Form 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549

FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      For the quarterly period ended  March 31, 2001

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      For the transition period from             to            

Commission
file number

Exact name of Registrant as specified in its charter,
State of incorporation, Address and Telephone number

IRS Employer
Identification No.

1-14766

Energy East Corporation
(A New York Corporation)
P. O. Box 12904
Albany, New York 12212-2904
(518) 434-3049

14-1798693

1-5139

Central Maine Power Company
(A Maine Corporation)
83 Edison Drive
Augusta, Maine 04336
(207) 623-3521

01-0042740

1-3103-2

New York State Electric & Gas Corporation
(A New York Corporation)
P. O. Box 3287
Ithaca, New York 14852-3287
(607) 347-4131

15-0398550

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes    X      No        

As of April 30, 2001, shares of common stock outstanding for each registrant were:

Registrant

Description

Shares

Energy East Corporation

Par value $.01 per share

116,349,598    

Central Maine Power Company

Par value $5 per share

31,211,471 (1)

New York State Electric & Gas Corporation

Par value $6.66 2/3 per share

64,508,477 (2)

(1) All shares are owned by CMP Group, Inc., a wholly-owned subsidiary of Energy East Corporation.
(2) All shares are owned by Energy East Corporation.

This combined Form 10-Q is separately filed by Energy East Corporation, Central Maine Power Company and New York State Electric & Gas Corporation. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.

 

 


Item

TABLE OF CONTENTS


Page
 

PART I - FINANCIAL INFORMATION

  

1

2

Financial Statements
and
Management's Discussion and Analysis of Financial Condition
  and Results of Operations

  
 

Energy East Corporation
  Consolidated Statements of Income
  Consolidated Balance Sheets
  Consolidated Statements of Cash Flows
  Consolidated Statements of Retained Earnings
  Consolidated Statements of Comprehensive Income
  Management's Discussion and Analysis of Financial Condition
    and Results of Operations
  (a) Liquidity and Capital Resources
  (b) Results of Operations


1
2
4
5
5


6
9
 

Central Maine Power Company
  Consolidated Statements of Income
  Consolidated Balance Sheets
  Consolidated Statements of Cash Flows
  Consolidated Statements of Retained Earnings
  Consolidated Statements of Comprehensive Income
  Management's Discussion and Analysis of Financial Condition
    and Results of Operations
  (a) Liquidity and Capital Resources
  (b) Results of Operations


11
12
14
15
15


16
16
 

New York State Electric & Gas Corporation
  Statements of Income
  Balance Sheets
  Statements of Cash Flows
  Statements of Retained Earnings
  Statements of Comprehensive Income
  Management's Discussion and Analysis of Financial Condition
    and Results of Operations
  (a) Liquidity and Capital Resources
  (b) Results of Operations


17
18
20
21
21


22
22
 

Notes to Financial Statements
Forward-looking Statements

24
27

3

Quantitative and Qualitative Disclosures About Market Risk

28
 


PART II - OTHER INFORMATION

  

1

Legal Proceedings

28

6

Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K


29
29

Signatures

30

Exhibit Index

31

 

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Energy East Corporation
Consolidated Statements of Income - (Unaudited)

Three Months Ended March 31

2001

2000
 

(Thousands, except per share amounts)

Operating Revenues

    

  Sales and services

$1,271,139 

$684,426 

Operating Expenses

    

  Electricity purchased and fuel used in generation

352,629 

231,347 

  Natural gas purchased

369,471 

111,813 

  Other operating expenses

140,739 

76,651 

  Maintenance

36,013 

21,019 

  Depreciation and amortization

51,339 

32,960 

  Other taxes

58,420 

41,309 

      Total Operating Expenses

1,008,611 

515,099 

Operating Income

262,528 

169,327 

Other (Income) and Deductions

1,246 

(7,596)

Interest Charges, Net

55,625 

28,412 

Preferred Stock Dividends of Subsidiaries

478 

99 

Income Before Income Taxes

205,179 

148,412 

Income Taxes

89,578 

55,085 

Net Income

$115,601 

$93,327 

Earnings Per Share, basic and diluted

$.98 

$.83 

Dividends Paid Per Share

$.23 

$.22 

Average Common Shares Outstanding

117,386 

112,777 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
 

March 31,
2001

Dec. 31,
2000

Assets

(Thousands)

Current Assets

    

 Cash and cash equivalents

$153,149

$143,626

 Special deposits

21,573

21,516

 Accounts receivable, net

584,375

536,280

 Fuel, at average cost

19,790

65,496

 Materials and supplies, at average cost

23,156

22,759

 Accumulated deferred income tax benefits, net

5,955

5,007

 Prepayments

60,630

57,720

   Total Current Assets

868,628

852,404

Utility Plant, at Original Cost

    

 Electric

4,684,798

4,784,312

 Natural gas

1,680,084

1,665,386

 Common

213,464

220,124
 

6,578,346

6,669,822

 Less accumulated depreciation

3,007,063

3,096,283

   Net Utility Plant in Service

3,571,283

3,573,539

 Construction work in progress

41,106

59,389

   Total Utility Plant

3,612,389

3,632,928

Other Property and Investments, Net

270,677

259,708

Regulatory and Other Assets

    

 Regulatory assets

    

  Nuclear plant obligations

236,089

234,929

  Unfunded future income taxes

186,755

184,570

  Unamortized loss on debt reacquisitions

57,515

58,848

  Demand-side management program costs

41,231

48,929

  Environmental remediation costs

77,508

78,406

  Other

227,918

241,396

 Total regulatory assets

827,016

847,078

 Other assets

    

  Goodwill, net

945,730

952,358

  Prepaid pension benefits

372,287

350,038

  Other

162,392

119,214

 Total other assets

1,480,409

1,421,610

   Total Regulatory and Other Assets

2,307,425

2,268,688

   Total Assets

$7,059,119

$7,013,728


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
 

March 31,
2001

Dec. 31,
2000

Liabilities

(Thousands)

Current Liabilities

    

 Current portion of long-term debt

$34,328 

$25,285 

 Notes payable

393,279 

418,995 

 Accounts payable and accrued liabilities

241,636 

345,424 

 Interest accrued

54,890 

35,309 

 Taxes accrued

89,926 

-      

 Other

143,779 

211,784 

   Total Current Liabilities

957,838 

1,036,797 

Regulatory and Other Liabilities

    

 Regulatory liabilities

    

  Deferred income taxes

100,911 

91,421 

  Deferred income taxes, unfunded future income taxes

76,247 

75,473 

  Gain on sale of generation assets

226,522 

232,041 

  Pension benefits

95,295 

96,514 

  Other

78,653 

76,813 

 Total regulatory liabilities

577,628 

572,262 

 Other liabilities

    

  Deferred income taxes

472,125 

457,495 

  Nuclear plant obligations

236,089 

234,929 

  Other postretirement benefits

276,067 

279,864 

  Environmental remediation costs

91,486 

91,811 

  Other

221,425 

233,910 

 Total other liabilities

1,297,192 

1,298,009 

   Total Regulatory and Other Liabilities

1,874,820 

1,870,271 

 Long-term debt

2,361,574 

2,346,814 

   Total Liabilities

5,194,232 

5,253,882 

Commitments

-      

-      

Preferred Stock of Subsidiaries
 Preferred stock redeemable solely at the option of subsidiaries


43,332 


43,324 

Common Stock Equity
 Common stock


1,185 


1,191 

 Capital in excess of par value

859,319 

871,078 

 Retained earnings

1,006,598 

918,016 

 Accumulated other comprehensive income

(6,607)

(34,823)

 Treasury stock, at cost

(38,940)

(38,940)

   Total Common Stock Equity

1,821,555 

1,716,522 

   Total Liabilities and Stockholders' Equity

$7,059,119 

$7,013,728 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

Energy East Corporation
Consolidated Statements of Cash Flows - (Unaudited)

Three Months Ended March 31

2001

2000

Operating Activities

(Thousands)

 Net income

$115,601 

$93,327 

 Adjustments to reconcile net income to net cash
  provided by operating activities

    

   Depreciation and amortization

51,339 

32,960 

   Income taxes and investment tax
     credits deferred, net


3,653 


(8,661)

   Pension income

(18,675)

(16,133)

 Changes in current operating assets and liabilities

    

   Accounts receivable

(48,095)

1,670 

   Inventory

45,309 

10,718 

   Prepayments

(2,910)

(12,026)

   Accounts payable and accrued liabilities

(103,788)

(25,338)

   Interest accrued

19,581 

9,375 

   Taxes accrued

89,926 

59,272 

   Other current liabilities

(68,005)

(32,201)

 Other, net

12,004 

5,529 

   Net Cash Provided by Operating Activities

95,940 

118,492 

Investing Activities

    

 Acquisition, net of cash acquired

-      

(212,025)

 Utility plant additions

(32,790)

(18,585)

 Temporary investments, net

-      

284,177 

 Other property and investments

(13,343)

(5,239)

 Other

526 

(7,318)

   Net Cash (Used in) Provided by Investing Activities

(45,607)

41,010 

Financing Activities

    

 Repurchase of common stock

(11,765)

(52,052)

 Repayments of first mortgage bonds and preferred
   stock of subsidiaries, including net premiums


(469)


(83,137)

 Long-term note issuances

25,000 

-      

 Long-term note retirements

(841)

(102)

 Notes payable, net

(25,716)

(82,600)

 Dividends on common stock

(27,019)

(24,055)

   Net Cash Used in Financing Activities

(40,810)

(241,946)

Net Increase (Decrease) in Cash and Cash Equivalents

9,523 

(82,444)

Cash and Cash Equivalents, Beginning of Period

143,626 

116,806 

Cash and Cash Equivalents, End of Period

$153,149 

$34,362 

Supplemental Disclosure of Cash Flows Information

    

 Cash paid during the period:
  Interest, net of amounts capitalized
  Income taxes


$34,338 
$7,946 


$18,227 
$6,636 

 Acquisition:
  Fair value of assets acquired
  Liabilities assumed
  Common stock issued
  Cash acquired


-      
-      
-      
-      


$585,512 
(152,251)
(215,382)
(5,854)

  Net cash paid for acquisition

-      

$212,025 


The notes on pages 24 through 27 are an integral part of the financial statements.

Item 1.  Financial Statements (Cont'd)

Energy East Corporation
Consolidated Statements of Retained Earnings - (Unaudited)

Three Months Ended March 31

2001

2000
 

(Thousands)

Balance, Beginning of Period

$918,016

$782,588
     

Add net income

115,601

93,327
     

Deduct dividends on common stock

27,019

24,055
     

Balance, End of Period

$1,006,598

$851,860


The notes on pages 24 through 27 are an integral part of the financial statements.







Energy East Corporation
Consolidated Statements of Comprehensive Income - (Unaudited)

Three Months Ended March 31

2001

2000
 

(Thousands)

Net income

$115,601 

$93,327 

Other comprehensive income, net of tax

    

  Foreign currency translation adjustment

-      

(11)

  Net unrealized gain (loss) on investments

(4,590)

1,526 

  Minimum pension liability adjustment

-      

(1,351)

  Unrealized gains 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



58,250 



-      

    Unrealized losses on derivatives qualified as hedges

(14,410)

-      

    Reclassification adjustment for gains included in net income

(11,034)

-      

  Net unrealized gains on derivatives qualified as hedges

32,806 

-      

    Total other comprehensive income

28,216 

164 

Comprehensive Income

$143,817 

$93,491 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations

Energy East Corporation

(a) Liquidity and Capital Resources

RGS Energy Merger Agreement

On February 20, 2001, Energy East Corporation (Energy East or 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 $1.0 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 preferred stock.

The merger is subject to, among other things, the approval of RGS Energy's shareholders and the approvals of various regulatory agencies, including the New York State Public Service Commission (NYPSC), Federal Energy Regulatory Commission (FERC), Nuclear Regulatory Commission and Securities and Exchange Commission. The company has made filings with the NYPSC and FERC. All regulatory approvals are expected to be obtained by the first quarter of 2002. The merger is also subject to the company's shareholders approving the issuance of Energy East shares in connection with the merger. Both RGS Energy's and Energy East's shareholder meetings are scheduled for June 15, 2001.

Electric Delivery Business

Sale of Millstone Unit No. 3: On March 31, 2001, Central Maine Power Company (CMP) sold its 2.5% ownership interest in the Millstone Unit No. 3 nuclear unit. The net proceeds from the sale, $1.3 million including unfunded deferred taxes, were used to reduce a regulatory asset related to CMP's non-nuclear generating assets that were sold in 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.

CMP owns an interest in Vermont Yankee, an operating nuclear unit, which is in the process of being sold through an auction.

MPUC Delivery Price Decision: In March 2001, in response to price increases resulting from higher energy prices, the Maine Public Utilities Commission (MPUC) reduced CMP's delivery prices for certain medium and large customer classes by 0.8 cent per kilowatt hour, effective

 

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations (Cont'd)

Energy East Corporation

April 15, 2001, through February 28, 2002. CMP expects that total revenues will not, however, be affected by this price reduction of approximately $30 million, because the MPUC is permitting CMP to amortize a corresponding amount into revenues from CMP's gain on sale of generation assets account, established as a result of the sale of its non-nuclear generating assets.

On April 5, 2001, the Industrial Energy Consumer Group (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-hour and extended it to more, but not all, medium and large customer classes for the period April 15, 2001, through February 28, 2002. CMP expects that total revenues will not be affected by this latest MPUC order because the resulting additional decrease of approximately $4 million will be offset by amortizing a corresponding amount into revenues from CMP's gain on sale of generation assets account.

NYSEG's Price Protection Plan: On March 14, 2001, New York State Electric & Gas Corporation (NYSEG) filed an electric Price Protection Plan with the NYPSC that would modify and extend NYSEG's 1998 electric rate and restructuring agreement for seven years from the date the plan is approved. The plan would, among other things: 1) freeze electricity prices for all customers at current levels for seven years and on March 3, 2002, implement the last 5% rate reduction under the existing agreement for eligible high-load factor customers; 2) absorb, within current rates, escalating NUG and wholesale electricity costs over the term of the plan and annual inflation of up to 4%; and 3) provide all customers the opportunity to choose an alternative electric power supplier.

NYPSC proceedings to review the Price Protection Plan are ongoing. NYSEG anticipates that the NYPSC will issue its decision about mid-year.

Retail Access Credit: In May 2000 the NYPSC instituted proceedings to review NYSEG's retail access credit (the amount backed out of a customer's bill when that customer participates in retail access). In September 2000 the NYPSC issued an order denying a petition NYSEG had filed in August 2000 related to issues concerning its retail access credit. In January 2001 the NYPSC issued an order directing NYSEG to adopt a market-based retail access credit, effective February 1, 2001. As a result of this order, NYSEG will be exposed to fluctuations in the spot price of electricity for customers who have chosen retail access. On April 26, 2001, the NYPSC issued an order denying NYSEG's request to recover costs and lost revenues associated with the implementation of the market-based retail access credit. NYSEG is planning to seek rehearing of this order.

Independent System Operator: 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.

 

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operation (Cont'd)

Energy East Corporation

In early 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 ordered a bid cap for a portion of the operating reserves markets until the market problems are corrected and the NYISO makes a filing to lift the cap but did not order refunds of earlier higher operating reserves prices as sought by NYSEG. Several requests for rehearing and litigation are pending before FERC or the court.

In response to complaints and other filings by NYSEG and other parties that raised concerns over energy market flaws and tight supply, FERC approved in July 2000 a bid cap on energy of $1,000 per megawatt-hour in the NYISO's energy markets. FERC subsequently extended the bid cap until April 30, 2001. On March 12, 2001, the NYISO filed with FERC a request to further extend the $1,000 per megawatt-hour bid cap until October 31, 2002. The bid cap limits the price NYSEG pays or receives for energy it buys or sells in the NYISO energy markets.

The NYISO also administers a market power mitigation plan that helps to reduce price spikes under certain circumstances. In the second quarter of 2001, the NYISO adopted certain enhancements to the plan that are being challenged at FERC.

Natural Gas Delivery Business

Natural Gas Supply Alliance: Energy East's four natural gas companies, NYSEG; The Southern Connecticut Gas Company (SCG); Connecticut Natural Gas Corporation (CNG) and The Berkshire Gas Company (Berkshire Gas), entered into a one-year strategic alliance agreement with BP Energy Company effective March 30, 2001, for the acquisition and management of natural gas supply. The alliance is expected to provide the companies with greater supply flexibility and enhance 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 Energy East natural gas companies have made appropriate regulatory filings concerning the alliance, seeking approvals as required.

Southern Connecticut Gas Incentive Rate Plan: In December 2000 the Connecticut Department of Public Utility Control (DPUC) issued a decision in the SCG rate proceeding that is designed to establish a multi-year incentive rate plan (IRP). The decision endorses the concept of an IRP and recommends a four-year price freeze, the continuation of the gas adjustment and weather-normalization clauses, a 50/50 sharing between customers and shareholders of earnings in excess of an 11.71% return on common equity, a 50/50 sharing of merger-enabled gas supply savings, and service quality requirements to help ensure that customer service standards are met.

In January 2001 the Office of Consumer Counsel (OCC) filed an appeal in State Superior Court arguing that the DPUC's order approving the SCG IRP was unlawful. On March 30, 2001, the OCC filed a Motion to Stay the implementation of the DPUC's order. The outcome of this appeal cannot be predicted, but the company believes it is without merit.

 

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operation (Cont'd)

Energy East Corporation

Connecticut Natural Gas Incentive Rate Plan: CNG proposed an IRP, similar to SCG's IRP, as a second phase of its rate case filed in November 1999. The IRP seeks the opportunity to share in returns on equity in excess of 11.8%, while holding rates constant for four years. The IRP also includes certain performance and service measures that CNG must meet.

In May 2001 the DPUC issued a decision for the 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. The performance and service measures were adopted, with certain adjustments and one addition. After-tax merger-related natural gas cost savings are to be shared 50/50.

Investing and Financing Activities

Investing Activities: Capital spending for the first three months of 2001 was $46 million, including nuclear fuel. For 2001 capital spending is projected to be $226 million, including nuclear fuel, and is expected to be paid for with internally generated funds. Capital spending will be primarily for the extension of energy delivery service, necessary improvements to existing facilities and compliance with environmental requirements.

Financing Activities: During the three months ended March 31, 2001, the company repurchased 0.6 million shares of its common stock at an average price of approximately $18.65 per share.

CMP issued on January 30, 2001, $25 million of 6.67% Series E Medium Term Notes due January 2006.

 

(b) Results of Operations

Due to the mergers completed in 2000, the company's results of operations for the first quarter of 2001 include Connecticut Energy Corporation (CNE), CMP Group, Inc, CTG Resources, Inc. and Berkshire Energy Resources. Results of operations for the first quarter of 2000 include CNE beginning with February 2000.

Three months ended March 31
(Thousands, except per share amounts)

     2001     

     2000     

Change

Operating Revenues

$1,271,139 

$684,426 

86% 

Operating Income

$262,528 

$169,327 

55% 

Net Income

$115,601 

$93,327 

24% 

Average Common Shares Outstanding

117,386 

112,777 

4% 

Earnings Per Share, basic and diluted

$.98 

$.83 

18% 

Dividends Paid Per Share

$.23 

$.22 

5% 

Earnings per share for the quarter increased 15 cents compared to last year primarily due to earnings from the merged companies, higher retail electricity and natural gas deliveries because of colder weather this quarter and the share repurchase program. Those increases were partially

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operation (Cont'd)

Energy East Corporation

offset by higher costs of energy, lower retail electricity prices and a non-recurring benefit in 2000 from a federal income tax audit adjustment. Due to the seasonal nature of the merged companies' businesses, earnings for 2001 are expected to be stronger in the first and fourth quarters and weaker in the second and third quarters, as compared to last year.

Operating Results for the Electric Delivery Business

Three months ended March 31
(Thousands)

     2001     

     2000     

Change

Retail Deliveries - Megawatt-hours

6,204 

3,561 

74% 

Operating Revenues

$688,006 

$438,011 

57% 

Operating Expenses

$498,868 

$331,152 

51% 

Operating Income

$189,138 

$106,859 

77% 

The $250 million increase in operating revenues is primarily due to the addition of CMP's delivery revenues, higher retail deliveries because of colder weather this quarter and higher transmission revenues. Those increases were partially offset by lower wholesale deliveries and lower retail electricity prices.

Operating expenses increased $168 million primarily due to the addition of CMP's purchases for retail deliveries and its operating costs. That increase was partially offset by lower purchased power costs, primarily due to lower wholesale deliveries and ancillary services costs, and cost control efforts.

Operating Results for the Natural Gas Delivery Business

Three months ended March 31
(Thousands)

     2001     

     2000     

Change

Retail Deliveries - Dekatherms

55,496 

34,493 

61% 

Operating Revenues

$513,213 

$211,302 

143% 

Operating Expenses

$430,860 

$146,907 

193% 

Operating Income

$82,353 

$64,395 

28% 

The $302 million increase in operating revenues is primarily due to the addition of delivery revenues from CNG, SCG and Berkshire Gas and the recovery of increased natural gas costs caused by higher market prices.

Operating expenses increased $284 million primarily due to the additional natural gas purchases and operating costs associated with the three merged gas companies, and an increase in retail purchased gas costs caused by higher market prices.

 

 

Item 1.  Financial Statements
(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.)

Central Maine Power Company
Consolidated Statements of Income - (Unaudited)


Three Months Ended March 31


2001

Predecessor
2000
 

(Thousands)

Operating Revenues

    

  Sales and services

$230,161 

$263,341 

Operating Expenses

    

  Electricity purchased and fuel used in generation

118,302 

139,084 

  Other operating expenses

42,178 

46,755 

  Maintenance

11,515 

6,476 

  Depreciation and amortization

9,145 

10,398 

  Other taxes

5,066 

4,899 

      Total Operating Expenses

186,206 

207,612 

Operating Income

43,955 

55,729 

Other (Income) and Deductions

(278)

(9,240)

Interest Charges, Net

6,500 

22,552 

Recovery of Non-Provided Deferred Income Taxes

-     

(75,421)

Income Before Income Taxes

37,733 

117,838 

Income Taxes

15,487 

84,070 

Net Income

22,246 

33,768 

Preferred Stock Dividends

361 

559 

Earnings Available for Common Stock

$21,885 

$33,209 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

Central Maine Power Company
Consolidated Balance Sheets - (Unaudited)
 

March 31,
2001

Dec. 31,
2000

Assets

(Thousands)

Current Assets

    

 Cash and cash equivalents

$24,229

$17,933

 Accounts receivable, net

123,912

135,707

 Materials and supplies, at average cost

9,067

9,052

 Accumulated deferred income tax benefits, net

2,758

4,533

 Prepayments

4,477

9,574

 Other

36

38

   Total Current Assets

164,479

176,837

Utility Plant, at Original Cost

    

 Electric

1,292,920

1,392,693

 Less accumulated depreciation

471,352

571,275

   Net Utility Plant in Service

821,568

821,418

 Construction work in progress

18,452

16,682

   Total Utility Plant

840,020

838,100

Other Property

6,586

6,526

Investment in Associated Companies, at Equity

33,641

33,952

Regulatory and Other Assets

    

 Regulatory assets

    

  Nuclear plant obligations

236,089

234,929

  Unfunded future income taxes

82,460

80,999

  Unamortized loss on debt reacquisitions

11,681

12,057

  Demand-side management program costs

18,936

20,563

  Environmental remediation costs

7,624

8,217

  Other

109,424

118,480

 Total regulatory assets

466,214

475,245

 Other assets

    

  Goodwill, net

339,699

342,306

  Prepaid pension benefits

32,270

32,070

  Other

14,153

23,761

 Total other assets

386,122

398,137

   Total Regulatory and Other Assets

852,336

873,382

   Total Assets

$1,897,062

$1,928,797


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

Central Maine Power Company
Consolidated Balance Sheets - (Unaudited)
 

March 31,
2001

Dec. 31,
2000

Liabilities

(Thousands)

Current Liabilities

    

 Current portion of long-term debt

$22,260 

$12,946 

 Notes payable

35,000 

46,500 

 Accounts payable and accrued liabilities

72,135 

77,075 

 Interest accrued

2,262 

5,084 

 Taxes accrued

4,607 

-      

 Other

38,993 

57,423 

   Total Current Liabilities

175,257 

199,028 

Regulatory and Other Liabilities
 Regulatory liabilities

    

  Deferred income taxes

29,007 

28,812 

  Deferred income taxes, unfunded future income taxes

33,647 

33,051 

  Gain on sale of generation assets

226,522 

232,041 

  Pension benefits

46,728 

47,632 

  Other

33,114 

37,796 

 Total regulatory liabilities

369,018 

379,332 

 Other liabilities

    

  Deferred income taxes

20,786 

20,065 

  Nuclear plant obligations

236,089 

234,929 

  Other postretirement benefits

61,947 

69,808 

  Environmental remediation costs

4,087 

4,147 

  Other

94,489 

99,710 

 Total other liabilities

417,398 

428,659 

   Total Regulatory and Other Liabilities

786,416 

807,991 

 Long-term debt

237,268 

222,309 

   Total Liabilities

1,198,941 

1,229,328 

Commitments

-      

-      

Preferred Stock
 Preferred stock


35,571 


35,571 

 Capital in excess of par value

(3,457)

(3,503)

Common Stock Equity
 Common stock


162,213 


162,213 

 Capital in excess of par value

500,443 

500,897 

 Retained earnings

22,076 

23,291 

 Accumulated other comprehensive income

275 

-      

 Treasury stock, at cost

(19,000)

(19,000)

   Total Common Stock Equity

666,007 

667,401 

   Total Liabilities and Stockholder's Equity

$1,897,062 

$1,928,797 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

Central Maine Power Company
Consolidated Statements of Cash Flows - (Unaudited)


Three Months Ended March 31


2001

Predecessor
2000
 

(Thousands)

Operating Activities

    

 Net income

$22,246 

$33,768 

 Adjustments to reconcile net income to net
  cash provided by operating activities

    

   Depreciation and amortization

9,145 

10,398 

   Income taxes and investment tax credits deferred, net

2,459 

(12,979)

   Pension income

(200)

-      

   Power supply costs recovered with asset sale

-      

(9,612)

 Changes in current operating assets and liabilities

    

   Accounts receivable

11,795 

27,331 

   Inventory

(15)

800 

   Prepayments

5,057 

426 

   Accounts payable and accrued liabilities

(4,940)

(37,598)

   Interest accrued

(2,822)

(673)

   Taxes accrued

4,607 

10,600 

   Other current liabilities

(18,430)

7,909 

 Changes in deferred balances and related carrying costs

(206)

12,660 

 Other, net

1,382 

12,562 

   Net Cash Provided by Operating Activities

30,078 

55,592 

Investing Activities

    

 Utility plant additions

(13,087)

(20,655)

 Contributions in aid of construction, net

-      

16,940 

 Other property and investments, net

7 

-      

   Net Cash Used in Investing Activities

(13,080)

(3,715)

Financing Activities

    

 Long-term note issuances

25,000 

-      

 Long-term note retirements

(741)

(30,734)

 Notes payable, net

(11,500)

-      

 Dividends on common and preferred stock

(23,461)

(11,795)

   Net Cash Used in Financing Activities

(10,702)

(42,529)

Net Increase in Cash and Cash Equivalents

6,296 

9,348 

Cash and Cash Equivalents, Beginning of Period

17,933 

112,873 

Cash and Cash Equivalents, End of Period

$24,229 

$122,221 

Supplemental Disclosure of Cash Flows Information

    

 Cash paid during the period:

    

  Interest, net of amounts capitalized

$8,477 

$4,452 

  Income taxes

$5,886 

$10,027 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

Central Maine Power Company
Consolidated Statements of Retained Earnings - (Unaudited)


Three Months Ended March 31


2001

Predecessor
2000
 

(Thousands)

Balance, beginning of period

$23,291

$100,754

Add net income

22,246

33,768
 

45,537

134,522

Deduct dividends on capital stock

    

 Preferred

361

559

 Common

23,100

11,236

 Amortization of reacquired capital stock

-     

68


23,461

11,863

Balance, end of period

$22,076

$122,659


The notes on pages 24 through 27 are an integral part of the financial statements.








Central Maine Power Company
Consolidated Statements of Comprehensive Income - (Unaudited)


Three Months Ended March 31


2001

Predecessor
2000
 

(Thousands)

Net income

$22,246

$33,768 

Other comprehensive income, net of tax

    

  Net unrealized gain on investments

275

-     

    Total other comprehensive income

275

-     

Comprehensive income

$22,521

$33,768


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations

Central Maine Power Company

(a) Liquidity and Capital Resources

Electric Delivery Business

Sale of Millstone Unit No. 3: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.

MPUC Delivery Price Decision: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.

Investing and Financing Activities

Investing Activities: Capital spending for the first three months of 2001 was $13 million, including nuclear fuel. For 2001 capital spending is projected to be $45 million, including nuclear fuel, and is expected to be paid for with internally generated funds. Capital spending will be primarily for the extension of electric delivery service, necessary improvements to existing facilities and compliance with environmental requirements.

Financing Activities: CMP issued on January 30, 2001, $25 million of 6.67% Series E Medium Term Notes due January 2006.

 

(b) Results of Operations


Three months ended March 31
(Thousands)


     2001     

Predecessor
     2000     


Change

Retail Deliveries - Megawatt-hours

2,418 

2,352 

3%  

Operating Revenues

$230,161 

$263,341 

(13%) 

Operating Expenses

$186,206 

$207,612 

(10%) 

Operating Income

$43,955 

$55,729 

(21%) 

Earnings Available for Common Stock

$21,885 

$33,209 

(34%) 

Earnings for the quarter decreased $11 million primarily due to the deregulation of Maine's electric industry and its associated effects on operating revenues and expenses, as discussed below. CMP no longer supplies electricity unless directed by the MPUC to be the standard offer provider. CMP is currently the standard offer provider for commercial and industrial rate classes.

The $33 million decrease in operating revenues is primarily the result of CMP no longer collecting revenue for the supply of electricity unless directed to by the MPUC, and a rate reduction that began March 1, 2000. Those decreases were partially offset by higher transmission revenues and asset sale gain amortization.

Operating expenses decreased $21 million primarily due to decreased purchased power expenses because CMP no longer supplies electricity unless directed to by the MPUC.

 

Item 1.  Financial Statements

New York State Electric & Gas Corporation
Statements of Income - (Unaudited)

Three Months Ended March 31

2001

2000
 

(Thousands)

Operating Revenues

    

  Electric

$457,761

$438,011 

  Natural Gas

167,700

137,753 

      Total Operating Revenues

625,461

575,764 

Operating Expenses

    

  Electricity purchased and fuel used in generation

201,520

215,116 

  Natural gas purchased

122,610

68,553 

  Other operating expenses

54,914

58,752 

  Maintenance

21,062

20,237 

  Depreciation and amortization

25,337

27,491 

  Other taxes

34,869

36,092 

      Total Operating Expenses

460,312

426,241 

Operating Income

165,149

149,523 

Interest Charges, Net

26,653

25,426 

Other (Income) and Deductions

2,385

(821)

Income Before Income Taxes

136,111

124,918 

Income Taxes

56,513

41,454 

Net Income

79,598

83,464 

Preferred Stock Dividends

99

99 

Earnings Available for Common Stock

$79,499

$83,365 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

New York State Electric & Gas Corporation
Balance Sheets - (Unaudited)
 

March 31,
2001

Dec. 31,
2000

Assets

(Thousands)

Current Assets

    

 Cash and cash equivalents

$15,621

$17,618

 Special deposits

21,440

21,440

 Accounts receivable, net

199,286

200,846

 Fuel, at average cost

2,767

28,677

 Materials and supplies, at average cost

7,626

7,395

 Prepayments

39,970

27,893

 Accumulated deferred income tax benefits, net

3,916

3,943

   Total Current Assets

290,626

307,812

Utility Plant, at Original Cost

    

 Electric

3,391,878

3,391,619

 Natural gas

649,994

647,145

 Common

133,269

140,020
 

4,175,141

4,178,784

 Less accumulated depreciation

2,120,066

2,116,787

   Net Utility Plant in Service

2,055,075

2,061,997

 Construction work in progress

12,308

25,006

   Total Utility Plant

2,067,383

2,087,003

Other Property and Investments, Net

78,612

76,737

Regulatory and Other Assets

    

 Regulatory assets

    

  Unfunded future income taxes

44,940

44,610

  Unamortized loss on debt reacquisitions

45,833

46,791

  Demand-side management program costs

22,296

28,366

  Environmental remediation costs

58,000

58,200

  Other

33,931

30,386

 Total regulatory assets

205,000

208,353

 Other assets

    

  Prepaid pension benefits

271,902

250,826

  Derivative assets

52,651

-     

  Other

22,470

22,254

 Total other assets

347,023

273,080

   Total Regulatory and Other Assets

552,023

481,433

   Total Assets

$2,988,644

$2,952,985


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

New York State Electric & Gas Corporation
Balance Sheets - (Unaudited)
 

March 31,
2001

Dec. 31,
2000

Liabilities

(Thousands)

Current Liabilities

    

 Current portion of long-term debt

$822

$1,088

 Notes payable

84,000

123,000

 Accounts payable and accrued liabilities

111,988

160,654

 Interest accrued

26,856

15,925

 Taxes accrued

49,810

9,006

 Other

49,514

71,510

   Total Current Liabilities

322,990

381,183

Regulatory and Other Liabilities
 Regulatory liabilities

    

  Deferred income taxes

49,137

50,306

  Deferred income taxes, unfunded future income taxes

18,848

18,848

  Other

19,668

16,975

 Total regulatory liabilities

87,653

86,129

 Other liabilities

    

  Deferred income taxes

315,718

287,560

  Other postretirement benefits

187,274

183,666

  Environmental remediation costs

77,300

77,500

  Other

90,252

100,148

 Total other liabilities

670,544

648,874

   Total Regulatory and Other Liabilities

758,197

735,003

 Long-term debt

1,189,369

1,189,249

   Total Liabilities

2,270,556

2,305,435

Commitments

-      

-      

Preferred Stock
 Preferred stock redeemable solely at NYSEG's option


10,159


10,159

Common Stock Equity
 Common stock


430,057


430,057

 Capital in excess of par value

170,678

170,678

 Retained earnings

74,285

35,329

 Accumulated other comprehensive income

32,909

1,327

   Total Common Stock Equity

707,929

637,391

   Total Liabilities and Stockholder's Equity

$2,988,644

$2,952,985


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

New York State Electric & Gas Corporation
Statements of Cash Flows - (Unaudited)

Three Months Ended March 31

2001

2000

Operating Activities

(Thousands)

 Net income

$79,598 

$83,464 

 Adjustments to reconcile net income to net
  cash provided by operating activities

    

   Depreciation and amortization

25,337 

27,491 

   Income taxes and investment tax credits deferred, net

5,205 

(3,687)

   Pension income

(18,041)

(16,320)

 Changes in current operating assets and liabilities

    

   Accounts receivable

1,560 

10,128 

   Inventory

25,679 

10,690 

   Prepayments

(12,077)

(12,394)

   Accounts payable and accrued liabilities

(48,666)

(24,142)

   Interest accrued

10,931 

10,595 

   Taxes accrued

40,804 

54,875 

   Other current liabilities

(21,996)

(17,325)

 Other, net

(120)

4,890 

   Net Cash Provided by Operating Activities

88,214 

128,265 

Investing Activities

    

 Utility plant additions

(11,786)

(12,431)

 Other property and investments

721 

(829)

 Other

496 

(7,343)

   Net Cash Used in Investing Activities

(10,569)

(20,603)

Financing Activities

    

 Notes payable, net

(39,000)

(163,240)

 Dividends on common and preferred stock

(40,642)

(38,237)

   Net Cash Used in Financing Activities

(79,642)

(201,477)

Net Decrease in Cash and Cash Equivalents

(1,997)

(93,815)

Cash and Cash Equivalents, Beginning of Period

17,618 

114,494 

Cash and Cash Equivalents, End of Period

$15,621 

$20,679 

Supplemental Disclosure of Cash Flows Information

    

 Cash paid during the period:
  Interest, net of amounts capitalized
  Income taxes


$14,624 
$6,664 


$13,698 
$5,661 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 1.  Financial Statements (Cont'd)

New York State Electric & Gas Corporation
Statements of Retained Earnings - (Unaudited)

Three Months Ended March 31

2001

2000
 

(Thousands)

Balance, Beginning of Period

$35,329

$26,731

Add net income

79,598

83,464
 

114,927

110,195

Deduct Dividends on Capital Stock

    

 Preferred

99

99

 Common

40,543

38,138


40,642

38,237

Balance, End of Period

$74,285

$71,958


The notes on pages 24 through 27 are an integral part of the financial statements.








New York State Electric & Gas Corporation
Statements of Comprehensive Income - (Unaudited)

Three Months Ended March 31

2001

2000
 

(Thousands)

Net income

$79,598 

$83,464 

Other comprehensive income, net of tax

    

  Net unrealized gain on investments

79 

138 

  Minimum pension liability adjustment

-      

(1,351)

  Unrealized gains 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



54,602 



-      

    Unrealized losses on derivatives qualified as hedges

(13,261)

-      

    Reclassification adjustment for gains included in net income

(9,838)

-      

  Net unrealized gains on derivatives qualified as hedges

31,503 

-      

    Total other comprehensive income (loss)

31,582 

(1,213)

Comprehensive Income

$111,180 

$82,251 


The notes on pages 24 through 27 are an integral part of the financial statements.

 

 

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations

New York State Electric & Gas Corporation

(a) Liquidity and Capital Resources

Electric Delivery Business

NYSEG's Price Protection Plan: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.

Retail Access Credit: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.

Independent System Operator: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.

Natural Gas Delivery Business

Natural Gas Supply Alliance: See Energy East Corporation's Item 2(a), Natural Gas Delivery Business, for the discussion of this item.

Investing Activities

Investing Activities: Capital spending for the first three months of 2001 was $11 million, including nuclear fuel. For 2001 capital spending is projected to be $77 million, including nuclear fuel, and is expected to be paid for with internally generated funds. Capital spending will be primarily for the extension of energy delivery service, necessary improvements to existing facilities and compliance with environmental requirements.

 

(b) Results of Operations

Three months ended March 31
(Thousands)

     2001     

     2000     

Change

Operating Revenues

$625,461 

$575,764 

9%  

Operating Income

$165,149 

$149,523 

10%  

Earnings Available for Common Stock

$79,499 

$83,365 

(5%) 

The $4 million decrease in earnings for the quarter was primarily due to higher natural gas costs caused by higher market prices, lower retail electricity prices and a non-recurring benefit in 2000 from a federal income tax audit adjustment. Those decreases were partially offset by higher retail electricity deliveries because of colder weather this quarter, lower purchased power and ancillary services costs and higher electricity transmission revenues.

 

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operation (Cont'd)

New York State Electric & Gas Corporation

Operating Results for the Electric Delivery Business

Three months ended March 31
(Thousands)

     2001     

     2000     

Change

Retail Deliveries - Megawatt-hours

3,787 

3,561 

6% 

Operating Revenues

$457,761 

$438,011 

5% 

Operating Expenses

$312,574 

$331,150 

(6%)

Operating Income

$145,187 

$106,861 

36% 

The $20 million increase in operating revenues is primarily due to higher retail deliveries because of colder weather this quarter and higher transmission revenues. Those increases were partially offset by lower wholesale deliveries and lower retail prices primarily due to higher retail access deliveries.

Operating expenses decreased $19 million for the quarter due to lower purchased power costs, primarily due to lower wholesale deliveries and ancillary services costs, and cost control efforts.

Operating Results for the Natural Gas Delivery Business

Three months ended March 31
(Thousands)

     2001     

     2000     

Change

Retail Deliveries - Dekatherms

23,964 

24,248 

(1%)

Operating Revenues

$167,700 

$137,753 

22% 

Operating Expenses

$147,738 

$95,091 

55% 

Operating Income

$19,962 

$42,662 

(53%)

The $30 million increase in operating revenues is primarily due to the recovery of increased natural gas costs for non-residential deliveries.

Operating expenses increased $53 million primarily due to an increase in retail purchased gas costs caused by higher market prices.

 

Item 1.  Financial Statements

Notes to Financial Statements
for
Energy East Corporation
Central Maine Power Company
New York State Electric & Gas Corporation

Notes to Financial Statements of Registrants:

Registrant

Applicable Notes

Energy East

1, 2, 3, 4, 5

CMP

1, 2, 3, 4

NYSEG

1, 3, 4, 5

 

Note 1. Unaudited Financial Statements

The accompanying unaudited financial statements reflect all adjustments which are necessary, in the opinion of the management of the registrants, for a fair presentation of the interim results. All such adjustments are of a normal, recurring nature.

Energy East's financial statements and CMP's financial statements consolidate their majority-owned subsidiaries after eliminating all intercompany transactions.

The accompanying unaudited financial statements for each registrant should be read in conjunction with the financial statements and notes contained in the report on Form 10-K filed by each registrant for the year ended December 31, 2000. Due to the seasonal nature of the registrants' operations, financial results for interim periods are not necessarily indicative of trends for a 12-month period.

 

Note 2. Acquisitions of Connecticut Energy, CMP Group, CTG Resources and Berkshire Energy

Due to completion of the company's merger with CNE on February 8, 2000, and its mergers with CMP Group, CTG Resources and Berkshire Energy on September 1, 2000, 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.

Amounts presented in the consolidated financial statements for CMP for the three months ended March 31, 2000, reflect the historical predecessor amounts reported by CMP prior to its acquisition by Energy East. Amounts reported for the three months ended March 31, 2001, include the amortization of goodwill related to the acquisition of CMP by Energy East.

The four merger transactions were accounted for using the purchase method. 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 will be amortized on a straight-line basis over the estimated useful life. The useful life is determined based on the individual characteristics of each acquired company and the lives range from four to 40 years. Goodwill may be adjusted over the 12 months following the mergers as actual amounts for estimated liabilities become known.

The following pro forma information for the company for the three months ended March 31, 2000, which is based on unaudited data, gives effect to the company's four mergers as if they had been completed January 1, 2000. This information does not reflect future revenues or cost savings that may result from the mergers and is not indicative of actual results of operations had the mergers occurred at the beginning of the period presented or of results that may occur in the future.

Three Months Ended March 31

      2000      

(Thousands, except per share amounts)

  

Revenues

$1,148,971

Net income

$120,730

Earnings per share of common stock

$.97

Pro forma adjustments reflected in the amounts presented above include: (1) adjusting the four merged companies' non-utility assets to fair value based on an independent appraisal, (2) amortization of goodwill, (3) elimination of merger costs, (4) adjustments for estimated tax effects of the above adjustments, (5) lower investment income due to the sale of temporary investments to complete the mergers and (6) interest expense due to the issuance of merger-related debt.

 

Note 3. Segment Information

Energy East's electric delivery business consists of its regulated transmission, distribution and generation operations in New York and Maine; and its natural gas delivery business consists of its regulated transportation, storage and distribution operations in New York, Connecticut, Maine and Massachusetts. Other includes: the company's corporate assets, interest costs and operating expenses; intersegment eliminations; and non-utility businesses.

CMP's electric delivery business consists of its transmission and distribution operations. CMP operates in the State of Maine. Other includes CMP's corporate assets.

NYSEG's electric delivery business consists of its transmission, distribution and generation operations; and its natural gas segment consists of its transportation, storage and distribution operations. NYSEG operates in the State of New York. Other includes NYSEG's corporate assets.

 

Selected financial information for Energy East's, CMP's and NYSEG's business segments is presented in the following table.
 

Electric
     Delivery     

Natural Gas
    Delivery    


     Other     


     Total     
   

(Thousands) 

  

Three Months Ended

        

March 31, 2001

        

  Operating Revenues
   Energy East
   CMP
   NYSEG


$688,006
$230,161
$457,761


$513,213
-      
$167,700


$69,920 
-      
-      


$1,271,139
$230,161
$625,461

  Net Income
   Energy East
   CMP
   NYSEG


$86,343
$22,246
$70,464


$35,275
-      
$9,134


($6,017)
-      
-      


$115,601
$22,246
$79,598

March 31, 2000

        

  Operating Revenues
   Energy East
   CMP (Predecessor)
   NYSEG


$438,011
$263,341
$438,011


$211,302
-      
$137,753


$35,113
-      
-      


$684,426
$263,341
$575,764

  Net Income
   Energy East
   CMP (Predecessor)
   NYSEG


$58,904
$33,768
$58,985


$31,853
-      
$24,479


$2,570
-      
-      


$93,327
$33,768
$83,464

Total Assets

        

March 31, 2001
   Energy East
   CMP
   NYSEG


$4,216,047
$1,892,600
$2,151,148


$2,443,934
-      
$644,333


$399,138
$4,462
$193,163


$7,059,119
$1,897,062
$2,988,644

December 31, 2000
   Energy East
   CMP
   NYSEG


$4,212,623
$1,924,357
$2,116,933


$2,406,848
-      
$639,684


$394,257
$4,440
$196,368


$7,013,728
$1,928,797
$2,952,985

 

Note 4. Reclassifications

Certain amounts have been reclassified on the unaudited financial statements to conform with the 2001 presentation.

 

 

Note 5. Statement 133

The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, in June 1998, which was amended in later FASB pronouncements. Statement 133 establishes standards for the accounting and reporting for derivative instruments and for hedging activities. Statement 133 requires that all derivatives be recognized as either assets or liabilities on a company's balance sheet at their fair value. The company adopted Statement 133 as of January 1, 2001.

Substantially all of the company's derivative instruments receive hedge accounting treatment under Statement 133. The transition adjustment for the company's derivative instruments, as of January 1, 2001, affected both Other Comprehensive Income and Net Income. The amount of the transition adjustment recorded in Other Comprehensive Income was a gain of approximately $58 million for the company, which included a gain of approximately $55 million for NYSEG. The amount of the transition adjustment recorded in Net Income was a gain of less than $1 million for the company due to NYSEG.

 

Forward-looking Statements

This Form 10-Q contains certain forward-looking statements that are based upon management's current expectations and information that is currently available. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements in certain circumstances. Whenever used in this report, the words "estimate," "expect," "believe," or similar expressions are intended to identify such forward-looking statements.

In addition to the assumptions and other factors referred to specifically in connection with such statements, factors that could cause actual results to differ materially from those contemplated in any forward-looking statements include, among others: the deregulation and continued regulatory unbundling of a vertically integrated industry; the companies' ability to compete in the rapidly changing and increasingly competitive electricity and natural gas utility markets; regulatory uncertainty in a politically-charged environment of rising energy prices; the operation of the New York Independent System Operator (NYISO) and ISO New England, Inc.; the ability to control non-utility generator and other costs; changes in fuel supply or cost and the success of strategies to satisfy power requirements now that all of the company's coal-fired generation assets have been sold; the company's ability to expand its products and services, including its energy infrastructure in the Northeast; the company's ability to integrate the operations of CNE, CMP Group, CTG Resources, Berkshire Energy and RGS Energy with its operations; market risk; the ability to obtain adequate and timely rate relief; nuclear or environmental incidents; legal or administrative proceedings; changes in the cost or availability of capital; growth in the areas in which the companies are doing business; weather variations affecting customer energy usage; and other considerations that may be disclosed from time to time in the companies publicly disseminated documents and filings. The companies undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
(See reports on Form 10-K for Energy East, CMP and NYSEG for fiscal year ended December 31, 2000, Item 7A- Quantitative and Qualitative Disclosures About Market Risk.)

Commodity Price Risk: NYSEG has hedged approximately 80% of its expected residential natural gas load for the remainder of 2001 through futures and option contracts. For its remaining unhedged positions in 2001, a $1.00 per dekatherm change in the cost of natural gas changes natural gas costs by $2 million.

NYSEG uses electricity contracts and contracts for differences (CFDs) to manage against fluctuations in the cost of electricity. Those contracts allow NYSEG to fix margins on the majority of its retail electricity sales. The cost or benefit of those contracts is included in the amount expensed for electricity purchased when the electricity is sold. NYSEG has CFDs, generation and other electricity contracts, which provide for all of its total expected demand for the remainder of 2001, 89% for 2002 and 67% for 2003.

NYSEG is also exposed to daily price fluctuations in the spot price of electricity. In situations where the electricity contracts do not cover peak demand, NYSEG must buy electricity in the spot market. Conversely, when NYSEG has contracts for more electricity than its demand, it must sell the excess in the spot market. NYSEG uses a cash flow at risk (CFAR) calculation to measure this price risk. At May 1, 2001, the CFAR for electricity requirements was approximately $6 million for the next 12-month period. The CFAR indicates the amount by which the fair value of NYSEG's net position could vary from its current level over a 12-month period, with a 97.5% certainty, assuming all unhedged positions during that period are filled in the spot market.

 

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

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 The AES Corporation 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 New York State Department of Environmental Conservation (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 basisfor 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.

 

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits - See Exhibit Index.

(b)  The following reports on Form 8-K were filed during the quarter:

Energy East filed a report on Form 8-K, dated February 16, 2001, to report certain information under Item 5, "Other Events" and Item 7, "Financial Statements, Pro Forma Financial Information and Exhibits."

 

 

Signatures

Pursuant to the requirements 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.

 

 
 

ENERGY EAST CORPORATION
                  (Registrant)

Date:  May 10, 2001

By   /s/Robert E. Rude                                                 
           Robert E. Rude
           Vice President and Controller
           (Chief Accounting Officer)

 

 
 

CENTRAL MAINE POWER COMPANY
                  (Registrant)

Date:  May 10, 2001

By   /s/Curtis I. Call                                                     
           Curtis I. Call
           Treasurer
           (Chief Accounting Officer)

 

 
 

NEW YORK STATE ELECTRIC & GAS CORPORATION
                  (Registrant)

Date:  May 10, 2001

By   /s/Sherwood J. Rafferty                                           
           Sherwood J. Rafferty
           Senior Vice President and
           Chief Financial Officer
           (Principal Financial Officer)

 

 

EXHIBIT INDEX

The following exhibit is delivered with this report:

Registrant

Exhibit No.

Description of Exhibit

Energy East Corporation

3-4 - 

By-Laws of the Company as amended April 12, 2001.