UTILITIES: Catharsis Time Again at Con Ed

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Yet some more fundamental problems were left to fester. Pressed through the 1960s by rising demand for power, but unable to build new facilities because of opposition from environmentalists, the company carried nonexistent reserve-generating capacity on its books, and more or less hoped for the best. When Luce took over, two new plants were under construction and plans were under way to develop a hydroelectric facility atop Storm King Mountain on the Hudson River. Though all three projects were supposed to be on line by mid-1972, it took the new chairman nearly a year to realize that the target dates were wildly unrealistic. By then, costs were soaring and the environmental lobby was pummeling the Storm King project in the courts.

By the spring of 1974, the whipsaw effect of recession and rising costs—particularly for oil, which fuels 80% of Con Ed's generating capacity—left the company strapped. Realizing that it could not afford to complete its two new generating plants, let alone begin construction at Storm King—even if environmental objections were overcome—Con Ed sold the two plants to the state power authority. Most dramatic of all, the company skipped its regular 450 quarterly dividend. From a high of $26 in

1973, Con Ed stock plunged to $6 a share, and the company gave every appearance of being a financial basket case, rather like the city it served.

But since then Con Ed's situation has brightened considerably. The company now operates on a comfortable profit margin, thanks to $678 million in rate increases won in the past 2% years. (Con Ed's electricity rate, now 10.10 per kilowatt-hour, has doubled since 1972 and is 17% above the national average.) More important, the $600 million brought in by sale of the two generating plants eliminated the need to borrow for improvements for some time. The $1 billion or so that the company plans to spend on new plant and equipment over the next three years will be financed entirely out of earnings; this will leave sufficient money in the Con Ed till to continue paying quarterly dividends, which were resumed after the 1974 hiatus and were raised to 500 a share in January. Additionally, a program to collect delinquent accounts more quickly has cut down the time of the average unpaid bill from 59 days in 1973 to a present tolerable level of slightly more than a month. These changes have helped bring about a sharp earnings turnaround: Con Ed's net income rose by 55% last year, to $301.4 million, al—though revenues grew by only 18%, to $2.9 billion. With Con Ed shares now at about $23 and the company in strong shape financially, some Wall Street brokers are again recommending the stock.