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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1993
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from to
Commission file number 1-4315
ORANGE AND ROCKLAND UTILITIES, INC.
(Exact name of registrant as specified in its charter)
New York 13-1727729
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Blue Hill Plaza, Pearl River, New York 10965
(Address of principal executive offices) (Zip Code)
(914) 352-6000
(Registrant's telephone number, including area code)
Common Stock, $5 Par Value -- New York Stock Exchange, Inc.
(Securities registered pursuant to Section 12(b) of the Act)
Preference Stock, No Par Value
(Securities registered pursuant to Section 12(g) of the Act)
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.
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
At February 28, 1994, the approximate aggregate market value of
the voting stock held by nonaffiliates of the registrant was
$487,642,452*
At February 28, 1994, the registrant had 13,532,439 shares of
Common Stock ($5 par value) outstanding.
(Continued)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Continued from first page)
ORANGE AND ROCKLAND UTILITIES, INC.
(Exact name of registrant as specified in its charter)
Documents incorporated by reference:
Annual Report to Shareholders for the year ended December 31, 1993
incorporated in Part I, Part II and Part IV to the extent described
therein.
The Company's definitive Proxy Statement in connection with the 1994
Annual Meeting of Common Shareholders incorporated in Part III to
the extent described therein.
* For purposes of this calculation, it is assumed that only directors
and officers of the registrant are affiliates of the registrant.
0064O.wp
TABLE OF CONTENTS
Page
PART I
Item 1. Business
General Development of Business 1
Financial Information about Industry Segments 1
Narrative Description of Business: 1
Principal Business 1
Events Affecting the Company 2
Electric Operations 3
Gas Operations 9
Diversified Activities 12
Construction Program and Financing 13
Regulatory Matters 16
Utility Industry Risk Factors 19
Competition 20
Marketing 21
Environmental Matters 21
Research and Development 24
Franchises 24
Employee Relations 25
Item 2. Properties 26
Item 3. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 39
Executive Officers of the Registrant 40
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 41
Item 6. Selected Financial Data 41
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 41
Item 8. Financial Statements and Supplementary Data 42
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 42
PART III
Item 10. Directors and Executive Officers of the Registrant 42
Item 11. Executive Compensation 42
Item 12. Security Ownership of Certain Beneficial Owners
and Management 42
Item 13. Certain Relationships and Related Transactions 42
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 43
Signatures 50
Report of Independent Certified Public Accountants on Financial
Statement Schedules 52
Consent of Independent Certified Public Accountants 52
-i-
PART I
Item 1. Business
General Development of Business:
Orange and Rockland Utilities, Inc. (the "Company") is a New York
corporation, with its principal office at One Blue Hill Plaza, Pearl
River, New York 10965 (telephone number 914-352-6000), which was formed
originally under the name Rockland Light and Power Company on May 21,
1926 through the consolidation of a company having the latter name
(organized in 1899), Catskill Power Corporation and Orange County Public
Service Company, Inc. Its present name was adopted on February 28,
1958, when The Orange and Rockland Electric Company was consolidated
with Rockland Light and Power Company.
The Company has two wholly owned utility subsidiaries, Rockland
Electric Company ("RECO"), a New Jersey corporation, and Pike County
Light & Power Company ("Pike"), a Pennsylvania corporation. The Company
has three wholly owned non-utility subsidiaries, O&R Energy Development,
Inc. ("ORED"), a Delaware corporation, Clove Development Corporation
("Clove"), a New York corporation and O&R Development, Inc. ("ORD"), a
Delaware corporation. RECO has a wholly owned non-utility subsidiary,
Saddle River Holdings Corp. ("SRH"), a Delaware corporation. SRH has
two wholly owned non-utility subsidiaries, O&R Energy, Inc. and Atlantic
Morris Broadcasting, Inc., both Delaware corporations. O&R Energy, Inc.
has a wholly owned non-utility subsidiary, Millbrook Holdings, Inc.,
also a Delaware corporation. The businesses of the non-utility
subsidiaries are described under the subheading "Diversified Activities"
in this Item 1.
Financial Information about Industry Segments:
Consolidated financial information regarding the Company's
principal business segments, Electric Operations, Gas Operations and
Diversified Activities is contained in Note 13 of the Notes to
Consolidated Financial Statements - "Segments of Business" on page 36
of the 1993 Annual Report to Shareholders, which material is
incorporated by reference in this Form 10-K Annual Report.
Narrative Description of Business:
Principal Business
The Company and its utility subsidiaries supply electricity and
gas to a territory covering approximately 1,350 square miles. The
eastern boundary of the Company's service territory extends along the
west bank of the Hudson River from a point in New Jersey six miles north
of the George Washington Bridge northerly for approximately 37 miles to
a point in New York a short distance north of the United States Military
Academy at West Point. From the Hudson River, the Company's territory
in New York State extends westward to the Delaware River, embracing all
of Rockland County, most of Orange County and a part of Sullivan County.
In New Jersey, RECO supplies electricity to the northern parts of Bergen
and Passaic Counties and small areas in the northeastern and
northwestern parts of Sussex County. Pike supplies electricity and gas
to the northeastern corner of Pike County, Pennsylvania.
As of December 31, 1993, the Company and its utility subsidiaries
furnished electric service to approximately 257,000 customers in 96
communities with an estimated population of 656,000 and gas service to
approximately 109,000 customers in 57 communities with an estimated
population of 463,000. There have been no significant changes in either
the population of the Company's service territory or in the number of
customers served since December 31, 1992. At that time, electric
service was provided to approximately 254,000 customers in 95
communities with an estimated population of 648,000 and gas service was
provided to approximately 108,000 customers in 56 communities with an
estimated population of 465,000. At December 31, 1993 and 1992, 95% of
the Company's residential gas customers used gas as their major source
of space heating fuel. While the territory served is predominantly
residential, the Company also serves a number of commercial and
industrial customers in diversified lines of business activities from
which significant electric and gas revenues are derived. No customer
accounts for more than 10% of either gas or electric sales. The
business of the Company and its utility subsidiaries is seasonal to the
extent that sales of electricity are higher during the summer, mainly
due to air conditioning requirements, and sales of gas are greater in
the winter months, primarily as a result of space heating requirements.
Events Affecting the Company
On August 16, 1993, the Rockland County, New York District
Attorney charged a then Vice President of the Company with grand
larceny, commercial bribery and making illegal political contributions
and commenced a related investigation of the Company. Two other former
employees who had reported to the Vice President were also charged with
grand larceny.
On August 20, 1993, the Company's Board of Directors created a
Special Committee (the "Special Committee") of the Board, consisting
entirely of outside Directors, to conduct an independent investigation
of the issues raised by the Rockland County District Attorney and any
other matters discovered in the course of the investigation as the
Special Committee deems necessary or desirable. The Special Committee
was granted full and complete power and authority to take whatever steps
it deems necessary or desirable, including retention of counsel and
other advisors, presenting to the Board of Directors periodic reports
regarding its activities and at the appropriate time its full findings,
and making recommendations to the Board of Directors with respect to any
remedial measures it deems appropriate to prevent a recurrence of any
improprieties or irregularities discovered by the investigation. The
Special Committee has retained the law firm of Stier, Anderson & Malone
as investigative counsel, and Price Waterhouse & Co. as accounting
experts, to assist it in conducting its independent investigation.
The Special Committee will present preliminary conclusions of its
investigation at the Annual Meeting of Shareholders on May 11, 1994.
The Special Committee intends to complete its investigation as promptly
as practicable after the Annual Meeting and will report its final
conclusions and recommendations to the Board of Directors at that time.
In addition, during the fourth quarter, James F. Smith was
terminated for cause as Chief Executive Officer and removed as Chairman
of the Board of Directors. President and Chief Operating Officer,
Victor J. Blanchet, Jr. was appointed to serve as acting Chief Executive
Officer. Details concerning these events, including the cost incurred
for legal counsel, accounting services, and other professional and
consultative services related to the ongoing investigations and their
effect on the Company's results of operations, are contained in the
"Review of the Company's Results of Operations and Financial Condition"
under the captions "Events Affecting the Company" and "Rate Activities"
and in Note 12 of the Notes to Consolidated Financial Statements under
the caption "Legal Proceedings" on pages 15, 19 and 34, respectively, of
the 1993 Annual Report to Shareholders, which material is incorporated
by reference in this Form 10-K Annual Report. Reference is also made to
Item 3, "Legal Proceedings", of this Form 10-K Annual Report.
Electric Operations
Generating Capacity and Purchased Power. As described more fully
in Item 2 of this Form 10-K Annual Report under the subheading "Electric
Generating Facilities", the capacity of the Company's plants provides
the Company with a net generating capacity of 1,032 megawatts ("Mw") in
the winter and 1,020 Mw in the summer. The electric energy which RECO
and Pike distribute to their customers is supplied by the Company. The
maximum historical one-hour demand for the Company and its utility
subsidiaries occurred on July 8, 1993 and was 1,037 Mw. Additional
statistics regarding electric operations are contained under the caption
"Operating Statistics-Electric" on page 38 of the 1993 Annual Report to
Shareholders, which material is incorporated by reference in this
Form 10-K Annual Report.
In addition to the energy produced at its generating facilities,
the Company, through various transmission interconnections, purchases
both capacity and energy from other utilities when needed to meet load
and reserve requirements and also when such power is available at a
price lower than the cost of production. The Company maintains
transmission interconnections with Central Hudson Gas and Electric
Corporation ("Central Hudson"), Public Service Electric and Gas Company
("PSE&G") and Consolidated Edison Company of New York, Inc. ("Con Ed").
Through these interconnections, and as a member of the New York Power
Pool ("NYPP"), the Company can exchange power directly with the above
utilities and, through the facilities of other members of the NYPP, the
Company can exchange power with all members of the NYPP and with
utilities in pools in neighboring states. In addition, members of the
NYPP are able to coordinate inter-utility transfers of bulk power in
order to achieve economy and efficiency, cooperate in long range
planning of generation and transmission facilities, coordinate inter-
utility operating and emergency procedures to assure reliable, adequate
and economic electric service throughout the state and provide for the
equitable sharing of the resulting benefits and costs. Through the NYPP
control center, the Company is able to purchase power in order to
optimize its generation-interchange mix, using the lowest cost energy
available to the Company in the interconnected system. By agreement
with the NYPP, the Company must maintain capacity reserves including
firm capacity purchases of not less than 18% of its peak load.
During 1993, the Company purchased 464,334 megawatt hours ("Mwh")
from or through the NYPP. In addition, the Company has agreements with
the New York Power Authority ("NYPA") and certain other utilities for
the purchase of firm power. During 1993, an agreement with the NYPA
provided for firm purchases of 25 Mw of year-round capacity from the
Blenheim-Gilboa pumped-storage generating facility ("Gilboa Facility")
and firm power purchase agreements with Central Hudson and with
Pennsylvania Power & Light Company ("PP&L") provided for an additional
225 Mw of capacity. Other agreements were in effect from time to time
throughout 1993 with several other utilities, including an agreement
with Philadelphia Electric Company pursuant to which significant economy
purchases were made during 1993, which provided for short-term, firm
purchases on an as-available, as-needed basis.
During 1993 purchased power, including purchases made pursuant to
firm purchase contracts, short-term purchase agreements and interchange
agreements, amounted to 42% of the Company's energy requirements.
Details are as follows:
191993 PURCHASED POWER
Purchased From Megawatt hours
Central Hudson Gas & Electric Corp. 68,925
Philadelphia Electric Co. 427,545
New York State Electric & Gas Corp. 26,606
General Public Utilities 83
New York Power Authority (1) 130,143
New York Power Pool 464,334
Niagara Mohawk Power Corp. 16,429
Public Service Electric & Gas Corp. 321,846
Pennsylvania Power & Light Company 387,654
Cogeneration and Small Power Producers 210,688
Total 2,054,253
=========
(1) The Company delivered 2,202 Mwh of NYPA hydroelectric power to
residential customers in Rockland County and Orange County under
NYPA's municipal distribution agency program. In addition, the
Company is party to an agreement with the NYPA regarding the
purchase of peaking power from the Gilboa Facility. Pursuant to
the agreement, the Company must replace the energy purchased
from the Gilboa Facility at a ratio of three-to-two. During
1993, the Company purchased 31,738 Mwh from the Gilboa Facility
and replaced 47,636 Mwh, for the net amount of (15,898) Mwh,
which is included in the amount shown above.
With regard to future purchases of capacity and energy, contracts are
in place with NYPA, Central Hudson, PP&L and PSE&G. The NYPA agreement
for firm purchases from the Gilboa Facility, which provides for 25 Mw of
year-round capacity, will be in effect through April 2015. The firm
purchase agreement with Central Hudson will provide 50 Mw of capacity
through April 1994, and the agreement with PP&L will provide capacity
ranging between 10 Mw and 125 Mw through October 1995. In addition, a
firm purchase power agreement with PSE&G will provide between 75 Mw and
300 Mw of capacity during the base contract term which extends from May
1994 through April 1998, with an additional 100 Mw available throughout
the base contract term at the option of the Company. The contract also
provides that at the option of the Company 100 Mw of additional capacity
would be available between May 1992 and April 1994 and 400 Mw of
additional capacity will be available from May 1998 through October 2000.
During 1994, the Company expects to purchase 50 Mw of capacity above the
base contract amount under these options. Other agreements will continue
to be in effect which will enable the Company to take advantage of
economic power purchases on an as available, as-needed basis.
Additional information regarding future power supply, particularly
capacity purchase contracts with Independent Power Producers and
Qualifying Facilities, is contained under the caption "Future Energy
Supply and Demand" in this Item 1. Information regarding future payments
under capacity purchase contracts is contained in Note 12 of the Notes to
Consolidated Financial Statements under the caption "Power Purchase
Agreements" on page 34 of the 1993 Annual Report to Shareholders, which
material is incorporated by reference in this Form 10-K Annual Report.
Fuel Supply. The Company's 1,032 Mw winter generating capacity is
available from the following fuel sources:
Coal,
Oil Oil Gas
Plant* & Gas & Gas Hydro Turbine Total
(Megawatts)
Lovett Plant
Units 1, 2 & 3 102.0 102.0
Units 4 & 5 399.6 399.6
Hydro Plants
Swinging Bridge,
Mongaup, Rio and
Grahamsville 43.8 43.8
Gas Turbine Plants
Hillburn and
Shoemaker 86.0 86.0
Bowline Point Plant
Units 1 & 2 400.6 400.6
502.6 399.6 43.8 86.0 1,032.0
===== ===== ==== ==== =======
*For a description of the Company's generating plants, see "Electric
Generating Facilities" in Item 2 of this Form 10-K Annual Report.
The availability and cost of fuels and the Company's choice of fuel
in any particular circumstance are affected by a number of factors, the
majority of which are beyond the control of the Company. These factors
include the domestic and international fuel supply situation,
environmental regulations, conservation measures and the availability of
alternative fuels. The Company's principal generating plants use natural
gas, coal or oil as their primary fuels. The Company has, however, reduced
its dependence on oil through the use of coal as the primary fuel for the
Lovett Plant's two largest generating units, the burning of increased
volumes of natural gas in its boilers and the purchase of power from other
systems.
Electricity available for sale is a mix of Company generation by
various fuel types, supplemented by purchased power when such power is
available at a price lower than the price of generation or is needed to
meet load requirements. Details for the years 1989 through 1993 are as
follows:
1989 1990 1991 1992 1993
Gas 25% 27% 22% 21% 16%
Coal 29 32 36 33 33
Oil 28 19 14 10 5
Hydro 3 4 3 3 4
Purchased Power 15 18 25 33 42
Total 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
Gas - During 1993, the Company was able to use significant volumes of
natural gas for boiler fuel at both its Lovett Plant and the Bowline Point
Plant. It also expects to be able to use natural gas in the Lovett
Plant and the Bowline Point Plant during 1994, whenever such gas is more
economical than alternative fuels. In 1993, the Company used 2.1 billion
cubic feet ("Bcf") and 6.0 Bcf of gas, respectively, at the Lovett Plant
and the Bowline Point Plant. The annual average cost per thousand cubic
feet ("Mcf") of natural gas burned in the Company's generating plants
during each of the years ended December 31, 1989 through 1993 was $2.79,
$2.78, $2.64, $2.82 and $3.01, respectively. This is equivalent to $2.71,
$2.69, $2.56, $2.74 and $2.92, respectively, per million British Thermal
Unit ("MMBTU").
Coal - The low sulfur coal (1.0 lbs. SO2 per MMBTU) used in Lovett
Plant Units 4 and 5 has been supplied to the Company primarily through
long term contracts with Massey Coal Sales, Inc. ("Massey") and Pittston
Coal Sales Corporation ("Pittston") as well as through spot market
purchases, which accounted for approximately 22% of the Company's 1993
coal requirements. The Company has the right, under the coal purchase
contracts, to suspend the purchase of coal if alternative fuel sources
become less expensive. The coal is fully washed and, as such, is low in
ash (typically 7%) and high in BTU content (26 MMBTU's per ton). The
annual average cost per ton of coal consumed at the Lovett Plant during
each of the years ended December 31, 1989 through 1993 was $58.53, $58.40,
$56.57, $55.95 and $55.25, respectively. This is equivalent to $2.26,
$2.25, $2.18, $2.16 and $2.14, respectively, per MMBTU. During 1993 coal
was the predominant fuel burned at the Lovett Plant, and the Company
expects it to be the predominant fuel burned during 1994. In February
1994, the contract with Pittston was terminated by the Company because of
Pittston's failure to meet the coal quality specification of its contract.
Alternative supplies have been obtained and arrangements for longer term
replacement coal are under review. Information regarding the coal supply
contracts is contained in Note 12 of the Notes to Consolidated Financial
Statements under the caption "Coal Supply Contracts" on page 34 of the
1993 Annual Report to Shareholders which material is incorporated by
reference in this Form 10-K Annual Report.
Oil - The Company does not anticipate purchasing any significant
quantity of fuel oil for its Lovett Plant. Con Ed has undertaken the
supply of #6 fuel oil (0.37% maximum sulfur content by weight) to the
Bowline Point Plant, which is supplied under a contract between Con Ed and
the Company. Pursuant to that contract, Con Ed has also undertaken to
provide a backup oil supply for the Company's Lovett Plant under certain
conditions. The Company believes that it will be able to secure
sufficient oil supplies to meet the total requirements of #6 fuel oil for
the calendar year 1994. The annual average cost per barrel of oil burned
in the Company's generating plants during each of the years ended
December 31, 1989 through 1993 was $19.21, $23.73, $21.23, $20.43 and
$21.27, respectively. This is equivalent to $3.09, $3.81, $3.40, $3.26
and $3.39, respectively, per MMBTU.
Hydro - Water for the operation of the Company's Mongaup River Hydro
Plants is controlled by the Company through the ownership of the necessary
land in fee or through easements. In the case of the Grahamsville Plant,
water is obtained under contract with the City of New York Board of Water
Supply. This contract, which expires in 2005, entitles the Company to 8.1
Bcf of free water each year. Water in excess of 8.1 Bcf, which amounted
to 9.0 Bcf during 1993, is billed at varying rates based on an average
cost of all fuels used in power generation.
Purchased Power - The Company's practice regarding purchased power is
to supplement the Company's electric generation by purchasing both
capacity and energy when needed to meet load and reserve requirements and
also when such power is available at a price lower than the cost of
production. Details regarding purchased power are contained under the
captions "Generating Capacity and Purchased Power" and "Future Energy
Supply and Demand" in this Item 1. In addition, information regarding the
cost of electric energy is contained under the caption "Electric Energy
Costs" in the "Review of the Company's Results of Operations and Financial
Condition" on page 16 in the 1993 Annual Report to Shareholders, which
material is incorporated by reference in this Form 10-K Annual Report.
Future Energy Supply and Demand. The Company continues to be
committed to meeting customer energy needs by providing reliable energy
service at the lowest prudent cost and in an environmentally sound manner.
Through its Integrated Resource Plan the Company has responded to the
changes that have occurred in the utility industry and has incorporated a
significant number of conservation and demand reduction alternatives as
well as purchased power from both utility and non-utility generators, into
its energy strategy.
The Demand Side Management ("DSM") program involves efforts to
control electric peak demand and energy usage, and addresses the need to
improve plant utilization by making customer demand more complementary
over time to the available capacity. DSM programs are available to all
market segments. Through December 31, 1993, DSM efforts have reduced the
annual need for increased generating capacity and energy by 97.9 Mw and
173,104 Mwh, respectively, both through programs administered by the
Company and by RECO as well as through contracts with outside consultants
pursuant to the competitive bidding program. The New York State Public
Service Commission ("NYPSC") has consistently authorized the recovery of
DSM costs, and in New Jersey, RECO's DSM costs are recoverable on a
current basis. Additional information regarding the recovery of DSM
costs, including the Company's achievement of certain DSM related goals
and their impact on the 1993 results of operations, as well as the impact
of certain events described under the caption "Events Affecting the
Company" in this Item 1, is contained under the captions "Electric
Operating Revenues and Sales" and "Rate Activities" in the "Review of the
Company's Results of Operations and Financial Condition" on pages 15 and
19, respectively, of the 1993 Annual Report to Shareholders, which
material is incorporated by reference in this Form 10-K Annual Report.
Reference is also made to Item 3, "Legal Proceedings" of this Form 10-K
Annual Report.
The Company's Supply-Side Management program involves the acquisition
of future increments of capacity and energy from both investor-owned
utilities and from non-utility generators. The Company has entered into
several agreements in this regard.
In 1990, the Company entered into a power supply agreement ("Wallkill
Agreement") with Wallkill Generating, L.P. ("Wallkill Generating"). The
Wallkill Agreement was approved by the NJBRC in October 1991, and in July
1991 the Federal Energy Regulatory Commission ("FERC") approved the rates
contained in the Wallkill Agreement. Pursuant to the agreement, Wallkill
Generating, a limited partnership formed by PG&E/Bechtel Generating
Company (now U.S. Generating Company), has contracted to construct and
operate a gas-fired combined cycle generating facility in the Town of
Wallkill, N.Y. and sell 95 Mw of capacity and associated energy to the
Company. The original target date for commercial operation of this
project as set forth in the Wallkill Agreement was April 1994. Wallkill
Generating has reported that construction of the project will begin in the
spring of 1994 and it will be available for commercial operation in late
1995.
In 1990, the Company entered into a long-term power supply agreement
("State Line Agreement") with State Line Power Associates Limited
Partnership ("State Line"). Under the terms of the State Line Agreement,
State Line contracted to construct and operate a gas-fired combined cycle
generating facility in the Borough of Ringwood, New Jersey and sell 100 Mw
of capacity and associated energy to the Company. In July 1992, the State
Line Agreement was terminated by the Company for, among others things,
State Line's failure to make a required milestone payment pursuant to
specified contract terms. On August 3, 1992, State Line filed suit
against the Company in the United States District Court for the Southern
District of New York claiming that the Company had wrongfully terminated
the State Line Agreement. On January 7, 1994, State Line and the Company
settled all litigation relating to the State Line Agreement. Information
regarding the settlement of the State Line litigation is contained under
Item 3, "Legal Proceedings" of this Form 10-K Annual Report, as well as in
the 1993 Annual Report to Shareholders in Note 12 of the Notes to
Consolidated Financial Statements under the caption "Legal Proceedings" on
page 34, which information is incorporated by reference in this Form 10-K
Annual Report.
In addition to the Wallkill Agreement, future increments of purchased
capacity and energy have been contracted from investor owned utilities and
the NYPA as previously described under the caption "Generating Capacity
and Purchased Power" in this Item 1. In addition, the Company has
contracted to purchase approximately 90 Mw of capacity and associated
energy from various Public Utility Regulatory Policies Act ("PURPA")
Qualifying Facilities. These contracts include a contract between the
Company and Harriman Energy Partners, Ltd., ("Harriman Energy") a limited
partnership, the general partner of which is Destec Holdings, Inc.
(formerly PSE, Inc.). This contract provides for the construction of a
project that upon commercial operation, which Harriman Energy has reported
to be in late 1996, would provide the Company with approximately 57 Mw of
capacity and associated energy for a period of 25 years. Although this
contract has been approved by the NYPSC and the New Jersey Board of
Regulatory Commissioners ("NJBRC"), the Company is seeking a NYPSC order
that would revise the purchase price downward to reflect current costs of
alternative supplies.
Construction has not been commenced on either the Wallkill Generating
or Harriman Energy projects and the Company cannot predict whether either
of these projects will be constructed. If either or both of these
projects are not constructed, other economic sources of capacity and
energy should be available to the Company.
Information regarding future payments under capacity purchase
contracts is contained in Note 12 of the Notes to Consolidated Financial
Statements under the caption "Power Purchase Agreements" on page 34 of the
1993 Annual Report to Shareholders, which material is incorporated by
reference in this Form 10-K Annual Report.
Gas Operations
The Company distributes purchased natural gas, supplemented at times
of peak load by gas produced in its propane air gas plants.
As of December 31, 1993, the gas distribution system included 1,685
miles of mains. The highest historical maximum daily gas send out of
200,396 Mcf occurred on January 19, 1994. Additional statistics regarding
gas operations are contained under the caption "Operating Statistics -
Gas" on page 39 of the 1993 Annual Report to Shareholders, which material
is incorporated by reference in this Form 10-K Annual Report.
Supply, Transportation and Storage. On April 8, 1992, the FERC
issued Order No. 636 which required significant changes to the structure
of the natural gas industry. Specifically, gas pipeline companies, which
previously had provided gas supply, transportation and gas storage
services to local gas distribution companies such as the Company, were
required to unbundle their services, and provide transportation services
only.
As a result of Order No. 636, the Company is responsible for the
acquisition of gas supply directly from gas production companies and gas
marketers. The Company was well-positioned to comply with the changes in
the gas industry which resulted from Order No. 636 by virtue of its
geographic location, high load factor and extensive gas procurement
experience. Four major pipeline company facilities are located within the
Company's service territory, and the gas supply into the territory is
enhanced by an additional pipeline interconnection with a fifth Company.
These interconnections provide the Company with access to interruptible
spot market supply and the ability to pursue least-cost supply options to
serve the Company's market area. In addition, the Company has been
contracting for gas supply from producers and marketers for several years
and has made extensive use of the gas spot market. As a result, the
Company has negotiated a gas supply portfolio which is diverse as to
supplier, pipeline and terms of contract.
The Company has firm, long-term gas supply contracts with seven gas
producers. Together these contracts account for all of the Company's base
load gas requirements and include a contract with a Canadian producer
which accounts for approximately 32% of supply requirements and expires in
the year 2002. Contracts for the remaining 68% of the Company's required
gas supply have been executed with six domestic producers and have
expiration dates ranging between 1994 and 2004. All of the gas supply
contracts contain options for renewal and certain of the agreements
contain "re-opener" provisions which allow the Company to modify price and
operating terms under certain conditions. This flexibility will insure
the reliability of the Company's gas supply while allowing the Company to
enhance its supply portfolio as market opportunities arise.
In addition to its long-term contracted supply sources, the Company
has made and will continue to make direct spot purchases from producers at
competitive prices to lower its average gas cost and to secure increments
of additional supply. During 1993, the Company made spot purchases of
approximately 14.1 million Mcf of gas or 33% of the total gas supply.
In addition to purchased gas, the Company manufactures gas at its
propane air gas plants located in Middletown, Orangeburg and Suffern,
New York which have a combined capacity of 30,600 Mcf per day of natural
gas equivalent. This capacity, together with gas purchases under
contracts between the Company and its suppliers, is expected to provide
adequate peak day supplies to serve existing and projected new customers
through the year 1998. Additional increments of new supply beyond this
point are being negotiated.
In addition to the gas supply contracts, the Company has provided for
the transportation of gas through firm, long-term transportation
agreements with four major pipeline companies: Tennessee Gas Pipeline
Company ("Tennessee"), Columbia Gas Transmission Corporation ("Columbia"),
Algonquin Gas Transmission Corporation ("Algonquin") and Texas Eastern
Transmission Corporation ("Texas Eastern"). The earliest expiration date
of any of these contracts is in the year 1999. The Company also has
entered into interruptible transportation agreements with the same
pipeline companies and has the ability to make use of the spot
transportation market. All transportation contracts contain options for
renewal.
With regard to gas storage, the Company also has long-term gas
storage contract arrangements with Tennessee, Columbia, Texas Eastern and
Penn-York Energy Corporation ("Penn-York"). The Tennessee, Columbia and
Texas Eastern agreements include a provision for the transportation of the
gas held in storage by these companies, and separate agreements with
Tennessee and Columbia provide for firm transportation services for gas
held in storage by Penn-York. The earliest expiration date of any of
these storage contracts is 1995 and all storage contracts contain options
for renewal. During 1993 the Company elected to secure capacity in an
innovative gas storage project operated by Avoca Natural Gas Storage. The
storage facility, which uses leached-out caverns in underground salt beds
to create a storage reservoir, is designed for fast withdrawal and refill
capacity and will enhance the Company's ability to meet incremental peak
day gas requirements.
Columbia, which provides the Company with both transportation and gas
storage services, filed for protection under Chapter 11 of the bankruptcy
code during 1991. This action has not affected Columbia's ability to
provide services under existing contracts while bankruptcy proceedings are
in progress.
As noted earlier, the Company's maximum daily send out of gas
occurred during 1994 and amounted to 200,396 Mcf. This compares to the
maximum daily gas delivery capacity of the Company's system of 225,227 Mcf
which is available from the following sources: direct purchases - 117,978
Mcf; storage withdrawals - 76,649 Mcf; and Company manufactured gas -
30,600 Mcf.
Additional information regarding gas supply and gas storage contracts
is contained in Note 12 of the Notes to Consolidated Financial Statements
under the caption "Gas Supply and Storage Contracts" on page 33 of the
1993 Annual Report to Shareholders, which material is incorporated by
reference in this Form 10-K Annual Report.
Transportation for Others. The Company, through the provisions of
FERC Order No. 436 concerning the transportation of natural gas, provides
gas transportation services for end users in the Company's service
territory who elect to obtain their own direct gas supplies. During 1993,
approximately 5.9 million Mcf of gas were transported for such end users.
Take-or-Pay Surcharge Costs and FERC Order No. 636 Transition Costs.
As a result of a 1987 FERC order, as well as other legal and regulatory
actions since that time regarding the pass-through of certain "take-or-
pay" costs by gas suppliers, the Company has deferred approximately $3.7
million of gas surcharges through December 31, 1993.
In addition, certain costs incurred by the gas pipeline companies in
complying with Order 636 have been approved by the FERC for allocation to
distribution companies including the Company. It is currently estimated
that the Company's obligation related to Order 636 transition costs will
amount to $23 million. It is anticipated that transition costs incurred
by the Company will be recoverable in gas rates to the extent such costs
were prudently incurred.
Information regarding take-or-pay charges and FERC Order 636
transition costs is contained under the caption "Gas Energy Costs" in the
"Review of the Company's Results of Operations and Financial Condition"
and in Note 12 of the Notes to Consolidated Financial Statements under
the caption "Gas Supply and Storage Contracts" on pages 17 and 33,
respectively, of the 1993 Annual Report to Shareholders, which material is
incorporated by reference in this Form 10-K Annual Report. Reference is
also made to Item 3, "Legal Proceedings" of this Form 10-K Annual Report.
Diversified Activities
Both the Company and RECO have certain non-utility subsidiaries which
engage in the following diversified, non-regulated business activities:
gas marketing, radio broadcasting, real estate development and oil and gas
production. The Company's Consolidated Financial Statements, which are
incorporated in this Form 10-K Annual Report by reference to the Company's
1993 Annual Report to Shareholders, include the results of operations of
all diversified activities. In addition, the diversified activities are
considered to be a reportable business segment, due to the fact that the
gross operating revenues of the non-regulated business activities, which
are primarily attributable to the gas marketing activities, account for
more than 10 percent of the Company's total consolidated gross revenue.
The nature of the gas marketing business is such, however, that the net
earnings realized from this activity, and from all non-regulated
activities combined, are not considered to be material. In addition,
neither the assets of the non-regulated businesses nor the continued
operation of the non-regulated business lines are material to the
operations of the Company. For these reasons, the disclosure related to
the Company's diversified activities, as prescribed by Regulation S-K,
has, with few exceptions, been omitted from other sections of this Form
10-K Annual Report.
Capital contributions to the non-utility subsidiaries by the Company
and RECO are borne by the shareholders. Any losses, profits, or tax
savings from investments in non-utility subsidiaries accrue to the
shareholders and are not included in the cost of service for ratemaking
purposes. A description of the non-utility subsidiaries of the Company
and RECO follows.
Saddle River Holdings Corp. ("SRH"). SRH, a wholly owned subsidiary
of RECO, was established for the purpose of investing in non-utility
business ventures and, through subsidiaries, is currently engaged in
natural gas marketing and radio broadcasting. Gas marketing activities
are conducted through a subsidiary, O&R Energy, Inc., which provides
natural gas to industrial, commercial and institutional end users, gas
distribution companies and electric generating facilities in 38 states. A
subsidiary of O&R Energy, Inc., Millbrook Holdings, Inc., holds
approximately twelve acres of non-utility real estate in Morris County,
New Jersey. Broadcasting activities are conducted through Atlantic Morris
Broadcasting, Inc., a subsidiary of SRH which owns radio stations WKTU
(FM) in Ocean City, New Jersey, WABT (FM) in Dundee, Illinois, WALL (AM)
and WKOJ (FM) in Middletown, New York and WCSO (FM) and WLPZ (AM) in
Portland, Maine.
O&R Development, Inc. ("ORD"). ORD, a wholly owned subsidiary of
the Company, was established to promote industrial and corporate
development within the Company's service territory by providing improved
sites and buildings. ORD's activities are aimed at attracting new
business and industry to the Company's service territory, which would
spread fixed costs for electricity and gas over a wider customer base.
ORD owns Interchange Commerce Center ("ICC Project"), a 300 acre
tract of land in Orange County, New York. The ICC Project has
governmental approvals for the development of 2.7 million square feet of
light industrial, office, warehouse and retail space. Approximately 2,000
lineal feet of street and utilities have been installed, and two buildings
totaling over 200,000 square feet have been completed and fully leased.
Due to the current depressed condition of the real estate industry,
further construction at the Orange County site has been suspended and
emphasis is placed on marketing of available properties.
Clove Development Corporation ("Clove"). Clove, a wholly owned
subsidiary of the Company, holds approximately 5,500 acres of non-utility
real estate, located primarily in the Mongaup Valley region of Sullivan
County, New York. Historically, Clove's revenues have been derived
primarily from the sale of timber and sand, property rentals and periodic
sales of land which are not required for the Company's utility operations.
Certain portions of Clove's property lend themselves to recreational
development. Two small subdivisions have been developed and substantially
sold off. A third development, Lakeside Forest at Swinging Bridge, is
actively being marketed, with eight lots having been sold through 1993.
O&R Energy Development, Inc. ("ORED"). ORED, a wholly owned
subsidiary of the Company, is engaged in oil and gas production.
Production activities are carried on through ownership interests in
producing wells in Texas, Mississippi, Ohio and Pennsylvania. At
December 31, 1993, ORED's net investment in producing properties was
$558,000.
Additional information regarding the non-utility subsidiaries of the
Company and of RECO is contained in the "Review of the Company's Results
of Operations and Financial Condition" under the caption "Diversified
Activities", and in Note 1 of the Notes to Consolidated Financial
Statements under the caption "Principles of Consolidation" and Note 13 -
"Segments of Business", on pages 18, 25 and 36 respectively, of the 1993
Annual Report to Shareholders, which information is incorporated by
reference in this Form 10-K Annual Report.
Construction Program and Financing
Construction Program. The construction expenditures, excluding
allowance for funds used during construction ("AFDC"), of the Company and
its utility subsidiaries for the period 1994 through 1998 are presently
estimated at approximately $377.2 million, as set forth in the table
below. The Company's construction program is under continuous review and
the estimated construction expenditures are, therefore, subject to
periodic revision to reflect, among other things, changes in energy
demands, economic conditions, environmental regulations, construction
delays, the level of internally generated funds and other modifications to
the construction program.
Forecasted Construction Expenditures (000's)
1994 1995 1996 1997 1998
Electric Production $18,675 $24,240 $20,980 $20,230 $24,740
Electric Transmission
and Substation 12,085 12,400 14,545 8,605 6,845
Electric Distribution 20,050 21,535 21,825 21,965 23,695
Gas Plant 14,455 14,050 14,735 16,345 12,655
General Plant 6,060 6,860 6,075 6,150 7,385
Total Construction $71,325 $79,085 $78,160 $73,295 $75,320
The Company's forecasted construction expenditures for the five year
period 1994 through 1998 consist primarily of routine production,
transmission and distribution projects for capital replacements or system
betterments and do not include any additions to generating capacity. The
1994, 1995 and 1996 forecasts do, however, contain forecasted
environmental protection expenditures of $8.2 million, $12.0 million and
$6.0 million, respectively, which will be required in order to comply with
regulations regarding reductions in nitrogen oxide emissions resulting
from the Clean Air Act Amendments of 1990.
Information regarding the Company's construction program is contained
under the caption "Liquidity and Capital Resources" in the "Review of the
Company's Results of Operations and Financial Condition" and under the
caption "Construction Program" in Note 12 of the Notes to Consolidated
Financial Statements on pages 18 and 33, respectively, of the 1993 Annual
Report to Shareholders, which material is incorporated by reference in
this Form 10-K Annual Report.
Financing. The Company has historically used short-term borrowings
in the form of commercial paper to finance construction expenditures when
such expenditures exceeded internally generated funds and to finance
short-term working capital requirements. Short-term borrowings undertaken
for construction expenditures are periodically repaid with the proceeds of
long-term debt and equity offerings.
At December 31, 1993, the Company and its utility subsidiaries had
unsecured bank lines of credit totaling $59 million. Commercial paper
borrowings, which are supported by such credit lines, amounted to $45.0
million at year end. Additional information regarding the Company's
short-term debt position is contained under the caption "Liquidity and
Capital Resources" in the "Review of the Company's Results of Operations
and Financial Condition" and in Note 8 of the Notes to Consolidated
Financial Statements - "Cash and Short-Term Debt" on pages 18 and 30,
respectively, of the 1993 Annual Report to Shareholders, which material is
incorporated by reference in this Form 10-K Annual Report.
The external financing activities of the Company and its utility
subsidiaries during 1993 were limited to refinancing of certain series of
first mortgage bonds by the Company and RECO. During the first quarter of
1993, the Company sold, at face value, $20 million of 6.14% Debentures due
2000 (Series C) and $35 million of 6.56% Debentures due 2003 (Series D),
(together the "Debentures"). The net proceeds to the Company from the
sale of the Debentures, together with cash provided by the Company were
used to refund, on April 3, 1993, an aggregate of $58 million principal
amount of the Company's First Mortgage Bonds outstanding. The principal
amount and series of First Mortgage Bonds refunded were: $21 million of
7 1/2% Bonds, Series K due 2001; $12 million of 8% Bonds, Series L due
2001 and $25 million of 8 1/8% Bonds, Series M due 2003.
In addition, on March 10, 1993, RECO sold $20 million of First
Mortgage 6% Bonds, Series I due 2000 ("Series I Bonds"). The Series I
Bonds were sold at a discount to yield 6.11% to the public. The net
proceeds to RECO from the sale of the Series I Bonds were used to pay the
principal and redemption premium on an aggregate of $16,017,000 of RECO's
First Mortgage Bonds outstanding and for other corporate purposes. The
principal amount and series of First Mortgage Bonds which were refunded on
March 27, 1993 were: $5,000,000 of 9 1/8% Bonds, Series D due 2000;
$6,000,000 of 7 7/8% Bonds, Series E due 2001; $3,680,000 of 8.95% Bonds,
Series F due 2004 and $1,337,000 of 10% Bonds, Series G due 1997.
It is currently expected that the Company's capital requirements will
be met primarily with funds from operations. The Company does, however,
anticipate that it may issue debentures during 1995, the amount, timing
and terms of which would be determined by market conditions at the time of
issuance. The proceeds of such debt issuance would be used to refinance
the Company's First Mortgage Bonds, Series H, which mature during 1995 and
to reduce short term debt.
With regard to equity issues, from mid 1988 through the end of 1992
the common stock requirements under the Company's Dividend Reinvestment
and Stock Purchase Plan ("DRP") and Employee Stock Purchase and Dividend
Reinvestment Plan ("ESPP") were satisfied with original issue shares
which provided approximately $28.6 million of equity capital. Effective
January 1, 1993, common shares acquired under the DRP and ESPP have been
purchased on the open market. The Company, however, retains the option of
satisfying plan requirements with original issue shares, has registered
common stock available for that purpose and is currently evaluating a
return to the original issue option.
Additional information regarding the Company's financing activities
is contained under the caption "Liquidity and Capital Resources" in the
"Review of the Company's Results of Operations and Financial Condition"
and in Note 7 of the Notes to Consolidated Financial Statements - "Long-
Term Debt" on pages 18 and 29, respectively, of the 1993 Annual Report
to Shareholders, which material is incorporated by reference in this
Form 10-K Annual Report.
The non-utility subsidiaries of the Company and RECO also maintain
certain lines of credit and undertake long and short-term borrowings or
make investments from time to time. The non-utility long-term notes
outstanding are borrowings made pursuant to several loan arrangements.
At December 31, 1993, SRH and its subsidiaries had outstanding loans
aggregating $2.9 million, the proceeds of which were used to make
investments in broadcasting properties, and ORD had an intermediate term
mortgage outstanding which amounted to $5.4 million. In addition, a
subsidiary of SRH had an available line of credit and standby letters of
credit which together amounted to $15 million under which there were $1.2
million of borrowings at December 31, 1993. Non-utility temporary cash
investments amounted to $1,440,000 at December 31, 1993.
For a description of the non-utility subsidiaries of the Company and
of RECO, see "Diversified Activities" in Item 1 of this Form 10-K Annual
Report.
Information regarding certain financial statistics of the Company is
contained under the caption "Financial Statistics" on page 40 of the 1993
Annual Report to Shareholders, which material is incorporated by reference
in this Form 10-K Annual Report.
Credit Ratings. The current ratings of the Company's principal
securities and its commercial paper are as follows:
Duff and
Phelps
Moody's Standard Credit Fitch
Investors & Poor's Rating Investors
Service,Inc. Corporation Company Service,Inc.
First Mortgage Bonds A2 A+ A+ AA-
Unsecured Debt A3 A+ A AA-
Preferred Stock a2 A A- AA-
Commercial Paper P-1 A-1 D-1 F-1+
The Company's credit ratings are not fixed, but rather are subject to
periodic revision or withdrawal by the particular rating agency, and each
rating should be evaluated independently of any other rating. The ratings
assigned to the Company's securities by the rating agencies are not a
recommendation to buy, sell or hold the Company's securities, but rather
are assessments of the respective credit-worthiness of the Company's
various securities by the rating agencies. The Company's bonds have a
high credit rating, its preferred stock has a medium credit rating and its
commercial paper has a high credit rating.
Regulatory Matters
State Regulation. The Company and its utility subsidiaries are
subject to the jurisdiction of state commissions in their respective
states of incorporation. The state commissions have the authority to
regulate, among other things, rates, services, the issuance of securities
and accounting and depreciation procedures. The Company is subject to the
jurisdiction of the NYPSC, which covers approximately 77% of consolidated
energy sales. RECO is subject to the jurisdiction of the NJBRC, which
covers approximately 21% of consolidated energy sales. Pike is subject to
the jurisdiction of the Pennsylvania Public Utility Commission (the
"PAPUC") which covers approximately 1% of consolidated energy sales.
Sales for resale, which are subject to regulation by the FERC, account for
the remaining 1% of consolidated energy sales.
Federal Regulation. The Company, pursuant to an order of the
Securities and Exchange Commission, has been exempted from all of the
provisions of the Public Utility Holding Company Act of 1935, except
Section 9(a)(2) thereof relating to the acquisition of securities of other
public utility companies.
The Company and its utility subsidiaries are subject to the
jurisdiction of the FERC as "public utilities". This regulation
primarily relates to sales and exchanges of electricity for resale,
certain transportation, sales and exchanges of natural gas under the
Natural Gas Act, Company sales to its utility subsidiaries and certain
other matters including accounting, recordkeeping and reporting.
Other Regulation. The Company and its utility subsidiaries are also
subject to regulation by various other Federal, state, county and local
agencies under numerous regulations dealing with, among other things,
environmental matters, energy conservation, long-range planning, fuel use,
plant siting and gas pricing.
Current Rate Activities. Information regarding the current rate
filings of the Company and its utility subsidiaries, including the impact
which the recent events affecting the Company, which are described under
the caption "Events Affecting the Company" in this Item 1, had on the rate
proceedings of the Company and its utility subsidiaries, is contained
under the caption "Rate Activities" in the "Review of the Company's
Results of Operations and Financial Condition" on page 19 of the 1993
Annual Report to Shareholders, which information is incorporated by
reference in this Form 10-K Annual Report, as well as in Item 3, "Legal
Proceedings" of this Form 10-K Annual Report. Information regarding NYPSC
proceedings dealing with certain "take-or-pay" gas contract costs is also
contained under Item 3, "Legal Proceedings" of this Form 10-K Annual
Report, and in the 1993 Annual Report to Shareholders in the "Review of
the Company's Results of Operations and Financial Condition" under the
caption "Gas Energy Costs" beginning on page 17 and in Note 12 of the
Notes to Consolidated Financial Statements under the caption "Gas Supply
and Storage Contracts" on page 33, which information is incorporated by
reference in this Form 10-K Annual Report.
Rate Relief. During the past five years, the Company and its utility
subsidiaries have sought rate relief to cover the impact of increased
costs. The amounts of rate relief approved by the NYPSC, NJBRC and PAPUC
are set forth in the following table.
Historical Rate Relief
1989 - 1993
Annual Amount Overall Rate Return on
Class of ($000's) of Return Equity
Service Effective Date Requested Granted Granted (%) Granted (%)
No Activity 1989 - - - -
Electric - N.Y. 01/01/90 (a) 6,800 - -
Gas - Pa. 06/16/90 100 55 (b) (b)
Electric - Pa. 10/01/90 210 105 (b) (b)
Gas - N.Y. 12/01/90 (c) 2,500 (c) (c)
Electric - N.Y. 01/01/91 22,483 10,450 (d) (d)
Gas - N.Y. 12/29/91 3,570 554 9.42 10.3
Electric - N.J. 01/24/92 12,863 5,100 10.17 12.0
Electric - N.Y. 05/01/92 (e) 7,417 (e) (e)
Gas - N.Y. 12/15/92 7,962 3,776 (f) (f)
Electric - N.J. 01/01/93 (g) 1,685 (g) (g)
Electric - N.Y. 05/08/93 (h) 11,308 (h) (h)
Electric - Pa. 06/11/93 498 270 (i) (i)
Gas - Pa. 06/25/93 36 12 (i) (i)
(a) Recovery of DSM costs pursuant to a cost recovery mechanism, Least
Cost Annual Power Supply ("LCAPS"), as approved by the NYPSC.
Beginning in January 1991, DSM cost recovery is accomplished through
the RDM procedures as approved by the NYPSC in Case 89-E-175.
(b) No redetermination of the rate of return on common equity was made
under a stipulated agreement. The implied return on common equity is
12.50%, and the implied overall rate of return is 10.33%.
(c) A third stage filing made pursuant to the NYPSC Order in the Company's
1988 gas base rate case provided for the recovery of wages, employee
welfare expenses, property taxes, inflation on non-fuel operation and
maintenance expenses and gas rate base additions.
(d) The Company was provided with an opportunity to earn a return on
common equity of 12.51% through the achievement of incentives related
to certain DSM and customer service goals.
(e) The first post rate year filing made in accordance with the NYPSC
Order in the Company's 1989 electric base rate case provided for the
recovery of inflation on non-fuel operation and maintenance expenses,
rate base additions and cost of capital. In addition, the Company was
permitted to recover a net under collection resulting from the
reconciliation of revenue and expenses as provided in the 1989 Order.
(f) The Company was provided with an opportunity to earn a return on
common equity of 12.15% through the achievement of incentives related
to its main replacement program, gas efficiency programs and gas
marketing programs.
(g) Rate increase as ordered by the NJBRC to reflect the effect of revised
legislation regarding gross receipts and franchise taxes. Rate
recovery with interest is permitted over a ten year period.
(h) The second post rate year filing made in accordance with the NYPSC
Order in the Company's 1989 electric base rate case provided for the
recovery of inflation on non-fuel operation and maintenance expenses,
rate base additions and cost of capital. In addition, the Company was
permitted to recover a net under collection resulting from the
reconciliation of revenue and expenses as provided in the 1989 Order.
(i) No redetermination of the rate of return on common equity was made
under a stipulated agreement. The implied return on common equity is
12.00%, and the implied overall rate of return is 9.98%.
Information regarding possible rate impacts of certain events described
under the caption "Events Affecting the Company" in this Item 1 is contained in
Item 3, "Legal Proceedings", of this Form 10-K Annual Report.
Utility Industry Risk Factors
The electric and gas utility industry is exposed to risks relating to
increases in fuel costs, numerous regulatory and environmental
restrictions, delays in obtaining adequate rate relief, increases in the
costs of construction and construction delays, the effects of energy
conservation, the effect of weather-related sales and revenue fluctuations
and meeting the growth of energy sales.
The Company and its utility subsidiaries are, to some extent,
experiencing all of these challenges. However, the impact on the Company
and its utility subsidiaries has been less than for the utility industry
in general, principally due to the Company's relatively low construction
expenditures, low external financing requirements, and, in particular, due
to rate procedures in effect for the Company's New York electric and gas
operations. Under an electric rate mechanism, the Revenue Decoupling
Mechanism ("RDM"), the cost of conservation programs is recoverable on a
current basis and, because of the decoupling of sales volume fluctuations
from revenues, any decrease in earnings which would otherwise result from
customer conservation is also recoverable. This decoupling of sales level
fluctuations from revenue, although reconciled in subsequent periods, also
mitigates the risk of loss of earnings due to abnormal weather conditions.
In addition, the NYPSC has approved certain incentives in the form of an
increased return on equity based on the achievement of goals related to
the Company's DSM programs. Capacity costs associated with purchased
power are recoverable under the RDM. Pursuant to an Order of the NYPSC
dated October 4, 1993, the RDM has been extended until June 30, 1994.
Information regarding such October 4, 1993 Order and its effect is
contained in Item 3, "Legal Proceedings" of this Form 10-K Annual Report.
Under the provisions of the gas rate settlement agreement which was
approved by the NYPSC on September 30, 1992, the Company's New York gas
revenue became subject to a weather adjustment clause which, as in the
case of New York electric revenue, mitigates the effect of variations in
weather conditions on gas revenue and earnings.
With regard to future power supply, the Company will utilize
competitive bidding to mitigate the risks associated with the Company's
purchase of both electric energy and capacity, particularly with regard to
prudency determinations and cost recovery. Additional information
concerning the DSM program, the RDM rate procedure and the gas weather
adjustment clause is contained under the captions "Electric Operating
Revenues and Sales", "Gas Operating Revenues and Sales" and "Rate
Activities" in the "Review of the Company's Results of Operations and
Financial Condition" on pages 15, 17 and 19, respectively, of the 1993
Annual Report to Shareholders, which material is incorporated by reference
in this Form 10-K Annual Report. Reference is also made to the caption
"Future Energy Supply and Demand" in this Item 1.
The problems associated with nuclear energy have not affected the
Company as it has no operating nuclear plants nor any under construction,
and has no plans for future participation in nuclear projects. For
further information on the recovery by the Company of its investment in
the cancelled Sterling Nuclear Project, see Note 3 of the Notes to
Consolidated Financial Statements - "Sterling Nuclear Project" on page 27
of the 1993 Annual Report to Shareholders, which information is
incorporated by reference in this Form 10-K Annual Report.
Competition
There are competitive factors present in the electric and gas
industry which affect utility companies in varying degrees. Among these
are the use by interruptible or dual-fuel customers of lower priced
alternative fuels; the establishment of municipal distribution agencies;
the ability of gas producers to sell gas directly to end users, usually
through an independent gas marketer; the presence of cogenerating systems,
small power producers and independent power producers; and the increasing
interest in, and research on, the development of energy sources other than
those now in use.
In recent years, changing laws and governmental regulation, combined
with a growing interest in self-generation and an increase in nonregulated
energy suppliers has served to intensify the level of competition
experienced by regulated utilities. The National Energy Policy Act of
1992 ("Energy Policy Act") is expected to bring major changes to the
electric utility industry, including increased competition from a new
category of wholesale electric generators which are exempt from the Public
Utility Holding Company Act of 1935. The Energy Policy Act also empowers
the FERC to require utilities, under certain circumstances, to provide
open access to electric wholesalers for use of the utility's transmission
systems. With regard to the natural gas industry, FERC Order 636 will
increase competition by assuring that equitable access to interstate
pipeline capacity is provided to local distribution companies and end-
users.
The Company recognizes the changes in the regulated utility
environment and is committed to remain competitive in its core business.
The Company's five year strategic plan has put forth as a corporate
objective the achievement of a competitive edge by providing the most
economical and effective energy service to customers. Such competitive
factors are not expected to have a material effect on either the Company
or its utility subsidiaries for the foreseeable future.
Marketing
The primary focus of the Company's marketing efforts is the efficient
use of energy by the Company's residential, commercial and industrial
customers. Existing programs being marketed include all state approved
DSM programs, as well as all other energy conservation programs.
With regard to economic development incentive mechanisms, the
Company's marketing program promotes the NYPSC approved competitive gas
pricing rates which are aimed at maintaining duel fuel and interruptible
gas customers. In New Jersey, marketing efforts include promotion of the
NJBRC Job Development Rates which offer discounts to customers who expand
their operations or who locate to vacant buildings in the RECO service
territory.
Environmental Matters
The Company is subject to regulation by Federal, state, county 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, various permits are required with respect
to the Company's facilities. Generally, the principal environmental areas
and requirements to which the Company is subject are as follows:
Water Quality. The Company is required to comply with Federal and
State water quality statutes and regulations, including the Federal Clean
Water Act ("Clean Water Act"). The Clean Water Act requires that Company
generating stations be in compliance with state issued State Pollutant
Discharge Elimination System Permits ("SPDES Permits"), which prescribe
applicable conditions to protect water quality. On May 18, 1992, the
Company applied to the State of New York Department of Environmental
Conservation (the "NYDEC") for the renewal of its SPDES Permit for the
Lovett Coal Ash Management Facility. The existing permit expired on
December 1, 1992, but remains in effect until issuance of a new permit.
The Company also has a SPDES Permit, effective October 1, 1991 for its
Lovett generating station. Additional information concerning the Lovett
SPDES Permit is contained in Item 3, "Legal Proceedings" of this Form 10-K
Annual Report.
The Bowline Point generating station currently operates under a SPDES
permit which expired on October 1, 1992. This permit remains in effect
since a permit renewal application was filed on April 3, 1992, which was
within the statutory deadline for renewal application. The Company is now
proceeding with the State Environmental Quality Review Act process as part
of the permit renewal procedure.
The Company entered into a settlement with the United States
Environmental Protection Agency (the "EPA") and others that relieved the
Company for at least 10 years from a regulatory agency requirement that,
in effect, would have required that cooling towers be installed at the
Bowline Point generating station. In return, the Company agreed to
certain plant modifications, operating restrictions and other measures.
This settlement expired in May 1991. On May 15, 1991, the Company and
others entered into an Interim Agreement with the NYDEC to continue
specific operating conditions and other measures for a period from May 15,
1991 to September 30, 1992. Several intervenors to the original
settlement filed a civil action challenging the Interim Agreement's
legality. On March 23, 1992, the parties to the Interim Agreement and
intervenors signed a Consent Order terminating litigation and agreeing to
certain operating limitations and biological monitoring requirements. The
Consent Order was due to expire on September 1, 1993. On August 5, 1993,
the parties executed the First Amended Consent Order which extends the
agreement through September 1, 1994.
Air Quality. Under the Federal Clean Air Act, the EPA has
promulgated national primary and secondary air quality standards for
certain pollutants, including sulfur oxides, particulate matter and
nitrogen oxides. The NYDEC has adopted, and the EPA has approved, the New
York State Implementation Plan ("SIP") for the attainment, maintenance and
enforcement of these standards. In order to comply with the SIP, the
Company burns #6 fuel oil at its Lovett and Bowline Point generating
stations with a 0.37% maximum sulfur content by weight.
Pursuant to the SIP, the Company is governed by the following
limitations when it is burning coal at Lovett Units 4 and 5: if one unit
is burning, the Company may emit sulfur dioxide at a rate not to exceed
1.5 lb/MMBTU, and if two units are burning, the Company may emit sulfur
dioxide at a rate not to exceed 1.0 lb/MMBTU per unit.
The NYDEC has proposed to revise the SIP to meet ozone attainment
standards and to provide a mechanism for Title V emissions fee billing.
Under the proposed fee revision, beginning in 1994, Title V sources which
include the Company's Lovett Plant and Bowline Point Plant will be
required to pay an emission fee based upon actual air emissions reported
to NYDEC at a rate of approximately $25 per ton of air emissions. The
effect of the proposed revision, based on 1992 emissions would have been
approximately $450,000.
The Clean Air Act Amendments of 1990, which became law on
November 15, 1990, could restrict the Company's ability to meet increased
electric energy demand after the year 2000 or could substantially increase
the cost to meet such demand. Regulations pertaining to nitrogen oxide
reduction and continuous emissions monitoring systems will require
increased capital expenditures totaling approximately $26.2 million during
1994 through 1996 as follows: $8.2 million in 1994, $12.0 million in 1995
and $6.0 million in 1996. The Company will continue to assess the impact
of the Clean Air Act Amendments of 1990 on its power generating operations
as additional regulations implementing these Amendments are promulgated.
The NYPSC has commenced a proceeding to consider the implications of
compliance with the Clean Air Act Amendments of 1990 by electric utilities
in New York State.
Toxic Substances and Hazardous Wastes. The Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986 ("Superfund"),
provides that both the owners and operators of facilities where releases
of hazardous substances into the environment have occurred or are
imminent, and the generators and transporters of hazardous substances
disposed of at the facilities, are, regardless of fault, jointly and
severally liable for all response, removal and remedial action costs and
also for damages to natural resources.
As part of its operations, the Company generates materials which are
deemed to be hazardous substances under Superfund. These materials
include asbestos and dielectric fluids containing polychlorinated
biphenyls ("PCB's"), both of which are disposed of at licensed, off-site
locations not owned by the Company. Other hazardous substances may be
generated in the course of the Company's operations or may be present at
Company-owned locations.
The Company has from time to time, received process or notice of
claims under Superfund or similar state statutes relating to sites at
which it is alleged that hazardous substances generated by the Company
(and, in most instances, by a large number of other potentially
responsible parties) were disposed of. Similar claims may be asserted
from time to time hereafter, involving additional sites. Typically, many
months, and sometimes years, are required to fully determine the probable
magnitude of the cleanup costs for a site, the extent, if any, of the
Company's responsibility, the number and responsibility of other parties
involved, the financial ability of the other parties to pay their
proportionate share of any costs, and the probable ultimate liability
exposure, if any, of the Company. This process is still under way at most
of the sites of which the Company has notice, and the costs at some of
these sites may be substantial. However, based on the information and
relevant circumstances known to the Company at this time, the Company's
share of these costs is not expected to be material.
Information concerning certain Superfund claims involving the Company
is included in Item 3, "Legal Proceedings" of this Form 10-K Annual
Report.
Environmental Expenditures. The Company estimates that expenditures
attributable, in whole or in substantial part, to environmental
considerations totaled $13.7 million in 1993.
Compliance with Federal, state and local laws and regulations which
have been enacted or adopted regulating the discharge of materials into
the environment or otherwise relating to the protection of the environment
is not anticipated to have a material financial impact on the Company.
The Company's projected environmental expenditures are under
continuous review and are revised periodically to reflect changes in
environmental regulations, inflation, technology and other factors which
are beyond the control of the Company. Although the Company is unable to
predict the ultimate impact of environmental regulations on existing or
proposed facilities or on the operations of the Company, the Company
believes that its expenditures for compliance with environmental
regulations will be given appropriate rate treatment by the respective
regulatory commissions.
Information concerning environmental issues and their potential
effect on the Company's operations is included in Note 12 of the Notes to
Consolidated Financial Statements under the captions "Construction
Program" and "Environmental" on pages 33 and 35 of the 1993 Annual Report
to Shareholders, which information is incorporated by reference in this
Form 10-K Annual Report, as well as in Item 3 "Legal Proceedings" of this
Form 10-K Annual Report.
Research and Development
The Company supports research and development agencies involved in
utility research, provides funds for joint utility research projects and
conducts its own internal program. Research and development expenditures
amounted to approximately $5.0 million in 1993, $3.7 million in 1992, and
$3.4 million in 1991.
The Company provides support to national agencies such as the
Electric Power Research Institute and the Gas Research Institute. At the
state level, the Company supports the Empire State Electric Energy
Research Corporation, the New York State Energy Research and Development
Authority and the New York Gas Group Research, Development and
Demonstration Committee.
Generally, the Company's internal research and development program
concentrates on projects which uphold the corporate goal of providing safe
and reliable electric and gas service to customers at a minimum price and
in an environmentally acceptable manner. The program includes projects
which seek improvement of generation and distribution systems, mitigation
of environmental impacts of electric power generation, and advancement in
customer utilization and conservation. Current projects include a
demonstration of a process to beneficiate coal combustion fly ash for use
in the construction industry, the development of a new technique for
locating faults in underground cables, and the development of a
methodology for measuring the impact of commercial and industrial demand-
side management programs.
Franchises
The Company's municipal consents or franchises, together with its
corporate or charter powers, give it the right to carry on its operations
in the territory served. The municipal consents or franchises held by the
Company are not exclusive. In certain municipalities, the area served by
the Company is limited either by the terms of the consents or franchises
or by order of the NYPSC. Under the present provisions of the Public
Service Law of the State of New York, no other private corporation can
commence public utility operations in any part of the territory now served
by the Company without obtaining a certificate of public convenience and
necessity from the NYPSC. Such certificate would not be required with
respect to a municipality furnishing electric or gas service under the
provisions of the General Municipal Law of the State of New York.
Municipal corporations, upon compliance with the provisions of the General
Municipal Law, are authorized to acquire the public utility service of any
public utility company by purchase or by condemnation.
The municipal consents or franchises of the Company are not uniform
and contain, in certain instances, provisions relating to, among other
things, the time of commencing operations, the furnishing of service to
the particular municipality, the approval by the municipal authorities of
the location and construction of distribution facilities, indemnification
of the municipality against liabilities and damages in consequence of
construction, and administrative matters. Such provisions are not
considered by the Company to be unduly burdensome.
In connection with the construction and maintenance of its electric
transmission lines, the Company has specific franchises for transmission
lines constructed outside its electric service territory and is authorized
under its general consents or franchises to construct and maintain its
transmission lines where constructed in its electric service territory.
The Company's gas franchises authorize the construction and maintenance of
its gas mains.
Employee Relations
At December 31, 1993, the Company had 1,721 employees of whom 27 were
part-time employees. The current contract with Local 503 of the
International Brotherhood of Electrical Workers ("IBEW") representing 977
production, maintenance, commercial and service employees of the Company
became effective June 1, 1991 and expires June 1, 1994. This contract
does not include supervisory employees.
The Company's utility subsidiaries, RECO and Pike, have no employees
other than officers. All services are performed for the utility
subsidiaries by employees of the Company pursuant to Joint Operating
Agreements approved by the NJBRC and the PAPUC, through which the Company
is reimbursed for these services. Several employees of the Company
provide managerial and clerical services for the non-utility subsidiaries
of the Company and of RECO, the cost of which are either paid directly by
the subsidiaries or are reimbursed to the Company through periodic
billings. In addition, the non-utility subsidiaries, at December 31,
1993, had 147 full-time and 51 part-time employees, none of whom were
participants in the Company's various employee benefit plans or were
covered by the Company's contract with the IBEW.
Item 2. Properties
The Company's property consists primarily of electric generation,
transmission and distribution facilities and gas distribution facilities.
These properties are required for the continued operation of the Company's
major business segments. In addition, the Company maintains certain
miscellaneous utility and non-utility property. The Company's facilities
are in satisfactory condition, are suitable for the particular purpose for
which they were acquired, and are adequate for the Company's present
operations.
Electric Generating Facilities. The Company's generating plants, all
of which are located in New York State, are as follows:
Maximum
Summer Percent Net Mwh
Net Mw of Total Generated
Plant Name Units Energy Source Capacity Capacity in 1993
Swinging Bridge, 8
Mongaup & Rio Hydroelectric 25.8 2.5% 60,437
Grahamsville 1 Hydroelectric 18.0 1.8 103,941
Hillburn 1 Jet Fuel/Gas 37.0 3.6 2,509
Shoemaker 1 Jet Fuel/Gas 37.0 3.6 5,048
Lovett 5 Coal/Oil/Gas 501.7 49.2 1,869,967
Bowline Point 2 Oil/Gas 400.6(1) 39.3 850,930
1,020.1 100.0% 2,892,832
(1) Company's share of maximum summer net megawatt capability.
Electric Transmission and Distribution Facilities. The Company owns, in
whole or in part, and operates 512 miles of transmission lines, 67
substations, 67,683 in-service line transformers and 4,891 miles of
distribution lines. The electric transmission and distribution facilities of
the Company and its utility subsidiaries are located within the Company's New
York, New Jersey and Pennsylvania service territory, which is described under
the caption "Principal Business" in Item 1 of this Form 10-K. The Bowline
Substation and the related transmission facilities are jointly owned by the
Company and Con Ed and are operated by the Company. The Ramapo Substation
and certain related transmission facilities consist of property which is
either owned by the Company, owned by Con Ed or jointly owned by the Company
and Con Ed and which is operated and maintained by the Company.
Gas Facilities. The Company owns and operates three propane air gas
plants at Middletown, Orangeburg and Suffern, New York and its gas
distribution system, which is located within its gas franchise territory in
New York and Pennsylvania, includes 1,685 miles of mains.
Miscellaneous Properties. The Company owns office buildings and
operating facilities in Middletown, Spring Valley, Blooming Grove and West
Nyack, New York, and other structures at different locations within the
Company's service territory which are used as offices, service buildings,
store houses and garages. The Company leases its corporate headquarters in
Pearl River, New York, as well as office space at other locations. In
addition, the Company has lease agreements covering certain of its data
processing equipment, office equipment and vehicle fleet.
Character of Ownership. The Company's electric and gas plants and its
major electric substations are located on land owned by the Company in fee,
except for the Grahamsville Plant and the Bowline Point Plant. The greater
portion of the Grahamsville Plant is located on land leased from the City of
New York and the Bowline Point Plant is located on land in which the Company
has a one-third undivided interest, with the remainder being owned by Con Ed.
Water power and flowage rights for the operation of its Mongaup River Hydro
Plants are controlled by the Company either through ownership of the
necessary land in fee or through easements which are, in practically all
cases, perpetual. In the case of the Grahamsville Plant, however, water is
obtained under contract with the City of New York.
Electric transmission facilities of the Company and its utility
subsidiaries (including substations) are, with minor exceptions, located on
land owned in fee or occupied pursuant to perpetual easements. Electric
distribution lines and gas mains are located in, on or under public highways
or private lands pursuant to lease, easement, permit, municipal consent,
agreement or license, express or implied through use by the Company or its
utility subsidiaries without objection by the owners. In the case of
distribution lines, the Company owns approximately 60% of the poles upon
which its wires are installed and has a joint right of use in the remaining
poles on which its wires are installed, which poles are owned, in most cases,
by telephone companies.
The Company's electric and gas plants are owned by the Company except
for the gas turbines at Hillburn and Shoemaker which are leased and the
Bowline Point Plant which is jointly owned with Con Ed and operated by the
Company.
Substantially all of the utility plant and other physical property owned
by the Company and its utility subsidiaries are subject to the liens of the
respective indentures securing the first mortgage bonds of the Company and
its utility subsidiaries.
Investments in securities of the utility subsidiaries costing $11.8
million which have been eliminated from the Consolidated Balance Sheet are
pledged under the Company's First Mortgage Indenture, as amended and
supplemented.
Item 3. Legal Proceedings
Investigation and Related Litigation:
On August 16, 1993, Linda Winikow, then a Vice President of the
Company, was arrested by the Rockland County (New York) District
Attorney (the "District Attorney") and charged with grand larceny,
commercial bribery and making campaign contributions under a false name.
In essence, the District Attorney alleged that Ms. Winikow (1) had been
coercing or inducing certain vendors of goods or services to the Company
to make contributions to political candidates or causes, while arranging
for some of those contributions to be, in effect, reimbursed by means of
false or inflated invoices paid by the Company, and (2) had used
advertising contracts to try to influence news reports about the
Company. Two other former employees who reported to Ms. Winikow were
charged with grand larceny. Ms. Winikow was immediately placed on leave
of absence by the Company. The District Attorney also announced that he
would commence an investigation of the Company and the Company announced
that it would undertake its own investigation into the matters cited by
the District Attorney. On August 26, 1993, the Board of Directors
terminated Ms. Winikow's employment. On the same day, the Company filed
Orange and Rockland Utilities, Inc. v. Winikow in the United States
District Court, Southern District of New York, against Ms. Winikow,
three other former Company employees and two vendors. In its suit,
filed under the Federal Racketeer Influenced and Corrupt Organizations
Act ("RICO"), the Company alleges that the defendants had engaged in a
conspiracy to divert monies from the Company through the submission of
false and fraudulent invoices totaling approximately $155,000 in order
to pay personal expenses of and/or to provide personal services to the
defendants. In addition, the Company alleges that the defendants made
various contributions to political candidates consisting of money and
services diverted from the Company. Accordingly, the Company seeks
treble damages as called for by the RICO statute, punitive damages,
attorney's fees, interest and court costs.
On October 5, 1993, the independent Directors determined to
terminate for cause the employment of James F. Smith as Chief Executive
Officer of the Company and to remove him as Chairman of the Board. On
October 7, 1993, notice of such termination was delivered to Mr. Smith
and he was suspended from all duties effective immediately. On the same
day, the Board of Directors appointed Victor J. Blanchet, Jr. to serve
as Acting Chief Executive Officer. Mr. Smith had certain rights under
his employment agreement with the Company to take corrective action with
respect to his termination for cause which lapsed, without such action
being taken, on December 6, 1993. Mr. Smith also has the right to
contest his termination for cause in an arbitration proceeding.
On February 7, 1994, the Company commenced Orange and Rockland
Utilities, Inc. v. James F. Smith, in New York State Supreme Court by
the filing of a Summons with Notice. The Summons put Mr. Smith on
notice of claims for breach of his fiduciary duties of loyalty and care,
waste, conversion, fraud, and unjust enrichment based on allegations
that Mr. Smith misused Company assets and personnel and misappropriated
Company funds for his own benefit or for other improper purposes, and
failed to maintain proper management controls or to properly supervise
corporate affairs and subordinate employees. The Company seeks an
accounting by Mr. Smith of certain Company funds and property,
restitution of all amounts misappropriated, misused, or unaccounted for,
forfeiture of compensation paid or awarded by the Company to Mr. Smith
during the period in which breaches of fiduciary duties occurred, and
compensatory and punitive damages. The Company seeks recovery in an
amount not less than $5,000,000. On February 25, 1994, Mr. Smith served
a Notice of Appearance upon the Company, which required the Company to
file a complaint in the action no later than March 17, 1994.
The Company served a complaint in this action on March 16, 1994.
Unless otherwise extended, Mr. Smith's answer will be due 20 days after
the complaint was served. The complaint alleges, among-other-things,
that (i) Mr. Smith intentionally misappropriated and converted Company
funds, assets and services to his own use by causing the Company to pay,
through the submission of false and inaccurate expense reports, for
personal expenses associated with his travel, entertainment, purchases
of merchandise, use of Company vendors and use of the Company's
conference center facilities; (ii) Mr. Smith engaged in a pattern of
excessive and extravagant expenditures of Company funds in connection
with purported business travel, entertainment and Company-sponsored
events that had no legitimate business purpose or conferred little or no
benefit to the Company's business, and constituted waste of corporate
assets; and (iii) Mr. Smith failed to institute and maintain adequate
internal controls, and knowingly permitted, induced and authorized the
personal use of Company funds, assets and services by other Company
officers.
On October 6, 1993, Ms. Winikow pleaded guilty in the Supreme Court
of the State of New York, County of Rockland, to grand larceny (a class
D felony), commercial bribery (a class A misdemeanor), and making a
campaign contribution under a false name (an unclassified misdemeanor)
and, on November 10, 1993, the two former employees pleaded guilty to
grand larceny (a class D felony). In pleading guilty to the felony
count, Ms. Winikow stated she had been acting on behalf of the Company.
The presiding judge informed Ms. Winikow that her sentence would be
based on her assistance to the prosecution in its investigation. Ms.
Winikow's sentencing on these pleas is currently scheduled for April 7,
1994.
On March 22, 1994, a Rockland County Grand Jury indictment was
returned charging Mr. Smith with eight felony counts of grand larceny
and two misdemeanor counts of petit larceny. According to the press
release issued by the Rockland County District Attorney on March 22,
1994, the ten count indictment charges Mr. Smith with stealing from the
Company by charging personal expenses to the Company, including (i)
approximately $7,300 to rent four vans and a panel truck that were used
by Mr. Smith's son's film production company, including approximately
$780 worth of parking summonses issued to the rental van and a Company
car that was being used by Mr. Smith's son; (ii) approximately $3,037 in
moving costs to have Mr. Smith's daughter's belongings moved to
Westchester County on two separate occasions and to have other
belongings moved to Mr. Smith's summer home in Kennebunkport, Maine;
(iii) approximately $4,600 for assorted graphic printing, consisting of
engagement invitations for both of his children, a hand-colored wedding
program for his daughter, as well as printed directions to his
Kennebunkport, Maine summer home; (iv) approximately $7,000 for holidays
baskets for Mr. Smith's family members, friends and his Maine Realtor;
(v) approximately $1,100 for assorted holiday plants delivered to Mr.
Smith's home; (vi) approximately $1,760 to have Mr. Smith's home cleaned
following a boiler replacement; (vii) approximately $1,098 for printed
materials associated with Mr. Smith's wife's election campaign for
village trustee (which Mr. Smith subsequently repaid to the Company
after Ms. Winikow's arrest); (viii) approximately $2,000 for a surprise
50th birthday party for Mr. Smith's wife at the Company's conference
center facilities; (ix) approximately $300 worth of auto repairs made to
Mr. Smith's son-in-law's automobile; and (x) approximately $600 worth of
watches given by Mr. Smith to his children and their spouses. Mr. Smith
was arraigned in Rockland County Supreme Court on March 22, 1994, and
entered a plea of not guilty.
On November 3, 1993, the Company and the District Attorney executed
a Joint Cooperation Agreement (the "Joint Cooperation Agreement"). As
part of the Joint Cooperation Agreement, the District Attorney confirmed
that, in light of the Company's cooperation, as reflected by its
undertakings in the Joint Cooperation Agreement, and in light of the
clear demonstration by the Company's Board of Directors of its
determination to uncover all past improper activities of the types being
investigated by the District Attorney and the NYPSC, no criminal charge
of any kind will be filed by the District Attorney against the Company
or any of its affiliates or subsidiaries in connection with the District
Attorney's investigation. For its part, pursuant to the Joint
Cooperation Agreement the Company has agreed to cooperate fully and
completely with the District Attorney by undertaking to: (1) permit the
District Attorney complete access to any Company documents, records or
files relating to the District Attorney's investigation; (2) permit full
access to all evidence and analyses collected and/or prepared by the
attorneys hired by the Company's Board of Directors (the "Board's
attorneys") in connection with its independent investigation of the
misuse of Company assets; (3) provide the District Attorney with
information uncovered by the Company separately from the Board of
Directors' independent investigation of criminal conduct of any sort on
the part of the Company's officers and employees; (4) provide the
District Attorney with direct contact with the independent accountants
currently involved in reviewing a certain Company account and furnish
the District Attorney with a copy of the final report of such
accountants regarding such account; (5) authorize the Board's attorneys
to satisfy any request of the District Attorney for further
investigation of matters related to the independent investigation, and
to charge the costs of satisfying such requests (along with the cost of
the independent investigation) to the Company's shareholders and not to
its ratepayers; and (6) continue the Company's cooperation with the
NYPSC, and cooperate on the same terms with other public agencies having
jurisdiction over the Company's activities. In addition, the Company
agreed to accept and implement the following remedial actions: (1) to
refund to ratepayers, in a manner to be determined by the NYPSC and
satisfactory to the District Attorney, all Company funds ascertained to
have been misappropriated or found to have been improperly charged to
ratepayers by Company officers and employees as determined by the
independent investigation, by the District Attorney, or by the NYPSC,
whichever is greater. Additionally, the Company agreed not to seek
recovery from ratepayers of any of the outstanding direct or indirect
costs of the investigations related to these matters; (2) to require
that all Company expenditures be subject to proper internal accounting
controls; (3) to prohibit the giving or receipt of gifts by Company
officers or employees except as permitted by law and applicable
corporate policies; (4) to discontinue for five years all political
contributions or in kind service and the activities of all Political
Action Committees associated with the Company; and (5) to establish,
independent from the Company, the position of "Inspector General", for a
period of seven years, to be assigned the authority and resources
necessary, including staff, to investigate and report on improper or
unethical conduct by Company officers or employees, the cost of such
Inspector General to be borne by the shareholders of the Company and not
by its ratepayers. The Joint Cooperation Agreement provides that the
duration of the Inspector General's appointment may be modified by the
parties as the circumstances may warrant.
The Joint Cooperation Agreement is also discussed under the caption
"Events Affecting the Company" in the "Review of the Company's Results
of Operations and Financial Condition" on page 15 of the 1993 Annual
Report to Shareholders, which material is incorporated by reference in
this Form 10-K Annual Report.
On January 29, 1993, the Company filed an electric rate increase
application with the NYPSC (Case 93-E-0082) requesting a $17.1 million
(4.8%) annual increase in electric revenues to be effective January 1,
1994. Following Ms. Winikow's arrest and the commencement of the
District Attorney's investigation, on August 26, 1993, the New York
State Department of Law ("DOL") filed a motion (the "DOL Motion") with
the NYPSC requesting that the NYPSC declare the Company's present
electric and gas rates temporary to the extent necessary to assure
refunds to ratepayers of any monies improperly collected from them. The
DOL Motion would subject to refund any inappropriate expenditures which
were collected in rates pursuant to the Company's previous electric
(Case 89-E-175) and gas (Case 92-G-0050) rate cases. On August 31,
1993, the NYPSC Staff filed a similar motion (the "NYPSC Staff Motion")
requesting that the Company's present electric rates remain temporary
pending the conclusion of the NYPSC Staff's review of the Company's
financial records to determine whether the Company expended funds for
inappropriate purposes. The NYPSC Staff Motion also requested the NYPSC
not to implement any increase in electric rates requested by the Company
in Case 93-E-0082 until the NYPSC Staff's investigation is completed.
Prior to the filing of the DOL and NYPSC Staff Motions, the Company
announced that it would refund to ratepayers any charges related to
illegal expenditures. The Company will also adjust its request for rate
relief in Case 93-E-0082 to delete any such inappropriate expenditures.
Citing these commitments and the fact that the amount associated with
the wrongful acts committed by Ms. Winikow appears to be a small
fraction of the rate relief sought by the Company, on September 7, 1993,
the Company filed a response to the DOL and NYPSC Staff Motions opposing
the extraordinary relief requested in both these Motions. On October 4,
1993, in response to the DOL and NYPSC Staff Motions, the NYPSC issued
an Order stating that the Company's current electric rate case
(Case 93-E-0082) would be terminated unless the Company agreed to an
extension of the rate cases's statutory suspension period to and
including June 30, 1994, and to (1) a two month rate reduction of
$115,000 per month in November and December 1993 (the Company
voluntarily extended this temporary rate reduction for a third month,
through January 1994, bringing the total amount refunded to New York
ratepayers to $345,000), (2) make $3 million of its existing annual
revenues ($2.25 million of electric revenues and $.75 million of gas
revenues) temporary and subject to refund, (3) continue to cooperate
fully and in a timely fashion with the NYPSC Staff's investigation, (4)
pre-file with the NYPSC a complete and detailed analysis of the results
of the Company's own internal investigation, (5) agree that further
hearings are appropriate for evaluation of the Company's analysis and
evidence, as well as those of other parties, including the NYPSC Staff,
(6) continue existing ratemaking mechanisms for the duration of the
further suspension period, including the revenue decoupling mechanism,
demand-side management and customer service incentives, the cap on
earnings and sharing mechanism, and the reconciliations/reforecasts of
expenses, and (7) agree that, if by June 30, 1994 the NYPSC Staff's
investigation is not completed, then temporary rates may be set. On
October 14, 1993, in response to the NYPSC's October 4, 1993 Order, the
Company agreed to the six-month extension of the statutory suspension
period in the Company's current electric rate case and accepted the
NYPSC's other conditions. On December 16, 1993, the NYPSC issued an
Order accepting the six-month extension period.
On December 17, 1993, the Company reported to the Administrative
Law Judge presiding over Case 93-E-0082 that the Company's analysis of
the results of the Special Committee's investigation will be available
no later than May 31, 1994, and proposed an additional six-month
extension to December 31, 1994, (the "additional six-month extension")
of both the statutory suspension period and the existing electric
ratemaking mechanisms.
On January 19, 1994, the NYPSC Staff filed its comments to the
Company's December 17 extension proposal. The NYPSC Staff argued that
the proposed additional six-month extension should be subject to certain
conditions, including the setting of the authorized return on common
equity for 1994 at 10.6%, with earnings in excess of that amount to be
passed back to ratepayers.
On January 28, 1994, the Company filed a motion with the NYPSC
seeking approval of the additional six-month extension or, in the
alternative, to establish an expedited procedural schedule in
Case 93-E-0082. The Administrative Law Judge's ruling on the Company's
proposal is expected shortly.
On November 3, 1993, the NJBRC commenced its periodic management
audit of RECO. As a result of the events and investigations described
above, the NJBRC audit includes, in addition to a standard review of
operating procedures, policies and practices, a review of the posture of
RECO management regarding business ethics and a determination regarding
the effect of such events on RECO ratepayers. In addition, under an
agreement with the NJBRC to return to customers funds misappropriated by
employees, RECO refunded to New Jersey ratepayers $94,100 through
reductions in the applicable fuel adjustment charges in February and
March 1994. The Company has also pledged to return any other funds that
are discovered to have been misappropriated.
On August 18, 1993, Feiner v. Orange and Rockland Utilities, Inc.,
et al. ("Feiner"), a purported ratepayer class action complaint against
the Company, RECO, Ms. Winikow and others, was filed in the United
States District Court, Southern District of New York. The complaint
names a number of "John Does" who are described as officers and
directors of the Company but does not identify any current or former
officer or director by name except Ms. Winikow. The Feiner complaint
alleges that the defendants violated RICO and New York common law by
using false and misleading testimony to obtain rate increases from the
NYPSC and used funds obtained from ratepayers in furtherance of an
alleged scheme to make illegal campaign contributions and other illegal
payments. Plaintiffs seek damages in the amount of $900 million (which
they seek to treble pursuant to the RICO statute). The Company intends
to vigorously contest these claims and filed a motion to dismiss them on
February 18, 1994.
On August 31, 1993, Patents Management Corporation v. Orange and
Rockland Utilities, Inc., et al. ("Patents Management"), a purported
shareholder derivative complaint, was filed in the Supreme Court of the
State of New York, County of New York, against the Company, all but one
of the Directors and several other named defendants by an alleged
shareholder of the Company. Plaintiff claims that the named Directors
breached their fiduciary duties by condoning the alleged wrongful acts
of Ms. Winikow or failing to exercise appropriate supervisory control
over Ms. Winikow. Plaintiff requests that the Court require each
Director to indemnify the Company against all losses sustained by the
Company as a result of these alleged wrongful acts of Ms. Winikow. The
defendants intend to vigorously contest these claims.
On November 23, 1993, Gross v. Orange and Rockland Utilities, Inc.
("Gross"), a purported shareholder class action complaint, was filed
in the United States District Court, Southern District of New York.
Plaintiff alleges that various Securities and Exchange Commission
filings of the Company during the period between March 2, and
November 4, 1993, contained false and misleading information, and
thereby violated Sections 11 and 12(2) of the Securities Act of 1933, by
failing to disclose what the plaintiff alleges was a "scheme" by the
Company to make illegal political payments and campaign contributions to
various public officials and politicians. As a result, plaintiff
claims, during such period persons who purchased the Company's stock
through the Company's Dividend Reinvestment and Stock Purchase Plan did
so at artificially inflated prices. The complaint seeks unspecified
money damages. The Company intends to vigorously contest these claims.
On January 14, 1994, at a status conference held before Judge
Brieant, April 8, 1994, was set as the date by which all answers and
motions must be filed in the Feiner and Gross suits. Plaintiff's
attorney in Patents Management has agreed to proceed in this litigation
according to the schedule set forth by Judge Brieant with regard to the
Feiner and Gross suits. Thus, all answers and motions with regard to
the Patents Management suit must be filed by April 8, 1994.
Other Litigation:
On May 11, 1993, an action was commenced against the Company by
Hudson Riverkeeper Fund, Inc. ("Riverkeeper") in the United States
District Court for the Southern District of New York. In its complaint,
Riverkeeper alleged that the Company has violated and continues to
violate its SPDES Permit for its Lovett Generating Station ("Lovett") by
failing to maintain cooling water intake structures that reflect the
best technology available for minimizing adverse environmental impact.
In addition, the complaint alleged that the Company failed to submit a
scope of work for entrainment studies required by its SPDES permit (the
"entrainment studies"). The original complaint requested that the Court
assess civil penalties aggregating $22 million and order the Company to
take steps to insure that the cooling water intake structures at Lovett
reflect the best technology available for minimizing adverse
environmental impact. On May 18, 1993, Riverkeeper amended its
complaint against the Company by withdrawing its entrainment studies
allegation and reducing the amount of civil penalties sought to
approximately $11 million. On June 30, 1993, the Company filed its
answer to Riverkeeper's amended complaint. In its answer the Company
denied Riverkeeper's allegations and thereafter, reflecting the
Company's belief that Riverkeeper's allegations have no legal merit, on
July 20, 1993 the Company filed a Motion for Summary Judgment seeking
the dismissal of this action. On October 21, 1993, the Court issued a
Memorandum and Order denying the Company's Motion for Summary Judgment
and ruling that the New York State Department of Environmental
Conservation ("DEC") should be included as a party to this action. On
January 14, 1994, a conference was held before Judge Brieant during
which the DEC intervened in this litigation as a designated plaintiff.
Discovery is proceeding in this matter.
Additional information regarding the Company's SPDES Permits is
contained under the caption "Water Quality" of "Environmental Matters"
in Item 1 of this Form 10-K.
On January 15, 1993, the Company was served with a complaint naming
the Company as one of several defendants in Warwick Administrative
Group, et al. v. Avon Products, Inc. et al., which case was filed in the
United States District Court for the Southern District of New York. The
allegations in this case stem from an Administrative Order for Remedial
Design and Remedial Action issued on February 28, 1992 by the United
States Environmental Protection Agency pursuant to Superfund laws which
impose liability upon entities who are identified as having contributed
hazardous wastes to a particular site requiring clean-up, including
generators and transporters of such wastes. The Order directs certain
members of the Warwick plaintiff group to implement a plan for the
clean-up of the Warwick Landfill site in Greenwood Lake, New York. The
Warwick plaintiff group now alleges that some defendants, including the
Company, arranged to have hazardous substances disposed of at the
Warwick site and thus seek to recover from the defendants costs incurred
and damages suffered in connection with the clean-up of the Warwick
Landfill site. An answer to the complaint, as amended, was filed by the
Company on February 23, 1993, denying all of the allegations in the
amended complaint and setting forth a number of affirmative defenses.
On May 3, 1993, Judge Goettel of the United States District Court,
Southern District of New York, dismissed the plaintiffs' amended
complaint for failure to state a claim for which relief could be granted
and granted plaintiffs leave to replead. Thereafter, the plaintiffs
filed a second amended complaint which was superseded by a third amended
complaint served on June 3, 1993. On June 23, 1993, the Company filed
an answer to the third amended complaint, denying all of the plaintiffs'
allegations and setting forth a number of affirmative defenses. As it
is presently unclear if any hazardous waste generated by the Company was
transported to the Warwick Landfill site, and because the nature and
quantities of hazardous waste sent by others to such site are
undetermined, the Company is unable to determine its liability, if any,
with regard to this proceeding.
On September 25, 1991, the Company was named as one of several
hundred third party defendants in the United States v. Kramer, et al.
and State of New Jersey Dep't of Environmental Protection v. Almo Anti-
Pollution Services, et al., which cases have been consolidated in the
United States District Court for the District of New Jersey, Camden
Vicinage. The allegations in this action concern the Helen Kramer
Landfill site in Mantua, New Jersey, which operated from 1963 to 1981.
Suit in this case was brought under Superfund laws. Additional
information concerning Superfund laws is contained under the subheading
"Environmental Matters" in Item 1 of this Form 10-K Annual Report.
While it is presently unclear if any hazardous waste generated by the
Company was transported to the Helen Kramer Landfill site, the total
cost of remediation and damages at the site, while not clearly
established, is reportedly estimated at $100 million or more, and the
Company is monitoring the situation. It appears reasonable to expect
the Company's relative contribution to the Helen Kramer site, if any, to
have been less than 1% of the total volume sent to the site, so that the
Company's exposure to liability would appear at the present time to be
an amount that is not material to the financial condition of the
Company.
On March 16, 1988, Hatzel and Buehler, Inc. v. Orange and Rockland
Utilities, Inc., a complaint brought by one of several prime contractors
employed by the Company as part of the Company's Lovett Coal
Reconversion Project, was filed in the United States Bankruptcy Court,
Wilmington, Delaware. Plaintiff claimed that the Company improperly
terminated its contract and sought damages in excess of $15 million. On
October 30, 1989, the United States District Court, Wilmington,
Delaware, granted the Company's motion to withdraw the case from the
United States Bankruptcy Court and to have the United States District
Court assume jurisdiction. On December 14, 1992, the United States
District Court issued a decision and order granting the Company's Motion
for Summary Judgment dismissing the plaintiff's non-contract claims and
punitive damage demands. On January 25, 1994, the parties settled the
remaining claims pursuant to a settlement agreement under which the
Company, without any admission of liability, paid to the plaintiff the
sum of $660,000 and the plaintiff delivered to the Company a release of
all outstanding claims against the Company.
On July 31, 1992, State Line Power Associates Limited Partnership
v. Orange and Rockland Utilities, Inc., a complaint brought by a New
Jersey partnership, was filed in the United States District Court,
Southern District of New York. The plaintiff had contracted, pursuant
to a Power Sales Agreement dated October 11, 1990 (the "Agreement"), to
build a gas-fired combined cycle generating facility in Ringwood, New
Jersey and sell 100 Mw of capacity and associated energy to the Company.
The Company terminated the Agreement following the plaintiff's failure
to meet certain deadlines and cure its related defaults under such
Agreement. In its complaint the plaintiff alleged that such termination
was improper. Based on this assertion, the complaint sought
compensatory damages in excess of $50 million and a declaratory judgment
to the effect that the Company remained obligated to purchase 100 Mw of
capacity and associated energy from the plaintiff. In its answer to the
complaint, the Company denied the plaintiff's allegations of wrongdoing
and asserted counterclaims against the plaintiff and various other
entities affiliated with the plaintiff ("Additional Counterclaim
Defendants") seeking damages in excess of $1.2 million. On October 22,
1992, the Additional Counterclaim Defendants filed a motion to dismiss
the counterclaims against them and the plaintiff filed its answer to the
counterclaims. Thereafter, on January 26, 1993, the Company submitted a
Motion for Summary Judgment requesting that the Court rule as a matter
of law that the plaintiff could not prevail on any of its causes of
action. The plaintiff filed its brief opposing the Company's motion on
March 10, 1993. On January 7, 1994, the parties entered into a
settlement agreement pursuant to which the Company, without any
admission of liability, paid to the plaintiff an amount that is not
material to the financial condition of the Company and the plaintiff,
the Additional Counterclaim Defendants and the Company delivered to each
other releases from all outstanding claims.
The Company has been named as a defendant or third-party defendant
in a number of proceedings involving alleged personal injuries,
primarily to construction workers, as a result of exposure to asbestos
at facilities owned and operated by the Company. Discovery with regard
to these cases will determine, among other things, if the plaintiffs in
each of these cases worked at Company facilities. The Company
anticipates that similar asbestos-related claims may be asserted against
the Company from time to time in the future. However, at this time the
Company does not believe that the asbestos-related lawsuits currently
outstanding, nor those which may be brought in the future, will,
individually or in the aggregate, have a material effect on the business
or financial condition of the Company.
Regulatory Matters:
Information regarding the Company's involvement in, and the effect
on the Company of, pipeline take-or-pay proceedings before the FERC is
contained under the caption "Gas Energy Costs" in the "Review of the
Company's Results of Operations and Financial Condition" and in Note 12
of the Notes to Consolidated Financial Statements - "Gas Supply and
Storage Contracts" on pages 17 and 33, respectively, of the 1993 Annual
Report to Shareholders, which material is incorporated by reference in
this Form 10-K Annual Report. Reference is also made to the information
contained under the caption "Take-or-Pay Surcharge Costs and FERC Order
636 Transition Costs" of "Gas Operations" in Item 1 of this Form 10-K
Annual Report.
On November 1, 1990, the FERC issued Order No. 528 which set forth
new guidelines for allocating and recovering take-or-pay costs.
Pursuant to Order No. 528, the Company's interstate pipeline suppliers
submitted rate and tariff filings for the allocation and recovery of
take-or-pay costs from the Company and other local distribution
companies. Based on these rate and tariff sheets, the Company had
estimated its total take-or-pay liability to be approximately $17 to $18
million. However, on June 25, 1991, one of the Company's pipeline
suppliers, Tennessee Gas Pipeline Company ("Tennessee"), filed, in
proceedings under Docket Nos. RP86-119 et al., what has commonly become
known as the Tennessee "cosmic settlement". This settlement covered
virtually every major case pending on the Tennessee system, at that
time, including those cases dealing with the allocation and recovery of
take-or-pay costs. The cosmic settlement was approved by the FERC on
June 25, 1992. Based on the amended cosmic settlement, as it relates to
Tennessee's take-or-pay charges, as well as a revised estimate regarding
the anticipated level of take-or-pay billings the Company expects to
receive, the Company now estimates its total take-or-pay liability at
approximately $13.9 million.
At present the Company is a party to an ongoing proceeding
(Case 88-G-062) commenced by the NYPSC in April 1988, examining the
extent to which the Company will be permitted to recover from its
customers the take-or-pay costs billed to it by its pipeline suppliers.
Until a final order is rendered by the NYPSC in this Case, the Company
has received interim authority, effective April 1, 1989, to recover,
subject to refund, 65% of the take-or-pay charges actually billed to it
by its pipeline suppliers and to defer the balance, with interest, until
such order is issued.
Hearings in Case 88-G-062 were held in two phases. Phase I
addressed the proper allocation of take-or-pay liabilities to customers
and the mechanisms for recovery of these costs. The NYPSC issued its
Opinion (Opinion 89-41) with regard to Phase I on December 11, 1989,
holding that allocations of direct-billed take-or-pay costs are to be
made among firm sales, interdepartmental, interutility and
transportation customers.
Phase II of Case 88-G-062 involves an examination of the prudence
of the activities of New York's local distribution companies with
respect to their incurrence of take-or-pay liabilities and sharing of
take-or-pay costs between these local distribution companies and their
customers. Hearings on Phase II issues with respect to the Company were
concluded on May 21, 1990. The Company and NYPSC Staff filed initial
and reply briefs on generic and Company-specific issues during the
summer of 1990. In its Company-specific initial brief, NYPSC Staff
proposed an imprudence disallowance that would deny rate recovery of
$2 million of take-or-pay costs billed to the Company by its suppliers.
In response, on August 31, 1990, the Company filed a motion to strike
that portion of NYPSC Staff's brief pertaining to its proposed
disallowance on the ground that it was wholly lacking in record support.
While this motion was denied by Administrative Law Judge Harrison ("ALJ
Harrison"), he did defer substantive judgment on the NYPSC staff's
proposed $2 million imprudence disallowance and ruled that the issue of
such proposed disallowance will be given consideration in his
Recommended Decision on Company-specific issues.
The generic aspect of Phase II of Case 88-G-062 examined NYPSC
Staff's proposal (called "equitable sharing") that would deny local
distribution companies, including the Company, recovery through rates of
between 25% and 50% of the take-or-pay costs billed to such companies by
their suppliers. On December 21, 1990, ALJ Harrison issued a
Recommended Decision on generic issues rejecting NYPSC Staff's proposal
calling for the equitable sharing of take-or pay costs, and recommending
instead that, with the exception of costs resulting from its own
imprudence, each utility be permitted to recover from its customers the
take-or-pay costs billed to such utility by its pipeline suppliers. ALJ
Harrison's recommendation, if adopted by the NYPSC, would be favorable
to the Company in that it would limit the Company's exposure solely to
NYPSC Staff's proposed $2 million imprudence disallowance which
disallowance the Company believes is not supported by the record
evidence. Briefs on exceptions to the Recommended Decision were
submitted on January 23, 1991 and reply briefs were filed on February
15, 1991. On November 24, 1992, a settlement conference was held
addressing Phase II issues affecting the Company. The Company was
unable to reach a settlement with NYPSC Staff with regard to these
issues at that time.
On April 8, 1992, FERC issued Order No. 636 requiring interstate
natural gas pipelines to unbundle their sales and transportation
services and to offer each of these services on a stand alone basis.
Information regarding the Company's involvement in, and effect on the
Company of, Order 636 and its related proceedings is contained under the
caption "Gas Energy Costs" in the "Review of the Company's Results of
Operations and Financial Condition" and in Note 12 of the Notes to
Consolidated Financial Statements under the caption "Gas Supply and
Storage Contracts" on pages 18 and 33, respectively, of the 1993 Annual
Report to Shareholders, which material is incorporated by reference in
this Form 10-K Annual Report. Reference is also made to the information
contained under the captions "Supply, Transportation and Storage" and
"Take-or-Pay Surcharge Costs and FERC Order 636 Transition Costs" of
"Gas Operations" in Item 1 of this Form 10-K Annual Report.
On December 30, 1992, in connection with RECO's 1991 electric rate
case (Docket No. ER910303565), the NJBRC issued a Decision and Order
dealing with the appropriateness of additional tax liability placed on
New Jersey utilities pursuant to New Jersey's June 1, 1991 tax
legislation. Pursuant to this legislation, RECO will be required to pay
a combined additional amount of approximately $16 million of gross
receipts and franchise taxes in 1993 and 1994. In its Decision and
Order the NJBRC allowed RECO to recover this amount over a ten year
period with interest on the unamortized balance at an annual rate of
7.5%. On February 26, 1993, Rate Counsel filed a Notice of Appeal from
the NJBRC Decision and Order with the Superior Court of New Jersey,
Appellate Division, stating as grounds for the appeal that the Decision
is arbitrary and capricious and would result in unjust and unreasonable
rates. On August 9, 1993, Rate Counsel filed its initial brief with
regard to its appeal. Thereafter, on October 12, 1993, RECO filed its
initial brief and on October 27, 1993, Rate Counsel filed its reply
brief with regard to this matter. Oral argument was held on March 7,
1994, and on March 21, 1994 the Superior Court affirmed the NJBRC's
December 30, 1992 Decision and Order.
The Company is a party to a number of administrative proceedings
involving potential impact to the environment. Such proceedings arise
out of the operation and maintenance of facilities for the generation,
transmission and distribution of electricity and natural gas.
Information regarding the Company's involvement in these various
proceedings is included in Note 12 of the Notes to Consolidated
Financial Statements under the caption "Environmental" on page 35 of the
1993 Annual Report to Shareholders, which information is incorporated by
reference in Item 1 of this Form 10-K Annual Report, as well as under
the subheading, "Environmental Matters" of this Form 10-K Annual Report.
Such proceedings are not, in the aggregate, material to the business or
financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders
during the fourth quarter of the fiscal year ended December 31, 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
All of the executive officers of the Company are appointed on an annual
basis at the first Board of Directors' meeting following the annual meeting.
Officers, Age, and Title Business Experience Past Five Years
Victor J. Blanchet, Jr., 52 Acting Chief Executive Officer since
Acting Chief Executive October 7, 1993. President and Chief
Officer, President and Operating Officer since January 1991.
Chief Operating Officer Executive Vice President from April
1990 until January 1991. Vice
President from 1977 to April 1990.
Patrick J. Chambers, Jr., 59 Senior Vice President since 1978
Senior Vice President and and Chief Financial Officer
Chief Financial Officer since 1979.
Robert J. Biederman, Jr., 41 Vice President since April 1990.
Vice President, Transmission Director of Operations from 1986 until
and Distribution April 1990.
Terry L. Dittrich, 48 Acting Controller since March 17,
Acting Controller 1994. Director of Accounting since
April 1990. Manager of Accounting
from 1985 to April 1990.
Frank E. Fischer, 60 Vice President since 1978.
Vice President, Engineering
and Production
Gerard A. Maher, 59 Assistant Secretary since April 1989.
Assistant Secretary and Assistant Treasurer since April 1990.
Assistant Treasurer Assistant General Counsel from April
1989 to August 1991. Partner, Nixon
Hargrave, Devans & Doyle from November
1986 to March 1989.
Robert J. McBennett, 51 Treasurer since 1984.
Treasurer
Victor A. Roque, 47 General Counsel since April 1989.
Vice President, General Counsel Vice President and Secretary since
and Secretary January 1987.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Common Stock of the Company is listed on the New York Stock Exchange
under the ticker symbol ORU. The stock is listed in published stock tables as
"OranRk".
At December 31 1993, there were 24,328 holders of record of the Company's
common stock, $5.00 par value. During 1993 dividend payments were made to
holders of the Company's common stock on February 1, May 1, August 1 and
November 1.
Quarterly market price and dividend information on the Company's Common
Stock is as follows:
Quarter High Low Dividend
1993 1 $45 7/8 $40 1/4 $.615
2 47 1/2 43 3/8 .615
3 47 1/2 44 3/8 .63
4 45 3/8 38 5/8 .63
1992 1 39 5/8 32 3/8 .60
2 37 3/4 34 .60
3 40 37 1/4 .615
4 41 7/8 39 .615
Information regarding the restriction of retained earnings for dividend
payment is contained in Note 4 of the Notes to Consolidated Financial
Statements - "Retained Earnings" on page 28 of the 1993 Annual Report to
Shareholders, which material is incorporated by reference in this Form 10-K
Annual Report.
Item 6. Selected Financial Data
The information required by this Item is contained under the captions
"Financial Statistics - Common Stock Data", and "Financial Statistics -
Selected Financial Data" on page 40 of the 1993 Annual Report to Shareholders,
which material is incorporated by reference in this Form 10-K Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is contained under the caption
"Review of the Company's Results of Operations and Financial Condition" on
pages 14 through 20 of the 1993 Annual Report to Shareholders, which
material is incorporated by reference in this Form 10-K Annual Report.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary financial information
required by this Item are contained on pages 21 through 37 of the 1993
Annual Report to Shareholders, which material is incorporated by reference
in this Form 10-K Annual Report. Such information is listed in Item
l4(a)(1) "Financial Statements" of this Form 10-K Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On February 10, 1994, the Executive Committee of the Board of Directors of
the Company appointed the accounting firm of Arthur Andersen & Co. to audit the
books, records and accounts of the Company and its subsidiaries for the 1994
fiscal year. The appointment of Arthur Andersen & Co. is subject to the
approval of the shareholders at the Annual Meeting to be held on May 11, 1994.
The accounting firm of Grant Thornton audited the Company's consolidated
financial statements for 1993 and prior years. Upon recommendation of the
Audit Committee, the Board of Directors decided to solicit bids for the
performance of auditing services for the Company for 1994. Bids were received
from six public accounting firms, including Grant Thornton. Based on a review
of the competing bids, the Audit Committee believed that the selection of
Arthur Andersen & Co. would be in the best interests of the Company and
recommended such selection to the Board of Directors.
The reports of Grant Thornton on the Company's consolidated financial
statements for the past two fiscal years did not contain an adverse opinion or
a disclaimer of opinion and the reports were not qualified or modified as to
uncertainty, audit scope or accounting principles, except that the report for
1993 was modified by inclusion of an explanatory paragraph regarding the
uncertainty of the pending investigations of the Company and related litigation
described in the Company's Current Reports on Form 8-K dated August 16,
October 6, November 23 and December 16, 1993 and Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993. Since January 1, 1992, there have
been no disagreements with Grant Thornton on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which, if not resolved to the satisfaction of Grant Thornton, would
have caused Grant Thornton to make reference to the subject matter of such
disagreements in connection with its report.
PART III
The information required by Item 10 - Directors and Executive Officers
of the Registrant is contained on page 40 of this Form 10-K Annual Report
and in the Company's definitive Proxy Statement in connection with the 1994
Annual Meeting of Common Shareholders (the "Proxy Statement"), which material
is incorporated by reference in this Form 10-K Annual Report. The information
required by Item 11 - Executive Compensation, Item 12 - Security Ownership of
Certain Beneficial Owners and Management and Item 13 - Certain Relationships
and Related Transactions is contained in Section 1, "Election of Directors,"
of the Proxy Statement which material is incorporated by reference in this
Form 10-K Annual Report. With the exception of this information, the Proxy
Statement is not deemed filed as part of this Form 10-K Annual Report.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
The following consolidated financial statements of the Company and
its subsidiaries appearing on pages 21 through 37 of the 1993 Annual
Report to Shareholders are incorporated by reference in this Form 10-K
Annual Report. With the exception of these consolidated financial
statements and the information incorporated in Items 1, 3, 5, 6, 7 and 8,
herein, the 1993 Annual Report to Shareholders is not deemed filed as part
of this Form 10-K Annual Report.
Page*
Consolidated Statements of Income and Retained Earnings for the
years ended December 31, 1993, 1992 and 1991. 21
Consolidated Balance Sheets as of December 31, 1993 and 1992. 22
Consolidated Cash Flow Statements for the years ended
December 31, 1993, 1992 and 1991. 24
Notes to Consolidated Financial Statements. 25
Report of Independent Certified Public Accountants. 37
*Page number reference is to the 1993 Annual Report
to Shareholders
(a)(2) Financial Statement Schedules Page**
Property, Plant and Equipment and Non-utility Property for the
years ended December 31, 1993, 1992 and 1991 (Schedule V). 53
Accumulated Depreciation, Depletion and Amortization of Property,
Plant and Equipment and Non-utility Property for the years ended
December 31, 1993, 1992 and 1991 (Schedule VI). 56
Valuation and Qualifying Accounts and Reserves for the years
ended December 31, 1993, 1992 and 1991 (Schedule VIII). 59
**Page number reference is to this Form 10-K Annual Report
The information required by Schedule IX - Short-Term Borrowings is
included under the caption "Liquidity and Capital Resources" of the
"Review of the Company's Results of Operations and Financial Condition"
and in Note 8 of Notes to Consolidated Financial Statements, "Cash and
Short-Term Debt" on pages 18 and 30, respectively of the 1993 Annual
Report to Shareholders, which material is incorporated by reference in
this Form 10-K Annual Report. All other schedules are omitted because
they are not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
The information required by Rule 5-04, Schedule III - Condensed Financial
Information of Registrant has been omitted since Consolidated Financial State-
ments of the Registrant and its subsidiaries are contained in the Company's
1993 Annual Report to Shareholders and the test prescribed was not met.
(a)(3) Exhibits
* 3.1 Restated Certificate of Incorporation, as amended through
April 14, 1988. (Exhibit 4.1 to Registration Statement
33-25359).
* 3.2 By-Laws, as amended through April 11, 1990. (Exhibit 3.2 to Form
10-K for the fiscal year ended December 31, 1990, File No. 1-4315).
* 4.1 Composite First Mortgage of the Company as Supplemented and
Modified by Twenty-six Supplemental Indentures. (Exhibit 4.1
to Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
* 4.2 Twenty-seventh Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1980. (Exhibit 4.2 to Form 10-K for
the fiscal year ended December 31, 1990, File No. 1-4315).
* 4.3 Mortgage Trust Indenture of Rockland Electric Company, dated as
of July 1, 1954. (Exhibit 2.16 to Registration Statement
No. 2-14159).
* 4.6 Third Supplemental Indenture of Rockland Electric Company, dated
as of August 15, 1965. (Exhibit 4.23 to Registration Statement
No. 2-24682).
* 4.11 Mortgage Trust Indenture of Pike County Light & Power Company, dated
as of July 15, 1971. (Exhibit 4.31 to Registration Statement
No. 2-45632).
* 4.12 Twenty-eighth Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1982. (Exhibit 4.12 to Form 10-K for the
fiscal year ended December 31, 1992, File No. 1-4315).
* 4.17 Twenty-ninth Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1984. (Exhibit 4.17 to Form 10-K
for the fiscal year ended December 31, 1989, File No. 1-4315).
* 4.20 Thirtieth Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1986. (Exhibit 4.20 to Form 10-K
for the fiscal year ended December 31, 1991, File No. 1-4315).
* 4.21 Thirty-first Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1988. (Exhibit 4.21 to Form 10-K for
the fiscal year ended December 31, 1988, File No. 1-4315).
* 4.22 Thirty-second Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1990. (Exhibit 4.22 to Form 10-K for
the fiscal year ended December 31, 1990, File No. 1-4315).
* 4.25 Indenture between the Company and The Bank of New York as Trustee
regarding unsecured debt, dated March 1, 1990. (Exhibit 4.25 to Form
10-K for the fiscal year ended December 31, 1990, File No. 1-4315).
* 4.26 First Supplemental Indenture between the Company and The Bank of
New York as Trustee regarding unsecured debt, dated March 7, 1990.
(Exhibit 4.26 to Form 10-K for the fiscal year ended December 31,
1990, File No. 1-4315).
* 4.27 Second Supplemental Indenture between the Company and the Bank of
New York as Trustee regarding unsecured debt, dated October 15, 1992.
(Exhibit 4.27 to Form 10-K for the fiscal year ended December 31, 1992,
File No. 1-4315).
* 4.28 Thirty-third Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1992. (Exhibit 4.28 to Form 10-K for
the fiscal year ended December 3, 1992, File No. 1-4315).
* 4.29 Third Supplemental Indenture between the Company and The Bank of
New York as Trustee regarding unsecured debt, dated as of March 1,
1993. (Exhibit 4.29 to Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-4315).
* 4.30 Ninth Supplemental Indenture of Rockland Electric Company, dated as
of March 1, 1993. (Exhibit 4.30 to Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-4315).
*10.1 General Agreement: Bowline Point Generating Plant, dated as of
October 10, 1969. (Exhibit 5(b) to Registration Statement No. 2-42156).
*10.2 Financing Agreements, dated as of February 1, 1971. (Exhibit 5(a) to
Registration Statement No. 2-42156).
*10.7 New York Power Pool Agreement, dated July 16, 1985. (Exhibit 10.7
to Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
*10.8 Agreement governing the supply of residual fuel oil by Con Edison to
Bowline Point Generating Station dated August 31, 1983. (Exhibit 10.18
to Form 10-K for fiscal year ended December 31, 1991, File No. 1-4315).
*10.10 PJM Facilities Agreement, dated May 1, 1970, as amended
December 12, 1972. (Exhibit 10.10 to Form 10-K for the fiscal year
ended December 31, 1992, File No. 1-4315).
+10.11 Officers' Supplemental Retirement Plan, as amended April 1, 1993.
*10.12 Incentive Compensation Plan, amended January 3, 1991. (Exhibit 10.12
to Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
*10.13 Severance Pay Plan, as amended January 3, 1991. (Exhibit 10.13 to
Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
*10.14 Management Long-Term Disability Plan. (Exhibit 10.14 to Form 10-K for
the fiscal year ended December 31, 1991, File No. 1-4315).
*10.15 New York Power Authority Firm Purchase Contract, dated July 28, 1975.
(Exhibit 10.15 to Form 10-K for the fiscal year ended December 31,
1992, File No. 1-4315).
*10.17 Coal Purchase and Sale Agreement among Orange and Rockland Utilities,
Inc., Rawl Sales and Processing Company, and Massey Coal Sales, Inc.,
dated March 9, 1984, as amended through July 1, 1991. (Exhibit 10.17
to Form 10-K for the fiscal year ended December 31, 1991, File
No. 1-4315).
*10.18 Agreement between Orange and Rockland Utilities, Inc., and Pittston
Coal Sales Company, dated March 14, 1984 as amended through December 1,
1986. (Exhibit 10.18 to Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-4315).
10.18A Amendment to the Agreement between Orange and Rockland Utilities, Inc.,
and Pittston Coal Sales Company, dated July 1, 1991 and executed May 5,
1993.
+*10.19 Employment contract between Orange and Rockland Utilities, Inc. and
James F. Smith as amended December 1, 1990. (Exhibit 10.19 to
Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
10.20 Orange and Rockland Utilities, Inc. Post Director Service Retainer
Continuation Program, as amended April 14, 1993.
*10.21 Electric Contract for the Sale of Firm Power and Energy by the
Power Authority of the State of New York to Orange and Rockland
Utilities, Inc., dated April 26, 1989, including Application dated
April 20, 1989. (Exhibit 10.21 to Form 10-K for the fiscal year
ended December 31, 1989, File No. 1-4315).
+*10.22 Form of Severance Agreement for Company Officers effective
January 3, 1991. (Exhibit 10.22 to Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-4315).
+*10.23 Performance Unit Incentive Plan effective December 3, 1992. (Exhibit
10.23 to Form 10-K for the fiscal year ended December 31, 1992,
File No. 1-4315).
+*10.24 Award Agreement under the Performance Unit Incentive Plan
applicable to P. J. Chambers, Jr., dated December 3, 1992.
(Exhibit 10.24 to Form 10-K for the fiscal year ended December 31,
1992, File No. 1-4315).
+*10.25 Award Agreement under the Performance Unit Incentive Plan applicable to
J. F. Smith dated December 3, 1992. (Exhibit 10.25 to Form 10-K for
the fiscal year ended December 31, 1992, File No. 1-4315).
13 The Company's 1993 Annual Report to Shareholders to the extent
identified in this Form 10-K Annual Report for the fiscal year
ended December 31, 1993.
*16 Letter from Grant Thornton (Exhibit 16 to Form 8-K/A dated
February 22, 1994, File No. 1-4315).
*21 Subsidiaries of the Company. (Exhibit 22 to Form 10-K for the fiscal
year ended December 31, 1992, File No. 1-4315).
24 Powers of Attorney.
*99.1 Joint Cooperation Agreement between the Office of the Rockland County
District Attorney and Orange and Rockland Utilities, Inc., dated
November 3, 1993 (Exhibit 99.1 to Form 10-Q for the quarter ended
September 30, 1993, File No. 1-4315).
99.2 Complaint against James F. Smith dated March 16, 1994.
99.3 Form 11-K for the Company's Management Employees' Savings Plan for
the year ended December 31, 1993.
99.4 Form 11-K for the Company's Hourly Group Savings Plan for the year
ended December 31, 1993.
+ Denotes executive compensation plans and arrangements.
* Incorporated by reference to the indicated filings.
The securities issued relevant to each of the following agreements were
not registered with the Securities and Exchange Commission and the total amount
of securities authorized under each agreement does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis. Therefore,
as provided in Item 601 of Regulation S-K, the following agreements are not
filed as exhibits. The Company agrees, however, to furnish to the Commission a
copy of each agreement upon request:
- Participation Agreement between NYSERDA and Orange and Rockland
Utilities, Inc., dated as of July 1, 1982.
- Indenture of Trust between NYSERDA and The Bank of New York, as
Trustee, relating to the Pollution Control Revenue Bonds (Orange and
Rockland Utilities, Inc. Project) dated as of July 1, 1982.
- First Supplemental Participation Agreement between NYSERDA and Orange
and Rockland Utilities, Inc., dated as of October 1, 1984.
- First Supplemental Indenture of Trust between NYSERDA and The Bank of
New York, as Trustee, relating to the 10 1/4% Pollution Control Revenue
Bonds (Orange and Rockland Utilities, Inc. Projects), 1984 Series.
- Second Supplemental Indenture of Trust between NYSERDA and the Bank of
New York, as Trustee, relating to the 9% Pollution Control Revenue
Bonds (Orange and Rockland Utilities, Inc. Projects), 1985 Series.
- Second Supplemental Participation Agreement between NYSERDA and Orange
and Rockland Utilities, Inc., dated as of August 1, 1985.
- First Supplemental Indenture, dated August 15, 1990, to the Indenture
of Mortgage and Deed of Trust of Pike County Light & Power Company.
- Eighth Supplemental Indenture of Rockland Electric Company, dated as of
August 15, 1990.
(b) Reports on Form 8-K
On February 18, 1993, the Company filed a Current Report on
Form 8-K, dated February 18, 1993, pertaining to the Warwick suit and
the fact that the Company was in receipt of a letter dated January 29,
1993, sent on behalf of the Riverkeeper, which purported to give a
60-day notice of intent to initiate a civil suit against the Company for
alleged violations of its SPDES Permit for the Lovett Generating Station
at Tomkins Cove, New York. Reference is made to Item 3, "Legal
Proceedings" of this Form 10-K Annual Report for further descriptions of
the aforementioned events. In addition, a press release dated January
21, 1993 which announced the Company's earnings for the year ended
December 31, 1992 was filed under Item 5, "Other Events" of the Form 8-K
dated February 18, 1993.
On March 8, 1993, the Company filed a Current Report on
Form 8-K, dated March 4, 1993, pertaining to the Series C and Series D
Debentures which were issued by the Company on March 10, 1993. Through
this Form 8-K, the Company filed, under Item 7 (Financial Statements and
Exhibits), certain exhibits relating to the Company's Registration
Statement No. 33-53256 registering up to $115 million in aggregate
principal amount of unsecured debt securities, the related Prospectus
dated October 21, 1992, and the Prospectus Supplement dated February 23,
1993, with respect to the Series C and Series D Debentures.
On September 10, 1993, the Company filed a Current Report on
Form 8-K, dated August 16, 1993, pertaining to (a) the arrest and
termination of employment of former Company Vice President Linda
Winikow; (b) the Feiner suit; (c) the creation by the Board of Directors
of the Special Committee; (d) the Company's RICO suit against Ms.
Winikow et al.; (e) the DOL and NYPSC Staff Motions; and (f) the Patents
Management suit. Reference is made to information contained under the
caption "Events Affecting the Company" in Item 1 and in Item 3, "Legal
Proceedings" of this Form 10-K Annual Report for further descriptions of
the aforementioned actions and events.
On October 21, 1993, the Company filed a Current Report on
Form 8-K, dated October 6, 1993, pertaining to (a) the delivery to
James F. Smith of notice of termination of his employment for cause as
Chief Executive Officer of the Company and the suspension of Mr. Smith
from all duties and responsibilities as an officer of the Company and
Chairman of the Board; (b) the investigation being conducted by the
Special Committee; (c) Ms. Winikow pleading guilty to charges of grand
larceny in the third degree, commercial bribe receiving in the second
degree and making a campaign contribution other than in the true name of
the contributor; and (d) the Order of the NYPSC issued in response to
the DOL and NYPSC Staff Motions. Reference is made to Item 3, "Legal
Proceedings" of this Form 10-K Annual Report for further descriptions of
the aforementioned actions and events.
On December 8, 1993, the Company filed a Current Report on
Form 8-K, dated November 23, 1993, disclosing the filing of the Gross
suit. Reference is made to Item 3, "Legal Proceedings" of this
Form 10-K Annual Report for further description of this suit.
On December 22, 1993, the Company filed a Current Report on
Form 8-K, dated December 16, 1993, pertaining to (i) the NYPSC's
December 16, 1993 Order accepting the six-month extension of the
statutory suspension period in the Company's current electric rate case
(Case 93-E-0082), and (ii) the Company's estimate that in connection
with the ongoing investigations of the Company's operations which were
commenced following the arrest of Ms. Winikow, the Company will incur
$6.0 million of costs during 1993, of which $1.1 million was reflected
in the Company's third quarter results. Reference is made to Item 3,
"Legal Proceedings" of this Form 10-K Annual Report for further
description of Case 93-E-0082.
On February 17, 1994, the Company filed a Current Report on
Form 8-K, dated February 10, 1994, reporting, under Item 4. "Changes in
Registrant's Certifying Accountant", the appointment by the Executive
Committee of the Board of Directors of the accounting firm of Arthur
Andersen & Co. to audit the books, records and accounts of the Company
and its subsidiaries for the 1994 fiscal year.
On February 22, 1994, the Company filed a Form 8-K/A dated
February 22, 1994, amending the February 10, 1994 Form 8-K to include as
Exhibit 16, a letter from the accounting firm of Grant Thornton, which
firm audited the Company's consolidated financial statements for the
1993 fiscal year and prior years.
On March 15, 1994, the Company filed a Form 8-K dated March 14,
1994, reporting under Item 5, "Other Events", the dismissal of two
officers from the Company's employ.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ORANGE AND ROCKLAND UTILITIES, INC.
(Registrant)
By VICTOR J. BLANCHET, JR.
(Victor J. Blanchet, Jr.
Acting Chief Executive Officer,
President, Chief Operating
Officer and Director)
Date: March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature and Title Capacity in Which Signing
VICTOR J. BLANCHET, JR.* Acting Chief Executive
(Victor J. Blanchet, Jr., Officer; Director
Acting Chief Executive
Officer, President and Chief
Operating Officer)
PATRICK J. CHAMBERS, JR.* Principal Financial
(Patrick J. Chambers, Jr., Officer; Director
Senior Vice President and
Chief Financial Officer)
TERRY L. DITTRICH* Acting Principal
(Terry L. Dittrich, Acting Accounting Officer
Controller)
H. KENT VANDERHOEF* Acting Chairman of the
(H. Kent Vanderhoef) Board of Directors
RALPH M. BARUCH* Director
(Ralph M. Baruch)
J. FLETCHER CREAMER* Director
(J. Fletcher Creamer)
Signature and Title Capacity in Which Signing
MICHAEL J. DEL GIUDICE* Director
(Michael J. Del Giudice)
FRANK A. McDERMOTT, JR.* Director
(Frank A. McDermott, Jr.)
KENNETH D. McPHERSON* Director
(Kenneth D. McPherson)
JAMES F. O'GRADY, JR.* Director
(James F. O'Grady, Jr.)
Director
(James F. Smith)
LINDA C. TALIAFERRO* Director
(Linda C. Taliaferro)
JOHN F. WHITE* Director
(John F. White)
*By VICTOR A. ROQUE
(Victor A. Roque,
Attorney-in-fact)
Date: March 25, 1994
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
Board of Directors and Shareholders of
Orange and Rockland Utilities, Inc.
In connection with our audit of the consolidated financial
statements of Orange and Rockland Utilities, Inc. and Subsidiaries
referred to in our report dated February 16, 1994, which report included
an explanatory paragraph that described the investigations and
litigation discussed in Note 12 (Legal Proceedings) of those statements,
which is included in the 1993 Annual Report to Shareholders and
incorporated by reference in this Form 10-K, we have also audited the
schedules listed in the Index at Item 14(a)(2). In our opinion, these
schedules present fairly, in all material respects, the information
required to be set forth therein.
GRANT THORNTON
New York, New York
February 16, 1994
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated February 16, 1994, accompanying
the consolidated financial statements and schedules incorporated by
reference or included in the Annual Report of Orange and Rockland
Utilities, Inc. and Subsidiaries on Form 10-K for the year ended
December 31, 1993. We hereby consent to the incorporation by
reference of said reports in the Registration Statements of Orange
and Rockland Utilities, Inc. and Subsidiaries on Forms S-8
(No. 33-25358, No. 33-25359 and No. 33-22129) and on Forms S-3
(No. 33-22130 and No. 33-63872).
GRANT THORNTON
New York, New York
March 25, 1994
SCHEDULE V
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Property, Plant and Equipment and Non-utility Property
For the Year Ended December 31, 1993
(Thousands of Dollars)
Column A Column F
Utility Plant Non-utility
Electric Gas Common Property Total
Plant in Service:
Production $377,778 $ 4,066 $ - $ - $ 381,844
Transmission 132,483 - - - 132,483
Distribution 383,821 178,141 - - 561,962
General 29,999 6,674 52,153 - 88,826
Gas Production
Properties - - - 9,781 9,781
Future Use 3,229 98 - - 3,327
Other 4,517 21 372 25,268 30,178
931,827 189,000 52,525 35,049 1,208,401
Construction Work
in Progress 22,124 4,018 4,765 - 30,907
Total $953,951 $193,018 $ 57,290 $ 35,049 $1,239,308
Neither the total additions nor the total deductions during the year ended
December 31, 1993 amounted to more than 10% of the closing balance of total
Utility Plant and Non-utility Property. The information required by Columns B,
C, D and E is, therefore, omitted. A summary of Columns C, D and E for the year
ended December 31, 1993 is as follows:
Column C - Additions at cost $54,308
Column D - Retirements 9,035
Column E - Other changes (3,124)*
Net Change $42,149
*Other changes include the following: $(3,124) adjustment of prior years additions
to correct vintage year records.
For information concerning depreciation procedures, see Note 1 of Notes to
Consolidated Financial Statements on page 26 of the 1993 Annual Report to
Shareholders.
SCHEDULE V
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Property, Plant and Equipment and Non-utility Property
For the Year Ended December 31, 1992
(Thousands of Dollars)
Column A Column F
Utility Plant Non-utility
Electric Gas Common Property Total
Plant in Service:
Production $368,958 $ 4,017 $ - $ - $ 372,975
Transmission 131,692 - - - 131,692
Distribution 370,544 167,059 - - 537,603
General 28,716 6,583 50,242 - 85,541
Gas Production
Properties - - - 9,781 9,781
Future Use 3,594 98 - - 3,692
Other 4,517 21 21 24,377 28,936
908,021 177,778 50,263 34,158 1,170,220
Construction Work
in Progress 19,689 3,944 3,306 - 26,939
Total $927,710 $181,722 $ 53,569 $ 34,158 $1,197,159
Neither the total additions nor the total deductions during the year ended
December 31, 1992 amounted to more than 10% of the closing balance of total
Utility Plant and Non-utility Property. The information required by Columns B,
C, D and E is, therefore, omitted. A summary of Columns C, D and E for the year
ended December 31, 1992 is as follows:
Column C - Additions at cost $56,438
Column D - Retirements 10,791
Column E - Other changes (113)*
Net Change $45,534
*Other changes include the following: $(113) adjustment of prior years additions
to correct vintage year records.
For information concerning depreciation procedures, see Note 1 of Notes to
Consolidated Financial Statements on page 26 of the 1993 Annual Report to
Shareholders.
/TABLE
SCHEDULE V
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Property, Plant and Equipment and Non-utility Property
For the Year Ended December 31, 1991
(Thousands of Dollars)
Column A Column F
Utility Plant Non-utility
Electric Gas Common Property Total
Plant in Service:
Production $361,210 $ 4,235 $ - $ - $ 365,445
Transmission 127,954 - - - 127,954
Distribution 349,091 156,686 - - 505,777
General 28,960 6,704 46,879 - 82,543
Gas Production
Properties - - - 9,781 9,781
Future Use 3,725 100 - - 3,825
Other 875 21 21 23,884 24,801
871,815 167,746 46,900 33,665 1,120,126
Construction Work
in Progress 25,529 2,875 3,095 - 31,499
Total $897,344 $170,621 $ 49,995 $ 33,665 $1,151,625
Neither the total additions nor the total deductions during the year ended
December 31, 1991 amounted to more than 10% of the closing balance of total
Utility Plant and Non-utility Property. The information required by Columns B,
C, D and E is, therefore, omitted. A summary of Columns C, D and E for the year
ended December 31, 1991 is as follows:
Column C - Additions at cost $70,726
Column D - Retirements 10,672
Column E - Other changes 153*
Net Change $60,207
*Other changes include the following: $153 adjustment of prior years additions
to correct vintage year records.
For information concerning depreciation procedures, see Note 1 of Notes to
Consolidated Financial Statements on page 26 of the 1993 Annual Report to
Shareholders.
/TABLE
SCHEDULE VI
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment and Non-utility Property
For the Year Ended December 31, 1993
(Thousands of Dollars)
Column A Column B Column C Column D Column E Column F
Additions Other Balance
Balance at charged to changes at
beginning costs and - add end of
Description of period expenses Retirements or (deduct) period
Electric plant $266,902 $ 26,479 $ 6,864 $ (1,110) $285,407
Gas plant 63,667 4,348 812 93 67,296
Common plant 17,746 2,752 1,296 374 19,576
Total utility plant $348,315 $ 33,579 $ 8,972 $ (643)(A) $372,279
Gas Production
Properties $ 9,055 $ - $ - $ 168 $ 9,223
Other physical property 3,014 - - 804 3,818
Total non-utility
property $ 12,069 $ - $ - $ 972(B) $ 13,041
(A) Other changes include the following: Additions of $1,037 materials salvaged;
$1,897 charged to other income and clearing accounts and net miscellaneous
items of $(120); and deductions of $3,457 for removal costs.
(B) Other changes include the following: Additions of $972 charged to non-
operating expenses.
SCHEDULE VI
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment and Non-utility Property
For the Year Ended December 31, 1992
(Thousands of Dollars)
Column A Column B Column C Column D Column E Column F
Additions Other Balance
Balance at charged to changes at
beginning costs and - add end of
Description of period expenses Retirements or (deduct) period
Electric plant $250,562 $ 25,461 $ 9,247 $ 126 $266,902
Gas plant 59,772 5,484 1,445 (144) 63,667
Common plant 15,213 2,535 859 857 17,746
Total utility plant $325,547 $ 33,480 $ 11,551 $ 839 (A) $348,315
Gas Production
Properties $ 8,912 $ - $ - $ 143 $ 9,055
Other physical property 2,342 - - 672 3,014
Total non-utility
property $ 11,254 $ - $ - $ 815(B) $ 12,069
(A) Other changes include the following: Additions of $3,016 materials salvaged;
$1,786 charged to other income and clearing accounts and net miscellaneous
items of $277; and deductions of $4,240 for removal costs.
(B) Other changes include the following: Additions of $815 charged to non-
operating expenses.
/TABLE
SCHEDULE VI
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment and Non-utility Property
For the Year Ended December 31, 1991
(Thousands of Dollars)
Column A Column B Column C Column D Column E Column F
Additions Other Balance
Balance at charged to changes at
beginning costs and - add end of
Description of period expenses Retirements or (deduct) period
Electric plant $232,169 $ 24,462 $ 9,083 $ 3,014 $250,562
Gas plant 56,043 4,597 824 (44) 59,772
Common plant 13,238 2,344 602 233 15,213
Total utility plant $301,450 $ 31,403 $ 10,509 $ 3,203 (A) $325,547
Gas Production
Properties $ 8,782 $ - $ - $ 130 $ 8,912
Other physical property 1,508 - - 834 2,342
Total non-utility
property $ 10,290 $ - $ - $ 964(B) $ 11,254
(A) Other changes include the following: Additions of $5,539 materials salvaged;
$1,731 charged to other income and clearing accounts and net miscellaneous
items of $55; and deductions of $4,122 for removal costs.
(B) Other changes include the following: Additions of $1,030 charged to non-
operating expenses; $6 for materials salvaged and deductions for net
miscellaneous items of $72.
SCHEDULE VIII
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars)
Column A Column B Column C Column D Column E
Additions
(1) (2) Balance
Balance at Charged to Charged at
beginning costs and to other end of
Description of period expenses accounts Deductions period
December 31, 1993
Allowance for Uncollect-
ible accounts:
Customer accounts $1,651 $2,428 $400 $2,453 $2,026
Other accounts 61 129 4 134 60
$1,712 $2,557 $404(A) $2,587(B) $2,086
Reserve for Claims
and Damages $3,521 $1,895 $146 $1,732(C) $3,830
Gas Turbine Maintenance
Reserve $(2,532) $1,367 $ - $ 210(C) $(1,375)
December 31, 1992
Allowance for Uncollect-
ible accounts:
Customer accounts $1,670 $2,019 $393 $2,431 $ 1,651
Other accounts 61 56 1 57 61
$1,731 $2,075 $394(A) $2,488(B) $ 1,712
Reserve for Claims
and Damages $3,427 $2,043 $523 $2,472(C) $ 3,521
Gas Turbine Maintenance
Reserve $(2,889) $ 622 $ - $ 265(C) $(2,532)
December 31, 1991
Allowance for Uncollect-
ible accounts:
Customer accounts $1,874 $2,162 $328 $2,694 $1,670
Other accounts 63 35 14 51 61
$1,937 $2,197 $342(A) $2,745(B) $1,731
Reserve for Claims
and Damages $3,653 $1,631 $ - $1,857(C) $3,427
Gas Turbine Maintenance
Reserve $(2,138) $ 621 $ - $1,372(C) $(2,889)
(A) Includes collection of accounts previously written off of $404 in 1993, $394
in 1992, and $342 in 1991.
(B) Accounts considered uncollectible and charged off of $2,587 in 1993, $2,488
in 1992 and $2,745 in 1991.
(C) Payments of damage claims of $1,732 in 1993, $2,472 in 1992 and $1,857 in 1991
and maintenance expenses of $210 in 1993, $265 in 1992 and $1,372 in 1991.
/TABLE
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
__________________________
Fiscal Year Ended December 31, 1993 Commission File Number 1-4315
ORANGE AND ROCKLAND UTILITIES, INC.
(Exact name of Registrant as Specified in its Charter)
EXHIBITS
Orange and Rockland Utilities, Inc.
Index of Exhibits
1993 Form 10-K
* 3.1 Restated Certificate of Incorporation, as amended through
April 14, 1988. (Exhibit 4.1 to Registration Statement
33-25359).
* 3.2 By-Laws, as amended through April 11, 1990. (Exhibit 3.2 to Form
10-K for the fiscal year ended December 31, 1990, File No. 1-4315).
* 4.1 Composite First Mortgage of the Company as Supplemented and
Modified by Twenty-six Supplemental Indentures. (Exhibit 4.1
to Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
* 4.2 Twenty-seventh Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1980. (Exhibit 4.2 to Form 10-K for
the fiscal year ended December 31, 1990, File No. 1-4315).
* 4.3 Mortgage Trust Indenture of Rockland Electric Company, dated as
of July 1, 1954. (Exhibit 2.16 to Registration Statement
No. 2-14159).
* 4.6 Third Supplemental Indenture of Rockland Electric Company, dated
as of August 15, 1965. (Exhibit 4.23 to Registration Statement
No. 2-24682).
* 4.11 Mortgage Trust Indenture of Pike County Light & Power Company, dated
as of July 15, 1971. (Exhibit 4.31 to Registration Statement
No. 2-45632).
* 4.12 Twenty-eighth Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1982. (Exhibit 4.12 to Form 10-K for the
fiscal year ended December 31, 1992, File No. 1-4315).
* 4.17 Twenty-ninth Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1984. (Exhibit 4.17 to Form 10-K
for the fiscal year ended December 31, 1989, File No. 1-4315).
* 4.20 Thirtieth Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1986. (Exhibit 4.20 to Form 10-K
for the fiscal year ended December 31, 1991, File No. 1-4315).
* 4.21 Thirty-first Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1988. (Exhibit 4.21 to Form 10-K for
the fiscal year ended December 31, 1988, File No. 1-4315).
* 4.22 Thirty-second Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1990. (Exhibit 4.22 to Form 10-K for
the fiscal year ended December 31, 1990, File No. 1-4315).
* 4.25 Indenture between the Company and The Bank of New York as Trustee
regarding unsecured debt, dated March 1, 1990. (Exhibit 4.25 to Form
10-K for the fiscal year ended December 31, 1990, File No. 1-4315).
* 4.26 First Supplemental Indenture between the Company and The Bank of
New York as Trustee regarding unsecured debt, dated March 7, 1990.
(Exhibit 4.26 to Form 10-K for the fiscal year ended December 31,
1990, File No. 1-4315).
* 4.27 Second Supplemental Indenture between the Company and the Bank of
New York as Trustee regarding unsecured debt, dated October 15, 1992.
(Exhibit 4.27 to Form 10-K for the fiscal year ended December 31, 1992,
File No. 1-4315).
* 4.28 Thirty-third Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1992. (Exhibit 4.28 to Form 10-K for
the fiscal year ended December 3, 1992, File No. 1-4315).
* 4.29 Third Supplemental Indenture between the Company and The Bank of
New York as Trustee regarding unsecured debt, dated as of March 1,
1993. (Exhibit 4.29 to Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-4315).
* 4.30 Ninth Supplemental Indenture of Rockland Electric Company, dated as
of March 1, 1993. (Exhibit 4.30 to Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-4315).
*10.1 General Agreement: Bowline Point Generating Plant, dated as of
October 10, 1969. (Exhibit 5(b) to Registration Statement No. 2-42156).
*10.2 Financing Agreements, dated as of February 1, 1971. (Exhibit 5(a) to
Registration Statement No. 2-42156).
*10.7 New York Power Pool Agreement, dated July 16, 1985. (Exhibit 10.7
to Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
*10.8 Agreement governing the supply of residual fuel oil by Con Edison to
Bowline Point Generating Station dated August 31, 1983. (Exhibit 10.18
to Form 10-K for fiscal year ended December 31, 1991, File No. 1-4315).
*10.10 PJM Facilities Agreement, dated May 1, 1970, as amended
December 12, 1972. (Exhibit 10.10 to Form 10-K for the fiscal year
ended December 31, 1992, File No. 1-4315).
+10.11 Officers' Supplemental Retirement Plan, as amended April 1, 1993.
*10.12 Incentive Compensation Plan, amended January 3, 1991. (Exhibit 10.12
to Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
*10.13 Severance Pay Plan, as amended January 3, 1991. (Exhibit 10.13 to
Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
*10.14 Management Long-Term Disability Plan. (Exhibit 10.14 to Form 10-K for
the fiscal year ended December 31, 1991, File No. 1-4315).
*10.15 New York Power Authority Firm Purchase Contract, dated July 28, 1975.
(Exhibit 10.15 to Form 10-K for the fiscal year ended December 31,
1992, File No. 1-4315).
*10.17 Coal Purchase and Sale Agreement among Orange and Rockland Utilities,
Inc., Rawl Sales and Processing Company, and Massey Coal Sales, Inc.,
dated March 9, 1984, as amended through July 1, 1991. (Exhibit 10.17
to Form 10-K for the fiscal year ended December 31, 1991, File
No. 1-4315).
*10.18 Agreement between Orange and Rockland Utilities, Inc., and Pittston
Coal Sales Company, dated March 14, 1984 as amended through December 1,
1986. (Exhibit 10.18 to Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-4315).
10.18A Amendment to the Agreement between Orange and Rockland Utilities, Inc.,
and Pittston Coal Sales Company, dated July 1, 1991 and executed May 5,
1993.
+*10.19 Employment contract between Orange and Rockland Utilities, Inc. and
James F. Smith as amended December 1, 1990. (Exhibit 10.19 to
Form 10-K for the fiscal year ended December 31, 1990, File
No. 1-4315).
10.20 Orange and Rockland Utilities, Inc. Post Director Service Retainer
Continuation Program, as amended April 14, 1993.
*10.21 Electric Contract for the Sale of Firm Power and Energy by the
Power Authority of the State of New York to Orange and Rockland
Utilities, Inc., dated April 26, 1989, including Application dated
April 20, 1989. (Exhibit 10.21 to Form 10-K for the fiscal year
ended December 31, 1989, File No. 1-4315).
+*10.22 Form of Severance Agreement for Company Officers effective
January 3, 1991. (Exhibit 10.22 to Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-4315).
+*10.23 Performance Unit Incentive Plan effective December 3, 1992. (Exhibit
10.23 to Form 10-K for the fiscal year ended December 31, 1992,
File No. 1-4315).
+*10.24 Award Agreement under the Performance Unit Incentive Plan
applicable to P. J. Chambers, Jr., dated December 3, 1992.
(Exhibit 10.24 to Form 10-K for the fiscal year ended December 31,
1992, File No. 1-4315).
+*10.25 Award Agreement under the Performance Unit Incentive Plan applicable to
J. F. Smith dated December 3, 1992. (Exhibit 10.25 to Form 10-K for
the fiscal year ended December 31, 1992, File No. 1-4315).
13 The Company's 1993 Annual Report to Shareholders to the extent
identified in this Form 10-K Annual Report for the fiscal year
ended December 31, 1993.
*16 Letter from Grant Thornton (Exhibit 16 to Form 8-K/A dated
February 22, 1994, File No. 1-4315).
*21 Subsidiaries of the Company. (Exhibit 22 to Form 10-K for the fiscal
year ended December 31, 1992, File No. 1-4315).
24 Powers of Attorney.
*99.1 Joint Cooperation Agreement between the Office of the Rockland County
District Attorney and Orange and Rockland Utilities, Inc., dated
November 3, 1993 (Exhibit 99.1 to Form 10-Q for the quarter ended
September 30, 1993, File No. 1-4315).
99.2 Complaint against James F. Smith dated March 16, 1994.
99.3 Form 11-K for the Company's Management Employees' Savings Plan for
the year ended December 31, 1993.
99.4 Form 11-K for the Company's Hourly Group Savings Plan for the year
ended December 31, 1993.
+ Denotes executive compensation plans and arrangements.
* Incorporated by reference to the indicated filings.
The securities issued relevant to each of the following agreements were
not registered with the Securities and Exchange Commission and the total amount
of securities authorized under each agreement does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis. Therefore,
as provided in Item 601 of Regulation S-K, the following agreements are not
filed as exhibits. The Company agrees, however, to furnish to the Commission a
copy of each agreement upon request:
- Participation Agreement between NYSERDA and Orange and Rockland
Utilities, Inc., dated as of July 1, 1982.
- Indenture of Trust between NYSERDA and The Bank of New York, as
Trustee, relating to the Pollution Control Revenue Bonds (Orange and
Rockland Utilities, Inc. Project) dated as of July 1, 1982.
- First Supplemental Participation Agreement between NYSERDA and Orange
and Rockland Utilities, Inc., dated as of October 1, 1984.
- First Supplemental Indenture of Trust between NYSERDA and The Bank of
New York, as Trustee, relating to the 10 1/4% Pollution Control Revenue
Bonds (Orange and Rockland Utilities, Inc. Projects), 1984 Series.
- Second Supplemental Indenture of Trust between NYSERDA and the Bank of
New York, as Trustee, relating to the 9% Pollution Control Revenue
Bonds (Orange and Rockland Utilities, Inc. Projects), 1985 Series.
- Second Supplemental Participation Agreement between NYSERDA and Orange
and Rockland Utilities, Inc., dated as of August 1, 1985.
- First Supplemental Indenture, dated August 15, 1990, to the Indenture
of Mortgage and Deed of Trust of Pike County Light & Power Company.
- Eighth Supplemental Indenture of Rockland Electric Company, dated as of
August 15, 1990.