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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, 1994
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, 1995, the approximate aggregate market value of
the voting stock held by nonaffiliates of the registrant was
$434,547,731*
At February 28, 1995, the registrant had 13,632,870 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, 1994
incorporated in Part I, Part II and Part IV to the extent described
therein.
The Company's definitive Proxy Statement in connection with the 1995
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 11
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 37
Executive Officers of the Registrant 38
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 39
Item 6. Selected Financial Data 39
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 39
Item 8. Financial Statements and Supplementary Data 40
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 40
PART III
Item 10. Directors and Executive Officers of the Registrant 40
Item 11. Executive Compensation 40
Item 12. Security Ownership of Certain Beneficial Owners
and Management 40
Item 13. Certain Relationships and Related Transactions 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 41
Signatures 47
Report of Independent Public Accountants on Financial
Statement Schedules 49
Consent of Independent Public Accountants 49
-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, NORSTAR Holdings, Inc.
("NHI") (formerly O&R Energy, Inc.) and Atlantic Morris Broadcasting,
Inc., both Delaware corporations. NHI has two wholly owned non-utility
subsidiaries, Millbrook Holdings, Inc. and NORSTAR Management, Inc.
("NMI"), both Delaware corporations. NMI is the sole general partner of
a Delaware limited partnership, NORSTAR Energy Limited Partnership. 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 32
of the 1994 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, 1994, the Company and its utility subsidiaries
furnished electric service to approximately 260,000 customers in 96
communities with an estimated population of 666,000 and gas service to
approximately 111,000 customers in 57 communities with an estimated
population of 470,000. 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, 1993. At that time, electric
service was provided to approximately 257,000 customers in 96
communities with an estimated population of 656,000 and gas service was
provided to approximately 109,000 customers in 57 communities with an
estimated population of 463,000. At December 31, 1994 and 1993, 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 and its utility subsidiaries also serve 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 (the "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.
The events which followed these actions include the formation of a
special committee of the Company's Board of Directors and the conduct of
an independent investigation under the supervision of that Committee,
investigations conducted by both the District Attorney and various
utility regulatory agencies, various legal actions brought both by and
against the Company, the refund of misappropriated funds to the
Company's customers and the effects on the Company's rate filings.
Details concerning these events, including the cost incurred for legal
counsel, accounting services, and other professional and consultative
services related to the 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
"Results of Operations", "Events Affecting the Company", "Rate
Activities" and "Other Income and Deductions and Interest Charges" and
in Note 12 of the Notes to Consolidated Financial Statements under the
caption "Legal Proceedings" beginning on pages 9 and 28, respectively,
of the 1994 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. Additionally, the Company
purchases capacity, as more fully described below, to satisfy its
reserve requirements, as well as any demand in excess of its installed
capacity. 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 34 of the 1994 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 1994, the Company had agreements in place for both capacity
and energy purchases. Capacity purchases included an agreement with
PSE&G which provided between 75 Mw and 150 Mw of capacity, an agreement
with Pennsylvania Power & Light Company ("PP&L") which provided between
50 Mw and 125 Mw of capacity, an agreement with the New York Power
Authority (the "NYPA") for 25 Mw of year-round capacity from the
Blenheim-Gilboa pumped storage facility (the "Gilboa Facility") and an
agreement with Central Hudson for 50 Mw of capacity which expired at the
end of April 1994.
During 1994 the Company met approximately 32% of its overall power
requirements by aggressively pursuing economic power purchases. These
purchases, which were made pursuant to short-term purchase agreements
and interchange agreements, resulted in lower costs to the Company's
customers. During 1994, the Company could have generated all of its
customers requirements more than 99% of the time. At the time of the
1994 peak demand, the Company's installed capacity could have satisfied
98% of its power requirements. The use of purchased power under these
circumstances reflects the Company's policy of supplementing it's
electric generation with purchased power not only when needed to meet
load requirements but also when such power is available at a cost lower
than the cost of production. Details regarding the power purchases
during 1994 are as follows:
1994 PURCHASED POWER
Purchased From Megawatt hours(Mwh)
Central Hudson Gas & Electric Corp. 67,485
Consolidated Edison Co. of N.Y. 18,250
Philadelphia Electric Co. 47,405
New York State Electric & Gas Corp. 222,559
General Public Utilities 87
New York Power Authority (1) 288,688
New York Power Pool 331,792
Niagara Mohawk Power Corp. 97,405
Public Service Electric & Gas Corp. 141,997
Pennsylvania Power & Light Company 96,671
Cogeneration and Small Power Producers 196,915
North American Energy Conservation 64,761
Total 1,574,015
=========
(1) 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
1994, the Company purchased 33,576 Mwh from the Gilboa Facility
and replaced 50,950 Mwh, for the net amount of (17,374) Mwh,
which is included in the amount shown above.
With regard to future purchases of capacity, contracts are in place
with the NYPA, 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 agreement with PP&L will provide
capacity ranging between 10 Mw and 50 Mw through October 1995. In
addition, a firm purchased power agreement with PSE&G will provide between
75 Mw and 300 Mw of capacity during the base contract term which extends
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 400 Mw of additional capacity
will be available from May 1998 through October 2000. Regarding future
purchases of energy, the Company anticipates that agreements will continue
to be in effect which will enable it to take advantage of economic power
purchases on an as available, as-needed basis.
Additional information regarding future power supply, particularly
the status of 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 29 of the 1994 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 1990 through 1994 are as
follows:
1990 1991 1992 1993 1994
Gas 27% 22% 21% 16% 23%
Coal 32 36 33 33 36
Oil 19 14 10 5 6
Hydro 4 3 13 4 3
Purchased Power 18 25 33 42 32
Total 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
Gas - During 1994, 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 1995, whenever such gas is more
economical than alternative fuels. In 1994, the Company used 2.8 billion
cubic feet ("Bcf") and 8.5 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, 1990 through 1994 was $2.78,
$2.64, $2.82, $3.01 and $2.53, respectively. This is equivalent to $2.69,
$2.56, $2.74, $2.92 and $2.44, 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 is supplied to the Company primarily through a long
term contract with Massey Coal Sales, Inc. ("Massey"), a short-term
contract with Blue Crystal Coal Sales Co. ("Blue Crystal") and through
spot market purchases, which accounted for approximately 50% of the
Company's 1994 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 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, including delivery charges,
consumed at the Lovett Plant during each of the years ended December 31,
1990 through 1994 was $58.40, $56.57, $55.95, $55.25 and $53.15,
respectively. This is equivalent to $2.25, $2.18, $2.16, $2.14 and $2.07,
respectively, per MMBTU. During 1994 coal was the predominant fuel burned
at the Lovett Plant, and the Company expects it to be the predominant fuel
burned during 1995. Information regarding the Company's coal supply
contracts is contained in Note 12 of the Notes to Consolidated Financial
Statements under the caption "Coal Supply Contracts" on page 29 of the
1994 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 1995. The annual average cost per barrel of oil burned
in the Company's generating plants during each of the years ended
December 31, 1990 through 1994 was $23.73, $21.23, $20.43, $21.27 and
$19.99, respectively. This is equivalent to $3.81, $3.40, $3.26, $3.39
and $3.20, 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 8.8 Bcf during 1994, 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 11 in the 1994 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 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, 1994, DSM efforts have reduced the
annual need for increased generating capacity and energy by 123.9 Mw and
193,864 Mwh, respectively, both through programs administered by the
Company and by RECO as well as through contracts with outside energy
service companies 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 1994 results of operations 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 10 and 14, respectively, of the 1994
Annual Report to Shareholders, which material is incorporated by reference
in this Form 10-K Annual Report.
The Company's Supply-Side Management program involves the acquisition
of future increments of capacity and energy as needed to meet anticipated
load and reserve requirements and, in particular, to reduce the cost of
electricity to the Company's customers. The firm capacity agreements
which are currently in place provide the Company with between 135 Mw and
375 Mw of capacity through 1998 with an additional 400 Mw of capacity
available at the option of the Company through the year 2000.
Regarding future purchases of energy, the Company will continue to
take an aggressive posture in securing economic increments of purchased
power, particularly through interchange transactions, short-term firm
contracts and spot purchases.
The status of the long-term power supply agreements between the
Company and certain independent power producers has been affected by the
abundance of economic power supply which has become available and by
general economic conditions. A summary of the status of these agreements
is as follows:
In 1990, the Company entered into a long-term power supply agreement
("Wallkill Agreement") with Wallkill Generating, L.P. ("Wallkill
Generating"). The Wallkill Agreement was approved by the New Jersey Board
of Regulatory Commissioners ("NJBRC"), now called the New Jersey Board of
Public Utilities ("NJBPU"), 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 and Bechtel Generating Company (now
U.S. Generating Company), 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. Changing economic conditions, however,
have rendered the contract prices increasingly uneconomic. Therefore, on
November 25, 1994, the Company notified Wallkill Generating to stop work
on the proposed generating facility and to commence buyout negotiations.
These buyout negotiations are continuing.
In 1990, the Company also 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.
In 1991, the Company entered into a long-term power supply agreement
("Harriman Energy Agreement") with Harriman Energy Partners, Ltd.
("Harriman Energy"), a limited partnership, the general partner of which
is Destec Holdings, Inc. (formerly PSE, Inc.). Pursuant to the terms of
the Harriman Energy Agreement, Harriman Energy contracted to construct and
operate a gas-fired combined cycle generating facility in Harriman,
New York and sell approximately 57 Mw of capacity and associated energy to
the Company. Due to changing economic conditions which rendered the
contract prices increasingly uneconomic, in November 1993 the Company
entered into negotiations to terminate the Harriman Energy Agreement. On
June 15, 1994, the parties reached agreement to terminate the Harriman
Energy Agreement through a buyout.
Information regarding the cost of terminating the State Line
Agreement and the Harriman Energy Agreement is contained in Note 1 of the
Notes to Consolidated Financial Statements under the caption "IPP
Settlement Agreements" and 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 pages 22 and 29, respectively of the 1994 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, 1994, the gas distribution system included 1,697
miles of mains. The highest historical maximum daily gas sendout of
206,038 Mcf occurred on January 19, 1994. Additional statistics regarding
gas operations are contained under the caption "Operating Statistics -
Gas" on page 35 of the 1994 Annual Report to Shareholders, which material
is incorporated by reference in this Form 10-K Annual Report.
Supply, Transportation and Storage. 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 28% of
firm contracted supply and expires in the year 2002. Contracts for the
remaining 72% of the Company's required gas supply have been executed with
six domestic producers. Three of these contracts are scheduled to expire
between March 31 and October 31, 1995. The remainder have expiration
dates ranging between 1996 and 2010. 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 ensure 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
purchases spot gas from producers primarily for use in electric
generation. During 1994, the Company made spot purchases of approximately
19.8 million Mcf of gas or 42% 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 1996. The Company also has
entered into interruptible transportation agreements with the same
pipeline companies. 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
National Fuel Gas Supply Corporation ("National Fuel"). 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 National Fuel. The earliest
expiration date of any of these storage contracts is 1996 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 will be available in
late 1997, uses leached-out caverns in underground salt beds to create a
storage reservoir and is designed for fast withdrawal and refill capacity
which 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 sendout of gas occurred
during January 1994 and amounted to 206,038 Mcf. This compares to the
maximum daily gas delivery capacity of the Company's system of 225,839 Mcf
which is available from the following sources: direct purchases - 119,567
Mcf; storage withdrawals - 75,672 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 28 of the
1994 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 1994,
approximately 5.6 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 $2.8
million of gas surcharges through December 31, 1994.
In addition, certain costs incurred by the gas pipeline companies in
complying with FERC Order No. 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 No. 636
transition costs will amount to $24.6 million. It is anticipated that
transition costs incurred by the Company will be recoverable in gas rates
to the extent such costs are deemed by the NYPSC to have been prudently
incurred.
Information regarding take-or-pay charges and FERC Order No. 636
transition costs is contained under the caption "Gas Energy Costs" in the
"Review of the Company's Results of Operations and Financial Condition",
in Note 1 of the Notes to the Consolidated Financial Statements under the
caption "Rate Regulation" and in Note 12 of the Notes to Consolidated
Financial Statements under the caption "Gas Supply and Storage Contracts"
on pages 12, 21 and 28, respectively, of the 1994 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, 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 1994 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. During 1994, gas marketing
activities were conducted through a subsidiary, O&R Energy, Inc., which
provided natural gas to industrial, commercial and institutional end
users, gas distribution companies, gas marketing companies and electric
generating facilities in 38 states, the District of Columbia and Canada.
Effective February 28, 1995, O&R Energy, Inc.'s (now NORSTAR Holdings,
Inc. ("NHI")) gas marketing activities were transferred to NORSTAR Energy
Limited Partnership ("NORSTAR Partnership"), a Delaware limited
partnership of which a subsidiary of NHI, NORSTAR Management, Inc., a
Delaware corporation, is the general partner and Shell NORSTAR Inc. is the
limited partner. Additional information regarding the NORSTAR partnership
is contained in the "Review of the Company's Results of Operations and
Financial Condition" under the caption "Diversified Activities" on page 12
of the 1994 Annual Report to Shareholders, which information is
incorporated by reference in this Form 10-K Annual Report.
A subsidiary of NHI, 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. During September 1994, the Company adopted a formal plan
to sell the broadcasting properties. Additional information regarding the
sale, which is expected to be completed during the second quarter of 1995,
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
"Sale of Broadcast Properties" on pages 12 and 23 of the 1994 Annual
Report to Shareholders, which information is incorporated by reference in
this Form 10-K Annual Report.
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 the 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.
During October 1994, ORD sold a twelve acre parcel of land to
Metroplex Distributors which has begun construction of a 145,000 sq. ft.
warehouse and bakery on the site. In addition, ORD has entered into a
contract of sale with K-Mart Corporation for the sale of sixty eight acres
of land.
Clove Development Corporation ("Clove"). Clove, a wholly owned
subsidiary of the Company, holds approximately 5,500 acres of 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.
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 1994.
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, 1994, ORED's net investment in producing properties was
$390,000.
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 12, 21 and 32 respectively, of the 1994
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 1995 through 1999 are presently
estimated at approximately $229.4 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)
1995 1996 1997 1998 1999
Electric Production $22,900 $13,400 $ 8,200 $11,900 $10,500
Electric Transmission
and Substation 5,000 1,700 1,300 2,100 1,600
Electric Distribution 20,600 20,600 16,300 15,400 16,400
Gas Plant 10,800 10,300 8,200 7,900 8,200
General Plant 2,200 1,900 6,000 2,700 3,300
Total Construction $61,500 $47,900 $40,000 $40,000 $40,000
The Company's forecasted construction expenditures for the five year
period 1995 through 1999 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
1995 forecast does, however, contain forecasted environmental protection
expenditures of $13.5 million 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 13 and 28, respectively, of the 1994 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 internally
generated funds and the proceeds of long-term debt and equity offerings.
At December 31, 1994, 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 $29.4
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 13 and 25,
respectively, of the 1994 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 1994 were limited to refinancing of certain pollution
control revenue bonds and the issuance of approximately $3.9 million of
common stock under the Company's Dividend Reinvestment and Stock Purchase
Plan ("DRP") and Employee Stock Purchase and Dividend Reinvestment Plan
("ESPP"). Information regarding these items, as well as a description of
the interest rate swap agreement which become effective during 1994 in
connection with the pollution control revenue bond refinancing, 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 13 and 24, respectively, of the 1994 Annual Report
to Shareholders, which material is incorporated by reference in this
Form 10-K Annual Report.
The Company currently has no plans for the issuance of additional
debt or equity securities and it is expected that capital requirements
will be met primarily with funds from operations, supplemented with short
term debt as required. However, the refinancing of the 9% Pollution
Control Revenue Bonds, 1985 Series, which will become subject to call on
August 1, 1995 is being evaluated. In addition, the Company has certain
series of debt which will mature during 1997 and which may be refinanced
at maturity.
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, 1994, Atlantic Morris Broadcasting, Inc., a subsidiary of
SRH had debt outstanding aggregating $267,000, the proceeds of which were
used to make investments in broadcasting properties, and ORD had an
intermediate term mortgage outstanding which amounted to $5.3 million.
O&R Energy, Inc. (now NHI) had an available line of credit and standby
letters of credit which together amounted to $15 million under which there
were no borrowings at December 31, 1994. As of March 1, 1995, the
available line of credit and standby letters of credit for O&R Energy,
Inc. (now NHI) were terminated and all amounts owing thereunder were paid
in full. In addition, on March 1, 1995, NORSTAR Partnership received an
available line of credit of up to $25 million. Non-utility temporary cash
investments amounted to $1.8 million at December 31, 1994.
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 36 of the 1994
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 A3 A- A+ A-
Unsecured Debt Baa1 A- A A-
Preferred Stock baa- BBB+ A- A-
Commercial Paper P-2 A-2 D-1 F-2
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 an
upper medium grade credit rating, its preferred stock has a lower medium
grade credit rating and its commercial paper has an upper medium grade
credit rating. Information regarding changes in the Company's credit
ratings during 1994 is contained under the caption "Liquidity and Capital
Resources" in the "Review of the Company's Results of Operations and
Financial Condition" on page 13 of the 1994 Annual Report to Shareholders,
which material is incorporated by reference in this Form 10-K Annual
Report.
Regulatory Matters
A description of the general character of rate regulation and its
effect on the financial statements of the Company and its utility
subsidiaries, including a disclosure of the Company's regulatory assets is
contained in Note 1 of Notes to Consolidated Financial Statements under
the caption "Rate Regulation" on page 21 of the 1994 Annual Report to
Shareholders, which information is incorporated by reference in this Form
10-K Annual Report.
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 NJBPU, 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 had on the rate proceedings
of the Company and its utility subsidiaries, is contained under the
captions "Events Affecting the Company" and "Rate Activities" in the
"Review of the Company's Results of Operations and Financial Condition" on
pages 9 and 14, respectively of the 1994 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 1994 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 12 and in Note 12 of the Notes to Consolidated Financial
Statements under the caption "Gas Supply and Storage Contracts" on page
28, which information is incorporated by reference in this Form 10-K
Annual Report.
Rate Relief. During the five year period ending December 31, 1994,
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, NJBPU and PAPUC are set forth in the following table.
Historical Rate Relief
1990 - 1994
Annual Amount Overall Rate Return on
Class of ($000's) of Return Equity
Service Effective Date Requested Granted Granted (%) Granted (%)
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 11.45(d) 9.87(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 10.04(f) 11.65(f)
Electric - N.J. 01/01/93 (g) 1,685 - -
Electric - N.Y. 05/08/93 (h) 11,308 - -
Electric - Pa. 06/11/93 498 270 (i) (i)
Gas - Pa. 06/25/93 36 12 (i) (i)
Electric - N.Y. 07/01/94 (j) (6,028) (k) (k)
Gas - N.Y. 11/04/94 (l) (l) (l) (l)
(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%, and an overall rate of return of 10.32%,
through the achievement of incentives related to certain DSM and
customer service goals. For 1993, the value of the incentive related
to DSM goals increased the total opportunity to earn a return on
common equity to 12.61%. However, effective January 1994, the DSM
incentive was reduced and the customer service incentive was
eliminated.
(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) Under a multi-year gas rate agreement (1993-1996), 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 NJBPU 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%.
(j) The third 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 an under collection resulting from the recalculation of
revenue and expenses. The change in rates was scheduled to become
effective on May 1, 1994. However, due to the investigation of
misappropriated funds, the NYPSC postponed the adjustment until July
1, 1994.
(k) By means of its Order dated June 10, 1994, the NYPSC, among
other things, continued the Revenue Decoupling Mechanism
("RDM") and reduced the return on equity threshold for
measuring excess earnings from 12.0% to 10.6%.
(l) On November 4, 1994, the NYPSC issued an order terminating the multi-
year gas rate agreement. The order denied the Company the opportunity
for rate adjustments in the third and fourth years (1995 and 1996) of
the agreement. On February 7, 1995, the Accounting and Finance
Division of the NYPSC issued an interpretation of the November 4, 1994
termination order which stated that the gas incentive mechanism
related to the attainment of certain goals are no longer available.
The Company will not contest this interpretation.
Utility Industry Risk Factors
The electric and gas utility industry is exposed to risks relating
to, among other things, 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 RDM rate mechanism, 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 based on a percent of net resource savings
attained under the Company's DSM programs. Capacity costs associated with
purchased power are recoverable under the RDM. Pursuant to an Order of
the NYPSC dated June 10, 1994, the RDM has been extended. Information
regarding such June 10, 1994 Order and its effect is contained in Item 3,
"Legal Proceedings" of this Form 10-K Annual Report.
With regard to future power supply, the Company will continue to
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 and the RDM rate procedure 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 10, 11
and 14, respectively, of the 1994 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 23
of the 1994 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 experi-
enced 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 No. 636 was designed
to increase competition by allowing more flexible utilization of inter-
state pipeline capacity by local distribution companies and end-users.
Additional information regarding competition in the utility industry
and the Company's strategy for meeting the challenges of increased
competition is contained in the "Review of the Company's Results of
Operation and Financial Condition" under the caption "Competition" on
page 16 of the 1994 Annual Report to Shareholders, which information is
incorporated by reference in this Form 10-K Annual Report.
Marketing
In response to increasing competition in the utility industry, the
Company has enhanced its marketing activities, and is developing a market
strategy that will be responsive to customer needs. A major program was
initiated to identify and address commercial and industrial customers
needs, recognizing these customers may have multiple energy supply
choices. The Company is also working with state regulators to promote
flexible ratemaking.
The Company continues to promote the efficient use of energy by
residential, commercial and industrial customers. Existing programs being
marketed include all state approved DSM programs.
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. Effective July 1, 1994,
the State of New York Department of Environmental Conservation (the
"NYDEC") issued a new SPDES permit for the Company's Lovett Coal Ash
Management Facility. 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 ("SEQUA")
process as part of the permit renewal procedure. The SEQUA process, and
the resulting delay in issuance of a new permit to the Company, has had no
practical impact on the operation of the Bowline Point generating station.
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 extended the
agreement until September 1, 1994. On September 1, 1994, the parties
executed a Second Amended Consent Order which extends the agreement until
September 1, 1995.
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 requested EPA approval of revisions to the SIP to meet
ozone attainment standards and to provide a mechanism for Title V
emissions fee billing as defined under the Clear Air Act. Beginning with
calendar year 1994, the owners of Title V sources in New York State, which
sources include the Company's Lovett Plant and Bowline Point Plant, are
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. In
1994, the Company paid approximately $468,000 in such emission fees,
approximately $107,000 of which was recovered from Con Ed pursuant to the
Bowline Point Plant operating agreement. In 1995, this emission fee will
be based on 1994 air emissions at a rate established by the NYDEC not to
exceed $50 per ton.
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 capital
expenditures totalling approximately $28.7 million thru 1995, $13.5
million of which will be spent during 1995. 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 ("PCBs"), 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 have a material effect on the
financial condition of the Company.
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 $21.4 million in 1994.
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 effect on the financial condition of
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", "Other Legal Proceedings" and "Environmental", beginning on
page 28 of the 1994 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 $3.8 million in 1994, $5.0 million in 1993, and
$3.7 million in 1992.
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 enhancement of
the value of electric energy for customers. Current projects include a
demonstration of a technology which should provide a low-cost option to
reduce power plant NOx emissions to comply with the Clean Air Act
Amendments; an evaluation of the performance characteristics of
underground distribution cable; and an investigation of the efficient use
of electrotechnologies at a municipal wastewater treatment plant.
Franchises
The Company's and its utility subsidiaries, RECO and Pike, each have
municipal consents or franchises, together with their corporate or charter
powers, which give each of them the right to carry on their respective
operations in the territories served. The municipal consents or
franchises held by the Company and its utility subsidiaries are not
exclusive. In certain municipalities, the areas served by the Company,
RECO and Pike are limited either by the terms of the consents or
franchises or by order of the NYPSC, the NJBPU, or the Pennsylvania Public
Utility Commission, respectively. Under the present provisions of the
State laws of New York, New Jersey and Pennsylvania, no other private
corporation can commence public utility operations in any part of the
territories now served by the Company, RECO or Pike, respectively, without
obtaining a certificate of public convenience and necessity from the
applicable State utility commission.
A certificate of public convenience and necessity would not be
required with respect to a municipality furnishing electric or gas service
within its borders under the present provisions of the State laws of
New York, New Jersey or Pennsylvania. Municipal corporations, upon
compliance with the State laws of New York, New Jersey or Pennsylvania, as
applicable, are authorized to acquire the public utility service of any
public utility company by purchase or by condemnation. The Company does
not reasonably expect any municipal corporation to acquire the public
utility service of the Company or its utility subsidiaries through either
purchase or condemnation.
The municipal consents or franchises of the Company and its utility
subsidiaries 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.
Employee Relations
At December 31, 1994, the Company had 1,640 employees of whom 37 were
part-time employees. The Company considers its relationship with its
employees to be satisfactory. The current contract with Local 503 of the
International Brotherhood of Electrical Workers ("IBEW") representing 955
production, maintenance, commercial and service employees of the Company
became effective June 1, 1994 and expires June 1, 1997. 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 NJBPU 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,
1994, had 157 full-time and 56 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.
This property is 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 1994
Swinging Bridge, 8
Mongaup & Rio Hydroelectric 25.8 2.5% 62,103
Grahamsville 1 Hydroelectric 18.0 1.8 106,046
Hillburn 1 Jet Fuel/Gas 37.0 3.6 1,063
Shoemaker 1 Jet Fuel/Gas 37.0 3.6 9,385
Lovett 5 Coal/Oil/Gas 501.7 49.2 2,098,547
Bowline Point 2 Oil/Gas 400.6(1) 39.3 1,183,869
1,020.1 100.0% 3,461,013
(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, 67,901 in-service line transformers and 4,930 miles of
distribution lines. With the exception of the Grahamsville Substation, 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 except for the 500/345 Kv
section of the Ramapo substation and a 500 Kv transmission line now operated
and maintained by Con Ed effective January, 1995.
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 1,697 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. Additional information regarding the investment in the Bowline
Point Plant by the Company and Con Ed is included in Note 1 of the Notes to
Consolidated Financial Statements under the caption "Jointly Owned Utility
Plant" on page 22 of the 1994 Annual Report to Shareholders, which material
is incorporated by reference in this Form 10-K Annual Report.
Substantially all of the utility plant and other physical property owned
by the Company and its utility subsidiaries is 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 26, 1993, the Company filed Orange and Rockland Utilities,
Inc. v. Winikow in the United States District Court, Southern District of New
York, against Linda Winikow, a former Vice President of the Company, 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 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 December 19, 1994, the Company
filed a notice dismissing the action against three former Company employees,
two of whom had paid restitution to the Company, and one vendor. The Company
is continuing to pursue its claims against Ms. Winikow and one vendor. The
Company has been directed to report to Judge Brieant on March 29, 1995 as to
whether a settlement can be reached in this case. Settlement negotiations
are ongoing.
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). Ms. Winikow's sentencing on these pleas is currently
scheduled to take place during March 1995.
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. 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.
On February 7, 1994, the Company commenced Orange and Rockland
Utilities, Inc. v. James F. Smith, in New York State Supreme Court, County of
Rockland, 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.
Under the terms of his employment agreement, Mr. Smith had the right to
contest his termination for cause in an arbitration proceeding. On May 5,
1994, Mr. Smith filed a motion demanding arbitration of his termination for
cause and the Company's claims asserted against him in Orange and Rockland
Utilities, Inc. v. Smith. On June 17, 1994, the Court issued an Order
granting Mr. Smith's motion to compel arbitration. Pursuant to a second
Court Order dated August 10, 1994, the parties filed their demands for
arbitration with the American Arbitration Association. Hearings in this
matter are currently scheduled to begin on May 15, 1995.
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. A superseding indictment on 22 counts
was brought against Mr. Smith in June 1994. Mr. Smith has entered a plea of
not guilty. The trial in this matter is scheduled to begin in March 1995.
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 Feiner complaint alleged
that the defendants violated RICO and New York common law by using false and
misleading information 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. On February 18, 1994, the
Company filed a motion to dismiss this case, which motion was granted on
September 8, 1994 and the case was dismissed. Plaintiff then filed a Notice
of Appeal with the United States Court of Appeals for the Second Circuit (the
"Second Circuit") appealing the District Court's decision. Thereafter, the
parties signed a Stipulation of Settlement dismissing the appeal, which was
approved by the Second Circuit on December 7, 1994. The settlement recognizes
the remedial measures already taken by the Company, pays $75,000 toward the
plaintiffs' attorneys fees and leaves the District Court decision dismissing
the case in effect.
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 claimed that the named Directors breached their
fiduciary duties by failing to exercise appropriate supervisory control over
Ms. Winikow and others. Plaintiff requested 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. On February 23, 1995, the Court
approved a settlement agreement entered into by the Directors, the plaintiff
and the Company resolving all issues in this case. Under the approved
settlement terms, the Company agrees to implement remedial measures and
provision is made for payment of the plaintiff's attorneys fees and expenses
totaling $155,000.
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
alleged that various Securities and Exchange Commission ("SEC") 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
alleged was a "scheme" by the Company to make illegal political payments and
campaign contributions to various public officials and politicians. As a
result, plaintiff claimed, 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 sought
unspecified money damages.
On March 31, 1994, Bernstein v. Orange and Rockland Utilities, Inc. and
James F. Smith ("Bernstein"), a purported shareholder class action complaint,
was filed in the United States District Court, Southern District of New York.
Plaintiff alleged that various SEC filings of the Company during the period
between March 2 and August 18, 1993 contained false and misleading
information or omitted to state material facts necessary to make the
statements therein not misleading, and thereby violated Section 10 of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, by
failing to disclose what the plaintiff alleged was a "scheme" by the Company
to make illegal political payments and campaign contributions to various
public officials and politicians. As a result, plaintiff claimed, during
such period persons who purchased the Company's stock did so at artificially
inflated prices. The Bernstein complaint sought unspecified money damages.
On November 3, 1994, the Company signed a settlement agreement in
the Gross and Bernstein actions. On November 21, 1994, the Court
consolidated the two cases, approved a notice, and conditionally certified
a class action for settlement purposes only. Notice to the class was mailed
and published at the end of November. The settlement was approved by the
Court on January 27, 1995. Pursuant to the settlement agreement, the Company
has created a settlement fund of $1.85 million, to be distributed on a pro
rata basis to members of the settlement class, and all claims in both cases
have been deemed resolved.
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 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, 1992, 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. On April 8, 1994, the parties agreed to have engineers
enter into discussions regarding modifications to the Lovett plant's cooling
water intake structures. These discussions are continuing.
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. ("Warwick"), 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
liabilities on 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 seeks 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. At this time, the Company does
not believe this action will have a material effect on the financial
condition of the Company.
On March 29, 1994, the Company received a third party summons and
complaint naming it as one of 22 third party defendants in Carpenters Local
No. 964 Pension Fund v. DiGiacinto et al. ("DiGiacinto"), filed in the
Supreme Court of the State of New York, County of Rockland. This complaint
stems from an underlying action, Guarino et al. v. Carpenters Local No. 964
Pension Fund ("Guarino"), brought by residents of a subdivision who allege
that homes developed and sold by the Carpenters Local No. 964 Pension Fund
(the "Pension Fund") were constructed on the site of a former landfill.
Plaintiffs claim that the deterioration of wallboard materials buried at the
site has resulted in a continuous release of hydrogen sulfide gas which has
rendered the houses unfit for dwelling. Plaintiffs seek damages in excess of
$25,000,000.
The third party complaint alleges that (1) the Company owned land that
ultimately became part of the subdivision; (2) the Company permitted the
dumping of wallboard materials on its former property; and (3) certain
improvements constructed by the Company on property adjacent to the
subdivision altered the flow of ground and surface water, contributing to the
production of hydrogen sulfide gas. The third party complaint seeks to hold
the Company responsible for any liability incurred by the Pension Fund as a
result of the Guarino action. On April 26, 1994, the Company filed its
answer denying all of the plaintiff's allegations and setting forth a number
of affirmative defenses.
On June 8, 1994, the New York State Attorney General's office commenced
an action in the Supreme Court of the State of New York, County of Rockland,
entitled State of New York v. Carpenters Local No. 964 Pension Fund, et al.
against the Pension Fund and five other defendants, not including the
Company, alleging that the subdivision site constituted a public nuisance.
On August 8, 1994, the Company was served with United States Gypsum Company
v. Broadhaver Realty Corp. ("U.S. Gypsum"), a third-party complaint brought
by the United States Gypsum Company, a defendant in the action brought by the
Attorney General's office.
The Company has concluded that its liability, if any, in the DiGiacinto
and U.S. Gypsum litigations, individually or in the aggregate, will not have
a material effect on the financial condition of the Company.
On January 17, 1995, the Company was served with a summons in Payran v.
Orange and Rockland Utilities, Inc. and James Donnery, a purported personal
injury action commenced in the Supreme Court of the State of New York.
Plaintiff seeks compensatory damages of $50 million as a result of injuries
allegedly resulting from actions by the defendants at the Company's Lovett
Power Plant. Since the Company has not been served with the complaint in
this action, it cannot evaluate plaintiff's claims.
Regulatory Matters:
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.
As a result of the ongoing investigation of alleged financial
improprieties, the NYPSC issued an Order on December 21, 1993 which resulted
in the postponement of the effective date of new electric rates from January
1, 1994 until June 30, 1994.
On June 10, 1994, the NYPSC issued an Order terminating Case 93-E-0082
due to the Company's failure to meet its burden of proof. The NYPSC stated
that various improprieties uncovered at the Company negated the credibility
of the record developed in this rate proceeding. In this Order, the NYPSC
reduced the Company's targeted rate of return on equity from 11.45% to 10.6%
retroactive to January 1, 1994. All earnings above 10.6% will be deferred
for later disposition pending the outcome of the investigations in Case 93-M-
0849 discussed below. Additional information regarding the termination of
Case 93-E-0082 is contained under the caption "Current Rate Activities" of
"Regulatory Matters" in Item 1 of this Form 10-K. On September 19, 1994, the
Company filed an Article 78 action against the NYPSC in New York State
Supreme Court, County of Albany appealing the NYPSC's June 10, 1994 Order
reducing the Company's targeted rate of return on equity to 10.6% (from
11.45%) and making such reduction retroactive to January 1, 1994. The appeal
contests the retroactivity of the NYPSC Order. The Company and the NYPSC
have agreed to stay the briefings in this appeal until after the NYPSC has
issued its final report on its investigation of the Company.
On September 30, 1992, the NYPSC approved a four-year settlement
agreement ("Settlement Agreement") in the Company's gas rate case (Case 92-G-
0050). The Settlement Agreement contains a weather adjustment clause which
automatically adjusts rates to offset the effects of variations in weather
from that assumed for setting rates. The Settlement Agreement provides for
an overall rate of return of 10.26%, with a return on common equity of 12.15%
including incentives of 50 basis points. On September 1, 1993, the Company
filed with the NYPSC the second stage adjustment to gas rates pursuant to the
Settlement Agreement. The requested increase in annual gas revenues as a
result of the second-stage adjustment is $3.8 million or 2.5%. Although the
Settlement Agreement provided for an effective date for this adjustment of
January 1, 1994, the Company agreed to extend the effective date until
June 30, 1994, in connection with the ongoing investigations of alleged
financial improprieties. The effective date of this adjustment was further
extended until December 30, 1994 by NYPSC Order issued June 3, 1994.
On September 1, 1994, the Company filed a plan to implement the second-
stage rate adjustment on January 1, 1995 and to postpone the next adjustment
to gas rates to January 1, 1996. On September 19, 1994, the Company
subsequently requested the further postponement of the second-stage gas rate
adjustment until the NYPSC's investigation of alleged financial improprieties
is concluded. The purpose of the request was to combine the results of the
investigation and staged filings into a single rate change. On November 4,
1994, the NYPSC issued an Order terminating the Settlement Agreement
effective December 31, 1994. The Order denies the Company the opportunity
for rate adjustments in the third and fourth years (1995 and 1996) of the
Settlement Agreement. However, the Order authorizes the Company to defer the
second-stage rate adjustment and all previously authorized reconciliations
through the end of 1994, pending review and audit by the NYPSC Staff and the
conclusion of the NYPSC's investigation of alleged financial improprieties.
On October 4, 1993, the NYPSC issued an order instituting a proceeding
(Case 93-M-0849) to investigate the operations and management of the Company.
On November 10, 1994, the Company filed with the NYPSC a quantification of
the rate making effects of its ongoing investigation into prior financial
improprieties. The Company requested that the NYPSC approve a refund of
approximately $3.4 million to its New York gas and electric customers. This
refund would be in addition to the $369,000 which previously had been
refunded to the Company's New York gas and electric customers. The NYPSC has
not yet acted on this proposal or issued its report of its investigation of
the Company. The Company is unable to predict the final results of this
proceeding and what modifications, if any, will be made to the amount
proposed to be refunded to New York ratepayers.
On November 3, 1993, the New Jersey Board of Regulatory Commissioners,
now the New Jersey Board of Public Utilities ("NJBPU") commenced its periodic
management audit of RECO. As a result of the events and investigations
described above, the NJBPU audit included, 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. The NJBPU has not yet issued its
report.
In December 1994, a filing was made with the NJBPU to refund
approximately $.7 million to the Company's New Jersey customers based upon
the Company's ongoing investigation into prior financial improprieties. By
order dated January 27, 1995, the NJBPU accepted this proposal. The Company
is unable to predict the final results of any NJBPU proceedings in this area
and what modifications, if any, will be made to the amount proposed to be
refunded in New Jersey.
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 was 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 was arbitrary and capricious and would result in unjust and
unreasonable rates. On March 21, 1994, the Superior Court of New Jersey,
Appellate Division, upheld the NJBRC Decision and Order.
On March 29, 1989, the New Jersey Department of Environmental Protection
("NJDEP") issued a directive under the New Jersey Spill and Control Act to
various potentially responsible parties ("PRPs") including the Company, with
respect to a site formerly owned and operated by Borne Chemical Company in
Elizabeth, Union County, New Jersey, ordering certain interim actions
directed at both site security and the off-site removal of certain hazardous
substances. Certain PRPs, including the Company, signed an administrative
consent order with the NJDEP requiring them to perform a removal action at
the site, which action was completed on June 22, 1992. The PRPs have entered
into negotiations with the NJDEP regarding the terms of the additional
administrative consent order which will obligate the PRPs, including the
Company, to perform a remedial investigation and feasibility study at the
site. The results of this study will determine what, if any, subsurface
remediation at the Borne site is required. The Company does not believe that
this matter will have a material effect on the financial condition of the
Company.
On August 2, 1994 the Company entered into a Consent Order with the New
York State Department of Environmental Conservation ("NYSDEC") in which the
Company agreed to conduct a remedial investigation of certain property it
owns in West Nyack, New York. Polychlorinated biphenyls ("PCBs") have been
discovered at the West Nyack site. The results of this investigation will
determine what, if any, remediation at the West Nyack site will be required.
The Company does not believe that this matter will have a material effect on
the financial condition of the Company.
On May 29, 1991 a group of ten electric utilities (the "Metal Bank
Group") entered into an Administrative Consent Order with the United States
Environmental Protection Agency ("EPA") to perform a remedial investigation
and feasibility study ("RIFS") at the Cottman Avenue/Metal Bank Superfund
site in Philadelphia, Pennsylvania. PCBs have been discharged at the Cottman
Avenue site from an underground storage tank and the handling of transformers
and other electrical equipment at the site. On May 25, 1994, the Company
entered into a tolling agreement pursuant to which the Metal Bank Group
reserved its right to file suit against the Company while the Metal Bank
Group and the Company entered into discussions to determine the extent of the
Company's involvement with the Cottman Avenue site. These discussions
continue. The RIFS has been completed and submitted to the EPA for
determination of what remedial measures will be required at the Cottman
Avenue site. The Company is unable at this time to estimate its share, if
any, of past or future costs at this site.
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 12 and 28, respectively, of the 1994 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 No. 636 Transition Costs" of "Gas
Operations" in Item 1 of this Form 10-K Annual Report.
The Company's gas operations were not materially affected by take-or-pay
charges in 1994. However, as required by the NYPSC in Case No. 88-G-062, the
Company has deferred a portion of these costs. As of December 31, 1994, $2.8
million of deferred take-or-pay charges and accrued interest remain on the
books of the Company. The Company is negotiating with the Staff of the
Commission to recover the remainder of the take-or-pay liability.
On April 8, 1992, the 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. It is currently
estimated that the Company's obligation related to Order No. 636 transition
costs will amount to $24.6 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 the Company's
involvement in, and effect on the Company of, Order No. 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 12 and 28, respectively, of the 1994
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.
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 financial condition of the Company.
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 31 of the 1994 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 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, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
All of the officers of the Company are appointed on an annual basis
at the first Board of Directors' meeting following the annual meeting. The
following list includes two Company employees who, due to the policy making
functions they perform for the Company, are considered executive officers under
SEC criteria, but who are not officers of the Company and who are not appointed
on an annual basis.
Officers, Age, and Title Business Experience Past Five Years
D. Louis Peoples, 54 Vice Chairman of the Board and Chief
Vice Chairman of the Executive Officer since July 14, 1994.
Board of Directors and Executive Vice President, and a member
Chief Executive Officer of the Board of Directors, Madison
Gas and Electric Company from 1992 to
1993. Senior Vice President,
RCG/Hagler, Bailly Inc. from 1991 to
1992. Senior Vice President, and
a member of the Board of the
Directors, Nuclear Services Division,
Tenera, L.P. from 1990 to 1991;
R. Lee Haney, 55 Vice President and Chief Financial
Vice President and Officer since September 8, 1994.
Chief Financial Officer Senior Vice President from January
1993 until September 1994, and Vice
President and Chief Financial Officer
until January 1993, San Diego Gas &
Electric Company.
G. D. Caliendo, 54 Vice President, General Counsel and
Vice President - Secretary since March 2, 1995.
General Counsel Senior Vice President, General
and Secretary Counsel and Secretary of Pennsylvania
Power and Light Company from 1989 to
1994.
Robert J. Biederman, Jr., 42 Vice President since April 1990.
Vice President, Operations Director of Operations from 1986 until
April 1990.
Robert J. McBennett, 52 Treasurer since 1984.
Treasurer
George V. Bubolo, Jr., 50 Director, Engineering and System
Director, Engineering and Operations since November 1, 1994.
System Operations Director, Electric Operations from
1983 until November 1, 1994.
Vincent R. Tummarello, 44 Division Vice President - Electric
Division Vice President, Production since November 1, 1994.
Electric Production Director, Electric Production from
April 1, 1985 until November 1, 1994.
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 1994, there were 23,299 holders of record of the Company's
common stock, $5.00 par value. During 1994 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
1994 1 41 1/4 32 1/8 .63
2 35 7/8 30 1/2 .63
3 31 7/8 29 1/2 .64
4 32 1/2 28 3/8 .64
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 24 of the 1994 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 36 of the 1994 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 8 through 16 of the 1994 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 17 through 33 of the 1994
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 LLP to audit the
books, records and accounts of the Company and its subsidiaries for the 1994
fiscal year. The appointment of Arthur Andersen LLP was approved by the
shareholders at the Annual Meeting held on May 11, 1994.
The accounting firm of Grant Thornton LLP 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
LLP. Based on a review of the competing bids, the Audit Committee believe that
the selection of Arthur Andersen LLP would be in the best interests of the
Company and recommended such selection to the Board of Directors.
The reports of Grant Thornton LLP on the Company's consolidated financial
statements for the fiscal years ended December 31, 1992 and 1993 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 LLP 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 LLP, would have caused Grant Thornton LLP 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 38 of this Form 10-K Annual Report
and in the Company's definitive Proxy Statement in connection with the 1995
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 17 through 33 of the 1994 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 1994 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, 1994, 1993 and 1992. 17
Consolidated Balance Sheets as of December 31, 1994 and 1993. 18
Consolidated Cash Flow Statements for the years ended
December 31, 1994, 1993 and 1992. 20
Notes to Consolidated Financial Statements. 21
Report of Independent Public Accountants. 33
*Page number reference is to the 1994 Annual Report
to Shareholders
(a)(2) Financial Statement Schedules Page**
Valuation and Qualifying Accounts and Reserves for the years
ended December 31, 1994, 1993 and 1992 (Schedule II). 51
**Page number reference is to 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 I - 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
1994 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 November 3, 1994.
* 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).
4.31 Thirty-fourth Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1994.
*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, 1994.
*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. (Exhibit 10.18A to Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-4315).
+*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 March 2, 1995.
*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).
+*10.26 Letter agreement dated September 29, 1994 between Orange and Rockland
Utilities, Inc. and R. Lee Haney regarding participation in the
Officers' Supplemental Retirement Plan of Orange and Rockland
Utilities, Inc. (Exhibit 10.26 to Form 10-Q for the period ended
September 30, 1994, File No. 1-4315).
+*10.27 Letter agreement dated September 29, 1994 between Orange and Rockland
Utilities, Inc. and D. Louis Peoples regarding participation in the
Officers' Supplemental Retirement Plan of Orange and Rockland
Utilities, Inc. (Exhibit 10.27 to Form 10-Q for the period ended
September 30, 1994, File No. 1-4315).
+10.28 Agreement between Orange and Rockland Utilities, Inc. and Victor J.
Blanchet, Jr. dated March 1, 1995.
+10.29 Deferred Compensation Plan for Non Employee Directors as amended
through October 6, 1994.
13 The Company's 1994 Annual Report to Shareholders to the extent
identified in this Form 10-K Annual Report for the fiscal year
ended December 31, 1994.
*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.
24 Powers of Attorney.
27 Financial Data Schedule.
*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. (Exhibit 99.2
to Form 10-K for the year ended December 31, 1993, File No. 1-4315).
*99.5 Agreement Between Orange and Rockland Utilities, Inc. and Kroll
Associates, Inc. dated as of November 1, 1994. (Exhibit 99.5 to
Form 10-Q for the period ended September 30, 1994, File No. 1-4315).
+ 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.
- 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.
- 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 August 15, 1994.
- Participation Agreement between NYSERDA and Orange and Rockland
Utilities, Inc., dated as of August 15, 1994.
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K current report
covering an event during the fourth quarter of 1994.
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 D. LOUIS PEOPLES
(D. Louis Peoples
Vice Chairman of the
Board of Directors and
Chief Executive Officer)
Date: March 17, 1995
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
D. LOUIS PEOPLES* Chief Executive
(D. Louis Peoples, Officer, Director
Vice Chairman of the
Board of Directors and
Chief Executive Officer)
R. LEE HANEY* Chief Financial Officer
(R. Lee Haney, Vice President
and Chief Financial Officer)
TERRY L. DITTRICH* Acting Principal
(Terry L. Dittrich, Acting Accounting Officer
Controller)
H. KENT VANDERHOEF* 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.)
FREDERIC V. SALERNO* Director
(Frederic V. Salerno)
LINDA C. TALIAFERRO* Director
(Linda C. Taliaferro)
*By G. D. CALIENDO
(G. D. Caliendo,
Attorney-in-fact)
Date: March 17, 1995
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
We have audited in accordance with generally accepted auditing
standards, the 1994 consolidated financial statements included in Orange
and Rockland Utilities, Inc.'s Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our report
thereon dated February 2, 1995. Our audit was made for the purpose of
forming an opinion on those consolidated financial statements taken as a
whole. Supplemental Schedule II, Valuation and Qualifying Accounts and
Reserves for the year ended December 31, 1994 (see index of financial
statements) is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not part of the basic consolidated
statements and, in our opinion, fairly states in all material respects
the financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated
statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the
basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
February 2, 1995
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by reference in
this Form 10-K, into the Company's previously filed Registration
Statements on Form S-8 (File Nos. 33-25358, 33-25359 and 33-22129) and
on Form S-3 (File No. 33-63872).
ARTHUR ANDERSEN LLP
New York, New York
March 17, 1995
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
schedule listed in the Index at Item 14(a)(2). In our opinion, this
schedule presents fairly, in all material respects, the information
required to be set forth therein.
GRANT THORNTON LLP
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 schedule 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. 33-63872).
GRANT THORNTON LLP
New York, New York
March 17, 1995
SCHEDULE II
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1994, 1993 and 1992
(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, 1994
Allowance for Uncollect-
ible accounts:
Customer accounts $2,026 $2,493 $391 $2,710 $2,200
Other accounts 102 544 8 445 209
Gas marketing accounts 471 287 2 433 327
$2,599 $3,324 $401(A) $3,588(B) $2,736
Reserve for Claims
and Damages $3,830 $2,474 $140 $1,731(C) $4,713
Gas Turbine Maintenance
Reserve $(1,375) $1,367 $ - $ 250(C) $ (258)
December 31, 1993
Allowance for Uncollect-
ible accounts:
Customer accounts $1,651 $2,428 $400 $2,453 $ 2,026
Other accounts 86 207 4 195 102
Gas marketing accounts 75 548 - 152 471
$1,812 $3,183 $404(A) $2,800(B) $ 2,599
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)
(Continued)
SCHEDULE II
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1994, 1993 and 1992
(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, 1992
Allowance for Uncollect-
ible accounts:
Customer accounts $1,670 $2,019 $393 $2,431 $1,651
Other accounts 110 132 1 157 86
Gas marketing accounts 40 43 - 8 75
$1,820 $2,194 $394(A) $2,596(B) $1,812
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)
(A) Includes collection of accounts previously written off of $401 in 1994, $404
in 1993, and $394 in 1992.
(B) Accounts considered uncollectible and charged off of $3,588 in 1994, $2,800
in 1993 and $2,596 in 1992.
(C) Payments of damage claims of $1,731 in 1994, $1,732 in 1993 and $2,472 in 1992
and maintenance expenses of $250 in 1994, $210 in 1993 and $265 in 1992.
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, 1994 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
1994 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 November 3, 1994.
* 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).
4.31 Thirty-fourth Supplemental Indenture to the First Mortgage of the
Company, dated as of April 1, 1994.
*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, 1994.
*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. (Exhibit 10.18A to Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-4315).
+*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 March 2, 1995.
*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).
+*10.26 Letter agreement dated September 29, 1994 between Orange and Rockland
Utilities, Inc. and R. Lee Haney regarding participation in the
Officers' Supplemental Retirement Plan of Orange and Rockland
Utilities, Inc. (Exhibit 10.26 to Form 10-Q for the period ended
September 30, 1994, File No. 1-4315).
+*10.27 Letter agreement dated September 29, 1994 between Orange and Rockland
Utilities, Inc. and D. Louis Peoples regarding participation in the
Officers' Supplemental Retirement Plan of Orange and Rockland
Utilities, Inc. (Exhibit 10.27 to Form 10-Q for the period ended
September 30, 1994, File No. 1-4315).
+10.28 Agreement between Orange and Rockland Utilities, Inc. and Victor J.
Blanchet, Jr. dated March 1, 1995.
+10.29 Deferred Compensation Plan for Non Employee Directors as amended
through October 6, 1994.
13 The Company's 1994 Annual Report to Shareholders to the extent
identified in this Form 10-K Annual Report for the fiscal year
ended December 31, 1994.
*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.
24 Powers of Attorney.
27 Financial Data Schedule.
*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. (Exhibit 99.2
to Form 10-K for the year ended December 31, 1993, File No. 1-4315).
*99.5 Agreement Between Orange and Rockland Utilities, Inc. and Kroll
Associates, Inc. dated as of November 1, 1994. (Exhibit 99.5 to
Form 10-Q for the period ended September 30, 1994, File No. 1-4315).
+ 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.
- 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.
- 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 August 15, 1994.
- Participation Agreement between NYSERDA and Orange and Rockland
Utilities, Inc., dated as of August 15, 1994.