Item 1. Business
(a) General development of business
Energy East: Energy East Corporation (Energy East or the company) is a public utility holding company that was organized under the laws of the State of New York in 1997 and became the parent of New York State Electric & Gas Corporation (NYSEG) in May 1998. Energy East is a super regional energy services and delivery company with operations in New York, Connecticut, Massachusetts, Maine and New Hampshire and corporate offices in New York and Maine.
The company merged with Connecticut Energy Corporation (CNE) on February 8, 2000, and merged with CMP Group, Inc., CTG Resources, Inc. and Berkshire Energy Resources (Berkshire Energy) on September 1, 2000. The four companies are wholly-owned Energy East subsidiaries. In connection with the mergers the company registered as a holding company with the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act of 1935. The company's consolidated financial statements include CNE's results beginning with February 2000 and include CMP Group's, CTG Resources' and Berkshire Energy's results beginning with September 2000.
CNE is engaged in the retail distribution of natural gas in Connecticut through its wholly-owned subsidiary, The Southern Connecticut Gas Company (SCG). CMP Group's principal operating subsidiary, Central Maine Power Company (CMP), is primarily engaged in transmitting and distributing electricity generated by others to retail customers in Maine. CTG Resources is the parent of Connecticut Natural Gas Corporation (CNG), a regulated natural gas distribution company in Connecticut. Berkshire Energy's wholly-owned subsidiary, The Berkshire Gas Company (Berkshire Gas), is a regulated natural gas distribution company that operates in western Massachusetts.
In February 2001 the company announced that it had entered into a merger agreement with RGS Energy Group, Inc. under which all of the outstanding common stock of RGS Energy would be exchanged for a combination of cash and Energy East common stock valued at approximately $1.4 billion in the aggregate. The company will also assume approximately $1 billion of RGS Energy debt. RGS Energy will become a wholly-owned subsidiary of the company and the transaction will be accounted for under the purchase method of accounting. (See Item 7 - Energy East Corporation and RGS Energy Merger Agreement.)
Central Maine Power Company: CMP is a public utility incorporated in Maine in 1905. In September 1998 CMP was reorganized into a holding company structure pursuant to a Plan of Merger with CMP Group. All of the shares of CMP common stock were converted into an equal number of shares of CMP Group common stock and CMP Group became CMP's parent. Effective September 2000, pursuant to a Plan of Merger, CMP Group became a wholly-owned subsidiary of Energy East.
New York State Electric & Gas Corporation: NYSEG was organized under the laws of the State of New York in 1852. It was reorganized into a holding company structure in May 1998 pursuant to an Agreement and Plan of Share Exchange with Energy East. Each outstanding share of NYSEG's common stock was exchanged for one share of Energy East's common stock and Energy East became NYSEG's parent.
The following general developments have occurred in the companies' businesses since January 1, 2001:
Regulatory and Rate Matters
(See Item 7 - Electric Delivery Business and Natural Gas Delivery Business.)
(b) Financial information about segments
(See Item 8 - Note 15 to the company's and Note 12 to CMP's Consolidated Financial Statements, and Note 13 to NYSEG's Financial Statements.)
(c) Narrative description of business
(See Item 7 - Energy East Corporation and RGS Energy Merger Agreement, Electric Delivery Business, Natural Gas Delivery Business and Other Businesses.)
Disposition of Assets
(See Item 7 - Electric Delivery Business, Sale of Nine Mile Point 2 and Sale of CMP Nuclear Interests and Item 8 - Note 9 to the company's and Note 7 to CMP's Consolidated Financial Statements and Note 8 to NYSEG's Financial Statements.)
(i) (a) Principal business
The company's principal energy delivery business consists primarily of its regulated electricity transmission and distribution operations in upstate New York and Maine and its regulated natural gas transportation, storage and distribution operations in upstate New York, Connecticut, Maine and Massachusetts.
CMP's principal business consists of its regulated electricity transmission and distribution operations in southern and central Maine.
NYSEG's principal business consists of its regulated electricity transmission and distribution operations and its regulated natural gas transportation, storage and distribution operations in upstate New York. NYSEG also generates electricity from its several hydroelectric and two internal combustion stations.
CMP's service territory is located in the southern and central areas of Maine, and includes most of Maine's industrial and commercial centers. NYSEG's service territory, 99% of which is located outside the corporate limits of cities, is in the central, eastern and western parts of the State of New York. One of the company's Connecticut service territories extends along the southern Connecticut coast from Westport to Old Saybrook and the other is located principally in the greater Hartford-New Britain area and Greenwich. The company's Massachusetts service territory is in the western area of the state. The approximate areas and populations of the company's service territories are: Maine - 11,000 square miles and one million people, New York - 20,000 square miles and 2.5 million people, Connecticut - 1,400 square miles and 1.6 million people, and Massachusetts - 1,000 square miles and 190,000 people.
In Maine CMP serves electricity customers in the city of Portland and the Lewiston-Auburn, Augusta-Waterville and Bath-Brunswick areas. The larger cities in New York in which NYSEG serves both electricity and natural gas customers are Binghamton, Elmira, Auburn, Geneva, Ithaca and Lockport. The larger cities in which the company serves natural gas customers in Connecticut are Bridgeport, New Haven, Greenwich and Hartford, and in Massachusetts they are Pittsfield and North Adams.
The company serves approximately 1.4 million electricity customers and 600,000 natural gas customers, including CMP's approximately 555,000 electricity customers and NYSEG's approximately 829,000 electricity customers and 250,000 natural gas customers. The service territories reflect diversified economies, including high-tech firms, insurance, light industry, pulp and paper industry, ship building, colleges and universities, agriculture, fishing and recreational facilities. No customer accounts for more than 5% of either electric or natural gas revenues for Energy East and NYSEG or for more than 5% of electric revenues for CMP.
Energy East's operating revenues derived from electricity deliveries were 67% in 2001, 68% in 2000 and 83% in 1999. Its operating revenues derived from natural gas deliveries were 27% in 2001, 26% in 2000 and 14% in 1999. CMP's operating revenues are derived from electricity deliveries. Approximately 83% of NYSEG's operating revenues for 2001, 2000 and 1999 was derived from electricity deliveries, with the balance each year derived from natural gas deliveries.
(i) (b) Other businesses
The company's other businesses include a nonutility generating company, a retail energy marketing company, telecommunications assets, a propane distribution company, a district heating system and a Federal Energy Regulatory Commission (FERC) regulated liquefied natural gas peaking plant.
Cayuga Energy owns electric generation facilities that sell power in the wholesale market at times of high demand. TEN Companies manages a district heating and cooling network in Hartford, Connecticut and owns an interest in Iroquois Gas Transmission System.
CNE Energy Services Group has an interest in two small pipelines that serve power plants in Connecticut. CNE Energy Services Group also leases a liquefied natural gas plant that serves the peaking gas markets in the Northeast and the peaking generation market in Connecticut. CNE Venture-Tech invests in ventures that offer technologically advanced energy-related products.
The Union Water-Power Company provides energy management, utility construction, utility locating and support services, and energy-efficiency contracting.
Energy East Solutions sells electricity and natural gas in wholesale and retail markets in the Northeast and mid-Atlantic regions. Berkshire Propane delivers propane to customers in western Massachusetts, southern Vermont and eastern New York. Berkshire Service Solutions sells energy-related services in the same area.
Energy East Telecommunications owns fiber optic lines in central New York that it leases to retail communications companies. MaineCom Services provides telecommunications services and holds an interest in NEON Communications, which owns a fiber optic network in New England and the mid-Atlantic region.
Energy East Enterprises includes two small natural gas delivery companies, Maine Natural Gas and New Hampshire Gas, and Seneca Lake Storage, which is developing high-deliverability gas storage in upstate New York.
(ii) New product or segment - Not applicable
(iii) Sources and availability of raw materials
Electric
(See Item 7 - Electric Delivery Business, Sale of Nine Mile Point 2, Sale of CMP Nuclear Interests, Independent System Operator, Regional Transmission Organization, Central Maine Power Electricity Supply Responsibility and NYSEG Electric Rate Settlement, Item 7A - Quantitative and Qualitative Disclosures About Market Risk, Commodity Price Risk and
Item 8 - Note 1 to the company's Consolidated Financial Statements and NYSEG's Financial Statements.)
NYSEG satisfied the majority of its power requirements for 2001 through purchases under long-term contracts from nonutility generators (NUGs) and the New York Power Authority and generation from its share of a nuclear plant and its several hydroelectric stations. NYSEG's share of the nuclear plant was sold in November 2001. For its remaining power requirements, NYSEG assumed the risk of market prices and used electricity contracts, both physical and financial, to manage its exposure to fluctuations in the market price of electricity. NYSEG's electric rate settlement provides for a reconciliation and true-up of certain actual power supply costs during 2002, therefore the supply cost risk for 2002 will be substantially eliminated.
CMP sold its power entitlements from its NUG contracts and from its minority interests in two nuclear stations for a two-year period beginning March 1, 2000. CMP sold its power entitlements from its NUG contracts and from its minority interest in its one remaining nuclear station for an additional three-year period beginning March 1, 2002. Under Maine Law adopted in 1997 CMP was mandated to sell its generation assets and relinquish its supply responsibility. However, the Maine Public Utilities Commission (MPUC) can mandate that CMP be a standard-offer provider for supply service should bids by competitive suppliers be deemed unacceptable by the MPUC.
Natural Gas
(See Item 7 - Natural Gas Delivery Business, Item 7A - Quantitative and Qualitative Disclosures About Market Risk, Commodity Price Risk and Item 8 - Note 1 to the company's Consolidated Financial Statements and NYSEG's Financial Statements.)
The company's natural gas supply mix includes long-term, short-term and spot natural gas purchases transported under both firm and interruptible transportation contracts. During 2001 about 44% of NYSEG's natural gas supply was purchased from various suppliers under long-term and short-term sales contracts and 56% was purchased in the monthly or daily spot natural gas market. CNG purchased about 44% of its natural gas supply for 2001 from various suppliers under long-term contracts and 56% under short-term sales contracts and in the monthly or daily spot natural gas market. SCG purchased about 58% of its 2001 natural gas supply from various suppliers under long-term contracts and 42% in the short-term/spot market. Berkshire Gas purchased about 82% of its 2001 natural gas supply from various suppliers under long-term contracts and 18% in the short-term/spot market. The company and NYSEG use natural gas futures and options contracts to manage their exposure to fluctuations in natural gas commodity prices.
(iv) Franchises
The company's operating companies, including CMP and NYSEG, have valid franchises, with minor exceptions, from the municipalities in which they render service to the public.
Effective September 21, 2001, Maine Law authorized any natural gas utility providing gas distribution service in the State of Maine to provide gas distribution service to any municipality in Maine that is not already being served by another natural gas utility.
(v) Seasonal business
Sales of electricity are highest during the winter months primarily due to space heating usage and fewer daylight hours. Sales of natural gas are highest during the winter months primarily due to space heating usage.
(vi) Working capital items
The company's operating companies, including CMP and NYSEG, have been granted, through the ratemaking process, an allowance for working capital to operate their ongoing electric and/or natural gas utility systems.
(vii) Single customer - Not applicable
(viii) Backlog of orders - Not applicable
(ix) Business subject to renegotiation - Not applicable
(x) Competitive conditions
(See Item 7 - Electric Delivery Business, Natural Gas Delivery Business, Other Businesses and Accounting Issues.)
(xi) Research and development
The company's expenditures on research and development were $5 million each year in 2001, 2000 and 1999, principally for NYSEG's internal research programs and for contributions to research administered by the New York State Energy Research and Development Authority, the Electric Power Research Institute and the New York Gas Group. These expenditures are designed to improve existing technologies and to develop new technologies for the delivery and customer use of energy.
(xii) Environmental matters
(See Item 3 - Legal proceedings, Item 7 - Electric Delivery Business, and Item 8 - Notes 7, 9 and 10 to the company's and Notes 6, 7 and 8 to CMP's Consolidated Financial Statements, and Notes 6, 8 and 9 to NYSEG's Financial Statements.)
The company, CMP and NYSEG are subject to regulation by the federal government and by state and local governments with respect to environmental matters. They are also subject to state laws regarding environmental approval and certification of proposed major transmission facilities.
From time to time environmental laws, regulations and compliance programs may require changes in the company's, CMP's and NYSEG's operations and facilities and may increase the cost of energy delivery service. Historically, rate recovery has been authorized for environmental compliance costs.
Capital additions to meet environmental requirements during the three years ended December 31, 2001, were approximately $9 million for Energy East, including $1 million for CMP and $6 million for NYSEG. Future capital additions to meet environmental requirements are not expected to be material as a result of the sale of the company's coal-fired generation plants in 1999.
Water and air quality
The company and NYSEG are required to comply with federal and state water and air quality statutes and regulations including the Clean Water Act. The Clean Water Act requires that generating stations be in compliance with federally issued National Pollutant Discharge Elimination System Permits or state issued State Pollutant Discharge Elimination System (SPDES) Permits, which reflect water quality considerations for the protection of the environment. The Energy Network (TEN) owns interests in three natural gas-fired peaking generating stations, which have the required federal or state operating permits and are in compliance with the permits.
(xiii) Number of employees
Energy East had 5,816 employees, which includes 1,410 CMP employees and 2,907 NYSEG employees, as of March 1, 2002.
(d) Financial information about geographic areas Not applicable
Item 2.
Item 2. Properties
(See Item 7 - Electric Delivery Business, Nine Mile Point 2 and Sale of CMP Nuclear Interests, and Other Businesses, Cayuga Energy Generating Plant.)
CMP's electric system includes substations and transmission and distribution lines, all of which are located in the State of Maine. NYSEG's electric system includes hydroelectric and internal combustion generating stations, substations and transmission and distribution lines, all of which are located in the State of New York. TEN owns interests in three natural gas-fired peaking generating stations, two that are operated by Cayuga Energy, a wholly-owned subsidiary, and located in the State of New York, and one for which Cayuga Energy manages fuel procurement and electricity sales that is located in Pennsylvania. Generating facilities are:
(1) CMP sold its power entitlement from Vermont Yankee for a two-year period beginning March 1, 2000, and has sold its power entitlement for an additional three-year period beginning March 1, 2002. CMP is in the process of selling its interest in Vermont Yankee, an operating unit, pending regulatory approvals. On January 30, 2002, the Federal Energy Regulatory Commission issued an order approving the sale. (See Item 8 - Note 9 to the company's and Note 7 to CMP's Consolidated Financial Statements.)
(2)
Cayuga Energy's 85% share of the generating capability.
(3) Cayuga Energy's 50.1% share of the generating capability.
CMP has ownership interests in three nuclear generating facilities in addition to its 4% interest in Vermont Yankee: Maine Yankee in Wiscasset, Maine, 38%; Yankee Atomic in Rowe, Massachusetts, 9.5%; and Connecticut Yankee in Haddam, Connecticut, 6%. Yankee Atomic, Maine Yankee and Connecticut Yankee have been permanently shut down. Yankee Atomic has been decommissioned and Maine Yankee and Connecticut Yankee are in the process of being decommissioned.
NYSEG owns 430 substations in New York having an aggregate transformer capacity of 12,696,630 kilovolt-amperes. The transmission system consists of 4,384 circuit miles of line. The distribution system consists of 34,027 pole miles of overhead lines and 2,321 miles of underground lines.
CMP owns 303 substations in Maine having an aggregate transformer capacity of 6,469,459 kilovolt-amperes. The transmission system consists of 2,546 circuit miles of line. The distribution system consists of 21,948 pole miles of overhead lines and 139 miles of underground lines.
The operating companies' natural gas systems consist of the following:
Operating Company
Location
Miles of
Transmission
Pipeline
Miles of
Distribution
Pipeline
NYSEG
New York State
7,506
SCG
Connecticut
-
3,621
CNG
Connecticut
-
3,473
Berkshire Gas
Massachusetts
-
Maine Natural Gas
Maine
-
New Hampshire Gas
New Hampshire
-
Substantially all of the company's utility plant is subject to liens or mortgages securing its subsidiaries' first mortgage bonds. None of CMP's utility plant is subject to liens or mortgages securing first mortgage bonds. NYSEG's first mortgage bond indenture constitutes a direct first mortgage lien on substantially all of its properties.
Item 3.
Item 3. Legal proceedings
(See Item 7 - Electric Delivery Business and Item 8 - Note 10 to the company's and Note 8 to CMP's Consolidated Financial Statements, and Note 9 to NYSEG's Financial Statements.)
Since the New York State Public Service Commission (NYPSC), Connecticut Department of Public Utility Control (DPUC), MPUC and Massachusetts Department of Telecommunications and Energy (DTE) have allowed the company's operating companies to recover in rates remediation costs for certain of the sites referred to in the second and fourth paragraphs of Note 10 to the company's and Note 8 to CMP's Consolidated Financial Statements, and the second and fourth paragraphs of Note 9 to NYSEG's Financial Statements, there is a reasonable basis to conclude that such operating companies will be permitted to recover in rates any remediation costs that they may incur for all of the sites referred to in those paragraphs. Therefore, the company, CMP and NYSEG believe that the ultimate disposition of the matters referred to in the paragraphs of the Notes referred to above in the company's and CMP's Consolidated Financial Statements and NYSEG's Financial Statements will not have a material adverse effect on their results of operations or financial position.
(a) In August 1997 NYSEG was notified by the New York State Department of Environmental Conservation (NYSDEC) that NYSDEC was contemplating enforcement action against NYSEG with respect to violations of regulations concerning opacity of air emissions at all of the company's New York coal-fired stations. NYSEG is in the process of negotiating a consent order with the NYSDEC to resolve the NYSDEC's demand for a penalty of approximately $650,000. The company sold its New York coal-fired stations to The AES Corporation (AES) in May 1999.
(b) NYSEG received a letter in October 1999 from the New York State Attorney General's office alleging that NYSEG may have constructed and operated major modifications to certain emission sources at the Goudey and Greenidge generating stations, which it formerly owned, without obtaining the required prevention of significant deterioration or new source review permits. The Goudey and Greenidge plants were sold to AES in May 1999. The letter requested that NYSEG and AES provide the Attorney General's office with a large number of documents relating to this allegation. In January 2000 NYSEG received a subpoena from the NYSDEC ordering production of similar documents. The NYSDEC subsequently requested similar documents with respect to the Hickling and Jennison generating stations, which the company formerly owned. Those stations were also sold to AES in May 1999.
In April 2000 NYSEG received a letter from the U.S. Environmental Protection Agency (EPA) requesting information with respect to the operation of the Milliken and Kintigh generating stations, which the company formerly owned. Those stations were also sold to AES in May 1999. NYSEG furnished documents pursuant to the Attorney General's, NYSDEC's and EPA's requests.
In May 2000 NYSEG received a notice of violation from the NYSDEC alleging that two projects at Goudey and four projects at Greenidge were constructed without the necessary permits having been obtained.
On April 18, 2001, EPA notified NYSEG by telephone that EPA would be issuing notices of violation alleging that various projects at the Milliken and Kintigh generating stations were constructed without the necessary permits having been obtained.
NYSEG believes it has complied with the applicable rules and regulations and there is no basis for the Attorney General's, NYSDEC's and EPA's allegations. NYSEG believes that any liability related to this matter will be the responsibility of AES in accordance with the asset purchase agreement.
(c) On October 30, 2000, NYSEG and Pennsylvania Electric Company (Penelec) received a letter from EME Homer City Generation, L.P. (EME), a subsidiary of the purchaser of the Homer City generating station (Station) in which NYSEG and Penelec each formerly owned a one-half interest. The letter gave NYSEG and Penelec notice that the EPA has found alleged violations of the federal Clean Air Act related to the Station. EME has indicated that it will claim that certain fines, penalties and costs arising out of or related to these alleged violations, which NYSEG believes may be material, are liabilities retained by NYSEG and Penelec under the terms of the asset purchase agreement for the Station. While it will continue to examine this matter, NYSEG believes that such fines, penalties and costs are not liabilities retained by it.
Item 4.
Item 4. Submission of matters to a vote of security holders
None for Energy East, CMP or NYSEG.
* * * * * * * * * * * *
Executive Officers of the Registrants
Name
Age
Positions, offices and business
experience -January 1997 to date
Energy East Corporation
Wesley W. von Schack
Chairman, President & Chief Executive Officer, April 1998 to date; Chairman, President & Chief Executive Officer of NYSEG to April 1999.
Kenneth M. Jasinski
Executive Vice President and Chief Financial Officer, February 2002 to date; Executive Vice President, General Counsel & Secretary, August 2000 to February 2002; Executive Vice President and General Counsel, April 1999 to August 2000; Senior Vice President and General Counsel, April 1998 to April 1999; Executive Vice President of NYSEG, April 1998 to April 1999; Partner of Huber Lawrence & Abell (attorneys at law) to April 1998.
Robert D. Kump
Vice President, Treasurer & Secretary, February 2002 to date; Vice President and Treasurer, November 1999 to February 2002; Treasurer, October 1998 to November 1999; Treasurer of NYSEG to August 2000.
Robert E. Rude
Vice President and Controller, November 1999 to date; Controller, October 1998 to November 1999; Executive Director, Corporate Planning of NYSEG, October 1998 to October 2000; Director, Corporate Planning and Rates of NYSEG to October 1998.
Robert M. Allessio
President and Chief Executive Officer of Berkshire Energy Resources and The Berkshire Gas Company, September 2000 to date; President and Chief Operating Officer of The Berkshire Gas Company, August 1999 to September 2000; Vice President, Utility Operations of The Berkshire Gas Company, to August 1999.
Richard R. Benson
Vice President, Human Resources of Energy East Management Corporation, October 2000 to date; Executive Director, Human Resources of NYSEG, October 1998 to October 2000; Director, Human Resources of NYSEG to October 1998.
Sara J. Burns
President of CMP, September 1998 to date; Chief Operating Officer, Distribution Services of CMP, May 1997 to September 1998; Managing Director, Human Resources of CMP to May 1997.
Executive Officers of the Registrants (Cont'd)
Name
Age
Positions, offices and business
experience -January 1997 to date
Michael I. German
Senior Vice President, Business Development of Energy East Management Corporation, March 2002 to date; Senior Vice President of Energy East Corporation, April 1998 to March 2002; President and Chief Executive Officer of The Energy Network, Inc., October 2000 to date; President and Chief Operating Officer of NYSEG, April 1999 to October 2000; Executive Vice President and Chief Operating Officer of NYSEG, April 1998 to April 1999; Executive Vice President of NYSEG, May 1997 to April 1998; Senior Vice President-Gas Business Unit of NYSEG to May 1997.
James P. Laurito
President and Chief Operating Officer of Connecticut Natural Gas Corporation and The Southern Connecticut Gas Company, October 2000 to date; President of TEN Companies, Inc. (formerly The Energy Network, Inc.), January 1999 to October 2000; Vice President, Business Development of TEN Companies, Inc., September 1997 to January 1999; President and Chief Executive Officer of Consumers Applied Technologies, Inc. to September 1997.
F. Michael McClain
Vice President, Finance of Energy East Management Corporation, October 2000 to date; Vice President, Corporate Development of CMP Group, Inc., September 1998 to October 2000; Vice President, Corporate Development of CMP, February 1998 to September 1998; Group Vice President and Chief Operating Officer of Petroleum Group, Dead River Company to February 1998.
Angela M. Sparks-Beddoe
Vice President, Governmental Affairs of Energy East Management Corporation, January 2001 to date; Director, Legislative Affairs of NYSEG, February 1999 to January 2001; Manager, Federal Government Affairs of NYSEG to February 1999.
Ralph R. Tedesco
President and Chief Operating Officer of NYSEG, October 2000 to date; Senior Vice President, Customer Service Business Unit of NYSEG, May 1997 to October 2000; Vice President, Strategic Growth Business Unit of NYSEG to May 1997.
Denis E. Wickham
Senior Vice President, Transmission and Supply of Energy East Management Corporation, October 2000 to date; Senior Vice President, Energy Operating Services of NYSEG, June 1998 to October 2000; Vice President, Electric Resource Planning of NYSEG to June 1998.
Executive Officers of the Registrants (Cont'd)
Wesley W. von Schack and Kenneth M. Jasinski each have an employment agreement for a term ending February 7, 2005. Mr. von Schack's agreement provides for his employment as Chairman, President & Chief Executive Officer of the company and Mr. Jasinski's agreement provides for his employment as Executive Vice President and Chief Financial Officer of the company. Michael I. German has an employment agreement for a term ending on December 31, 2003. Mr. German's agreement provides for his employment as Senior Vice President, Business Development of Energy East Management Corporation and President and Chief Executive Officer of The Energy Network, Inc. Each agreement provides for automatic one-year extensions unless either party to an agreement gives notice that such agreement is not to be extended.
Sara J. Burns, F. Michael McClain and Robert M. Allessio each have an employment agreement for a term of three years beginning September 1, 2000, which is automatically extended each month unless either party to an agreement gives written notice that it is not to be extended. Ms. Burns' agreement provides for her employment as President of CMP and Mr. Allessio's agreement provides for his employment as President and Chief Executive Officer of Berkshire Gas.
Each officer holds office for the term for which he or she is elected or appointed, and until his or her successor is elected and qualifies. The term of office for each officer extends to and expires at the meeting of the Board of Directors following the next annual meeting of shareholders.
PART II
Item 5.
Item 5. Market for Registrants' common equity and related stockholder matters
See Item 8 - Note 16 to the company's Consolidated Financial Statements.
CMP Group, Inc., a wholly-owned subsidiary of Energy East, owns all of CMP's common stock. See Item 8 - CMP's Consolidated Statements of Changes in Common Stock Equity for information regarding dividends declared.
Energy East owns all of NYSEG's common stock. See Item 8 - NYSEG's Statements of Changes in Common Stock Equity for information regarding dividends declared.
Item 6.
Item 6. Selected financial data
See the information under the heading Selected financial data for each registrant, which is included in this report as follows:
Energy East - page 16
CMP - page 58
NYSEG - page 80
Item 7.
Item 7. Management's discussion and analysis of financial condition and results of operations
See the information under the heading Management's discussion and analysis of financial condition and results of operations for each registrant, which is included in this report as follows:
Energy East - pages 17 to 31
CMP - pages 58 to 61
NYSEG - pages 80 to 85
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of changes in value of a financial instrument, derivative or nonderivative, caused by fluctuations in interest rates and prices. The following discussion of the companies' risk management activities includes "forward-looking" statements that involve risks and uncertainties. Actual results could differ materially from those contemplated in the "forward-looking" statements. The companies handle market risks in accordance with established policies, which may include various derivative transactions. (See Item 8
Item 8. Financial statements and supplementary data
Index to 2001 Financial Statements
Page
Energy East Corporation
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Common Stock Equity
Notes to Consolidated Financial Statements
Report of Independent Accountants
Financial Statement Schedule
II. Consolidated Valuation and Qualifying Accounts
Central Maine Power Company
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Common Stock Equity
Notes to Consolidated Financial Statements
Report of Independent Accountants
Financial Statement Schedule
II. Consolidated Valuation and Qualifying Accounts
New York State Electric & Gas Corporation
Balance Sheets
Statements of Income
Statements of Cash Flows
Statements of Changes in Common Stock Equity
Notes to Financial Statements
Report of Independent Accountants
Financial Statement Schedule
II. Valuation and Qualifying Accounts
Item 9.
Item 9.
Changes in and disagreements with accountants on accounting and
financial disclosure
None for Energy East, CMP or NYSEG.
Selected Financial Data
Energy East Corporation
All per share amounts and shares outstanding have been restated to reflect the two-for-one common stock split effective April 1, 1999.
Reclassifications: Certain amounts included in Selected Financial Data have been reclassified to conform with the 2001 presentation.
(1) Includes the $78 million writedown of CMP Group's investment in NEON Communications, Inc. that decreased net income by $46 million and earnings per share by 39 cents.
(2) Due to the completion of the company's merger transactions during 2000 the consolidated financial statements include CNE's results beginning with February 2000 and include CMP Group's, CTG Resources' and Berkshire Energy's results beginning with September 2000.
(3) Includes the effects of the nonrecurring benefit from the sale of the company's coal-fired generation assets that increased net income by $8 million and earnings per share by 7 cents and the nonrecurring loss from the sale of XENERGY, Inc. that decreased net income by $4 million and earnings per share by 4 cents.
(4) Depreciation and amortization includes accelerated amortization of the Nine Mile Point 2 nuclear generating station (NMP2) related to the sale of the company's coal-fired generation assets, authorized by the NYPSC. (See Item 8 - Note 8 to the company's Consolidated Financial Statements.)
(5) Includes the effect of the extraordinary loss from the early retirement of debt that decreased net income by $18 million and earnings per share by 15 cents and the nonrecurring benefit from the sale of the company's coal-fired generation assets net of the writeoff of NMP2 that increased net income by $14 million and earnings per share by 12 cents.
(6) Includes the effect of fees related to an unsolicited tender offer that decreased net income by $17 million and earnings per share by 12 cents.
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
Liquidity and Capital Resources
Energy East Corporation and RGS Energy Merger Agreement
In February 2001 Energy East announced that it had entered into a merger agreement with RGS Energy Group, Inc. under which all of the outstanding common stock of RGS Energy would be exchanged for a combination of cash and Energy East common stock valued at approximately $1.4 billion in the aggregate. The company will also assume approximately $1 billion of RGS Energy debt. RGS Energy will become a wholly-owned subsidiary of the company and the transaction will be accounted for under the purchase method of accounting.
Under the merger agreement 45% of the RGS Energy common stock will be exchanged for Energy East common stock with a value of $39.50 per RGS Energy share, subject to restrictions on the minimum and maximum number of shares to be issued, and 55% of the RGS Energy common stock will be converted into $39.50 in cash per RGS Energy share. RGS Energy shareholders will be able to elect the form of consideration they wish to receive, subject to proration. The company intends to finance the cash portion of the transaction primarily through the issuance of long-term debt and trust preferred securities. (See Financing Activities.)
RGS Energy and Energy East each held their annual meeting on June 15, 2001: RGS Energy's shareholders approved the merger and Energy East's shareholders approved the issuance of Energy East shares in connection with the merger.
The merger is subject to, among other things, various regulatory approvals, including the NYPSC, FERC, Nuclear Regulatory Commission (NRC) and SEC. The company has made all required regulatory filings and received approval from FERC in September 2001 and NRC in December 2001 for the change in control of RGS Energy's nuclear generation assets. In addition, the transaction cleared anti-trust review by the U.S. Department of Justice in October 2001.
On January 15, 2002, the company and NYSEG reached settlement with the NYPSC Staff and several other parties on a joint proposal for the merger and a new five-year electric rate plan for NYSEG. (See NYSEG Electric Rate Settlement.) The NYPSC approved the joint proposal and merger on February 27, 2002. As a result of the passage of time in connection with reaching the settlement with the NYPSC, the company expects to complete its merger with RGS Energy in the second quarter of 2002.
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
Electric Delivery Business
The company's electric delivery business consists primarily of its regulated electricity transmission and distribution operations in upstate New York and Maine.
Sale of Nine Mile Point 2: On November 7, 2001, after receiving all regulatory approvals, NYSEG sold its 18% interest in the Nine Mile Point 2 nuclear generating station (NMP2) to Constellation Nuclear. For its share of NMP2, NYSEG received at closing $59 million in cash and a $59 million 11% promissory note, which will be paid in five annual payments unless it is prepaid.
On September 28, 2001, NYSEG and the Staff of the NYPSC reached agreement on a joint settlement with respect to the regulatory and ratemaking aspects of the sale of NYSEG's interest in NMP2. On October 26, 2001, the NYPSC issued an order approving the sale, which provided for an asset sale gain account of approximately $110 million to be established at the time of closing. Disposition of the asset sale gain is addressed in the new NYSEG electric rate settlement approved by the NYPSC on February 27, 2002. (See NYSEG Electric Rate Settlement.)
NYSEG's pre-existing decommissioning funds were transferred to Constellation, which has taken responsibility for all future decommissioning funding.
The transaction included a power purchase agreement that calls for Constellation to provide electricity to NYSEG, at fixed prices, for 10 years. After the power purchase agreement is completed a revenue sharing agreement will begin. The revenue sharing agreement could provide NYSEG additional revenue through 2021, which would mitigate increases in electricity prices. Both agreements are based on plant output.
In 1999 the majority of NYSEG's investment in NMP2 was recovered through a gain on the sale of the company's coal-fired generation assets. The remaining balance was written off pursuant to Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
Sale of CMP Nuclear Interests: On March 31, 2001, CMP sold its 2.5% ownership interest in the Millstone Unit No. 3 nuclear unit. The net proceeds from the sale, $1.4 million including unfunded deferred taxes, were used to reduce a regulatory asset related to CMP's nonnuclear generating assets that were sold in April 1999. CMP contributed $1.3 million to the qualified nuclear trust fund, as part of the sale agreement, and is released from any liability for decommissioning the plant in the future.
On August 15, 2001, Vermont Yankee Nuclear Power Corporation reached an agreement to sell the Vermont Yankee nuclear power plant to Entergy Corporation. CMP has a 4% ownership interest in Vermont Yankee. The transaction includes a power purchase agreement that calls for Entergy to provide all of the plant's electricity to the sellers through 2012, the year the operating license for the plant expires. The sale is subject to the approval of the Public Service Board of Vermont, the NRC, the FERC and other regulatory authorities. On January 30, 2002, FERC issued an order approving the sale. (See Item 8 - Note 9 to the company's and Note 7 to CMP's Consolidated Financial Statements.)
Management's discussion and analysis of financial condition and results of operations
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Independent System Operator (ISO): The New York Independent System Operator (NYISO) has operational control over certain transmission facilities of each of the New York transmission-owning utilities, including NYSEG. The NYISO administers centralized capacity, energy, transmission and ancillary service markets, including operating reserves markets in New York.
In January and February 2000 the NYISO's operating reserves markets experienced problems that resulted in substantial charges to all customers required to buy operating reserves, including NYSEG. Several parties, including NYSEG, commenced FERC and court proceedings in response to these problems. In May 2000 the FERC approved a bid cap effective March 28, 2000, for a portion of the operating reserves markets until the market problems are corrected and the NYISO demonstrates that all reserves markets are competitive, but did not order refunds of earlier higher operating reserves prices as sought by NYSEG. Several parties sought rehearing of FERC's order. On October 1, 2001, the United States District Court for the Northern District of New York issued a stay of NYSEG's action for a period of 12 months or until the FERC issues a decision on the parties' request for rehearing. On November 8, 2001, FERC issued an order denying rehearing and requiring the NYISO to resettle March 2000 operating reserves charges at higher prices. The NYISO sought rehearing of this order and rebilled customers, including NYSEG. NYSEG paid and expensed this additional reserve charge of $3 million.
Regional Transmission Organization: On July 12, 2001, FERC issued an order requiring the NYISO and neighboring New England and Mid-Atlantic independent system operators to negotiate to form a single Northeast Regional Transmission Organization (RTO). RTOs are similar to ISOs, but have more authority and cover broader geographic regions. The NYISO and other parties involved in negotiating the formation of the RTO participated in mediation facilitated by a FERC administrative law judge (ALJ) for 45 days, leading to a business plan detailing the process to develop a Northeast RTO. The business plan, coupled with an ALJ's report, have been submitted to the FERC. A FERC decision on the Northeast RTO is expected in the spring of 2002.
In October 2001 FERC also commenced a proceeding to consider national standard market design issues and is expected to engage in a rulemaking proceeding soon. NYSEG and CMP have consistently advocated the formation of a Northeast/Mid-Atlantic RTO, including PJM Interconnection, L.L.C., or functionally combined markets throughout the Northeast because they believe that a larger wholesale power market is essential to facilitate greater liquidity and competition. A Northeast RTO may include an independent transmission company which would be owned by participating transmission owners. The transmission company would share RTO responsibilities with an independent market administrator and would focus on transmission investment opportunities, instead of energy, capacity and other generation-based markets. The company is unable to predict the ultimate effect, if any, of the expected rulemaking on wholesale power markets and the company's transmission system.
Transmission Planning and Expansion: In June and July 2001 FERC issued orders that addressed a number of transmission planning and expansion issues that would directly affect CMP and NYSEG as transmission owners. The FERC orders discussed giving exclusive responsibility for the transmission planning process to a Northeast RTO, rather than the transmission owners. The orders also discussed redefining the cost-sharing responsibilities of
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
interconnecting generators for transmission expansion costs. In October 2001 FERC also announced that it plans to engage in rulemaking proceedings on generation interconnection terms, conditions and cost allocation. The company is unable to predict the ultimate effect, if any, of the expected rulemaking on its transmission system.
Electric Transmission Rates: Rates charged for the use of the company's transmission system are subject to FERC approval. NYSEG filed a transmission rate case with the FERC in March 1997. Effective November 1997 NYSEG began charging its filed rate, which was accepted by the FERC subject to refund based on a FERC final order. In August 2000 the FERC issued an order in NYSEG's transmission rate case that increased NYSEG's transmission rates. The new rates, however, were lower than the rates in NYSEG's filed rate case, which it began collecting in November 1997 subject to refund. Therefore, NYSEG refunded $14 million, which included interest, to customers. On September 17, 2000, NYSEG filed a petition for rehearing with the FERC that states why FERC inappropriately excluded certain expenses from its calculation. FERC has yet to rule on the request for rehearing.
On July 2, 2001, as supplemented October 23, 2001, CMP filed with FERC to increase its local transmission rates, beginning June 1, 2001, to recover increased costs associated with transmission during periods of high demand and other costs. On January 4, 2002, FERC issued an order accepting the filing as supplemented.
Central Maine Power Alternative Rate Plan: In September 2000 the MPUC approved CMP's new Alternative Rate Plan (ARP 2000). ARP 2000 provides the vehicle for CMP and the company to share merger synergies with CMP's customers.
ARP 2000 applies only to CMP's state jurisdictional distribution revenue requirement and excludes revenue requirements related to stranded costs and transmission services. Recovery of stranded costs, primarily over-market NUG contracts, has been provided for under Maine's Restructuring Law. ARP 2000 began January 1, 2001, and continues through December 31, 2007, with price changes, if any, occurring on July 1, in the years 2002 through 2007.
In December 2000 an appeal was filed in the Maine Supreme Judicial Court by the Industrial Energy Consumer Group (IECG) arguing that the MPUC order in CMP's ARP 2000, in certain respects, was unlawful. On July 18, 2001, the court issued a decision affirming the MPUC's ARP 2000 order.
MPUC Delivery Price Decision: In March 2001, in response to price increases resulting from higher energy prices, the MPUC reduced CMP's delivery prices for certain medium and large customer classes by 0.8 cent per kilowatt-hour, effective April 15, 2001, through February 28, 2002. Earnings were not, however, affected by this price reduction of approximately $30 million, because the MPUC permitted CMP to amortize a corresponding amount into revenues from a gain recorded by CMP on the sale of its nonnuclear generation assets.
On April 5, 2001, the IECG filed a motion for reconsideration of the MPUC's decision to reduce CMP's delivery prices for certain medium and large customer classes by 0.8 cent per kilowatt-hour. The IECG requested an increase in the price reduction from 0.8 cent to 1.0 cent per kilowatt-hour for all medium and large customer classes. As a result of this motion, the MPUC issued an order dated May 3, 2001, that retained the price reduction at 0.8 cent per kilowatt-
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
hour and extended it to more, but not all, medium and large customer classes for the period April 15, 2001, through February 28, 2002. Earnings were not affected by this MPUC order because the resulting additional decrease of approximately $4 million was offset by amortizing a corresponding amount into revenues from CMP's gain on sale of generation assets account.
On December 21, 2001, the MPUC approved continuation of a 0.45 cent per kilowatt-hour price reduction for certain large customer classes for the period March 1, 2002, through February 28, 2003. The resulting revenue reduction, estimated at $7 million, will continue to be offset by amortizing amounts from CMP's gain on sale of generation assets account.
Central Maine Power Electricity Supply Responsibility: Under Maine Law adopted in 1997 CMP was mandated to sell its generation assets and relinquish its supply responsibilities. However, the MPUC can mandate that CMP be a standard-offer provider for supply service should bids by competitive suppliers be deemed unacceptable by the MPUC.
On September 18, 2001, the MPUC chose Constellation Power Source Maine, LLC as the new supplier of standard-offer electricity to CMP's residential and small commercial standard-offer class for a three-year period beginning March 1, 2002. On January 14, 2002, the MPUC chose Select Energy, Inc. as the new supplier of standard-offer electricity to all other CMP commercial customers and all CMP industrial customers for a one-year period beginning March 1, 2002.
MPUC Stranded Cost Proceeding: On December 21, 2001, the MPUC approved a stipulation among CMP, the Office of the Public Advocate and the IECG settling all issues related to the setting of CMP's stranded cost revenue requirement for the period March 1, 2002, through February 28, 2005. On January 15, 2002, CMP submitted a compliance filing to the MPUC setting the three-year stranded cost revenue requirement. The amount of the revenue requirement reflects the on-going costs related to CMP's remaining nondivested generating resources and the decommissioning of two nuclear power plants, offset by revenues to be received for the output from remaining nondivested generating resources and amortization of amounts from CMP's gain on sale of generation assets account.
NYSEG Electric Rate Settlement: On January 15, 2002, the company, NYSEG, RGS Energy, Rochester Gas and Electric Corporation (RG&E), the NYPSC Staff, the Attorney General of the State of New York, the New York State Consumer Protection Board, Multiple Intervenors and other parties reached settlement on both a new five-year NYSEG electric rate plan, which extends through December 31, 2006, and Energy East's merger with RGS Energy. The NYPSC approved the joint proposal on February 27, 2002. The joint proposal supersedes NYSEG's 1998 electric rate and restructuring agreement and the NYPSC Order issued January 10, 2002, regarding temporary rates for NYSEG's electric customers. The joint proposal also provides for the discontinuance of several outstanding NYSEG proceedings, including a proceeding regarding the refunding of state income taxes for calendar years 2000 and 2001. (See New York State Energy Taxes.) NYSEG's and the company's earnings will be lower in 2002 (one year earlier than expected) as a result of the joint proposal because NYSEG's electric rates now reflect the sale of generation assets that was completed in 1999.
Management's discussion and analysis of financial condition and results of operations
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Other significant provisions of the joint proposal include:
A $205 million annualized electric revenue reduction for NYSEG customers commencing March 1, 2002, which amounts to an overall average reduction of 13% for most customers. In the first rate year ending December 31, 2002, approximately $55 million of the annualized reduction will be funded with the partial amortization of an asset sale gain account created by NYSEG's sale in 2001 of its interest in NMP2. The remainder of the asset sale gain account will be used to offset uncontrollable costs that arise during the term of the rate plan. At the end of the rate plan, any remaining balance will be returned to customers in a manner to be determined by the NYPSC. (See Item 8 - Note 9 to the company's Consolidated Financial Statements and Note 8 to NYSEG's Financial Statements.)
Provisions for the sharing of electric and gas merger synergies between customers and shareholders for both NYSEG and RG&E.
Equal sharing of earnings between NYSEG customers and shareholders of returns on equity in excess of 15.5% for 2002 and equal sharing on the greater of returns on equity in excess of 12.5% on electric delivery, or 15.5% on the total electric business (including supply) for each of the years 2003 through 2006. For purposes of earnings sharing, NYSEG will use the lower of its actual equity ratio or a 45% equity ratio, which approximates $700 million.
Beginning in 2003 four competitive supply options will be available to NYSEG's electric customers for two periods of two years (2003 through 2004 and 2005 through 2006): 1) a bundled rate option that combines delivery and supply service at a fixed price; 2) fixed-price delivery service from NYSEG and the ability to purchase electricity supply from an alternative energy company; 3) NYSEG-provided delivery and supply service with delivery service fixed and a pass-through of market prices; and 4) bundled delivery and supply fixed-price service from NYSEG with the ability to switch to an alternative energy supplier and receive a market-based backout. Customers will also pay nonbypassable wires charges.
Over the term of the plan uncontrollable costs are recoverable through the use of funds in the asset sale gain account.
Continued economic development, customer service and reliability programs.
New York State Energy Taxes: New York State legislation in 2000 included major changes to the taxation of electric and natural gas companies. Those changes included, among others, the repeal of certain gross receipts taxes and the imposition of a net income tax effective January 1, 2000. On June 28, 2001, the NYPSC issued an order concerning the ratemaking treatment related to the implementation of those tax changes, placing certain limits on the recovery of such taxes. NYSEG had previously deferred the excess tax created by the early imposition of the income tax before the repeal of the gross receipts taxes. Subsequently, NYSEG was directed to refund to electric customers approximately $13 million, beginning January 1, 2002, representing the alleged overcollection of state taxes during calendar year 2000. The refunding of these taxes is no longer applicable as it is superseded by the new NYSEG electric rate settlement. (See NYSEG Electric Rate Settlement.)
Nonutility Generation: In December 1999 NYSEG notified the owners of Allegheny Hydro No. 8 and Allegheny Hydro No. 9 demanding that they each provide adequate assurance that they will perform their individual contractual obligations under two power purchase agreements with NYSEG, including the obligation to pay back overpayments made by NYSEG over the course of the agreements. Such overpayments are the cumulative difference between the rate NYSEG
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
pays for power under the agreements and its actual avoided costs. At the end of 2001 this cumulative overpayment was more than $148 million and is expected to grow substantially by 2030 when both agreements expire. Allegheny and its lenders filed a motion in the New York State Supreme Court (N.Y. County) seeking a declaration that NYSEG's demand for adequate assurance was improper. The motion is still pending before the court.
NYSEG and CMP together expensed approximately $593 million for NUG power in 2001. They estimate that their purchases will total $637 million in 2002, $651 million in 2003, $672 million in 2004, $677 million in 2005 and $623 million in 2006. NYSEG and CMP continue to seek ways to provide relief to their customers from above-market NUG contracts that state regulations ordered NYSEG and CMP to sign, and which averaged 8.24 cents per kilowatt-hour for 2001. Recovery of these NUG costs is provided for in NYSEG's and CMP's current regulatory plans. (See Item 8 - Note 7 to the company's Consolidated Financial Statements.)
Natural Gas Delivery Business
The company's natural gas delivery business consists of its regulated natural gas transportation, storage and distribution operations in New York, Connecticut, Maine and Massachusetts.
Natural Gas Supply Alliance: Four of Energy East's natural gas companies: NYSEG, SCG, CNG and Berkshire Gas, entered into a one-year strategic alliance agreement with BP Energy Company effective March 30, 2001, for the acquisition, optimization and management of natural gas supply, including price risk management. The alliance provides the companies with greater supply flexibility and enhances the benefits of a larger natural gas portfolio as a result of Energy East's mergers that were completed in 2000. The alliance is based on sharing incremental savings. The companies still own and control their natural gas assets and work with BP Energy to obtain the lowest cost supply while maintaining reliability of service.
The alliance agreement with BP Energy expires on March 31, 2002. On December 21, 2001, four of Energy East's natural gas companies issued a request for a proposal to various suppliers, producers and marketers seeking to explore alternatives to replace the expiring contract. RG&E, a subsidiary of RGS Energy, issued a similar request for a proposal.
NYSEG Natural Gas Rate Filings: On October 19, 2001, NYSEG filed a natural gas rate case with the NYPSC. NYSEG proposes to unbundle delivery and gas supply charges, increase delivery rates by approximately $23 million, implement a gas adjustment clause, a weather normalization clause and a delivery adjustment clause, and continue the promotion of retail choice for all customers. The filing proposes to change the existing residential rate structure from fully bundled fixed sales service rates to fixed delivery rates and floating gas supply charges. Similarly, for nonresidential customers, delivery charges will be reset and fixed, while gas supply charges will float with market changes. NYSEG also proposes rate design changes by rate area and service class to more closely match NYSEG's cost to serve.
NYSEG's natural gas prices have been frozen for six years. The requested increases will allow NYSEG to recover and earn a return on over $250 million in infrastructure improvements since 1995, and ensure the continued safety and reliability of its natural gas delivery system. The rate plan is premised on an 11.5% return on equity and a 48% equity ratio. The new rates would become effective October 2002.
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
NYSEG's natural gas business is currently operating under a four-year rate plan that ends September 30, 2002. The plan continues NYSEG's natural gas rate freeze for residential sales customers and provides pricing options for nonresidential customers.
On October 29, 2001, NYSEG filed a petition with the NYPSC for authorization to defer the difference between natural gas costs embedded in its residential gas sales rates and actual gas costs incurred for residential sales customers during the period November 1, 2001, through September 30, 2002. The petition is the result of sustained unanticipated high wholesale commodity costs. (See Item 7A - Quantitative and Qualitative Disclosures About Market Risk - Commodity Price Risk.) The petition also addresses the direction NYSEG received to refund to natural gas customers approximately $1 million beginning January 1, 2002, representing the alleged overcollection of state taxes during calendar year 2000. NYSEG anticipates the NYPSC will issue its decision in the second quarter of 2002.
Connecticut Regulatory Proceedings: In January 2001 the Connecticut Office of Consumer Counsel (OCC) filed an appeal in State Superior Court arguing that the Connecticut Department of Public Utility Control's (DPUC) order in December 2000 approving the SCG multi-year incentive rate plan (IRP) was unlawful. On March 30, 2001, the OCC filed a Motion to Stay the implementation of the DPUC's order, but the court denied the motion on June 18, 2001.
In May 2001 the DPUC issued a decision for CNG's IRP, approving a four-year term and replacing the proposed sharing in returns on equity with a graduated sharing in returns on equity in excess of 10.8%. The excess over 10.8% would be shared among shareholders and customers as follows: first 2% 75/25, next 4% 50/50 and over 6% 25/75. Performance and service measures were also adopted. After-tax merger-related natural gas cost savings are to be shared 50/50. On June 20, 2001, the OCC filed an appeal in Superior Court, arguing that the IRP approved by the DPUC for CNG was unlawful.
In August 2001 the court appeals for SCG's and CNG's IRPs were combined.
On October 23, 2001, SCG and CNG reached a settlement with the OCC, resolving numerous outstanding regulatory and legal proceedings. The settlement was also endorsed by Prosecutorial Staff of the DPUC. The proceedings resolved by the settlement include a review of past SCG affiliate transactions, SCG's Purchased Gas Adjustment Clause (PGA) charges and credits, alleged over-earnings at SCG and CNG, and the above court appeal of the approved IRPs for SCG and CNG.
The settlement provides rate reductions of $1.5 million for SCG and $0.5 million for CNG, effective October 1, 2001. The settlement extends the approved IRPs for an additional year through September 2005 and maintains an earnings sharing mechanism that generally shares earnings above the authorized returns on equity 50/50 between shareholders and customers. In addition, the settlement permits the recovery of SCG deferred gas costs through the PGA and through the customer portion of earnings sharing by the end of the IRP in 2005. Merger-enabled gas costs savings for both companies are also shared 50/50 between customers and shareholders, with the shareholder portion recovered through the PGA.
The settlement was filed with the DPUC on October 25, 2001, and hearings were held in December 2001. SCG and CNG received a final decision from the DPUC approving the settlement on February 22, 2002.
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
Berkshire Gas Rate Increase: On July 17, 2001, Berkshire Gas filed a petition with the Massachusetts Department of Telecommunications and Energy (DTE) for a rate increase that would add about $5 million, or 9%, to Berkshire Gas' total annual revenues. On January 31, 2002, the DTE approved a rate increase of $2.3 million, or 4.5%, on total annual revenues. The DTE's approval included Berkshire's proposal for a 10-year incentive-based rate plan with a mid-period review after five years. After the initial rate increase, rates will be frozen until September 2004, at which time rates will be adjusted annually based on inflation less a 1% consumer dividend. The DTE also approved Berkshire's proposed rate design based on seasonal rates for residential and small commercial and industrial customers that are the same in the winter and summer. Berkshire's proposal for service quality enhancements will be addressed in another proceeding. The new rates became effective February 1, 2002. On February 20, 2002, Berkshire filed a motion for clarification and recalculation of certain items in the DTE's final decision.
NYPSC Collaborative on End State of Energy Competition
: In March 2000 the NYPSC instituted a proceeding to address the future of competitive natural gas and electricity markets, including the role of regulated utilities in those markets. Other objectives of the proceeding include identifying and suggesting actions to eliminate obstacles to the development of those competitive markets and providing recommendations concerning Provider of Last Resort and related issues. In a separate phase of this proceeding, the NYPSC issued an order on November 9, 2001, directing the development of embedded cost of service studies. Certain of these objectives are to be implemented in connection with NYSEG's electric rate settlement.
Other Businesses
The company's other businesses include a nonutility generating company, a retail energy marketing company, telecommunications assets, a propane distribution company, a district heating system and a FERC-regulated liquefied natural gas peaking plant.
Cayuga Energy Generating Plant: On May 29, 2001, Cayuga Energy, a wholly-owned subsidiary of the company, and PEI Power Corporation announced that their newly-constructed peaking-power plant in Archbald, Pennsylvania, which is an exempt wholesale generator, was in service and selling electricity to the mid-Atlantic market. In July 2000 the two companies announced the formation of a joint venture company, PEI Power II, L.L.C., to build and operate the 44-megawatt natural gas-fired plant. Cayuga Energy owns 50.1% of the plant and manages fuel procurement and electricity sales. PEI Power Corporation owns the remaining 49.9% and is responsible for the plant's daily operation.
Natural Gas Storage Facility: On August 3, 2001, Seneca Lake Storage, Inc. (SLSI), a subsidiary of the company, announced plans to develop a high-deliverability natural gas storage facility in depleted salt caverns in the Town of Reading, New York. SLSI expects to begin operating the facility in November 2002. The storage facility will be linked to interstate pipelines, have a projected working gas capacity of 300,000 dekatherms (dth) and be capable of delivering up to 50,000 dth a day. In August 2001 SLSI filed with the FERC for authority to use the new facility to supply firm and interruptible natural gas storage services at market-based rates. On February 14, 2002, FERC granted the requested authorizations. State and local permits are also being sought from the appropriate agencies.
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
Maine Natural Gas: In June 2001 Maine Natural Gas began construction of a new natural gas distribution system to serve the towns of Brunswick and Topsham, Maine. It began serving natural gas to certain larger customers in November 2001, and after further construction, expects to begin serving residential and commercial customers in mid-2002.
Other Matters
Accounting Issues
Statement 71: Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation, allows companies that meet certain criteria to capitalize, as regulatory assets, incurred costs that are probable of recovery in future periods. Those companies record, as regulatory liabilities, obligations to refund previously collected revenue or obligations to spend revenue collected from customers on future costs.
Although the company believes its public utility subsidiaries will continue to meet the criteria of Statement 71 for their regulated electricity and natural gas operations in New York State, Connecticut, Maine and Massachusetts, the company cannot predict what effect a competitive market or future actions of the NYPSC, MPUC, DPUC or DTE will have on their ability to continue to do so. If the company's public utility subsidiaries can no longer meet the criteria of Statement 71 for all or a separable part of their regulated operations, they may have to record as expense or revenue certain regulatory assets and liabilities. NYSEG and CMP may also have to record as a loss an estimated $1.1 billion and $0.9 billion, respectively, on a present value basis at December 31, 2001, of above-market costs on their power purchase contracts with NUGs. Those costs are currently being recovered in rates.
Statements 141 and 142: The Financial Accounting Standards Board (FASB), in July 2001, issued Statement of Financial Accounting Standards No. 141, Business Combinations and Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. (See Item 8 - Note 1 to the company's Consolidated Financial Statements.)
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
Investing and Financing Activities
The company's financial strength provides the flexibility required to compete in the developing competitive energy market and continue expanding its products and services, including its energy infrastructure, in the Northeast.
Investing Activities: Capital spending totaled $223 million in 2001, $168 million in 2000 and $83 million in 1999, including nuclear fuel, but not including the company's four merger transactions in 2000. (See Item 8 - Note 2 to the company's Consolidated Financial Statements.) Capital spending in all three years was financed with internally generated funds and was primarily for the extension of energy delivery service, necessary improvements to existing facilities and compliance with environmental requirements.
Capital spending, excluding the RGS merger transaction, is projected to be $223 million in 2002. It is expected to be paid for with internally generated funds and will be primarily for the same purposes described above. (See Item 8 - Note 7 to the company's Consolidated Financial Statements.)
In August 2001 the company provided a $100 million equity contribution to NYSEG. The contribution was used by NYSEG to help repay $152 million in debt in connection with the termination of its sale of accounts receivable program.
Financing Activities: (See Item 8 - Note 4 to the company's Consolidated Financial Statements.) The company repurchased 1.3 million shares of its common stock at an average price of $18.45 per share during 2001. The company expects to repurchase shares on an opportunistic basis in the future. The amount of future repurchases will depend on expected cash flows, alternative uses of cash, and overall economic and market conditions.
The company raised its common stock dividend 4% in January 2002 to a new annual rate of 96 cents per share.
In August 2001 the company began issuing new common shares through its Dividend Reinvestment and Stock Purchase Plan, rather than purchasing them on the open market. The company expects to issue approximately one million shares per year under this plan.
The company and its subsidiaries have credit agreements with various expiration dates in 2002. The agreements provided for maximum borrowings of $755 million at December 31, 2001, and $724 million at December 31, 2000.
The company and its subsidiaries use short-term, unsecured notes and drawings on their credit agreements (see above) to finance certain refundings and for other corporate purposes. There was $173 million of such short-term debt outstanding at December 31, 2001, and $419 million outstanding at December 31, 2000. The weighted-average interest rate on short-term debt was 2.6% at December 31, 2001, and 7.7% at December 31, 2000.
On May 31, 2001, the company filed a shelf registration statement with the SEC to sell up to $1 billion in an unspecified combination of debt and trust preferred securities, of which $405 million is currently available. The company plans to use the net proceeds from this shelf
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
registration to fund the cash portion of the consideration for the pending merger with RGS Energy. (See Energy East Corporation and RGS Energy Merger Agreement.) The company may also use a portion of the proceeds for general corporate purposes, such as short-term debt reduction, repurchases of securities and to fund equity contributions to subsidiaries.
In July 2001 a business trust subsidiary issued $345 million of 81/4% Capital Securities. (See Energy East Corporation and RGS Energy Merger Agreement.) The proceeds were used to purchase Energy East's 81/4% junior subordinated debt securities. Payments on such debt securities will be used by the trust to pay dividends on the Capital Securities.
In July 2001 the company entered into a fixed-to-floating interest rate swap on the company's 8.05% debt series due November 2010. The company receives a fixed rate of 8.05% and will pay a rate based on the six month London Interbank Offered Rate plus 1.875%, on a notional amount of $200 million through November 2010.
In November 2001 the company issued $250 million of 5.75% five-year notes due November 2006. The proceeds were used to fund the $100 million equity contribution to NYSEG previously noted and the balance will be used to fund the RGS Energy merger.
Additional financing needed to complete the RGS Energy merger, estimated at $400 million, is expected to be issued just prior to completion of the merger. Through financial instruments entered into in August 2001, the company has locked in the treasury rate component of that financing at an average rate of 5.05%.
CMP issued the following Series E Medium Term Notes, the proceeds of which were used to redeem short-tem debt and for general corporate purposes:
On January 30, 2001, $25 million of 6.67% due January 2006.
On June 20, 2001, $10 million of 7% due June 2011.
On July 16, 2001, $5 million of 6 7/8% due July 2008.
On July 23, 2001, $20 million of 6 3/8% due July 2005.
On August 14, 2001, $15 million of 7% due August 2011.
On December 11, 2001, CMP issued $19.5 million of 5 3/8% Pollution Control Revenue Refunding Bonds due May 2014. The proceeds were used to refund $19.5 million of Floating/Fixed Rate Pollution Control Revenue Bonds.
On September 28, 2001, SCG issued $30 million of 6.59% Secured Medium-Term Notes due September 2011. The proceeds were used to repay short-term debt and for working capital purposes.
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
Results of Operations
Due to the mergers completed in 2000 - CNE in February 2000 and CMP Group, CTG Resources and Berkshire Energy in September 2000 - the company's results of operations for 2001 include those merged companies. Results of operations for 2000 include CNE beginning with February 2000 and include CMP Group, CTG Resources and Berkshire Energy beginning with September 2000.
Earnings Per Share
The company's earnings per share for 2001 were $2.00 compared to $2.04 for 2000, excluding certain one-time items. Those items include a writedown of 39 cents to CMP Group's investment in NEON Communications, Inc. in 2001 (See Item 8 - Note 11 to the company's Consolidated Financial Statements), and in 2000 a nonrecurring loss of four cents from the sale of XENERGY, Inc., a nonrecurring benefit of seven cents from the sale of the company's coal-fired generation assets and an extraordinary loss from the early retirement of debt of one cent. The decrease was primarily due to lower electric and natural gas deliveries due to warmer weather and reduced electric transmission revenues. Those decreases were partially offset by cost control efforts and earnings from the merged companies.
The company's 2000 earnings per share were $2.04 compared to $1.91 for 1999, excluding a nonrecurring loss of four cents from the sale of XENERGY, Inc. in 2000, nonrecurring benefits of seven cents in 2000 and 12 cents in 1999 from the sale of the company's coal-fired generation assets and extraordinary losses from the early retirement of debt of one cent in 2000 and 15 cents in 1999. The increase was primarily due to higher retail electric and natural gas deliveries for NYSEG, cost control efforts, earnings from the merged companies and fewer shares outstanding due to the share repurchase program. Those increases were partially offset by higher costs of energy net of transmission revenues, lower wholesale electric deliveries as a result of the sale of the company's coal-fired generation assets, and lower retail electric prices.
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
Other Items
Other income and deductions decreased in 2001 and 2000 primarily due to lower investment income after the net proceeds from the sale of the company's coal-fired generation assets were used to finance the company's merger transactions, partially offset by other income associated with the merged companies.
Interest charges increased in 2001 and 2000 primarily due to additional borrowings to finance the company's merger transactions, including the RGS merger, and interest charges associated with the merged companies.
Preferred stock dividends increased in 2001 primarily due to the issuance of trust preferred securities in July 2001 and preferred dividends associated with the merged companies. Preferred stock dividends decreased in 2000 primarily due to the redemptions and repurchases of preferred stock in 1999.
Operating Results for the Electric Delivery Business
2001 over 2000 Change
2000 over 1999 Change
(Thousands)
Deliveries - Megawatt-hours
Retail
Wholesale
23,238
6,048
17,133
6,214
13,843
10,978
36%
(3%)
24%
(43%)
Operating Revenues
$2,504,896
$2,023,610
$1,889,318
24%
7%
Operating Expenses
$1,951,475
$1,540,953
$1,373,674
27%
12%
Operating Income
$553,421
$482,657
$515,644
15%
(6%)
Operating Revenues: Operating revenues for 2001 increased $481 million compared to 2000 primarily due to the first full year of CMP's delivery revenues. Those increases were partially offset by lower deliveries because of warmer weather and by reduced transmission revenues.
The $134 million increase in operating revenues for 2000 is due to the addition of CMP's delivery revenues beginning September 1, 2000, higher transmission revenues, and higher retail deliveries due to colder weather in 2000. That increase was partially offset by lower wholesale deliveries as a result of the sale of the company's coal-fired generation assets in 1999 and lower retail prices.
Operating Expenses: Operating expenses for 2001 increased $411 million primarily due to the first full year of CMP's operating costs. That increase was partially offset by lower purchased power costs due to lower deliveries and by cost control efforts.
Operating expenses for 2000 increased $54 million, excluding a $113 million benefit in 1999 from the sale of the company's coal-fired generation assets, net of the writeoff of NMP2. That increase was due to the addition of CMP's purchases for retail deliveries and operating costs beginning September 1, 2000, and higher purchase costs of electricity primarily due to higher
Management's discussion and analysis of financial condition and results of operations
Energy East Corporation
than anticipated ancillary services costs associated with the NYISO and higher market prices. Those increases were partially offset by a reduction in operating expenses because of the sale of the company's coal-fired generation assets and a related reduction in amortization of NMP2 and by cost control efforts.
Operating Results for the Natural Gas Delivery Business
2001 over 2000 Change
2000 over 1999 Change
(Thousands)
Deliveries - Dekatherms
Retail
Wholesale
148,000
9,298
108,139
10,674
59,346
8,617
37%
(13%)
82%
24%
Operating Revenues
$1,026,124
$772,131
$331,745
33%
133%
Operating Expenses
$936,606
$699,402
$269,551
34%
159%
Operating Income
$89,518
$72,729
$62,194
23%
17%
Operating Revenues: For 2001, operating revenues increased $254 million primarily due to the first full year of revenues from SCG, CNG and Berkshire Gas. Those increases were partially offset by lower deliveries due to warmer weather.
Operating revenues for 2000 increased $440 million primarily due to the addition of revenues from SCG beginning February 1, 2000, and CNG and Berkshire Gas beginning September 1, 2000. The recovery of increased gas costs for nonresidential deliveries and higher deliveries due to colder weather also added to operating revenues.
Operating Expenses: Operating expenses for 2001 increased $237 million primarily due to the first full year of natural gas purchases and operating costs for SCG, CNG and Berkshire Gas. Those increases were partially offset by reduced purchased natural gas costs due to lower deliveries and by cost control efforts.
Operating expenses for 2000 increased $430 million primarily due to the addition of natural gas purchases and operating costs associated with the three merged gas companies - SCG, CNG and Berkshire Gas, and higher retail purchased gas costs caused by higher market prices and higher deliveries.
Energy East Corporation
Consolidated Balance Sheets
The notes on pages 37 through 55 are an integral part of the financial statements.
Energy East Corporation
Consolidated Balance Sheets
The notes on pages 37 through 55 are an integral part of the financial statements.
Energy East Corporation
Consolidated Statements of Income
The notes on pages 37 through 55 are an integral part of the financial statements.
Energy East Corporation
Consolidated Statements of Cash Flows
Year Ended December 31
(Thousands)
Operating Activities
Net income
$187,607
$235,034
$218,751
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization
204,281
165,524
648,970
Income taxes and investment tax credits deferred, net
3,089
27,097
(432,774)
Gain on sale of generation assets
(84,083)
-
(674,572)
Deferral of asset sale gain
71,803
-
-
Writeoff of Nine Mile Point 2
-
-
72,532
Pension income
(78,015)
(65,659)
(77,559)
Writedown of investment
78,422
-
-
Extraordinary loss, net of tax
-
1,645
17,566
Changes in current operating assets and liabilities
Accounts receivable
124,484
(87,301)
(8,671)
Sale of accounts receivable program
(152,000)
-
-
Inventory
(25,445)
(13,376)
58,504
Accounts payable and accrued liabilities
(121,274)
(4,076)
19,219
Taxes accrued
7,020
14,145
Other current liabilities
(68,858)
41,325
(16,021)
Other, net
(11,698)
(62,887)
28,582
Net Cash Provided by (Used in) Operating Activities
135,333
237,994
(131,328)
Investing Activities
Sale of generation assets
59,441
-
1,850,000
Acquisitions, net of cash acquired
-
(1,442,717)
-
Utility plant additions
(208,580)
(155,704)
(69,853)
Temporary investments, net
-
1,017,609
(760,996)
Other property and investments
(12,519)
8,711
(24,664)
Other
22,619
(12,741)
2,560
Net Cash (Used in) Provided by Investing Activities
(139,039)
(584,842)
997,047
Financing Activities
Issuance of common stock
7,201
-
-
Repurchase of common stock
(24,116)
(163,493)
(396,915)
Issuance of mandatorily redeemable trust
preferred securities
345,000
-
-
Treasury stock acquired, net
-
-
(31,373)
Repayments of first mortgage bonds and preferred
stock of subsidiaries, including net premiums
(1,890)
(134,947)
(329,719)
Long-term note issuances
355,553
601,114
10,185
Long-term note retirements
(31,700)
(21,346)
(35,374)
Notes payable, net
(245,612)
191,946
84,940
Dividends on common stock
(107,342)
(99,606)
(98,725)
Net Cash Provided by (Used in) Financing Activities
297,094
373,668
(796,981)
Net Increase in Cash and Cash Equivalents
293,388
26,820
68,738
Cash and Cash Equivalents, Beginning of Year
143,626
116,806
48,068
Cash and Cash Equivalents, End of Year
$437,014
$143,626
$116,806
The notes on pages 37 through 55 are an integral part of the financial statements.
Energy East Corporation
Consolidated Statements of Changes in Common Stock Equity
The notes on pages 37 through 55 are an integral part of the financial statements.
Notes to Consolidated Financial Statements
Energy East Corporation
Note 1. Significant Accounting Policies
Accounts receivable: Accounts receivable on the consolidated balance sheets are shown net of an allowance for doubtful accounts of $18 million at December 31, 2001, and $19 million at December 31, 2000. Bad debt expense was $34 million in 2001, which includes the merged companies for a full year for the first time, $24 million in 2000, and $12 million in 1999.
In August 2001 NYSEG terminated its agreement to sell, with limited recourse, undivided percentage interests in certain of its accounts receivable from customers. The agreement allowed NYSEG to receive up to $152 million from the sale of such interests. At December 31, 2000, accounts receivable on the consolidated balance sheets are shown net of $152 million of interests in accounts receivable sold. All fees related to the sale of accounts receivable through March 31, 2001, are included in other income and deductions on the consolidated statements of income and amounted to approximately $2 million in 2001, $10 million in 2000 and $9 million in 1999. Fees related to the agreement beginning April 1, 2001, which were approximately $3 million, are included in interest expense on the consolidated statements of income.
Consolidated statements of cash flows: The company considers all highly liquid investments with a maturity date of three months or less when acquired to be cash equivalents. Those investments are included in cash and cash equivalents on the consolidated balance sheets.
Depreciation and amortization: The company determines depreciation expense substantially using straight-line rates, based on the average service lives of groups of depreciable property in service at each operating company. The company's depreciation accruals were equivalent to 3.1% of average depreciable property for 2001, 3.1% for 2000, which was weighted for the effect of the mergers completed in September 2000, and 3.4% for 1999. Amortization expense includes the amortization of certain regulatory assets and the accelerated amortization of NMP2 in 1999 as authorized by the NYPSC. (See Note 8. Sale of Coal-Fired Generation Assets.)
Estimates: Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Notes to Consolidated Financial Statements
Energy East Corporation
Goodwill: The excess of the cost over fair value of net assets of purchased businesses is recorded as goodwill and was amortized on a straight-line basis over five to 40 years through December 31, 2001. The company evaluates the carrying value of goodwill for impairment at least annually and on an interim basis if there are indications that goodwill might be impaired. Any impairments would be recognized when the fair value of goodwill is less than its carrying value. (See Statements 141 and 142, below.)
Income taxes: The company files a consolidated federal income tax return. Deferred income taxes reflect the effect of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and the amount recognized for tax purposes. Investment tax credits (ITC) are amortized over the estimated lives of the related assets.
Principles of consolidation: These financial statements consolidate the company's majority-owned subsidiaries after eliminating intercompany transactions.
Reclassifications: Certain amounts have been reclassified on the consolidated financial statements to conform with the 2001 presentation.
Regulatory assets and liabilities: Pursuant to Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation, the company capitalizes, as regulatory assets, incurred costs that are probable of recovery in future electric and natural gas rates. It also records, as regulatory liabilities, obligations to refund previously collected revenue or to spend revenue collected from customers on future costs.
Unfunded future income taxes and deferred income taxes are amortized as the related temporary differences reverse. Unamortized loss on debt reacquisitions is amortized over the lives of the related debt issues. Nuclear plant obligations, demand-side management program costs, gain on sale of generation assets, other regulatory assets and other regulatory liabilities are amortized over various periods in accordance with the company's current rate plans. The company earns a return on substantially all regulatory assets for which funds have been spent.
Revenue recognition: The company recognizes revenues upon delivery of energy and energy-related products and services to its customers.
Risk management: The company uses natural gas futures and options contracts to manage its exposure to fluctuations in natural gas commodity prices. Such contracts allow the company to fix margins on sales of natural gas generally expected to occur in 2002. The cost or benefit of natural gas futures and options contracts is included in the commodity cost when the related sales commitments are fulfilled. At December 31, 2001, the company held natural gas futures and options contracts for 15 million dekatherms of natural gas, at an average price of $3.35 per dekatherm, through August 2004.
The company uses electricity contracts, both physical and financial, to manage against fluctuations in the cost of electricity. The contracts allow the company to fix margins on the majority of its retail electricity sales. The cost or benefit of electricity contracts is included in the amount expensed for electricity purchased when the electricity is sold. At December 31, 2001, the company held financial contracts for five million megawatt-hours, at an average price of $30.01 per megawatt-hour, through April 2003.
Notes to Consolidated Financial Statements
Energy East Corporation
The company uses interest rate swap agreements to manage the risk of increases in variable interest rates and to maintain desired fixed-to-floating rate ratios. It records amounts paid and received under the agreements as adjustments to the interest expense of the specific debt issues.
The company does not hold or issue financial instruments for trading or speculative purposes.
In accordance with the FASB's Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities (an amendment of FASB Statement No. 133), the company recognizes the fair value of its natural gas options, futures, financial electricity contracts and interest rate agreements as assets or liabilities on the consolidated balance sheets. The company's liability at December 31, 2001, was $32 million. All of these arrangements are designated as cash flow hedging instruments except for the company's $200 million fixed-to-floating interest rate swap agreement, which is designated as a fair value hedge. Changes in the fair value of the cash flow hedging instruments are recognized in other comprehensive income until the underlying transaction occurs. When the underlying transaction occurs, the amounts in accumulated other comprehensive income are reported in the consolidated statements of income.
As of December 31, 2001, the maximum length of time over which the company is hedging its exposure to the variability in future cash flows for forecasted transactions is 31 months. The company estimates that losses of $21 million will be reclassified from accumulated other comprehensive income into earnings in 2002, as the underlying transactions occur.
The company has commodity purchase and sales contracts for both capacity and energy that have been designated and qualify for the normal purchase and sale exception in Statement 138.
Statements 141 and 142: The FASB issued Statement 141 and Statement 142 in July 2001. Statement 141 requires that all business combinations be accounted for using the purchase method of accounting. Use of the pooling-of-interests method of accounting for business combinations is prohibited. Statement 141 also addresses the initial recognition and measurement of goodwill and other intangible assets. The provisions of Statement 141 apply to all business combinations that are initiated after June 30, 2001, and to all business combinations accounted for by the purchase method of accounting that are completed after June 30, 2001. Transition provisions that apply to business combinations completed before July 1, 2001, that were accounted for by the purchase method of accounting, may require companies to reclassify certain intangible assets and/or goodwill.
Statement 142 requires that goodwill no longer be amortized, but instead be tested at least annually for impairment using a two-step impairment test. The first step of the goodwill impairment test identifies potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value is greater than the carrying value, then goodwill is not impaired and the second step is not necessary. The second step of the goodwill impairment test is performed if the carrying amount of a reporting unit is greater than its fair value. If the carrying amount of a reporting unit's goodwill is greater than the implied fair value of its goodwill, the excess is to be recognized as an impairment loss.
Notes to Consolidated Financial Statements
Energy East Corporation
Statement 142 also requires that a recognized intangible asset with a finite life be amortized over its useful life and be reviewed for impairment, and that a recognized intangible asset with an indefinite life not be amortized until its life is determined to be no longer indefinite. A recognized intangible asset that is not amortized is to be tested for impairment annually, or more frequently if circumstances indicate an asset might be impaired. If the carrying amount of an intangible asset is greater than its fair value, the excess is to be recognized as an impairment loss. The provisions of Statement 142 are effective for fiscal years beginning after December 15, 2001.
The company adopted Statements 141 and 142 as of January 1, 2002, which had the following effects: goodwill valued at an estimated $898 million is no longer being amortized and the expected annual decrease in amortization expense for goodwill is $24 million. Management is still evaluating the additional effects that the adoptions may have, including the possible reclassification of goodwill and/or intangible assets and the need to recognize any transition or impairment losses.
Utility plant: The company charges repairs and minor replacements to operating expense accounts, and capitalizes renewals and betterments, including certain indirect costs. The original cost of utility plant retired or otherwise disposed of and the cost of removal less salvage are charged to accumulated depreciation.
Note 2. Acquisitions of Connecticut Energy, CMP Group, CTG Resources and
Berkshire Energy
The company's merger with CNE was completed on February 8, 2000, and its mergers with CMP Group, CTG Resources and Berkshire Energy were completed on September 1, 2000. The four transactions were accounted for using the purchase method. The company's consolidated financial statements include CNE's results beginning with February 2000 and include CMP Group's, CTG Resources' and Berkshire Energy's results beginning with September 2000.
In each transaction the purchase price was allocated to the assets acquired and liabilities assumed based on values on the date of purchase. The cost in excess of the fair value of the net assets acquired in each transaction was recorded as goodwill and was amortized through December 31, 2001, on a straight-line basis over the estimated useful life. The useful life was determined based on the individual characteristics of each acquired company and the lives ranged from five to 40 years. Goodwill was adjusted over the 12 months following the mergers as actual amounts for the estimated liabilities became known. On January 1, 2002, the company adopted Statements 141 and 142. (See Note 1 - Statements 141 and 142.)
The following pro forma information for the company for the years ended December 31, 2000 and 1999, which is based on unaudited data, gives effect to the company's four mergers as if they had been completed January 1, 1999. This information does not reflect future revenues or
Notes to Consolidated Financial Statements
Energy East Corporation
cost savings from the mergers and is not indicative of actual results of operations had the mergers occurred at the beginning of the periods presented or of results that may occur in the future.
Pro forma adjustments reflected in the amounts presented above include: (1) additional depreciation and amortization related to adjusting the four merged companies' nonutility assets to fair value based on an independent appraisal, (2) amortization of goodwill, (3) elimination of merger costs, (4) lower investment income due to the sale of temporary investments to complete the mergers, (5) interest expense due to the issuance of merger-related debt, (6) adjustments for estimated tax effects of the above adjustments and (7) additional common shares issued in connection with the mergers.
Note 3. Income Taxes
Year Ended December 31
(Thousands)
Current
$147,497
$129,220
$662,512
Deferred, net
Accelerated depreciation
12,312
(379,422)
Pension benefits
30,430
24,051
37,311
Statement 106 postretirement benefits
(4,079)
(11,417)
(6,618)
Demand-side management
(9,295)
(8,335)
(4,300)
Miscellaneous
(20,371)
23,676
(5,505)
ITC
(2,115)
(2,262)
(83,187)
Total
154,379
155,561
220,791
Less amount classified as extraordinary item
-
(1,121)
(9,458)
Total Before Extraordinary Item
$154,379
$156,682
$230,249
The company's effective tax rate differed from the statutory rate of 35% due to the following:
Year Ended December 31
(Thousands)
Tax expense at statutory rate
$124,754
$137,045
$154,787
Depreciation and amortization not normalized
26,373
8,032
123,435
ITC amortization
(2,115)
(2,262)
(77,919)
State taxes, net of federal benefit
14,692
21,386
10,241
Other, net
(9,325)
(8,640)
10,247
Total
154,379
155,561
220,791
Less amount classified as extraordinary item
-
(1,121)
(9,458)
Total Before Extraordinary Item
$154,379
$156,682
$230,249
In 1999 depreciation not normalized and ITC amortization included the result of the sale of coal-fired generation assets and the writeoff of NMP2. (See Note 8. Sale of Coal-Fired Generation Assets and Note 9. Jointly-Owned Generation Assets.)
Notes to Consolidated Financial Statements
Energy East Corporation
The company's deferred tax assets and liabilities consisted of the following:
Note 4. Long-term Debt
At December 31, 2001 and 2000, the company's consolidated long-term debt was:
At December 31, 2001, long-term debt, including sinking fund obligations, and capital lease payments (in thousands) that will become due during the next five years are:
$225,678
$80,613
$27,646
$55,378
$325,716
(1) Substantially all of the company's utility plant is subject to liens or mortgages securing its subsidiaries' first mortgage bonds. The after-tax extraordinary losses on early extinguishment of debt were $2 million or one cent per share in 2000 and $18 million or 15 cents per share in 1999.
(2) The Putable Asset Term Securities bear interest at 7.75% until November 15, 2003, and then, as provided by an agreement, will either be redeemed by the company or will bear interest at a fixed or floating rate until November 15, 2033, unless extended to November 15, 2034.
Notes to Consolidated Financial Statements
Energy East Corporation
Note 5. Bank Loans and Other Borrowings
The company and its subsidiaries have credit agreements with various expiration dates in 2002 and pay fees in lieu of compensating balances in connection with the credit agreements. The agreements provided for maximum borrowings of $755 million at December 31, 2001, and $724 million at December 31, 2000.
The company and its subsidiaries use short-term, unsecured notes and drawings on their credit agreements (see above) to finance certain refundings and for other corporate purposes. There was $173 million of such short-term debt outstanding at December 31, 2001, and $419 million outstanding at December 31, 2000. The weighted-average interest rate on short-term debt was 2.6% at December 31, 2001, and 7.7% at December 31, 2000.
Note 6. Preferred Stock of Subsidiaries
Trust preferred securities: The company-obligated mandatorily redeemable trust preferred securities are 81/4% Capital Securities issued by Energy East Capital Trust I, a Delaware business trust that is a 100%-owned finance subsidiary of the company. The assets of the trust consist solely of the company's 81/4% junior subordinated debt securities maturing on July 31, 2031. The company has fully and unconditionally guaranteed the trust's payment obligations with respect to the Capital Securities.
Preferred stock redeemable solely at the option of subsidiaries: At December 31, 2001 and 2000, the consolidated preferred stock redeemable solely at the option of subsidiaries was:
(1) At December 31, 2001, the company and its subsidiaries had 14,510,786 shares of $100 par value preferred stock, 12,800,000 shares of $25 par value preferred stock, 775,472 shares of $3.125 par value preferred stock, 600,000 shares of $1 par value preferred stock, 10,000,000 shares of $.01 par value preferred stock, 1,000,000 shares of $100 par value preference stock and 1,000,000 shares of $1 par value preference stock authorized but unissued.
Notes to Consolidated Financial Statements
Energy East Corporation
The company's subsidiaries redeemed or purchased the following amounts of preferred stock during the period 1999 through 2001:
Subsidiary Company
Date
Series
Amount
NYSEG:
February 1, 1999
7.40%
$25 million*
April 1, 1999
3.75%
$7.2 million**
April 1, 1999
4 1/2% (1949)
$2.8 million**
April 1, 1999
4.15%
$1.4 million**
April 1, 1999
4.40%
$4.8 million**
April 1, 1999
4.15% (1954)
$3.1 million**
December 10, 1999
6.30%
$25 million*
CMP
October 1, 2000
7.999%
$9.9 million*
CNG:
September 26, 2000
8.00%
$3,250*
Various 2001
6.00%
$45,900*
Various 2001
8.00%
$41,222***
Berkshire
September 30, 2001
4.80%
$41,000*
* Redeemed ** Purchased at a discount *** Substantially all purchased at a premium
Note 7. Commitments
Capital spending: The company has commitments in connection with its capital spending program. Capital spending, excluding the RGS merger transaction, is projected to be $223 million in 2002 and is expected to be paid for with internally generated funds. The program is subject to periodic review and revision. The company's capital spending will be primarily for the extension of energy delivery service, necessary improvements to existing facilities and compliance with environmental requirements.
Nonutility generator power purchase contracts: NYSEG and CMP together expensed approximately $593 million for NUG power in 2001 and $439 million in 2000 (CMP beginning on September 1, 2000, the date it was acquired). NYSEG expensed $354 million in 1999 for NUG power. NYSEG and CMP estimate that together their NUG power purchases will total $637 million in 2002, $651 million in 2003, $672 million in 2004, $677 million in 2005 and $623 million in 2006.
Note 8. Sale of Coal-Fired Generation Assets
The company completed the sale of its Homer City generation assets to Edison Mission Energy in March 1999, and the sale of its remaining coal-fired generation assets to The AES Corporation in May 1999 for a total of $1.85 billion. The proceeds from the sale of those assets - net of taxes and transaction costs - in excess of the net book value of the generation assets, less funded deferred taxes, were used to write down NYSEG's 18% investment in NMP2 by $380 million. This treatment is in accordance with NYSEG's restructuring plan approved by the NYPSC in January 1998. NYSEG wrote down its investment by an additional $106 million due to the required writeoff of funded deferred taxes related to NMP2. These writedowns are reflected in depreciation and amortization on the 1999 consolidated statement of income. (See Note 9. Jointly-Owned Generation Assets.)
Notes to Consolidated Financial Statements
Energy East Corporation
Note 9. Jointly-Owned Generation Assets
NYSEG: NYSEG had an 18% interest in the output and costs of NMP2 before it was sold. NYSEG's 18% share of NMP2's operating expenses until it was sold is included in various categories on the consolidated statements of income.
Sale of Nine Mile Point 2: On November 7, 2001, after receiving all regulatory approvals, NYSEG sold its 18% interest in NMP2 to Constellation Nuclear. For its share of NMP2, NYSEG received at closing $59 million in cash and a $59 million 11% promissory note, which will be paid in five annual payments unless it is prepaid.
On September 28, 2001, NYSEG and the Staff of the NYPSC reached agreement on a joint settlement with respect to the regulatory and ratemaking aspects of the sale of NYSEG's interest in NMP2. On October 26, 2001, the NYPSC issued an order approving the sale, which provided for an asset sale gain account of approximately $110 million to be established at the time of closing. Disposition of the asset sale gain is addressed under the settlement the company reached on January 15, 2002, with the NYPSC Staff and other parties on a joint proposal for a new five-year NYSEG electric rate plan and approval of the company's merger with RGS Energy.
NYSEG's pre-existing decommissioning funds were transferred to Constellation, which has taken responsibility for all future decommissioning funding.
In 1999 the majority of NYSEG's investment in NMP2 was recovered through a gain on the sale of the company's coal-fired generation assets. The remaining balance was written off pursuant to Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
CMP: CMP has ownership interests in four nuclear generating facilities in New England. The largest is a 38% interest in Maine Yankee Atomic Power Company. CMP also owns a 9.5% interest in Yankee Atomic Electric Company, a 6% interest in Connecticut Yankee Atomic Power Company and a 4% interest in Vermont Yankee Nuclear Power Corporation. Maine Yankee, Yankee Atomic and Connecticut Yankee have been permanently shut down. Yankee Atomic has been decommissioned and Maine Yankee and Connecticut Yankee are in the process of being decommissioned. Vermont Yankee is an operating unit.
On March 31, 2001, CMP sold its 2.5% ownership interest in the Millstone Unit No. 3 nuclear unit. The net proceeds from the sale, $1.4 million including unfunded deferred taxes, were used to reduce a regulatory asset related to CMP's nonnuclear generating assets that were sold in April 1999. CMP contributed $1.3 million to the qualified nuclear trust fund, as part of the sale agreement, and is released from any liability for decommissioning the plant in the future.
On August 15, 2001, Vermont Yankee Nuclear Power Corporation reached an agreement to sell the Vermont Yankee nuclear power plant to Entergy Corporation. CMP has a 4% ownership interest in Vermont Yankee. The transaction includes a power purchase agreement that calls for Entergy to provide all of the plant's electricity to the sellers through 2012, the year the operating license for the plant expires. The sale is subject to the approval of the Public Service Board of Vermont, the NRC, the FERC and other regulatory authorities.
Notes to Consolidated Financial Statements
Energy East Corporation
Nuclear insurance: The Price-Anderson Act is a federal statute providing, among other things, a limit on the maximum liability for damages resulting from a nuclear incident. The public liability limit for a nuclear incident is approximately $8.9 billion. Should losses stemming from a nuclear incident exceed the commercially available public liability insurance, each licensee of a nuclear facility would be liable for up to $84 million per incident, payable at a rate not to exceed $10 million per year. The $84 million assessment is subject to periodic inflation indexing and a 5% surcharge should funds prove insufficient to pay claims associated with a nuclear incident.
CMP's maximum liability for its interest in Vermont Yankee would be approximately $4 million per incident. The Price-Anderson Act also requires indemnification for precautionary evacuations whether or not a nuclear incident actually occurs.
In addition to the insurance required by the Price-Anderson Act, the nuclear generating facilities carry additional nuclear property damage insurance. Property insurance is obtained through the Nuclear Insurance Pools and Nuclear Electric Insurance Limited and other commercial sources.
Nuclear plant decommissioning costs: CMP's estimated liability for decommissioning its various interests in the jointly-owned nuclear plants is $202 million in 2002 dollars. Its current share of these costs is recovered through electric rates.
Cayuga Energy, Inc.: Cayuga Energy, Inc. owns an 85% interest in South Glens Falls Energy, L.L.C., the owner of a 67-megawatt natural gas-fired combined cycle generating station operating as an exempt wholesale generator.
As part of a joint venture with PEI Power Corporation, Cayuga Energy owns 50.1% of a
44-megawatt natural gas-fired peaking-power plant. The joint venture company, PEI Power II, L.L.C., operates the plant as an exempt wholesale generator.
Notes to Consolidated Financial Statements
Energy East Corporation
Note 10. Environmental Liability
From time to time environmental laws, regulations and compliance programs may require changes in the company's operations and facilities and may increase the cost of electric and natural gas service.
The U.S. Environmental Protection Agency and various state environmental agencies, as appropriate, notified the company that it is among the potentially responsible parties who may be liable for costs incurred to remediate certain hazardous substances at 17 waste sites. The 17 sites do not include sites where gas was manufactured in the past, which are discussed below. With respect to the 17 sites, seven sites are included in the New York State Registry of Inactive Hazardous Waste Disposal Sites, five are included in Maine's Uncontrolled Sites Program, one is included on the Massachusetts Non-Priority Confirmed Disposal Site list and six of the sites are also included on the National Priorities list.
Any liability may be joint and several for certain of those sites. The company has recorded an estimated liability of $2 million related to 13 of the 17 sites. The ultimate cost to remediate the sites may be significantly more than the estimated amount. Factors affecting the estimated remediation amount include the remedial action plan selected, the extent of site contamination and the portion attributed to the company.
The company has a program to investigate and perform necessary remediation at its 52 sites where gas was manufactured in the past. Eight sites are included in the New York State Registry, four sites are part of Maine's Voluntary Response Action Program and three of those four sites are part of Maine's Uncontrolled Sites Program, three sites are included in the Connecticut Inventory of Hazardous Waste Sites, and three sites are on the Massachusetts Department of Environmental Protection's list of confirmed disposal sites. The company has entered into consent orders with various environmental agencies to investigate and, where necessary, remediate 39 of its 52 sites.
The company's estimate for all costs related to investigation and remediation of its 52 sites ranges from $101 million to $212 million at December 31, 2001. The estimate could change materially based on facts and circumstances derived from site investigations, changes in required remedial action, changes in technology relating to remedial alternatives and changes to current laws and regulations.
The liability to investigate and perform remediation, as necessary, at the known inactive gas manufacturing sites, reflected on the company's consolidated balance sheets was $101 million at December 31, 2001, and $88 million at December 31, 2000. The company recorded a corresponding regulatory asset, net of insurance recoveries, since it expects to recover the net costs in rates.
Notes to Consolidated Financial Statements
Energy East Corporation
Note 11. Fair Value of Financial Instruments
The carrying amounts and estimated fair values of some of the company's financial instruments included on its consolidated balance sheets are shown in the following table. The fair values are based on the quoted market prices for the same or similar issues of the same remaining maturities.
The carrying amounts for cash and cash equivalents, notes payable and interest accrued approximate their estimated fair values. Special deposits may include restricted funds set aside as collateral for first mortgage bonds. The carrying amount approximates fair value because the special deposits have been invested in securities that mature within one year.
The company has been evaluating the carrying value of CMP Group's investment in NEON Communications, Inc. because there has been a significant decline in the market value of NEON common shares over the past 18 months. That decline is consistent with the market performance of telecommunications businesses as a whole. During the third quarter of 2001, the company determined that the decline in NEON's market value was other than temporary and wrote down the cost basis of the investment in NEON to $12 million, based on the closing market price of NEON common shares at the end of September 2001. The writedown totaled $46 million after taxes, or 39 cents per share. The company's investment in NEON is classified as available-for-sale, accounted for by the cost method and carried at its fair value, with any changes recognized in other comprehensive income. The fair value of the investment in NEON was $12 million at December 31, 2001, but it dropped significantly in January 2002 due to a further decline in the market value of NEON's common shares.
Notes to Consolidated Financial Statements
Energy East Corporation
Note 12. Accumulated Other Comprehensive Income
Notes to Consolidated Financial Statements
Energy East Corporation
Note 13. Stock-Based Compensation
The company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, to account for its stock-based compensation plans. Compensation expense would have been the same in 2001, 2000 and 1999 had it been determined consistent with Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.
The company may grant options and stock appreciation rights (SARs) to senior management and certain other key employees under its stock option plan. Options granted in 1999 vest over either two-year or three-year periods, and options granted in 2000 and 2001 vest over either one-year or two-year periods, subject to, with certain exceptions, continuous employment. All options expire 10 years after the grant date. Of the 10 million shares authorized at December 31, 2001 and 2000, unoptioned shares totaled 4.5 million at December 31, 2001, and 6.2 million at December 31, 2000.
The company recorded compensation expense (benefit) for options/SARs of less than $(1) million in 2001, $(1) million in 2000 and $(5) million in 1999.
During 2001 1,799,000 options/SARs were granted with a weighted-average exercise price of $18.88. 54,332 SARs with a weighted-average exercise price of $17.51 were exercised in 2001. 34,000 options/SARs with an exercise price of $21.03 were forfeited in 2001. The 4,636,047 options/SARs outstanding at December 31, 2001, had a weighted-average exercise price of $20.95. Of those outstanding at December 31, 2001, 191,309 options/SARs with exercise prices ranging from $10.88 to $14.69 and a weighted-average remaining life of five years had a weighted-average exercise price of $10.88 and 4,444,738 options/SARs with exercise prices ranging from $17.94 to $28.72 and a weighted-average remaining life of eight years had a weighted-average exercise price of $21.38. Of those exercisable at December 31, 2001, 191,309 options/SARs with exercise prices ranging from $10.88 to $14.69 had a weighted-average price of $10.88 and 2,939,545 options/SARs with exercise prices ranging from $17.94 to $28.72 had a weighted-average exercise price of $22.17.
During 2000 1,070,597 options/SARs were granted with a weighted-average exercise price of $23.06. 2,797 options with a weighted-average exercise price of $16.43 and 107,731 SARs with a weighted-average exercise price of $17.56 were exercised in 2000. 312,548 options/SARs with an exercise price of $23.99 were forfeited in 2000. The 2,925,379 options/SARs outstanding at December 31, 2000, had a weighted-average exercise price of $22.15. Of those outstanding at December 31, 2000, 197,309 options/SARs with exercise prices ranging from $10.88 to $14.69 and a weighted-average remaining life of six years had a weighted-average exercise price of $10.88 and 2,728,070 options/SARs with exercise prices ranging from $17.94 to $28.72 and a weighted-average remaining life of eight years had a weighted-average exercise price of $22.97. Of those exercisable at December 31, 2000, 197,309 options/SARs with exercise prices ranging from $10.88 to $14.69 had a weighted-average price of $10.88 and 1,470,287 options/SARs with exercise prices ranging from $17.94 to $28.72 had a weighted-average exercise price of $22.98.
Notes to Consolidated Financial Statements
Energy East Corporation
During 1999 1,122,412 options/SARs were granted with a weighted-average exercise price of $26.68. 3,118 options with a weighted-average exercise price of $16.90 and 102,362 SARs with a weighted-average exercise price of $18.70 were exercised in 1999. 30,000 options/SARs with an exercise price of $18.43 were forfeited in 1999. The 2,277,858 options/SARs outstanding at December 31, 1999, had a weighted-average exercise price of $21.75. Of those outstanding at December 31, 1999, 206,170 options/SARs with exercise prices ranging from $10.88 to $14.69 and a weighted-average remaining life of seven years had a weighted-average exercise price of $10.88 and 2,071,688 options/SARs with exercise prices ranging from $17.94 to $28.72 and a weighted-average remaining life of nine years had a weighted-average exercise price of $22.83. Of those exercisable at December 31, 1999, 206,170 options/SARs with exercise prices ranging from $10.88 to $14.69 had a weighted-average price of $10.88 and 645,172 options/SARs with exercise prices ranging from $17.94 to $28.72 had a weighted-average exercise price of $22.97.
The company's Long-term Executive Incentive Share Plan provides participants cash awards if certain shareholder return criteria are achieved. There were 95,418 performance shares outstanding at December 31, 2001, and 140,782 performance shares outstanding at December 31, 2000. There was no compensation expense for 2001 and compensation expense was $1 million for 2000 and 1999. Beginning January 1, 2001, no new performance shares are granted under this plan (other than dividend performance shares), which will be eliminated in 2003.
Notes to Consolidated Financial Statements
Energy East Corporation
Note 14. Retirement Benefits
Other comprehensive income decreased $3 million in 2001 as a result of a change in additional minimum pension liability.
CNE's, CMP Group's and CTG Resources' postretirement benefits were partially funded as of December 31, 2001 and 2000.
The company assumed a 12% annual rate of increase in the costs of covered health care benefits for 2001 that gradually decreases to 5% by the year 2005.
Notes to Consolidated Financial Statements
Energy East Corporation
The sale of the company's coal-fired generation assets in 1999 resulted in a curtailment gain and a settlement gain, which were the result of the termination of certain generation employees. The curtailment gain reduced the expected years of future service under the pension benefit plan and the settlement gain reduced the postretirement benefit obligation.
The net periodic benefit cost for postretirement benefits represents the cost the company charged to expense for providing health care benefits to retirees and their eligible dependents. The amount of postretirement benefit cost deferred was $68 million as of December 31, 2001, and $75 million as of December 31, 2000. The company expects to recover any deferred postretirement costs by 2012. The transition obligation for postretirement benefits is being amortized over a period of 20 years.
A 1% increase or decrease in the health care cost inflation rate from assumed rates would have the following effects:
1% Increase
1% Decrease
Effect on total of service and interest cost components
$2 million
$(2 million)
Effect on postretirement benefit obligation
$30 million
$(26 million)
Notes to Consolidated Financial Statements
Energy East Corporation
Note 15. Segment Information
Selected financial information for the company's business segments is presented in the table below. The company's electric delivery segment consists of its regulated transmission, distribution and generation operations in New York and Maine and its natural gas delivery segment consists of its regulated transportation, storage and distribution operations in New York, Connecticut, Maine and Massachusetts. Other includes: the company's corporate assets, interest income, interest expense and operating expenses; intersegment eliminations; and nonutility businesses.
(1)
Includes the effect of the writedown of CMP Group's investment in NEON Communications, Inc. that decreased net income by $46 million. (2)
Includes the effect of a nonrecurring loss from the sale of XENERGY, Inc. that decreased net income by $4 million.
Notes to Consolidated Financial Statements
Energy East Corporation
Note 16. Quarterly Financial Information (Unaudited)
(1)
The company's common stock is listed on the New York Stock Exchange. The number of shareholders of record was 34,354 at December 31, 2001. (2)
Includes the effect of the writedown of CMP Group's investment in NEON Communications, Inc. that decreased net income by $46 million and earnings per share by 39 cents. (3)
Includes the effect of the nonrecurring benefit from the sale of generation assets that increased net income by $8 million and earnings per share by 7 cents. (4)
Includes the effect of a nonrecurring loss from the sale of XENERGY, Inc. that decreased net income by $4 million and earnings per share by 4 cents.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors,
Energy East Corporation and Subsidiaries
Albany, New York
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 107 present fairly, in all material respects, the financial position of Energy East Corporation and its subsidiaries ("the Company") at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(2) on page 107 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 1 and 12 to the consolidated financial statements, the Company changed its method of accounting for derivative and hedging activities pursuant to Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities (an amendment of FASB Statement No. 133).
PricewaterhouseCoopers LLP
New York, New York
January 25, 2002
ENERGY EAST CORPORATION
SCHEDULE II - Consolidated Valuation and Qualifying Accounts
(Thousands)
Years Ended December 31, 2001, 2000 and 1999
Classification
Beginning
of Year
Additions
Write-offs (a)
Adjustments
End
of Year
Allowance for Doubtful
Accounts - Accounts
Receivable
$18,781
$27,435
$(28,417)
$(16)
$17,783
(c)
Allowance for Doubtful
Accounts - Accounts
Receivable
$6,645
$21,240
$(20,365)
$11,261
(b)
$18,781
(c)
Deferred Tax Asset
Valuation Allowance
$1,191
-
-
$(1,191)
(d)
-
Allowance for Doubtful
Accounts - Accounts
Receivable
$9,279
$12,446
$(15,080)
-
$6,645
(c)
Deferred Tax Asset
Valuation Allowance
$2,001
-
-
$(810)
(e)
$1,191
(a) Uncollectible accounts charged against the allowance, net of recoveries.
(b) Includes $11,520 due to the mergers with CNE, CMP Group, CTG Resources and Berkshire Energy, and $(259) due to the sale of XENERGY, Inc.
(c) Includes $6.3 million which represents an estimate for NYSEG of the write-offs that will not be recovered in rates.
(d) Due to the sale of XENERGY, Inc.
(e) Reversal of Federal income tax net operating loss.
Selected Financial Data
Central Maine Power Company
Reclassifications: Certain amounts included in Selected Financial Data have been reclassified to conform with the 2001 presentation.
Management's discussion and analysis of financial condition and results of operations
Central Maine Power Company
Liquidity and Capital Resources
Electric Delivery Business
CMP's electric delivery business consists of its regulated electricity transmission and distribution operations in Maine. It also generates electricity from its minority interests in jointly-owned nuclear stations, but no longer sells this energy at retail.
Sale of CMP Nuclear Interests: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Regional Transmission Organization: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Transmission Planning and Expansion: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Electric Transmission Rates : See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Central Maine Power Alternative Rate Plan: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Management's discussion and analysis of financial condition and results of operations
Central Maine Power Company
MPUC Delivery Price Decision: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Central Maine Power Electricity Supply Responsibility: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
MPUC Stranded Cost Proceeding: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Nonutility Generation: CMP expensed approximately $225 million for NUG power in 2001. It estimates that its purchases will total $253 million in 2002; $254 million in 2003, 2004 and 2005; and $209 million in 2006. CMP continues to seek ways to provide relief to its customers from above-market NUG contracts that state regulations ordered it to sign, and which averaged 7.8 cents per kilowatt-hour for 2001. Recovery of these NUG costs is provided for in CMP's current regulatory plans. (See Item 8 - Note 6 to CMP's Consolidated Financial Statements.)
Other Matters
Accounting Issues
Statement 71: See Energy East Corporation's Item 7, Other Matters, Accounting Issues, Statement 71 for the discussion of this item.
Statements 141 and 142: See Energy East Corporation's Item 7, Other Matters, Accounting Issues, Statements 141 and 142 for the discussion of this item. (See Item 8 - Note 1 to CMP's Consolidated Financial Statements.)
Management's discussion and analysis of financial condition and results of operations
Central Maine Power Company
Investing and Financing Activities
Investing Activities: Capital spending totaled $46 million in 2001, $79 million in 2000 (including $23 million from acquisition and $56 million to acquisition) and $65 million in 1999, including nuclear fuel. Capital spending in all three years was financed with internally generated funds and was primarily for the extension of energy delivery service, necessary improvements to existing facilities and compliance with environmental requirements.
Capital spending is projected to be $41 million in 2002. It is expected to be paid for with internally generated funds and will be primarily for the same purposes described above. (See Item 8 - Note 6 to CMP's Consolidated Financial Statements.)
Financing Activities: CMP has a three-year secured credit facility that expires December 23, 2002. The facility provides for maximum borrowings of $75 million. CMP uses short-term borrowings and drawings on its credit facility to provide initial financing for construction and for other corporate purposes. There was $47 million of such short-term debt outstanding at December 31, 2001 and 2000. The weighted-average interest rate on short-term debt was 2.5% at December 31, 2001, and 7.1% at December 31, 2000.
CMP issued the following Series E Medium Term Notes, the proceeds of which were used to redeem short-term debt and for general corporate purposes:
On January 30, 2001, $25 million of 6.67% due January 2006.
On June 20, 2001, $10 million of 7% due June 2011.
On July 16, 2001, $5 million of 6 7/8% due July 2008.
On July 23, 2001, $20 million of 6 3/8% due July 2005.
On August 14, 2001, $15 million of 7% due August 2011.
On December 11, 2001, CMP issued $19.5 million of 5 3/8% Pollution Control Revenue Refunding Bonds due May 2014. The proceeds were used to refund $19.5 million of Floating/Fixed Rate Pollution Control Revenue Bonds.
Management's discussion and analysis of financial condition and results of operations
Central Maine Power Company
Results of Operations
over
Change
over
Change
(Thousands)
Deliveries - Megawatt hours
Retail
Wholesale
9,284
3,333
9,815
3,301
9,539
(5%)
1%
3%
312%
Operating Revenues
$815,050
$890,993
$954,463
(9%)
(7%)
Operating Expenses
$701,306
$794,926
$823,028
(12%)
(3%)
Operating Income
$113,744
$96,067
$131,435
18%
(27%)
Earnings Available for Common Stock
$52,998
$51,492
$65,425
3%
(21%)
Earnings for 2001 increased $2 million compared to the prior year, primarily due to cost control efforts.
Earnings for 2000 decreased $14 million due primarily to lower sales of electricity as a result of the deregulation of Maine's electric industry. CMP no longer supplies electricity unless it is directed by the MPUC to be the standard-offer provider. CMP was the standard-offer provider for commercial and small industrial rate classes beginning in March 2000.
Operating Revenues: Operating revenues decreased $76 million in 2001 primarily as a result of CMP no longer collecting revenue for the supply of electricity to certain retail customers. Those decreases were partially offset by higher transmission revenues and amortization of deferred gains.
Operating revenues decreased $63 million in 2000 as a result of CMP no longer collecting revenue for the supply of electricity unless directed to by the MPUC. An increase in the sale of wholesale electricity partially offset this decrease.
Operating Expenses: Operating expenses for 2001 decreased $94 million primarily due to lower electricity supply costs because CMP no longer supplies electricity unless directed to by the MPUC, and cost control efforts.
Operating expenses decreased by $28 million in 2000 as a result of the sale of generation assets and lower electricity supply costs due to CMP no longer supplying electricity unless directed to by the MPUC.
Central Maine Power Company
Consolidated Balance Sheets
The notes on pages 67 through 77 are an integral part of the financial statements.
Central Maine Power Company
Consolidated Balance Sheets
The notes on pages 67 through 77 are an integral part of the financial statements.
Central Maine Power Company
Consolidated Statements of Income
The notes on pages 67 through 77 are an integral part of the financial statements.
Central Maine Power Company
Consolidated Statements of Cash Flows
The notes on pages 67 through 77 are an integral part of the financial statements.
Central Maine Power Company
Consolidated Statements of Changes in Common Stock Equity
The notes on pages 67 through 77 are an integral part of the financial statements.
Notes to Consolidated Financial Statements
Central Maine Power Company
Note 1. Significant Accounting Policies
Accounts receivable: Accounts receivable on the consolidated balance sheets are shown net of an allowance for doubtful accounts of $3 million at December 31, 2001 and 2000. Bad debt expense was $3 million in 2001, $5 million in 2000 (including $2 million from acquisition and $3 million to acquisition), and $4 million in 1999.
Consolidated statements of cash flows: CMP considers all highly liquid investments with a maturity date of three months or less when acquired to be cash equivalents. Those investments are included in cash and cash equivalents on the consolidated balance sheets.
Depreciation and amortization: CMP determines depreciation expense using the straight-line method. CMP's depreciation accruals were equivalent to 2.9% of average depreciable property for 2001 and 2.8% for 2000 and 1999.
Estimates: Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Goodwill: The excess of the cost over fair value of net assets and as a result of push down accounting is recorded as goodwill and was amortized on a straight-line basis over 40 years through December 31, 2001. CMP evaluates the carrying value of goodwill for impairment at least annually and on an interim basis if there are indications that goodwill might be impaired. Any impairments would be recognized when the fair value of goodwill is less than its carrying value. (See Statements 141 and 142, below.)
Income taxes: Deferred income taxes reflect the effect of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and the amount recognized for tax purposes. Investment tax credits (ITC) are amortized over the estimated lives of the related assets.
Organization: CMP is a wholly-owned subsidiary of CMP Group, Inc. Effective September 1, 2000, CMP Group became a wholly-owned subsidiary of Energy East Corporation. The acquisition was accounted for under the purchase method of accounting and adjustments were included in CMP's financial statements under the push down method of accounting.
Notes to Consolidated Financial Statements
Central Maine Power Company
Principles of consolidation: CMP's financial statements consolidate its majority-owned subsidiaries after eliminating intercompany transactions.
Reclassifications: Certain amounts have been reclassified on the consolidated financial statements to conform with the 2001 presentation.
Regulatory assets and liabilities: Pursuant to Statement 71, CMP capitalizes, as regulatory assets, incurred costs that are probable of recovery in future electric rates. It also records, as regulatory liabilities, obligations to refund previously collected revenue or to spend revenue collected from customers on future costs. Approximately $300 million of the regulatory liability resulting from CMP's sale of nonnuclear assets was used to offset regulatory assets in March 2000.
Unfunded future income taxes and deferred income taxes are amortized as the related temporary differences reverse. Unamortized loss on debt reacquisitions is amortized over the lives of the related debt issues. Nuclear plant obligations, demand-side management program costs, gain on sale of generation assets, other regulatory assets and other regulatory liabilities are amortized over various periods in accordance with CMP's current rate plans. CMP earns a return on substantially all regulatory assets for which funds have been spent.
Revenue recognition: CMP recognizes revenues upon delivery of energy and energy-related products and services to its customers.
Statements 141 and 142: The FASB issued Statement 141 and Statement 142 in July 2001. Statement 141 requires that all business combinations be accounted for using the purchase method of accounting. Use of the pooling-of-interests method of accounting for business combinations is prohibited. Statement 141 also addresses the initial recognition and measurement of goodwill and other intangible assets. The provisions of Statement 141 apply to all business combinations that are initiated after June 30, 2001, and to all business combinations accounted for by the purchase method of accounting that are completed after June 30, 2001. Transition provisions that apply to business combinations completed before July 1, 2001, that were accounted for by the purchase method of accounting, may require companies to reclassify certain intangible assets and/or goodwill.
Statement 142 requires that goodwill no longer be amortized, but instead be tested at least annually for impairment using a two-step impairment test. The first step of the goodwill impairment test identifies potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value is greater than the carrying value, then goodwill is not impaired and the second step is not necessary. The second step of the goodwill impairment test is performed if the carrying amount of a reporting unit is greater than its fair value. If the carrying amount of a reporting unit's goodwill is greater than the implied fair value of its goodwill, the excess is to be recognized as an impairment loss.
Statement 142 also requires that a recognized intangible asset with a finite life be amortized over its useful life and be reviewed for impairment, and that a recognized intangible asset with an indefinite life not be amortized until its life is determined to be no longer indefinite. A recognized intangible asset that is not amortized is to be tested for impairment annually, or more frequently if circumstances indicate an asset might be impaired. If the carrying amount of
Notes to Consolidated Financial Statements
Central Maine Power Company
an intangible asset is greater than its fair value, the excess is to be recognized as an impairment loss. The provisions of Statement 142 are effective for fiscal years beginning after December 15, 2001.
CMP adopted Statements 141 and 142 as of January 1, 2002, which had the following effects: goodwill valued at an estimated $325 million is no longer being amortized and the expected annual decrease in amortization expense for goodwill is $8 million. Management is still evaluating the additional effects that the adoptions may have, including the possible reclassification of goodwill and/or intangible assets and the need to recognize any transition or impairment losses.
Utility plant: CMP charges repairs and minor replacements to operating expense accounts, and capitalizes renewals and betterments, including certain indirect costs. The original cost of utility plant retired or otherwise disposed of and the cost of removal less salvage are charged to accumulated depreciation.
Note 2. Income Taxes
* Includes the effect of the sale of nonnuclear generation assets.
CMP's effective tax rate differed from the statutory rate of 35% due to the following:
(1) Reflects effect of MPUC rate case settlement.
(2) Reflects the effect of the sale of nonnuclear generation assets.
Notes to Consolidated Financial Statements
Central Maine Power Company
CMP's deferred tax assets and liabilities consisted of the following:
Note 3. Long-term Debt
At December 31, 2001 and 2000, CMP's consolidated long-term debt was:
At December 31, 2001, long-term debt, including sinking fund obligations, and capital lease payments (in thousands) that will become due during the next five years are:
$52,959
$63,072
$12,915
$23,003
$27,745
Note 4. Bank Loans and Other Borrowings
CMP uses short-term borrowing to provide initial financing for construction and for other corporate purposes. The weighted-average interest rate on short-term debt was 2.5% at December 31, 2001, and 7.1% at December 31, 2000.
CMP has a revolving credit facility with certain banks that provides for borrowing up to $75 million through December 23, 2002, and which is secured by CMP's accounts receivable. There was $47 million of such short-term debt outstanding under this facility at December 31, 2001 and 2000. The interest rate on borrowings is related to the London Interbank Offered Rate or base-rate-priced loans. The arrangement provides for payment of fees including a facility fee that was .125% per annum, and a utilization fee that was .1% per annum for each day the outstanding balance exceeds 25% of the total facility, at December 31, 2001 and 2000.
Notes to Consolidated Financial Statements
Central Maine Power Company
Note 5. Preferred Stock
At December 31, 2001 and 2000, CMP's cumulative preferred stock was:
(1) At December 31, 2001, CMP had 2,000,000 shares of $25 par value preferred stock and 1,950,000 shares of $100 par value callable preferred stock authorized but unissued.
CMP's redemptions during the period 1999 through 2001: On October 1, 2000, CMP redeemed, at par $9.9 million of 7.999% Flexible Money Market Preferred Stock Series A.
Note 6. Commitments
Capital spending: CMP has commitments in connection with its capital spending program. Capital spending is projected to be $41 million in 2002 and is expected to be paid for with internally generated funds. The program is subject to periodic review and revision. CMP's capital spending will be primarily for the extension of energy delivery service, necessary improvements to existing facilities and compliance with environmental requirements.
Nonutility generator power purchase contracts: CMP expensed approximately $225 million for NUG power in 2001, $243 million in 2000 (including $81 million from acquisition and $162 million to acquisition) and $270 million in 1999. CMP estimates that NUG power purchases will total $253 million in 2002; $254 million in 2003, 2004, and 2005; and $209 million in 2006.
Notes to Consolidated Financial Statements
Central Maine Power Company
Note 7. Jointly-Owned Generation Assets
CMP has ownership interests in four nuclear generating facilities in New England, which are accounted for under the equity method. Three of the facilities have permanently ceased operations, and one of the three has been decommissioned. CMP's estimated liability for decommissioning its various interests in the jointly-owned nuclear plants is $202 million in 2002 dollars. Its current share of these costs is recovered through electric rates.
Maine Yankee: In August 1997 the Board of Directors of Maine Yankee Atomic Power Company voted to permanently shut down and decommission the Maine Yankee plant. The plant had experienced a number of operational and regulatory problems and did not operate after December 6, 1996. The decision to close the plant was based on an economic analysis of the costs, risks and uncertainties associated with operating the plant compared to those associated with closing and decommissioning it.
Yankee Atomic: In 1993 the FERC approved a settlement agreement regarding recovery of decommissioning costs and plant investment, and all issues with respect to the prudence of the owners decision to discontinue operation of the Yankee Atomic plant. CMP estimates that it will not incur any future costs for the shut down of Yankee Atomic.
Connecticut Yankee: In December 1996 the Board of Directors of Connecticut Yankee Atomic Power Company voted to permanently shut down and decommission the Connecticut Yankee plant for economic reasons. The plant did not operate after July 22, 1996.
Vermont Yankee: The Vermont Yankee plant is an operating unit. On August 15, 2001, Vermont Yankee Nuclear Power Corporation reached an agreement to sell the Vermont Yankee nuclear power plant to Entergy Corporation. The transaction includes a power purchase agreement that calls for Entergy to provide all of the plant's electricity to the sellers
Notes to Consolidated Financial Statements
Central Maine Power Company
through 2012, the year the operating license for the plant expires. The sale is subject to the approval of the Public Service Board of Vermont, the NRC, the FERC and other regulatory authorities.
Millstone Unit No. 3: On March 31, 2001, CMP sold its 2.5% direct ownership interest in the Millstone Unit No. 3 nuclear unit. The net proceeds from the sale, $1.4 million including unfunded deferred taxes, were used to reduce a regulatory asset related to CMP's nonnuclear generating assets that were sold in April 1999. CMP contributed $1.3 million to the qualified nuclear trust fund, as part of the sale agreement, and is released from any liability for decommissioning the plant in the future.
Operating expenses: CMP is obligated to pay its proportionate share of the operating expenses, including fuel, depreciation, operation and maintenance expenses, and a return on invested capital, of each of the Yankee Companies referred to above for periods expiring at various dates to 2012. Pursuant to a joint ownership agreement, CMP was similarly obligated to pay its proportionate share of the operating costs of Millstone Unit No. 3, until it was sold in March 2001. CMP is also required to pay its share of the estimated decommissioning costs of each of the Yankee Companies, which are included in CMP's stranded costs for purposes of rate recovery.
Nuclear insurance: The Price-Anderson Act is a federal statute providing, among other things, a limit on the maximum liability for damages resulting from a nuclear incident. The public liability limit for a nuclear incident is approximately $8.9 billion. Should losses stemming from a nuclear incident exceed the commercially available public liability insurance, each licensee of a nuclear facility would be liable for up to $84 million per incident, payable at a rate not to exceed $10 million per year. The $84 million assessment is subject to periodic inflation indexing and a 5% surcharge should funds prove insufficient to pay claims associated with a nuclear incident.
CMP's maximum liability for its interests in Vermont Yankee would be approximately $4 million per incident. The Price-Anderson Act also requires indemnification for precautionary evacuations whether or not a nuclear incident actually occurs.
In addition to the insurance required by the Price-Anderson Act, the nuclear generating facilities carry additional nuclear property damage insurance. Property insurance is obtained through the Nuclear Insurance Pools and Nuclear Electric Insurance Limited and other commercial sources.
Notes to Consolidated Financial Statements
Central Maine Power Company
Note 8. Environmental Liability
From time to time environmental laws, regulations and compliance programs may require changes in CMP's operations and facilities and may increase the cost of electric service.
The U.S. Environmental Protection Agency and various state environmental agencies, as appropriate, notified CMP that it is among the potentially responsible parties who may be liable for costs incurred to remediate certain hazardous substances at six waste sites. The six sites do not include sites where gas was manufactured in the past, which are discussed below. With respect to the six sites, five sites are included in Maine's Uncontrolled Sites Program, one is included on the Massachusetts Non-Priority Confirmed Disposal Site list and three of the sites are also included on the National Priorities list.
Any liability may be joint and several for certain of those sites. CMP has recorded an estimated liability of $1 million related to the six sites. The ultimate cost to remediate the sites may be significantly more than the estimated amount. Factors affecting the estimated remediation amount include the remedial action plan selected, the extent of site contamination and the portion attributed to CMP.
CMP has a program to investigate and perform necessary remediation at its five sites where gas was manufactured in the past. Four sites are part of Maine's Voluntary Response Action Program and three of those four sites are part of Maine's Uncontrolled Sites Program.
CMP's estimate for all costs related to investigation and remediation of the five sites ranges from $1 million to $5 million at December 31, 2001. The estimate could change materially based on facts and circumstances derived from site investigations, changes in required remedial action, changes in technology relating to remedial alternatives and changes to current laws and regulations.
The liability to investigate and perform remediation, as necessary, at the known inactive gas manufacturing sites, reflected on CMP's consolidated balance sheets was $1 million at December 31, 2001 and 2000.
Note 9. Fair Value of Financial Instruments
The carrying amounts and estimated fair values of some of CMP's financial instruments included on its consolidated balance sheets are shown in the following table. The fair values are based on the quoted market prices for the same or similar issues of the same remaining maturities.
Notes to Consolidated Financial Statements
Central Maine Power Company
The carrying amounts for cash and cash equivalents, notes payable and interest accrued approximate their estimated fair values.
Note 10. Accumulated Other Comprehensive Income
Note 11. Retirement Benefits
Due to the merger with Energy East, under purchase accounting all unrecognized actuarial gain/loss, prior service cost and net transition asset/obligation were eliminated as of September 1, 2000.
Other comprehensive income decreased $2 million in 2001 as a result of a change in additional minimum pension liability.
Notes to Consolidated Financial Statements
Central Maine Power Company
CMP assumed a 12% annual rate of increase in the costs of covered health care benefits for 2001 that gradually decreases to 5% by the year 2005.
In 2000 the net periodic benefit cost for pension benefits of $(103,000) includes $(127,000) from acquisition and $24,000 to acquisition; and the net periodic benefit cost for postretirement benefits of $9,235,000 includes $2,582,000 from acquisition and $6,653,000 to acquisition.
The sale of CMP's generation assets in 1999 resulted in a curtailment gain and a settlement gain, which were the result of the termination of certain generation employees. The curtailment gain reduced the expected years of future service under the pension benefit plan and the settlement gain reduced the postretirement benefit obligation.
The net periodic benefit cost for postretirement benefits represents the cost CMP charged to expense for providing health care benefits to retirees and their eligible dependents. The amount of postretirement benefit cost deferred was $42 million as of December 31, 2001, and $45 million as of December 31, 2000. The transition obligation for postretirement benefits is being amortized over a period of 20 years. CMP expects to recover any deferred postretirement costs related to the transition obligation by 2012.
Notes to Consolidated Financial Statements
Central Maine Power Company
A 1% increase or decrease in the health care cost inflation rate from assumed rates would have the following effects:
1% Increase
1% Decrease
Effect on total of service and interest cost components
$1 million
$(1 million)
Effect on postretirement benefit obligation
$9 million
$(8 million)
Note 12. Segment Information
Selected financial information for CMP's business segments is presented in the table below. CMP's electric delivery business, which it conducts in the State of Maine, consists of its transmission and distribution operations. All Operating Revenues; Depreciation and Amortization; Operating Income; Interest Charges, Net; Income Taxes and Earnings Available for Common Stock relate to CMP's electric delivery business. Other consists of CMP's corporate assets.
Electric
Delivery
Other
Total
(Thousands)
Total Assets
$1,857,157
$8,643
$1,865,800
Capital Spending
$46,182
$91
$46,273
Total Assets
$1,919,630
$9,167
$1,928,797
Capital Spending - From Acquisition
- To Acquisition
$22,989
$55,778
$43
$248
$23,032
$56,026
Total Assets
$1,937,716
$9,041
$1,946,757
Capital Spending
$65,090
$7
$65,097
Note 13. Quarterly Financial Information (Unaudited)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Directors of
Central Maine Power Company and Subsidiaries
Augusta, Maine
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 107 present fairly, in all material respects, the financial position of Central Maine Power Company and its subsidiaries ("CMP") at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(2) on page 107 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of CMP's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
January 25, 2002
CENTRAL MAINE POWER COMPANY
SCHEDULE II - Consolidated Valuation and Qualifying Accounts
(Thousands)
Years Ended December 31, 2001, 2000 and 1999
Classification
Beginning
of Year
Additions
Write-offs (a)
Adjustments
End
of Year
Allowance for Doubtful
Accounts - Accounts
Receivable
$2,874
$3,383
$(3,629)
$226
$2,854
Allowance for Doubtful
Accounts - Accounts
Receivable
$2,904
$4,516(b)
$(4,546)
-
$2,874
Allowance for Doubtful
Accounts - Accounts
Receivable
$3,136
$3,576
$(3,808)
-
$2,904
(a) Uncollectible accounts charged against the allowance, net of recoveries.
(b) Includes $1,842 from acquisition and $2,674 to acquisition.
Selected Financial Data
New York State Electric & Gas Corporation
Reclassifications: Certain amounts included in Selected Financial Data have been reclassified to conform with the 2001 presentation.
(1) Includes the effect of the nonrecurring benefit from the sale of an affiliate's coal-fired generation assets that increased net income by $8 million.
(2) Depreciation and amortization includes accelerated amortization of NMP2 related to the sale of an affiliate's coal-fired generation assets, authorized by the NYPSC. (See Item 8 - Note 7 to NYSEG's Financial Statements.)
(3) Includes the effect of the extraordinary loss from the early retirement of debt that decreased net income by $18 million and the writeoff of NMP2 net of the nonrecurring benefit from the sale of an affiliate's coal-fired generation assets that decreased net income by $5 million.
(4) Includes the effect of fees related to an unsolicited tender offer that decreased net income by $17 million.
Management's discussion and analysis of financial condition and results of operations
Liquidity and Capital Resources
Electric Delivery Business
NYSEG's principal electric business is transmitting and distributing electricity. It also generates electricity from its several hydroelectric and two internal combustion stations.
Sale of Nine Mile Point 2: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Independent System Operator (ISO): See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Regional Transmission Organization: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Management's discussion and analysis of financial condition and results of operations
New York State Electric & Gas Corporation
Transmission Planning and Expansion: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Electric Transmission Rates: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
NYSEG Electric Rate Settlement: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
New York State Energy Taxes: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
Nonutility Generation: See Energy East Corporation's Item 7, Electric Delivery Business, for the discussion of this item.
NYSEG expensed approximately $368 million for NUG power in 2001. It estimates that its purchases will total $385 million in 2002, $397 million in 2003, $419 million in 2004, $423 million in 2005 and $414 million in 2006. NYSEG continues to seek ways to provide relief to its customers from above-market NUG contracts that state regulations ordered it to sign, and which averaged 8.54 cents per kilowatt-hour for 2001. Recovery of these NUG costs is provided for in NYSEG's current regulatory plan. (See Item 8 - Note 6 to NYSEG's Financial Statements.)
Natural Gas Delivery Business
NYSEG's natural gas delivery business consists of transporting, storing and distributing natural gas.
Natural Gas Supply Alliance: See Energy East Corporation's Item 7, Natural Gas Delivery Business, for the discussion of this item.
NYSEG Natural Gas Rate Filings: See Energy East Corporation's Item 7, Natural Gas Delivery Business, for the discussion of this item.
NYPSC Collaborative on End State of Energy Competition: See Energy East Corporation's Item 7, Natural Gas Delivery Business, for the discussion of this item.
Other Matters
Accounting Issues
Statement 71: See Energy East Corporation's Item 7, Other Matters, Accounting Issues, Statement 71 for the discussion of this item.
Statements 141 and 142: See Energy East Corporation's Item 7, Other Matters, Accounting Issues, Statements 141 and 142 for the discussion of this item. (See Item 8 - Note 1 to NYSEG's Financial Statements.)
Management's discussion and analysis of financial condition and results of operations
New York State Electric & Gas Corporation
Investing and Financing Activities
NYSEG's financial strength provides the flexibility required to compete in the developing competitive energy market.
Investing Activities: Capital spending, including nuclear fuel, totaled $74 million in 2001, $79 million in 2000 and $69 million in 1999. Capital spending in all three years was financed with internally generated funds and was primarily for necessary improvements to existing facilities, compliance with environmental requirements and the extension of energy delivery service.
Capital spending is projected to be $104 million in 2002. It is expected to be paid for with internally generated funds and will be primarily for the same purposes described above. (See Item 8 - Note 6 to NYSEG's Financial Statements.)
Financing Activities: In August 2001 Energy East provided a $100 million equity contribution to NYSEG. The contribution was used by NYSEG to help repay $152 million in debt in connection with the termination of its sale of accounts receivable program.
NYSEG also has a revolving credit agreement with certain banks that provides for borrowing up to $200 million through December 31, 2002. There were no amounts outstanding under this agreement during 2001 or 2000.
NYSEG uses short-term, unsecured notes to finance certain refundings and for other corporate purposes. NYSEG had no short-term debt outstanding at December 31, 2001, and $123 million outstanding at December 31, 2000. The weighted-average interest rate on short-term debt was 7.6% at December 31, 2000.
Management's discussion and analysis of financial condition and results of operations
New York State Electric & Gas Corporation
Results of Operations
2001 over 2000 Change
2000 over 1999 Change
(Thousands)
Operating Revenues
$2,037,874
$2,123,024
$2,094,040
(4%)
1%
Operating Income
$448,525
$468,972
$605,655
(4%)
(23%)
Income Before
Extraordinary Item
$194,807
$221,240
$223,700
(12%)
(1%)
Extraordinary Loss,
Net of Tax
-
$1,645
$17,566
(100%)
(91%)
Earnings Available for Common Stock
$194,411
$219,199
$203,428
(11%)
8%
Earnings
Earnings for 2001 decreased $17 million, excluding a nonrecurring benefit in 2000 from the sale of an affiliate's coal-fired generation assets. The decrease is primarily due to lower electric transmission revenues, higher prices of natural gas purchased and lower retail natural gas deliveries because of warmer weather in 2001. Those decreases were partially offset by cost control efforts.
Earnings for 2000 decreased $25 million, excluding the nonrecurring benefits in 2000 and 1999 from the sale of an affiliate's coal-fired generation assets net of the NMP2 writeoff and after excluding the extraordinary losses related to the early retirement of debt. The decrease was primarily due to higher costs of energy due to higher market prices, lower retail electricity prices and higher than anticipated ancillary services costs associated with the NYISO. Those decreases were partially offset by higher retail deliveries, cost control efforts and transmission revenues.
Management's discussion and analysis of financial condition and results of operations
New York State Electric & Gas Corporation
Operating Results for the Electric Delivery Business
2001 over 2000 Change
2000 over 1999 Change
(Thousands)
Deliveries - Megawatt-hours
Retail
Wholesale
13,955
2,714
13,953
4,988
13,843
5,522
-
(46%)
1%
(10%)
Operating Revenues
$1,689,464
$1,746,138
$1,763,191
(3%)
(1%)
Operating Expenses
$1,249,775
$1,309,337
$1,221,694
(5%)
7%
Operating Income
$439,689
$436,801
$541,497
1%
(19%)
Operating Revenues: Operating revenues decreased $57 million in 2001 due to lower wholesale deliveries and lower transmission revenues.
Operating revenues for 2000 decreased due to lower retail prices primarily due to the retail access program and lower wholesale sales. That decrease was partially offset by transmission revenues and higher retail deliveries due to colder weather in 2000.
Operating Expenses: Operating expenses for 2001 decreased $47 million, excluding the effect of the sale of the company's share of NMP2, due to lower purchased power costs primarily due to lower wholesale deliveries and cost control efforts.
Operating expenses decreased in 2000, excluding a nonrecurring benefit in 1999 from the sale of an affiliate's coal-fired generation assets net of the writeoff of NMP2. That decrease was due to reduced purchased power requirements due to the retail access program, a reduction in amortization of NMP2 and cost control efforts. Those decreases were partially offset by higher purchase costs of electricity primarily due to higher market prices and higher than anticipated ancillary services costs associated with the NYISO.
Management's discussion and analysis of financial condition and results of operations
New York State Electric & Gas Corporation
Operating Results for the Natural Gas Delivery Business
2001 over 2000 Change
2000 over 1999 Change
(Thousands)
Deliveries - Dekatherms
Retail
Wholesale
56,503
6,134
62,102
7,236
59,249
8,617
(9%)
(15%)
5%
(16%)
Operating Revenues
$348,410
$376,886
$330,849
(8%)
14%
Operating Expenses
$339,574
$344,715
$266,691
(1%)
29%
Operating Income
$8,836
$32,171
$64,158
(73%)
(50%)
Operating Revenues: The $28 million decrease in revenues for 2001 is primarily due to lower deliveries because of warmer winter weather and lower natural gas prices for wholesale sales, partially offset by gas cost recovery from nonresidential deliveries.
Operating revenues for 2000 increased primarily due to recovery of increased gas costs for nonresidential deliveries and higher retail deliveries due to colder weather in 2000.
Operating Expenses: Operating expenses in 2001 decreased $5 million primarily due to lower natural gas deliveries and cost control efforts, partially offset by increases in the price of natural gas.
Operating expenses increased in 2000 primarily due to an increase in retail purchased gas costs caused by higher market prices and higher retail deliveries.
New York State Electric & Gas Corporation
Balance Sheets
The notes on pages 91 through 103 are an integral part of the financial statements.
New York State Electric & Gas Corporation
Balance Sheets
The notes on pages 91 through 103 are an integral part of the financial statements.
New York State Electric & Gas Corporation
Statements of Income
Year Ended December 31
(Thousands)
Operating Revenues
Electric
$1,689,464
$1,746,138
$1,763,191
Natural Gas
348,410
376,886
330,849
Total Operating Revenues
2,037,874
2,123,024
2,094,040
Operating Expenses
Electricity purchased and fuel used in generation
801,877
830,008
808,019
Natural gas purchased
247,156
243,482
163,207
Other operating expenses
237,513
256,772
262,045
Maintenance
85,814
87,460
74,695
Depreciation and amortization
101,083
109,484
616,244
Other taxes
128,186
126,846
166,215
Gain on sale of generation assets
(84,083)
-
(674,572)
Deferral of asset sale gain
71,803
-
-
Writeoff of Nine Mile Point 2
-
-
72,532
Total Operating Expenses
1,589,349
1,654,052
1,488,385
Operating Income
448,525
468,972
605,655
Other (Income) and Deductions
(5,602)
4,028
(369)
Interest Charges, Net
103,624
103,279
128,063
Income Before Income Taxes
350,503
361,665
477,961
Income Taxes
155,696
140,425
254,261
Income Before Extraordinary Item
194,807
221,240
223,700
Extraordinary Loss on Early Extinguishment of
Debt, Net of Income Tax Benefit of $1,121 for
2000 and $9,458 for 1999
-
1,645
17,566
Net Income
194,807
219,595
206,134
Preferred Stock Dividends
2,706
Earnings Available for Common Stock
$194,411
$219,199
$203,428
The notes on pages 91 through 103 are an integral part of the financial statements.
New York State Electric & Gas Corporation
Statements of Cash Flows
Year Ended December 31
(Thousands)
Operating Activities
Net income
$194,807
$219,595
$206,134
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization
101,083
109,484
616,244
Income taxes and investment tax credits deferred, net
14,933
1,257
126,084
Gain on sale of generation assets
(84,083)
-
(674,572)
Deferral of asset sale gain
71,803
-
-
Writeoff of Nine Mile Point 2
-
-
72,532
Pension income
(71,855)
(64,854)
(77,559)
Extraordinary loss, net of tax
-
1,645
17,566
Changes in current operating assets and liabilities
Accounts receivable
60,159
(61,745)
(25,548)
Sale of accounts receivable program
(152,000)
-
-
Loan receivable, affiliated company
-
17,789
116,654
Note receivable, current
(12,126)
-
-
Inventory
(3,049)
(11,948)
4,368
Prepayments
1,472
4,719
(1,428)
Accounts payable and accrued liabilities
(51,178)
30,373
28,770
Interest accrued
(610)
(3,022)
Taxes accrued
(1,507)
(5,726)
14,031
Other current liabilities
(6,242)
4,815
(24,481)
Other, net
21,381
26,412
22,887
Net Cash Provided by Operating Activities
83,640
271,206
418,660
Investing Activities
Sale of generation assets
59,441
-
494,146
Utility plant additions
(79,885)
(81,386)
(69,249)
Other property and investments
5,658
3,000
-
Other
24,084
(13,067)
2,560
Net Cash Provided by (Used in) Investing Activities
9,298
(91,453)
427,457
Financing Activities
Equity contribution from parent
100,000
-
-
Capital distribution to parent
-
-
(289,000)
Repayments of first mortgage bonds and preferred
stock, including net premiums
-
(25,392)
(329,719)
Notes payable, net
(123,000)
(40,240)
84,940
Dividends on common and preferred stock
(65,939)
(210,997)
(209,993)
Net Cash Used in Financing Activities
(88,939)
(276,629)
(743,772)
Net Increase (Decrease) in Cash and
Cash Equivalents
3,999
(96,876)
102,345
Cash and Cash Equivalents, Beginning of Year
17,618
114,494
12,149
Cash and Cash Equivalents, End of Year
$21,617
$17,618
$114,494
The notes on pages 91 through 103 are an integral part of the financial statements.
New York State Electric & Gas Corporation
Statements of Changes in Common Stock Equity
The notes on pages 91 through 103 are an integral part of the financial statements.
Notes to Financial Statements
New York State Electric & Gas Corporation
Note 1. Significant Accounting Policies
Accounts receivable: Accounts receivable on the balance sheets are shown net of an allowance for doubtful accounts of $6 million at December 31, 2001 and 2000. Bad debt expense was $14 million in 2001, $13 million in 2000 and $12 million in 1999.
In August 2001 NYSEG terminated its agreement to sell, with limited recourse, undivided percentage interests in certain of its accounts receivable from customers. The agreement allowed NYSEG to receive up to $152 million from the sale of such interests. At December 31, 2000, accounts receivable on the balance sheets is shown net of $152 million of interests in accounts receivable sold. All fees related to the sale of accounts receivable through March 31, 2001, are included in other income and deductions on the statements of income and amounted to approximately $2 million in 2001, $10 million in 2000 and $9 million in 1999. Fees related to the agreement beginning April 1, 2001, which were approximately $3 million, are included in interest expense on the statements of income.
Statements of cash flows: NYSEG considers all highly liquid investments with a maturity date of three months or less when acquired to be cash equivalents. Those investments are included in cash and cash equivalents on the balance sheets.
Depreciation and amortization: NYSEG determines depreciation expense using straight-line rates, based on the average service lives of groups of depreciable property in service. NYSEG's depreciation accruals were equivalent to 2.9% of average depreciable property for 2001, 3.1% for 2000 and 3.4% for 1999. Amortization expense includes the amortization of certain regulatory assets and the accelerated amortization of NMP2 in 1999 as authorized by the NYPSC. (See Note 7. Sale of Affiliate's Coal-Fired Generation Assets.)
Estimates: Preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Goodwill: The excess of the cost over fair value of net assets of purchased businesses is recorded as goodwill and was amortized on a straight-line basis over 40 years through December 31, 2001. NYSEG evaluates the carrying value of goodwill for impairment at least annually and on an interim basis if there are indications that goodwill might be impaired. Any impairments would be recognized when the fair value of goodwill is less than its carrying value. (See Statements 141 and 142, below.)
Notes to Financial Statements
New York State Electric & Gas Corporation
Income taxes: Deferred income taxes reflect the effect of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and the amount recognized for tax purposes. Investment tax credits (ITC) are amortized over the estimated lives of the related assets.
Reclassifications: Certain amounts have been reclassified on the financial statements to conform with the 2001 presentation.
Regulatory assets and liabilities: Pursuant to Statement 71, NYSEG capitalizes, as regulatory assets, incurred costs that are probable of recovery in future electric and natural gas rates. It also records, as regulatory liabilities, obligations to refund previously collected revenue or to spend revenue collected from customers on future costs.
Unfunded future income taxes and deferred income taxes are amortized as the related temporary differences reverse. Unamortized loss on debt reacquisitions is amortized over the lives of the related debt issues. Demand-side management program costs, other regulatory assets and other regulatory liabilities are amortized over various periods in accordance with NYSEG's current rate plans. NYSEG earns a return on all regulatory assets for which funds have been spent.
Revenue recognition: NYSEG recognizes revenues upon delivery of energy and energy-related products and services to its customers.
Risk management: NYSEG uses natural gas futures and options contracts to manage its exposure to fluctuations in natural gas commodity prices. Such contracts allow NYSEG to fix margins on sales of natural gas generally expected to occur in 2002. The cost or benefit of natural gas futures and options contracts is included in the commodity cost when the related sales commitments are fulfilled. At December 31, 2001, NYSEG held natural gas futures and options contracts for nine million dekatherms of natural gas, at an average price of $3.39 per dekatherm, through June 2003.
NYSEG uses electricity contracts, both physical and financial, to manage against fluctuations in the cost of electricity. The contracts allow NYSEG to fix margins on the majority of its retail electricity sales. The cost or benefit of electricity contracts is included in the amount expensed for electricity purchased when the electricity is sold. At December 31, 2001, NYSEG held financial contracts for 4.7 million megawatt-hours, at an average price of $29.52 per megawatt-hour, through April 2003.
NYSEG uses interest rate swap agreements to manage the risk of increases in variable interest rates and to maintain desired fixed-to-floating rate ratios. It records amounts paid and received under the agreements as adjustments to the interest expense of the specific debt issues.
NYSEG does not hold or issue financial instruments for trading or speculative purposes.
In accordance with the FASB's Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities (an amendment of FASB Statement No. 133), NYSEG recognizes the
Notes to Financial Statements
New York State Electric & Gas Corporation
fair value of its natural gas options, futures, financial electricity contracts and interest rate agreements as assets or liabilities on its balance sheets. NYSEG's liability at December 31, 2001, was $30 million. All of these arrangements are designated as cash flow hedging instruments. Changes in the fair value of the cash flow hedging instruments are recognized in other comprehensive income until the underlying transaction occurs. When the underlying transaction occurs, the amounts in accumulated other comprehensive income are reported in the statements of income.
As of December 31, 2001, the maximum length of time over which NYSEG is hedging its exposure to the variability in future cash flows for forecasted transactions is 18 months. NYSEG estimates that losses of $17 million will be reclassified from accumulated other comprehensive income into earnings in 2002, as the underlying transactions occur.
NYSEG has commodity purchase and sales contracts for both capacity and energy that have been designated and qualify for the normal purchase and sale exception in Statement 138.
Statements 141 and 142: The FASB issued Statement 141 and Statement 142 in July 2001. Statement 141 requires that all business combinations be accounted for using the purchase method of accounting. Use of the pooling-of-interests method of accounting for business combinations is prohibited. Statement 141 also addresses the initial recognition and measurement of goodwill and other intangible assets. The provisions of Statement 141 apply to all business combinations that are initiated after June 30, 2001, and to all business combinations accounted for by the purchase method of accounting that are completed after June 30, 2001. Transition provisions that apply to business combinations completed before July 1, 2001, that were accounted for by the purchase method of accounting, may require companies to reclassify certain intangible assets and/or goodwill.
Statement 142 requires that goodwill no longer be amortized, but instead be tested at least annually for impairment using a two-step impairment test. The first step of the goodwill impairment test identifies potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value is greater than the carrying value, then goodwill is not impaired and the second step is not necessary. The second step of the goodwill impairment test is performed if the carrying amount of a reporting unit is greater than its fair value. If the carrying amount of a reporting unit's goodwill is greater than the implied fair value of its goodwill, the excess is to be recognized as an impairment loss.
Statement 142 also requires that a recognized intangible asset with a finite life be amortized over its useful life and be reviewed for impairment, and that a recognized intangible asset with an indefinite life not be amortized until its life is determined to be no longer indefinite. A recognized intangible asset that is not amortized is to be tested for impairment annually, or more frequently if circumstances indicate an asset might be impaired. If the carrying amount of an intangible asset is greater than its fair value, the excess is to be recognized as an impairment loss. The provisions of Statement 142 are effective for fiscal years beginning after December 15, 2001.
NYSEG adopted Statements 141 and 142 as of January 1, 2002, which had the following effects: goodwill valued at an estimated $11 million is no longer being amortized and the expected annual decrease in amortization expense for goodwill is $400,000. Management is still
Notes to Financial Statements
New York State Electric & Gas Corporation
evaluating the additional effects that the adoptions may have, including the possible reclassification of goodwill and/or intangible assets and the need to recognize any transition or impairment losses.
Utility plant: NYSEG charges repairs and minor replacements to operating expense accounts, and capitalizes renewals and betterments, including certain indirect costs. The original cost of utility plant retired or otherwise disposed of and the cost of removal less salvage are charged to accumulated depreciation.
Note 2. Income Taxes
Year Ended December 31
(Thousands)
Current
$140,764
$138,804
$124,268
Deferred, net
Accelerated depreciation
10,036
(5,000)
151,698
Pension benefits
28,917
24,316
37,311
Statement 106 postretirement benefits
(3,479)
(11,417)
(6,618)
Demand-side management
(8,499)
(8,335)
(4,300)
Miscellaneous
(11,221)
2,597
(24,965)
ITC
(822)
(1,661)
(32,591)
Total
155,696
139,304
244,803
Less amount classified as extraordinary item
-
(1,121)
(9,458)
Total Before Extraordinary Item
$155,696
$140,425
$254,261
NYSEG's effective tax rate differed from the statutory rate of 35% due to the following:
Year Ended December 31
(Thousands)
Tax expense at statutory rate
$122,676
$125,615
$157,826
Depreciation and amortization not normalized
15,182
4,408
93,756
ITC amortization
(822)
(1,661)
(27,323)
State taxes, net of federal benefit
16,526
19,172
10,241
Other, net
2,134
(8,230)
10,303
Total
155,696
139,304
244,803
Less amount classified as extraordinary item
-
(1,121)
(9,458)
Total Before Extraordinary Item
$155,696
$140,425
$254,261
In 1999 depreciation not normalized and ITC amortization included the result of the sale of an affiliate's coal-fired generation assets and the writeoff of NMP2. (See Note 7. Sale of Affiliate's Coal-Fired Generation Assets and Note 8. Nuclear Generation Assets.)
Notes to Financial Statements
New York State Electric & Gas Corporation
NYSEG's deferred tax assets and liabilities consisted of the following:
Note 3. Long-term Debt
At December 31, 2001 and 2000, NYSEG's long-term debt was:
At December 31, 2001, long-term debt and capital lease payments (in thousands) that will become due during the next five years are:
$150,873
$576
$578
$559
$37,626
(1) NYSEG's first mortgage bond indenture constitutes a direct first mortgage lien on substantially all of its utility plant. NYSEG's after-tax extraordinary losses on early extinguishment of debt were $2 million in 2000 and $18 million in 1999.
Notes to Financial Statements
New York State Electric & Gas Corporation
Note 4. Bank Loans and Other Borrowings
NYSEG uses short-term, unsecured notes to finance certain refundings and for other corporate purposes. The weighted-average interest rate on short-term debt was 7.6% at December 31, 2000.
NYSEG has a revolving credit agreement with certain banks that provides for borrowing up to $200 million through December 31, 2002. The revolving credit agreement does not require compensating balances. NYSEG had no outstanding loans under this agreement at December 31, 2001 and 2000. At NYSEG's option, the interest rate on borrowings is related to the prime rate, the London Interbank Offered Rate or the interest rate applicable to certain certificates of deposit. The agreement provides for payment of a commitment fee, which was .125% at December 31, 2001 and 2000.
Note 5. Preferred Stock
At December 31, 2001 and 2000, NYSEG's serial cumulative preferred stock was:
(1) At December 31, 2001, NYSEG had 2,353,411 shares of $100 par value preferred stock, 10,800,000 shares of $25 par value preferred stock and 1,000,000 shares of $100 par value preference stock authorized but unissued.
NYSEG redeemed or purchased the following amounts of preferred stock during the period 1999 through 2001:
Date
Series
Amount
February 1, 1999
7.40%
$25 million*
April 1, 1999
3.75%
$7.2 million**
April 1, 1999
4 1/2% (1949)
$2.8 million**
April 1, 1999
4.15%
$1.4 million**
April 1, 1999
4.40%
$4.8 million**
April 1, 1999
4.15% (1954)
$3.1 million**
December 10, 1999
6.30%
$25 million*
* Redeemed ** Purchased at a discount
Notes to Financial Statements
New York State Electric & Gas Corporation
Note 6. Commitments
Capital spending: NYSEG has commitments in connection with its capital spending program. Capital spending is projected to be $104 million in 2002 and is expected to be paid for with internally generated funds. The program is subject to periodic review and revision. NYSEG's capital spending will be primarily for necessary improvements to existing facilities, compliance with environmental requirements and the extension of energy delivery service.
Nonutility generator power purchase contracts: NYSEG expensed approximately $368 million for NUG power in 2001, $358 million in 2000 and $354 million in 1999. NYSEG estimates that its purchases will total $385 million in 2002, $397 million in 2003, $419 million in 2004, $423 million in 2005 and $414 million in 2006.
Note 7. Sale of Affiliate's Coal-Fired Generation Assets
An affiliate completed the sale of its Homer City generation assets to Edison Mission Energy in March 1999, and the sale of its remaining coal-fired generation assets to The AES Corporation in May 1999 for a total of $1.85 billion. The proceeds from the sale of those assets - net of taxes and transaction costs - in excess of the net book value of the generation assets, less funded deferred taxes, were used to write down NYSEG's 18% investment in NMP2 by $380 million. This treatment is in accordance with NYSEG's restructuring plan approved by the NYPSC in January 1998. NYSEG wrote down its investment by an additional $106 million due to the required writeoff of funded deferred taxes related to NMP2. These writedowns are reflected in depreciation and amortization on NYSEG's 1999 statement of income. (See Note 8. Nuclear Generation Assets.)
Note 8. Nuclear Generation Assets
NYSEG had an 18% interest in the output and costs of NMP2 before it was sold. NYSEG's 18% share of NMP2's operating expenses until it was sold is included in various categories on the statements of income.
Sale of Nine Mile Point 2: On November 7, 2001, after receiving all regulatory approvals, NYSEG sold its 18% interest in NMP2 to Constellation Nuclear. For its share of NMP2, NYSEG received at closing $59 million in cash and a $59 million 11% promissory note, which will be paid in five annual payments unless it is prepaid.
On September 28, 2001, NYSEG and the Staff of the NYPSC reached agreement on a joint settlement with respect to the regulatory and ratemaking aspects of the sale of NYSEG's interest in NMP2. On October 26, 2001, the NYPSC issued an order approving the sale, which provided for an asset sale gain account of approximately $110 million to be established at the time of closing. Disposition of the asset sale gain is addressed under the settlement the company reached on January 15, 2002, with the NYPSC Staff and other parties on a joint proposal for a new five-year NYSEG electric rate plan and approval of Energy East's merger with RGS Energy.
Notes to Financial Statements
New York State Electric & Gas Corporation
NYSEG's pre-existing decommissioning funds were transferred to Constellation, which has taken responsibility for all future decommissioning funding.
In 1999 the majority of NYSEG's investment in NMP2 was recovered through a gain on the sale of an affiliate's coal-fired generation assets. The remaining balance was written off pursuant to Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
Note 9. Environmental Liability
From time to time environmental laws, regulations and compliance programs may require changes in NYSEG's operations and facilities and may increase the cost of electric and natural gas service.
The U.S. Environmental Protection Agency and the New York State Department of Environmental Conservation (NYSDEC), as appropriate, notified NYSEG that it is among the potentially responsible parties who may be liable for costs incurred to remediate certain hazardous substances at nine waste sites, not including its sites where gas was manufactured in the past, which are discussed below. With respect to the nine sites, seven sites are included in the New York State Registry of Inactive Hazardous Waste Disposal Sites and three of the sites are also included on the National Priorities list.
Any liability may be joint and several for certain of those sites. NYSEG has recorded an estimated liability of $1 million related to seven of the nine sites. The ultimate cost to remediate the sites may be significantly more than the estimated amount. Factors affecting the estimated remediation amount include the remedial action plan selected, the extent of site contamination and the portion attributed to NYSEG.
NYSEG has a program to investigate and perform necessary remediation at its sites where gas was manufactured in the past. In 1994 and 1996 NYSEG entered into Orders on Consent with the NYSDEC. These Orders require NYSEG to investigate and, where necessary, remediate 34 of its 38 sites. Eight sites are included in the New York State Registry.
NYSEG's estimate for all costs related to investigation and remediation of the 38 sites ranges from $76 million to $173 million at December 31, 2001. That estimate is based on both known and potential site conditions and multiple remediation alternatives for each of the sites. The estimate has not been discounted and is based on costs in 1996 dollars that NYSEG expects to incur through the year 2017. The estimate could change materially based on facts and circumstances derived from site investigations, changes in required remedial action, changes in technology relating to remedial alternatives and changes to current laws and regulations.
The liability to investigate and perform remediation, as necessary, at the known inactive gas manufacturing sites, reflected on NYSEG's balance sheets was $76 million at December 31, 2001, and $77 million at December 31, 2000. NYSEG recorded a corresponding regulatory asset, net of insurance recoveries, since it expects to recover the net costs in rates.
Notes to Financial Statements
New York State Electric & Gas Corporation
Note 10. Accumulated Other Comprehensive Income
Balance, January 1 2000
Change
Balance, December 31 2000
Change
Balance, December 31 2001
(Thousands)
Unrealized gains on investments:
Unrealized holding gains during period, net of income tax expense of $(1,054) for 2000 and $(380) for 2001
-
$1,957
$1,957
$176
$2,133
Net unrealized gains on investments
-
1,957
1,957
2,133
Minimum pension liability adjustment, net of income tax benefit (expense) of $339 for 2000 and $(67) for 2001
-
(630)
(630)
(604)
Unrealized gains (losses)
on derivatives qualified
as hedges:
Unrealized gains on derivatives qualified as hedges arising during the period due to cumulative effect of a change in accounting principle, net of income tax expense of $(36,706) for 2001
Unrealized losses during period on derivatives qualified as hedges, net of income tax benefit of $55,271 for 2001
Reclassification adjustment for losses included in net income, net of income tax benefit of $6,624 for 2001
-
-
-
-
-
-
-
-
-
54,602
(82,219)
9,853
54,602
(82,219)
9,853
Net unrealized (losses) on derivatives qualified
as hedges
-
-
-
(17,764)
(17,764)
Accumulated Other Comprehensive
Income (Loss)
-
$1,327
$1,327
$(17,562)
$(16,235)
Notes to Financial Statements
New York State Electric & Gas Corporation
Note 11. Fair Value of Financial Instruments
The carrying amounts and estimated fair values of some of NYSEG's financial instruments included on its balance sheets are shown in the following table. The fair values are based on the quoted market prices for the same or similar issues of the same remaining maturities.
The carrying amounts for cash and cash equivalents, notes payable and interest accrued approximate their estimated fair values. Special deposits may include restricted funds set aside as collateral for first mortgage bonds. The carrying amount approximates fair value because the special deposits have been invested in securities that mature within one year.
Note 12. Retirement Benefits
NYSEG's postretirement benefits were unfunded as of December 31, 2001 and 2000.
Notes to Financial Statements
New York State Electric & Gas Corporation
NYSEG assumed a 12% annual rate of increase in the costs of covered health care benefits for 2001 that gradually decreases to 5% by the year 2005.
The sale of an affiliate's coal-fired generation assets in 1999 resulted in a curtailment gain and a settlement gain, which were the result of the termination of certain generation employees. The curtailment gain reduced the expected years of future service under the pension benefit plan and the settlement gain reduced the postretirement benefit obligation.
The net periodic benefit cost for postretirement benefits represents the cost NYSEG charged to expense for providing health care benefits to retirees and their eligible dependents. The amount of postretirement benefit cost deferred was $3 million as of December 31, 2001, and $5 million as of December 31, 2000. NYSEG expects to recover any deferred postretirement costs by March 2003. The transition obligation for postretirement benefits is being amortized over a period of 20 years.
A 1% increase or decrease in the health care cost inflation rate from assumed rates would have the following effects:
1% Increase
1% Decrease
Effect on total of service and interest cost components
$1 million
$(1 million)
Effect on postretirement benefit obligation
$18 million
$(16 million)
Notes to Financial Statements
New York State Electric & Gas Corporation
Note 13. Segment Information
Selected financial information for NYSEG's business segments is presented in the table below. NYSEG's electric delivery segment consists of its regulated transmission, distribution and generation operations. Its natural gas delivery segment consists of its regulated transportation, storage and distribution operations. Other includes NYSEG's corporate assets.
Notes to Financial Statements
New York State Electric & Gas Corporation
Note 14. Quarterly Financial Information (Unaudited)
(1) Includes the effect of the nonrecurring benefit from the sale of an affiliate's coal-fired generation assets that increased net income by $8 million.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors,
New York State Electric & Gas Corporation
Ithaca, New York
In our opinion, the financial statements listed in the index appearing under Item 14(a)(1) on page 107 present fairly, in all material respects, the financial position of New York State Electric & Gas Corporation ("NYSEG") at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(2) on page 107 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and financial statement schedule are the responsibility of NYSEG's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 1 and 10 to the financial statements, NYSEG changed its method of accounting for derivative and hedging activities pursuant to Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities (an amendment of FASB Statement No. 133).
PricewaterhouseCoopers LLP
New York, New York
January 25, 2002
NEW YORK STATE ELECTRIC & GAS CORPORATION
SCHEDULE II - Valuation and Qualifying Accounts
(Thousands)
Years Ended December 31, 2001, 2000 and 1999
Classification
Beginning
of Year
Additions
Write-offs (a)
Adjustments
End
of Year (b)
Allowance for Doubtful
Accounts - Accounts
Receivable
$6,300
$14,435
$(14,435)
-
$6,300
Allowance for Doubtful
Accounts - Accounts
Receivable
$6,300
$12,679
$(12,679)
-
$6,300
Allowance for Doubtful
Accounts - Accounts
Receivable
$6,306
$12,407
$(12,413)
-
$6,300
(a) Uncollectible accounts charged against the allowance, net of recoveries.
(b) Represents an estimate of the write-offs that will not be recovered in rates.
PART III
Item 10.
Item 10.
Directors and executive officers of the Registrants
Incorporated herein by reference to the information under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in Energy East's Proxy Statement, which will be filed with the Commission on or before April 30, 2002.
Information regarding CMP's Directors and compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth in CMP's Exhibit 99-1.
Information regarding NYSEG's Directors and compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth in NYSEG's Exhibit 99-1.
Information regarding executive officers of the registrants is on pages 9, 10 and 11 of this report.
Item 11.
Item 11. Executive compensation
Incorporated herein by reference to the information under the captions "Stock Performance Graph," "Executive Compensation," "Employment, Change in Control and Other Arrangements," "Directors' Compensation" and "Report of Executive Compensation and Succession Committee" in Energy East's Proxy Statement, which will be filed with the Commission on or before April 30, 2002.
Information regarding CMP's executive compensation is set forth in CMP's Exhibit 99-1.
Information regarding NYSEG's executive compensation is set forth in NYSEG's Exhibit 99-1.
Item 12.
Item 12. Security ownership of certain beneficial owners and management
Incorporated herein by reference to the information under the caption "Security Ownership of Management" in Energy East's Proxy Statement, which will be filed with the Commission on or before April 30, 2002.
CMP Group, Inc., a wholly-owned subsidiary of Energy East, is the beneficial owner of 100% of CMP's common stock. Information regarding ownership of equity securities of Energy East is set forth in CMP's Exhibit 99-1.
Energy East is the beneficial owner of 100% of NYSEG's common stock. Information regarding ownership of equity securities of Energy East is set forth in NYSEG's Exhibit 99-1.
Item 13.
Item 13. Certain relationships and related transactions
Incorporated herein by reference to the information under the caption "Election of Directors" in
Energy East's Proxy Statement, which will be filed with the Commission on or before April 30, 2002.
None for CMP or NYSEG.
PART IV
Item 14.
Item 14. Exhibits, financial statement schedule, and reports on Form 8-K
(a) The following documents are filed as part of this report for Energy East and CMP:
The following documents are filed as part of this report for NYSEG:
Schedules other than those listed above have been omitted since they are not required, are inapplicable or the required information is presented in the Consolidated Financial Statements, Financial Statements or notes thereto.
Exhibits
(a)(1) The following exhibits are delivered with this report:
Registrant
Exhibit No.
Description
Energy East Corporation
4-4 -
Fourth Supplemental Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of November 14, 2001, related to the Indenture between the Company and JPMorgan Chase Bank, as Trustee, dated as of August 31, 2000.
Energy East Corporation
(A)10-5 -
Supplemental Executive Retirement Plan Amendment
No. 1.
Energy East Corporation
(A)10-14 -
Employment Agreement dated February 8, 2002, for W. W. von Schack.
Energy East Corporation
(A)10-15 -
Employment Agreement dated February 8, 2002, for K. M. Jasinski.
Energy East Corporation
(A)10-16 -
Employment Agreement dated March 1, 2002, for M. I. German.
Energy East Corporation
(A)10-23 -
Energy East Management Corporation Form of Change In Control Agreement.
Energy East Corporation
(A)10-24 -
Energy East Management Corporation Form of Employee Invention and Confidentiality Agreement.
Energy East Corporation
21 -
Subsidiaries.
Energy East Corporation
23 -
Consent of PricewaterhouseCoopers LLP to incorporation by reference into certain registration statements.
Energy East Corporation
99-1 -
Form 11-K for New York State Electric & Gas Corporation Tax Deferred Savings Plan for Salaried Employees.
Energy East Corporation
99-2 -
Form 11-K for New York State Electric & Gas Corporation Tax Deferred Savings Plan for Hourly Paid Employees.
Energy East Corporation
99-3 -
Form 11-K for Central Maine Power Company Savings And Investment Plan for Union Employees.
Energy East Corporation
99-4 -
Form 11-K for Central Maine Power Company Savings And Investment Plan for Non-Union Employees.
Energy East Corporation
99-5 -
Form 11-K for The Southern Connecticut Gas Company Target Plan.
Energy East Corporation
99-6 -
Form 11-K for Connecticut Natural Gas Corporation Employee Savings Plan.
Energy East Corporation
99-7 -
Form 11-K for Connecticut Natural Gas Corporation Union Employee Savings Plan.
Energy East Corporation
99-8 -
Form 11-K for Berkshire Energy Resources Retirement Savings Plan.
Energy East Corporation
99-9 -
Form 11-K for Berkshire Energy Resources Retirement Savings Plan for Union Employees.
Central Maine Power Company
10-9 -
Amendatory Agreement between the Company and Maine Yankee Atomic Power Company dated as of August 6, 1997, amending Company Exhibits 10-2 and 10-6.
Central Maine Power Company
(A)10-22 -
Employment Agreement between the Company and Peter E. Bedard dated June 30, 1997.
Central Maine Power Company
(A)10-23 -
First Amendment dated March 18, 1999 to the Employment Agreement between the Company and Peter E. Bedard dated June 30, 1997.
Central Maine Power Company
(A)10-24 -
Employment Agreement between the Company and Douglas A. Herling dated May 12, 1999.
Central Maine Power Company
(A)10-25 -
Employment Agreement between the Company and Stephen G. Robinson dated May 12, 1999.
Central Maine Power Company
21 -
Subsidiaries.
Registrant
Exhibit No.
Description
Central Maine Power Company
23 -
Consent of PricewaterhouseCoopers LLP to incorporation by reference into certain registration statements.
Central Maine Power Company
99-1 -
Information regarding directors, Section 16(a) compliance, executive compensation, employment, change in control and other arrangements, and security ownership of management.
New York State Electric
& Gas Corporation
(A)10-5 -
Amendment No. 1 to Supplemental Executive Retirement Plan, amended and restated effective August 1, 2001.
New York State Electric
& Gas Corporation
23 -
Consent of PricewaterhouseCoopers LLP to incorporation by reference into certain registration statements.
New York State Electric
& Gas Corporation
99-1 -
Information regarding directors, Section 16(a) compliance, executive compensation, employment, change in control and other arrangements, and security ownership of management.
(a)(2) The following exhibits are incorporated herein by reference:
Registrant
Exhibit No.
Filed in
As Exhibit No.
Energy East Corporation
2-1 -
Agreement and Plan of Merger, dated as of February 16, 2001, by and among RGS Energy Group, Inc., the Company and Eagle Merger Corp. - Company's Current Report on Form 8-K dated February 20, 2001 - File No. 1-14766
2.1
Energy East Corporation
3-1 -
Restated Certificate of Incorporation of the Company pursuant to Section 807 of the Business Corporation Law filed in the Office of the Secretary of State of the State of New York on April 23, 1998 - Post-effective Amendment No.1 to Registration
No. 033-54155
4-1
Energy East Corporation
3-2 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on April 26, 1999 - Company's 10-Q for the quarter ended March 31, 1999 - File No.
1-14766
3-3
Energy East Corporation
3-3 -
By-Laws of the Company as amended April 12, 2001 - Company's 10-Q for the quarter ended March 31, 2001 - File No.
1-14766
3-4
Energy East Corporation
4-1 -
Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of August 31, 2000 - Company's 10-Q for the quarter ended September 30, 2000 - File No. 1-14766
4-1
Energy East Corporation
4-2 -
Second Supplemental Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of November 14, 2000 related to the Indenture between the Company and JPMorgan Chase Bank, as Trustee, dated as of August 31, 2000 - Company's 10-K for the year ended December 31, 2000 - File No. 1-14766
4-2
Registrant
Exhibit No.
Filed in
As Exhibit No.
Energy East Corporation
4-3 -
Third Supplemental Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of November 14, 2000 related to the Indenture between the Company and JPMorgan Chase Bank, as Trustee, dated as of August 31, 2000 - Company's 10-K for the year ended December 31, 2000 - File No. 1-14766
4-3
Energy East Corporation
4-5 -
Subordinated Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of July 24, 2001 - Company's 10-Q for the quarter ended September 30, 2001 - File No. 1-14766
4-4
Energy East Corporation
4-6 -
First Supplemental Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of July 24, 2001, related to the Subordinated Indenture between the Company and JPMorgan Chase Bank, as Trustee, dated as of July 24, 2001 - Company's 10-Q for the quarter ended September 30, 2001 - File No. 1-14766
4-5
Energy East Corporation
(A)10-1 -
Deferred Compensation Plan for Directors - Company's 10-Q for the quarter ended September 30, 2000 - File No. 1-14766
10-40
Energy East Corporation
(A)10-2 -
Amended and Restated Director Share Plan - Company's 10-Q for the quarter ended September 30, 2000 - File No.
1-14766
10-38
Energy East Corporation
(A)10-3 -
Deferred Compensation Plan - Director Share Plan - Company's 10-Q for the quarter ended September 30, 2000 - File No. 1-14766
10-39
Energy East Corporation
(A)10-4 -
Supplemental Executive Retirement Plan - Company's 10-Q for the quarter ended September 30, 2001 - File No. 1-14766
10-33
Energy East Corporation
(A)10-6 -
Annual Executive Incentive Plan - Company's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-8
Energy East Corporation
(A)10-7 -
Annual Executive Incentive Plan Amendment No. 1 - Company's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-9
Energy East Corporation
(A)10-8 -
Annual Executive Incentive Plan Amendment No. 2 - Company's 10-Q for
the quarter ended June 30, 2001 - File
No. 1-14766
10-28
Energy East Corporation
(A)10-9 -
Long-Term Executive Incentive Share Plan - Company's 10-Q for the quarter ended June 30, 2001 - File No. 1-14766
10-29
Energy East Corporation
(A)10-10 -
Long-Term Executive Incentive Share Plan Amendment No. 1 - Company's 10-Q for the quarter ended June 30, 2001 - File
No. 1-14766
10-30
Registrant
Exhibit No.
Filed in
As Exhibit No.
Energy East Corporation
(A)10-11 -
New York State Electric & Gas Corporation Long-Term Executive Incentive Share Plan Deferred Compensation Agreement - New York State Electric & Gas Corporation's
10-K for the year ended December 31, 1995 - File No. 1-3103-2
10-44
Energy East Corporation
(A)10-12 -
Company Deferred Compensation Plan for New York State Electric & Gas Corporation's Long-Term Executive Incentive Share Plan - Company's 10-K for the year ended December 31, 1999 -
File No. 1-14766
10-14
Energy East Corporation
(A)10-13 -
Company Deferred Compensation Plan - Salaried Employees - Company's 10-K for the year ended December 31, 1999 - File No. 1-14766
10-23
Energy East Corporation
(A)10-17 -
Restricted Stock Plan - Company's 10-K for the year ended December 31, 1998 - File No. 1-14766
10-36
Energy East Corporation
(A)10-18 -
2000 Stock Option Plan - Company's 10-Q for the quarter ended June 30, 2000 - File No. 1-14766
10-36
Energy East Corporation
(A)10-19 -
2000 Stock Option Plan Amendment No. 1 - Company's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-25
Energy East Corporation
(A)10-20 -
Award Agreement under the 2000 Stock Option Plan - Company's 10-Q for the quarter ended June 30, 2000 - File
No. 1-14766
10-37
Energy East Corporation
(A)10-21 -
Award Agreement (February 2001) under the 2000 Stock Option Plan - Company's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-27
Energy East Corporation
(A)10-22 -
Energy East Management Corporation Supplemental Executive Retirement Plan - Company's 10-Q for the quarter ended September 30, 2001 - File No. 1-14766
10-34
Central Maine Power Company
3-1 -
Articles of Incorporation, as amended - Company's 10-K for the year ended December 31, 1992 - File No. 1-5139
3-1
Central Maine Power Company
3-2 -
Articles of Amendment to the Articles of Incorporation - Company's 10-K for the year ended December 31, 2000 - File
No. 1-5139
3-1.2
Central Maine Power Company
3-3 -
Amended and Restated By-Laws - Company's 10-Q for the quarter ended June 30, 2001 - File No. 1-5139
3-2
Central Maine Power Company
4-1 -
Indenture, dated as of August 1, 1989, between the Company and The Bank of New York, as Trustee, relating to the Medium-Term Notes - Registration No.
33-29626
4.1
Registrant
Exhibit No.
Filed in
As Exhibit No.
Central Maine Power Company
4-2 -
Fifth Supplemental Indenture dated as of May 18, 2000, relating to the Medium-Term Notes, Series E, and supplementing the Indenture dated as of August 1, 1989, between the Company and The Bank of New York, as Trustee - Registration No. 333-36456
4-6
Central Maine Power Company
10-1 -
Stockholder Agreement dated as of May 20, 1968 among the Company and the other stockholders of Maine Yankee Atomic Power Company - Registration No. 2-32333
4.30
Central Maine Power Company
10-2 -
Power Contract dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company - Registration No. 2-32333
4.31
Central Maine Power Company
10-3 -
Amendment No. 1 dated as of March 1, 1984 to Power Contract dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company - Maine Yankee Atomic Power Company's 10-K for the year ended December 31, 1985 - File No. 1-6554
10.1.1
Central Maine Power Company
10-4 -
Amendment No. 2 dated as of January 1, 1984 to Power Contract dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company - Maine Yankee Atomic Power Company's 10-K for the year ended December 31, 1985 - File No. 1-6554
10-1.2
Central Maine Power Company
10-5 -
Amendment No. 3 dated as of October 1, 1984 to Power Contract dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company - Maine Yankee Atomic Power Company's 10-K for the year ended December 31, 1985 - File No. 1-6554
10-1.3
Central Maine Power Company
10-6 -
Additional Power Contract between the Company and Maine Yankee Atomic Power Company dated as of February 1, 1984 - Maine Yankee Atomic Power Company's 10-K for the year ended December 31, 1985 - File No. 1-6554
10-1.4
Central Maine Power Company
10-7 -
Capital Funds Agreement dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company - Registration No. 2-32333
4.32
Central Maine Power Company
10-8 -
Amendment No. 1 dated as of August 1, 1985 to Capital Funds Agreement dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company - Maine Yankee Atomic Power Company's 10-K for the year ended December 31, 1985 - File No. 1-6554
10-2.1
Registrant
Exhibit No.
Filed in
As Exhibit No.
Central Maine Power Company
(A)10-10 -
Energy East Corporation's Supplemental Executive Retirement Plan - Energy East Corporation's 10-Q for the quarter ended September 30, 2001 - File No. 1-14766
10-33
Central Maine Power Company
(A)10-11 -
Energy East Corporation's Supplemental Executive Retirement Plan Amendment No. 1 - Energy East Corporation's 10-K for the year ended December 31, 2001 - File No. 1-14766
10-5
Central Maine Power Company
(A)10-12 -
Energy East Corporation's Annual Executive Incentive Plan - Energy East Corporation's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-8
Central Maine Power Company
(A)10-13 -
Energy East Corporation's Annual Executive Incentive Plan Amendment
No. 1 - Energy East Corporation's 10-K
for the year ended December 31, 2000 - File No. 1-14766
10-9
Central Maine Power Company
(A)10-14 -
Energy East Corporation's Annual Executive Incentive Plan Amendment
No. 2 - Energy East Corporation's 10-Q
for the quarter ended June 30, 2001 - File No. 1-14766
10-28
Central Maine Power Company
(A)10-15 -
Energy East Corporation's Restricted Stock Plan - Energy East Corporation's
10-K for the year ended December 31, 1998 - File No. 1-14766
10-36
Central Maine Power Company
(A)10-16 -
Energy East Corporation's 2000 Stock Option Plan - Energy East Corporation's 10-Q for the quarter ended June 30, 2000 - File No. 1-14766
10-36
Central Maine Power Company
(A)10-17 -
Energy East Corporation's 2000 Stock Option Plan Amendment No. 1 - Energy East Corporation's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-25
Central Maine Power Company
(A)10-18 -
Energy East Corporation's Award Agreement (February 2001) under the 2000 Stock Option Plan - Energy East Corporation's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-27
Central Maine Power Company
(A)10-19 -
Amended and Restated Employment Agreement between the Company, Energy East Corporation and Sara J. Burns dated June 14, 1999 - Company's 10-K for the year ended December 31, 2000 -
File No. 1-5139
10-104
Central Maine Power Company
(A)10-20 -
Employment Agreement between the Company and Curtis I. Call dated June 30, 1997 - Company's 10-K for the year ended December 31, 1998 - File No. 1-5139
10-107
Central Maine Power Company
(A)10-21 -
First Amendment dated as of March 18, 1999 to the Employment Agreement between the Company and Curtis I. Call dated June 30, 1997 - Company's 10-K for the year ended December 31, 1999 - File No. 1-5139
10-107.1
Registrant
Exhibit No.
Filed in
As Exhibit No.
New York State Electric
& Gas Corporation
3-1 -
Restated Certificate of Incorporation of the Company pursuant to Section 807 of the Business Corporation Law filed in the Office of the Secretary of State of the State of New York on October 25, 1988 - Registration No. 33-50719
4-11
New York State Electric
& Gas Corporation
3-2 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 17, 1989 - Registration No.
33-50719
4-12
New York State Electric
& Gas Corporation
3-3 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on May 22, 1990 - Registration No.
33-50719
4-13
New York State Electric
& Gas Corporation
3-4 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 31, 1990 - Registration No.
33-50719
4-14
New York State Electric
& Gas Corporation
3-5 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on February 6, 1991 - Registration No.
33-50719
4-15
New York State Electric
& Gas Corporation
3-6 -
Certificate of Merger of Columbia Gas of New York, Inc. into the Company filed in the Office of the Secretary of State of the State of New York on April 8, 1991 - Registration No. 33-50719
4-20
New York State Electric
& Gas Corporation
3-7 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 15, 1991 - Registration No.
33-50719
4-16
New York State Electric
& Gas Corporation
3-8 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New
York on May 28, 1992 - Registration No. 33-50719
4-17
New York State Electric
& Gas Corporation
3-9 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New
York on October 20, 1992 - Registration No. 33-50719
4-18
New York State Electric
& Gas Corporation
3-10 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 14, 1993 - Registration No.
33-50719
4-19
New York State Electric
& Gas Corporation
3-11 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on December 10, 1993 - Company's 10-K for the year ended December 31, 1993 - File No. 1-3103-2
3-11
Registrant
Exhibit No.
Filed in
As Exhibit No.
New York State Electric
& Gas Corporation
3-12 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on December 20, 1993 - Company's 10-K for the year ended December 31, 1993 - File No. 1-3103-2
3-12
New York State Electric
& Gas Corporation
3-13 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on December 20, 1993 - Company's 10-K for the year ended December 31, 1993 - File No. 1-3103-2
3-13
New York State Electric
& Gas Corporation
3-14 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on September 6, 2000 - Company's 10-Q for the quarter ended September 30, 2000 - File No. 1-3103-2
3-16
New York State Electric
& Gas Corporation
3-15 -
Certificates of the Secretary of the Company concerning consents dated March 20, 1957, May 9, 1975, and April 1, 1999, of holders of Serial Preferred Stock with respect to issuance of certain unsecured indebtedness - Company's
10-Q for the quarter ended March 31, 1999 - File No. 1-3103-2
3-16
New York State Electric
& Gas Corporation
3-16 -
By-Laws of the Company as amended August 29, 2000 - Company's 10-Q for the quarter ended September 30, 2000 - File No. 1-3103-2
3-17
New York State Electric
& Gas Corporation
4-1 -
First Mortgage dated as of July 1, 1921 executed by the Company under its then name of "New York State Gas and Electric Corporation" to The Equitable Trust Company of New York, as Trustee (JPMorgan Chase Bank is Successor Trustee) - Registration No. 33-4186
4-1
New York State Electric & Gas Corporation Supplemental Indentures to First Mortgage dated as of
July 1, 1921:
4-2 -
No. 37 - Registration No. 33-31297
4-2
4-3 -
No. 39 - Registration No. 33-31297
4-3
4-4 -
No. 43 - Registration No. 33-31297
4-4
4-5 -
No. 51 - Registration No. 2-59840
2-B(46)
4-6 -
No. 75 - Registration No. 2-59840
2-B(70)
4-7 -
No. 103 - Registration No. 33-43458
4-8
4-8 -
No. 104 - Registration No. 33-43458
4-9
4-9 -
No. 105 - Registration No. 33-52040
4-8
4-10 -
No. 106 - Company's 10-K for the year ended December 31, 1992 - File No.
1-3103-2
4-23
4-11 -
No. 107 - Company's 10-K for the year ended December 31, 1992 - File No.
1-3103-2
4-24
4-12 -
No. 108 - Registration No. 33-50719
4-8
4-13 -
No. 109 - Registration No. 33-50719
4-9
Registrant
Exhibit No.
Filed in
As Exhibit No.
New York State Electric
& Gas Corporation
10-1 -
Agreement between New York Independent System Operator and Transmission Owners, dated as of December 2, 1999 - Company's 10-K for the year ended December 31, 1999 - File No. 1-3103-2
10-1
New York State Electric
& Gas Corporation
10-2 -
Independent System Operator Agreement, dated as of December 2, 1999 - Company's 10-K for the year ended December 31, 1999 - File No. 1-3103-2
10-2
New York State Electric
& Gas Corporation
10-3 -
Asset Purchase Agreement by and among Niagara Mohawk Power Corporation, the Company, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation and Constellation Energy Group, Inc. and Constellation Nuclear, LLC dated as of December 11, 2000 - Company's 10-K for the year ended December 31, 2000 - File No. 1-3103-2
10-5
New York State Electric
& Gas Corporation
(A)10-4 -
Supplemental Executive Retirement Plan, amended and restated effective August 1, 2001 - Company's 10-Q for the quarter ended September 30, 2001 - File No.
1-3103-2
10-31
New York State Electric
& Gas Corporation
(A)10-6 -
Energy East Corporation's Supplemental Executive Retirement Plan - Energy East Corporation's 10-Q for the quarter ended September 30, 2001 - File No. 1-14766
10-33
New York State Electric
& Gas Corporation
(A)10-7 -
Energy East Corporation's Supplemental Executive Retirement Plan Amendment No. 1 - Energy East Corporation's 10-K for the year ended December 31, 2001 - File No. 1-14766
10-5
New York State Electric
& Gas Corporation
(A)10-8 -
Energy East Corporation's Annual Executive Incentive Plan - Energy East Corporation's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-8
New York State Electric
& Gas Corporation
(A)10-9 -
Energy East Corporation's Annual Executive Incentive Plan Amendment No. 1 - Energy East Corporation's 10-K for the year ended December 31, 2000 - File No.
1-14766
10-9
New York State Electric
& Gas Corporation
(A)10-10 -
Energy East Corporation's Annual Executive Incentive Plan Amendment No. 2 - Energy East Corporation's 10-Q for the quarter ended June 30, 2001 - File No.
1-14766
10-28
New York State Electric
& Gas Corporation
(A)10-11 -
Energy East Corporation's Long-Term Executive Incentive Share Plan - Energy East Corporation's 10-Q for the quarter ended June 30, 2001 - File No. 1-14766
10-29
New York State Electric
& Gas Corporation
(A)10-12 -
Energy East Corporation's Long-Term Executive Incentive Share Plan Amendment No. 1 - Energy East Corporation's 10-Q for the quarter ended June 30, 2001 - File No. 1-14766
10-30
Registrant
Exhibit No.
Filed in
As Exhibit No.
New York State Electric
& Gas Corporation
(A)10-13 -
Long-Term Executive Incentive Share Plan Deferred Compensation Agreement - Company's 10-K for the year ended December 31, 1995 - File No. 1-3103-2
10-44
New York State Electric
& Gas Corporation
(A)10-14 -
Form of Severance Agreement for Senior Vice Presidents - Company's 10-K for the year ended December 31, 1993 - File No.
1-3103-2
10-47
New York State Electric
& Gas Corporation
(A)10-15 -
Form of Severance Agreement for Senior Vice Presidents Amendment No. 1 - Company's 10-K for the year ended December 31, 1995 - File No. 1-3103-2
10-50
New York State Electric
& Gas Corporation
(A)10-16 -
Form of Severance Agreement for Senior Vice Presidents Amendment No. 2 - Company's Schedule 14D-9, dated
July 30, 1997
New York State Electric
& Gas Corporation
(A)10-17 -
Form of Severance Agreement for Senior Vice Presidents Amendment No. 3 - Company's Schedule 14D-9, dated
July 30, 1997
New York State Electric
& Gas Corporation
(A)10-18 -
Form of Severance Agreement for Vice Presidents - Company's 10-K for the year ended December 31, 1993 - File No.
1-3103-2
10-48
New York State Electric
& Gas Corporation
(A)10-19 -
Form of Severance Agreement for Vice Presidents Amendment No. 1 - Company's 10-K for the year ended December 31, 1995 - File No. 1-3103-2
10-52
New York State Electric
& Gas Corporation
(A)10-20 -
Form of Severance Agreement for Vice Presidents Amendment No. 2 - Company's Schedule 14D-9, dated July 30, 1997
New York State Electric
& Gas Corporation
(A)10-21 -
Form of Severance Agreement for Vice Presidents Amendment No. 3 - Company's Schedule 14D-9, dated July 30, 1997
New York State Electric
& Gas Corporation
(A)10-22 -
Form of Amendment to the Company's Severance Agreements - Company's 10-Q for the quarter ended June 30, 1998 - File No. 1-3103-2
10-51
New York State Electric
& Gas Corporation
(A)10-23 -
Employee Invention and Confidentiality Agreement (Existing Executive) - Company's Schedule 14D-9, dated
July 30, 1997
New York State Electric
& Gas Corporation
(A)10-24 -
Employee Invention and Confidentiality Agreement (Existing Executive) Amendment No. 1 - Company's Schedule 14D-9, dated July 30, 1997
New York State Electric
& Gas Corporation
(A)10-25 -
Deferred Compensation Plan for Salaried Employees - Company's 10-K for the year ended December 31, 1995 - File No.
1-3103-2
10-53
New York State Electric
& Gas Corporation
(A)10-26 -
Energy East Corporation's Restricted Stock Plan - Energy East Corporation's
10-K for the year ended December 31, 1998 - File No. 1-14766
10-36
Registrant
Exhibit No.
Filed in
As Exhibit No.
New York State Electric
& Gas Corporation
(A)10-27 -
Energy East Corporation's 2000 Stock Option Plan - Energy East Corporation's 10-Q for the quarter ended June 30, 2000 - File No. 1-14766
10-36
New York State Electric
& Gas Corporation
(A)10-28 -
Energy East Corporation's 2000 Stock Option Plan Amendment No. 1 - Energy East Corporation's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-25
New York State Electric
& Gas Corporation
(A)10-29 -
Energy East Corporation's Award Agreement under the 2000 Stock Option Plan - Energy East Corporation's 10-Q for the quarter ended June 30, 2000 - File No. 1-14766
10-37
New York State Electric
& Gas Corporation
(A)10-30 -
Energy East Corporation's Award Agreement (February 2001) under the 2000 Stock Option Plan - Energy East Corporation's 10-K for the year ended December 31, 2000 - File No. 1-14766
10-27
_____________________________
(A) Management contract or compensatory plan or arrangement.
Energy East agrees to furnish to the Commission, upon request, a copy of the following documents. The total amount of securities authorized under each of such documents does not exceed 10% of the total assets of Energy East:
A.
Credit Agreement among The Southern Connecticut Gas Company, Connecticut Natural Gas Corporation and The Berkshire Gas Company, and Fleet National Bank, as Agent, dated June 28, 2001.
B.
The Southern Connecticut Gas Company's Indenture, dated as of March 1, 1948, with The Bridgeport City Trust Company (now State Street Bank and Trust Company), as Trustee, and Supplemental Indentures related thereto.
C.
Connecticut Natural Gas Corporation's Indenture of Mortgage and Deed of Trust, dated February 1, 1947, with The First National Bank of Hartford (now State Street Bank and Trust Company), as Trustee, and Supplemental Indentures related thereto.
D.
Connecticut Natural Gas Corporation's Issuing and Paying Agency Agreement with The Connecticut National Bank (now State Street Bank and Trust Company) for Medium Term Notes, Series A, dated November 1, 1991.
E.
Connecticut Natural Gas Corporation's Issuing and Paying Agency Agreement with Shawmut Bank Connecticut, National Association (now State Street Bank and Trust Company) for Medium Term Notes, Series B, dated June 14, 1994, and an Amendment related thereto.
F.
The Berkshire Gas Company's First Mortgage Indenture and Deed of Trust, dated as of July 1, 1954, with Chemical Corn Exchange Bank (now JPMorgan Chase Bank), and the Supplemental Indenture related thereto.
G.
The Berkshire Gas Company's Mortgage and Security Agreement, dated as of August 31, 2000, with KeyBank National Association, and Letter Agreement related thereto.
H.
The Berkshire Gas Company's Term Loan Agreement, dated as of December 14, 1993, with Fleet National Bank, and Amendments related thereto.
CMP agrees to furnish to the Commission, upon request, a copy of the Loan and Trust Agreement dated as of December 1, 2001, among The Business Finance Authority of the State of New Hampshire and CMP and State Street Bank and Trust Company, as Trustee, relating to Pollution Control Revenue Refunding Bonds (Series 2001). The total amount of securities authorized under such agreement does not exceed 10% of the total assets of CMP.
NYSEG agrees to furnish to the Commission, upon request, a copy of the Revolving Credit Agreement dated as of July 31, 1992, as amended, between NYSEG, The Chase Manhattan Bank, as Agent, and certain banks; a copy of the Participation Agreements dated as of June 1, 1987, and December 1, 1988, between NYSEG and New York State Energy Research and Development Authority (NYSERDA) relating to Adjustable Rate Pollution Control Revenue Bonds (1987 Series A), and (1988 Series A), respectively; a copy of the Participation Agreements dated as of March 1, 1985, October 15, 1985, and December 1, 1985, between NYSEG and NYSERDA relating to Annual Tender Pollution Control Revenue Bonds (1985 Series A), (1985 Series B), and (1985 Series D), respectively, a copy of the Participation Agreements dated as of February 1, 1993, February 1, 1994, June 1, 1994, October 1, 1994, and December 1, 1994, between NYSEG and NYSERDA relating to Pollution Control Refunding Revenue Bonds (1994 Series A), (1994 Series B), (1994 Series C), (1994 Series D), and (1994 Series E), respectively; a copy of the Participation Agreement dated as of December 1, 1993, between NYSEG and NYSERDA relating to Solid Waste Disposal Revenue Bonds (1993 Series A); and a copy of the Participation Agreement dated as of December 1, 1994, between NYSEG and the Indiana County Industrial Development Authority relating to Pollution Control Refunding Revenue Bonds (1994 Series A). The total amount of securities authorized under each of such agreements does not exceed 10% of the total assets of NYSEG.
(b) Reports on Form 8-K
Energy East filed reports on Form 8-K dated October 25, 2001, and December 19, 2001, to report certain information under Item 5, "Other Events".
NYSEG filed a report on Form 8-K dated December 19, 2001, to report certain information under Item 5, "Other Events".
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 25, 2002
ENERGY EAST CORPORATION
By /s/Kenneth M. Jasinski
Kenneth M. Jasinski
Executive Vice President and
Chief Financial Officer
Date: March 25, 2002
CENTRAL MAINE POWER COMPANY
By /s/Curtis I. Call
Curtis I. Call
Vice President, Controller & Treasurer
Date: March 25, 2002
NEW YORK STATE ELECTRIC & GAS CORPORATION
By /s/Sherwood J. Rafferty
Sherwood J. Rafferty
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of each Registrant and in the capacities and on the dates indicated.
ENERGY EAST CORPORATION
Date: March 25, 2002
PRINCIPAL EXECUTIVE OFFICER
By /s/Wesley W. von Schack
Wesley W. von Schack
Chairman, President, Chief
Executive Officer & Director
Date: March 25, 2002
PRINCIPAL FINANCIAL OFFICER
By /s/Kenneth M. Jasinski
Kenneth M. Jasinski
Executive Vice President and
Chief Financial Officer
Date: March 25, 2002
PRINCIPAL ACCOUNTING OFFICER
By /s/Robert E. Rude
Robert E. Rude
Vice President and Controller
Signatures
(Cont'd)
ENERGY EAST CORPORATION, cont'd
Date: March 25, 2002
By /s/Richard Aurelio
Richard Aurelio, Director
Date: March 25, 2002
By /s/James A. Carrigg
James A. Carrigg, Director
Date: March 25, 2002
By /s/Alison P. Casarett
Alison P. Casarett, Director
Date: March 25, 2002
By /s/Joseph J. Castiglia
Joseph J. Castiglia, Director
Date: March 25, 2002
By /s/Lois B. DeFleur
Lois B. DeFleur, Director
Date: March 25, 2002
By /s/Paul L. Gioia
Paul L. Gioia, Director
Date: March 25, 2002
By /s/David M. Jagger
David M. Jagger, Director
Date: March 25, 2002
By /s/John M. Keeler
John M. Keeler, Director
Date: March 25, 2002
By /s/Ben E. Lynch
Ben E. Lynch, Director
Date: March 25, 2002
By /s/Peter J. Moynihan
Peter J. Moynihan, Director
Date: March 25, 2002
By /s/Walter G. Rich
Walter G. Rich, Director
Signatures (Cont'd)
CENTRAL MAINE POWER COMPANY
Date: March 25, 2002
PRINCIPAL EXECUTIVE OFFICER
By /s/Sara J. Burns
Sara J. Burns
President and Director
Date: March 25, 2002
PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER
By /s/Curtis I. Call
Curtis I. Call
Vice President, Controller & Treasurer
Date: March 25, 2002
By /s/Kenneth M. Jasinski
Kenneth M. Jasinski, Director
Date: March 25, 2002
By /s/Wesley W. von Schack
Wesley W. von Schack, Director
Signatures (Cont'd)
NEW YORK STATE ELECTRIC & GAS CORPORATION
Date: March 25, 2002
PRINCIPAL EXECUTIVE OFFICER
By /s/Ralph R. Tedesco
Ralph R. Tedesco
President and Director
Date: March 25, 2002
PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER
By /s/Sherwood J. Rafferty
Sherwood J. Rafferty
Senior Vice President and
Chief Financial Officer
Date: March 25, 2002
By /s/Kenneth M. Jasinski
Kenneth M. Jasinski, Director
Date: March 25, 2002
By /s/Wesley W. von Schack
Wesley W. von Schack, Director
EXHIBIT INDEX
Registrant
Exhibit No.
Description
Energy East Corporation
*2-1 -
Agreement and Plan of Merger, dated as of February 16, 2001, by and among RGS Energy Group, Inc., the Company and Eagle Merger Corp.
Energy East Corporation
*3-1 -
Restated Certificate of Incorporation of the Company pursuant to Section 807 of the Business Corporation Law filed in the Office of the Secretary of State of the State of New York on April 23, 1998.
Energy East Corporation
*3-2 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on April 26, 1999.
Energy East Corporation
*3-3 -
By-Laws of the Company as amended April 12, 2001.
Energy East Corporation
*4-1 -
Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of August 31, 2000.
Energy East Corporation
*4-2 -
Second Supplemental Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of November 14, 2000 related to the Indenture between the Company and JPMorgan Chase Bank, as Trustee, dated as of August 31, 2000.
Energy East Corporation
*4-3 -
Third Supplemental Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of November 14, 2000 related to the Indenture between the Company and JPMorgan Chase Bank, as Trustee, dated as of August 31, 2000.
Energy East Corporation
4-4 -
Fourth Supplemental Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of November 14, 2001, related to the Indenture between the Company and JPMorgan Chase Bank, as Trustee, dated as of August 31, 2000.
Energy East Corporation
*4-5 -
Subordinated Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of July 24, 2001.
Energy East Corporation
*4-6 -
First Supplemental Indenture between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, dated as of July 24, 2001, related to the Subordinated Indenture between the Company and JPMorgan Chase Bank, as Trustee, dated as of July 24, 2001.
Energy East Corporation
*(A)10-1 -
Deferred Compensation Plan for Directors.
Energy East Corporation
*(A)10-2 -
Amended and Restated Director Share Plan.
Energy East Corporation
*(A)10-3 -
Deferred Compensation Plan - Director Share Plan.
Energy East Corporation
*(A)10-4 -
Supplemental Executive Retirement Plan.
Energy East Corporation
(A)10-5 -
Supplemental Executive Retirement Plan Amendment No. 1.
Energy East Corporation
*(A)10-6 -
Annual Executive Incentive Plan.
Energy East Corporation
*(A)10-7 -
Annual Executive Incentive Plan Amendment No. 1.
Energy East Corporation
*(A)10-8 -
Annual Executive Incentive Plan Amendment No. 2.
Energy East Corporation
*(A)10-9 -
Long-Term Executive Incentive Share Plan.
Energy East Corporation
*(A)10-10 -
Long-Term Executive Incentive Share Plan Amendment
No. 1.
Energy East Corporation
*(A)10-11 -
New York State Electric & Gas Corporation Long-Term Executive Incentive Share Plan Deferred Compensation Agreement.
Energy East Corporation
*(A)10-12 -
Company Deferred Compensation Plan for New York State Electric & Gas Corporation's Long-Term Executive Incentive Share Plan.
EXHIBIT INDEX
(Cont'd)
Registrant
Exhibit No.
Description
Energy East Corporation
*(A)10-13 -
Company Deferred Compensation Plan - Salaried Employees.
Energy East Corporation
(A)10-14 -
Employment Agreement dated February 8, 2002, for
W. W. von Schack.
Energy East Corporation
(A)10-15 -
Employment Agreement dated February 8, 2002, for
K. M. Jasinski.
Energy East Corporation
(A)10-16 -
Employment Agreement dated March 1, 2002, for
M. I. German.
Energy East Corporation
*(A)10-17 -
Restricted Stock Plan.
Energy East Corporation
*(A)10-18 -
2000 Stock Option Plan.
Energy East Corporation
*(A)10-19 -
2000 Stock Option Plan Amendment No. 1.
Energy East Corporation
*(A)10-20 -
Award Agreement under the 2000 Stock Option Plan.
Energy East Corporation
*(A)10-21 -
Award Agreement (February 2001) under the 2000 Stock Option Plan.
Energy East Corporation
*(A)10-22 -
Energy East Management Corporation Supplemental Executive Retirement Plan.
Energy East Corporation
(A)10-23 -
Energy East Management Corporation Form of Change In Control Agreement.
Energy East Corporation
(A)10-24 -
Energy East Management Corporation Form of Employee Invention and Confidentiality Agreement.
Energy East Corporation
21 -
Subsidiaries.
Energy East Corporation
23 -
Consent of PricewaterhouseCoopers LLP to incorporation by reference into certain registration statements.
Energy East Corporation
99-1 -
Form 11-K for New York State Electric & Gas Corporation Tax Deferred Savings Plan for Salaried Employees.
Energy East Corporation
99-2 -
Form 11-K for New York State Electric & Gas Corporation Tax Deferred Savings Plan for Hourly Paid Employees.
Energy East Corporation
99-3 -
Form 11-K for Central Maine Power Company Savings And Investment Plan for Union Employees.
Energy East Corporation
99-4 -
Form 11-K for Central Maine Power Company Savings And Investment Plan for Non-Union Employees.
Energy East Corporation
99-5 -
Form 11-K for The Southern Connecticut Gas Company Target Plan.
Energy East Corporation
99-6 -
Form 11-K for Connecticut Natural Gas Corporation Employee Savings Plan.
Energy East Corporation
99-7 -
Form 11-K for Connecticut Natural Gas Corporation Union Employee Savings Plan.
Energy East Corporation
99-8 -
Form 11-K for Berkshire Energy Resources Retirement Savings Plan.
Energy East Corporation
99-9 -
Form 11-K for Berkshire Energy Resources Retirement Savings Plan for Union Employees.
Central Maine Power Company
*3-1 -
Articles of Incorporation, as amended.
Central Maine Power Company
*3-2 -
Articles of Amendment to the Articles of Incorporation.
Central Maine Power Company
*3-3 -
Amended and Restated By-Laws.
Central Maine Power Company
*4-1 -
Indenture, dated as of August 1, 1989, between the Company and The Bank of New York, as Trustee, relating to the Medium-Term Notes.
Central Maine Power Company
*4-2 -
Fifth Supplemental Indenture dated as of May 18, 2000, relating to the Medium-Term Notes, Series E, and supplementing the Indenture dated as of August 1, 1989, between the Company and The Bank of New York, as Trustee.
Central Maine Power Company
*10-1 -
Stockholder Agreement dated as of May 20, 1968 among the Company and the other stockholders of Maine Yankee Atomic Power Company.
EXHIBIT INDEX
(Cont'd)
Registrant
Exhibit No.
Description
Central Maine Power Company
*10-2 -
Power Contract dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company.
Central Maine Power Company
*10-3 -
Amendment No. 1 dated as of March 1, 1984 to Power Contract dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company.
Central Maine Power Company
*10-4 -
Amendment No. 2 dated as of January 1, 1984 to Power Contract dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company.
Central Maine Power Company
*10-5 -
Amendment No. 3 dated as of October 1, 1984 to Power Contract dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company.
Central Maine Power Company
*10-6 -
Additional Power Contract between the Company and Maine Yankee Atomic Power Company dated as of February 1, 1984.
Central Maine Power Company
*10-7 -
Capital Funds Agreement dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company.
Central Maine Power Company
*10-8 -
Amendment No. 1 dated as of August 1, 1985 to Capital Funds Agreement dated as of May 20, 1968 between the Company and Maine Yankee Atomic Power Company.
Central Maine Power Company
10-9 -
Amendatory Agreement between the Company and Maine Yankee Atomic Power Company dated as of August 6, 1997, amending Company Exhibits 10-2 and 10-6.
Central Maine Power Company
*(A)10-10 -
Energy East Corporation's Supplemental Executive Retirement Plan.
Central Maine Power Company
*(A)10-11 -
Energy East Corporation's Supplemental Executive Retirement Plan Amendment No. 1.
Central Maine Power Company
*(A)10-12 -
Energy East Corporation's Annual Executive
Incentive Plan.
Central Maine Power Company
*(A)10-13 -
Energy East Corporation's Annual Executive Incentive Plan Amendment No. 1.
Central Maine Power Company
*(A)10-14 -
Energy East Corporation's Annual Executive Incentive Plan Amendment No. 2.
Central Maine Power Company
*(A)10-15 -
Energy East Corporation's Restricted Stock Plan.
Central Maine Power Company
*(A)10-16 -
Energy East Corporation's 2000 Stock Option Plan.
Central Maine Power Company
*(A)10-17 -
Energy East Corporation's 2000 Stock Option Plan Amendment No. 1.
Central Maine Power Company
*(A)10-18 -
Energy East Corporation's Award Agreement (February 2001) under the 2000 Stock Option Plan.
Central Maine Power Company
*(A)10-19 -
Amended and Restated Employment Agreement between the Company, Energy East Corporation and Sara J. Burns dated June 14, 1999.
Central Maine Power Company
*(A)10-20 -
Employment Agreement between the Company and Curtis I. Call dated June 30, 1997.
Central Maine Power Company
*(A)10-21 -
First Amendment dated as of March 18, 1999 to the Employment Agreement between the Company and Curtis I. Call dated June 30, 1997.
Central Maine Power Company
(A)10-22 -
Employment Agreement between the Company and Peter E. Bedard dated June 30, 1997.
Central Maine Power Company
(A)10-23 -
First Amendment dated March 18, 1999 to the Employment Agreement between the Company and Peter E. Bedard dated June 30, 1997.
Central Maine Power Company
(A)10-24 -
Employment Agreement between the Company and Douglas A. Herling dated May 12, 1999.
Central Maine Power Company
(A)10-25 -
Employment Agreement between the Company and Stephen G. Robinson dated May 12, 1999.
EXHIBIT INDEX
(Cont'd)
Registrant
Exhibit No.
Description
Central Maine Power Company
21 -
Subsidiaries.
Central Maine Power Company
23 -
Consent of PricewaterhouseCoopers LLP to incorporation by reference into certain registration statements.
Central Maine Power Company
99-1 -
Information regarding directors, Section 16(a) compliance, executive compensation, employment, change in control and other arrangements, and security ownership of management.
New York State Electric
& Gas Corporation
*3-1 -
Restated Certificate of Incorporation of the Company pursuant to Section 807 of the Business Corporation Law filed in the Office of the Secretary of State of the State of New York on October 25, 1988.
New York State Electric
& Gas Corporation
*3-2 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 17, 1989.
New York State Electric
& Gas Corporation
*3-3 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on May 22, 1990.
New York State Electric
& Gas Corporation
*3-4 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 31, 1990.
New York State Electric
& Gas Corporation
*3-5 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on February 6, 1991.
New York State Electric
& Gas Corporation
*3-6 -
Certificate of Merger of Columbia Gas of New York, Inc. into the Company filed in the Office of the Secretary of State of the State of New York on April 8, 1991.
New York State Electric
& Gas Corporation
*3-7 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 15, 1991.
New York State Electric
& Gas Corporation
*3-8 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on May 28, 1992.
New York State Electric
& Gas Corporation
*3-9 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 20, 1992.
New York State Electric
& Gas Corporation
*3-10 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on October 14, 1993.
New York State Electric
& Gas Corporation
*3-11 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on December 10, 1993.
New York State Electric
& Gas Corporation
*3-12 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on December 20, 1993.
New York State Electric
& Gas Corporation
*3-13 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on December 20, 1993.
New York State Electric
& Gas Corporation
*3-14 -
Certificate of Amendment of the Certificate of Incorporation filed in the Office of the Secretary of State of the State of New York on September 6, 2000.
New York State Electric
& Gas Corporation
*3-15 -
Certificates of the Secretary of the Company concerning consents dated March 20, 1957, May 9, 1975, and April 1, 1999, of holders of Serial Preferred Stock with respect to issuance of certain unsecured indebtedness.
New York State Electric
& Gas Corporation
*3-16 -
By-Laws of the Company as amended August 29, 2000.
EXHIBIT INDEX
(Cont'd)
Registrant
Exhibit No.
Description
New York State Electric
& Gas Corporation
*4-1 -
First Mortgage dated as of July 1, 1921 executed by the Company under its then name of "New York State Gas and Electric Corporation" to The Equitable Trust Company of New York, as Trustee (JPMorgan Chase Bank is Successor Trustee).
New York State Electric & Gas Corporation Supplemental Indentures to First Mortgage dated as of
July 1, 1921:
*4-2 -
No. 37
*4-6 -
No. 75
*4-10 -
No. 106
*4-3 -
No. 39
*4-7 -
No. 103
*4-11 -
No. 107
*4-4 -
No. 43
*4-8 -
No. 104
*4-12 -
No. 108
*4-5 -
No. 51
*4-9 -
No. 105
*4-13 -
No. 109
Registrant
Exhibit No.
Description
New York State Electric
& Gas Corporation
*10-1 -
Agreement between New York Independent System Operator and Transmission Owners, dated as of December 2, 1999.
New York State Electric
& Gas Corporation
*10-2 -
Independent System Operator Agreement, dated as of December 2, 1999.
New York State Electric
& Gas Corporation
*10-3 -
Asset Purchase Agreement by and among Niagara Mohawk Power Corporation, the Company, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation and Constellation Energy Group, Inc. and Constellation Nuclear, LLC dated as of December 11, 2000.
New York State Electric
& Gas Corporation
*(A)10-4 -
Supplemental Executive Retirement Plan, amended and restated effective August 1, 2001.
New York State Electric
& Gas Corporation
(A)10-5 -
Amendment No. 1 to Supplemental Executive Retirement Plan, amended and restated effective August 1, 2001.
New York State Electric
& Gas Corporation
*(A)10-6 -
Energy East Corporation's Supplemental Executive
Retirement Plan.
New York State Electric
& Gas Corporation
*(A)10-7 -
Energy East Corporation's Supplemental Executive
Retirement Plan Amendment No. 1.
New York State Electric
& Gas Corporation
*(A)10-8 -
Energy East Corporation's Annual Executive
Incentive Plan.
New York State Electric
& Gas Corporation
*(A)10-9 -
Energy East Corporation's Annual Executive Incentive Plan Amendment No. 1.
New York State Electric
& Gas Corporation
*(A)10-10 -
Energy East Corporation's Annual Executive Incentive Plan Amendment No. 2.
New York State Electric
& Gas Corporation
*(A)10-11 -
Energy East Corporation's Long-Term Executive Incentive Share Plan.
New York State Electric
& Gas Corporation
*(A)10-12 -
Energy East Corporation's Long-Term Executive Incentive Share Plan Amendment No. 1.
New York State Electric
& Gas Corporation
*(A)10-13 -
Long-Term Executive Incentive Share Plan Deferred Compensation Agreement.
New York State Electric
& Gas Corporation
*(A)10-14 -
Form of Severance Agreement for Senior Vice Presidents.
New York State Electric
& Gas Corporation
*(A)10-15 -
Form of Severance Agreement for Senior Vice Presidents Amendment No. 1.
New York State Electric
& Gas Corporation
*(A)10-16 -
Form of Severance Agreement for Senior Vice Presidents Amendment No. 2.
New York State Electric
& Gas Corporation
*(A)10-17 -
Form of Severance Agreement for Senior Vice Presidents Amendment No. 3.
New York State Electric
& Gas Corporation
*(A)10-18 -
Form of Severance Agreement for Vice Presidents.
EXHIBIT INDEX
(Cont'd)
Registrant
Exhibit No.
Description
New York State Electric
& Gas Corporation
*(A)10-19 -
Form of Severance Agreement for Vice Presidents Amendment No. 1.
New York State Electric
& Gas Corporation
*(A)10-20 -
Form of Severance Agreement for Vice Presidents Amendment No. 2.
New York State Electric
& Gas Corporation
*(A)10-21 -
Form of Severance Agreement for Vice Presidents Amendment No. 3.
New York State Electric
& Gas Corporation
*(A)10-22 -
Form of Amendment to the Company's Severance Agreements.
New York State Electric
& Gas Corporation
*(A)10-23 -
Employee Invention and Confidentiality Agreement
(Existing Executive).
New York State Electric
& Gas Corporation
*(A)10-24 -
Employee Invention and Confidentiality Agreement (Existing Executive) Amendment No. 1.
New York State Electric
& Gas Corporation
*(A)10-25 -
Deferred Compensation Plan for Salaried Employees.
New York State Electric
& Gas Corporation
*(A)10-26 -
Energy East Corporation's Restricted Stock Plan.
New York State Electric
& Gas Corporation
*(A)10-27 -
Energy East Corporation's 2000 Stock Option Plan.
New York State Electric
& Gas Corporation
*(A)10-28 -
Energy East Corporation's 2000 Stock Option Plan Amendment No. 1.
New York State Electric
& Gas Corporation
*(A)10-29 -
Energy East Corporation's Award Agreement under the 2000 Stock Option Plan.
New York State Electric
& Gas Corporation
*(A)10-30 -
Energy East Corporation's Award Agreement (February 2001) under the 2000 Stock Option Plan.
New York State Electric
& Gas Corporation
23 -
Consent of PricewaterhouseCoopers LLP to incorporation by reference into certain registration statements.
New York State Electric
& Gas Corporation
99-1 -
Information regarding directors, Section 16(a) compliance, executive compensation, employment, change in control and other arrangements, and security ownership of management.
____________________________
* Incorporated by reference.
(A) Management contract or compensatory plan or arrangement.