the
incremental cost of generating the energy in Central Hudson's
plants.
Fuel and purchased electricity increased $6.3 million (5%)
in 1999 due to the increase in electric sales as well as sales of
electricity for resale.
Purchased natural gas costs increased $9.0 million (20%) in
1999 largely due to higher firm and interruptible gas sales,
including gas used as a boiler fuel. Purchased natural gas
37
decreased $16.6 million (27%) in 1998 primarily due to lower firm
and interruptible gas sales, including gas used as a boiler fuel.
Other expenses of operation increased by $2.3 million (2%) in
1999 largely due to an increase in employee welfare costs and an
increase in the amount of labor costs charged to operations
instead of capital construction activities. The increase in
employee welfare costs is primarily due to the effect of a
favorable premium adjustment recorded in 1998. In 1998 other
expenses of operations decreased $5.0 million (5%) resulting from
decreased employee compensation due to fewer employees and
associated fringe benefits. See Note 4 - "Federal Income Tax,"
hereof for an analysis and reconciliation of the federal income
tax.
Other Income and Interest Charges
Other income and deductions increased $2.0 million in 1999
as compared to 1998. The net increase results primarily from
interest earned on proceeds held in escrow from debt issued for
the scheduled refinancing of existing debt and an increase in
carrying charges due Central Hudson on accumulated pension
expense credits (noncash) used to reduce customer rates. The net
increase in other income was also offset by increases in federal
income tax, a reduction in allowance for funds used during
construction and a reduction in equity earnings from competitive
business affiliates prior to the Holding Company Restructuring.
The reduction in competitive business affiliates' earnings is due
to start-up costs of the generating plants acquired by Resources
and a non-recurring item recorded in 1998 for the gain on the
sale of an investment. In 1998, other income and deductions
decreased $3 million (27%), primarily due to interest refunded in
1997 from the settlement of various IRS audits.
Total interest charges (excluding AFDC) increased $2.3
million (8%) in 1999 and increased $1.0 million (4%) in 1998
because of an increase in financing activity. Interest earned on
the escrow funds discussed above largely offset the increase in
interest on debt in 1999.
38
The following table sets forth some of the pertinent data on
Central Hudson's outstanding debt:
1999 1998 1997
---- ---- ----
(In Thousands)
Long-term debt:
Debt retired................ $ 25,818 $ 90 $ 85
Outstanding at year-end:*
Amount (including current
portion).................. 371,180 396,998 363,744
Effective rate............. 6.43% 6.56% 6.78%
Short-term debt:
Average daily amount
outstanding ............... $ 10,274 $ 1,171 $ 1,692
Weighted average
interest rate ............. 6.22% 5.51% 5.54%
*Including debt of subsidiaries of $9.0 million 1998 and $7.4
million in 1997.
See Note 5 - "Short-Term Borrowing Arrangements" and Note 7 -
"Capitalization - Long-Term Debt" hereof for additional
information on short-term and long-term debt of Central Hudson.
Nuclear Operations
Nine Mile 2 Plant: The Nine Mile 2 Plant is owned, as
tenants-in-common, by Central Hudson, Niagara Mohawk, New York
State Electric & Gas Company ("NYSEG"), Long Island Lighting
Company ("LILCO"), a subsidiary of the Long Island Power
Authority ("LIPA"), and Rochester Gas and Electric Corporation
("Rochester"). Niagara Mohawk operates the Nine Mile 2 Plant.
Central Hudson owns a 9% interest of the Nine Mile 2 Plant,
which is discussed in Note 3 - "Nine Mile 2 Plant."
Central Hudson's share of operating expenses, taxes and
depreciation pertaining to the operation of the Nine Mile 2 Plant
are included in the financial results. In both 1999 and 1998,
underruns in costs of operations and maintenance expenses were
entirely deferred for the future benefit of customers (see Note 2
- - "Regulatory Matters").
For a discussion of the agreements among and proposals of
Niagara Mohawk, NYSEG and Rochester regarding disposition of
their interests in the Nine Mile 2 Plant, see Note 3 hereof.
In August 1997, the PSC Staff issued a "Notice Soliciting
Comments on Nuclear Generation" requesting comments and
alternative approaches by interested parties on a "Staff Report
on Nuclear Generation" ("Nuclear Report"). The Nuclear Report
concludes that nuclear generation along with non-nuclear
39
generation facilities, should be subject to the discipline of
market-based pricing.
In March 1998, the PSC initiated a proceeding to examine a
number of issues raised by the Nuclear Report and the comments
received in response to it. In reviewing the Nuclear Report and
parties' comments, the PSC, among others: (a) adopted as a
rebuttable presumption the premise that nuclear power should be
priced on a market basis to the same degree as power from other
sources, with parties challenging that premise having to bear a
substantial burden of persuasion, (b) characterized the proposals
in the Staff paper as by and large consistent in concept with the
PSC's goal of a competitive, market-based electricity industry,
and (c) questioned PSC Staff's position that would leave funding
and other decommissioning responsibilities with the sellers of
nuclear power interests. The parties in this proceeding
developed a consensus report that discusses ownership and rate-
making alternatives for future consideration, which report was
submitted to the PSC in June 1999.
For information on the NRC Plant Performance Review on the
Nine Mile 1 and the Nine Mile 2 Plants, see Note 3 hereof.
Nuclear Decommissioning: A decommissioning study for the
Nine Mile 2 Plant was completed in 1995. The study's estimate of
the cost to decommission that Plant is significantly higher than
previous estimates. Central Hudson believes that decommissioning
costs, if higher than currently estimated, will ultimately be
recovered in rates by Central Hudson, although no such assurance
can be given. However, future developments in the utility
industry, including the effects of deregulation and increasing
competition could change this conclusion. Central Hudson cannot
predict the outcome of these developments. For further
information on decommissioning, see Note 3 - "Nine Mile 2 Plant."
In February 1996, the Financial Accounting Standards Board
("FASB") issued an exposure draft entitled "Accounting for
Certain Liabilities Related to Closure and Removal of Long-Lived
Assets," which includes nuclear plant decommissioning. Over the
past four years, this exposure draft has been the source of
continual debate. The FASB has committed to completing this
project and is proceeding toward issuance of another exposure
draft expected in the first quarter of 2000 with an effective
date for financial statements for fiscal years beginning after
June 15, 2001. If the accounting standard proposed in such
exposure draft is adopted, it could result in higher annual
provisions for removal or decommissioning to be recognized
earlier in the operating life of nuclear and other generating
units and an accelerated recognition of the decommissioning
obligation. The FASB is continuing to explore various issues
associated with this project including liability measurement and
recognition issues. The FASB is deliberating this issue and the
40
resulting final pronouncement could be different from that
proposed in the exposure draft. Central Hudson can make no
prediction at this time as to the ultimate form of such proposed
accounting standard, assuming it is adopted, nor can it make any
prediction as to its ultimate effect(s) on the financial
condition of Energy Group.
The NRC issued a policy statement on the Restructuring and
Economic Deregulation of the Electric Utility Industry ("Policy
Statement") in 1997. The Policy Statement addresses NR0's
concerns about the adequacy of decommissioning funds and about
the potential impact on operational safety and reserves. The
Policy Statement gives the NRC the right, in highly unusual
situations where adequate protection of public health and safety
would be compromised, to consider imposing joint and several
liability on minority co-owners when one or more co-owners have
defaulted on their contractual obligations. On January 5, 1999,
the NRC commenced a rulemaking proceeding initiated by a group of
utilities which are non-operating joint owners of nuclear plants.
These utilities request that the enforcement provisions of the
NRC regulations be amended to clarify NRC policy regarding the
potential liability of joint owners if other joint owners become
financially incapable of bearing their share of the burden for
safe operation or decommissioning of a nuclear power plant.
Current NRC regulations allow a utility to set aside
decommissioning funds annually over the estimated life of a
plant. In addition to the above Policy Statement, the NRC is
proposing to amend its regulations on decommissioning funding to
reflect conditions expected from deregulation of the electric
power industry. Central Hudson is unable to predict how such
increased stringency may affect the results of operations or
financial condition of the Nine Mile 2 Plant.
Refueling Outage: The Nine Mile 2 Plant commenced its
seventh refueling outage on or about March 3, 2000.
Other Matters
New Accounting Standards: In June 1998, the FASB issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133").
This Statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at
fair value. Any gain or loss resulting from changes in such fair
value is required to be recognized in earnings to the extent the
derivatives are not effective as hedges. Until the December 15,
1999 Holding Company Restructuring, Central Hudson owned
derivative instruments under an energy trading risk management
program implemented in 1999 to manage the price risks associated
41
with fuel purchases for generation, natural gas purchases for
native load customers, and wholesale power transactions. Central
Hudson used various financial instruments, such as futures,
options, swaps, caps, floors and collars to stabilize the price
volatility of these commodities. The hedging program was assumed
by Energy Group, effective December 15, 1999. Central Hudson
believes that the hedging program will not have a material impact
on its financial position or results of operations.
The FASB issued Statement No. 137 "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133" in June 1999 amending SFAS 133 to
defer the effective date by one year to all fiscal quarters of
all fiscal years beginning after June 15, 2000. This proposed
change is made in response to requests to consider delaying the
effective date to provide more time to study, understand and
implement the provisions of the SFAS 133.
For information about market risk and activities relating to
derivative financial instruments and other financial instruments,
see Item 7A - "Quantitative and Qualitative Disclosure about
Market Risk."
Other Issues: On an ongoing basis, Central Hudson assesses
environmental issues which could impact Central Hudson and its
customers. Note 3 - "Nine Mile 2 Plant" and Note 9 -
"Commitments and Contingencies" discuss current environmental
issues affecting Central Hudson, including (i) the 1995
decommissioning cost study of the Nine Mile 2 Plant, (ii) the
Clean Water Act and the CAA Amendments, which Amendments require
control of emissions from fossil-fueled electric generating
units, and air opacity settlements, (iii) a lawsuit filed against
Central Hudson by the Riverkeeper, Inc., (iv) the environmental
initiatives of the New York State Governor, (v) the investigation
by the New York State Attorney General of older New York State
power plants for possible violation of air emission rules, and
(vi) a legal action filed in 1995 against Central Hudson by the
City of Newburgh, New York.
42
FINANCIAL INDICES
Selected financial indices for the last five years are set forth in the following
table:
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Pretax coverage of total interest charges:
Including AFDC................................. 3.58x 3.83x 3.94x 4.08x 3.68x
Excluding AFDC................................. 3.29x 3.54x 3.69x 3.83x 3.43x
Funds from Operations.......................... 4.34x 4.39x 5.18x 5.29x 4.69x
Pretax coverage of total interest
charges and preferred stock dividends.............. 3.09x 3.27x 3.37x 3.47x 2.97x
Percent of construction expenditures
financed from internal funds....................... 100% 100% 100% 100% 100%
AFDC and Mirror CWIP* as a percentage
of income available for common stock............... 19% 17% 13% 13% 16%
Effective tax rate.................................. 35% 35% 32% 36% 35%
*Refer to Note 2 - "Regulatory Matters" under the caption "Summary of Regulatory Assets
and Liabilities" and the subcaptions "Deferred Finance Charges and Deferred Nine Mile 2
Plant Costs" for a definition of Mirror CWIP.
43
COMMON STOCK DIVIDENDS AND PRICE RANGES
Central Hudson and its principal predecessors have paid
dividends on its common stock in each year commencing in 1903,
and such common stock has been listed on the New York Stock
Exchange since 1945. The price ranges and the dividends paid for
each quarterly period during the last two fiscal years are as
follows:
1999 1998
------------------------- --------------------------
High Low Dividend High Low Dividend
---- --- -------- ---- --- --------
1st Quarter $45 35 3/4 .54 $43 3/4 $39 5/8 $.535
2nd Quarter 42 3/8 35 15/16 .5416 46 38 7/8 .535
3rd Quarter 42 3/4 38 7/8 .54 47 1/16 40 7/8 .54
4th Quarter* 40 1/4 31 7/8 .54 45 1/8 39 7/8 .54
*On December 15, 1999, the Holding Company Restructuring took
place.
On June 26, 1998, Central Hudson increased its quarterly
dividend rate to $.54 per share from $.535 per share. In 1999,
Central Hudson maintained its quarterly dividend rate at $.54 per
share.
Any determination with regard to future dividend
declarations by Central Hudson, payable to its sole shareholder,
Energy Group, and the amounts and dates of such dividends, will
depend on the circumstances at the time of consideration of such
declaration.
The Agreement provides certain dividend payment restrictions
on Central Hudson, including the following: in the event of a
downgrade of Central Hudson senior debt rating below BBB+ by more
than one credit rating agency, if the stated reason(s) for the
downgrade is the performance of, or concerns about, the financial
condition of Energy Group or any affiliate other than Central
Hudson, dividends will be limited to a rate of not more than 75%
of the average annual income available for dividends, on a two-
year rolling average basis. In the event that Central Hudson's
senior debt is placed on "Credit Watch" (or the equivalent) for a
rating below BBB by more than one credit rating agency, if the
stated reason(s) for the downgrade is the performance of or
concerns about the financial condition of Energy Group or any
44
affiliate other than Central Hudson, dividends will be limited to
a rate of not more than 50% of the average annual income
available for dividends, on a two-year rolling average basis. In
the event of a downgrade of Central Hudson's senior debt rating
below BBB- by more than one credit rating agency, if the action
is stated as being due in substantial part to the performance of,
or concerns about, the financial condition of Energy Group or any
affiliate other than Central Hudson, no dividends will be paid by
Central Hudson until Central Hudson's senior debt rating has been
restored to BBB- or higher by all credit rating agencies then
rating Central Hudson.
The number of registered holders of common stock of Central
Hudson as of December 31, 1999, was one, which is Energy Group.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK
Central Hudson's primary market risks are commodity price
risk and interest rate risk. However, Central Hudson's exposure
to commodity price risk related to its purchases of natural gas,
fuel for electric generation and other power supplies is
mitigated by its electric and gas cost adjustment clauses. These
adjustment mechanisms provide for the return or collection of
costs to or from customers for costs below or in excess of base
costs included in rates charged to customers. Additionally,
variations in electric fuel costs are subject to a fuel costs
incentive mechanism with an annual exposure of up to $3.0 million
in additional revenues or costs.
In 1999, Central Hudson implemented an energy risk
management program (assumed by Energy Group upon the Holding
Company Restructuring) with its primary goal being to further
manage, through the use of defined risk management practices,
price risk associated with commodity purchases in its operations.
The written policy and procedures for this program allows for the
use of derivative financial instruments to hedge price risk and
prohibits the use of these instruments for speculative purposes.
Additionally, the PSC in a Memorandum and Resolution
("Resolution"), effective April 13, 1999, authorized the
inclusion of risk management costs as a recoverable component of
the Gas Adjustment Clause ("GAC"). The Resolution defines these
costs as "costs associated with transactions that are intended to
reduce price volatility or reduce overall costs to customers.
These costs include transaction costs, and gains and losses
associated with other risk management entities."
Central Hudson, starting in September 1999, purchased
derivative instruments to hedge a small portion of its total gas
supply requirements for the period November 1999 through October
2000. The fair value of these derivative financial instruments
at December 31, 1999 is not material to Central Hudson's
financial position or results of operations. Additionally,
resultant transaction gains and losses actually realized in 1999
were included in Central Hudson's GAC as authorized by the PSC.
With regard to electric energy operations, Central Hudson has
begun to enter into derivative instruments to hedge purchased
electric transactions. There were no electric derivative
45
instruments outstanding at December 31, 1999, and the
transactions occurring in 1999 were not material to Central
Hudson's financial position or result of operations.
Central Hudson manages its interest rate risk through the
issuance of fixed-rate debt with varying maturities through
economic refundings of debt through optional refunding. A
portion of Central Hudson's long-term debt consists of variable
rate debt for which interest is reset on a periodic basis
reflecting current market conditions. The difference between
costs associated with actual interest rates and costs embedded in
customer rates are deferred for eventual passback or recovery to
or from customers.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
I - Index to Financial Statements: Page
Report of Independent Accountants 47
Statement of Management's Responsibility 48
Consolidated Balance Sheet at
December 31, 1999 and 1998 50
Consolidated Statement of Income for the
three years ended December 31, 1999 52
Consolidated Statement of Retained Earnings
for the three years ended December 31, 1999 54
Consolidated Statement of Cash Flows for the
three years ended December 31, 1999 55
Notes to Consolidated Financial Statements 57
Selected Quarterly Financial Data Unaudited) 97
II - Schedule II - Reserves
All other schedules are omitted because they are not
applicable or the required information is shown in the
Consolidated Financial Statements or the Notes thereto.
Supplementary Data
Supplementary data is included in "Selected Quarterly
Financial Data (Unaudited)" referred to in I above and reference
is made thereto.
46
Report of Independent Accountants
To the Board of Directors and Shareholder of Central Hudson Gas &
Electric Corporation.
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Central Hudson Gas & Electric
Corporation ("Central Hudson") and its subsidiaries at
December 31, 1999 and 1998, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial
statements are the responsibility of Central Hudson's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards
generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
New York, New York
January 28, 2000
47
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
Management is responsible for the preparation, integrity and
objectivity of the consolidated financial statements of Central
Hudson Gas & Electric Corporation ("Central Hudson") as well as
all other information contained in this Form 10-K Annual Report
for the fiscal year ended December 31, 1999. The consolidated
financial statements have been prepared in conformity with
generally accepted accounting principles and, in some cases,
reflect amounts based on the best estimates and judgements of
Central Hudson's Management, giving due consideration to
materiality.
Central Hudson maintains adequate systems of internal
control to provide reasonable assurance, that, among other
things, transactions are executed in accordance with Management's
authorization, that the consolidated financial statements are
prepared in accordance with generally accepted accounting
principles and that the assets of Central Hudson are properly
safeguarded. The systems of internal control are documented,
evaluated and tested by Central Hudson's internal auditors on a
continuing basis. Due to the inherent limitations of the
effectiveness of internal controls, no internal control system
can provide absolute assurance that errors will not occur.
Management believes that Central Hudson has maintained an
effective system of internal control over the preparation of its
financial information including the consolidated financial
statements of Central Hudson as of December 31, 1999.
Independent accountants were engaged to audit the
consolidated financial statements of Central Hudson and issue
their report thereon. The Report of Independent Accountants,
which is presented above, does not limit the responsibility of
Management for information contained in the consolidated
financial statements and elsewhere in this Form 10-K Annual
Report.
Until the December 15, 1999 Holding Company Restructuring,
Central Hudson's Board of Directors maintained a Committee on
Audit which was composed of Directors who were not employees of
Central Hudson. The Committee on Audit met with Management, the
Internal Auditing Manager, and Energy Group's independent
accountants several times a year to discuss internal controls and
accounting matters, Central Hudson's consolidated financial
statements, the scope and results of the audits performed by the
independent accountants and the Internal Auditing Department.
The independent accountants and the Internal Auditing Manager had
direct access to the Committee on Audit. On and after the
48
Holding Company Restructuring, a substantially similar Committee
of the Board of Directors of Energy Group, the parent company of
Central Hudson, exists and conducts substantially similar
meetings, which include review of the financial affairs of
Central Hudson.
PAUL J. GANCI DONNA S. DOYLE
Chairman of the Board and Vice President - Accounting
Chief Executive Officer and Controller
January 28, 2000
49
CONSOLIDATED BALANCE SHEET
(In Thousands)
December 31,
1999 1998
ASSETS ---- ----
Utility Plant
Electric............................... $1,250,456 $1,222,743
Gas.................................... 164,767 158,165
Common................................. 100,659 94,271
Nuclear fuel........................... 42,847 42,317
---------- ---------
1,558,729 1,517,496
Less: Accumulated depreciation......... 638,910 597,383
Nuclear fuel amortization........ 38,354 35,381
------- -------
881,465 884,732
Construction work in progress.......... 39,951 43,512
------- -------
Net Utility Plant.................... 921,416 928,244
Other Property and Plant................. 975 19,059
------- ------
Investments and Other Assets
Prefunded pension costs................ 46,038 40,218
Other.................................. 17,611 18,209
------ ------
Total Investments and Other Assets... 63,649 58,427
------ ------
Current Assets
Cash and cash equivalents.............. 11,756 10,499
Accounts receivable from customers -
net of allowance for doubtful accounts;
$2.9 million in 1999 and $2.4 million
in 1998............................... 46,483 45,564
Accrued unbilled utility revenues...... 16,327 15,233
Other receivables...................... 4,123 4,555
Materials and supplies, at average cost:
Fuel................................. 18,725 11,797
Construction and operating........... 11,560 11,790
Special deposits and prepayments....... 14,574 34,823
Total Current Assets................. 123,548 134,261
------- -------
Deferred Charges
Regulatory assets (Note 2)............. 137,487 149,261
Unamortized debt expense............... 5,016 5,062
Other.................................. 7,299 21,724
------- -------
Total Deferred Charges............... 149,802 176,047
------- -------
TOTAL ASSETS $1,259,390 $1,316,038
========== ==========
The Notes to Consolidated Financial Statements are an integral
part hereof.
50
CONSOLIDATED BALANCE SHEET (CONT'D)
(In Thousands)
December 31,
CAPITALIZATION AND LIABILITIES 1999 1998
---- ----
Capitalization
Common Stock Equity
Common stock, $5.00 par value
(Note 6)............................. $ 84,311 $ 87,775
Paid-in capital (Note 6).............. 273,238 284,465
Retained earnings..................... 69,281 133,287
Reacquired capital stock (Note 6)..... - (27,143)
Capital stock expense................. (5,939) (6,204)
------ ------
Total Common Stock Equity............ 420,891 472,180
------- -------
Cumulative Preferred Stock (Note 6)
Not subject to mandatory redemption... 21,030 21,030
Subject to mandatory redemption....... 35,000 35,000
------ ------
Total Cumulative Preferred Stock..... 56,030 56,030
------ ------
Long-term Debt (Note 7)................. 335,451 356,918
- ------- -------
Total Capitalization................. 812,372 885,128
------- -------
Current Liabilities
Current maturities of long-term debt.... 35,100 39,507
Notes payable........................... 50,000 18,000
Accounts payable........................ 26,825 23,591
Dividends payable....................... 7,808 9,913
Accrued taxes and interest.............. - 6,334
Accrued vacation ....................... 4,344 4,400
Customer deposits....................... 4,471 4,248
Other................................... 7,545 7,932
----- -----
Total Current Liabilities............ 136,093 113,925
------- -------
Deferred Credits and Other Liabilities
Regulatory liabilities (Note 2)......... 87,039 81,065
Operating reserves...................... 6,294 5,995
Other................................... 18,351 27,251
------ ------
Total Deferred Credits and
Other Liabilities..................... 111,684 114,311
------- -------
Deferred Income Tax (Note 4)............. 199,241 202,674
------- -------
Commitments and contingencies
(Notes 2, 3 and 9)..................... ------- -------
TOTAL CAPITALIZATION AND LIABILITIES $1,259,390 $1,316,038
========== ==========
The Notes to Consolidated Financial Statements are an integral
part hereof.
51
CONSOLIDATED STATEMENT OF INCOME
(In Thousands)
Year ended December 31,
1999 1998 1997
---- ---- ----
Operating Revenues
Electric................... $427,809 $418,507 $416,429
Gas........................ 94,131 84,962 103,848
------- ------- -------
Total Operating Revenues 521,940 503,469 520,277
Operating Expenses
Operation:
Fuel used in electric
generation................ 85,848 84,688 66,117
Purchased electricity...... 45,731 40,573 55,864
Purchased natural gas...... 53,957 44,964 61,514
Other expenses of operation 98,528 96,247 101,219
Maintenance................. 28,213 26,904 27,574
Depreciation and amortization
(Note 1).................... 46,913 45,560 43,864
Taxes, other than income
tax........................ 63,986 63,458 64,879
Federal income tax
(Note 4).................... 27,852 29,775 29,190
------- ------- -------
Total Operating Expenses. 451,028 432,169 450,221
------- ------- -------
Operating Income............. 70,912 71,300 70,056
------- ------- -------
Other Income
Allowance for equity funds
used during construction
(Note 1).................. - 585 387
Federal income tax (Note 4) (292) 1,148 2,953
Other - net................ 10,875 6,865 8,079
------ ----- -----
Total Other Income....... 10,583 8,598 11,419
------ ----- ------
Income before Interest
Charges.................... 81,495 79,898 81,475
------ ------ ------
The Notes to Consolidated Financial Statements are an integral
part hereof.
52
CONSOLIDATED STATEMENT OF INCOME (CONT'D)
(In Thousands)
Year ended December 31,
1999 1998 1997
---- ---- ----
Interest Charges
Interest on long-term debt.. 24,151 23,115 23,097
Other interest.............. 4,860 3,639 2,647
Allowance for borrowed
funds used during
construction (Note 1)...... (390) (324) (261)
Amortization of expense on
debt....................... 993 924 906
------ ------ ------
Total Interest Charges.... 29,614 27,354 26,389
------ ------ ------
Net Income................... 51,881 52,544 55,086
Dividends Declared on Cumula-
tive Preferred Stock........ 3,230 3,230 3,230
------ ------ ------
Income Available for Common
Stock....................... $ 48,651 $ 49,314 $ 51,856
======== ======== ========
The Notes to Consolidated Financial Statements are an integral
part hereof.
53
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(In Thousands)
Year ended December 31,
1999 1998 1997
---- ---- ----
Balance at beginning of
year........................ $133,287 $120,540 $105,821
Net Income................... 51,881 52,544 55,086
Common Stock Retirement
(cancellation)............. (12,642) - -
Transfer of Business Affiliates
to Energy Group............. (65,698) - -
Dividends declared:
On cumulative preferred
stock..................... (3,230) (3,230) (3,230)
On common stock............ (27,317) (36,567) (37,137)
To Parent - Energy
Group..................... (7,000) - -
Total Dividends Declared... (37,547) (39,797) (40,367)
------- ------- -------
Balance at end of year....... $ 69,281 $133,287 $120,540
======== ======== ========
The Notes to Consolidated Financial Statements are an integral
part hereof.
54
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands) Year ended December 31,
1999 1998 1997
---- ---- ----
Operating Activities
Net Income........................ $51,881 $ 52,544 $ 55,086
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization
including nuclear fuel
amortization............... $51,186 49,011 48,348
Deferred income taxes, net..... 4,219 (116) 14,077
Allowance for equity funds used
during construction.......... - (585) (387)
Nine Mile 2 Plant deferred
finance charges, net......... (4,855) (4,855) (4,855)
Provisions for uncollectibles.. 2,930 2,639 3,493
Net accrued/deferred pension
costs......................... (10,968) (12,277) (8,555)
Deferred gas costs............ 3,080 1,072 3,475
Deferred gas refunds.......... (19) (1,640) 1,695
Other - net.................... 9,297 4,888 7,233
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled
utility revenues............. (10,385) (46) (4,420)
Materials and supplies........ (6,975) 513 3,995
Special deposits and
prepayments............ (17,746) (20,613) (770)
Accounts payable.............. 8,784 (777) (1,769)
Accrued taxes and interest.... (6,715) 3,094 (2,107)
Other current liabilities..... (22) 1,695 (61)
------ ------ -------
Net cash provided by operating
activities...................... 108,985 74,547 114,478
------- ------ -------
The Notes to Consolidated Financial Statements are an integral
part hereof.
55
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
(In Thousands) 1999 1998 1997
---- ---- ----
Investing Activities
Additions to plant............... (46,495) (45,661) (43,868)
Allowance for equity funds used
during construction............. - 585 387
------- ------- -------
Net additions to plant........... (46,495) (45,076) (43,481)
Competitive Business Affiliates
fixed asset additions........... (38,381) (19,460) -
Nine Mile 2 Plant decommissioning
trust fund...................... (868) (868) (868)
Other - net...................... (589) (801) 396
------- ------- -------
Net cash used in investing
activities...................... (86,333) (66,205) (43,953)
------- ------- -------
Financing Activities
Proceeds from issuance of:
Long-term debt................. 176,250 35,250 2,000
Net borrowings (repayments) of
short-term debt................. 32,000 18,000 (15,600)
Retirement & redemption
of long-term debt............... (185,462) (2,466) (2,282)
Dividends paid on cumulative
preferred common stock.......... (39,652) (39,936) (40,426)
Debt issuance costs.............. (4,531) - -
Reacquired capital stock......... - (17,745) (9,398)
-------- ------- -------
Net cash used in financing
activities...................... (21,395) (6,897) (65,706)
------- ------- -------
Net Change in Cash and Cash
Equivalents....................... 1,257 1,445 4,819
Cash and Cash Equivalents at
Beginning of Year................. 10,499 9,054 4,235
-------- -------- --------
Cash and Cash Equivalents at End
of Year........................... $ 11,756 $ 10,499 $ 9,054
======== ======== ========
Supplemental Disclosure of Cash
Flow Information
Interest paid (net of amounts
capitalized)................... $ 26,236 $ 24,002 $ 24,309
Federal income taxes paid...... 29,025 26,900 17,111
The Notes to Consolidated Financial Statements are an integral
part hereof.
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Central Hudson Gas & Electric Corporation ("Central Hudson"), and,
until the December 15, 1999 Holding Company Restructuring, all of
its affiliates. Intercompany balances and transactions have been
eliminated.
In April 1998, Central Hudson formed a wholly-owned
subsidiary named CH Energy Group, Inc. ("Energy Group"), which,
after a one-for-one share exchange on December 15, 1999 ("Holding
Company Restructuring"), became the holding company parent of
Central Hudson and its existing subsidiaries (with the exception
of Phoenix Development Company, Inc. which remains a subsidiary of
Central Hudson). See Note 2 - "Regulatory Matters," under the
caption "Competitive Opportunities Proceeding Settlement
Agreement" for further details.
Central Hudson's affiliates are each directly or indirectly
wholly-owned and their businesses are comprised of an electric and
gas utility landholding, cogeneration, fuel oil, electric
generating or energy management companies and electric and gas
sales. The net income of Central Hudson's affiliates, until the
December 15, 1999 Holding Company Restructuring, is reflected in
the Consolidated Statement of Income as "Other Income - Equity
Earnings - Competitive Business Affiliates."
Rates, Revenues and Cost Adjustment Clauses
Central Hudson's electric and gas retail rates are regulated
by the Public Service Commission of the State of New York ("PSC").
Transmission rates, facilities charges and rates for electricity
sold for resale in interstate commerce are regulated by the
Federal Energy Regulatory Commission ("FERC").
Central Hudson's tariff for retail electric service includes
a fuel cost adjustment clause pursuant to which electric rates are
adjusted to reflect changes in the average cost of fuels used for
electric generation and in certain purchased power costs, from the
average of such costs included in base rates. Central Hudson's
tariff for gas service contains a comparable clause to adjust gas
rates for changes in the price of purchased natural gas.
57
Utility Plant
The costs of additions to utility plant and replacements of
retired units of property are capitalized at original cost.
Central Hudson's share of the costs of Unit No. 2 of the Nine Mile
Point Nuclear Station ("Nine Mile 2 Plant") are capitalized at
original cost, less the disallowed investment of $169.3 million
which was recorded in 1987. Capitalized costs include labor,
materials and supplies, indirect charges for such items as
transportation, certain taxes, pension and other employee
benefits, and Allowance for the Cost of Funds Used During
Construction ("AFDC"), a non-cash item, or capitalized interest.
Replacement of minor items of property is included in maintenance
expenses.
The original cost of property, together with removal cost,
less salvage, is charged to accumulated depreciation at such time
as the property is retired and removed from service.
Jointly-Owned Facilities
Central Hudson has a 9%, or 103 megawatt ("MW"), undivided
interest in the 1,143 MW Nine Mile 2 Plant (see Note 3 - "Nine
Mile 2 Plant") and a 35%, or 420 MW, undivided interest in the
1,200 MW Roseton Electric Generating Station ("Roseton Plant").
Central Hudson's share of the respective investments in the
Nine Mile 2 Plant and the Roseton Plant, as included in its
Consolidated Balance Sheet at December 31, 1999 and 1998, were:
1999 1998
---- ----
(In Thousands)
Nine Mile 2 Plant
Plant in service.................. $314,844 $315,358
Accumulated depreciation.......... (81,799) (77,178)
------- -------
Net Plant....................... 233,045 238,180
Construction work in progress..... 2,204 2,132
Roseton Plant
Plant in service.................. $135,561 $135,197
Accumulated depreciation.......... (83,754) (80,486)
------- -------
Net Plant....................... 51,807 54,711
Construction work in progress..... 325 213
Allowance For Funds Used During Construction
Central Hudson's regulated utility plant includes AFDC, which
is defined in applicable regulatory systems as the net cost of
borrowed funds used for construction purposes and a reasonable
rate on other funds when so used. The concurrent credit for the
amount so capitalized is reported in the Consolidated Statement of
58
Income as follows: the portion applicable to borrowed funds is
reported as a reduction of interest charges while the portion
applicable to other funds (the equity component, a noncash item)
is reported as other income. The AFDC rate was 6.25% in 1999,
8.5% in 1998 and 8.0% in 1997.
For a discussion of the effect of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation ("SFAS 71"), as issued by the
Financial Accounting Standards Board ("FASB"), on Central Hudson's
fossil-fueled generating plants, see Note 2 - "Regulatory
Matters," under the caption "Impact of Settlement Agreement on
Accounting Policies." Accordingly, beginning in 1998, significant
capital projects relating to the fossil-fueled generating plants
include capitalized interest instead of AFDC. For 1999 and 1998
no such projects met the criteria for capitalized interest.
Depreciation and Amortization
For financial statement purposes, Central Hudson's
depreciation provisions are computed on the straight-line method
using rates based on studies of the estimated useful lives and
estimated net salvage value of properties, with the exception of
the Nine Mile 2 Plant which is depreciated on a remaining life
amortization method. The year 2026, the year in which the Nine
Mile 2 Plant operating license expires, is used as the end date in
the development of the remaining life amortization. Central
Hudson performs depreciation studies on a continuing basis and,
upon approval by the PSC, periodically adjusts the rates of its
various classes of depreciable property.
Central Hudson's composite rates for depreciation were 3.22%
in 1999, 3.21% in 1998 and 3.16% in 1997 of the original cost of
average depreciable property. The ratio of the amount of
accumulated depreciation to the cost of depreciable property at
December 31 was 41.0% in 1999, 39.6% in 1998 and 38.2% in 1997.
For federal income tax purposes, Central Hudson uses an
accelerated method of depreciation and generally uses the shortest
life permitted for each class of assets.
The cost of the Nine Mile 2 Plant nuclear fuel assemblies and
components is amortized to operating expense based on the quantity
of heat produced for the generation of electric energy.
Cash and Cash Equivalents
For purposes of the Consolidated Statement of Cash Flows,
Central Hudson considers temporary cash investments with a
maturity, when purchased, of three months or less to be cash
equivalents.
59
Federal Income Tax
Central Hudson and its affiliates file a consolidated federal
income tax return. Federal income taxes are allocated to
operating expenses and other income and deductions in the
Consolidated Statement of Income. Federal income taxes are
deferred under the liability method in accordance with Financial
Accounting Standard No. 109, "Accounting for Income Taxes," ("SFAS
109"). Under the liability method, deferred income taxes are
provided for all differences between financial statement and tax
basis of assets and liabilities. Additional deferred income taxes
and offsetting regulatory assets or liabilities are recorded by
Central Hudson to recognize that income taxes will be recoverable
or refundable through future revenues.
Use of Estimates
Preparation of the financial statements in accordance with
generally accepted accounting principles includes the use of
estimates and assumptions by management that affect the reported
amounts of assets and liabilities and disclosures of contingent
liabilities at the date of the financial statements and reported
amount of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
New Accounting Standards and Other FASB Projects
In June 1998, the FASB issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This Statement
establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities
in the balance sheet and measure those instruments at fair value.
Any gain or loss resulting from changes in such fair value is
required to be recognized in earnings to the extent the
derivatives are not effective as hedges. Central Hudson implemented an
energy trading risk management program to manage the price risks
associated with fuel purchases for generation, natural gas
purchases for native load customers, and wholesale power
transactions. Central Hudson utilized various financial
instruments, such as futures, options, swaps, caps, floors, and
collars to stabilize the price volatility of these commodities.
Central Hudson believes that such hedging program will not have a
material impact on its financial position
or results of operations.
60
In June 1999, the FASB issued FASB Statement No. 137
"Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133" amending
SFAS 133 to defer the effective date by one year to all fiscal
quarters of all fiscal years beginning after June 15, 2000. This
proposed change is made in response to requests to consider
delaying the effective date to provide more time to study,
understand and implement the provisions of the SFAS 133.
Plant Decommissioning: In February 1996, the FASB issued an
exposure draft entitled "Accounting for Certain Liabilities
Related to Closure and Removal of Long-Lived Assets," which
includes nuclear plant decommissioning. Over the past four years,
this exposure draft has been the source of continual debate. The
FASB has committed to completing the project and is proceeding
toward issuance of another exposure draft expected in the first
quarter of 2000 with an effective date for financial statements
for fiscal years beginning after June 15, 2001. If the accounting
standard proposed in such exposure draft were adopted, it could
result in higher annual provisions for removal or decommissioning
to be recognized earlier in the operating life of nuclear and
other generating units and an accelerated recognition of the
decommissioning obligation. The FASB is continuing to explore
various issues associated with this project, including liability
measurement and recognition issues. The FASB is deliberating this
issue and the resulting final pronouncement could be different
from that proposed in the exposure draft. Central Hudson can make
no prediction at this time as to the ultimate form of such
proposed accounting standard, assuming it is adopted, nor can it
make any prediction as to its ultimate effect(s) on the financial
condition of Central Hudson.
NOTE 2 - REGULATORY MATTERS
Competitive Opportunities Proceeding Settlement Agreement
In response to the May 1996 Order of the PSC issued in its
generic Competitive Opportunities Proceeding ("Proceeding"),
Central Hudson, the PSC Staff and certain other parties entered
into an Amended and Restated Settlement Agreement, dated
January 2, 1998. The PSC approved such Agreement by its final
Order issued and effective June 30, 1998. By Order, issued and
effective March 7, 2000, the PSC authorized certain amendments to
such Agreement, which, as amended, is hereinafter called the
"Agreement."
Shortly after the PSC issued its May 1996 Order, Central
Hudson and other electric utilities filed a court challenge to
such Order. The challenge was denied and Central Hudson and other
electric utilities appealed such denial. The Public Utility Law
Project ("PULP"), which had intervened in the proceeding, filed a
similar appeal. PULP subsequently filed a court challenge to the
61
PSC's Order approving the Agreement of Central Hudson and filed
similar challenges to similar agreements of other electric
utilities. Central Hudson subsequently moved to dismiss PULP's
challenge to the Agreement. In August 1999, Central Hudson and
other electric utilities filed with the court a request to
withdraw their appeal with respect to the denial of the challenge
to the PSC's May 1996 Order without prejudice to restoration of
such appeal should PULP's challenge to the restructuring agreement
of any of the electric utilities be successful. Said request to
withdraw the appeal without prejudice was granted by the Appellate
Court on January 12, 2000. The appeal of PULP remains pending at
this time, and Central Hudson can make no prediction as to the
potential outcome.
The Agreement generally includes the following provisions:
(i) continuation of a basic electric rate freeze, along with a
phase-in of retail access, for residential, commercial and small
industrial customers through June 2001; (ii) a 5% reduction in
base electric rates for large industrial customers; (iii) a 10.6%
return on equity ("ROE") cap with excess earnings, if any,
deferred for stranded cost mitigation (as of December 31, 1999,
Central Hudson has recorded an estimated regulatory liability of
$3.5 million due to excess earnings); (iv) a reasonable
opportunity to recover all prudently incurred strandable costs,
defined as "production expenditures made by Central Hudson in
fulfilling its obligation to serve and provide safe, reliable
electric service to customers within its franchise territory which
are not expected to be recoverable in a competitive electricity
market"; (v) functional separation of Central Hudson's Danskammer
Steam Generating Station ("Danskammer Plant") and its interest in
the Roseton Plant in 1998; (vi) transfer of title by an auction of
Central Hudson's Danskammer Plant and its interest in the Roseton
Plant to be completed by June 30, 2001 (an affiliate of Central
Hudson's was given the option to bid, and the PSC reserved its
authority to require an auction and transfer of Central Hudson's
fossil-fueled electric generating assets prior to June 30, 2001 if
such action is found by the PSC to be in the public interest);
(vii) approval to effect a holding company restructuring not later
than June 30, 2001; and (viii) certain regulation of Central
Hudson's operations; (ix) standards of conduct in transactions
between Central Hudson and its competitive business affiliates
including Energy Group; (x) prohibitions against Central Hudson
making loans to Energy Group or any other affiliate or Central
Hudson guaranteeing debt of Energy Group or any other affiliate;
(xi) limitations on the transfer of Central Hudson employees to
affiliates and on the use of Central Hudson officers in common
with affiliates; and (xii) permission for Central Hudson to
transfer up to $100 million of equity to competitive business
affiliates until the earlier of (i) the receipt of the proceeds
from such auction of its fossil generation assets or (ii) June 30,
62
2001, which $100 million is subject to reduction by the amount of
dividends Central Hudson pays to Energy Group that exceeds the
amount of dividends paid by Energy Group to its shareholders.
In addition, the PSC directed the PSC Staff to provide
assurance that Central Hudson does not incur imprudent generation
costs which could be avoided by divestiture of fossil-fueled
electric generating assets prior to June 30, 2001, and added a
provision dealing with mergers and acquisitions; namely, pursuant
to a petition filed jointly or individually by Central Hudson,
Central Hudson will have the flexibility to retain, on a
cumulative basis, all savings associated with an acquisition or
merger with another utility for a period of five years from the
date of closing of any merger or acquisition, up to the amount of
the acquisition premium paid over the lesser of book value or fair
market value of assets merged or acquired. Savings in excess of
the recovery of such premium will be disposed of by the PSC for
the benefit of customers.
The consideration received by Central Hudson in an auction,
referred to in (vi) of the second preceding paragraph above, will,
up to the net book value of the assets sold, be available for
disposition for the benefit of shareholders without PSC approval.
Any excess over such net book value will be required to be used to
offset Central Hudson's fossil-fueled generation related
regulatory assets and, to the extent of any remaining
consideration, to reduce the book cost of Central Hudson's
investment in the Nine Mile 2 Plant. In the event that the sale
price of any such assets is below Central Hudson's then current
net book value, the difference will be preserved for recovery as
strandable costs. Central Hudson's potential strandable costs are
those prior utility investments and commitments that may not be
recoverable in a competitive energy market, which are
predominantly related to Central Hudson's investment in the Nine
Mile 2 Plant. During the period ending June 30, 2001, Central
Hudson will continue to recover its potential electric strandable
costs in the rates it charges its transmission and distribution
customers. Following June 30, 2001, Central Hudson will be given
a reasonable opportunity to recover, through a non-bypassable
charge to customers, all prudently incurred, verifiable and
appropriately mitigated electric strandable costs.
By Order issued and effective February 23, 2000, the PSC
approved Central Hudson's auction plan to sell the Roseton and
Danskammer Plants and certain related accounting and rate-making
proposals. For further information, see the subcaption below
"Auction of Fossil Generation Plants."
After such divestiture, Central Hudson expects to be
obligated to continue to serve a portion of its electric
customers. Central Hudson cannot predict the amount of such
service which Central Hudson will be obligated to provide or the
63
cost or availability of electricity to satisfy customer service
obligations.
Impact of Settlement Agreement on Accounting Policies
The Agreement created certain changes to Central Hudson's
accounting policies. Central Hudson's accounting policies conform
to generally accepted accounting principles, which, for regulated
public utilities, include SFAS 71. Under SFAS 71, regulated
companies apply AFDC to the cost of construction projects.
Because Central Hudson's fossil-fueled generating plants are no
longer subject to SFAS 71, capitalized interest will be applied
instead of AFDC. Under SFAS 71, regulated companies defer costs
and credits on the balance sheet as regulatory assets and
liabilities when it is probable that those costs and credits will
be allowed in the rate-making process in a period different from
when they otherwise would have been reflected in income. These
deferred regulatory assets and liabilities are then reflected in
the income statement in the period in which the same amounts are
reflected in rates. If some of an enterprise's operations are
regulated and meet the appropriate criteria, SFAS 71 is applied
only to the regulated portion of the enterprise's operations.
During 1997, the FASB Emerging Issues Task Force ("EITF")
concluded that an entity should discontinue application of SFAS
71, to any portion of its business when a deregulation
transition plan is in place and the terms are known. However, the
EITF further qualified, in its Issue No. 97-4, that regulatory
assets and liabilities should be evaluated based on where the cash
flows are to be derived in the determination of the applicability
of SFAS 71. When the cash flows are from rates to be charged to
customers of the regulated business for recovery and settlement,
respectively, of regulatory assets and liabilities, they should
not be eliminated until: a) they are recovered or settled through
the regulated cash flows, or b) they are individually impaired or
the regulator eliminates the individual obligation, or c) the
portion of the business providing the regulated cash flows no
longer meets the criteria of SFAS 71. None of these conditions
has occurred as it applies to Central Hudson's fossil-fueled
generation regulatory assets and liabilities even though the
Agreement put into place a deregulation transition plan with the
ultimate goal of divesting Central Hudson's fossil-fueled
generating plant assets. Therefore, these balances continue to be
reflected in the total for regulatory assets and liabilities in
Central Hudson's Consolidated Balance Sheet. At December 31, 1999
and 1998, net regulatory assets associated with the fossil-fueled
generating assets totaled $1.0 million and $2.5 million,
respectively. The fossil-fueled generating assets continue to be
recorded as utility plant.
64
Summary of Regulatory Assets and Liabilities
The following table sets forth Central Hudson's regulatory
assets and liabilities:
At December 31, 1999 1998
- ------------------------------------------------------------------
Regulatory Assets (Debits): (In Thousands)
- --------------------------
Deferred finance charges -
Nine Mile 2 Plant..................... $ 66,181 $ 67,326
Income taxes recoverable
through future rates.................. 26,426 35,221
Deferred Newburgh Gas Site (Note 9)..... 15,114 22,679
Other................................... 29,766 24,035
-------- --------
Total Regulatory Assets............... $137,487 $149,261
-------- --------
Regulatory Liabilities (Credits):
- ---------------------------------
Deferred finance charges -
Nine Mile 2 Plant..................... $ 4,431 $ 10,431
Income taxes refundable................. 15,978 17,574
Deferred Nine Mile 2 Plant costs........ 20,895 15,790
Deferred pension costs overcollection
(Note 8)............................... 6,545 11,693
Deferred OPEB costs overcollection
(Note 8)............................... 13,035 9,796
Customer benefits account............... 9,158 5,447
Other................................... 16,997 10,334
-------- --------
Total Regulatory Liabilities.......... 87,039 81,065
-------- --------
Net Regulatory Assets.............. $ 50,448 $ 68,196
======== ========
Some of the significant regulatory assets and liabilities
include:
Deferred Finance Charges - Nine Mile 2 Plant: During the
construction of the Nine Mile 2 Plant, the PSC authorized the
inclusion in rate base of increasing amounts of Central Hudson's
investment in that Plant. Central Hudson did not accrue AFDC on
any of the Nine Mile 2 Plant construction work in progress
("CWIP") which was included in rate base and for which a cash
return was being allowed; however, the PSC ordered, effective
January 1, 1983, that amounts be accumulated in deferred debit and
credit accounts equal to the amount of AFDC which was not being
accrued on the CWIP included in rate base ("Mirror CWIP"). The
balance in the deferred credit account is available to reduce
future revenue requirements by amortizing portions of the deferred
credit to other income or by the elimination through writing off
other deferred balances as directed by the PSC. Central Hudson
expects such application of the deferred credit will occur over a
period substantially shorter than the life of the Nine Mile 2
Plant. When amounts of such deferred credit are applied in order
65
to reduce revenue requirements, amortization is started for a
corresponding amount of the deferred debit, which amortization
continues on a level basis over the remaining life of the Nine
Mile 2 Plant, resulting in recovery of such corresponding amount
through rates. Mirror CWIP is expected to be exhausted by the end
of the useful life of the Nine Mile 2 Plant either through the
amortization or write-off procedures described above or through
the write-off of the remaining debit and credit as directed by the
PSC. The net effect of this procedure is that at the end of the
amortization period for the deferred credit, the accounting and
rate-making treatment will be the same as if the Nine Mile 2 Plant
CWIP had not been included in rate base during the construction
period.
Pursuant to a PSC Order issued and effective February 11,
1994, in an electric rate proceeding, Central Hudson was
authorized to amortize $6 million annually of the deferred credit
beginning in December 1993.
The $6 million amortization of the deferred credit will be
continued unless changed by a future PSC rate order or until it is
exhausted. Under provisions of the Agreement, this amortization
will be replaced with other deferred credits to the extent
necessary to provide for full replacement of the expiring Mirror
CWIP credits. The current level of the deferred debit
amortization of $1.1 million is based on the level of deferred
credits that have been utilized through the most recent rate year.
Credit amounts utilized subsequently are included in the deferred
debit amortization level at the time of the next PSC rate order
for the new rate year based on the then remaining life of the Nine
Mile 2 Plant.
Income Taxes Recoverable/Refundable: The adoption of SFAS
109 in 1993 increased Central Hudson's net deferred tax
obligation. As it is probable that the increase will be recovered
from customers, Central Hudson established a net regulatory asset
for the recoverable future taxes.
Deferred Nine Mile 2 Plant Costs: The existing rate-making
for the Nine Mile 2 Plant, as directed by the PSC in its Order on
Nine Mile 2 Operating and Capital Forecast for 1996 ("Supplement
No. 5"), provides for the deferral of the difference between
actual and authorized operating and maintenance expense.
Supplement No. 5 continues in effect until changed by a subsequent
rate order. For 1999 and 1998, the Nine Mile 2 Plant incurred
less actual expense than authorized, and Central Hudson's share
has been recorded as a regulatory liability in accordance with
Supplement No. 5.
Customer Benefits Account: The Agreement requires that
Central Hudson set aside $10.0 million per calendar year in a
Customer Benefits Account to fund rate reductions and retail
66
access options. Funding sources include $3.0 million from
shareholder sources, $3.5 million from fuel cost savings generated
by the installation of Central Hudson's coal dock unloading
facility at its Danskammer Plant and $3.5 million from deferred
credits related to the reconciliation of pension and OPEB costs.
The Agreement also stipulates that unused funding accumulated to
the end of the Agreement term is to be used for offsetting
strandable costs or providing other ratepayer benefits.
Auction of Fossil Generation Plants
Under the Agreement, Central Hudson is required to sell its
fossil generation plants and transfer title by June 30, 2001.
Central Hudson has provided for the necessary internal and
external resources to carry out the auction that is called for in
the Agreement. Central Hudson has agreements with Niagara Mohawk
Power Corporation ("Niagara Mohawk") and Consolidated Edison
Company of New York, Inc. ("Consolidated Edison") for the
disposition of their co-tenancy interests in the Roseton Plant in
conjunction with such auction. On November 19, 1999, Central
Hudson filed with the PSC, for review and approval, an auction
plan for a combined auction of the Roseton Plant and the
Danskammer Plant ("Auction Plan") which includes the auction of
the interests of Niagara Mohawk and Consolidated Edison in the
Roseton Plant. The Auction Plan is intended to maximize the value
received by the assets and provide for an orderly process and an
objective bid evaluation. The Auction Plan filing also requests
the PSC's approval for certain accounting and rate-making
proposals relating to the Agreement.
In the Agreement, the consideration received by Central
Hudson, after transaction costs, in the sale of its interest in
such Plants is available to Central Hudson, up to the net book
value of such Plants, for investment in competitive business
affiliates or other disposition for the benefit of shareholders
without PSC approval ("Unregulated Investments"). In the
Agreement, Central Hudson also retained the right for an affiliate
to participate in the auction process of such Plants. In the
event that no such affiliate were to bid in such auction, Central
Hudson would retain, for Unregulated Investments, an additional
amount of such consideration equal to 10% of the consideration of
such sale in excess of the net book value of its interest in such
Plants; such excess being hereinafter called the "Earned Auction
Incentive." However, the aggregate of all such consideration to
be so available to Central Hudson cannot exceed $17.5 million
("Cap"). In the Auction Plan filing, Central Hudson stated to the
PSC that it is willing to waive the right of an affiliate of
Central Hudson to participate in such auction if the PSC approves
all of the accounting and rate-making proposals described in the
Auction Plan filing, including the following: (i) an increase in
the Cap, on a formula basis, not to exceed $18.5 million; (ii) any
67
Earned Auction Incentive recognized as income over a period of
three to five years; and (iii) the Earned Auction Incentive would
apply not just to Central Hudson's interest in the Roseton Plant
and the Danskammer Plant, but would apply to the gross
consideration received from a combined auction of these Plants
less the gross proceeds to be provided to the other owners of the
Roseton Plant.
By Order, issued and effective February 23, 2000, the PSC
approved the Auction Plan. The agreements with each of the
cotenant owners as to the disposition of the proceeds of their
Roseton Plant interest were approved, subject to PSC review of
their implementation. Central Hudson must make a subsequent
filing with the PSC for approval of the sales transaction for each
such Plant after the purchaser of each such Plant has executed a
contract of sale. That Order also approved said accounting and
ratemaking proposals; therefore, Central Hudson has waived its
right to have an affiliate participate in such auction.
Selection of the winning bidder(s) is anticipated later in
2000, with the actual sale to take place in early 2001 after all
regulatory approvals are obtained.
Independent System Operator
Central Hudson was a member of the New York Power Pool
("NYPP"), whose members, major investor-owned State electric
utility companies, Long Island Lighting Company ("LILCO"), as a
subsidiary of the Long Island Power Authority ("LIPA"), and the
Power Authority of the State of New York ("PASNY"), by agreement,
provided for coordinated operation of their bulk power electric
systems.
As part of the ongoing discussions regarding the
restructuring of the electric industry in New York State referred
to under the caption "Competitive Opportunities Proceeding
Settlement Agreement" of this Note 2, proposals were made to
terminate the NYPP and establish the following: a new market
structure that included as its key elements the establishment of
an Independent System Operator ("ISO") and the New York State
Reliability Council ("Reliability Council"), collectively to
replace the NYPP. On September 15, 1999, FERC gave its final
approval for the ISO and the Reliability Council. In November
1999, the NYPP was terminated and the ISO and Reliability Council
began operations.
The ISO is open to buyers, sellers, consumers and
transmission providers; each of these groups is represented on the
Board of Directors of the ISO, which is a not-for-profit New York
corporation. The Reliability Council's mission is to promote and
preserve the reliability of the bulk power system within New York
68
State through its primary responsibility for the promulgation of
reliability rules; the ISO will develop the procedures necessary
to operate the system within these reliability rules. The
Reliability Council is governed by a committee comprised of
transmission providers and representatives of buyers, sellers, and
consumer and environmental groups.
Central Hudson does not expect that such NYPP restructuring
will have a material adverse effect on its financial position or
results of operations.
NOTE 3 - NINE MILE 2 PLANT
General
The Nine Mile 2 Plant is located in Oswego County, New York,
and is operated by Niagara Mohawk. The Nine Mile 2 Plant is owned
as tenants-in-common by Central Hudson (9% interest), Niagara
Mohawk (41% interest), New York State Electric & Gas Corporation
("NYSEG") (18% interest), LILCO, as a subsidiary of the LIPA (18%
interest), and Rochester Gas and Electric Corporation
("Rochester") (14% interest). The output of the Nine Mile 2
Plant, which has a rated net capability of 1,143 MW, is shared and
the operating expenses of the Plant are allocated to the cotenants
in the same proportions as the cotenants' respective ownership
interests. Central Hudson's share of direct operating expense for
the Nine Mile 2 Plant is included in the appropriate expense
classifications in the accompanying Consolidated Statement of
Income.
Under the Operating Agreement entered into by the cotenants
in January 1993, Niagara Mohawk acts as operator of the Nine Mile
2 Plant, and all five cotenants share certain policy, budget and
managerial oversight functions. The Operating Agreement remains
in effect subject to termination on six months notice.
On September 30, 1999, the Nuclear Regulatory Commission
("NRC") issued a Plant Performance Review on the Nine Mile 2 and
Nine Mile 1 (wholly owned by Niagara Mohawk) Plants. The NRC
stated that it will increase its scrutiny of the operation of the
Nine Mile plants over the next six months as a result of a decline
in the performance of those plants due to weaknesses in areas such
as plant maintenance, work planning and scheduling, and
engineering support. Niagara Mohawk has announced significant
management changes at the Nine Mile plants, including the
reassignment of several experienced employees to the site. If
operating performance of the Nine Mile 2 Plant deteriorates
further, significant expenditures may be required to improve
69
performance, the impact of which on Energy Group cannot now be
predicted.
Niagara Mohawk and NYSEG have each entered into an agreement
to sell their interest in the Nine Mile 2 Plant to AmerGen Energy
Company, L.L.C. ("AmerGen"). AmerGen would replace Niagara Mohawk
as the operator of the Nine Mile 2 Plant. Niagara Mohawk has also
entered into an agreement to sell its 100% interest in the
adjacent Nine Mile Point Unit No. 1 Nuclear Plant ("Nine Mile 1
Plant") to AmerGen.
The cotenant owners of the Nine Mile 2 Plant have rights of
first refusal under the Basic Agreement, dated September 22, 1975,
creating the tenancy-in-common ownership of the Nine Mile 2 Plant.
Pursuant to such rights, each cotenant has the right to acquire
all or a proportional share of another cotenant's interest in the
Nine Mile 2 Plant by matching the terms of the cotenant's sale of
its interest in the Nine Mile 2 Plant to a third party.
In July 1999, AmerGen, Niagara Mohawk and NYSEG filed joint
petitions with the PSC, pursuant to Section 70 of the Public
Service Law of New York seeking the PSC's consent for the transfer
of such interests in the Nine Mile 2 Plant and Nine Mile 1 Plant.
In July 1999, Niagara Mohawk, NYSEG and AmerGen jointly filed for
requisite approvals with FERC with respect to such transfers. In
September 1999, Niagara Mohawk, NYSEG and AmerGen filed jointly
with the NRC for requisite approvals with respect to such
transfers. In early December 1999, NYSEG petitioned the PSC for
an emergency declaratory ruling as to whether Rochester may
acquire additional interests in the Nine Mile 1 Plant and the Nine
Mile 2 Plant. By Order issued in December 1999, the NRC suspended
its proceeding pending the determination of Rochester, Central
Hudson and LILCO of their rights of first refusal with respect to
the proposed transfer to AmerGen.
On December 21, 1999, Rochester exercised its right of first
refusal under the Nine Mile 2 Plant Basic Agreement to match the
AmerGen offer to purchase the collective 59% interests of Niagara
Mohawk and NYSEG in the Nine Mile 2 Plant. Rochester would also
match AmerGen's offer to purchase Niagara Mohawk's 100% interest
in the Nine Mile 1 Plant. Rochester publicly announced that it
had entered into arrangements with a subsidiary of Entergy
Corporation to operate the Nine Mile 2 Plant and the Nine Mile 1
Plant. In December 1999, Central Hudson elected not to exercise
its right of first refusal with respect to the Nine Mile 2 Plant.
Central Hudson can make no prediction as to the outcome of
the proposed acquisition of interests in the Nine Mile 1 and Nine
Mile 2 Plants by AmerGen or Rochester or the effect of any such
acquisition on Central Hudson.
70
Radioactive Waste
Niagara Mohawk has contracted with the U.S. Department of
Energy ("DOE") for disposal of high-level radioactive waste
("spent fuel") from the Nine Mile 2 Plant. Despite a court order
reaffirming the DOE's obligation to accept spent nuclear fuel by
January 31, 1998, the DOE has forecasted the start of operations
of its high-level radioactive waste repository to be no earlier
than 2010. Central Hudson has been advised by Niagara Mohawk that
the Nine Mile 2 Plant spent fuel storage pool has a capacity for
spent fuel that is adequate until 2012. If DOE schedule slippage
should occur, facilities that extend the on-site storage
capability for spent fuel at the Nine Mile 2 Plant beyond 2012
would need to be acquired.
Nuclear Plant Decommissioning Costs
Central Hudson's 9% share of costs to decommission the Nine
Mile 2 Plant is estimated to be approximately $209.6 million
($83.3 million in 1999 dollars) and assumes that decommissioning
will begin shortly after the operating license expires in the year
2026. This estimate is based upon a site-specific study completed
in December 1995.
In order to assist Central Hudson in meeting this obligation,
Central Hudson makes annual contributions of $868,000 to a
qualified external decommissioning trust fund. The total annual
amount allowed in rates is $999,000, but the maximum annual tax
deduction allowed is $868,000. Currently, the difference between
the rate allowance ($999,000) and the amount contributed to the
external qualified fund ($868,000) is recorded as an internal
reserve ($131,000), and the funds are held by Central Hudson.
The qualified external decommissioning trust fund at
December 31, 1999 and 1998, amounted to $17.4 million and $13.9
million, respectively, including net reinvested earnings to date
of $9.0 million. The qualified external decommissioning trust
fund is reflected in the Consolidated Balance Sheet in
"Investments and Other Assets-Other." At December 31, 1999, the
external decommissioning trust fund investments carrying value
approximated fair market value. The amount of accumulated
decommissioning costs recovered through rates (including both the
external fund and the internal reserve) and the net earnings of
the external decommissioning trust fund are reflected in
accumulated depreciation in the Consolidated Balance Sheet and
amount to $19.3 million and $15.6 million at December 31, 1999 and
1998, respectively.
Reference is made to the subcaption "New Accounting Standards
71
and Other FASB Projects - Plant Decommissioning" in Note 1 -
"Summary of Significant Accounting Policies" for details of the
proposed changes in accounting for nuclear decommissioning costs.
Central Hudson believes that if decommissioning costs are
greater than currently estimated, such revised costs would be
recovered in Central Hudson's rates. However, future developments
in the utility industry, including the effects of deregulation and
increasing competition, could change this belief.
NOTE 4 - FEDERAL INCOME TAX
Components of Federal Income Tax
The following is a summary of the components of federal
income tax as reported in the Consolidated Statement of Income:
1999 1998 1997
---- ---- ----
(In Thousands)
Charged to operating expense:
Federal income tax.......... $22,254 $28,408 $19,004
Deferred income tax......... 5,598 1,367 10,186
------- ------- -------
Income tax charged to
operating expense....... 27,852 29,775 29,190
------- ------- -------
Charged (credited) to other
income and deductions:
Federal income tax.......... 1,670 335 (6,844)
Deferred income tax......... (1,378) (1,483) 3,891
------- ------- -------
Income tax (credited)
to other income and
deductions.............. 292 (1,148) (2,953)
------- ------- -------
Total federal income tax.. $28,144 $28,627 $26,237
======= ======= =======
72
Reconciliation: The following is a reconciliation between the
amount of federal income tax computed on income before taxes at
the statutory rate and the amount reported in the Consolidated
Statement of Income:
1999 1998 1997
---- ---- ----
(In Thousands)
Income Available for Common Stock $48,651 $49,314 $51,856
Preferred Stock Dividend...... 3,230 3,230 3,230
Federal income tax............ 23,924 28,743 12,160
Deferred income tax........... 4,220 (116) 14,077
------- ------- -------
Income before taxes......... $80,025 $81,171 $81,323
======= ======= =======
Computed tax @ 35%
statutory rate............... $28,008 $28,396 $28,463
Increase (decrease) to computed
tax due to:
Pension expense............. (3,697) (4,486) (2,855)
Deferred finance charges -
Nine Mile 2 Plant.......... (1,699) (1,700) (1,699)
Deferred environmental
remediation costs.......... (1,683) (578) (286)
Alternative minimum tax..... - (1,048) (7,350)
Tax depreciation............ (550) 4,248 (4,225)
Customer Benefits Account... 1,299 1,906 -
Nine Mile 2 settlement costs 1,402 1,282 1,567
Deferred gas costs.......... 1,078 375 1,216
Deferred storm costs........ - - (2,257)
Other....................... (234) 309 (414)
------- ------- -------
Federal income tax............ 23,924 28,743 12,160
Deferred income tax........... 4,220 (116) 14,077
------- ------- -------
Total federal income tax.... $28,144 $28,627 $26,237
======= ======= =======
Effective tax rate........... 35.0% 35.2% 32.3%
======= ======= =======
73
The following is a summary of the components of deferred
taxes at December 31, 1999 and 1998, as reported in the
Consolidated Balance Sheet:
1999 1998
---- ----
(In Thousands)
Accumulated Deferred Income
Tax Assets:
Future tax benefits on
investment tax credit basis
difference................. $ 13,229 $ 14,033
Unbilled revenues............ 5,718 5,261
Other........................ 37,844 32,938
-------- --------
Accumulated Deferred Income
Tax Assets...................... $ 56,791 $ 52,232
-------- --------
Accumulated Deferred Income
Tax Liabilities:
Tax depreciation............. $179,927 $180,339
Accumulated deferred investment
tax credit................. 24,569 26,062
Future revenues - recovery of
plant basis differences.... 8,787 11,319
Other........................ 42,749 37,186
-------- --------
Accumulated Deferred Income
Tax Liabilities................. 256,032 254,906
-------- --------
Net Accumulated Deferred Income
Tax Liability................... $199,241 $202,674
======== ========
NOTE 5 - SHORT-TERM BORROWING ARRANGEMENTS
Central Hudson has in effect a revolving credit agreement
with four commercial banks which allows it to borrow up to $50
million through October 23, 2001, ("Borrowing Agreement"). The
Borrowing Agreement gives Central Hudson the option of borrowing
at either the higher of the prime rate or the sum of the federal
funds rate plus 1/2 of 1%, or three other money market rates, if
such rates are lower. Compensating balances are not required
under the Borrowing Agreement. In addition, Central Hudson
maintains confirmed lines of credit totaling $1.5 million with
regional banks. There were no outstanding loans under the
Borrowing Agreement or the line of credit at December 31, 1999 or
1998. In order to diversify its sources of short-term financing,
Central Hudson has entered into short-term credit facilities
agreements with several commercial banks. At December 31, 1999,
Central Hudson had outstanding short-term debt of $50 million.
74
Authorization from the PSC limits the amount Central Hudson
may have outstanding, at any time, under all of its short-term
borrowing arrangements to $52 million in the aggregate.
75
NOTE 6 - CAPITALIZATION - CAPITAL STOCK
Common Stock, $5.00 par value; 30,000,000 shares authorized:
Reacquired
Common Stock Paid-In Capital
Shares Amount Capital Stock
Outstanding ($000) ($000) ($000)
----------- ------ ------- ----------
January 1, 1997.................... 17,554,987 $ 87,775 $284,465 $ -
Repurchased under common
stock repurchase plan............ (275,200) - - (9,398)
---------- -------- -------- --------
December 31, 1997.................. 17,279,787 87,775 284,465 (9,398)
Repurchased under common
stock repurchase plan............. (417,700) - - (17,745)
---------- -------- -------- --------
December 31, 1998.................. 16,862,087 87,775 284,465 (27,143)
Cancellation - Reacquired Stock - (3,464) (11,227) 27,143
---------- -------- -------- --------
December 31, 1999.................. 16,862,087 $ 84,311 $273,238 $ -
========== ======== ======== ========
76
Cumulative Preferred Stock, Central Hudson, $100 par value;
1,200,000 shares authorized:
Final Redemption Shares Outstanding
Redemption Price December 31,
Series Date 12/31/99 1999 1998
------ ---------- ---------- ------------------
Not Subject to Mandatory
Redemption:
4 1/2% $107.00 70,300 70,300
4.75% 106.75 20,000 20,000
4.35% 102.00 60,000 60,000
4.96% 101.00 60,000 60,000
------- -------
210,300 210,300
------- -------
Subject to Mandatory
Redemption:
6.20% 10/1/08 (a) 200,000 200,000
6.80% 10/1/27 (b) 150,000 150,000
------- -------
350,000 350,000
------- -------
Total 560,300 560,300
======= =======
(a) Cannot be redeemed prior to October 1, 2003. Subject to
mandatory annual sinking fund payment of $1.0 million
commencing October 1, 2003 with final payment of $15.0
million on the final redemption date.
(b) Cannot be redeemed prior to October 1, 2003. Subject to
mandatory annual sinking fund payment of $600,000 commencing
October 1, 2003 through final redemption date.
Central Hudson had no cumulative preferred stock redemptions
or issuances during 1999 and 1998.
Expenses incurred on issuance of capital stock are
accumulated and reported as a reduction in common stock equity.
These expenses are not being amortized, except that, as directed
by the PSC, certain issuance and redemption costs and unamortized
expenses associated with certain issues of preferred stock that
were redeemed have been deferred and are being amortized over the
remaining lives of the issues subject to mandatory redemptions.
77
NOTE 7 - CAPITALIZATION - LONG-TERM DEBT
Details of long-term debt are as follows:
Series Maturity Date December 31,
------ ------------- -------------------
First Mortgage Bonds: 1999 1998
---- ----
(In Thousands)
6.10% (a) April 28, 2000 $ 10,000 $ 10,000
7.70% (a) June 25, 2000 25,000 25,000
7.97% (a) June 11, 2003 8,000 8,000
7.97% (a) June 13, 2003 8,000 8,000
6.46% (a) Aug. 11, 2003 10,000 10,000
6 1/4%(b) June 1, 2007 4,230 4,325
9 1/4% May 1, 2021 70,000 70,000
8.12% (a) Aug. 29, 2022 10,000 10,000
8.14% (a) Aug. 29, 2022 10,000 10,000
8.375%(b)(d) Dec. 1, 2028 - 16,700
-------- --------
155,230 172,025
Promissory Notes:
1984 Series A (7 3/8%)(c)(e) Oct. 1, 2014 - 16,700
1984 Series B (7 3/8%)(c)(e) Oct. 1, 2014 - 16,700
1985 Series A (Var. rate)(c)(f) Nov. 1, 2020 - 36,250
1985 Series B (Var. rate)(c)(f) Nov. 1, 2020 - 36,000
1987 Series A (Var. rate)(c)(g) Jun. 1, 2027 - 33,700
1987 Series B (Var. rate)(c)(g) Jun. 1, 2027 - 9,900
1998 Series A (4.20%)(c) Dec. 1, 2028 16,700 16,700
5.38% (a) Jan. 15, 1999 - 20,000
5.93% (a) Sep. 10, 2001 15,000 15,000
7.85% (a) Jul. 2, 2004 15,000 15,000
1999 Series C (6%)(a) Jan. 15, 2009 20,000 -
1999 Series A (5.45%)(c) Aug. 1, 2027 33,400 -
1999 Series B (Var. rate)(c) Jul. 1, 2034 33,700 -
1999 Series C (Var. rate)(c) Aug. 1, 2028 41,150 -
1999 Series D (Var. rate)(c) Aug. 1, 2028 41,000 -
-------- --------
215,950 215,950
Secured Notes Payable of Services - 9,023
Unamortized Discount on Debt (629) (573)
Total long-term debt 370,551 396,425
-------- --------
Less Current Portion (35,100) (39,507)
-------- --------
$335,451 $356,918
======== ========
(a) Issued under Central Hudson's Medium Term Note Program.
(b) First Mortgage Bonds issued in connection with the sale by
the New York State Energy Research and Development Authority
("NYSERDA") of tax-exempt pollution control revenue bonds.
(c) Promissory Notes issued in connection with the sale by
NYSERDA of tax-exempt pollution control revenue bonds.
(d) Redeemed March 1, 1999.
(e) Redeemed October 1, 1999.
(f) Redeemed November 1, 1999.
(g) Redeemed September 1, 1999.
78
Long-Term Debt Maturities
The aggregate principal amounts of Central Hudson long-term
debt maturing for the next five years, including sinking fund
requirements, and thereafter are as follows: $35.1 million in
2000, $22.6 million in 2001, including $7.5 million Medium Term
Notes issued January 31, 2000, $.1 million in 2002, $26.1 million
in 2003, $15.1 million in 2004 and $279.7 million thereafter.
First Mortgage Bonds
Central Hudson, on December 2, 1998, refinanced the 8.375%
Series of pollution control bonds, issued on its behalf by NYSERDA
in 1988 in the aggregate principal amount of $16.7 million, which
bonds are supported by Central Hudson's First Mortgage Bonds of
like principal amount. Such bonds were refinanced with lower cost
NYSERDA pollution control bonds, which bonds are supported by
Central Hudson's Promissory Note of like principal amount, at a
fixed rate of 4.20% for their initial term of five years and
thereafter are subject to repricing. The 8.375% Series was
redeemed on March 1, 1999, in order to coordinate with the Article
XXI Mortgage Indenture requirements noted below under the
subcaption "Mortgage Indenture Covenant." Accordingly, these
bonds have been included in the "Current Maturities of Long-Term
Debt" on Central Hudson's Balance Sheet at December 31, 1998.
Medium Term Notes
On January 15, 1999, Central Hudson issued and sold a $20
million tranche of its unsecured Medium Term Notes, Series C,
under its Medium Term Note program. Such notes bear a fixed
annual interest rate of 6.00%, mature on January 15, 2009, and are
not redeemable at the option of Central Hudson prior to maturity.
The net proceeds to Central Hudson from the sale of such notes
were $19,875,000 or 99.875% (before deducting expenses). Such
proceeds were applied to the payment at maturity on January 15,
1999, of a $20 million tranche of Central Hudson's unsecured
Medium Term Notes, Series A, that bore interest at a fixed annual
interest rate of 5.38%.
On January 31, 2000, Central Hudson issued and sold a $7.5
million tranche of its unsecured Medium Term Notes, Series C,
under its Medium Term Note program. Such notes bear a fixed
annual interest rate of 7.05%, mature June 30, 2001, and are not
redeemable prior to maturity. The net proceeds to Central Hudson
from the sale of such notes were $7,488,750 or 99.85% (before
deducting expenses). Such proceeds were applied to the payment of
working capital requirements of Central Hudson.
79
Settlement Agreement
The Agreement permits Central Hudson to transfer up to $100
million to its competitive business affiliates until the earlier
of (i) receipt of the proceeds from the auction of its fossil
generating plants or (ii) June 30, 2001. Approximately $51.5
million has been transferred to such affiliates as of December 31,
1999. Central Hudson may, pursuant to this authorization, issue,
no later than June 30, 2001, up to $100 million of new securities,
including up to one million shares of common stock in furtherance
of its business plan. Central Hudson expects to issue Medium Term
Notes to finance such fund transfers; however, the amount and
timing of any such issuance is not determinable at this time.
NYSERDA
As discussed in the subcaption "First Mortgage Bonds" above,
Central Hudson refunded certain of its outstanding NYSERDA Bonds
in 1999. On August 3, 1999, Central Hudson refinanced its 7 3/8%
Series pollution control bonds issued on its behalf in 1984 in the
aggregate principal amount of $33.4 million by NYSERDA by
refunding such bonds with the proceeds of the issuance and sale on
that date of $33.4 million aggregate principal amount of a new
series of NYSERDA bonds (the "1999 NYSERDA Bonds, Series A"). The
1999 NYSERDA Bonds, Series A carry an effective interest rate of
5.47%, are unsecured and are insured as to payment of principal
and interest as they become due by a municipal bond insurance
policy issued by AMBAC Assurance Corporation. As a part of such
refinancing, the maturity of these bonds was extended from
October 1, 2014 to August 1, 2027.
On August 3, 1999, Central Hudson refinanced its 1985 Series
A and B and its 1987 Series A and B NYSERDA Bonds, $115.85 million
aggregate principal amount, all of which series were subject to
weekly repricing, with three new series of NYSERDA Bonds: 1999
Series B, $33.7 million principal amount, 1999 Series C, $41.15
million principal amount and 1999 Series D, $41.0 million
principal amount (the "1999 NYSERDA Bonds, Series B, C, D"). The
1999 NYSERDA Bonds, Series B, C, D are in multi-modal form, which
allows Central Hudson to convert these series to various variable
rate modes as well as to fix the rate of interest for periods of
time up to the remaining life of the bonds. The 1999 NYSERDA
Bonds, Series B, C, D were initially issued in Dutch Auction mode,
under which the rate of interest is determined every 35 days by an
auction process. The 1999 NYSERDA Bonds, Series B, C, D are
unsecured and insured as to payment of principal and interest as
they become due by a municipal bond insurance policy issued by
AMBAC Assurance Corporation. As part of the refinancing, the
maturities of such refinanced series were extended to August 1,
2028, except that the maturity date of the 1987 Series B, which is
subject to alternative minimum tax, was extended to July 1, 2034.
In its rate orders, the PSC has authorized deferred accounting for
the interest costs on Central Hudson's variable rate NYSERDA
80
Bonds. The authorization provides for full recovery of the actual
interest costs supporting utility operations. The percent of
interest costs supporting utility operations represents
approximately 95% of the total costs. The deferred balances under
such accounting were $5.9 million and $4.9 million at December 31,
1999 and 1998, respectively, and were included in "Regulatory
Assets" in the Consolidated Balance Sheet. Such deferred balances
are to be addressed in future rate cases.
Letters of Credit
Central Hudson had in place irrevocable letters of credit
which supported certain payments required to be made on the 1985
and 1987 NYSERDA Bonds. Such letters of credit were terminated in
1999 as part of the refunding of the underlying NYSERDA bonds in a
format that does not require such letters of credit.
Debt Expense
Expenses incurred on debt issues and any discount or premium
on debt are deferred and amortized over the lives of the related
issues. Expenses incurred on debt redemptions prior to maturity
have been deferred and are generally being amortized over the
shorter of the remaining lives of the related extinguished issues
or the new issues as directed by the PSC.
Debt Covenants
Certain debt agreements require the maintenance by Central
Hudson of certain financial ratios and contain other restrictive
covenants.
Mortgage Indenture Covenant
Article XXI of Central Hudson's Indenture of Mortgage,
pursuant to which Central Hudson's First Mortgage Bonds are
outstanding (the "Mortgage"), requires generally that, to the
extent that the cost of property additions (as defined in the
Mortgage) acquired by Central Hudson during a calendar year is
less than the allowance for depreciation on property subject to
the Mortgage (calculated pursuant to the Mortgage) for such
calendar year, Central Hudson must deposit cash with the Mortgage
Trustee in the amount of such deficiency, less certain credits
available to Central Hudson under the Mortgage (the "Article XXI
Deficiency").
Any cash deposited with the Mortgage Trustee as a result of
an Article XXI Deficiency may be withdrawn by Central Hudson in an
amount equal to the cost of property additions acquired by Central
Hudson subsequent to such calendar year, or may be applied by the
Mortgage Trustee, at the request of Central Hudson, to redeem or
81
purchase outstanding mortgage bonds in accordance with the
provisions of the Mortgage. If any such cash left on deposit with
the Mortgage Trustee for 12 consecutive months or more is in
excess of $350,000, the amount of such cash in excess of $250,000
must be applied by the Mortgage Trustee to redeem or purchase
mortgage bonds, subject to certain exceptions set forth in the
Mortgage. Article XXI of the Mortgage will remain in effect so
long as any of Central Hudson's mortgage bonds of any series
created prior to 1994 are outstanding under the Mortgage.
For calendar year 1998, Central Hudson experienced an Article
XXI Deficiency in the approximate amount of $16.3 million, in
satisfaction of which it deposited with the Mortgage Trustee cash
in that amount received by Central Hudson from the proceeds of the
1998 NYSERDA Bonds. Such cash deposited was applied by the
Mortgage Trustee, at the request of Central Hudson, to the
redemption, on March 1, 1999, of Central Hudson's First Mortgage
Bonds, 8.375% Series due 2028. For calendar year 1999, Central
Hudson experienced an Article XXI Deficiency in the approximate
amount of $7.6 million, in satisfaction of which it deposited with
the Mortgage Trustee cash in that amount. Such cash deposited
will be applied by the Mortgage Trustee, at the request of Central
Hudson to the redemption, on April 28, 2000, of the 6.10% Series
Mortgage Bonds.
NOTE 8 - POSTEMPLOYMENT BENEFITS
Pension Benefits
Central Hudson has a non-contributory retirement income plan
("Retirement Plan") covering substantially all of its employees
and certain employees of Central Hudson Enterprises Corporation
("CHEC"), an indirectly, wholly-owned subsidiary of Energy Group.
The Retirement Plan provides pension benefits that are based on
the employee's compensation and years of service. It has been
Central Hudson's practice to provide periodic updates to the
benefit formula stated in the Retirement Plan.
Central Hudson's funding policy is to make annual
contributions equal to the amount of net periodic pension cost,
but not in excess of the maximum allowable tax-deductible
contribution under the federal income tax law nor less than the
minimum requirement under the Employee Retirement Income Security
Act of 1974.
The accounting for pension benefits reflects adoption of PSC-
prescribed provisions which, among other things, requires ten-year
amortization of actuarial gains and losses and deferral of
differences between actual pension expense and rate allowances.
82
In addition to the Retirement Plan, Central Hudson sponsors
an Executive Deferred Compensation Plan for eligible officers and
a non-qualified Retirement Benefit Restoration Plan.
Other Postretirement Benefits
Central Hudson provides certain health care and life
insurance benefits for retired employees through its post-
retirement benefit plan ("Benefit Plan") (this includes retirees
of CHEC). Substantially all of Central Hudson's employees may
become eligible for these benefits if they reach retirement age
while working for Central Hudson. These and similar benefits for
active employees are provided through insurance companies whose
premiums are based on the benefits paid during the year. In order
to reduce the total costs of these benefits, Central Hudson
requires employees who retired on or after October 1, 1994, to
contribute toward the cost of such benefits.
Central Hudson is fully recovering its net periodic
postretirement costs in accordance with PSC guidelines. Under
these guidelines, the difference between the amounts of post-
retirement benefits recoverable in rates and the amounts of post-
retirement benefits determined by the actuary under SFAS 106,
"Employers Accounting for Postretirement Benefits Other Than
Pensions," are deferred as either a regulatory asset or liability,
as appropriate.
83
Reconciliations of Pension and OPEB Plans' benefit obligation, plan assets and funded
status, as well as the components of net periodic pension cost and the weighted average
assumptions are as follows:
Pension Benefits Other Benefits
---------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
In Thousands In Thousands
Change in Benefit
Obligation:
Benefit obligation at
beginning of year $270,504 $225,038 $ 93,471 $ 78,953
Service cost 6,417 5,205 2,525 2,076
Interest cost 17,546 16,234 5,832 5,610
Participant contributions - - 206 -
Plan amendments 10,633 14,439 - -
Benefits paid (13,344) (12,433) (3,396) (2,973)
Actuarial (gain)or loss (38,629) 22,021 (18,641) 9,805
Benefit Obligation at End of -------- -------- -------- --------
Year $253,127 $270,504 $ 79,997 $ 93,471
Change in Plan Assets:
Fair value of plan assets at
beginning of year $309,037 $316,852 $ 57,180 $ 45,109
Actual return on plan assets 46,487 6,040 5,166 10,607
Employer contributions 188 72 4,448 5,489
Participant contributions - - 206 -
Benefits paid (13,344) (12,433) (2,733) (3,569)
Administrative Expenses (995) (1,494) (259) (456)
Fair Value of Plan Assets at -------- -------- -------- --------
End of Year $341,373 $309,037 $ 64,008 $ 57,180
84
Pension Benefits Other Benefits
---------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
In Thousands In Thousands
Reconciliation of Funded status
Funded status $ 88,246 $ 38,533 $(15,989) $(36,291)
Unrecognized actuarial (gain) (73,051) (18,985) (28,862) (9,800)
Unrecognized transition
(asset) or obligation (1,430) (2,065) 40,465 43,579
Unamortized prior service cost 29,309 20,179 (119) (129)
-------- -------- -------- --------
Accrued Benefit Cost $ 43,074 $ 37,662 $ (4,505) $ (2,641)
Components of Net Periodic
Benefit Cost
Service cost $ 6,417 $ 5,205 $ 2,525 $ 2,076
Interest cost 17,546 16,234 5,832 5,610
Expected return on plan assets (24,314) (27,325) (3,756) (2,867)
Amortization of prior service
cost 1,503 552 (10) (10)
Amortization of transitional
(asset) or obligation (635) (635) 3,114 3,114
Recognized actuarial (gain) or
loss (5,742) (10,162) (1,686) (1,789)
-------- -------- -------- --------
Net Periodic Benefit Cost $ (5,225) $(16,131) $ 6,019 $ 6,134
Weighted-average assumptions as
of December 31
Discount rate 7.75% 6.50% 7.75% 6.50%
Expected long-term rate of
return on plan assets 9.75% 8.50% 6.80% 6.80%
Rate of compensation increase 4.00% 4.00% 4.00% 4.00%
85
For measurement purposes, a 9.0% (9.4% for participants over
age 65) annual rate of increase in the per capita cost of covered
health benefits is assumed for 2000. The rate is assumed to
decrease gradually to 5.5% for 2008 and remain at that level
thereafter.
Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plan. A one-
percentage-point change in assumed health care cost trend rates
would have the following effects:
One-Percentage- One-Percentage-
Point Decrease Point Increase
--------------- ---------------
Effect on total of service
and interest cost compo-
nents for 1999 $ 1,254,000 $(1,086,000)
Effect on year-end 1999
postretirement benefit
obligation $10,480,000 $(9,266,000)
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Nuclear Liability Insurance
The Price-Anderson Act is a federal law which limits the
public liability which can be imposed with respect to a nuclear
incident at a licensed nuclear electric generating facility. Such
Act also provides for assessment of owners of all licensed nuclear
units in the United States for losses in excess of certain limits
in the event of a nuclear incident at any such licensed unit.
Under the provisions of the Price-Anderson Act, Central Hudson's
potential assessment (based on its 9% ownership interest in the
Nine Mile 2 Plant and assuming that the other Nine Mile 2 Plant
cotenants were to contribute their proportionate shares of the
potential assessments) would be $7.6 million (subject to
adjustment for inflation) and Central Hudson could be assessed
$380,000 (subject to adjustment for inflation) as an additional
surcharge, but would be limited to a maximum assessment of
$900,000 in any year with respect to any nuclear incident. The
public liability insurance coverage of $200 million required under
the Price-Anderson Act for the Nine Mile 2 Plant is provided
through Niagara Mohawk.
Central Hudson also carries insurance to cover the additional
costs of replacement power (under a Business Interruption and/or
Extra Expense Insurance Policy) incurred by Central Hudson in the
event of a prolonged accidental outage of the Nine Mile 2 Plant.
This insurance arrangement provides for payments of up to $409,000
per week if the Nine Mile 2 Plant experiences a continuous
86
accidental outage which extends beyond 12 weeks. Such payments
will continue for 52 weeks after expiration of the 12-week
deductible period, and thereafter the insurer shall pay 80% of the
weekly indemnity for a second and third 52-week period. Subject
to certain limitations, Central Hudson may request prepayment, in
a lump sum amount, of the insurance payments which would otherwise
be paid to it with respect to said third 52-week period,
calculated on a net present value basis.
Central Hudson is insured as to its respective interest in
the Nine Mile 2 Plant under property damage insurance provided
through Niagara Mohawk. The insurance coverage provides $500
million of primary property damage coverage for both Units of the
Nine Mile Point Nuclear Station and $2.25 billion of excess
property damage coverage solely for Unit 2 of that station. Such
insurance covers decontamination costs, debris removal and repair
and/or replacement of property.
Central Hudson intends to maintain, or cause to be
maintained, insurance against such risks at the Nine Mile 2 Plant,
provided such coverage can be obtained at an acceptable cost.
Environmental Matters
General: On an ongoing basis, Central Hudson assesses
environmental issues which could impact Central Hudson and its
customers.
Water: In 1992 Central Hudson filed renewal applications for
the State Pollution Discharge Elimination System ("SPDES") permits
for its Roseton and Danskammer Plants. Such permits are required
to operate the Plants' cooling water systems and wastewater
treatment systems. Central Hudson is a party to an active
proceeding with other New York utilities before the New York State
Department of Environmental Conservation ("NYSDEC") related to the
processing of the SPDES permit renewal application for the Roseton
Plant. The utility participants in the proceeding prepared and
submitted a revised Draft Environmental Impact Statement ("DEIS")
on December 15, 1999. At this stage of the proceeding, Central
Hudson can make no determination as to the outcome of the
proceeding or the impact, if any, on Central Hudson's financial
position.
In 1999 Riverkeeper, Inc., commenced a citizen suit, in the
United States District Court for the Southern District of New
York, against Central Hudson under Section 11 of the Endangered Species
Act, 16 U.S.C. Section 1540, seeking injunctive relief from Central
Hudson's alleged unpermitted takings of the endangered shortnose
sturgeon through Central Hudson's Roseton and Danskammer Plants on
the Hudson River. Central Hudson does not believe it has violated
such Act and intends vigorously to defend this action. Central
87
Hudson can make no prediction as to the outcome of this
litigation.
Air: The Clean Air Act Amendments of 1990 ("CAA Amendments")
added several new programs which address attainment and
maintenance of national ambient air quality standards. These
include control of emissions from fossil-fueled electric
generating plants that affect "acid rain" and ozone. As of
December 31, 1999, Central Hudson believes it is in full
compliance with regulations promulgated to date under the CAA
Amendments. Ongoing federal and state clean air initiatives may
require Central Hudson to reduce its emissions in the future.
Central Hudson's emissions of nitrogen oxides ("NOx") were
subject to additional controls, effective May 31, 1995 and May 1,
1999, under Title I of the CAA Amendments. Central Hudson has
installed appropriate controls in compliance with the May 31, 1995
requirements. The 1999 requirements were addressed by fuels and
operation management. Backend controls were not required. The
NYSDEC has recently promulgated regulations requiring a third
round of NOx reductions to go into effect in 2003.
In July 1997, the Environmental Protection Agency ("EPA")
promulgated proposed revisions to the National Ambient Air Quality
Standards for ozone and particulates. These regulations have been
stayed by the courts. Further action by the EPA is pending.
Beginning in 1997 the NYSDEC, began an initiative seeking
penalties from all New York electric utilities for past opacity
variances and requiring various opacity reduction measures and
stipulated penalties for future excursions after execution of a
consent order. Each New York State electric utility, including
Central Hudson, is in the process of negotiating, or has
negotiated, the various terms and conditions of a draft consent
order with the NYSDEC. Central Hudson and the NYSDEC entered into
an Order on Consent, effective April 26, 1999, pursuant to which
Central Hudson, in settlement of a claim by the NYSDEC that
emissions from the Roseton and Danskammer Plants exceeded
applicable opacity emissions standards, agreed to a civil penalty
of $1.5 million for both Plants, of which $500,000 was paid to the
NYSDEC. The remaining $1.0 million of such penalty was suspended
upon Central Hudson causing certain environmentally beneficial
projects in Dutchess and Orange Counties, New York to be
implemented, as set forth in said Order. Said Order also provides
for (i) a new level of stipulated penalty provisions for future
opacity exceedences, and (ii) an Opacity Reduction Program, all
with respect to said Plants.
In October 1999, New York State Governor Pataki indicated he
will cause a rulemaking proceeding to be initiated intended to
lead to regulations requiring electric generation plants in New
York State to reduce sulfur dioxide and NOx emissions beyond the
88
reductions mandated by federal law. Until the issuance and
analysis of any such regulations, Central Hudson can make no
prediction as to the effect of such regulations, on the cost of
operating the Danskammer and Roseton Plants or whether or not
capital improvements would be required.
In October 1999, the New York State Attorney General
indicated he is investigating eight older New York State power
plants for possible violations of federal and state air emission
rules. By letter dated October 12, 1999 from the Office of said
Attorney General, Central Hudson was notified that such
investigation indicates that Central Hudson, "may have
constructed, and continues to operate, major modifications to its
Danskammer [Plant...] without obtaining [certain] requisite
preconstruction permits." Such letter requests that Central
Hudson provide certain information with respect to such
investigation. The NYSDEC, by subpoena dated January 13, 2000,
has requested substantially the same information from Central
Hudson. Central Hudson believes that the NYSDEC has assumed
responsibility for such investigation, but Central Hudson has not
received formal notification thereof. Central Hudson is reviewing
this matter in depth, and believes any required permits were
obtained.
Former Manufactured Gas Plant Facilities
City of Newburgh: In October 1995, Central Hudson and the
NYSDEC entered into an Order on Consent regarding the development
and implementation of an investigation and remediation program for
Central Hudson's former coal gasification plant ("Central Hudson
Site"), the City of Newburgh, New York's ("City") adjacent and
nearby property and the adjoining areas of the Hudson River.
Initial remediation investigations were completed in September
1997. The investigations revealed the presence of contaminants in
the soil in portions of the study area. In the majority of the
study area contaminants were found deep within the ground and are
not a threat to the public. Contaminated groundwater is
associated with the contaminated soil but it is not used as a
drinking water supply. Impacted sediments were also present
within the Hudson River adjacent to the City's property which is
the location of its sewage treatment plant.
In May 1995, the City filed suit against Central Hudson in
the United States District Court for the Southern District of New
York. The City alleged that Central Hudson released certain
allegedly hazardous substances without a permit from the Central
Hudson Site in Newburgh, New York into the ground and into
adjacent and nearby property of the City, in violation of the
federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the federal Resources Conservation and
Recovery Act ("RCRA") and the federal Emergency Planning and
89
Community Right to Know Act ("EPCRA"). The City also alleged a
number of nuisance, trespass, damage and indemnification claims
pursuant to New York State law.
The City sought injunctive relief against such alleged
disposal, storage or release of hazardous substances at the
Central Hudson Site, remediation and abatement of the conditions
alleged to lead to endangerment of the City's property, payment of
restitution of clean-up costs and monetary damages of at least $70
million, assessment of certain civil penalties under RCRA, CERCLA
and EPCRA, and recovery of the City's costs and attorneys' fees in
such action.
Among the City's allegations was that the presence of
contamination on its site was preventing it from making required
improvements to its sewage treatment plant ("STP") on the site.
In partial settlement of the City's claims against Central Hudson,
the City and Central Hudson entered into an agreement, in July
1998, whereby the City would construct a clarifier at the STP and
deal appropriately with any contaminants that were encountered
during the construction, and Central Hudson would fund these
construction and related activities. Construction of the
clarifier was completed in July 1999; however, all invoices for
the construction costs and related work have not yet been
received. It is expected that the total cost will be
approximately $2.9 million.
The trial on this matter began in November 1998, and in
December 1998, the jury made its determination that the proper
cost of environmental remediation on the City's property is $20
million and Central Hudson's share is 80% (or $16 million). In
addition, the jury awarded the City $435,000 in damages for
increased costs of future operations of the City's STP due to the
existence of contaminants.
Subsequent to the December 1998 jury award referred to above,
Central Hudson and the City entered into a Settlement Agreement,
dated May 4, 1999, which received court approval on the same date.
Under the Settlement Agreement: (i) said lawsuit was disposed
of and the City's claims were dismissed with prejudice; (ii) the
City waived its right to have the $16 million awarded by the jury
for the cost of said environmental remediation on the City's
property and Central Hudson agreed to remediate the City's
property at Central Hudson's cost pursuant to said NYSDEC's
October 1995 Order on Consent; (iii) Central Hudson paid the City
$2 million and will pay the City $500,000 in the future on the
occurrence of certain events; (iv) if the total cost of such
remediation is less than $16 million; Central Hudson will pay the
City an additional amount on a formula basis up to $500,000
depending on the extent to which the cost of remediation is less
than $16 million; and (v) Central Hudson agreed to indemnify and
90
hold harmless the City against claims or lawsuits by any third
party against the City alleging injury, damages or violation of
law caused by or arising from the alleged contamination in said
lawsuit having migrated from Central Hudson's to the City's
property.
Pursuant to said October 1995 Order on Consent with the
NYSDEC, Central Hudson conducted additional studies as part of the
required remedial investigation. The results of these studies
were provided to the NYSDEC which determined that the contaminants
found in such investigation may pose a significant threat to human
health or the environment. As a result, Central Hudson developed
a draft Feasibility Study Report ("Report") which was filed with
the NYSDEC on December 28, 1999. The Report summarizes the nature
and location of the contamination at and around the City's
property, evaluates the potential ecological and human health
risks associated with that contamination and discusses clean-up
alternatives. The Report recommends (1) limited soil removal from
the southern portion of the City's property, where there is
elevated contamination and (2) capping of contaminated sediments
in the Hudson River. The estimated costs for the proposed
remediation activities are $3 million for the soil removal and
$2.5 million for the capping of sediment in the Hudson River.
Central Hudson, in December 1999, provided the Report to NYSDEC
and to the City. Central Hudson expects that both NYSDEC and the
City will respond with comments on the Report. Subject to
anticipated additional negotiations among Central Hudson, the City
and NYSDEC, NYSDEC will issue a Proposed Remedial Action Plan, for
public review and comment, which is expected to be issued in the
second quarter of 2000. Following such public review, NYSDEC will
issue a Record of Decision which will specify a remediation plan
for Central Hudson's implementation. Such remediation plan is not
expected to be issued until late in 2000.
As of December 31, 1999, Central Hudson recorded liabilities
of $6.5 million regarding this matter which are included in
"Deferred Credits and Other Liabilities - Other" in its
Consolidated Balance Sheet.
By letter dated June 3, 1997, Central Hudson received
authorization from the PSC to defer costs related to this matter,
including legal defense costs but excluding Central Hudson's
labor, related to environmental site investigation and remediation
actions. Central Hudson has deferred costs expended to date that
it expects to be recovered in future rates. The cumulative
deferred costs through 1999 amounted to $15.1 million and were
included in "Deferred Charges - Regulatory Assets" in the
Consolidated Balance Sheet.
Central Hudson can make no prediction as to the full
financial effect this matter will have on it, including the
extent, if any, of insurance reimbursement and including
91
implementation of environmental clean-up under said Order on
Consent. However, Central Hudson has put its insurers on notice
of this matter and Central Hudson intends to seek reimbursement
from such insurers for the cost of any such liability. Two of
such insurers have denied coverage.
Former Manufactured Gas Plant Sites: In February 1999, the
NYSDEC informed Central Hudson of its intention to perform site
assessments at the sites of three manufactured gas plants formerly
operated by Central Hudson, two of which are located in
Poughkeepsie, New York and one in Beacon, New York. Central
Hudson will conduct the site assessments under agreements
negotiated with NYSDEC for each site. The purpose of the site
assessments will be to determine if there are significant
quantities of residues from the manufactured gas operations on the
sites. If NYSDEC determines that significant quantities of
residues are not present or that the residues pose no threat to
public health or the environment given the current uses of the
sites, NYSDEC will not require additional investigations and/or
remediation at the respective sites. If, after its review of each
site assessment, NYSDEC determines that significant residues are
present, or that residues pose a threat to public health or the
environment at a site, Central Hudson will likely be responsible
for any required remediation. Central Hudson can make no
prediction as to the outcome of these matters at present. Central
Hudson has put its comprehensive general liability insurers on
notice of these matters, and Central Hudson intends to seek
reimbursement from its insurance carriers for amounts for which it
may become liable.
Central Hudson has requested from the PSC permission to defer
the incremental costs of the investigations and potential
remediation of these sites.
Asbestos Litigation
Since 1987, Central Hudson, along with many other parties,
has been joined as a defendant or third-party defendant in 1,972
asbestos lawsuits commenced in New York State and federal courts.
The plaintiffs in these lawsuits have each sought millions of
dollars in compensatory and punitive damages from all defendants.
The cases were brought by or on behalf of individuals who have
allegedly suffered injury from exposure to asbestos, including
exposure which allegedly occurred at Central Hudson facilities.
To date, of the 1,972 cases that had been brought against
Central Hudson, 1,035 remained pending against Central Hudson. Of
the 937 cases no longer pending against Central Hudson, 810 have
been dismissed or discontinued, and Central Hudson has settled 127
cases. Central Hudson is presently unable to assess the validity
of the remaining asbestos lawsuits; accordingly, it cannot
92
determine the ultimate liability relating to these cases. Based
on information known to Central Hudson at this time, including
Central Hudson's experience in settling asbestos cases and in
obtaining dismissals of asbestos cases, Central Hudson believes
that the cost to be incurred in connection with the remaining
lawsuits will not have a material adverse effect on Central
Hudson's financial position or results of operations.
Central Hudson is insured under successive comprehensive
general liability policies issued by a number of insurers, has put
such insurers on notice of the asbestos lawsuits and has demanded
indemnification reimbursement for its defense costs and liability.
In December 1994, Central Hudson commenced a lawsuit against eight
such insurers in the New York State Supreme Court, Dutchess
County. By order dated October 2, 1998, the Court granted a
motion by Central Hudson against one insurer, Travelers Casualty
and Surety Company (f/k/a The Aetna Casualty and Surety Company)
("Travelers"), seeking a declaration that Travelers owed Central
Hudson the cost of defense in the underlying asbestos litigation.
Travelers has since paid Central Hudson approximately $3.2
million, consisting of the undisputed portion of Central Hudson's
past defense costs together with prejudgment interest. Travelers
has made this payment subject to the October 2, 1998 order of the
Court and without prejudice to its rights to appeal or to seek
contribution from the other insurers and from Central Hudson.
Purchased Power Commitments
Under federal and New York State laws and regulations,
Central Hudson is required to purchase the electrical output of
unregulated cogeneration facilities ("IPPs") which meet certain
criteria for Qualifying Facilities, as such term is defined in the
appropriate legislation. Purchases are made under long-term
contracts which require payment at rates higher than what can be
purchased on the wholesale market. These costs are currently
fully recoverable through Central Hudson's electric fuel
adjustment clause, with one exception, for which the impaired
portion of the contract has been recognized as a reduction to
income. IPPs with which Central Hudson has contracts represent 6%
of Central Hudson's energy purchases in 1999.
Other Matters
Central Hudson is involved in various other legal and
administrative proceedings incidental to its business which are in
various stages. While these matters collectively involve
substantial amounts, it is the opinion of management that their
ultimate resolution will not have a material adverse effect on
Central Hudson's financial position or results of operations.
93
Included in such proceedings are lawsuits against Central
Hudson arising from a November 1992 explosion in a dwelling in
Catskill, New York. One of these lawsuits involving claims for
personal injury and property damages was settled in December 1999
in amounts not considered material to Central Hudson. A lawsuit
alleging personal injuries and property damage and compensatory
and punitive damages in the sum of $4 million remains. In January
2000, the court dismissed this lawsuit on the merits because of
plaintiff's failure to prosecute the case.
In addition to the above, on February 12, 1994, a fire and an
explosion destroyed a residence in the Village of Wappingers
Falls, New York, in Central Hudson's service territory. A short
time later, a second explosion and fire destroyed a nearby
commercial facility. Lawsuits commenced against Central Hudson
arising out of the Wappingers Falls incident include one alleging
property damage and seeking recovery of $250,000 in compensatory
damages and one alleging personal injuries and property damage and
seeking an unspecified amount of damages against Central Hudson.
All such lawsuits have been consolidated; however, no trial date
has been set.
Central Hudson is investigating the Wappingers Falls claims
and presently has insufficient information on which to predict
their outcome. Central Hudson believes that Central Hudson has
adequate insurance to cover any compensatory damages that might be
awarded.
NOTE 10 - SEGMENTS AND RELATED INFORMATION
Central Hudson's primary reportable operating segments are
its regulated electric and gas operations. For 1999, "Other"
includes the activity of Energy Group prior to the Holding Company
Restructuring on December 15, 1999.
Certain additional information regarding these segments is
set forth in the following table. General corporate expenses,
property common to both segments and depreciation of such common
property have been allocated to the segments in accordance with
practice established for regulatory purposes.
94
*Central Hudson Gas & Electric Corporation
Segment Disclosure - FAS 131
Year Ended December 31,
1999
----
In Thousands Electric Gas Other Total
------------ -------- --- ----- -----
Net revenues from
external customers $ 427,729 $ 93,099 $ - $ 520,828
Intersegment net
revenues 80 1,032 - 1,112
---------- -------- ----- ----------
Total net revenues 427,809 94,131 - 521,940
Depreciation and
amortization 42,157 4,756 - 46,913
Interest expense 25,803 4,201 - 30,004
Interest income 2,133 314 - 2,447
Income tax (credit)
expense 24,170 3,974 - 28,144
Net Income 44,383 6,065 1,433 51,881
Segment assets 1,078,945 180,357 88 1,335,899
Construction
Expenditures 38,346 8,149 - 46,495
1998
----
In Thousands Electric Gas Other Total
------------ -------- --- ----- -----
Net revenues from
external customers $ 418,427 $ 83,899 $ - $ 502,326
Intersegment net
revenues 80 1,063 - 1,143
Total net revenues 418,507 84,962 - 503,469
---------- -------- ------- ----------
Depreciation and
amortization 40,996 4,564 - 45,560
Interest expense 23,803 3,875 - 27,678
Interest income 695 87 - 782
Income tax (credit)
expense 24,944 3,683 - 28,627
Net Income 45,525 6,336 683 52,544
Segment assets 1,093,455 169,587 52,996 1,316,038
Construction
Expenditures 39,183 6,478 - 45,661
95
Central Hudson Gas & Electric Corporation
Segment Disclosure - FAS 131
Year Ended December 31,
1997
----
In Thousands Electric Gas Other Total
------------ -------- --- ----- -----
Net revenues from
external customers $ 416,346 $103,044 $ - $ 519,390
Intersegment net -
revenues 83 804 887
---------- -------- ------ ----------
Total net revenues 416,429 103,848 - 520,277
Depreciation and
amortization 39,480 4,384 - 43,864
Interest expense 23,186 3,464 - 26,650
Interest income 1,970 290 - 2,260
Income tax (credit)
expense 21,405 4,832 - 26,237
Net Income 47,787 6,937 362 55,086
Segment assets 1,067,042 163,021 22,027 1,252,090
Construction
Expenditures 36,685 7,183 - 43,868
NOTE 11 - FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it
is practicable to estimate that value:
Cash and Temporary Cash Investments: The carrying amount
approximates fair value because of the short maturity of those
instruments.
Cumulative Preferred Stock Subject to Mandatory Redemption:
The fair value is estimated based on the quoted market price of
similar instruments.
Long-Term Debt: The fair value is estimated based on the
quoted market prices for the same or similar issues or on the
current rates offered to Central Hudson for debt of the same
remaining maturities and quality.
Notes Payable: The carrying amount approximates fair value
because of the short maturity of those instruments.
96
The estimated fair values of Central Hudson's financial
instruments are as follows:
December 31, 1999
-----------------
Carrying Fair
Amount Value
-------- -----
(In Thousands)
Cumulative preferred stock subject
to mandatory redemption............. $ 35,000 $ 34,455
Long-term debt (including
current maturities)................. 370,551 365,741
December 31, 1998
-----------------
Carrying Fair
Amount Value
-------- -----
Cumulative preferred stock subject
to mandatory redemption............. $ 35,000 $ 37,083
Long-term debt (including
current maturities)................. 396,425 413,905
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial data for each quarterly period within 1999 and 1998
are presented
below:
Income
Available
Operating Operating for
Revenues Income Common Stock
-------- ------ ------------
(In Thousands)
------------------------------------------
Quarter Ended:
1999
----
March 31........ $146,471 $24,991 $18,297
June 30......... 117,035 14,439 8,630
September 30.... 134,323 18,100 13,064
December 31..... 124,111 12,834 8,504
1998
----
March 31........ $143,882 $24,003 $18,360
June 30......... 112,106 14,404 9,234
September 30.... 125,723 18,350 13,003
December 31..... 121,758 14,543 8,717
97
SCHEDULE II - Reserves
Additions
---------
Balance at Charged to Charged to
Beginning Cost and Other
Description of Period Expenses Accounts
- ----------- --------- ---------- ----------
YEAR ENDED DECEMBER 31, 1999
Operating Reserves........ $5,994,600 $2,158,546 $ 520,700
========== ========== ===========
Reserve for Uncollectible
Accounts................. $2,400,000 $2,972,556 $ -
========== ========== ===========
YEAR ENDED DECEMBER 31, 1998
Operating Reserves........ $6,581,614 $7,474,979 $ 103,700
========== ========== ===========
Reserve for Uncollectible
Accounts................. $2,800,000 $2,638,719 $ -
========== ========== ===========
YEAR ENDED DECEMBER 31, 1997
Operating Reserves........ $4,755,264 $2,142,391 $ 334,700
========== ========== ==========
Reserve for Uncollectible
Accounts................. $3,200,000 $3,493,405 $ -
========== ========== ==========
98
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------ ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------------------
None.
PART III
--------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF CENTRAL HUDSON
------- --------------------------------------------------
The information with respect to the directors and executive
officers of Central Hudson required hereunder is incorporated by
reference to Item 1 herein, under the caption "Directors and
Executive Officers."
ITEM 11 - EXECUTIVE COMPENSATION
------- ----------------------
The Summary Compensation Table set forth below includes
compensation information on the Chairman of the Board and Chief
Executive Officer of Central Hudson and each of Central Hudson's
four (4) most highly compensated executive officers, whose
salaries in 1999 exceeded $100,000, for services rendered to
Central Hudson and its affiliates:
99
Summary Compensation Table
ANNUAL COMPENSATION
-------------------
Name and Principal Position(s) Year Salary(1) Bonus Compensation(2)
- ------------------------------ ---- --------- ----- ---------------
Paul J. Ganci, Chairman of the 1999 $341,569 $20,100(3) $5,000
Board and Chief Executive Officer 1998 $322,500 $22,800(3) $5,000
of Central Hudson and Chairman of 1997 $280,250 $21,280(3) $4,750
the Board, President and Chief
Executive Officer of Energy Group
Carl E. Meyer, President and Chief 1999 $242,529 $ 2,471(4) $5,000
Operating Officer of Central Hudson 1998 $212,000 $ 3,582(4) $5,000
and Executive Vice President 1997 $186,750 $ 6,331(4) $4,750
Energy Group
Allan R. Page, Vice President of 1999 $229,462 $ 2,205(4) $5,000
Central Hudson; Executive Vice 1998 $189,199 $ 3,180(4) $5,000
President of Energy Group and 1997 $165,750 $ 6,331(4) $4,750
President and Chief Operating
Officer of Services
Joseph J. DeVirgilio, Jr., 1999 $177,436 $ 1,897(4) $5,000
Senior Vice President - 1998 $162,870 $ 2,925(4) $5,000
Corporate Services and 1997 $152,720 $ 6,194(4) $4,750
Administration of Central Hudson
Ronald P. Brand, Senior Vice 1999 $170,174 $ 1,826(4) $5,000
President - Engineering, 1998 $153,822 $ 2,817(4) $5,000
Environmental Affairs and 1997 $141,161 $ 5,714(4) $4,750
Special Projects of Central Hudson
_________
(1) This base salary amount includes amounts deferred pursuant to Central Hudson's (i) Flexible
Benefits Plan, which Plan is established pursuant to Section 125 of the Internal Revenue Code of
1986, as amended ("Code"), which permits those electing to participate to defer salary, within
specified limits, to be applied to qualified medical and/or child care benefit payments and (ii)
Savings Incentive Plan ("SIP"), a "defined contribution" plan which meets the requirements of the
Code, including Code Section 401(k), which, among other things, permits, within limitations,
participants to tax-defer base salary, and, within limits, provides for Central Hudson contributions to
participants.
(2) These are amounts contributed by Central Hudson for the benefit of the named individual under the
SIP.
(3) Compensation paid pursuant to the terms of Central Hudson's Executive Incentive Compensation
Plan ("Executive Incentive Plan"), which terms are more fully described below under the caption
"Report on Executive Compensation - Central Hudson Executive Incentive Plan."
(4) Compensation paid pursuant to the terms of Central Hudson's Management Incentive Plan, which
terms are more fully described below under the caption "Report on Executive Compensation -
Central Hudson Management Incentive Plan."
100
Pensions/Deferred Compensation Plans
Central Hudson Retirement Income Plan
- -------------------------------------
Central Hudson's Retirement Income Plan ("Retirement Plan")
is a "defined benefit" plan, which meets the requirements of the
Code, and applies to all employees of Central Hudson and those
affiliates which have adopted that Plan, including the individuals
listed in the table under the above caption "Executive
Compensation." In 1999, there were no contributions made to the
Retirement Plan as a result of its full-funding status for Federal
income tax purposes. The Retirement Plan provides for retirement
benefits related to the participant's annual base salary for each
year of eligible employment. Retirement Plan benefits depend upon
length of service, age at retirement and earnings during years of
participation in the Retirement Plan and any predecessor plans. A
participant's benefits under the Retirement Plan are determined as
the accumulation, over that participant's career, of a percentage
of each year's base salary. For periods on and after October 1,
1998, the percentage is 2% of base salary, except that for years
in which the participant is over 50 years of age such percentage
is increased to 2.5%. The Retirement Plan also provides a benefit
for service prior to October 1, 1998 based on a percentage of a
participant's average earnings at October 1, 1998 (being 50% of
each of the base salaries at October 1, 1995 and 1998 and 100% of
each of the base salaries at October 1, 1996 and 1997) and the
number of years of service while a member of the Retirement Plan
prior to October 1, 1998, all subject to certain limitations.
A cash balance account benefit is also available upon
retirement under the Retirement Plan, which benefit, generally,
provides for a credit to those participants in the Retirement Plan
on January 1, 1987, of 10% of their base salary on that date, a
credit to those participants in the Retirement Plan on September
30, 1991, of 5% of their base salary on that date, a credit to
those participants in the Retirement Plan on September 30, 1997,
of 5% of their base salary on that date and a further credit to
those participants in the Retirement Plan on September 30, 1999,
of 5% of their base salary on that date with, in all four cases,
annual interest earned thereon.
While the amount of the contribution payment or accrual with
respect to a specified person is not and cannot readily be
separately or individually calculated by the actuaries for the
Retirement Plan, estimated annual benefits under the Retirement
Plan upon retirement at age 65 for the individuals listed in the
table under the above caption "Executive Compensation," assuming
continuation of current annual salary levels and giving effect to
applicable benefit limitations in the Code, are as follows:
Mr. Ganci - $135,000; Mr. Meyer - $131,998; Mr. Page - $128,923;
Mr. DeVirgilio - $135,000 and Mr. Brand - $104,107.
101
Central Hudson Retirement Benefit Restoration Plan
- --------------------------------------------------
Central Hudson maintains an unfunded, uninsured pension
benefit plan for a select group of highly compensated management
employees called the Retirement Benefit Restoration Plan ("RBRP").
The RBRP provides an annual retirement benefit to those
participants in the Retirement Plan who hold the following offices
with Central Hudson: Chairman of the Board and Chief Executive
Officer, President, Vice President (including all levels thereof),
Secretary, Treasurer, Controller and Assistant Vice President.
Such benefit is equal to the difference between (i) that received
under the Retirement Plan, giving effect to applicable salary and
benefit limitations under the Code and (ii) that which would have
been received under the Retirement Plan, without giving effect to
such limitations under the Code. The individuals listed in the
table under the above caption "Executive Compensation" have a
current salary level which, if continued to retirement at age 65,
would provide a benefit under the RBRP. The estimated annual
benefits under the RBRP upon retirement at age 65 for those
individuals, assuming the continuation of current annual salary
levels, are as follows: Mr. Ganci - $83,757; Mr. Meyer - $43,207;
Mr. Page - $28,191; Mr. DeVirgilio - $6,061 and Mr. Brand - $294.
Executive Deferred Compensation Plan
- ------------------------------------
Central Hudson's Executive Deferred Compensation Plan
("EDCP") was assumed by Energy Group upon the Holding Company
Restructuring. The EDCP covered a select group of highly
compensated management employees as an incentive for them to
remain with Central Hudson. Under that Plan, an annual benefit is
payable for 10 years, commencing on retirement, to eligible
participants (who retire at age 60 or older and with 10 or more
years of service) of the following percentage of annual base
compensation at retirement: 60 to 63 - 10%; 63 to 65 - 15%; 65 or
over -20%. In view of changes in the Code which became effective
January 1, 1994, the EDCP was amended prior thereto so that
eligible participants, who reached age 55 at December 31, 1993,
are considered to have accrued benefits under the EDCP as if they
were age 60 and had 10 years of service with Central Hudson at
December 31, 1993. No amounts were paid under the EDCP for the
individuals named in the table under the above caption "Executive
Compensation" for the year 1999. Estimated annual benefits under
the EDCP upon retirement at age 65 for such named individuals,
assuming continuation of current annual salary levels, are as
follows: Mr. Ganci - $75,000; Mr. Meyer - $50,000; Mr. Page -
$48,000; Mr. DeVirgilio - $36,000 and Mr. Brand - $34,600.
102
Employment Contracts and Termination of Employment and Change of
Control Arrangements
Central Hudson entered into Employment Agreements (each, the
"Agreement") with each of the individuals listed in the table
under the above caption "Executive Compensation" ("Officers")
which were assumed by Energy Group from Central Hudson, effective
December 15, 1999. Until a Change of Control occurs, each
Agreement is automatically renewed for one (1) year on each July
31, unless a notice not to extend is given.
If a Change of Control (defined in the Agreement) occurs
during the term of an Agreement, the Agreement becomes operative
for a fixed three (3)-year period. Upon a Change of Control, each
Agreement provides generally that the Officers' terms and
conditions of employment (including position, location, base
salary, bonus and benefits) will not be adversely changed during
the three (3)-year period after a Change of Control. If the
Officer's employment is terminated by Energy Group or an
affiliate, including Central Hudson, for reasons other than death,
cause or disability (as those terms are defined in each
Agreement), by the Officer for good reason (as that term is
defined in each Agreement), by the Officer regardless of reason
(during the 30-day period beginning on the first anniversary of
the Change of Control), upon certain terminations prior to a
Change of Control or in connection with or in anticipation of a
Change of Control, the Officer, in addition to all amounts accrued
to the date of termination, will receive a lump-sum payment
("Lump-Sum Payment") equal to the sum of: (i) the Officer's base
salary through the date of termination; (ii) a proportionate bonus
based on the higher of the Officer's most recent annual bonus and
the Officer's annual bonus for the last fiscal year ("Highest
Annual Bonus"); (iii) accrued vacation and (iv) three (3) times
the sum of the Officer's base salary and the Officer's Highest
Annual Bonus. In addition, such Officers would be entitled to
continued employee welfare benefits and to credit for pension
purposes for the three (3) years from the date of such
termination.
Mr. Ganci's Agreement is substantially identical to the other
Officers, except that it is modified to limit the term of his
Agreement to his normal retirement date, May 1, 2003. In
addition, Mr. Ganci will not receive a lump sum payment if his
employment is terminated at any time on or after a Change of
Control through May 1, 2003; (i) by Energy Group, or an
affiliate, including Central Hudson, for reasons other than for
cause or disability; (ii) by Mr. Ganci for any reason; (iii) upon
certain terminations prior to a Change of Control or (iv) in
connection with or in anticipation of a Change of Control. In
such case, he will receive all amounts accrued to the date of his
termination and will be treated as if he had retired on May 1,
103
2003 for all employee welfare benefits of Energy Group or an
affiliate, including Central Hudson. If Mr. Ganci's employment is
so terminated for any reason other than by Energy Group or an
affiliate, including Central Hudson, for cause, Mr. Ganci or his
beneficiaries, as the case may be, will receive collective
benefits under the EDCP, the RBRP and the Retirement Plan as if
Mr. Ganci had continued to be employed through May 1, 2003, and as
if his base salary and other cash compensation had increased by
10% annually on each October 1 from the date of his termination of
employment to May 1, 2003.
In the event any payments made to any of the Officers as a
result of a Change of Control, whether under an Agreement or
otherwise, would subject the Officer to the excise tax on certain
"excess parachute payments" payable under Code Section 4999, or
interest or penalties with respect to such tax, the Officer will
be entitled to be made whole for the payment of any such taxes,
interest or penalties. Each Officer, while covered by an
Agreement, is not entitled to participate in Energy Group's Change
of Control Severance Policy. In the event of a Change of Control,
the Agreements will supersede any individual employment and/or
severance agreements entered into by Energy Group with the
Officers, except in certain instances.
Report on Executive Compensation
The following disclosure is made over the name of each
Director, on the date hereof:
The compensation of the executive officers of Central Hudson
for 1999 was received only from Central Hudson.
Until the Holding Company Restructuring, Central Hudson's
Board of Directors maintained a Committee on Compensation and
Succession ("Compensation Committee"). Among the responsibilities
of the Compensation Committee were consideration and
recommendation to the Board of Directors of the salaries of
officers of Central Hudson. Annual salary determinations by the
Board of Directors become effective as of the Annual Meeting of
Shareholders of each year and continue until the following Annual
Meeting.
Compensation Philosophy
- -----------------------
The Compensation Committee of Central Hudson based its 1999
officers' compensation recommendations to the Central Hudson Board
of Directors on an evaluation of each of the following three (3)
factors, giving balanced weight to each, which factors reflect a
long-standing executive compensation philosophy of Central Hudson:
104
(1) Compensation comparisons of other comparable executive
officers. Comparisons are made to the compensation of
officers of other New York State utilities and of other
utilities with revenues and other characteristics
similar to those of Central Hudson, using data received
from the Edison Electric Institute ("EEI") and the
American Gas Association. In addition, every two (2)
years, an executive compensation study is performed by
an independent consultant engaged by the Central Hudson.
The data obtained by these various sources was evaluated
and compensation levels for Central Hudson's officers
were established based generally on averages of
comparative salary ranges;
(2) The experience, responsibility and contribution of each
individual officer to Central Hudson's performance; and
(3) The incumbent's performance in carrying out the
responsibilities and duties of his or her office, as
described below.
The performance of each officer of Central Hudson (other than
Mr. Ganci, as discussed below) was also evaluated by the Central
Hudson Compensation Committee, on the basis of how he or she
contributed, to the extent applicable, to furthering Central
Hudson's mission:
to provide Central Hudson's customers with safe,
reliable utility service at the lowest reasonable price;
to provide a competitive return to Central Hudson's
shareholders;
to provide a safe working environment that will attract,
retain and motivate employees; and
to provide corporate resources to enhance the quality of
life in Central Hudson's service territory.
With the exception of (1) above, the performance criteria set
forth above for Mr. Ganci and each other officer of Central Hudson
were subjectively evaluated by the Central Hudson Compensation
Committee in its deliberations related to compensation for each
officer, based on an assessment of the degree to which each such
officer (i) met the criteria set forth in his or her position
description and (ii) accomplished Central Hudson's strategic goals
and objectives for which such officers were responsible.
Section 162(m) of the Code
- --------------------------
The Compensation Committee and the Board of Directors are
aware of, and have considered, the qualifying compensation
105
regulations established in Section 162(m) of the Code, which
provides that, unless an appropriate exemption applies, a tax
deduction for remuneration of any officer named in Item 1 hereof
will not be allowed to the extent such remuneration in any taxable
year exceeds $1 million. As no officer of Central Hudson or
Energy Group received remuneration during the 1999 fiscal year
approaching $1 million, neither Central Hudson nor Energy Group
has developed an executive compensation policy with respect to
qualifying compensation paid to its executive officers for
deductibility under Section 162(m) of the Code, except that Energy
Group has proposed to its shareholders for approval a Long-Term
Performance-Based Incentive Plan which would permit deductibility
of certain benefits paid thereunder to be deductible under Code
Section 162(m).
Central Hudson Management Incentive Plan
- ----------------------------------------
The Central Hudson Management Incentive Plan is a cash bonus
program which bases its awards on Central Hudson meeting certain
"Incentive Goals," as such term is defined in that Plan. All
Central Hudson management employees are eligible to receive awards
except for (i) Central Hudson's Chairman of the Board and Chief
Executive Officer (Mr. Ganci) and any other officer(s) which
Mr. Ganci shall determine from time to time, (ii) temporary
employees and (iii) those employees whose employment is terminated
in a year in which an incentive award is made unless such
termination is a retirement.
The Incentive Goal is established each fiscal year by the
Central Hudson Board of Directors. After the audited financial
results of Central Hudson for a fiscal year have been made public,
the Board of Directors of Central Hudson determines whether or not
the Incentive Goal has been met for that fiscal year, which
determination is final. The resulting award is allocated among
and paid to each eligible management employee in the same
proportion that each such employee's compensation for the fiscal
year bears to base compensation paid to all such eligible
management employees for that fiscal year.
Central Hudson Executive Incentive Plan
- ---------------------------------------
The Executive Incentive Plan of Central Hudson, established
in 1993, was terminated effective January 1, 2000. That Plan is
applicable to Mr. Ganci during 1999 as President and Chief
Executive Officer of Central Hudson until April 27, 1999, and
thereafter as the Chairman of the Board and Chief Executive
Officer of Central Hudson, and to Carl E. Meyer, as President and
Chief Operating Officer of Central Hudson on and after April 27,
1999. That Plan was also applicable to John E. Mack III until his
retirement as Chairman of the Board of Central Hudson, on
April 27, 1999.
106
The Executive Incentive Plan established the compensation for
the incumbents in such offices based on two components: annual
base salary (which becomes effective as of April 1 of each year
and continues until the following March 31) and an incentive
feature (which provides an award, as noted below, for performance
for the most recently ended calendar year). The determination of
1999 annual base salary and incentive compensation, if any, was
determined by the outside Directors of Central Hudson.
Under the incentive component of the Executive Incentive
Plan, Messrs. Ganci, Mack and Meyer had the opportunity to earn up
to an additional 10% of their base salaries, based on a formula
which measures Central Hudson's achievement of goals within the
following four (4) categories: (i) shareholder value, (ii) level
of Central Hudson customer electric and gas prices and
reliability, (iii) employee safety and (iv) community involvement.
A determination as to whether or not any incentive
compensation is earned is made within 90 days after the end of
each calendar year; and if an award is made, compensation will be
made in a lump sum within 30 days of such determination.
Central Hudson 1999 Base Salaries and Executive Incentive
---------------------------------------------------------
Compensation for Messrs. Ganci, Mack and Meyer
----------------------------------------------
The 1999 performances of Mr. Ganci, as President and Chief
Executive Officer of Central Hudson until April 27, 1999 and as
Chairman of the Board and Chief Executive Officer of Central
Hudson thereafter, of Mr. Mack, as Chairman of the Board until
April 27, 1999 and of Mr. Meyer, as President and Chief Operating
Officer of Central Hudson since April 27, 1999, were evaluated
under the Executive Incentive Plan by the outside Directors of
Central Hudson.
In establishing the annual base salary component for Messrs.
Ganci and Meyer under the Executive Incentive Plan, which for the
period April 1, 1999 to March 31, 2000 are $375,000 and $250,000,
respectively, the outside Directors of Central Hudson reviewed
Messrs. Ganci and Meyer's performances during 1998 related to
their policies and leadership in the goal of building a more
profitable corporation and thereby increasing shareholder value
while providing reliable service at reasonable prices. As a
measure of this goal, their performances were evaluated pursuant
to the following criteria:
107
Has the confidence of the financial community and
Central Hudson's shareholders been maintained and/or
enhanced? Key financial indices, credit ratings, total
return to shareholders and the adequacy of cash flow are
significant quantitative factors.
Does Central Hudson have effective management and other
personnel to assure a high quality of customer service
and to meet the changing needs of its customers?
Has Central Hudson's physical plant and equipment been
maintained and/or improved to assure that Central Hudson
continues to meet its objective of providing highly
reliable utility service at the lowest reasonable price?
Is Central Hudson's strategic plan effective in keeping
Central Hudson abreast of or ahead of changes that occur
as a result of competition, technology changes and new
regulation?
Mr. Mack's performance in 1998 was also evaluated based on
the above criteria. With respect to the relationship of Central
Hudson's performance in 1998 to Messrs. Ganci's and Meyer's base
salaries for 1999, the outside Directors of Central Hudson
determined that performance by Ganci and Meyer of their duties in
1998 more than satisfied the related performance criteria, as
described above.
Not all of these performance criteria lend themselves to
objective measurement. However, in 1998 (i) Central Hudson's
total return to shareholders was 49.1% as compared to the EEI peer
group return of 29.3%, (ii) Central Hudson's residential electric
prices were 20% lower than the New York State average, (iii)
Central Hudson's Employee Safety Index was lower than the average
of the prior five years and (iv) Central Hudson demonstrated a
high level of involvement in the communities served.
Based on the recommendation of the Central Hudson
Compensation Committee, the Board of Directors of Central Hudson,
on February 27, 1999, awarded Mr. Ganci 6% (or $20,100) and
Mr. Mack 6% (or $24,000) of their respective 1998 Base Salaries as
incentive compensation. Mr. Meyer was not eligible for an
incentive compensation award with respect to his 1998 Base Salary.
Mr. Ganci did not participate in the determination of his
1999 compensation.
Paul J. Ganci
Carl E. Meyer
Steven V. Lant
Arthur R. Upright
108
Compensation Committee/Interlocks and Insider Participation
Until the Holding Company Restructuring on December 15, 1999,
the Compensation Committee was comprised of Jack Effron
(Chairman), Stanley J. Grubel, Charles LaForge, Edward P. Swyer
and Frances D. Fergusson, all members of the Central Hudson Board
of Directors until December 15, 1999. The Compensation Committee
had six (6) meetings in 1999. The Compensation Committee
considered and recommended to the Board of Directors the
compensation (and special terms, if any, of employment) of
directors; the Chairman of the Board and Chief Executive Officer,
officers of the Board of Directors and salaries of other officers
of Central Hudson. The Compensation Committee also considered and
recommended to the Board of Directors the candidates to be
nominated for election to the Board and candidates for appointment
by the Board as officers of Central Hudson. The Compensation
Committee was charged with receiving recommendations of nominees
by shareholders for election of the Board of Directors and
reviewing and comparing the qualifications of such nominees with
those of other potential nominees.
On and after December 15, 1999, the Compensation Committee no
longer exists. The functions of the Compensation Committee are
performed by the Committee on Compensation and Succession/
Retirement of Energy Group which makes recommendations to the
Central Hudson Board of Directors.
No Compensation Committee interlock relationship existed in
1999 for Central Hudson.
Compensation of Directors and Officers of the Board
Prior to the Holding Company Restructuring, each non-employee
member of Central Hudson's Board of Directors ("Outside
Directors") (Mr. Ganci is an employee-Director), received an
annual retainer of $15,000, $1,000 for attendance at each meeting
of the Board and $850 for attendance at each meeting of any
Committee of the Board of which such Director was a member if such
meeting was held on the same day as a meeting of the Board and
$1,000 for such committee meeting if held on a day other than that
on which a Board meeting was held. Mr. Mack also received
compensation in the amount of $5,000 for his role as Chairman of
the Board's Committee on Finance, and Messrs. Fridrich and Effron
each received $2,500 for their roles as Chairmen of the Committee
on Audit and Compensation Committee, respectively.
On and after the Holding Company Restructuring, there are no
Outside Directors of Central Hudson. Therefore, the current
directors of Central Hudson receive no additional compensation for
services rendered as a director.
109
Central Hudson Directors' Deferred Compensation Plan
- ----------------------------------------------------
Central Hudson's Directors' Deferred Compensation Plan
("Deferred Plan") was in effect until January 1, 2000 when it was
merged into a new plan of Energy Group. The Deferred Plan applied
to Outside Directors of Central Hudson and permitted a director to
elect at any time, or from time to time, to defer all or part of
such director's compensation for services thereafter rendered to
Central Hudson. For purposes of the Deferred Plan, compensation
was defined to include the amount of money to be paid to the
director for serving as a member of the Board of Directors and any
committee of the Board, for serving as an officer of the Board of
Directors and any committee of the Board and for any other
services rendered individually by agreement with Central Hudson.
A director's compensation deferred in accordance with the Deferred
Plan was paid to said director (together with an interest
equivalent or an equity option, as elected by the director) at
such time as the director ceased being a member of the Central
Hudson Board of Directors or at such other time after ceasing to
be a director as the director specified when making the original
election to defer compensation.
Energy Group's Stock Plan for Outside Directors
- -----------------------------------------------
The Central Hudson Stock Plan for Outside Directors ("Stock
Plan") was assumed by Energy Group from Central Hudson, effective
December 15, 1999. The Stock Plan assured that at least a portion
of compensation of the Outside Directors of Central Hudson prior
to the Holding Company Restructuring, and after December 15, 1999
for the Outside Directors of Energy Group, assures that such
compensation be made in the form of Common Stock.
Pursuant to the terms of the Stock Plan, for each full
quarter of each year of service, an Outside Director receives, on
a quarterly basis, 25 shares of Central Hudson's Common Stock. In
addition, when an Outside Director ceases to be a director for any
reason, other than removal for cause, that director will receive
quarterly, 25 shares of such Common Stock for each full quarter
(but not beyond 40 such periods) during which that director served
as an Outside Director; however, no such distribution is made
after that director's death.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
------- AND MANAGEMENT
-----------------------------------------------
No director or executive officer of Central Hudson, including
the executive officers listed in the table under the caption
"Executive Compensation" in Item 11 hereof, own any equity
securities of Central Hudson.
110
The following table lists the number of shares of equity
securities of Energy Group beneficially owned by all the
directors, executive officers listed in the table in Item 11
hereof, and by all directors and executive officers of Central
Hudson as a group:
No. of Percentage of
Energy Group's Energy Group's
Name Common Stock (1) Common Stock (2)
- ---- ---------------- ----------------
Paul J. Ganci. . . . . . . 11,643(3) Less than 1%
Carl E. Meyer. . . . . . . 1,893 Less than 1%
Steven V. Lant . . . . . . 645 Less than 1%
Arthur R. Upright. . . . . 1,005 Less than 1%
Allan R. Page. . . . . . . 2,833 Less than 1%
Ronald P. Brand. . . . . . 2,563 Less than 1%
Joseph J. DeVirgilio, Jr.. 1,566 Less than 1%
All directors and
executive officers
as a group (13 persons). 23,159 Less than 1%
____________
(1) Based on information furnished to Central Hudson by the
directors and executive officers as of December 31, 1999.
(2) The percentage ownership calculation for each owner has been
made on the basis that there are outstanding 16,862,087,
shares of Energy Group Common Stock on March 1, 2000.
(3) Includes shares owned by the respective spouses of the named
individuals as follows: Mrs. Ganci - 2,098 shares. The
shares owned by Mrs. Ganci are considered to be beneficially
owned by Mr. Ganci, only for the purpose of this Form 10-K
Annual Report and Mr. Ganci disclaims any beneficial
interest in such shares for all other purposes.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires Central Hudsons officers and directors and persons who
own more than ten percent of a registered class of Central
Hudson's equity securities ("Reporting Persons") to file initial
reports of ownership and reports of changes in ownership with the
SEC and the New York Stock Exchange. Such Reporting Persons are
required by SEC regulations to furnish Central Hudson with copies
of all Section 16(a) forms they file. Based solely on a review
of the copies of such forms furnished to Central Hudson and
written representations from the Central Hudson's officers and
111
directors, all of the Reporting Persons, with the exception of
Stanley J. Grubel, an Outside Director of Central Hudson until
the Holding Company Restructuring on December 15, 1999, in filing
his initial ownership report, made all requisite filings on a
timely basis in 1999.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------------------
There were no relationships or transactions of the type
required to be described by this Item.
PART IV
-------
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
------- REPORTS ON FORM 8-K
-------------------------------------------
(a) Documents filed as part of this Report
--------------------------------------
1. and 2. All Financial Statements and Financial Statement
Schedules filed as part of this Report are included in Item
8 of this Form 10-K and reference is made thereto.
3. Exhibits
Incorporated herein by reference to the Exhibit Index for
this Report. Such Exhibits include the following management
contracts or compensatory plans or arrangements required to
be filed as an Exhibit pursuant to Item 14(c) hereof:
Description in the Exhibit List and Exhibit Nos. for this
---------------------------------------------------------
Report
------
Directors' Deferred Compensation Plan, effective October 1,
1980, together with Amendment thereto, effective October 1,
1999, merged into Energy Group's Directors and Executives
Deferred Compensation Plan, effective January 1, 2000.
(Exhibit (10)(iii)1 and 19)
Executive Deferred Compensation Plan, effective March 1,
1992, together with Amendments thereto effective
December 17, 1993 and December 1, 1998 and an instrument of
assumption by Energy Group, dated December 15, 1999.
(Exhibits (10)(iii)2, 5, 17 and 20)
Retirement Benefit Restoration Plan, effective May 1, 1993,
together with Amendments thereto effective July 23, 1993 and
December 1, 1998. (Exhibits (10)(iii)3, 4 and 18)
112
Agreement, made March 14, 1994, by and between Central
Hudson and Mellon Bank, N.A., amending and restating,
effective April 1, 1994, Central Hudson's Savings Incentive
Plan and related Trust Agreement with The Bank of New York,
together with amendments dated July 22, 1994, and
December 16, 1994. (Exhibits (10)(iii)7, 8 and 9)
Executive Incentive Compensation Plan, effective January 3,
1993, as amended and restated, effective April 4, 1995 and
terminated effective January 1, 2000. (Exhibits (10)(iii)6
and 10)
Stock Plan for Outside Directors, dated November 17, 1995,
together with an amendment, restatement and assumption
thereof by Energy Group thereof, effective December 15,
1999. (Exhibit (10)(iii)11 and 21)
Management Incentive Program, effective April 1, 1994,
together with Amendment thereto, dated July 25, 1997.
(Exhibits (10)(iii)12 and 13)
Change-of-Control Severance Policy, effective December 1,
1998, for all management employees, and a form of instrument
of assumption by Energy Group, dated December 15, 1999.
(Exhibit (10)(iii)14 and 22)
Form of Employment Agreement, dated October 23, 1998,
effective December 1, 1998, for all officers, and a form of
instrument of assumption by Energy Group, dated December 15,
1999. (Exhibit (10)(iii)15 and 23)
Employment Agreement, dated October 23, 1998, effective
December 1, 1998, for Paul J. Ganci, and a form of
instrument of assumption by Energy Group, dated December 15,
1999. (Exhibit (10)(iii)16 and 24)
(b) Reports on Form 8-K
-------------------
During the last quarter of the period covered by this Report
and including the period to the date hereof, the following
Reports on Form 8-K were filed by Central Hudson:
1) Report dated November 12, 1999, relating to the change
of Central Hudson's stock trading symbol from "CNH" to
"CHG."
2) Report dated November 23, 1999, relating to the auction
of the Roseton and Danskammer Plants, as reported in
the caption, "Auction of Fossil Generation Plants," in
Note 2 of the Notes to Financial Statements of this
Annual Report on Form 10-K; and the appointment of
officers of Energy Group.
113
3) Report dated December 15, 1999, relating to the
reorganization of Central Hudson into a holding company
structure pursuant to an Agreement and Plan of Exchange
between Central Hudson and Energy Group as more fully
described in Item I hereof under the caption "Holding
Company" and in Note 2 hereof under the caption
"Competitive Opportunities Proceeding Settlement
Agreement."
4) Report dated February 1, 2000 relating to Central
Hudson's sale of a tranche of Medium Term Notes in the
aggregate principal amount of $110 million, such sale
being authorized under Central Hudson's shelf
registration statement on Form S-3 (Registration No.
333-65597), as filed with the SEC.
(c) Exhibits Required by Item 601 of Regulation S-K
-----------------------------------------------
Incorporated herein by reference to subpart (a)-3 of Item
14, above.
(d) Financial Statement Schedule required by Regulation S-X
--------------------------------------------------------
which is excluded from Central Hudson's Annual Report to
--------------------------------------------------------
Shareholders for the fiscal year ended December 31, 1999
--------------------------------------------------------
Not applicable, see Item 8 hereof.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, Central Hudson has duly
caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTRAL HUDSON GAS & ELECTRIC
CORPORATION
By /s/ Paul J. Ganci
----------------------------
Paul J. Ganci
Chairman of the Board and
Chief Executive Officer
Dated: March 20, 2000
114
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the following
person on behalf of Central Hudson and in the capacities and on
the date indicated:
Signature Title Date
--------- ----- ----
(a) Principal Executive
Officer or Officers:
/s/ Paul J. Ganci
- --------------------------
(Paul J. Ganci) Chairman of
the Board and
Chief Executive
Officer March 20, 2000
(b) Principal Accounting
Officer:
/s/ Donna S. Doyle
- --------------------------
(Donna S. Doyle) Vice President -
Accounting and
Controller March 20, 2000
(c) Chief Financial
Officer:
/s/ Steven V. Lant
- --------------------------
(Steven V. Lant) Chief Financial
Officer and
Treasurer March 20, 2000
(d) All of the Directors:
Paul J. Ganci*, Carl E. Meyer*,
Arthur R. Upright* and Steven V.
Lant*, Directors
By /s/ Paul J. Ganci
- -------------------------------------
(Paul J. Ganci) March 20, 2000
115
- -----------------------------------
*Paul J. Ganci, by signing his name hereto, does thereby sign
this document for himself and on behalf of the persons named
above after whose printed name an asterisk appears, pursuant to
powers of attorney duly executed by such persons and filed with
the SEC as Exhibit 24 hereof.
116
EXHIBIT INDEX
Following is the list of Exhibits, as required by Item
601 of Regulation S-K, filed as a part of this Annual Report on
Form 10-K, including Exhibits incorporated herein by reference
(1):
Exhibit No.
(Regulation S-K
Item 601
Designation) Exhibits
- --------------- --------
(3) Articles of Incorporation and Bylaws:
(i) 1-- Restated Certificate of Incorporation of
Central Hudson under Section 807 of the
Business Corporation Law, filed
August 14, 1989. ((1); Exhibit (3)1)
(i) 2-- Certificate of Amendment to the
Certificate of Incorporation of Central
Hudson under Section 805 of the Business
Corporation Law, filed April 5, 1990.
((1); Exhibit (3)2)
(i) 3-- Certificate of Amendment to the
Certificate of Incorporation of Central
Hudson under Section 805 of the Business
Corporation Law, filed October 19, 1993
((1); Exhibit (3)3)
(ii) 1-- By-laws of Central Hudson in effect on
the date of this Report.
(4) Instruments defining the rights of security holders,
including indentures (see also Exhibit (3) above):
- ---------------------
(1) Exhibits which are incorporated by reference to
other filings are followed by information contained in
parentheses, as follows: The first reference in the parenthesis
is a numeral, corresponding to a numeral set forth in the Notes
which follow this Exhibit list, which identifies the prior filing
in which the Exhibit was physically filed; and the second
reference in the parenthesis is to the specific document in that
prior filing in which the Exhibit appears.
*(ii) 1-- Indenture dated January 1, 1927 between
Central Hudson and American Exchange
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)1)
*(ii) 2-- Supplemental Indenture dated March 1,
1935 between Central Hudson and Irving
E-1
Trust Company, as Trustee. ((2);
Exhibit (4)(ii)2)
*(ii) 3-- Second Supplemental Indenture dated
June 1, 1937 between Central Hudson and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)3)
*(ii) 4-- Third Supplemental Indenture dated
April 1, 1940 between Central Hudson and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)4)
*(ii) 5-- Fourth Supplemental Indenture dated
March 1, 1941 between Central Hudson and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)5)
*(ii) 6-- Fifth Supplemental Indenture dated
December 1, 1950 between Central Hudson
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)6)
*(ii) 7-- Sixth Supplemental Indenture dated
December 1, 1952 between Central Hudson
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)7)
*(ii) 8-- Seventh Supplemental Indenture dated
October 1, 1954 between Central Hudson
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)8)
*(ii) 9-- Eighth Supplemental Indenture dated
May 15, 1958 between Central Hudson and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)9)
(ii) 10-- Ninth Supplemental Indenture dated
December 1, 1967 between Central Hudson
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)10)
(ii) 11-- Tenth Supplemental Indenture dated as of
January 15, 1969 between Central Hudson
and Irving Trust Company, as Trustee.
((3); Exhibit 2.12)
(ii) 12-- Eleventh Supplemental Indenture dated as
of June 1, 1970 between Central Hudson
and Irving Trust Company, as Trustee.
((4); Exhibit 1.13)
E-2
(ii) 13-- Twelfth Supplemental Indenture dated as
of February 1, 1972 between Central
Hudson and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)13)
(ii) 14-- Thirteenth Supplemental Indenture dated
as of April 15, 1974 between Central
Hudson and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)14)
(ii) 15-- Fourteenth Supplemental Indenture dated
as of November 1, 1975 between Central
Hudson and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)15)
(ii) 16-- Fifteenth Supplemental Indenture dated
as of June 1, 1977 between Central
Hudson and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)16)
(ii) 17-- Sixteenth Supplemental Indenture dated
as of September 15, 1979 between Central
Hudson and Irving Trust Company, as
Trustee. ((4); Exhibit 1.18)
(ii) 18-- Seventeenth Supplemental Indenture dated
as of May 15, 1980 between Central
Hudson and Irving Trust Company, as
Trustee. ((5); Exhibit (4)(a)18)
(ii) 19-- Eighteenth Supplemental Indenture dated
as of November 15, 1980 between Central
Hudson and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)19)
(ii) 20-- Nineteenth Supplemental Indenture dated
as of August 15, 1981 between Central
Hudson and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)20)
(ii) 21-- Twentieth Supplemental Indenture dated
as of September 1, 1982 between Central
Hudson and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)21)
(ii) 22-- Twenty-First Supplemental Indenture
dated as of November 22, 1982 between
Central Hudson and Irving Trust Company,
as Trustee. ((2); Exhibit (4)(ii)22)
(ii) 23-- Twenty-Second Supplemental Indenture
dated as of May 24, 1984 between Central
E-3
Hudson and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)23)
(ii) 24-- Twenty-Third Supplemental Indenture
dated as of June 15, 1985 between
Central Hudson and Irving Trust Company,
as Trustee. ((2); Exhibit (4)(ii)24)
(ii) 25-- Twenty-Fourth Supplemental Indenture
dated as of September 1, 1986 between
Central Hudson and Irving Trust Company,
as Trustee. ((2); Exhibit (4)(ii)25)
(ii) 26-- Twenty-Fifth Supplemental Indenture
dated as of December 1, 1988 between
Central Hudson and Irving Trust Company,
as Trustee. ((2); Exhibit (4)(ii)26)
(ii) 27-- Twenty-Sixth Supplemental Indenture
dated as of May 1, 1991 between Central
Hudson and The Bank of New York, as
Trustee. ((2); Exhibit (4)(ii)27)
(ii) 28-- Twenty-Seventh Supplemental Indenture
dated as of May 15, 1992 between Central
Hudson and The Bank of New York, as
Trustee. ((2); Exhibit (4)(ii)28); and
Prospectus Supplement Dated May 28, 1992
(To Prospectus Dated April 13, 1992)
relating to $125,000,000 principal
amount of First Mortgage Bonds,
designated Secured Medium-Term Notes,
Series A, and the Prospectus Dated
April 13, 1992, relating to $125,000,000
principal amount of Central Hudson's
debt securities attached thereto, as
filed pursuant to Rule 424(b) in
connection with Registration Statement
No. 33-46624. ((6)(a)), and, as
applicable to a tranche of such Secured
Medium-Term Notes, one of the following:
(a) Pricing Supplement No. 1, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(b))
E-4
(b) Pricing Supplement No. 2, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(c))
(c) Pricing Supplement No. 3, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(d))
(d) Pricing Supplement No. 4, Dated
August 20, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(e))
(e) Pricing Supplement No. 5, Dated
August 20, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(f))
(f) Pricing Supplement No. 6, Dated
July 26, 1993 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(g))
(g) Pricing Supplement No. 7, Dated
July 26, 1993 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
E-5
connection with Registration
Statement No. 33-46624. ((6)(h))
(ii) 29-- Twenty-Eighth Supplemental Indenture
dated as of May 1, 1995 between Central
Hudson and The Bank of New York, as
Trustee. ((27); Exhibit (4)(ii)33)
Prospectus Supplement Dated May 15, 1995
(To Prospectus Dated April 4, 1995)
relating to $80,000,000 principal amount
of First Mortgage Bonds, designated
Secured Medium-Term Notes, Series B, and
the Prospectus Dated April 4, 1995,
relating to (i) $80,000,000 of Central
Hudson's Debt Securities and Common
Stock, $5.00 par value, but not in
excess of $40 million aggregate initial
offering price of such Common Stock and
(ii) 250,000 shares of Central Hudson's
Cumulative Preferred Stock, par value
$100 per share, which may be issued as
1,000,000 shares of Depositary Preferred
Shares each representing 1/4 of a share
of such Cumulative Preferred Stock
attached thereto, as filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-56349).
(9)
(ii) 30-- Indenture, dated as of April 1, 1992,
between Central Hudson and Morgan
Guaranty Trust Company of New York, as
Trustee. ((7); Exhibit (4)(ii)29); and
Prospectus Supplement Dated May 28, 1992
(To Prospectus Dated April 13, 1992)
relating to $125,000,000 principal
amount of Medium-Term Notes, Series A,
and the Prospectus Dated April 13, 1992,
relating to $125,000,000 principal
amount of Central Hudson's debt
securities attached thereto, as filed
pursuant to Rule 424(b) in connection
with Registration Statement No. 33-
46624. ((8)(a)), and, as applicable to a
tranche of such Medium-Term Notes, one
of the following:
(a) Pricing Supplement No. 1, Dated
June 26, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
E-6
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((8)(b))
(b) Pricing Supplement No. 2, Dated
October 6, 1993 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624.
((8)(c)); and
Prospectus Supplement Dated August 24,
1998 (To Prospectus Dated April 4, 1995)
related to $80,000,000 principal amount
of Medium-Term Notes, Series B, and the
Prospectus Dated April 4, 1995, relating
to (i) $80,000,000 of Central Hudson's
Debt Securities and Common Stock, $5.00
par value, but not in excess of $40
million aggregate initial offering price
of such Common Stock and (ii) 250,000
shares of Central Hudson's Cumulative
Preferred Stock, par value $100 per
share, which may be issued as 1,000,000
shares of Depositary Preferred Shares
each representing 1/4 of a share of such
Cumulative Preferred Stock attached
thereto, as filed pursuant to Rule
424(b) in connection with Registration
Statement No. 33-56349). ((10)(a)),
and, as applicable to a tranche of such
Medium-Term Notes, one of the following:
Pricing Supplement No. 1, Dated
September 2, 1998 (To Prospectus Dated
April 4, 1995, as supplemented by a
Prospectus Supplement Dated August 24,
1998) filed pursuant to Rule 424(b) in
connection with Registration Statement
No. 33-56349. ((10)(b)); and
Prospectus Supplement Dated January 8,
1999 (To Prospectus Dated January 7,
1999) relating to $110,000,000 principal
amount of Medium-Term Notes, Series C,
and the Prospectus Dated January 7,
1999, relating to $110,000,000 principal
amount of Central Hudson's debt
securities attached thereto, as filed
E-7
pursuant to Rule 424(b) in connection
with Registration Statement Nos. 333-
65597 and 33-56349. ((36)(a)), and, as
applicable to a tranche of such Medium-
Term Notes, one of the following:
(a) Pricing Supplement No. 1, Dated
January 12, 1999 (To Prospectus
Dated January 7, 1999, as
supplemented by a Prospectus
Supplement Dated January 8, 1999)
filed pursuant to Rule 424(b) in
connection with Registration
Statement Nos. 333-65597 and 33-
56349. ((36)(b))
(b) Pricing Supplement No. 2, Dated
January 31, 2000 (To Prospectus
Dated January 7, 1999, as
supplemented by a Prospectus
Supplement Dated January 31,
2000) filed pursuant to Rule
424(b) in connection with
Registration Statement Nos.
333-65597 and 33-56349.
((41)(5))
(ii) 31-- Participation Agreement, dated as of
November 1, 1985, by and between New
York State Energy Research and
Development Authority and Central
Hudson. ((2); Exhibit (4)(ii)31)
(ii) 32-- Central Hudson has entered into certain
other instruments with respect to long-
term debt of Central Hudson. No such
instrument relates to securities
authorized thereunder which exceed 10%
of the total assets of Central Hudson
and its other affiliates on a
consolidated basis. Central Hudson
agrees to provide the Commission, upon
request, copies of any instruments
defining the rights of holders of long-
term debt of Central Hudson and other
affiliates for which consolidated or
unconsolidated financial statements are
required to be filed with the
Commission.
E-8
(10) Material contracts:
(i) 1-- Agreement dated October 31, 1968 between
Central Hudson and Consolidated Edison
Company of New York, Inc. and Niagara
Mohawk Power Corporation. ((3); Exhibit
5.1)
(i) 2-- Agreement dated as of April 4, 1977
between Central Hudson, Consolidated
Edison Company of New York, Inc., Long
Island Lighting Company, New York State
Electric & Gas Corporation, Niagara
Mohawk Power Corporation, Orange and
Rockland Utilities, Inc., Rochester Gas
and Electric Corporation and the Power
Authority of the State of New York.
((3); Exhibit 5.6)
(i) 3-- Agreement dated April 27, 1973 between
Central Hudson and the Power Authority
of the State of New York. ((11);
Exhibit 5.19)
(i) 4-- Agreement dated as of September 22, 1975
between Central Hudson, Niagara Mohawk
Power Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation, and Rochester Gas and
Electric Corporation. ((12); Exhibit
5.21)
(i) 5-- Agreement dated November 23, 1976
between Central Hudson and Consolidated
Edison Company of New York, Inc. ((13);
Exhibit 5.29)
(i) 6-- Agreement dated December 29, 1975
between Central Hudson and Niagara
Mohawk Power Corporation, Long Island
Lighting Company, New York State
Electric & Gas Corporation, and
Rochester Gas & Electric Corporation.
((14); Exhibit (10)(i)18)
(i) 7-- Assignment and Assumption dated as of
October 24, 1975 between Central Hudson
and New York State Electric & Gas
Corporation. ((12); Exhibit 5.25)
(i) 8-- Amendment to Assignment and Assumption
dated October 30, 1978 between Central
E-9
Hudson and New York State Electric & Gas
Corporation. ((3); Exhibit 5.34)
(i) 9-- Agreement dated as of May 12, 1977
between Central Hudson and Niagara
Mohawk Power Corporation. ((15);
Exhibit 5.34)
(i) 10-- Agreement, dated May 8, 1980, by and
between Central Hudson and Jersey
Central Power & Light Company. ((16);
Exhibit (10)(i)21)
(i) 11-- Purchase Agreement, dated as of June 1,
1980, by and between Central Hudson and
Consolidated Edison Company of New York,
Inc. ((16); Exhibit (10)(i)22)
(i) 12-- Purchase Agreement, dated as of June 16,
1980, by and between Central Hudson and
Philadelphia Electric Company. ((16);
Exhibit (10)(i)23)
(i) 13-- Purchase Agreement, dated as of June 18,
1980, by and between Central Hudson and
Public Service Electric and Gas Company.
((16); Exhibit (10)(i)24)
(i) 14-- Purchase Agreement, dated as of July 1,
1980, by and between Central Hudson and
Connecticut Light and Power Company.
((16); Exhibit (10)(i)25)
(i) 15-- Letter Amendment Agreement, dated
December 16, 1980, by and between
Central Hudson and Niagara Mohawk Power
Corporation. ((16); Exhibit (10)(i)26)
(i) 16-- Settlement Agreement, dated December 19,
1980, by and among the United States
Environmental Protection Agency, The
Department of Environmental Conservation
of the State of New York, The Attorney
General of the State of New York, Hudson
River Fisherman's Association, Inc.,
Scenic Hudson Preservation Conference,
Natural Resources Defense Council, Inc.,
Central Hudson, Consolidated Edison
Company of New York, Inc., Orange and
Rockland Utilities, Inc., Niagara Mohawk
Power Corporation and Power Authority of
E-10
the State of New York. ((16); Exhibit
(10)(i)27)
(i) 17-- Agreement dated April 2, 1980 by and
between Central Hudson and the Power
Authority of the State of New York.
((2); Exhibit (10)(i)24)
(i) 18-- Purchase Agreement, dated April 19,
1983, between Central Hudson and New
York State Electric & Gas Corporation.
((2); Exhibit (10)(i)29)
(i) 19-- Transmission Agreement, dated
October 25, 1983, between Central Hudson
and Niagara Mohawk Power Corporation.
((2); Exhibit (10)(i)30)
(i) 20-- Underground Storage Service Agreement,
dated June 30, 1982, between Central
Hudson and Penn-York Energy Corporation.
((2); Exhibit (10)(i)32)
(i) 21-- Interruptible Transmission Service
Agreement, dated December 20, 1983,
between Central Hudson and Power
Authority of the State of New York.
((2); Exhibit (10)(i)33)
(i) 22-- Agreement, dated December 7, 1983,
between Central Hudson and the Power
Authority of the State of New York.
((2); Exhibit (10)(i)34)
(i) 23-- Specification of Terms and Conditions of
Settlement in State of New York Public
Service Commission Proceeding - Case
29124, dated September 3, 1985. ((2);
Exhibit (10)(i)35)
(i) 24-- Reimbursement Agreement, dated as of
November 1, 1985, between Central Hudson
and the Bank named therein. ((2);
Exhibit (10)(i)36)
(i) 25-- General Joint Use Pole Agreement between
Central Hudson and the New York
Telephone Company effective January 1,
1986 (not including the Administrative
and Operating Practices provisions
thereof). ((2); Exhibit (10)(i)37)
E-11
(i) 26-- Agreement, dated June 3, 1985, between
Central Hudson, Consolidated Edison
Company of New York, Inc. and the Power
Authority of the State of New York
relating to Marcy South Real Estate -
East Fishkill, New York. ((2); Exhibit
(10)(i)38)
(i) 27-- Agreement, dated June 11, 1985, between
Central Hudson and the Power Authority
of the State of New York relating to
Marcy South Substation - East Fishkill,
New York. ((2); Exhibit (10)(i)39)
(i) 28-- Agreement, dated as of April 9, 1986,
among Central Hudson, Consolidated
Edison Company of New York, Inc.,
Niagara Mohawk Power Corporation and the
Power Authority of the State of New York
relating to Real Estate - Roseton/
Danskammer. ((2); Exhibit (10)(i)40)
(i) 29-- Agreement, dated as of April 9, 1986,
between Central Hudson, for itself and
as agent for itself, Niagara Mohawk
Power Corporation and Consolidated
Edison Company of New York, Inc., and
the Power Authority of the State of New
York relating to Supplemental Land Use -
Roseton/Danskammer. ((2); Exhibit
(10)(i)41)
(i) 30-- Roseton Amendment Agreement, dated as of
September 9, 1987, between Central
Hudson and Niagara Mohawk Power
Corporation, for the purchase of
interests in the Roseton Steam Electric
Generating Plant. ((17); Exhibit
(19)(10)(i)76)
(i) 31-- Memorandum of Understanding, dated as of
March 22, 1988, by and among Central
Hudson, Alberta Northeast Gas, Limited,
the Brooklyn Union Gas Company, New
Jersey Natural Gas Company and
Connecticut Natural Gas Corporation.
((17); Exhibit (20)(10)(i)98)
(i) 32-- Restatement of Purchase and
Administration Agreement, dated as of
April 4, 1989, between Central Hudson
and CSW Credit, Inc., amending and
E-12
restating the Purchase and
Administration Agreement, dated as of
November 25, 1987, between such parties
providing for the sale of Central
Hudson's accounts receivables. ((18);
Exhibit (28) (10)(i)101)
(i) 33-- Credit Agreement, dated as of
December 17, 1990, among Central Hudson
and the Banks named therein. ((19);
Exhibit (19)(10)(i)74)
(i) 34-- Agreement, effective as of November 1,
1989, between Columbia Gas Transmission
Corporation and Central Hudson. ((19);
Exhibit (19)(10)(i)75)
(i) 35-- Agreement, dated as of November 1, 1989,
between Columbia Gas Transmission
Corporation and Central Hudson. ((19);
Exhibit (19)(10)(i)77)
(i) 36-- Agreement, dated as of November 1, 1989,
between Columbia Gas Transmission
Corporation and Central Hudson. ((19);
Exhibit (19)(10)(i)78)
(i) 37-- Agreement, dated as of November 1, 1989,
between Columbia Gulf Transmission
Company and Central Hudson. ((19);
Exhibit (19)(10)(i)79)
(i) 38-- Agreement, dated October 9, 1990,
between Texas Eastern Transmission
Corporation and Central Hudson. ((19);
Exhibit (19)(10)(i)80)
(i) 39-- Agreement, dated July 2, 1990, between
Texas Eastern Transmission Corporation
and Central Hudson. ((19); Exhibit
(19)(10)(i)81)
(i) 40-- Agreement, dated December 28, 1989,
between Texas Eastern Transmission
Corporation and Central Hudson. ((19);
Exhibit (19)(10)(i)82)
(i) 41-- Agreement, dated December 28, 1989,
between Texas Eastern Transmission
Corporation and Central Hudson. ((19);
Exhibit (19)(10)(i)83)
E-13
(i) 42-- Agreement, dated November 3, 1989,
between Texas Eastern Transmission
Corporation and Central Hudson. ((19);
Exhibit (19)(10)(i)84)
(i) 43-- Agreement, dated September 4, 1990,
between Algonquin Gas Transmission
Company and Central Hudson. ((19);
Exhibit (19)(10)(i)87)
(i) 44-- Storage Service Agreement, dated July 1,
1989, between CNG Transmission
Corporation and Central Hudson. ((19);
Exhibit (19)(10)(i)91)
(i) 45-- Agreement dated as of February 7, 1991
between Central Hudson and Alberta
Northeast Gas, Limited for the purchase
of Canadian natural gas from ATCOR Ltd.
to be delivered on the Iroquois Gas
Transmission System. ((19); Exhibit
(19)(10)(i)92)
(i) 46-- Agreement dated as of February 7, 1991
between Central Hudson and Alberta
Northeast Gas, Limited for the purchase
of Canadian natural gas from AEC Oil and
Gas Company, a Division of Alberta
Energy Company, Ltd. to be delivered on
the Iroquois Gas Transmission System.
((19); Exhibit (19)(10)(i)93)
(i) 47-- Agreement dated as of February 7, 1991
between Central Hudson and Alberta
Northeast Gas, Limited for the purchase
of Canadian natural gas from ProGas
Limited to be delivered on the Iroquois
Gas Transmission System. ((19); Exhibit
(19)(10)(i)94)
(i) 48-- Agreement No. 2 dated as of February 7,
1991 between Central Hudson and Alberta
Northeast Gas, Limited for the purchase
of Canadian natural gas from TransCanada
Pipelines Limited under Precedent
Agreement No. 2 to be delivered on the
Iroquois Gas Transmission System.
((19); Exhibit (19)(10)(i)95)
(i) 49-- Agreement No. 1 dated as of February 7,
1991 between Central Hudson and Alberta
Northeast Gas, Limited for the purchase
E-14
of Canadian natural gas from TransCanada
Pipelines Limited under Precedent
Agreement No. 1 to be delivered on the
Iroquois Gas Transmission System.
((19); Exhibit (19)(10)(i)96)
(i) 50-- Agreement dated as of February 7, 1991
between Central Hudson and Iroquois Gas
Transmission System to transport gas
imported by Alberta Northeast Gas,
Limited to Central Hudson. ((19);
Exhibit (19)(10)(i)97)
(i) 51-- Service Agreement, dated September 30,
1986, between Central Hudson and
Algonquin Gas Transmission Company, for
firm storage transportation under Rate
Schedule SS-III. ((20); Exhibit
(19)(10)(i)95)
(i) 52-- Service Agreement, dated March 12, 1991,
between Central Hudson and Algonquin Gas
Transmission Company, for firm
transportation of 5,056 dth. of Texas
Eastern Transmission Corporation
incremental volume. ((20); Exhibit
(19)(10)(i)99)
(i) 53-- Agreement, dated December 28, 1990 and
effective February 5, 1991, between
Central Hudson and National Fuel Gas
Supply Corporation for interruptible
transportation. ((20); Exhibit
(19)(10)(i)100)
(i) 54-- Utility Services Contract, effective
October 1, 1991, between Central Hudson
and the U.S. Department of the Army, for
the provision of natural gas service to
the U.S. Military Academy at West Point
and Stewart Army Subpost, together with
an Amendment thereto, effective
October 10, 1991. ((20); Exhibit
(19)(10)(i)101)
(i) 55-- Service Agreement, effective December 1,
1990, between Central Hudson and Texas
Eastern Transmission Corporation, for
firm transportation service under Rate
Schedule FT-1. ((20); Exhibit
(19)(10)(i)103)
E-15
(i) 56-- Service Agreement, dated February 25,
1991, between Central Hudson and Texas
Eastern Transmission Corporation, for
incremental 5,056 dth. under Rate
Schedule CD-1. ((20); Exhibit
(19)(10)(i)104)
(i) 57-- Service Agreement, dated January 7,
1992, between Central Hudson and Texas
Eastern Transmission Corporation, for
the firm transportation of 6,000
dth./day under Rate Schedule FTS-5.
((20); Exhibit (19)(10)(i)106)
(i) 58-- Agreement dated as of July 1, 1992
between Central Hudson and Tennessee Gas
Pipeline Company for storage of natural
gas. ((21); Exhibit (10)(i)114)
(i) 59-- Agreement dated as of July 1, 1992
between Central Hudson and Tennessee Gas
Pipeline Company for firm transportation
periods. ((21); Exhibit (10)(i)115)
(i) 60-- Agreement, dated November 1, 1990,
between Tennessee Gas Pipeline and
Central Hudson for transportation of
third-party gas for injection into and
withdrawal from Penn York storage. ((2);
Exhibit (19)(10)(i)100)
(i) 61-- Agreement, dated December 1, 1991,
between Central Hudson and Iroquois Gas
Transmission System for interruptible
gas transportation service. ((2);
Exhibit (19)(10)(i)101)
(i) 62-- Letter Agreement, dated August 24, 1992,
between Central Hudson and Iroquois Gas
Transmission System amending that
certain Agreement, dated December 1,
1991 between said parties for
interruptible gas transportation
service. ((19); Exhibit (19)(10)(i)102)
(i) 63-- Agreement, dated as of July 16, 1993,
between Central Hudson, Consolidated
Edison Company of New York, Inc., Long
Island Lighting Company, New York State
Electric & Gas Corporation, Niagara
Mohawk Power Corporation, Orange and
Rockland Utilities, Inc., Rochester Gas
E-16
and Electric Corporation and the Power
Authority of the State of New York.
((2); Exhibit (19)(10)(i)104)
(i) 64-- Nine Mile Point Nuclear Station Unit 2
Operating Agreement, effective
January 1, 1993, between and among
Central Hudson, Niagara Mohawk Power
Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation and Rochester Gas and
Electric Corporation. ((2); Exhibit
(19)(10)(i)105)
(i) 65-- Gas Transportation Agreement, dated as
of September 1, 1993, by and between
Tennessee Gas Pipeline Company and
Central Hudson. ((1); Exhibit
(19)(10)(i)108)
(i) 66-- Agreement, dated as of May 20, 1993,
between Central Hudson and New York
State Electric & Gas Corporation. ((24);
Exhibit (10)(i)93)
(i) 67-- Agreement for the Sale and Purchase of
Coal, dated as of December 1, 1996,
among Central Hudson, Inter-American
Coal N.V. and Inter-American Coal, Inc.
[Certain portions of the agreement
setting forth or relating to pricing
provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((30);
Exhibit (10)(i)107)
(i) 68-- Credit Agreement, dated as of
October 23, 1996, among Central Hudson
and The Banks listed herein and Morgan
Guaranty Trust Company of New York, as
Agent. ((30); Exhibit (10)(i)110)
(i) 69-- Settlement Agreement, dated March 20,
1997, among Central Hudson, the
Staff of the Public Service Commission
of the State of New York and the New
York State Department of Economic
Development. ((31); Exhibit (10)(i)111)
E-17
(i) 70-- Amended and Restated Settlement
Agreement, dated January 2, 1998, among
Central Hudson, the Staff of the Public
Service Commission of the State of New
York and the New York State Department
of Economic Development. ((32); Exhibit
(10)(i)112)
(i) 71-- Amendment, dated as of March 20, 1994,
to the Agreement, dated as of
September 9, 1987, between Central
Hudson and Niagara Mohawk Power
Corporation relating to the purchase of
interests in the Roseton Steam Electric
Generating Plant (Exhibit (19)(10)(i)76)
[Certain portions of said Amendment set
forth and relate to confidential terms
of said Amendment and will be filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((33);
Exhibit (10)(i)112)
(i) 72-- Amendment, dated as of November 1, 1997,
to the Agreement for the Sale and
Purchase of Coal, dated December 1,
1996, among Central Hudson, Inter-
American Coal N.V. and Inter-American
Coal, Inc. [Certain portions of said
Amendment set forth and relate to
pricing provisions and will be filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((33);
Exhibit (10)(i)113)
(i) 73-- Order of the Public Service Commission
of the State of New York, issued and
effective February 19, 1998, adopting
the terms of Central Hudson's Amended
Settlement Agreement, subject to certain
modifications and conditions. ((34);
Exhibit (10)(i)114)
(i) 74-- Modification to the Amended and Restated
Settlement Agreement, dated February 26,
1998, signed by Central Hudson, the
Staff of the Public Service Commission
of the State of New York, the New York
State Consumer Protection Board and Pace
E-18
Energy Project. ((34); Exhibit
(10)(i)115)
(i) 75-- Order of the Public Service Commission
of the State of New York, issued and
effective June 30, 1998, explaining in
greater detail and reaffirming its
Abbreviated Order, issued and effective
February 19, 1998, which February 19,
1998 Order modified, and as modified,
approved the Amended and Restated
Settlement Agreement, dated January 2,
1998, entered into among Central Hudson,
the PSC Staff and others as part of the
PSC's "Competitive Opportunities"
proceeding (ii) the Order, dated
June 24, 1998, of the Federal Energy
Regulatory Commission conditionally
authorizing the establishment of an
Independent System Operator by the
member systems of the New York Power
Pool and (iii) disclosing, effective
August 1, 1998, Paul J. Ganci's
appointment by Central Hudson's Board of
Directors as President and Chief
Executive Officer and John E. Mack III's
(formerly Chairman of the Board and
Chief Executive Officer) continuation as
Chairman of the Board. ((35); Exhibit
(10)(i)116)
(i) 76-- Amendment II, dated as of November 1,
1998, to the Agreement for the Sale and
Purchase of Coal, dated December 1,
1996, among Central Hudson, Inter-
American Coal N.V. and Inter-American
Coal, Inc. [Certain portions of said
Amendment setting forth or relating to
pricing provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((39;
Exhibit (10)(i)80)
(i) 77-- Agreement, dated as of November 1, 1998,
between Central Hudson and Glencore
Ltd., for the Sale and Purchase of Coal.
[Certain portions of said Agreement
setting forth or relating to pricing
provisions are omitted and filed
separately with the Securities and
E-19
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((39);
Exhibit (10)(i)81)
(i) 78-- Participation Agreement, dated as of
December 1, 1998, by and between New
York State Energy Research and
Development Authority and Central
Hudson. ((39); Exhibit (10)(i)82)
(i) 79-- Reimbursement Agreement, dated as of
July 1, 1987, between Central Hudson and
the Bank named therein. ((17); Exhibit
(19) (10)(i)90)
(i) 80-- First Amendment, dated as of
September 1, 1987, to the Reimbursement
Agreement, dated as of November 1, 1985,
between Central Hudson and the Bank
named therein. ((17); Exhibit
(19)(10)(i)72)
(i) 81-- Second Amendment, dated as of July 1,
1990, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Central Hudson and the Bank named
therein. ((19); Exhibit (19)(10)(i)93)
(i) 82-- First Amendment, dated as of July 1,
1990, to the Reimbursement Agreement,
dated as of July 1, 1987, between
Central Hudson and the Bank named
therein. ((19); Exhibit (19)(10)(i)73)
(i) 83-- Third Amendment, dated as of July 29,
1992, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Central Hudson and the Bank named
therein. ((2); Exhibit (19)(10)(i)106)
(i) 84-- Second Amendment, dated as of July 29,
1992, to the Reimbursement Agreement,
dated as of July 1, 1987, between
Central Hudson and the Bank named
therein. ((2); Exhibit (19)(10)(i)107)
(i) 85-- Agreement, dated April 1, 1999, between
Central Hudson and Arch Coal Sales
Company, Inc. for the Sale and Purchase
of Coal. [Certain portions of the
Agreement setting forth or relating to
E-20
pricing provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((37);
Exhibit (10)(i)89)
(i) 86-- Agreement and Plan of Exchange by and
between Central Hudson and CH Energy
Group, Inc. (Incorporated by reference
to Exhibit A to the Proxy Statement and
Prospectus in Part 1 of Registration
Statement on Form S-4 of CH Energy
Group, Inc. (No. 333-52797). ((38;
Exhibit 2.1)
(i) 87-- Amendment No. 3, dated as of November 1,
1999, to the Agreement for the Sale and
Purchase of Coal, dated December 1,
1996, between Central Hudson and Inter-
American Coal, Inc. [Certain portions of
said Amendment set forth and relate to
pricing provisions and will be filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((41);
Exhibit (10)(i)88)
(i) 88-- Amendment No. 1, dated as of November 1,
1999, to the Agreement for the Sale and
Purchase of Coal, dated November 1,
1998, between Central Hudson and
Glencore, Ltd. [Certain portions of
said Amendment set forth and relate to
pricing provisions and will be filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((41);
Exhibit (10)(i)89)
(i) 89-- Amendment No. 1, dated as of November 1,
1999, to the Agreement for the Sale and
Purchase of Coal, dated April 1, 1999
between Central Hudson and Arch Coal.
[Certain portions of said Amendment set
forth and relate to pricing provisions
and will be filed separately with the
Securities and Exchange Commission
pursuant to a request for confidential
E-21
treatment under the rules of said
Commission.] ((41); Exhibit (10)(i)90)
(iii) 1-- Directors' Deferred Compensation Plan of
Central Hudson, effective October 1,
1980. ((16); Exhibit (10)(iii)1)
(iii) 2-- Executive Deferred Compensation Plan of
Central Hudson, effective March 1, 1992.
((20); Exhibit (19)(10)(iii)8)
(iii) 3-- Retirement Benefit Restoration Plan of
Central Hudson, effective May 1, 1993.
((22); Exhibit (10)(iii)10)
(iii) 4-- Amendment, dated July 23, 1993, to
Retirement Benefit Restoration Plan of
Central Hudson. ((22); Exhibit
(10)(iii)11)
(iii) 5-- First Amendment, dated December 17,
1993, to Central Hudson's Executive
Deferred Compensation Plan. ((29);
Exhibit (10)(iii)15)
(iii) 6-- Executive Incentive Compensation Plan of
Central Hudson, effective January 1,
1993. ((24); Exhibit (10)(iii)17)
(iii) 7-- Agreement, made March 14, 1994, by and
between Central Hudson and Mellon Bank,
N.A., amending and restating, effective
April 1, 1994, Central Hudson's Savings
Incentive Plan and related Trust
Agreement with The Bank of New York.
((25); Exhibit (10)(iii)18)
(iii) 8-- Amendment 1, dated July 22, 1994
(effective April 1, 1994) to the Amended
and Restated Savings Incentive Plan of
Central Hudson. ((26); Exhibit
(10)(iii)19)
(iii) 9-- Amendment 2, dated December 16, 1994
(effective January 1, 1995) to the
Amended and Restated Savings Incentive
Plan of Central Hudson, as amended.
((26); Exhibit (10)(iii)20)
(iii) 10-- Amendment, dated April 4, 1995, to the
Executive Incentive Compensation Plan of
E-22
Central Hudson. ((30); Exhibit
(10)(iii)21)
(iii) 11-- Stock Plan for Outside Directors of
Central Hudson, dated November 17, 1995.
((30); Exhibit (10)(iii)22)
(iii) 12-- Management Incentive Program of Central
Hudson, effective April 1, 1994. ((30);
Exhibit (10)(iii)23)
(iii) 13-- Amendment, dated July 25, 1997, to the
Management Incentive Program of Central
Hudson, effective August 1, 1997.
((33); Exhibit (10)(iii)24)
(iii) 14-- Change-of-Control Severance Policy, as
approved by the Board of Directors
October 23, 1998 and, effective
December 1, 1998, for all management
employees of the Company. ((39);
Exhibit (10)(iii)14)
(iii) 15-- Form of Employment Agreement, dated
October 23, 1998, effective December 1,
1998, for all officers of the Company.
((39); Exhibit (10)(iii)15)
(iii) 16-- Employment Agreement, dated October 23,
1998, effective December 1, 1998, for
the President and Chief Executive
Officer of the Company. ((39; Exhibit
(10)(iii)16)
(iii) 17-- Amendment, dated December 1, 1998, to
the Executive Deferred Compensation Plan
of Central Hudson. ((39); Exhibit
(10)(iii)17)
(iii) 18-- Amendment, dated December 1, 1998, to
the Retirement Benefit Restoration Plan
of Central Hudson. ((39; Exhibit
(10)(iii)18)
(iii) 19-- Amendment, dated October 1, 1999 to
Central Hudson's Directors Deferred
Compensation Plan, effective October 1,
1980, which Plan was merged into CH
Energy Group, Inc.'s Directors and
Executives Deferred Compensation Plan,
effective January 1, 2000. ((41);
Exhibit(10)(iii)19)
E-23
(iii) 20-- Form of Instrument of Assignment and
Assumption, dated December 15, 1999, by
CH Energy Group, Inc. of the Executive
Deferred Compensation Plan of Central
Hudson, dated March 1, 1992 and as
amended, December 17, 1993 and
December 1, 1998. ((41); Exhibit
(10)(iii)20)
(iii) 21-- Amended and Restated Stock Plan for
Outside Directors of Central Hudson,
together with Form of Instrument of
Assignment and Assumption by CH Energy
Group, Inc., dated December 15, 1999.
((41); Exhibit (10)(iii)21).
(iii) 22-- Form of Instrument of Assignment and
Assumption, dated December 15, 1999, by
CH Energy Group, Inc. of the Change of
Control Severance Policy of Central
Hudson, dated December 1, 1998. ((41);
Exhibit (10)(iii)22)
(iii) 23-- Form of Instrument of Assignment and
Assumption, dated December 15, 1999, by
CH Energy Group, Inc. of Central Hudson
Employment Agreements, effective
December 1, 1998, covering all officers
of CH Energy Group, Inc. and Central
Hudson. ((41); Exhibit (10)(iii)23)
(iii) 24-- Form of Instrument of Assignment and
Assumption, dated December 15, 1999, by
CH Energy Group, Inc. of Central Hudson
Employment Agreement, effective
December 1, 1998, covering Paul J.
Ganci. ((41); Exhibit (10)(iii)24)
(iii) 25-- Directors and Executives Deferred
Compensation Plan of CH Energy Group,
Inc., dated December 17, 1999 and
effective January 1, 2000. ((41);
Exhibit (10)(iii)25)
(iii) 26-- Trust and Agency Agreement, dated
December 17, 1999 and effective
January 1, 2000, between CH Energy
Group, Inc. and First America Trust
Company for CH Energy Group, Inc.'s
Directors and Executives Deferred
Compensation Plan. ((41); Exhibit
(10)(iii)26)
E-24
(iii) 27-- Long-Term Performance-Based Incentive
Plan of CH Energy Group, Inc., dated
October 22, 1999 and effective
January 1, 2000 and Form of Instrument
of Assignment and Assumption, dated
December 15, 1999. (The long-term
incentive portion of such Plan subject
to Shareholder approval 4/25/99.) ((41);
Exhibit (10)(iii)27)
(12) -- Statement showing the computation of the ratio of
earnings to fixed charges and ratio of earnings to
fixed charges and preferred dividends.
(21) -- Affiliates of Central Hudson Gas & Electric
Corporation:
State or other Name under which
Jurisdiction of Affiliate conducts
Name of Affiliate Incorporation Business
- ----------------- -------------- ------------------
CH Energy Group, Inc. New York CH Energy Group, Inc.
Central Hudson Energy New York Central Hudson
Services, Inc. Energy Services, Inc.
Phoenix Development New York Phoenix Development
Company, Inc. Company, Inc.
Greene Point New York Greene Point
Development Corporation Development Corporation
CH Resources, Inc. New York CH Resources, Inc.
CH Syracuse New York CH Syracuse Properties,
Properties, Inc. Inc.
CH Niagara New York CH Niagara Properties,
Properties, Inc. Inc.
Central Hudson New York Central Hudson
Enterprises Enterprises Corporation
Corporation
SCASCO, Inc. Connecticut SCASCO, Inc.
Island Sound Delaware Island Sound Commercial
Commercial Energy Energy Sales, Inc.
Sales, Inc. (merged into SCASCO,
Inc. 12/31/99)
E-25
State or other Name under which
Jurisdiction of Affiliate conducts
Name of Affiliate Incorporation Business
- ----------------- -------------- ------------------
Prime Industrial New York Prime Industrial Energy
Energy Services, Inc. Services, Inc.
(23) -- Consent of Experts:
The consent of PricewaterhouseCoopers LLP.
(24) -- Powers of Attorney:
Powers of Attorney for each of the directors comprising a
majority of the Board of Directors of Central Hudson
authorizing execution and filing of this Annual Report on
Form 10-K by Paul J. Ganci.
(27) -- Financial Data Schedule
(99) -- Additional Exhibits:
(i) 1-- Stipulation and Order on Consent signed on
behalf of the Department of Environmental
Protection of the City of New York,
Environmental Defense Fund, Inc., Department of
Environmental Conservation of the State of New
York, Central Hudson Gas & Electric Corporation
and Consolidated Edison Company of New York,
Inc. ((23); Exhibit 28.1)
(i) 2-- Settlement Agreement on Issues Related to Nine
Mile Two Nuclear Plant, dated June 6, 1990,
among the Staff of the Department of Public
Service, the Consumer Protection Board, the
Attorney General of the State of New York,
Assemblyman Maurice Hinchey, Multiple
Intervenors, Central Hudson, Long Island
Lighting Company, New York State Electric & Gas
Corporation, Niagara Mohawk Power Corporation
and Rochester Gas and Electric Corporation.
((19); Exhibit (19)(28)(i)4)
(i) 3-- Order on Consent signed on behalf of the New
York State Department of Environmental
Conservation and Central Hudson relating to
Central Hudson's former manufactured gas site
located in Newburgh, New York. ((28); Exhibit
(99)(i)5)
E-26
(i) 4-- Summary of principal terms of the Amended and
Restated Settlement Agreement, dated January 2,
1998, among Central Hudson, the Staff of the
Public Service Commission of the State of New
York and the New York State Department of
Economic Development. ((32); Exhibit 99(i)9)
(i) 5-- Central Hudson's acceptance, dated February 26,
1998, of the Order of the Public Service
Commission of the State of New York, issued and
effective February 19, 1998, adopting the terms
of Central Hudson's Amended and Restated
Settlement subject to modifications and
conditions. ((34); Exhibit 99(i)10)
(I) 6-- Order of the Public Service Commission of the
State of New York, issued and effective March 7,
2000 amending Central Hudson's Amended and
Restated Settlement Agreement dated February 19,
1998, as amended.
The following are notes to the Exhibits listed above:
(1) Incorporated herein by reference to Central
Hudson's Quarterly report on Form 10-Q for
fiscal quarter ended September 30, 1993 (File
No. 1-3268).
(2) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1992 (File No. 1-
3268).
(3) Incorporated herein by reference to Central
Hudson's Registration Statement No. 2-65127.
(4) Incorporated herein by reference to Central
Hudson's Registration Statement No. 2-67537.
(5) Incorporated herein by reference to Central
Hudson's Registration Statement No. 2-69640
(6) (a) Incorporated herein by reference to Prospectus
Supplement Dated May 28, 1992 (To Prospectus
Dated April 13, 1992) relating to $125,000,000
principal amount of First Mortgage Bonds,
designated Secured Medium-Term Notes, Series A,
and to the Prospectus Dated April 13, 1992
relating to $125,000,000 principal amount of
Central Hudson's debt securities attached
thereto, as filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(5)
E-27
under the Securities Act of 1933, in connection
with Registration Statement No. 33-46624.
(b) Incorporated herein by reference to Pricing
Supplement No. 1, Dated June 4, 1992 (To
Prospectus Dated April 13, 1992, as supplemented
by a Prospectus Supplement Dated May 28, 1992),
as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-46624.
(c) Incorporated herein by reference to Pricing
Supplement No. 2, Dated June 4, 1992 (To
Prospectus Dated April 13, 1992, as supplemented
by a Prospectus Supplement Dated May 28, 1992),
as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-46624.
(d) Incorporated herein by reference to Pricing
Supplement No. 3, Dated June 4, 1992 (To
Prospectus Dated April 13, 1992, as supplemented
by a Prospectus Supplement Dated May 28, 1992),
as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-46624.
(e) Incorporated herein by reference to Pricing
Supplement No. 4, Dated August 20, 1992 (To
Prospectus Dated April 13, 1992, as supplemented
by a Prospectus Supplement Dated May 28, 1992),
as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-46624.
(f) Incorporated herein by reference to Pricing
Supplement No. 5, Dated August 20, 1992 (To
Prospectus Dated April 13, 1992, as supplemented
by a Prospectus Supplement Dated May 28, 1992),
as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-46624.
(g) Incorporated herein by reference to Pricing
Supplement No. 6, Dated July 26, 1993 (To
Prospectus Dated April 13, 1992, as supplemented
by a Prospectus Supplement Dated May 28, 1992),
E-28
as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-46624.
(h) Incorporated herein by reference to Pricing
Supplement No. 7, Dated July 26, 1993 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3)
under the Securities Act of 1933 in connection
with Registration Statement No. 33-46624.
(7) Incorporated herein by reference to Central
Hudson's Current Report on Form 8-K, dated
May 27, 1992 (File No. 1-3268).
(8) (a) Incorporated herein by reference to Prospectus
Supplement Dated May 28, 1992 (To Prospectus
Dated April 13, 1992) relating to $125,000,000
principal amount of Medium-Term Notes, Series A,
and to the Prospectus Dated April 13, 1992,
relating to $125,000,000 principal amount of
Central Hudson's debt securities attached
thereto, as filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(5)
under the Securities Act of 1933, in connection
with Registration Statement No. 33-46624.
(b) Incorporated herein by reference to Pricing
Supplement No. 1, Dated June 26, 1992 (To
Prospectus Dated April 13, 1992, as supplemented
by a Prospectus Supplement Dated May 28, 1992),
as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-46624.
(c) Incorporated herein by reference to Pricing
Supplement No. 2, Dated October 6, 1993 (To
Prospectus Dated April 13, 1992, as supplemented
by a Prospectus Supplement Dated May 28, 1992),
as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-46624.
(9) Incorporated herein by reference to Prospectus
Supplement Dated May 15, 1995 (To Prospectus
Dated April 4, 1995) relating to $80,000,000
principal amount of First Mortgage Bonds,
E-29
designated Secured Medium-Term Notes, Series B,
and the Prospectus Dated April 4, 1995, relating
to (i) $80,000,000 of Central Hudson's Debt
Securities and Common Stock, $5.00 par value,
but not in excess of $40 million aggregate
initial offering price of such Common Stock and
(ii) 250,000 shares of Central Hudson's
Cumulative Preferred Stock, par value $100 per
share, which may be issued as 1,000,000 shares
of Depositary Preferred Shares each representing
1/4 of a share of such Cumulative Preferred
Stock attached thereto, as filed pursuant to
Rule 424(b) in connection with Registration
Statement No. 33-56349.
(10) (a) Incorporated herein by reference to Prospectus
Supplement Dated August 24, 1998 (To Prospectus
Dated April 4, 1995) relating to $80,000,000
principal amount of Medium-Term Notes, Series B,
and the Prospectus Dated April 4, 1995, relating
to (i) $80,000,000 of Central Hudson's Debt
Securities and Common Stock, $5.00 par value,
but not in excess of $40 million aggregate
initial offering price of such Common Stock and
(ii) 250,000 shares of Central Hudson's
Cumulative Preferred Stock, par value $100 per
share, which may be issued as 1,000,000 shares
of Depositary Preferred Shares each representing
1/4 of a share of such Cumulative Preferred
Stock attached thereto, as filed pursuant to
Rule 424(b) in connection with Registration
Statement No. 33-56349.
(b) Incorporated herein by reference to Pricing
Supplement No. 1, Dated September 2, 1998 (To
Prospectus Dated April 4, 1995, as supplemented
by a Prospectus Supplement Dated August 24,
1998), as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(2) under the
Securities Act of 1933 in connection with
Registration Statement No. 33-56349.
(11) Incorporated herein by reference to Central
Hudson's Registration Statement No. 2-50276.
(12) Incorporated herein by reference to Central
Hudson's Registration Statement No. 2-54690.
(13) Incorporated herein by reference to Central
Hudson's Registration Statement No. 2-58500.
E-30
(14) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1986 (File No. 1-
3268).
(15) Incorporated herein by reference to Central
Hudson's Registration Statement No. 2-60496.
(16) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 1-
3268).
(17) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987 (File No. 1-
3268).
(18) Incorporated herein by reference to Central
Hudson's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1989 (File No. 1-
3268).
(19) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 (File No. 1-
3268).
(20) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-
3268).
(21) Incorporated herein by reference to Central
Hudson's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1992 (File
No. 1-3268).
(22) Incorporated herein by reference to Central
Hudson's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1993 (File
No. 1-3268).
(23) Incorporated herein by reference to Central
Hudson's Current Report on Form 8-K, dated
May 15, 1987 (File No. 1-3268).
(24) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (File
No. 1-3268).
E-31
(25) Incorporated herein by reference to Central
Hudson's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1994 (File
No. 1-3268).
(26) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (File
No. 1-3268).
(27) Incorporated herein by reference to Central
Hudson's Current Report on Form 8-K, dated
May 15, 1995 (File No. 1-3268).
(28) Incorporated herein by reference to Central
Hudson's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1995 (File
No. 1-3268).
(29) Incorporated herein by reference to Central
Hudson's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 (File
No. 1-3268).
(30) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (File
No. 1-3268).
(31) Incorporated herein by reference to Central
Hudson's Current Report on Form 8-K, dated
April 1, 1997 (File No. 1-3268).
(32) Incorporated herein by reference to Central
Hudson's Current Report on Form 8-K, dated
January 7, 1998 (File No. 1-3268).
(33) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, as amended
December 8, 1998 (File No. 1-3268).
(34) Incorporated herein by reference to Central
Hudson's Current Report on Form 8-K, dated
February 10, 1998 (File No. 1-3268).
(35) Incorporated herein by reference to Central
Hudson's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1998 (File No. 1-
3268).
E-32
(36) (a) Incorporated herein by reference to Prospectus
Supplement Dated January 8, 1999 (To Prospectus
Dated January 7, 1999) relating to $110,000,000
principal amount of Medium-Term Notes, Series C,
and to the Prospectus Dated January 7, 1999,
relating to $110,000,000 principal amount of
Central Hudson's debt securities attached
thereto, as filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(2)
under the Securities Act of 1933, in connection
with Registration Statement Nos. 333-65597 and
33-56349.
(b) Incorporated herein by reference to Pricing
Supplement No. 1, Dated January 12, 1999 (To
Prospectus Dated January 7, 1999, as
supplemented by a Prospectus Supplement Dated
January 8, 1999), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement Nos.
333-65597 and 33-56349.
(37) Incorporation herein by reference to Central
Hudson's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1999 (File No.
1-3268).
(38) Incorporated herein by reference to Central
Hudson's Current Report on Form 8-K dated
December 15, 1999 (File No. 1-3268)
(39) Incorporated herein by reference to Central
Hudson's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (File No.
1-3268).
(40) Incorporated herein by reference to Pricing
Supplement No. 2, Dated January 31, 2000 (To
Prospectus dated January 7, 1999, as
supplemented by a Prospectus Supplement Dated
January 31, 2000, as filed with the Securities
and Exchange Commission pursuant to Rule 424(b)
under the Securities Act of 1933 in connection
with Registration Statement Nos. 333-65597 and
33-56349.
(41) Incorporated herein by reference to CH Energy
Group, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 (File No.
030512).
E-33
* Exhibits preceded by an asterisk have heretofore been
classified as basic documents under previous Rule 24(b) of
the SEC Rules of Practice.
E-34