ML19309C405
| ML19309C405 | |
| Person / Time | |
|---|---|
| Site: | Millstone  |
| Issue date: | 03/14/1980 |
| From: | CONNECTICUT LIGHT & POWER CO. (SUBS. OF NORTHEAST |
| To: | |
| Shared Package | |
| ML19309C401 | List: |
| References | |
| NUDOCS 8004080564 | |
| Download: ML19309C405 (24) | |
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% ;p ij~ ' ff;0.. 4Q:lf Vj! ^ dWU,4 .i,N'ihlf ? ffWi.t I,f,f ,;e i '. il 'b ii# The Connecticut Light and Power Company N1 arch 14,1980 To the Shareholders: The Annual Report of Northeast Utilities, which provides coverage of the entire i Northeast Utilities system, including The Connecticut Light and Power Company, has been mailed to all CL&P preferred stockholders. This report is brief for that reason. The financial statements and statistical data included in this report show the results of operations of the Company in 1970 As you will note, the Company's earnings showed a decline during 1979 and remained significantly below the return allowed by the Connecticut Division of Public Utility Control (DPUCL Additional revenues generated by a 553.7 million rate increase, approved by the DPUC in June of 1979, were offset by the effects of rapid inflation, higher fossil fuel costs, expenses required for service restoration following storms, costs associated with im-piementing new requirements of the Nuclear Regulatory Commissicin as well as higher short-term interest rates, in addition, earnings were adversely affected by a lower level of nuclear generation than in 1978 and the operation, during the last five months of the year, of the Generation Utilization Adjustment Clause (GUAC), which was authorized by the DPUC as part of its 1979 rate decision. The GUAC should have a stabilizing effect on earnings in the future, however. The Company expects to file shortly for increased electric and gas rates. Carroll A. Caffrey and Walter T. Schultheis were elected Vice Presidents in 1979. Robert S, Bromage, Vice President, retired after 43 years of system service and Warren A. Greten, Vice President, resigned af:er 30 years of system service. Warren F. Brecht, previously Vice President - Financial Control and Information Services, was named Vice President - hlanagement Information Systems and Controller when Warren A. Hunt became System Director - Revenue Requirements. Sincerely, /s fff. President Chairnen 1 The Connecticut Light and Power Company STATEMENTS OF INCOME i for the Years En.le.i December 31 147o 1078(a) (Thousands of Dollarv Operating Hevenue e tNote 21 5501.o2e 5505 838 Operating Expenu s: Operation - Fuel used n generation lo2,245 114,422 Cas purchased for resale 54,514 4o,075 Orher 121,723 100.53o N1aintenarcc 43,lo3 .37.024 Depret.iat'on 50,025 40 00o Federal and state mcome tases (Note 3) o,480 13.305 Tases other than income taxes
- 50. coo 45.100 Total operating expenses 442.774 407.277 Operating income 08.852 98 Sol Other Income:
Allowan e for equity tunds used during construction 0.542 10.473 Equity in earnings of regional nuclear generating companies 2,878 2.097 Other. net (737) 342 income tases applicable to other income-cresht (Note 3) c34 424 Net other income 12.322 13.33o income bef ore interest charges 1I1,174 Ii1.807 Interest Charges: Interest on long-tcrm debt 57,000 5o 310 Other mierest 7,270 4.757 Allowance f or borrow ed f unds used during construc tion 111.051 t (10 e54) T otal interest (harges 53,327 50.422 Net income (Note 2) s 57.847 5 ol.475 (a) The 1978 financial statements have been restated as discussed in Note 10. ST.^.TCMENTO OF RETAINED EARNINGS For the Year < Foded December 31 1970 1078 i Thowands o_t Dol lar u llalance at beginning of period 5170,448 $158347 Ntt income 37,847 c1.475 Cash dividends on pref erred stot k (14.c45) (14,o44) Cash thvidends on common stock f 33.170) (34 o30) llalance at end of period tai 5180.071 5170 048 f a) At December 31. 1070, retained earnings of So?.000.000 were available f >r payment of cash dividends on common stock under the provisions of the Company's Indenture of Niortgage and i Deed of Trust, r l l l The accompanying notes are an integral part of these financial statements. 2 The Connecticut Light and Power Company STATEMENTS OF SOURCES OF FUNDS FOR GROSS PROPERTY ADDITIONS For tire Years Emled December 3L 197o 1078la) !Titousamis of Dellarsb funds Generated From Operations Net income S 57,847 5 e1,475 Principal noncash items - Depreciation 50,025 49.90o Deferred income tases. net o,004 9,557 Amortization of deferred charges and other noncash items 2,544 3.476 Amortitation of deferred fuelcosts 2,553 1.413 Allowance for funds used during construction f 20.5031
- 21 127)
Total funds from operations 00,280 104.700 1.ess - Cash dividends paid on: Common stock 33,179 34.630 Preferred stock %~ 14.644 Net funds generated from operations ) 55 42o Funds Obtained from Financing increase in short-term debt 40,045 1.105 Proceeds from issuance of long-term debt 30.755 Repayment of long-term debt 131) (lo.031) Net f unds from Iinancing 40.014 24.829 Other Sources (Uses) Of Funds Decrease (increase) in net current assets (excluding short-term debt. long-term debt due within one year and preferred stock to be redeemed within one year): Cash and special deposits 3,500 3.573 Receivables and accrued utdity revenues (29,834) (7.071) Fuel. materials and supplies a14,579; (3.200) Accounts payable 27,oS5 (3.421) Accrued tases 2,374 2,352 Revenues to be ref unded to customers (Note 2) 10.022 Other, net (21.21J) o 104 Net change (32,Ic2i 8.440 Sales of utility plant (Note 9) 44,227 11.732 Energy adjustment clauses, net t 7,1856 30o Other, net 4,437 (1.0741 Net other sources (uses) of funds o.377 10.413 Total Funds Ft,r Construction From Above Sources 100,847 co.ec8 Allowance for Funds Used During Construction 20,503 21.127 GROSS PROPERTY ADDITIONS 5121.440 S120 705 Composition Of Gross Property Additions: Electric utihty plant $108.540 $114.70o - Gas utility plant o.480 3.700 Nuclear iuel o.420 2.200 Total 5121.440 $1:0 7o5 f a) The 1078 financial statements have been restated. as discussed in Note 10. The accompanyin.t notes are an integral part of these tinancial statements. 3 = c The Connecticut Light and Power Company BALANCE SHEETS At December 31. 1070 1078 i Thous.mds of Dallarn i! ASSETS Utility Plant, at original cost: Ele < t ric $1.412.073 .51,380.400 } Cas 125,540 120 o4o 1.537,622 1.507,13e less: Accumulated provision for depreciation 403.o54 3o2.215 1,133,oc8 1.144,021 Construction work in progress (Note 93 320.o38 200.121 Nuclear tuelin process, net o,105 7 288 Total net utility plant 1,4o3,801 1.442.330 1 1 Other Preperty and Investments: Investments in regional nuclear generating companies, at equity 24,743 23.043 Investments in subsidiary companies, at equity 4,74o 5.743 Other, at cost 5.82o 5 Slo 35.315 35.202 i Current Assets: Cash and spccial deposits (Note 4) 1,5cl 5.001 Receivables, less accumulated provision for uncollectible accounts of $2,0o0,000 in 1970 and $1.8M.000 in 1978 o0,475 44.044 i Due f rom affiliated companies 25,873 15.035 Accrued utility revenues 24.347 24.082 Fuel, materials and supplies, at average cost 40,584 35,005 Prepayments and other 2.02o 847 1o8.8o0 12o 774 Deferred Charges: Unamortized debt expense 1,777 1 038 Energy adjustment clauses, net 0,174 4 157 Other o.882 e 100 17.833 15 285 Total Aswts St.e85.818 51 elo. Sol f The accompanying notes are an integral part of these financial statements. 4 c f 1 At Daember3L l070 1078 t Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock - $10 par value. Authonzed 20.000.000 shares: outstanding 8.931,014 shares S 89.310 5 89.310 Capital surplus, paid in t no change during years) 208,o14 208.o14 Retained earnings 180,071 ~170.048 Total common stockholder's equity 478,845 4e8 872 Preferred stock not subject to mandatory redemption (cumulativel- $50 par value. Authorized 5,000.000 shares: outstanding 3,500.000 shares (Note 5) 175,000 175.000 Preferred stoc k subiect to mandatory redemption tcumulative)- 550 par value. Authorized r 400,000 shares: outstandmg 400.000 shares (Note 6) 10,000 20.000 Long-term debt, net (Note 7) 75o.50o 771.541 Total capitalization 1,420.4o1 1.435 413 Current Liabilities: Notes payable to banks (Note 4) 23,000 5,500 Commercial paper (Note 4) e5,245 42.700 Long-term debt due within one year (Note 7) 15,031 31 Preferred stock to be redeemed within one year (Note 6) 1,000 Accounts payable 21,531 10.528 i Due to affiliated companies 38,042 22.118 Accrued taxes 25.053 23.570 Accrued interest 18,818 10 074 Revenues to be refunded to customers (Note 2) 14.720 Other 7,385 8 074 21o.035 147.221 Deferred Credits: Accumulated deferred income taxes 7,8o4 7.400 Accumulated deferred investment tax credits 2e,o14 22.456 Other 3.514 7 008 - 40.202 3o 034 Commitments and Contingencies (Notes 2 and 9) Total Capitalization and Liabilities 51.685.818 SLelo 301 .5 o l 4 ~ The Connecticut Light and Power Company NOTES TO FINANCIAL STATEMENTS (1) SUMh1ARY OF SIGNIFICANT ACCOUNTING POLICIES Cenend: The Connecticut Light and Power Company (the Company), The Hartford Electric Light Company (HELCO), Western Massachusetts Electric Company (WMECO) and Holyoke Water Power Company are the principal operating subsidiaries comprising the Northeast Utilities system (the system) and are wholly owned by Northeast Utilities, a registered holding company under the Public. Utility Holding Company Act of 1935. Other wholly owned subsidiaries of Northeast Utilities providing substantial support services to the system operating companies include Northeast Utilities Service Company (NUSCO) (a system service company supplying centralized administrative, accounting, engineering, financial legal, operations, planning, purchasing and other services to_ the system companies). Northeast Nuclear Energy Company (NNECO).(agent for the system companies in construction and operation of nuclear generating facilities and the financing of nuclear fuel for such facilities) and The Rocky River Realty Company and The Quinnehtuk Company (each a real estate company which rents administrative facilities to the system companies). All transactions among affiliated companies are on a recovery of cost basis, except for transactions with NNECO, which also include amounts representing a return on equity, and are subject to approval of various federal and state regulatory commissions having jurisdiction. The Company and HELCO have consolidated their operations by means of a transfer of 1 all HELCO regional personnel (other than production personnel) to the Company. The Company is responsible for meeting the local service needs of customers of both companies and bills HELCO for work performed for HELCO on a recovery of cost basis. The Company and HELCO have been investigating the feasibility of a corporate merger, in which the Company would be the surviving corporation. The Company is part of a New England bulk power system which provides for purchases and sales of electric energy through a regional dispatch control agency. Arrangements among the Company and system companies, outside agencies and other utilities covering inter-connections, interchange of electric power and sales of utility property are subject to regulation by the Federal Energy Regulatory Commission (FERC) or the Securities and Ex-change Commission (SEC). The Company is subject to further regulation by FERC and the Connecticut Division of Public Utility Control (DPUC) and follows the accounting policies prescnbed by the respective commissions. The Company is a part owner with other system and New England electric utilities of the stock of four regional nuclear generating companies. These companies, together with the Company's ownership interest shown parenthetically are: Connecticut Yankee Atomic Power ] Company (25 percent). Yankee Atomic Electric Company (15 percent), Maine Yankee Atomic J Power Company (8 percent) and Vermont Yankee Nuclear Power Corporation (6 percent). The Company's investment in these companies is accounted for on an equity basis. The electricity produced by these facilities is committed to the participants based on their ownership interests and is billed pursuant to contractual agreements which'are approved by FERC. Rcrennes: Revenues are based on authorized rates applied to customer consumption of utility services. Rates may not be increased withcut a formal proceeding before the appropriate regulatory commission. The Company accrues an estimate for energy delivered but unbilled at the end of accounting periods. i Nuclear Fact: The Company. HELCO and WMECO own Millstone I and !! as tenants in common. NNECO owns the nuclear fuel for such units. The cost of NNECO's nuclear fuel is amortized on a unit-of-production method at rates based on estimated kilowatt-hours of energy to be provided and is billed to the companies based on their percentage ownership in the units. The amount of nuclear fuel expense charged to the Company, based on its 53 percent ownership; aggregated 513,543.000 and $10,404.000 in 1970 and 197S, respectively. This includes a provision in 1979 for estimated spent nuclear fuel disposal costs on the Millstone units which the Company is allowed by the DPUC to collect from customers: - however, amounts collected from customers must be deducted from rate base. The Company is not paying NNECO. the owner of the nuclear fuel, until NNECO has to make payments for o o-such costs. The unpaid spent nuclear fuel costs' which amounted to S1.000.000 in 1979, were transferred from accounts payable to the accumulated provision for amortization of nuclear fuel assemblies. As approved by the DPUC, the estimated spent fuel disposal costs pertaining to fuel amortized prior to 1979 are being amortized over a ten-year period. Storage for spent fuel at the Millstone nuclear station, including the facilities currently under construction at Millstone Ill, will be sufficient until at least the mid-1990's.- ' Dcpreciation: The provision for depreciation is computed using the straight-line method at approved rates which are based on the estimated service lives of depreciable utility plant in service and estimated removal costs less expected salvage. The depreciation rates for the several classes of electric plant, which are equivalent to a composite rate of 3.5 percent in 1979 and 3.7 percent in 1978, and for several classes of gas plant, which are equivalent to a com-posite rate of 2.8 percent in 1979 and 2.7 percent in 1978, are applied to the average plant in service during the year, other than for major facilities which are depreciated from the time such facilities are placed in service. At the time depreciable property is retired from service, the original cost, plus cost of removal less salvage of such property, is charged to the ac-cumulated provision tar depreciation. A study comp!cted in 1979 indicates that the complete removal commencing at the time of retirement of the two nuclear units in which the Company has a 53% ownership interest is the most viable and economic method of decommissioning these units. The Company's share of the total estimated decommissioning cost is $70.8 million. Depreciation rates recognized for regulatory rate setting for the Company include an element of decommissioning costs. It is estimated that, at such time as the costs indicated in the 1979 study are allowed by the DPUC, depreciation expense will increase from approximately $1.1 million per year for the Company to approximately $2.8 million per year. Maintenance: The cost of maintenance, repairs and replacements of minor items of property is charged to maintenance expense. Replacements and renewals of items considered to be units of property are charged to the utility plant accounts. Federallncome Taxes: The tax effect of timing differences (differences between the periods in which transactions affect income in the financial statements and the periods in which they affect the determination of income subject to tax), is accounted for as prescribed by and in accordance with the rate-making treatment of the applicable regulatory commissions. The Company follows the flow through method except for FERC jurisdictional operations and the additionalinvestment tax credits received as a result of the Tax Reduction Act of 1973, which requires normalization of such additional credits. It is expected that deferred tases not provided for currently will be collected in customers' rates when such taxes become payable. See Note 3 for the detail of income tax expense. Allowance for Fmtds Used DuriNg Construction: The allowance for funds used during con-struction (AFUDC) represents the estimated cost of capital funds used to finance the Com-pany's construction program. The costs of construction are not recognized as part of the rate base for rate-making purposes until facdities are brought into service and, as permitted by applicable regulatory commissions, the Company charges AFUDC to the construction cost of utility plant. The AFUDC rate applied to construction work in progress for 1979 and 1o78 was ' 9 percent. Through 1079, the Company did not record the effect of compounding such rate. Effective January 1.1980. the Company adopted an AFUDC rate of 9.5 percent and also adopted. subject to the approval by the DPUC. net-of-income tax accounting treatment. In addition. AFUDC on Millstone 111 and on that portion of Seabrook not currently under contract to be sold will be compounded semi-annually. Retirement Plan: The Company participates in the Northeast Utilities Service Company Retirement Plan (the Plan). The Plan, which covers all regular employees is non-contnbutory. The system's policy is to annually fund an actuarially determined contribution. which includes that year's normal cost. the amortization of prior years' actuarial los es over fif teen years and the amortization of prior service costs over forty years. At December 31, 1070, it is estimated that the Plan's unfunded liabdity was approumately 5111.200.000 and that the Plan's assets exceeded the value of vested benefits. The Company's allocated portion ot-the system's contribution part of which was charged to utility plant. approximated $9.c00.000 in 1970 and $4,700.000 in 1078. 7 1 Energy Adjustment Clauses: The Company's retail electric and gas rates include adjustment clauses under which certain fossil fuel and purchased power costs and purchased gas costs, respectively, above or below base rate levels are charged or credited to customers. As prescribed by the DPUC, costs not currently recovered under the adjustment clauses are deferred until recovery is permitted by the DPUC. Effective August 1.- 1979, the Company implemented a Generation Utilization Ad-justment Clause (GUAC), as approved by the DPUC. Monthly, this clause levelizes the effect on fuel costs caused by variations from a 70 percent nuclear generation factor. At the end of - the twelve-month period, ending July 31 of each year, any deferred balance resulting from the actual nuclear generation f actor being above or below 70 percent will be either refunded to or collected from customers over the subsequent twelve-month period. For the period August 1, 1979 to December 31, 1970, the nuclear capacity factor was 70.6 percent, resulting in a j leveling charge to fuel expense of 55,242,000. I ' As of December 31,1979, the components included in the energy adjustment clauses, net t are as follows: Fuel and Purchased Power $10.027,000 i Cas Purchased for Resale 4.380.000 GUAC (5.242.000) i Total. 50,174.000 (2) RATE MATTERS in June 1079, the DPUC issued a decision granting the Company an increase in retail electric i and gas revenues of 553.7 million. The level granted was el percent of the 587.o million the Company had requested. The new rates went into ef fect in July 1970 ^ In January 1979, the DPUC approved the recovery of an aggregate of 56,588,000 by the Company from its electric and gas customers, representing previously unrecovered costs which were found by the Connecticut Supreme Court to have been improperly disallowed by the DPUC in its 1977 rate case decision. The recovery of these costs was recorded in revenues i during the first half of 1079 j The 514,720,000 of revenues to be refunded to customers as of December 31. 1978 resulted from FERC approved settlements between gas distribution companies and their gas suppliers which required refunds to ultimate customers. The refunds ~ were passed on to the Company's customers by reducing their gas bills in February 1979 The Company has collected certain revenues subject to possible refund under wholesale rate cases hled with FERC. Based on management's and its counsel's evaluations of the f acts in these cases. it is the opinion of management that, if refunds are required in excess of provisions which have been recorded, any additional amounts would not have a material effect on ihe Company's results of operations. (3) INCOME TAX EXPENSE The detall of federal and state income tas provisions charged to operations is set forth below: [ Year Ended Decembcr31. 1970 1078 -i (Thousands of Dollars > Current income taxes: .5 113 Federal. S 656 State 2,181 3.211 Total current 2,837 3,324 l Deferred income taxes, net: Investment tax credits'.
- 5,630 10.210 Federal 210 (473)
State lo4 (180) 1 Totaldeferred 6,004 - 9.557-Totalincome tads 5 8,841 512.881 8: o = Year Ended December 3L 1970 1078 (Thousands of Dollars) ' Such provision (credit) is included in the accompanying statements of income as follows: Operating expenses S 9,480 513,305 f Other income (639: (424)- Totalincome taxes S 8.841 512.881 . Deferred income taxes are comprised of the tax effects of timing differences as follows: Investment tax credits S 5,630 510.210 Liberalized depreciation 963 849 Unbilled revenues (1,254) (474) 4 Settlement credits - nuclear fuel (2,007) Energy adjustment clauses 2.910 (788) Other (238) (240) Deferred income taxes, net S 6,004 5 9.557 The principal reasons for the difference between total tax expense and the amount calculated by applying the federal in-come tax rate to pretax income are as follows: Expected tax, at 46ec of pretax income in 1979 (48% in 1978) 530,677 535.o91 Tax effect of differences: Additional depreciation for tax purposes (7,896) 18.8o4) Allowance for funds used during construction - not recognized as income for tax purposes (9.473) (10.142) Overhead costs of construction - expensed for tax purposes (2,245) (2.217) Investment tax credits (2.812) (1,691) Allocated affiliated companies' losses (1,273) (1.517) Cost of removal - expensed for tax purposes (1,367) (697) State tax, net of federal benefit 1,266 1,576 Other, net 1,964 742 i Totalincome taxes S 8.841 512.881 Effective income tax rate 13 ". 17", - k At December 31.1979. the Company had unused and unrecorded investment tax credits amounting to approximately 50.e00,000, which are available to offset federal income tax provisions for years through 1986. ] (4) SHORT TERM DEBT The Company utilizes bank loans and commercial paper to finance temporardy its continuing construction program. The system companies have joint bank credit lines with terms calling for interest rates equal to the prime rate or the prime rate plus a fraction thereof, at the time of borrowing. The credit lines expire at various times in 1980 and, although these lines are i generally renewable. the continuing availability of the unused lines of credit is subject to-review by the banks involved. At December 31, 1970 the amount of unused available - s borrowing capacity under the credit lines available to the Company _ was Slo 4.505.000; i however. substantially all of these joint credit lines are also available to other system com-panies. The maximum amount of short-term borrowings as currentip authorized by the SEC is 5135.000,000. 1 Essentially all of the cash of the Company represents compensating balances in~ support of the system's lines of credit: however. the compensating balances are not subject to contractual - restrictions on withdrawal. 9 6 I . Additional information with respect to short-term debt is as follows: 1o70 lo78 Weighted average interest rate for borrowings outstanding at end of period (excluding effect of compensating balances) E 11.2 "o hlaximum amount of borrowings outstanding at any month-end 588,245.000 550.000.000 Average daily borrowings during period S49,228,000 ' 530,180.000 Weighted average interest rate during the Period (based on the daily amounts out-standing and escluding effect of compensating balances) 12.3 6
- 8. 6 *o Rangeof maturities at December 31 (in days) 2-91 2-47 (5)
PREFERRED STOCK NOT SUBJECT TO h!ANDATORY REDEh1PTION Details of preferred stock outstanding are as follows: Par Value Currerst Sitares December 31. Description Rederruptious Price Outstartdirtg 1979 1978 (Tiscusarids of Dollars) 52.00 Series of 1947 554.00 33o,088 5 16,804 5 lo.804 51.90 Series of 1947 52.50 163.912 8,196 8,196 52.20 Series of 1949 52.?0 200.000 10,000 10.000 52.04 Series of 1949 52.0t, 100.000 5,000 5,000 52.co Series E of 1954 51.00 200.000 10,000 10,000 52.09 Series F of 1955 51.00 100,000 5,000 5,000 53.24 Series G of 1968 52.o5* 300.000 15,000 15.000 54.48 Series 11 of 1970 54.45* 300,000 15,000 15.000 54.48 Series I of 1070 54.So* 400.000 20,000 20,000 53.80 Series J of 1971 54.00* 400.000 20,000 20.000 54.56 Series K of 1974 54.36* 1.000.000 50.000 50.000 Total preferred stock not subject to mandatory redemption 3 500.000 S175.000 5175.000 l
- Redemption price reduces in tuture years.
All or any part of each outstanding series of preferred stock may be redeemel by the Company at any time at established redemption pnces plus accrued dividends to the date of redemption. (6) PREFERRED STOCK SUBJECT TO N1 ANDATORY REDEh1PTION Details of preferred stock outstanding are as follows: Par Value Current Sitares December 31. Descriptiort Redemption Price Outstanding 1979 1078 (Tiscusands of Dollars) 55.52 Series 1.of 1975 55.52' 400.000 20,000 20.000 Less preferred stock to be redeemed within one year 11.000) f . Total preferred stock subject to mandatory redemption 19,000 20.000 ? Redemption price reduces in future years. l The Series L preferred stock (the Series) requires a sinking fund sufficient to retire a minimum of 20,000 shares at 550 per share each year commencing September 1,1980. In case of default on sinking fund payments. no payments may be made on any junior stock by way I . of dividends or otherwise (other than in shares of junior stock) so long as the default con- . tinues. The Company's preferred stock provisions would prohibit the redemption or purchase t-I l 10 of shares of the Series if the Company is in arrears with respect to payment of dividends on any outstanding shares of preterred stock. There were no changes during the year in the Senes. All or part of the Senes may be redeemed by the Company at any time at established redemption prices plus accrued dividends to the date of redemptian, except that during the initial five-year redemption period, the Series is subject to certain refunding lim tations. m LONG-TERN! DEBT Details of long-term debt outstanding are as follows: December 3L 1070 1078 (Thousands of Dallarst First Ucrtgage Bonds: 3o Series K. due 1980 S 15,000 $ 15.000 23/4"o Series L due lo84 10,000 10.000 31/4"o Series N1. due 1082 35,000 35.000 31/4% Series N. due 1985 20,000 20.000 37 8". Series 0, due 1988 30.000 30.000 47/8"o Series P. due 1000 25,000 25.000 41/2% Series Q. due 1o86 9,c00 0.e00 43/8"o Series R. due 1093 25,000 25.000 o "o Series S, due 1997 30,000 30.000 61/2"o Series T, due 1908 20,000 20.000 o 7/8"o Series U, due1908 40,000 40.000 83/4"o Series V, due 2000 40,000 40.000 87/8"o Series W. due 2000 40.000 40.000 73'8"o Series X, due 2001 30.000 30.000 75/8"o Series Y, due 2002 50,000 50,000 7 5i8"o Series 2. due 2003 30.000 50.000 83/4% Series AA. due 2004 e5,000 c5.000 o "o Series BB. due 1082 85,000 85,000 11 "o Series CC, due 2000 50.000 50.000 87/8"o Series DD. due 2007 45,000 45.000 01.4% Series EE, due 2008 40.000 40.000 Total First N!ortgage Bonds 754,o00 754.o00 Pollution Control Notes: 5.00"c due 1908 o,175 6.175 o.50%, due 2007 11,870 11.870 Other 218 248 Less due within one year 15.031 31 Unamortized premium and discount, net ( 1.23M (1.321) Long-term debt. net 575o Sao 57 1 541 Long-term debt maturities and cash sinking fund requirements on debt outstanding at December 31,1070 are as Iollows: 1080. 515.031.000: 1081. 52.531.000: 1o82. 5122.531.000: 1033. 52.531.000 and 1084. 512.531.000. In addition. there is an annual I percent sinking and improvement fund requirement. which amounts to $3.850.000 for 1080. Such sinking and improvement fund requirement may be satisfied by the deposit of cash or bonds. or by cer-tification of property additions. All or any part of each outstanding series of first mortgage bonds may be redeemed by the Company at any time at established redemption prices plus accrued interest to the date of redemption. except certain series which are subject to certain refunding limitations during their respective imtial tive-year redemption perieds. The Series CC bonds require a sinking f und suf ticient to retire a minimum of $2.500.000 in pnncipal amount each year commencing September 1.1981. Essentially all utility plant is subject to the lien of the mortgage indenture. (8) LEASES The Company has entered into lease aereements for the use of substation equipment. data processing and office equipment, vehicles and ef fice < pace. Since ! case rentals are charged to 11 --~ expense for rate-making purposes capitalization of these leases is not required. Had the Company capitalized the leased property at the beginning of the lease terms, the effect on assets, liabilities, expenses or net income would not be material, Rental payments charged to operations, including rental payments on capitalizable leases, amounted to $5.775.000 for 1979 and $5.329.000 for 1o78. Future minimum rental payments, excluding executory costs such as real estate taxes, state use taxes, insurance and maintenance, under long term noncancellable leases are ap-proximately as follows: 1980, 5o,800.000: 1981, 55.600.000; 1982, 53,100.000: 1983, 55,200,000: 1984. 54,500,000: and for the years subsequent to 1984, an aggrega:e of 1 557,700,000. (0) CONSTRUCTION PROGRAht, FINANCING AND CONTINGENCIES The Company is engaged in a continuous construction program and currently forecasts construction expenditures, including nuclear fuel, to be approximately $159.2 million in 1980 and $845 mi!! ion for the years 1981 1985. The construction program is subject to periodic review and revision, and actual con-struction expenditures may vary from such estimates due to various factors such as revised load estimates, inflation, the availability and cost of capital, and the granting of timely and adequate rate relief by regulatory commissions. It is expected that compliance with present and developing regulations established by various authorities in the areas of nuclear plant licensing and safety, land use, water and air quality, and other environmental matters will require additional capital expenditures and increased operating costs not now determinable in amount. Substantial capital and operating expenditures have been budgeted by the Company in response to known and anticipated requirements of the U.S. Nuclear Regulatory Com-mission (NRC) as a result of its analysis of the Three Afile Island accident. However, ad-ditional expenditures may be required as a result of further NRC analysis of the accident. In addition, uncertainties related to the reprocessing or permanent storage of nuclear fuel may require revisions in future nuclear f uel costs. At December 31.1979 construction work in progress included an investment of $285.6 million in jointly owned nuclear generating facilities, as follows: a 34.5 percent interest in h!illstone !!! of $232.3 million, a 4.5 percent interest in the Seabrook nuclear plant of $38.8 million, and a 30.8 percent interest in the proposed Ntontague nuclear plant of 514.5 million. All the compames owning undivided interests in these jointly owned facilities are required to provide their own financing in order to support their portion of construction costs. The h!illstone !!! nuclear unit is being constructed for a 1086 in-service date. The an-ticipated cost of the Company's 34.5 percent ownership share of the unit. assuming approval by the appropriate regulatory commissions of the net-of-income tax accounting treatment, as discussed in Note 1. will be $713 million. As part of its effort to finance its construction program and to reduce construction expenditures, the Company has sold a 7.5 percent interest in Seabrook and is attempting to sell its remaining 4.5 percent interest in Seabrook. The Company currently anticipates selling a 1.5 percent interest in Seabrook in 1080, which would reduce the Company's current six year construction and nuclear fuel program expenditures approximately $19 million. The Company continues to attempt to sell its remaining interest. In 1078. because of regulatory delays and financial constraints, the system suspended its early site review effort for the h!ontague facility but continues to perform meteorological and ' aquatic studies of the site and to capitalize AFUDC. In 1980. the Company's construction program is expected to be financed from internal sources. long-term financing and short-term debt. Future earnings and the Company's ability to meet earnings coverage requirements for long term financing will be affected by a number of factors, including timely and adequate rate relief growth in sales, performance of nuclear generating units, inflation, interest and preferred stock dividend rates and other factors, the nature and effect of which cannot be determined in advance. The current six year construction program does not include any funds for the conversion of any of the Company's oil-fired generating units to coal. Certain of the Company's units may be subject to federal orders prohibiting the use of oil. The estimated cost of conversion of units which the Company believes are presently under consideration by the federal govern-i l 12 l., ment for conversion, ranges from approximately $137 million to approximately $306 million, depending on the environmental requirements applicable to each unit. An antitrust action was instituted agamst NU. Cl& P. HELCO and NUSCO in 1973 by six Connecticut municipally owned electric utilities claiming So4.500.000 in treble damages. Three of the plaintiffs have settled their claims for amounts which have been accrued by the system companies as of December 31.1070 The claims of the remaining three plaintiffs, for which amounts have also been accrued, must proceed to trial. In the opmion of counsel for the system. based upon all the tacts now known to them, the system companies will not be held liable for the antitrust offenses claimed in the plaintiffs' complaint. t10) TERNllNATION OF AGREEN1ENT FOR THE SALE OF THE CAS PROPERTIES On October 1.1079, the Company. HELCO and Connecticut Natural Gas Corporation (CNG) jointly terminated their agreement under which gas Properties of the Company and HELCO would be sold to CNG. The Company and HELCO are currently reevaluating the future of their gas businesses in light of SEC requirements that a registered holding company limit its utility operations to providing either electric or gas service. The 1078 financial data has been restated to eliminate the discontinued operaticns disclosure reflected in the 1978 Annual Report in order to conform with the 1970 presentation. (11) SEGNIENTS OF BUSINESS Segments of Business information relating to the Company's electric and gas operations for the years ended December 31,1970 and 1978 can be located in the Statements of Segments of Business on page 10 of this Annual Report. (12) QUARTERLY FINANCIAL DATA (UNAUDITED) f al Summarized quarterly financial data for 1079 and 1978 are as follows: Quarter Ended N1 arch 31 June 30 September 30 December 31 lo70 (Thoussmds of DadarsI Operating Revenues $160.081 5125,806 5144.880 5160.760 Operating Income S 31.423 5 15,307 5 25.667 5 26.365 Net income 5 21,1W 5 5.810 $ 15.442 5 15,391 lo78(b) Operating Revenues $148100 $114.222 ggi 5127.314 Operating !ncome 5 22.440 $ 20.389 5 25.651 5 30.072 Net income 513 e53 5 11.280 5 16.368 5 20.165 (a) Fluctuations between quarters within a year and as compared to the previous year are pnmarily due to seasonal variations and the impact of nuclear performance. However, the comparison of the third and fourth quarters of 1979 have been levelized for the impact of nuclear performance due to the implementation of the GUAC, as discussed in Note 1. Energy Adjustment Clauses. (b) 1078 data has been restated to include amounts related to gas operations. t13) INIPACT OF CHANGING PRICES (UNAUDITED) The following supplementary information was prepared on the basis prescnbed by the Financial Accounting Standards Board in Statement of Financial Accounting Standards No.
- 33. " Financial Reporting and Changing Pnces", for the purpose of providing certain in-formation about the effects of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than a precise measure. Specifically, fixed assets, and related depreciation expense appearing in the primary, historical cost financial statements have been restated on two bases constant dollar and current cost amounts. Restatement of other items would not materially affect the restated amount of net income.
13 Statement of Income Adjusted for Changing Prices For the Year Ended December 31,1979 Conventional Constant Dollar Current Cost Historical Average Average Cost 1979 Dollars 1979 Dollars (A1illions of Dollars) Operating revenues 5502 5592 5592 Fuel used in generation 162 lo2 162 Cas purchased for resale 54 54 54 Depreciation and nuclear fuel amortization 50 97 113 Other operation and maintenance enpenses 167 167 167 Federal and state income taxes 9 9 9 Interest expense 53 53 53 Taies other than income taxes 51 51 51 Other income 12 12 12 Net income (loss) (excludmg reduction to net recoverable cost) {8, S 11(b) $ (5) herease in specific prices (current cost) of fixed assets and nuclear fuel held during the year (a) 5308 Reduction to net recoverable cost Sl87) (11) Ef fect of increase in general price level (367) Excess of increase in general price Icvel over increase in specific prices af ter reduction to net recoverable cost (70) Gain from decline in purchasing power of net amounts owed 128 128 Net S 41 5 58 (a) At December 31,1979, current cost of fixed assets and nuclear fuel, net of accumulated depreciation, was $3.037.650.000, while historical cost or net cost recoverable through depreciation was $1,4o0,451,000. (b) Induding the reduction to net recoverable cost, net income (loss) on a constant dollar basis would have been 1576.000.000) for 1079 Five Year Comparison Of Selected Supplementary Financial Data Adjusted For Effects Of Changing Prices Years Ended December 31, 1970 1078 1977 1076 1075 (in Afillions of Average 1079 dollars) Operating revenues $502 55o3 55e8 5574 5565 llistorical cost information adjusted for generalinflation Net income (loss)(excluding reduction to net l recoverable cost) S 11 l Net assets at year-end at net recoverable cost $453 Current cost information l Net income (lossHexcluding reduction to net l recoverable cost) 5 (5) Excess of increase in general price level over increase in specific prices atter reduction to net recoverable cost S 70 Net assets at year end at net recoverable cost 5453 GeneralInformation Cain from decline in purchasmg power of net amounts owed $123 Average consumer price index 217.3 105.4 181.5 170.5 1o1.2 14 Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the average level of the Consumer Price Index for all Urban Consumers (CPI-U) durmg the year. With the cueption of CWIP. which has been escalated for AFUDC during the construction period, the data for plant was determined by applying the appbcable CPI-U to the historical cost of each plant function f or which an average age was determined. Constant dollar restatement corrects distortions caused by recordmg transactions in dollars of varymg purchasing power. The restated amounts do not purport to be appraised value, replacement cost. current value. or the individual prices of particular goods and services in the current market: nor are they indicative of the Company's future capital requirements. Current cost amounts reflect the changes in specific prices of plant from the date the plant was acquired to the present, and are based on estimates of the costs to acquire or produce today. assets identical to those owned or assets having the same service potential as the assets owned. The current cost of plant and equipment was determined by mdexing the historical costs of each plant f unction. for which an average age was determined by the applicable Handy-Whitman Index of Public Utihty Construction Costs. Both the constant dollar and current cost amounts ot land have been estimated by using the CPI-U. The current year's depreciation expense for both constant dollar and current cost methods was determmed by applying the Company's depreciation rates to the indexed plant amounts. Ac-cumulated depreciation under both methods was estimated for each n.,jor plant function by multiplying the respective cost data by a percentage representing the espi ed hfe of esisting facilities of each f unction at December 31,1979. Fossil fuel inventories and the cost of fossd fuel used in generation hace not been restated from their historical cost as regulation permits the recovery of fuel costs throegh the operation of ad-justment clauses. For this reason, fuelinventones are considered to be monetary assets. As prescnbed in Statement of Financial Accountmg Standards No. 33, income tases were not aJ usted. i The escess of the increase in general prices over the increases in specific prices of plant indicates that. for the year 1970. general intiation was greater than the increase in specific pnces of plant. Under the rate-making process prescnbed by the regulatory commissions to which the Company is subject, only the historical cost of plant is recoverable in revenues as depreciation. Therefore. the euess of the cost of plant stated in terms of constant dollars or current cost that exceeds the historical cost of plant is not presently recoverabie in rates as depreciation. and is rettected as a reduction to net recoverable cost. During a period of intiation. holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabdities esperience a gain. The gain from the decline in purchasing power of net amounts owed is pnmarily attnbutable to tha substantial amount et debt which has been used to finance property. plant and equipment. Auditors' Report To the Board of Directors et The Connecticut Light and Power Company: We have esamined the balance sheets of The Connecticut Light and Power Company (a Con-necticut corporation Jnd a wholly owned subsidiary of Northeast Utdities) as et December 31,1070 and 1o78 and the related statements of income. retamed earnmgs and sources of tunds for gross property additions for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and. accordingly. included such tests of the accountmg records and such other auditing procedures as we considered necessary in the circumstances. In our opinion. the tinanc:al statements reterred to above present f airly the tinancial position et The Connecticut Light and Power Company as of December 31.1070, and 1o78, and the results of its operations and the sources of tunds for gross property adJitions for the years then ended. in con-formity with generally accepted accounting pnnc:ples applied on a consistent basis. ARTliUR ANDERSEN & CO. liartf ord. Connecucut. February 20.1080. 13 The Connecticut Light and Power Company SUMM ARY OF OPERATIONS (a) For the Year < En.fe,i Duentbvr 31 lo70 1078 Operating Revenues 5501.o2e 5505 838 Operating bpenses: Operation and maintenance 381,700 208,957 Depreciation 50,025 40 000 Federal and state incorne taxes o.480 13.305 Taies other than income tases 50, coo 45 100 Total operatmg espenses 4o2.774 407.277 Operating Income 08,852 08,5o1 Other Income, Net 12.322 13.33o income Hefore Interest Charges 111,174 111 807 Interest Charges, Net 53.327 30.422 Income before cumulative effect of accounting changes 57,847 c1,475 Cumulative effect prior to January 1,1974 of accounting changes, relating to energy adjustment clauses and unbilled resenues, net of applicable income tases of 55.o72,000 Net income S 57.847 5 o1.475 Pro l'orma Net income (assuming the 1974 accounting changes above were applied retroactively) (a) These financial statements have been restated. as discussed in Note 10. tb) The pro f orma change for 1%o is estimated to be immaterial and. therefore, has not been computed. L 16 6 lI 1077 107o 1975 1074 ij 10 0 0 t Iluousanstwt Lhllarsi $474 000 $450,2o1 $410,3o1 $380 080 Sles.310 282.870 250.751 273.027 234.151 di 52o 44.3% 30.008 20.o24 28 058 13.212 l 7 273 8.381 a1.1721 4.021 3.008 4T 1TS 42.710 37 370 34 000 i 10 525 382 503 340 040 338.840 301.22o 120.271 01.473 100 312 80.512 85.7o3 3o.048 11 013 0.53o 12.300 11.105 3.000 103 38o 100 848 02.812 Oc 058 30.oS7 45.827 44 347 3o.225 3o 314 12.480 37.550 o5.001 So.587 c0144 27.177 13 375 S 37,550 $ e5 001 $So.5{ S 73 510 S 27.177 9 c0.144 (b) 17 The Connecticut Light & Power Company MANAGEMENT DISCllSSION AND ANALYSIS OF
SUMMARY
OF OPERATIONS A summary of the changes in the principal items affecting earnings is shown below:
Increase / (Decrease) 1979 vs.1978 1978 vs. lo77 Amount Percent Amount Percent (Thousands of Dollars)
Operating revenues..
585,788 17.0 S31,772 6.7 Operation and maintenance expenses:
Cost of fuel and gas.
55.417 34.3 2.704 1.7 Other operation expenses.
21,187 21.1 7.422 8.0 h!aintenance..
6.139 16.6 5,952 19.2 Provision for depreciation.
1.019 2.0 600 1.2 Provision for income taxes.
(3.825) f28.7) 6.032 82.9 Other taxes.....
5,560 12.3 1.974 4.6 Allowance for funds used during construction (534)
(2.5) 3.057 16.9 Interest and other charges (excluding allowance for borrowed funds used during construction).
3,302 5.4 6,575 12.1 Operating Revenues The revenue increase in 1979 resulted principally from the rate increase granted by the DPUC in July 1079 and from additional fuel cost recoveries resulting from rising fuel prices. Additional revenues were received in 1979 due to a temporary surcharge amounting to So.5 million to recover costs which were found by the Connecticut Supreme Court to have been improperly disallowed by the DPUC. The revenue increase in 1978 was primarily due to a rate increase which was received late in 1977 and higher kWh sales.
Operation and Alaintenance Expenses Operation and maintenance expenses increased in 1979 and 1978 by S82.7 million (28 percent) and $16.1 million (6 percent), respectively. The most significant portion of the increase in 1979 was a f uel and gas cost increase of 555.4 million (34 percent). Fuel cost increases in 1979 were attributable to escalating fossil fuel prices, additional purchases of interchange power, and increased nuclear fuel costs. Nuclear fuel expenses increased due to an increase in fuel prices and the provision for the ultimate disposal of spent fuel. Another contnbuting factor was the implementation of GUAC which deferred fuel cost reductions related to the high nuclear performance for the months of August through December 1979. The most significant portion of the operation and maintenance expense increase in 1978 related to costs associated with the Niillstone I and !! outages for reft.eling and maintenance. hiaintenance expense increases in 1979 were due to increased maintenance expenditures on fossil and nuclear plants of 53.2 million (22 percent) and the continuing impact of inflation.
Taxes Federal and Connecticut state income taxes decreased in 1979 due to lower taxable income and the lower tederal statutory rate. Income taxes increased in 1978 due to higher taxable income and increased normalization of investment tax credits. Taxes other than income taxes increased in 1079 largely due to an increa ed Connecticut gross earnings tax as a result of higher revenues. In' Con-necticut. 5 percent of all utility revenues are paid to the state as a gross earnings tax.-
Other Income Other income consists mainly of the allowance for equity funds used during construction (AFUDC). Total AFUDC. including the portion classified as a credit to interest charges, decreased by 5500.000 (3 percent) in 1970 and increased by $3.1 million (17 percent) in 1o78. The decrease in 1970 is due to the impact on construction work in progress of the sale of a portion of the Company's in.
terest in the Seabrook nuclear project.
Interest Charges Total interest charges (excluding the credit for allowance for borrowed funde used during construction) increased in 1979 and 1978 by S3.3 million (5 percent) and S6 6 million (12 percent),
respectively. Increases in 1979 were due to increased short-term borrowings at higher rates. Ad-ditional interest charges were incurred in both 1979 and 1978 due to the interest on a new bond issue l
in April 1o78.
i 18 l
9 The Connecticut Light and Power Company STATEMENTS OF SEGMENTS OF BUSINESS 1479 1978 1077 1476 1975 t Thousamis 01 L).>Ilare For the Year Ended December 31, Operating Information Electric Operations:
Operating revenues 5505.970 5431,4os 5403,500 5381,o14 S363,210 Operating c=penses, escludmg provision for income taxes 404.075 325.584 300.311 281.58o 291,o44 Pre-tax operating income 100,095 105,876 04,180 100.028 71,5o6 Provision (credit) for income taxes 9,708 14,175 8,747 8,729 (1,254)
Allowance for funds used during corntruction ( AFUDC) 20.406 20.092 17.820 14.247 20 eco Operating income and AFUDC 5111.co3 5112.c 3 5 03.262 SI05.546 543.441 o
Depreciation espense 547 704 546.904 S4o.512 53o,45o 527.052 Capital expenditures S114.c o 5117.005 5131.870 S134.1o2 514o.7v7 o
Gas Operations:
Operating revenues 585.o56 574,373 570,5eo So8,o47 55o,151 Operating expenses excluding provision for income tases 78.319 o8,383 e6 000 30 082 48.377 Pre-tax operating income 7,337 5,900 4.557 8.co5 7,774 Provision (credit) for income tases 13186 f870 (1,4741 (348 87 AFUDC 97 135 244 124 13e Operating income and AFUDC 57.752 So.995 So.280 S4.137 57.823 Depredation e= pense 53.21e S2.907 S2,7o4 S2.o42 52.572 Capital espenditures So.480 S3.700 Sc.442 55 o74 55.244 At December 31.
Investment Information:
Identifiable assets (a)
Electric S t.Jo5,8o7 S1,347,958 SI,204.2o2 S1,233,318 S t.148,2o7 Gas 10o,o51 102,135 101,434 07,700 05,173 Nonallocabic assets 213.300 164,498 161.047 1o1,072 175.791 Total assets S t.o85.818 S t.olo.501 St.55o,703 S t.403. 080 51.410.231 fa) Includes constructien work in progress. materials and supplies and allocated common utility property.
19 L
The Connecticut Light and Power Company STATISTICS c
Operating Revenues Utility Plant December 31.
(Thousands >:
(Thousands)
Electric Gas Total 19e#.
$ 731,564 5139,112 526,207 5165,319 1974 1,338,057 338,257 48,732 386,989 l
1975
'1,482,884 363,210
.56,151 419,361 1976 1.605,256 381.614 -
68,o47 450,261 1977 1,710,880 -
403,500 70,56o 474,066 I -
1978 1,804,545 431,465 74,373 505,838 1979 1.867,755 505,970 85,656 591.626 1
j Average l
Average Annual Annual Cubic Feet Residential Electric Gas l
o Kwh Sales Residential of Gas Sales Cubic Feet Customers Customers Entployees I
thfillionsi Kwh Use (Alillions) of Gas Used (Average) (Average) (December 31) l 1969 7,161 6.436 17,910 78.491 476,743 113.316 3,251 i
1974 9,358 7,774 18,9o5 80.736 538,526 113,563 3,456 l
1975 9,175 7,o94 17,564 75,622 546,407 113.356 3,263 1976 9,802 8.057 19,246 82.084 555,319 113,187 3,105 1977 10,221 8,079 18,420 78,458 565.224 113,374 3,540(a) 1978 10,560 8.077 18,720 79,358 574.438 113.621 3,936(a)
- i. -
1970 10.882 8,080 20,572 76,733 585.034 114.723
'3.834 h
(aI!ncreases are due to the consolidation of the Company's and HELCO's operations.
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