ML19318D169
| ML19318D169 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 03/06/1980 |
| From: | EASTERN UTILITIES ASSOCIATES |
| To: | |
| Shared Package | |
| ML19318D157 | List: |
| References | |
| NUDOCS 8007080020 | |
| Download: ML19318D169 (33) | |
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i The Company System Companies i
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! Eastern Utilities Associates is the parent company Eastern Utilities Associates j for two retail electric companies, a wholesale generation 99 High Street 1 and transmission company and a service company. Boston, Mass. 02110 The LJA System furnishes electric service to portions of (617)357-9590
]
- Southeastern Massachusetts and Northern Rhode Island.
Blackstone Va!'ey Electric Company The name Eastern Utilities Associates is the desig-Washington Highway lj nation of the Trustees for the time being under a Declara- Lincoln, R.I. 02865 1 tion of Trust dated April 2,1928, as amended, and all persons dealing with Eastern Utilities Associates must (401) 333-1400 l look solely to the trust property for the enforcement of Eastern Edison Company any claims against Eastern Utilities Associates as neither 36 Main Street )
i the Trustees, officers nor shareholders assume any Brockton, Mass. 02403 personal liability for obligations entered into on behalf (617)580-1213 of Eastern Utilities Associates.
Montaup Electric Company 1606 Riverside Ave.
Somerset, Mass. 02726 (617) 678-5283 EUA Service Corporation j 99 High Street Boston, Mass. 02110 (617) 357-9590 ,
l The Cover Annual Meeting !
Eastern Utilities Associates' two retail subsidiaries, The 1980 Annual Shareholders Meeting will be Eastern Edison Company and Blackstone Valley Electric, held on Tuesday, April 22,1980 at 10 a.m. in the !
l serve 29 cities and towns in Massachusetts and R'. ode Board Room on the 33rd Floor at State Street Bank Island. They share a heritage unique in the history of our and Trust Company,225 Franklin Street, Boston, Mass, country. The illustrations in this Annual Report reflect this sense of tradition and economic growth.
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P"4 l Eastem i
rl Utilities h.4 Associates
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% increase income Earnings, Dividends:
Consolidated Net income $ 8,526,000 $ 8,656,000 (1.5%)
Average Common Shares Outstanding 4,871,667 4,2S6,921 14.2 % i Consolidated Earnings per Average Comman Share $1.75 S2.03 (13.8%)
Dividends Paid Per Share $1.60 S1.60 Sales and Customers: l Total Operating Revenues $185,875,000 $159,195,000 16.8 %
)
Total Electric Sales (KWH) 4,115,000 3,925,000 4.8 % )
Customers, Year End 222,896 220,090 1.3 %
Property and Plent:
Net Utility Plant $289,559,000 $271,663,000 6.6 %
Construction E..penditures $ 30,498,000 S 25,948,000 17.5 %
Tabla of Contents Highlights 1 President's Letter 2 Executive Officers 3 Review of Operations 4 Consolidated Fina.icial Statements 16 Notes to Consolidated Financial Statements 20 Common Share and Dividend Reinvestment information 25 Supplementary Financial Statement Information 26 Consolidated Operating Statistics 28 C' nsolidated Summary of Operations 30 Management's Discussion and Analysis cf the Consolidated Summary of Operations 31 Trustees 32 Map inside Back Cover 1
To Our Shareholdec: March 6,1980 Electric utilities continue to operate under power, reasonably-priced, while improving the difficult conditions. The EUA System is no investment quality of our securities. Our exception. EUA earnings for the year 1979 were corporate objective is to continue to provide S1.75 per average Common Share, compared our customers with a reliable supply of electric to S2.03 for last year on a lesser number of energy at the lowest cost consistent with a average shares outstanding. This decline in fair return to the investor.
earnings per share is caused by the continuing in December 1979, your Association sold effects of inflation on all aspects of our 600,000 additional Common Shares to under-business. In particular, we are encountering writers through competitive bidding. Net extraordinarily high, short-term interest rates on proceeds to the Association of $12.139 per bank borrowings. Regulatory lag is especially share, or an aggregate of $7,283,400, were harmful in the present inflationary economy. utilized to reduce System short-term bank loans.
Inadequate rate relief, combined with the Selling additional Common Shares at less than ravaging effects of inflationary pressures, has book value has the effect of lowering the prevented us from achieving the return on book value of all the outstanding existing shares.
common equity authonzed by appropriate Management of EUA fully recognizes the regulatory agencies. In an effort to reduce regu- increasing seriousness of the situation in which latory lag, System companies are increasing most utility companies today are able to sell the frequency of their filings for rate increases. common shares only at prices substantially We must obtain more equitable rate increases if below their book value. Since 1975, the five sales we are to raise the return on equity and of EUA Common Shares have caused a increase System earnings to a proper level. reduction in book value of $8.3 million, or a On December 13,1979, Montaup Electric loss of about 8.9%. We are concerned about Company, our generation and transmission the inadequate rates of return which subsidiary, petitioned the Federal Energy underlie this situation. The maintenance of Regulatory Commission for permission to appropriate ratios of common equity to other include in rate base a portion of its investment components of the consolidated capitalization of in Construction Work in Progress, also referred the EUA System is necessary in order to to as CWIP. With CWIP, customers would peserve the ability to issue other types of begin to pay now for the fixed charges on se curities.
selected generating units presently under con- Your Trustees have adopted as a major struction. This is on a " pay-as-you-go" basis, objective the strengthening of the financial rather than payment years later when construc- position of the Association. An important ele-tion is finished and the cost of construction ment in this strengthening process consists and financing has compounded. Under the of efforts to reduce our short-term bank loans
" pay-as-you-go" method, the total cost of the and maintain a proper balance between project is reduced because the cost of funded debt and equity in our capital structure.
money during the construction period is not included as part of the cost of the new generating Yours very truly, units. Since the project cost is less, lower total revenues will be required over the thirty-year life of these units. Including CWIP in rate base is essential if the EUA System is to MQ John F. G. Eichorn, Jr.
continue to supply customers with reliable President 2
Review of Operations Earnings and Dividonds These clauses are not always fully understood by our Consolidated Net income for the year 1979 was customers and, therefore, result in many questions slightly more than $8.5 million, a 1.5% decrease from concerning their accuracy, validity, and justification.
1978. Earnings per avero se Common Share outstanding We are increasing our communications efforts in this were $1.75 in 1979, down 28c from the $2.03 earned area of customer concern.
in 1978 on fewer average shares. Expenses The quarterly dividend paid during 1979 was main- Fuel and purchased power expense for 1979 was tained at 40c per share, the rate established in the first $104.5 million, up $26.7 million over 1978. This increase quarter of 1977. exactly matches the increase in operating revenues.
AlI dividends received by Common Shareholders The coat of residual oil used by Montaup to in 1979 are reportable as dividend income for Federal generate electricity escalated sharply and dramatically income tax purposes. This information was contained in 1979. From a level of $11.42 per barrel in January, in a notice sent to shareholders on January 31,1980. the price increased almost monthly thereafter to a At present there are more than 20,000 holders of year-end level of just under $19 per barrel. Adding to EUA Common Shares. Over 17,000, or 85%, of our the economic distress associated with higher oil prices i shareholders own fewer than 300 shares apiece. the fact that this nation continues to be reliant on Many EUA shareholders, about 8,400 of them, live foreign oil for too large a portion of its energy needs.
in New England, and 75% of these live in Mawachusetts Other operation and maintenance expenses were or Rhode island. The remaining 11,600 are scattered up $1.3 million, an increase of less than 4% over 1978.
throughout the United States and many foreign countries. We continue to make every effort to control and reduce Revenues and Sales expenses to the lowest possible level without adversely Total primary kwh sales in 1979, as shown on the affect ..g quality of service. We have computerized the chart below, were up 3% over 1978. Total kwh sales to general ledger system, updated our telephone and radio residential, commercial, and industrial customers communication networks, purchased diesel-engine increased 2.4%,4.1 %, and 5.4%, respectively, over vehicles, and inaugurated a diversion control policy 1978. Current projections for 1980 call for kwh sales which is aimed at eliminating the theft of electricity.
to these customers to increase 3.2% over 1979, with an The number of full-time System employees con-increase of about 1% in the total number of customers. tinues at substantially the same level reported in last Operating revenues of $185.9 million were up year's Annual Report. While this constitutes a reduction
$26.7 million, or 16.8%, over 1978. A significant portion of approximately 300 employees in a six-year period, of the revenue increase is directly attributable to the we do not anticipate iurther significant reductions.
recovery of higher fuel costs through the operation of The EUA System is subject to the voluntary wage and the purchased power cost adjustment clauses which price standards of the Federal Council on Wage and are now an integral part of System companies' rates. Pricc Stability. While the standards have been subject Total Primary Sales (Millions-kwh) 4,000 3.500 3.000 2.500 -
2.000 1,500 1,000 500 4
1972 1973 1974 1975 1976 1977 1978 1971 1969 1970 1971
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to revision and reconsideration by the Council, we We continue to gatrer data from several different believe that we have fully complied with appropriate, types of local research and development projects. One applicable guidelines for both wages and prices. test involves the installation of six storage units in Interest charges on long-term and short-term debt individual homes. The units are basically large volume increased $4.0 million in 1979 to a total of $20.2 million. hot water storage tanks in which the water is heated and The increase was due to an extraordinarily high prime stored during off-peak periods.The hot water may then interest rato combined with an increase in short-term be utilized during on-peak periods as well as off-peak.
borrowings. Another project involves two residential customers The Year in Review who have recently installed 1500-watt wind generators Work continued during 1079 on the installation of a designed to provide a portion of their total electric
$5.5 million SCADA system. SCADA - the acronym for energy requirements. We are metering the output of Supervisory Control and Data Acquisition -will effect ths.,e generators in order to measure the overall effec-the centralized, computerized monitoring of our genera- tiveness of this type of al'ernative energy source. Thus tion, transmission, and distribution facilities. The SCADA far, the results have been disappointing, as very small syrtem is expected to become operational in late 1980, quantities of electricity have been generated.
The shipping channel and tuming basins in the The installation of a solar water-heating research Taunton River adjacent to Montaup Electric's generating project which we sponsored at the Lincoln campus of station in Somerset, Massachusetts were dredged by the Rhode Island Junior College has been completed the U.S. Army Corps of Engineers to restore a depth of and ownership of the equipment has been formally 35 feet below low water. Since deeper draft tankers transferred to the college. In successful operation for and barges can now deliver fuel to our wharf, the more than a year now, the project conserves electric efficiency of the delivery process has been improved. energy by supplying supplementary hot water require-Two of our smaller, older,less officient generating ments, and also acts as a teaching station for the units at Montaup's Somerset Station have been placed college's engineering department. We will continue to 1 in reserve status at the end of 1979. This was possible monito- data from this so!ar energy project.
because Somercet Unit No. 5 was retumed to service in The feasibility of reactivating a small, obsolete early December, after a one-year scheduled outage hydroelectric generating facility owned by our Rhode (cr intensive maintenance, overhaul, and replacement of Island subsidiary is currently being investigated. The the turbine generator. The new, $5.5 million turbine has 400-kilowatt plant was deactivated in 1971 when a higher capacity rating and a more efficient heat rate. the operating and maintenance expenses exceeded the The table below lists the System's interest in existing ca of replacement power. Today's oil costs, combined major generating sources. with an undesirable dependence on foreign oil, have EUA Generating Units in Service EUA Systern Interest
- Not Capability System Share In (thousands of (thousands of Unit T)pe Owner Service kilowatts) % kilowatts)
Somerset Nos. 5. 6 Oil Montaup Electric Company 1951-1959 199 100.0 199 Somerset Nos. J1, J2 Gas Turoine Montaup Electric Company 1970 1971 48 100.0 48 Yankeo Rowe Nuclear Yankee Atomic Electric Co. 1961 176 4.5 8 i Connecticut Yankee Nuclear Conn. Yankee Atomic Power Co. 1968 575 4.5 26 l CanalNo.1 Oil Canal Electric Co. 1968 572 25.0 143 l Canal No. 2 Oil Canal Electric Co. & Montaup 1976 584 50.0 292 Vermont Yanker Nuclear Vt. Yankee Nuclear Power Corp. 1972 528 2.5 9 Maino Yankco Nuclear Maine Yankee Atomic Power Co. 1972 830 4.0 26 Pilgrim No.1 Nuclear Boston Edison Co. 1972 670 11.0 70 Cleary No. 9 Oil City of Taunton, Mass. 1975 110 69.1 76 New Brunswick Oil New Brunswick Electric Power 1976 400 6.41 26 Nos.1,2,3 Commission Wyman No. 4 Oil Central Maine Power Co. 1979 615 1.96 12
- Interest can be ir any of the following forms: ownership. joint ownership, stock ownership. variable purchase contract. or " life of unit" ,
purchase contract.
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caused us to reassess the merits and economics of this Company our retail subsidiary. The one-day fair had small hydro-generation. The City of Woonsocket, Rhode more than fifty exhibits and information booths offering Island is proposing to develop another hydro-generation the latest conservation and alternative energy devices.
project on the Blackstone River. The project would be The dissemination of conservation information and funded by general obligation bonds issued by the City. . the conducting of energy audits on customers' premises Wa are negotiating with the City for the purchase of the continue to represent a major component of our clectric energy generated by the proposed hydro project. customer contact program. This type of activity is now Thirty dwelling unite utilizing solar energy have been in its fourth year in our System and has been well i completed and occupied in a proposed 160-unit con- received by our customers. The Residential Conserva-
' dominium townhouse complex served by' Eastern Edison tion Services Program - a part of the National Energy Company, our Massachusetts retail subsidiary, The Conservation Policy Act of 1978-directs state govern-
, privately-financed complex received a solar demonstra- mental agencies to provide comprehensive services to
, tion grant from the Federal Department of Housing and residential customers in the form of conservation inform-Urban Development and will utilize solar energy for ation and energy audits. Both Massachusetts and Rhode j . spa.;e-heating, as well as for water-heating require- Island are interested in evaluating the feasibility of ments. Electric appliances have been selectea for having services like these provided by an independent cooking and other domestic uses. Electricity has also contractor. Accordingly, our retail subsidiary companies been selected for complete back-up systems for space- are participating in the funding of pilot programs which heating end water-heating in the event of the unavail- are aimed at determining the best means of implement-
' ability of solar energy or a malfunction of the solar ing,in both states, the Federal mandates under the
- energy equipment. Residential Conservation Services Program.
!- Teachers wanting to introduce the subject of energy Our customers' bills now :ontain an Energy Con-to their elementary or high school pupils, to explore servation Report- also known as " Report Card" billing.
alternate energy sources or to enlarge on the socio- A message on each monthly bill ampares the custo-oconomic aspects.of those subjects, have found our mers' current month's kilowatt-hov asagewith the expanded educational-services program valeMle. previous year's kilowatt-hours for the ,,eme month. This The program covers a broad range of subjects: energy . innovative program has been supported by newspaper
. conservation, electric safety, environmental issues, advertising and monthly bill inserts which urge our nuclear power, economics, and others. Resources customers to try harder to "get a better grade" next
- include films, multi-media kits, speakers, special month in the important subject of energy conservation.
demonstrations, literature and slide presentations. A reader survey card was included with the 1978 Last. summer, the University of Rhode Island pro- Annual Report of Eastern Utilities Associates. Comments posed the establishment of an Office of Energy Educa- made by survey respondents enabled us to Identify
'llon, the first of its kind in New England. We are several specific areas of shareholder interest. These contriba; ting to the initial funding of this Office, which is areas were discussd in a " Response to Annual Report aimed at a balanced approach to the education of pre- Survey" which we mailed to all shareholders with the college teachers in all aspects of the energy problem. November 15,1979 dividend checks.
' URl's program will be utilized by teachers from Massa- . A Customer Satisfaction Survey was initiated in
- chusetts as wellas Rhode Island. Fully-informed, knowl- late 1978. This is an on-going survey designed to
- cdgeable teachers should greatly enhance the level of determine whether or not our customer contact
- energy awareness in their students, who are tomorrow's employees are perceived as being prompt, courteous, customers. .
knowledgeable and helpful by the customers who have Thousan'ds of energy-conscious citizens attended - occasion to call on us for information or service. We a Northern Rhode Island Energy Fair which was co- receive high marks on our quality of service from those
-sponsored by the Governor's Energy Office, the local customers who have direct contact with us.
gas utility company, and Blackstone Vuey Electric 7
Construction in energy sales to residential, commerc;al and industrial Construction expenditures for utility plant were $30.5 customers reflects the construction of industrial parks, million in 1979, up $4.6 million from the previous year. hospitals and schools, the revitalization of downtown Transmission, distribution and other non-generation ex- urban centers, and other building activity. The 3% -
penditures were $11.1 million, up $1.7 million from 1978. growth rate also reflects the effect of continuing con-Nearly $16.9 million was spent dur%; the year on servation efforts by all customer classes.
our share of large generating units which are designated Generation-related expenditures for the Seabrook as pool-planned under the New England Power Pool units shown in the table on page 10 are based on a 5%
Agreement. NEPOOL is a regional association of utilities level of ownership. This participation represents an which controls and operates the generation and trans- incror.se from the present 1.9% and is subject to various mission network throughout New England. regulatory approvals. The increased participation in Construction requirements for 1980 are currently Seabrook is particularly timely in view of the cancellation estimated at $75.2 million. This includes $17.6 million of the two nuclear generating units to have been built for all non generation expenditures, and $57.6 million by New England Power Company (NEPCO) in which the for generation. The generation estimate includes $56.6 EUA System was to have a 4.35% interest.
million for the jointly-owned generating units now Final costs associated with the cancelled NEPCO either under construction or in various stages of un- project have not yet been fully established. We will gineering and design. The table on page 10 lists apply for appropriate Federal regulatory approval to Montaup's ownership interest in the only major generat- recover our portion of the total costs of the cancelled ing units presently scheduled to be operational in New project, over a five-year period commencing with the England by 1990. effective date of our next wholesale rate filing.
Construction requirements for the five-year period We are conducting a preliminary feasibility study of 1980-1984 are estimated at $302.9 million. Transmission, a coal fired generating unit. We would not expect to be distribution, and other non-generation exrser.ditures will the lead participant in such a project, which would not total approximately $86.5 million. Expenditures for be operational until the 1990's, based on current jointly-owned generating units are expected to require estimates of capacity requirements.
$216.4 million during this same period. The EUA System has sufficient capability available Present estimam of kilowatt hour one.gy sales (see table on page 6) to provide sufficient capacity to reflect an annualload growth of pproximately 3% for meet our estimated load and reserve requirements the period 1980-1989, with a slightly lower growth rate through 1982. Any significant delays in construction, or for the System's peak demand. The projected growth failure to obtain regulatory approval for our proposed Electric Construction Expenditures (Millions of Dollars) u System - i .1 Cos. ,
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increase to 5% participation in the Seabrook units, will other things, it recommended that the NRC be re-have an adverse impact on our ability to meet System organized and it proposed procedures, inc'uding review estimated load and reserve requirements beyorid 1982 of safety factors, of personnel training, and of state and with low-cost nuclear capability and may force us to local emergency plans, which should be folloaed by the resort to various short-term, more expensive options. NRC or its successor on a case-by-case basis before Nuclear Power issuing a new construction permit or operating license.
Events beginning March 28,1979,at the Three Mile The TMI incident has also generated a multiplicity of Island Nuclear Unit No. 2 in Pennsylvania (TMI) resulted legislative proposals in Congress and various state in damage to that unit and release of a small amount of legislatures.
radioactivity into the surrounding environment. While Modifications at substantial cost are likely to be there was no documented evidence of injury to the required in nuclear units now in operation. With respect public the incident nevertheless caused widespread to the units under construction at Seabrook, it is believed, concern about the safety of nuclear generating plants. based upon a preliminary engineering review, that the We cannot predict what effect the events at TMI, new requirm ents already promulgated by the NRC will which have precipitated increased opposition to nuclear result in desgn changes which will add several million power, may ultimately hcve upon the completion of dollars to the total cost of the Seabrook project. This cost of completion of the planned nuclear units or those represents less than two-tenths of one percent in under construction or upon the continued operation of additional cost, and indicates the high standards of the existing nuclear generating plants in New England. safety and construction which were already an integral The various New England plants utilize nuclear steam part of the project design.
supply systems which are substantially different in design The EUA System reaffirms its commitment to nuclear from that utilized at TMI and are furnished by vendors power as a safe, environmentally clean, economical other than the one which supplied TMI. The TMI incident source of energy that can substantially reduce our has prompted a rigorous re-examination of safety-related dependence on the increasingly costly and insecure equipment and operating procedures in all nuclear supply of imported fuel oil. With the lessons teamed facilities. The plants in which Montaup has an interest from Three Mile Island, nuclear power will become even are being reviewed by their owner-operators, and those safer. Toward this end we have joined in the funding plants and all other nuclear facilities are being re. of the electric utility industry's Nuc car Safety Analysis examined i
- the Nuclear Regulatory Commission (NRC). Center and will join in support of other industry efforts A Presidentia, 'Tmmission,after investigating the cause of a similar nature.
of the TMI incident, made a report in which, among EUA Generating Units Scheduled Through 1989
_ EUA _ System Interest
- Expenditures to Cost 12/31/79 Estimated Thousands (millions (millions Operating Unit Name Location Typo % of Kilowatts of $) of S) Date Seabrook No.1 Seabrook, NH Nuclear ,
5.0 57.5(1) 76.7 9.4 1983 Seabrook No. 2 Seabrook, NH Nuclear 5.0 57.5(1) 75.4 9.4 1985 Millstone No. 3 waterford, CT Nuclear 4 01 46 112.1 29 2 1986 Pilgrim No. 2 Plymouth, MA Nuc! car 2.15 25 55.0 7.5 1987 TOTAL 18G 319.2 55.5
- Estimated as of 12/31/79 (1) Assumes effectiveness of agreed upon increase in participation from present 1.9% which is subject to regulatory approvals.
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Today oil, coal, nuclear, and hydro power are the Present plans call for Eastern Edison Company to technologies that enable the electric utility industry to issue S15 million in long-term debt and $10 million in best serve the public efficiently, economically, and with preferred stock in late 1980. In addition, the Association the amounts of electricity people need. A multitude of presently plans to sell additional Common Shares, attemative energy resources are in various stages of probably in the fourth quarter of 1980. The feasibility research and development. When these alternative of this proposed 1980 financing program will be energy rescurces meet appropriate criteria for efficiency, dependent upon a number of factors, including the economy, environmental impact and quantities sufficient ability to obtain adequate and timely rate increases, to meet customer needs, the electric utility industry will conditions in the securities markets, a more f avorable employ them to serve its customers. market appraisal of Association companies' securities, Financing economic conditions, and the level of kilowatt-hour in January 1979 our Massachusetts retail company sales.
finalized the arrangements for $20 million in term loans The prime rate on short-term bank borrowings rose with a final maturity of December 1,1985. $19 million to unprecedented levels during 1979. The rate fluctuated represented existing debt which was due in 1979. The in a narrow range of 11 W % to 12% % for the first eight remaining S1 million was used to reduce short-term debt. months of the year. A 1% increase in September was A private placement of $22.5 million of 10% % followed by a 2% increase in October, with the prime Senior Notes due in 1999 was completed in May by the rate peakir3 at 153Wo in mid-November before falling Association. S20 million was immediately utilized to back to the year-end level of 15% %. The effect of discharge a hke amount of higher-cost Serial Notes high interest rates on bank borrowings had an obvious which had a final maturity in 1982. The remaining $2.5 adverse impact on the earnings of the Association.
milhon was received on November 30 and was used to Permission was received from the Securities and pay off at matunty the S2.43' milhon balance of the Exchange Commission to implement a revised Dividend Association's 3%% Collateral Trust Bonds. Reinvestment and Common Share Purchase Plan. The In December, the Association sold 600,000 revised Plan was made available to shareholders prior additional Common Shares to underwriters through to the February 15.1980 dividend payment date. Share-competitive bidding. The price to the public was $12.625 holders may now reinvest dividends to acquire newly-per share, from which the Aasociation received $12.139 issued Common Shares at a 5% discount from an aver-per share, or almost $7.3 million. The net proceeds, af ter age market price. In addition newly-issued shares may expenses, were applied to reduce System short-term also be purchased, by cash payment, on a monthly bank borrowings, basis. at market price but with no service charge. Since 1979 Energy (kwh) Priraary Sales Source of Energy Use of Energy _
Other 12.7 %
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newly-issued shares are utilized to service the revised 1978 by our Massachusetts retail subsidiary. The Plan, the Association is provided with additional equity DPU disallowed any increase in rt.*es. The decision f unds to meet its on-going construction program. The was appealed to the Massachusetts 'upreme Judicial revised Plar; is also available to System employ 's. For Court on the basis that the DPU allowe. i an inadequate information regarding the Plan seo page 25. return on common equity and, in addition, made certain Rates errors in its treatment of income tax-interest deduction A settlement was reached with intervenors in the allocations. On January 31,1980, the Court denied our rate case involving Montaup Electric Company's whole- appeal, but ordered the DPU to re-examine the calcula-safe-for-resale rate M-4. On June 15,1979 the Federal tion of the interest deduction allocation. We petitioned Energy Regulatory Commission ordered the Co upany to the Court for a rehearing in this proceJding but our refund a portion of the monies collected during a seven- petition was denied by the Court on February 29,1980.
month period under the rates as originally filed. The The revised purchased power cost adjustment refunds to our Massachusetts customers have been clauses which have been in effect in our retail subsidiary completed. The refunds to our Rhode Island customers companies since 1978 have brought about a more are scheduied to be processed in April 1980 as a result equitable and timely matching of revenues with changes of different refund procedures of the Rhode island in the cost of purchased power. The computation of each regulatory agency. cost adjustment billing factor and the periodic reconcilia-On January 5,1979, the Rhode Island Public Utilities tion of purchased power revenues and expenses are Commission had remanded to it by the Rhode Island reviewed and approved by the appropriate state Supreme Court a 1976 rate decision in which the PUC regulatory commission. In addition, in each state the had ordered a " freeze" on the revenues derived from Attorney-General's office is an active participant in each the first 300 kilowatt-hours of monthly consumption by review session.
residential customers. Local Chambers of Commerce had In 1978, Congress enacted the Public Utility felt that this treatment constituted customer discrimina- Regulatory Policies Act. PURPA is a complex piece of tion. As a result of the Supreme Court remand order, the legislation which is designed to bring about sweeping PUC held hearings in February and March,1979 and changes in rate structures, pricing, and cost method-approved revised rate tariffs which reflected the ology. Extensive information-reporting requirements elimination of the " freeze" and a resultant revenue shift must be complied with on a specific time schedule. The of $0.9 million from other customer classes to the thrust of PURPA is that Federal intervention in rate-residential customer class. related matters will result if the state regulatory agencies Our Rhode is!and company filed an application do not implement or give good reasons for not imple-with the PUC on August 15,1979 for additional annual menting the various provisions of PURPA. It is too soon revenues of $4 million. Hearings commenced on January to predict the effects that this legislation will have on the 7,1980. Statutes require that an order be issued regard- broad spectrum of this nation's utility rates and pricing.
ing this application no later than May 15,1980. Optional time-of-use rates have been made avail-On June 28,1979, the Massachusetts Department able to customers of our Massachusetts retail subsidiary of Public Utilities issued its decision in response to the company. The rates are based on peak demand and
$2.1 million rate increase application filed in December time differential pricing and are intended to determine whether or not customers are willing to change their patterns of energy consumption. Customer interest in these optional rates has been disappointing, brgely due to the lack of a substantial price differente between 14
on peak and off peak rates. Massachusetts law requires Rhode Island. Newport's beard of directors has agreed that the purchased power cost adjustment clause be to consider and respond 's any proposals EUA may applied uniformly to all kilowatt-hours regardless of the make after its investigation. Should acquisition appear time of usage. Unfortunately, this tends to virtually desirable, the approval of shareholders, various stato eliminate the base rate differential between on-peak and Federal agencies, and other interested parties would and off-peak energy. Remedial action must be taken be required.
by the Massachusetts legislature if meaningful time Atter an eighteen-day work stoppage - the first in differential pricing is to be implemented throughout its history- the then-Fall River Electric Light Company the state. completed negotiations for a two-year labor contract In late 1977 the Massachusetts DPU promulgated which will expire in June 1981. The union local involved regulations which will require electric utilities to adopt represents approximately 11 % of the EUA System em-mandator / rate structures based on peak load and time ployees. Montaup Electric has a labor contract which differential pricing. We have developed a plan for will expire in mid-July 1980. Montaup's union local implementing the regulations and have filed that plan represents approximately 9% of the total System em-with the DPU. The implementation period is expected to ployees. The remaining 80% of our employees are not be of considerable duration. represented by any bargaining unit.
A two-year " time-of-day" rate experiment spon. " Spectrum", the newsletter-magazine which is sored by the Rhode Island Public Utilities Commission published monthly for our employees and retirees, re-and the Federal Department of Energy involved the ceived a first-place award from the Public Utilities Com-cooperation and participation of our Rhode Island municators Association in the 1979 national "Better subsidiary. The experiment has been completed, and we Communications Competition." One of " Spectrum's" continue to gather metering data under our on-going objectives is to provide employees with up-to-date load research program. The Department of Energy's factual information on developments which affect their project manager, a private consultant, has not yet issued jobs, their company, and their industry, a report on the results of the experiment. The research Donald G. Pardus became Vice President and program will provide important information which will Treasurer of the Association in June 1979. Mr. Pardus's be used in cost-of-service studies, rate design, cost experience in the electric utility industry includes more allocation studies, and load forecasting. than twenty years of employment by another public Crganiz tion utility holding company.
A further step in our corporate r tanization and Francis 1. Patterson retired as Senior Vice President simplification was completed on Juiy 2',,1979 with the of the Association in September 1979, after a 45 year merger of Fall River Electric Light Companyinto Brock- period of service to the utility industry.
ton Edison Company. On August 1, Brockton Edison's name was changed to Eastern Edison Company. Eastem Edison Company owns 100% of Montaup Electric Com-pany, our generation and transmission subsidiary.
A preliminary analysis is under way concerning the possibility of acquiring Newport Electric Corporation.
Newport Electric is an investor-owned retail electric dis-tribution company which provides electricity to approxi-mately 25,000 customers in the City of Newport and the Towna of Jamestown, Middletown, and Portsmouth, 15
Eastern Utilities Associates and Subsidiary Companies Cansolid:ted inc m3 Sint:m:nt .
Years Ended December 31, (in Thousands Except Numbers of Shares and Per Share Amounts) 1979 1978 Operating Revenues (A) $ 185,875 $ 159,195 Operating Expenses: 1 Operation - Fuel 82,133 56,295 I
- Purchased Power - Net (1) 22,403 21,577
- Other 28,662 27,330 133,198 105,202 Maintenance 5,153 5,210 Depreciation (A) 9,729 9,377 Amortization of Investment Credit (Credit) (A) (446) (414)
Taxes - Other Than Federal Income 12,724 13,286
- Federal Income (Credit) (B) (48) 4,804
- Deferred (Cronit) (A) (B) 2,515 (122)
Total Operating E> aenses 162,825 137,343 Operating income 23,050 21,852 Equity in Earnings of Nuclear Generating Companies 807 679 Allowance For Gther Funds Used During Construction (A) 1,608 982 Other income - Nel 238 73 income Before Interest Charges 25,703 23.586 Interest Charges:
Interest on Long-Term Debt 11,401 10,385 Amortization of Debt Expense and Premium 123 210 Other Interest Expense 8,680 5,639 Allowance for Borrowed Funds Used During Construction (Credit) (A) (4,660) (2,937)
Net Interest Charges 15,544 13.297 income After Interest Charges 10,159 10,289 Prefered Dividends of Subsidiaries 1,633 1,633 l Consolidated Net income $ 8,526 S 8,656 l Average Common Shares Outstanding ,871, 4.266,9M l
Consolidated Earnings Per Average Common Share $1.75 S2.03 Dividends Paid Per Common Share $1.60 S1.60 l
Consolidated Retained Earnings Statement Years Ended December 31, (In Thousands) 1979 1978 Consolidated Retained Earnings-Beginning of Year $22,998 521,116 Consolidated Net income 8,526 8,656 Total 31,524 29,772 l
Dividends Paid - EUA Common Shares 7,738 6,774 l Consolidated Retained Earnings - End of Year (E) $23,786 $22,998 l
l l
l 16 Tne accompanying notes are an integral part of the financial statements.
Ecstc.n Utilitbs Associates and Subsidiary Companies Consolidated Statement cf Changes in Fin nci:I Position Years Ended December 3t, I (In Thousands) 1979 1978 SOURCE OF FUNDS:
From Operations:
l Incoma After loterest Charges $10,159 $10,289 ;
Principat Non-Cash Charges (Credits) to income: l Depreciation (A) 9,992 9,592 Amortization of Deb' Expense and Premium 123 210 Deferred Federal income Tax (A) 2,360 1,378 Investment Tax Credits, Less Amortization (A) 514 2,751 Equity in Undistributed Earnings of Nuclear Generating Companies (169)
Allowance for Funds Used During Construction (A) (6,268) (3,920)
Total Funds from Operations 16,711 2_0,3_00 External Sources:
Increase (Decrease)in Short-Term No'es Payable to Banks 12,850 (1,400)
Procetids from Sale of Common Shares 7,331 9,001 Proceeds from Sale of Term Notes 20,000 Proceeds from Sale of Senior Notes 22,500 Other - Net 921 Total Funds from External Sources 62,681 K55U Total Source of Funds $79,392 S28,822 APPLICATION OF FUNDS:
Construction Expenditures $30,498 S25,948 Less: Allowance for Funds Used During Construction (6,268) (3.920)
Net Construction Expenditures 24,230 22.028 Subsidiary Preferred Divider:ds 1,633 1,633 EUA Common Dividends 7,738 6,774 Retirement of Long-Term Debt 37,637 3,880 Increase (Decrease) in Working Capital 7,142 (5,875)
Other Application - Not 1,012 382 Total Application of Funds $79,3'92' S28,822
~ ~ - ~ ~ ~
CHANGES IN COMPONENTS OF WORKING CAPITAL l (Excluding S,iort-Term Debt):
Increase (Decrease) in Current Assets:
Cash and Temporary investments $ (3,580) $ 1,938 Accounts Receivable 5,332 (822)
Muerials and Supplies 7,802 (2,496)
Other Current Assets (229) 22_3 9,777 (1,609)
Increase (Decrease) in Current Liabilities:
Account:> Payable 4,557 817 Accrued and Deferred Taxes (1,452) 1,177 Other Current and Accrued Liabilities (470) 2,272
_ _2,635 4,266 increase (Decrease) in Working Capital $ 7,142 $ (5,875)
The accompanying notes are an integral part of the financial statements. 17
E^st rn Utiliti:s Associ:t:s and Subsidiary Companies Consolidated B lance Sheet December 31, (In Thousands) 1979 1978 Assets Utility Plant and Other Investments:
Utility Plant (at cost) (H):
In Service $322,684 $312,601 Less Accumulated Provision for Depreciation (A) 94,618 87,728 Net Uiility Plant in Service 228,066 224,873 Construction Work in Progress 61,493 46,790 Not Utility Plant 289,559 271,663 Nonutility Property - Nel 1,630 992 Investments in Nuclear Generating Companies (at equity) 7,401 7,232 Other Investments (at cost) 67 _
67 Total Utility Plant and Other Investments 298,657 279,954 Current Assets:
Cash and Temporary Investments (G) 2,187 5,767 Accounts Receivable (A):
Customers, Less Allowance for Doubtful Accounts of $290,000 and $423,000, Respective;y 25,288 20,507 Others 879 328 Materials and Supplies (at average cost):
Fuel 10,702 3,329 Plant Materials, Operating Supplies and Other 4,646 4,217 Other Current Assets 559 337 Total Current Assets 44,261 34,485 Deferred Debits:
Unamortized Debt Expense 739 699 Extraordinary Property Loss (H) 2,065 Other Deferred Debits 3,875 3,562 Total Deferred Debits 6,679 4,261 Total Assets $349,597 $318 70_0 Liabilities and Capitalization Capitalization:
Common Equity $ 94,260 $ 86,299 Non-Redeemable Preferred Stock of Subsidiaries 15,079 15,079 Redeemable Preferred Stock of Subsidiaries 5,607 5,921 Long-Term Debt 123,485 97,870 Total Capitalization 238,431 205,169 Current Liabilities:
Long-Term Debt Due WithiriOne Year 20,770 Notes Payable- Banks (G) 63,300 50,450 Accounts Payable 13,336 8,780 Redeemable Preferred Stock Sinking Fund Requirement 314 Customer Deposits 1,270 1,143 Taxes Accrued (B) 2,550 4,051 Deferred Taxes (A) (B) 1,573 1,522 Interest Accrued 2,752 1,926 Other Current Liabilities 533 1,957 Total Current Liabilities 85,628 90,599 Deferred Credits:
Unamortized Investment Credit (A) 10,186 9,673 Other Deferred Credits 69 336 Total Deferred Credits 10,255 10,009 Accumutated Deferred Taxes (A) (B) 15,283 12,923 Total Liabilities and Capitalization $349,597 $318,700 4 1
18 The accompanying notes are an integral part of the fmancial statements.
E'st:rn Utiliti;s Associata and Subs l diary Companies Consolidated Statement of C pitalization December 31, 1979 1978 1979 1978 (in Thousands) (Capitalization Ratios)
Eastem Utilities /.ssociates:
Common Shares
$5 par value, authorized 7,000,000 shares, outstanding 5,438,969 shares (1978, 4,835,598 sharrs) (C) $ 27,195 $ 24,178 Other Paid-in Capital (C) 44,382 40,068 Common Shares Expense (1,103) (945)
Retained Earnings (E) _ 2_3,7_86 _ 22,998 _ _ _ _
Totai Common Equity 94,260 86,299 _ _ _ .39.5 % 42.1 %
Preferred Stock cf Subsidiaries:
Non-Redeemable Preferred (C):
Blackstone Valley Electric Company:
4.25%, $100 par value 35,000 sharest 3,500 3,500 5.60%, $100 par value 25,000 sharest 2,500 2,500 Premium 129 129 Eastern Edison Company:
4 64%, $100 par value 60,000 sharest 6,000 6.000 8.32%, $100 par value 30,000 charest 0,6vv 3,000 Premium 48 48 Expense (98) (98) 15,079 15,079 6.3 7.3 Redeemable Preferred (D):
Eastern Edison Company:
13.60%, $100 par value 60,000 sharest 6,000 6,000 Premium 8 8 Expense (87) (87)
Sinking Fund Requirement (314) 5,607 5,921 2.4 2.9 1 ong-Term Debt (F):
Eastern Utilities Associates:
Collateral Trust Bonds,3%% due 1979 2,437 Serial Notes due 1982 20,000 Senior Notes 10% % N 1999 22,500 Eastern Edison Company First Mortgage and C eral Trust Bonds:
3%% due 198? 6,800 6,800 7%% due 1983, .ond series) 5,000 5,000 4W% due 1983 (third series) 2,196 2,196 3%% duc 1985 6,000 6,000 12% due 1985 (second series) 19,800 20,000 4Ya% due 1987 ",000 3,000 4%% due 1988 3,000 3,000 4h % due 1993 5,000 5,000 Gh% due 1997 7,000 7,000 8%% due 1999 5,000 5,000 7W% due 2002 8,000 8,000 8%% due 2003 10,000 10,000 Note Payable due 1979 15,000 Note Payable due 1984 (Prime X 104.8%) 5,000 Note Payable duc 1985 (Prime X 109%) 15,000 Unamortized Premium 189 207 123,485 118,640 Less Portion Due Within One Year 20,770 Total 123,485 97,870 51.8 47,7 Total Capitalization $238,431 $205,169 100.0 % 100.0 %
tAuthorized and outstanding The t.ccompanying notes are an integral part of the financial statemCnts. 19 l
Eastern Utilities Associates and Subsidiary Companies Notes To Consolidated Financi:1 St;t~ ment]
l December 31,1979 and 1978 l
l l (A) Summary of Significant Accounting Policies: Operating Revenues: Revenues are based on l General: Eastom Utilities Associates (EUA) and billing rates authorized by applicable Federal and l
EUA Servico Corporation (Service) are subject stato regulatory commissions. The retail subsidiaries l to the jurisdiction of the Securities and Exchange follow the policy of accruing the estimated amount Commission under the Public Utility Holding of unbilled revenues for electricity provided at tho
- Company Act of 1935 and Servico's accounts are end of the month to more closely match costs and maintained under the system of accounts prescribed revenues. The amount of estimated unbilled by that Act. The accounting policies and practicos revenues included in accounts receivablo at of the retail subsidiarios Blackstone Valley Electric December 31,1979 and 1978 amounted to l
- Company (Blackstone) and Eastem Edison Company S3,106,254 and $2,930,000, respectively.
(Eastom Edison), and of Montaup Electric Company As of April 1,1979 Montaup began classifying (Montaup) are subject to regulation by the Federal sales of electricity to the New England Power Pool Energy Regulatory Commission (FERC) and two as interchange power and these amounts are stato regulatory commissions with respect to their reflected as credits to purchased power expense.
rates and accounting. The retail subsidiaries and Amounts reported for periods prior to April 1,1979 Montaup conform with generally accepted have been reclassified to conform with classifica-accounting principles, as applied in the case of tions used since that date, regulated public utilities, and conform with the Federal Income Taxes: The general policy of accounting requirements and rato-making practices EUA and its subsidiaries with respect to accounting of the regulatory authority having jurisdiction. for Federal income taxes is to reflect in incomo the Effectivo July 31,1979 Fall River Electric Light estimated amount of taxes currently payable and to Company (Fall River) was merged into Brockton provide for deferred taxes on certain items subject Edison Company (Brockton) and on August 1,1979 to timing differences. The significant items which Brockton's name was changed to Eastern Edison. are subject to provision for deferred Federal incomo A description of the significant accountin0 policies taxes are as follows:
follows. 1. Additional depreciation resulting from
, Principles of Consolidation:The consolidated the use of accelerated methods for tax
( financial statements include the accounts of purposes.
dastem Ublities Associates and its subsidiaries 2. Accrued unbilled service revenues and l (Blackstone, Eastern Edison, Montaup and Service), fuel adjustment costs recoverable in subsequent l All materialintercompany balances and trans- periods.
actions have been eliminated in consolidation. 3. Abandonment Loss on New England l Utility Plant: Utility plant is stated at original Power Company Unit Nos.1 and 2. (See
! cost. The cost of additions to utility plant includes Noto H)
I contracted work, direct labor and material, alloc- As permitted by the regulatory commissions it i able overhead, allowance for funds used during is the policy of the subsidiaries to defer the annual construction and indirect charges for engineering investment tax credits and to amortize these credits l and supervisicq. Replacement of minor items of over the productive lives of the related assets.
l property and the cost of repairs is charged to Allowance for Funds Used During Construc-j maintenance expenses. At the time depreciable tion: Allowance for funds used during construction properties are retired or otherwise disposed of, the (AFUDC) is defined in the applicable regulatory original cost, together with removal cost, less system of accounts as "the not cost during the I salvage, is charged to accumulated provision for period of construction of borrowed funds used for l depreciation and the cost of related replacements construction purposes and a reasonable rate upon l is added to utility plant. other funds when so used."
l Depreciation of Utility Plant: For financial The combined rato used in calculating AFUDC statement purposes, depreciation is computed on was 11,50% in 1979 and ranged from 8.50% to the straight-lino method based on estimated useful 10.50% in 1978.
lives of the various classes of property. The AFUDC amounted to 73.5% and 45.3% of Provisions for depreciation, on a consolidated consolidated net income for the years 1979 and basis, were equivaient to a composito rato of 3.2% 1978 respectively.
in 1979 and 1978 based on the average depreciable property balances at the beginning and end of each year.
20
(B) Federalincome Taxes: In the event of involuntary liquidation the non-Federal income tax expense for the years 1979 redeemable preferred stock of Blackstone and and 1978 were less than the amounts computed by Eastern Edison is entitled to $100 per share. In the applying Federalincome tax statutory rates to book event of voluntary liquidation, or if redeemed at the income subject to tax for the following reasons: option of those companies, the non-redeemable preferred stock is entitled to: Blackstone's 4.25%
(in Thousands) 1979 1978 issue, S104.40; Blackstone's 5.60% issue, S103.82; Current Federal incomo Taxes Per Books: Eastern Edison's 4.64% issue, $102.98; Eastem
- I Edison's 8.32% issue, S107.70 prior to 10-1-83; harged to other income Total (40) 4.875
$105.62 prior to 10-1-88; S103.54 prior to 10-1-93 Deferred Federaf income Tax 2,411 68 and $102.30 per share thereafter.
Total Federal income Tax Expense 2,371 4,943 Under the terms and provisions of the issues Net incomo Per Books 10,159 10,289 of preferred stock of Blackstone and Eastern income Before Federal income Tax Edison, certain restrictions are placed upon the Expense $12,530 $15.232 payment of dividends on common stock by each Fe rauncom ax Computed at company, but at December 31,1979 and 1978 the SSM5 $
(Decrease) in Federal income Tax on respective capitalization ratios were in excess of account of items capitalized - the minimum which would make these restrictions Allowance for Funds Used During effective.
Construction (2,883) (1,881) overheads (377) (372) (D) Redeemable Preferred Stock:
Other (114) (102) Eastern Edison's 13.60% Preferred Stock is entitled Federal income Tax Expense $_2,371_ $_4,943_ to a mandatory sinking fund sufficient to redeem Effective Federal Income Tax Rate % 18.92 32.45 3,000 shares during each 12 month period, com-The provision for deferred income taxes mencing October 1,1980, at a redemption price resulting from timing differences is comprised of equal to the initial public offering price plus accrued the following: dividends. Eastern Edison has the non-cumulative option to redeem an additional 3,000 shares 1979 1978 during each period at such p;ce.
Excess Tax Depreciation $ 1,264 $1.394 Sinking fund redemption requirements for each computer conversion costs (135) (48) of the five years through 1984 are approximately Estimated Unbilled Revenue 703 (1,288)
Abandonment Loss 602
$314,000 per year, Effect of state and Local Taxes 103 (190) (E) Retained Earnings:
other - Net (22) 10 Under the provisions of the Note Agreements Total s 2,515 $ (122) dated May 23,1979 relating to EUA's Senior Notes,
~~
Retained Earnings in the amount of $15,787,430 as At December 31,1979 unused investment tax of December 31,1979 was unrestricted as to the credits of approximately $4,900,000 are available to payment of cash dividends on EUA Common Shares.
reduce future Federal income tax liability. (F) Long-Term Debt:
(C) CapitalStock: Under terms of the Indenture securing the First The changes in the number of common shares Mortgage and Collateral Trust Bonds, Eastern I outstanding and the increases in other paid-in Edison is required to deposit annually with the capital during the year ended December 31,1979 Indenture Trustee, cash in an arr'ount equal to 1 %
and 1978 were as follows: of the greatest aggregate principal amount of bonds Number of Common Shares issued previously authenticated and delivered.
Epioy.. increas. Where permitted, Eastern Edison has satisfied var oln'.?,
na pac nip sai.s Tom Uls' canna' sinking fund requirements for 1979 and 1978 under alternate provisions of the indenture either 1979 3,371 600,000 603,371 $4,313,750 by depositing cash or by certifying to the Indenture 1978 2,736 600,000 602,736 5.987,408 Trustee "available property additions" and Eastern Edison expects to continue such practice during There were no changes in the number of shares the year 1980.
of non-redeemable preferred stock during the years ended December 31,1979 and 1978.
21
' The First Mortgage and Collateral Trust Bonds - Substantially all of the physical property of of Eastern Edison and Castem's Note Peyable' Blackstone is pledged to secure a $25,000,000 duo 1985 are collatorialized by securities of short-term note to a bank.
Montaup in the principal amount of $139,975,000. In (H) Jointly Owned Facilities:
' addition the First Mortgage and Collateral Trust At December 31,1979 and 1978 Montaup owned the Bonds of Eastern Edison are collateralized by following interests in jointly-owned electric substantially all of its utility plant. facilities (dollars in thousands):
- The Note Agreements relating to EUA's 10% %' o. . ., si, im Senior Notes due March 1,1999 require, for the p,,,,,, , , ,,,,, p,y,tg cogtgon issuance of additionallong term debt by EUA that un,i o.n.o s.<vic. oept.ci.i,on service eroaress at the time of such issuance and immediately there- Canal No. 2 50.0 % $63.670 $6.823 $54,847 $
after (i) long-term debt of EUA shall not exceed 30% Wyrnan No. 4 1.96 3,871 116 3.755 of EUA's total capitalization (ii) consolidated i long term debt of EUA and its subsidiarios shall sgapo7sI not exceed 65% of consolidated total capitalization, and 2 1.90 40 40 18,792
., (iii) tho sum of consolidated long-term debt, Pilgrirn No. 2 2.15 7,520 preferred stock of subsidiaries and any minority N*o' f 4.01 29.221 interests in subsidiaries shall not exceed 70% Montague of consolidated total capitalization, and (iv) consoli- N s1
,n 2 2.00 937 dated net income available for fixed charges for ,
- 12 consecutive calendar months within the D.c.mtwr 31. 1978
- proceding 15 calendar months shall have been at p,,,,,, p,,,,,, ,c,,,,,,,,, p,,y,(,TJ,y least twice the sum of consolidated interest charges unit own.o somc. o.preci.i.on servic. prog,..
, on long-term debt and dividend requirements on Canal No. 2 50.0 % $63,415 $6,574 $50,841 $ 64 preferred stock of subsidiaries. WYgan4 1.96 3,568 9 3,559 The aggregate amount of cash sinking fund scabrook requirements and maturities for each of the five No.'s 1 Pug n Nd j5 4
years following 1979 are: none in 1980,1981 and 1982, $13,996,000 in 1983 and $11,125,000 in 1984. Mmstone '
(G) Notes Payable to Banks: No.3 4.01 22,365 ,
During 1979 and 1978 the EUA System followed Moga,guo i the practice of borrowing from banks for construc- and 2 2.00 830
- tion and other working capital requirements on a 2
short-term basis at the prevailing prime rate of The foregoing amounts represent Montaup's interest with compensating balances of up to 20% of interest in each facility. Financing for all such t amounts borrowed or at an equivalent or lower interest is provided by Montaup. Montaup's share effective rate. At December 31,1979 and 1978 the of related operating and maintenance expenses is
' included in its corresponding operating expenses.
lowest prevailing prime rates were 15.00% and 11,75% and the average effective rates were Montaup has a 4.35% ownership interest 15.47% and 13.36%, respectively. A summary of in two nuclear generating units designated as short-term unsecured bank borrowing information NEP 1 and 2 (lead participant, New England I
for the years 1979 and 1978 is as follows: Power Company-NEPCO) proposed to be built at a site in Charlestown, Rhode Island. On December MaMmum Montti W.ighted Unused Un.s 4,1979 an order was issued by the United States
=
od."' "'7"r'o' ni $Z*ns intJ.*3*.i. o 'es'r'a'i District Court for the District of Columbia which on nou..noo upheld a previous decision by the U.S. General 1979 ' 11-3o 344,sso $32,o19 14.39 % sse,soo Services Administration barring transfer of the site 1978 .113o . $33.550 - $27,350 10.16 % $15.275 property to NEPCO. As a result of the adverse court decision, the Board of Directors of NEPCO, on Except for daily working funds and like items, December 17,1979, approved the cancellation of substantially all of the funds included in cash the units and NEPCO has concluded that all capital a represent compensating balances maintained in respect of bank borrowings. costs relative to NEP 1 and 2 should be written off 1 as being valueless. As of December 31,1979 Montaup had incurred approximately $2,065,000 of costs (including allowance for funds used during -
22 i-
,_ ,. .. - - _ _ , , _ _ - - - - _ _ . , . . , . . , . - , ,. . .. _m . . . ..m. . . , _ , - _ _ . . _ , .
construction) in connection with the project. om a % sm a n,,ms Additional costs (which are not expected to be ou tE @I2 ^U material) relating to cancellation charges, or salvage, -
if any, are undetermimble at this time. Montaup Taunton Municipal Clea 1984 Var us $ 7M has reported the costs of the abandoned project as an extraordinary property loss and has requested Yankee Atomic Power Co. 1991 4.50 828 permission from the Federal Energy Regulatory Conn. Yankee Atomic Commission (FERC) for approval to amortize these Power co. 1998 4.50 2.004 costs, net of the related tax savings to be realized e t c Co.
Cagaj 1998 25 oo 4.072 in the EUA System's 1979 Federal income tax return, Pilgrim Unit No.1 2000 11.00 7.800 over a period of five years and will request approval Maine Yankee Atomic from FERC for recovery of such costs commencing Power Co. 2002 4.00 1.968 t Yankeo Atomic with the effective date of its next rate filing. Y'C"e (l) Commitments: $21.928 At December 31,1979 and 1978, the System com-panies had leases covering certain facilities and The EUA System's construction program is equipment. Total rental expense for these leases for estimated at $75,200,000 for the year 1980 and the years 1979 and 1978 amounted to approximately $302,900,000 for the years 1980 through 1984
$993,000 and $876,000, respectively. (including allowance for funds used during All of the System cnmpanies' leases are treated construction),
as operating leases for rate making purposes and (J) Contingencies:
have been accounted for as such; however, certain Montaup currently has a 1.90% ownership interest lease agreements meet the criteria requiring cap- in each of the two 1,150 megawatt nuclear generat-italization as set forth in the Statement of Financial ing units being constructed in Seabrook, New Accounting Standards No.13. If such leases were Hampshire. In addition, approval has been requested capitalized, the amounts thereof would not have a from the Massachusetts Department of Public material effect on assets, liabilities, or related Utilities to purchase an additional 3.10% interest expenses. from three other participants. All of the necessary Future minimum rental payments at December state and federal regulatory ap rovals for the con-31,1979 for such leases are estimated to aggregate struction of the units have been obtained, and
$867,000 in 1980, $837,000 in 1981, $704,000 in construction is in progress; a petition for a Nuclear 1982, $609,000 in 1983, $325,000 in 1984 and Regulatory Commission (NRC) review of the seismic
$3,285,000 for years after 1984, design issue, as to which one member of the NRC The entire cost of the Employees' Retirement Appeal Board dissented, is pending before the NRC.
Plan of Eastern Utilities Associates and its Subsidiary The appiovals have been consistently opposed by a Companies is assumed by the respective companies. number of intervening groups, resulting in significant it is the policy of the companies to fund the pension delays and greatly increased cost. Various court costs accrued, including amortization of past service appeals from federal regulatory approvals have been costs on a 20-year basis. As of January 1,1979, the decided in favor of the lead participant in the project, latest valuation date, plan assets exceeded the but one appeal, in which intervenors are challenging actuarially computed value of vested benefits by the refusal of the NRC in 1976 to suspend the con-approximately $481,000. As of the same date, total struction permits, is still pending in the United unfunded past service liability was $4,149,300. States Court of Appeals for the First Circuit. Further Pension expense charged to operating court appeals are possible and t"ere is pending expenses and to construction and other accounts before the NRC staff a request o, an intervenor for was $1,948,967 and $193,720, respectively, in 1979 issuance of show cause orders as to why the con-and $2,005,449 and $162,489, respectively, in 1978. struction permits should not be suspended or The EUA System is committed under purchased revoked on grounds concerning the NRC's failure power contracts to pay demand charges whether or to require development of evacuation plans and not energy is received. The following table sum- related matters. An operating license must be marizes information concerning such contracts at sought and obtained from the NRC before the units December 31,1979, can be put into operation. The lead participant in the Seabrook project, Public Service Company of New Hampshire (PSNH), which presently owns an undivided 50% ownership interest in the units, has stated that it is experiencing serious difficultes in 23
financing its construction program because of state (L) Replacement Cost Information (Unaudited):
regulatory changes denying the inclusion of con- The impact of the rate of inflation experienced in struction work in progress in its rate base. Among recent years has resulted in replacement costs of ;
other steps to reduce its construction expenditures, productive capacity that are significantly greater PSNH decided in March,1979 to reduce its owner- than the historical costs of such assets reported in ship interest in the Seabrook plant to 28% by the System's financial statements. In compliance offering ownership interests to other utilities. with reporting requirements, quantitative replace-Through October 31,1979, subject to receipt of ment cost information will be disclosed in the requested regulatory approvals, other utilities System's 1979 Annual Report to the Securities and (including Montaup) have committed to acquire Exchange Commission on Form 10-K.
only approximately 15% of the additional plant being offered. As of December 31,1979 Montaup's invest-ment in the project amounted to approximately
$18,800,000. Montaup is unable to predict wha. .
Auditors' Report to the Trustees of effect further administrative and court actions or Eastern Utilit.ies Associates financing problems may have on the Seabrook project or its cost. We have examined the consolidated balance sheets Montaup also has a 2.00% ownership interest in and statements of capitalization of Eastern Utilities a planned nuclear project, Montague Unit Nos.1 Associates and subsidiary companies as of December 31,1979 and 1978 and the related con-and 2 (lead participant, subsidiary of Northeast Utilities). Expenditures on this project have been solidated statements of incorre, retained eamings reduced to a minimum and the project schedule and and changes in financial position for the years then related projected capital expenditures are uncertain ended. Our examinations were made in accordance at this time. As of December 31,1979 Montaup with generally accepted auditing standards, and had spent approximately S937,000 in connection accordingly included such tests of the accounting with its interest in the Montague project. Final costs records and such other auditing procedures as we associated with cancellation of the project, if considered necessary in the circumstances, In our opinion, the financial statements referred ultimately necessary, cannot now be ascertained.
in the event of such cancellation, Montaup would to above present fairly the consolidated financial apply for appropriate regulatory approval to recover sition of Eastem Utilities Associates and sub-P.
si diary companies at December 31,1979 and 1978 its total costs over an appropriate future period, The extent to which rate relief, if any, would permit and the consolidated results of the,r i operations recovery of the project costs cannot be determined and changes in the,r i financial position for the years then ended, in conformity with generally accepted at this time.
accounting principles applied on a consistent basis.
(K) Quarterly Financial Data (Unaudited):
- TUS lfS*def*' ALEXANDER GRANT & COMPANY Oua ter Ended )
%'@ T4,*- S%v7 f,%3 '- Boston, Massachusetts Operating Revenues 43.014 43,138 49.006 50.717 Operating income 6.057 5.513 5.735 5.746 Consolidated Net income 2,972 2.379 2.574 2,234 Earnings Applicablo to EUA Common Shares 2.564 1,971 2,166 1.826 Earnings Per Average Common Share $ 0.53 $ 0.41 $ 0.45 $ 0.36 Ovvter Ended 78 ' 978 19 8 I Operating Revenues 44.482 36.855 38.042 39,816 Operating income 6,952 4.608 5.191 5.101 l Consolidated Net income 4,109 1,766 2,482 1,931 Earnings Apphcable to EUA Common Shares 3,701 1,358 2.074 1,523 Earnings Per Average g Common Share S 0.87 $ 0.32 $ 0.49 $ 0.35
C;mm:n Sh:ro Infarm:tian l .
l The common shares of Eastern Utilities Associates are hsted on the New York Stock Exchange end the ticker symbol is "EUA" l
The annual market price range of common shares is shown in the Consolidated Operating Staistics on page 29. The high and low sales prices and dividends paid for the past two years by quarters are shown below:
1 Ouarterly Dividend Year High Low Per Share 1979 First Quarter 15 % 14 % $0.40 Second Quarter 14 % 13 % $0.40 Third Quarter 15 13 % $0.40 Fourth Quarter 14 % 11 % $0.40 1978 First Quarter 17 16 S0.40 Second Quarter 16 % 15 % S0.40 Third Quarter 16 % 15 S0.40 Fourth Quarter 10 % 14 % $0.40 Dividsnd Reinvestment and Stock Purchase Plan A Dividend Reinvestment and Common Share Purchase Plan is available to all registered shareholders and System company employees.
Participants in the Plan are given a 5% discount on shares purchased with reinvested dividends.
Participants may also send in additional cash payments as frequently as once a month to purchase additional shares with no discount. Optional cash payments are kmited to a maximum of $5,000 per calendar quarter and must be received not later than the 5th day preceding the Investment Date.
The Investment Date for all shares purchased under the Plan is the dividend payment date for the months in which dividends are payabic. For each month in which a dividend is not payable the Investment Date is the 15th of such month. The price of shares purchased is based on the average closing prices of EUA shares for the five trading days preceding each investment date.
Com;*te details regarding the Plan may be obtained by writing:
ne First National Bank of Boston EUA Automatic Dividend Reinvestment Plan P.O. Box 1681 Boston, Mass. 02105 Transfer Agent Trustee and Registrar The First National Bank of Boston State Street Bank and Trust Company l P.O. Box 644 225 Franklin Street Boston, Mass. 02102 Boston, Mass. 02110 (Common and Preferred Shares) (Bonds of all series)
/
25 1
Eastern Utilities Associates and Subsidiary Companies Supplement:ry Inform:ti:n To Di:cl:se The Effects of Changing Prices The following supplementary information is supplied in accordance with the requirements of the Statement of Financial Accounting Standards No. 33 for the purpose of providing certain information about the effects of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than a precise measure, since a number of subjective judgments and estimating techniques were used in developing this information.
Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumers Prico index for all Urban Consumers.
The current year's provision for depreciation on a constant dollar basis was computed by applying the average composite depreciation rate to the average depreciable balance of property, plant and equipment af ter adjusting such accounts for inflation.
Fuelinventones, the cost of fuel used in generation, and purchased power for resale have not been restated ficm their historical cost. Regulation limits the recovery of fuel and purchased power costs through the operation of adjustment clauses. For this reason fuel inventorios are effectively monetary assets.
Consolidated Statement of Income From Continuing Operations Adjusted For Changing Prices For the year-ended December 31,1979 Adjusted for General Inflation As Reported (Constant Dollar)
Historical Average
__ __ _ _ . _ _ _ _ _ _ _ _. Cost _ _ _ _ _ _ ___19_79 Dollars Operating Revenues $185,875 S185,875 Fuel and Purchased Power Expense 104,536 104,536 Other Operating and Maintenance Expenses 33.815 33,815 Depreciation Expense 9,729 18.537 Taxes Other than Fe'1eral Income 12,724 12,724 Federal Income Taxes 2,021 2,021 Interest Charges - nel 15,544 15,544 Other (income) and Deductions- net (2,653) (2,653) 175,716 184,524 Income From Continuing Operations (excluding reduction to net recoverable cost) S 10.159 $ 1,351f Reduction to Net Recoverable Cost S (26,350) !
Gain From Decline in Purchasing Power of Not Amounts Owed 21,082 l NET $_(5,269)
I
- Including the reduction to net recoverable cost, the loss from contiriuing cperat:ons on a constant dollar basis would have been $(24,999).
26
As prescobed in Financial Accounting Standard No. 33, incomo taxes were not adjusted.
Under the rate-making prescribed by the regulatory commissions to which the System companies are subject, only the historical cost of plant is recoverable in revenues ns depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars that exceeds the historical cost of plant is not presently recoverable in rates as depreciation, and is reflected as a reduction to net recoverable cost. To properly reflect the economics of rate regulation in the Statement of incomo from Continuing Operations, the reduction to net recoverable cost of not property, plant, and equipment should be offset by the gain from the decline in purchasing power of net amounts owed. During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of not amounts owed is primarily attributable to the substantial amount of debt which has been used to financo property, plant, and equipment. Since the depreciation on this plant is limited to the recovery of historical costs, the System companies do not have the opportunity to realizo a holdin0 gain on debt and are limited to recovery only of the embedded cost of debt capital.
Five Year Summary of Selected Financial Data Adjut,ted for the Effects of Changing Prices N ears Ended December 31,
'Ol0 0- ? ?- A 0l?. AU?5-Operating Revenues $185,875 S177,118 $188,893 $194,040 $176.961 incomo From Continuing Operations (excluding reduction to not recoverable cost) 1,351 Gain From Declino in Purchasing Power of Amounts Owed 21,082 Per Common Sharo:
Earnings (Loss) Frorn Continuing Operations (after preferred dividend requirements) (0.06)
Cash Dividends Declared 1.60 1.78 1.92 i.91 2.02 Year-end Data:
Net Assets at Not Recoverablo Cost 108,696 Market Prico Per sharo 11.75 15.26 19.42 22.7G 18.95 Average Consumer Prico Index 217.4 195.4 181.5 170.5 161.2 27
d Eastern Utilities Associates and Subsidiary Companies
! Consolidat d Operating Statistics l I i
1 1979 1978 1977 .976 1975 1974 1969 i
j Ener9/ Generated and Purchased l l
j (mdhons kwh):
, Generated - by EUA System 792 f40 667 774 1.164 1,642 1,931
- by Equity Owned Nuclear Units 479 530 490 523 480 420 215
- by Jointly-Owned Units 1,795 1.865 1.599 1,512 153 Interchange with NEPOOL (600) (620) (284) (187) 200 151 78 Purchased Power - Unit Power 1,649 1.490 1,381 1.419 1,482 1.240 652 Tctal Generated and Purchased 4,115 3.925 3.853 4.041 3.479 3,454 2 876 Operating Revenues (thousands).
Residential $ 63,468 $ 56.613 $ 56.302 $ 53.036 5 50,535 $ 47,803 $ 20,405 Commercial 53,012 46.976 45,159 41,104 36,478 33,163 10,619 Industrial 38,192 3?,440 30. 03 28.246 26.021 28,380 11,472 Other Electric Utatics 12,435 to 220 11,418 11.315 10,151 10,197 2.274 Other 7,502 7,505 7,657 7,154 _ 5,91_2 5_,159 1,650 Total Pnmary Sales Revenues 174,609 153.754 150,739 140.855 129,097 124,702 46,420 Un,t Contracts 11,266 5.441 6.961 11.325 2.118 1.541 1,001 Total Operat.n9 Revenues $185,875 $159.195 $157,700 $152.180 $131.215 $126.243 $ 47,421 f Ener0y Sales (mulions kwh):
Residential 1,150 1.123 1,119 1 098 1,073 1.052 784 l
j Commercial 1,052 1 011 998 950 848 792 463
} Industrial 859 815 738 77S 726 830 801 Other Electric Utaties 398 403 399 434 396 393 35G Other . _ _ _
44 49 _48 47 45 45 _
35 Total Primary Sales 3,503 3,401 3,352 3.305 3,088 3.118 2,439 Losses and Company Use 226 290 246 276 248 21" 231 Total System Requirements 3,729 3.691 3.596 3,581 3,33G 3.333 2,670 Un:t Contracts 386 234 255 460 143 121 206 Total Energy Sales 4,115 3,925 3.853 4,041 3.479 3.454 2,876 Number cf Customers at Dec ember 31:
Remdential 201,435 198.910 199,063 196,760 195.207 193.110 180,758 Commercial 20,073 19,781 21.501 21,006 20,813 20,311 18.362 Industrial 1,222 1.213 1,513 1,542 1,594 1,655 1,773 j
Other Electric Utaties 16 15 16 16 14 12 12 Other _150 171 222 229 _ 234 241 _
200 t
Total Customers 222,896 220.090 222,315 219,613 217,862 215.329 201.105 a
Average Revenue per Residential Customer ($) 315 285 283 270 259 249 114 Average Use per Resident.al Customer (kwh) 5,708 5.G46 5.621 5.582 5.497 5.448 4,337 Average Revenuo per KWH:
Residential 5.52c 5.04c 5 03c 4 83c 4 71c 4.54c 2.60c Commerciat 5.04c 4.65c 4.53c 4.33c 4 30c 4,19c 2.29c Industrial 4.44c 3 98c 3 83c 3.64c 3.58c 3.42c 1.43c 1
l l
l 28 l
Eastem Utilities Associates and Subsidiary Companies ,
Ccnsolidct d Operating Statistics-Gsn ral 1979 1978 1977 1976 1975 1974 1969 l
Capitanzation: l (thousands) l Mortgage Bonds (Net) $ 80,985 $ 81.203 $ 83.658 $ 87,860 $ 88.321 $ 68,697 $ 54,409 Other Long-Term Debt 42,500 16.667 35.000 35.000 Total Long-Term Debt 123,485 97,870 118.658 122,860 88,321 68,697 54,409 Preferred Stock 20,686 21.000 21,000 21,000 21.000 15,078 12,175 Common Equity 94,260 86.299 75.417 64.917 55,783 50,097 43,822 Total Capitafization $238,431 $205,169 $215.075 $208.777 $165.104 $133,872 $110,406 Common Shares Data:
Earnings Per Share ($) 1.75 2.03 1.50 2.07 1.96 1.56 1.52 Diodends Per Share ($) 1.60 1.60 1.60 1.50 1.50 1.50 1.40 Payout (%) 91.4 78.8 106.7 72.5 76.5 96.2 92.1 Average Common Shares Outstanding 4,871,667 4.266.921 3,970,459 3.389.560 2,939,945 2,784,945 2,510,718 Book Value Per Share ($) 17.33 17.85 17.6.' 18.03 18.02 17.99 17.C5 Percent Earned On Average Common Equity 9.4% 10.7 % 8.5% 11.6 % 10.8 % 8.7 % 9.0%
MJrket Price ($)
High 15% 17 19 % 18 % 16 17 30 %
Low 11 % 14 % 16 % 14 % 85/s 8 18 %
(
M,scellaneous:
l System Capability - MW 908 969 939 940 781 822 577 System Peak Demand - MW 677 666 668 687 614 590 506 Reserve Margin (%) 34.1 44.2 40 6 36.9 27.1 39.3 14.1 System Load Factor (%; 62.8 62.7 61.5 59.5 62.0 64.5 60.3 Sources of Energy (%):
Nuclear 21.9 22.0 18.7 19.5 22.0 18.4 8.1 Fossil 78.1 78.0 81.3 80.5 78.0 81.6 91.9 Cost of Fuel (Mills Per KWH):
Fossi! (O!! and Coa!) 25.1 18.1 21 5 17.8 19.5 20.2 3.0 Nuclear 3.5 3.0 2.4 2.6 '3.0 2.4 3.1 All Fuels Combined 19.6 14.3 17.5 15.0 16.0 16.8 3.1 29
E:st m Utilitics Associat:s and Subsidiary Companies Consolidated Summary of Operations (Thousands of Dollars Ex::ept Number cf Shares and Per Share Amounts) 1979 1976 1977 1976 1975 1974 1969 Operating Revenues $185,875 $159,195 $157,700 $152,180 $131.215 $126,242 $ 47,421 Operating Expenses Operation and maintenance 138,351 110.412 119.441 105.883 97,642 93,319 27,048 Depreciation 9,729 9.377 9,131 8.873 6.368 5,755 3,636 Taxa other than Federal income taxes 12,724 13.286 12.493 11,776 10,606 10,0GO 6.076 Federal income taxes 2,021 4.268 706 5.454 621 773 3.315 Total operating expenses 162,825 137,343 141.771 131.986 115,237 109,907 40,075 Operating income 23,050 21.852 15.929 20,194 15,978 16,335 7,346 Other income and Deductions
- 2,653 1,734 1,006 1.763 5,423 3,875 626 Income Before Interest Charges 25,703 23.536 16.935 21,957 21,401 20,210 7,972 Interest Charges
- 15,544 13.297 11.894 13.312 14,626 15.055 3,498 income After Interest Charges 10,159 10.289 5,041 8.645 6,775 5,155 4,474 Preferred Dividends of Subsidiaries 1,633 1,633 1,633 1,633 1,021 817 567 income Before Cumdative Effect of Change in Method of RcCor6ng Revenue 8,526 8,656 3.408 7,012 5,754 4.338 3,907 Cumulative Effect on Years Prior to 1977 of Accruing Estimated Unbilled Revenue After Deduction of Related Taxes of $2.630,600 2,526 Conschdated Net income $ 8,526 $ 8,656 $ 5,934 $ 7.012 $ 5,754 $ 4.338 $ 3,907
~ ~ ~
EUA Common Shares Outstanding (Weighted Average) 4,871,667 4.266.921 3.970,459 3.389.560 2,939.945 2,784,945 2,570,718 Consolidated Earnings Per Average Common Share Outstanding:
Defore Cumu:ative Effect of Change in Method of Recording Revenue $1.75 $2.03 $0 86 $2.07 $1.96 $1.56 $1.52 Cume :ive Effect of Years Prior to 1977 of uruing Estimated Unbilled
_$2 03~[
ta __$h75
~~ ' ~~ U [$M ]1796 ~ ' ~_ _$1.56 _ __$_1.52
~ ' ~ ~ ~ ~ ~
~ ~
Pro Forma Amounts Assuming Change in Method of Recording Revenues was Apphed Retroac.voly:
Consohdated Net income $3,409 $7.226 $5,990 $5,034 $3,963 Consolidated Earnings Per Average Common Sharo Outstanding $0 86 $2.13 $2.04 $1.81 $1.54 Dividends Paid Per Common Share $1.60 $1.60 $1.60 $1.50 $1.50 $1.50 $1.40
- 1979,1978 and 1977 Interest Charges have been reduced by the borrowed funds component of allowance for funds used during construction. In prior years the total allowance for funds was included in Other incoma and Deductions.
30
Management's Discussion and Analysis of the Consolidated Summary of Operations Operating Revenues: 1979 opera *ing revenues over 1978 is primarily the result of decreases in increased 16.8% over 1978 primarily due to a state franchise taxes due to lower taxable income.
significant increase in the recovery of higher fuel The increase in taxes, other than Federal incomo costs.1978 operating revenues ;ncreased only 1% in 1978 over 1977 of 6% is primarily the result of over 1977, ref!ccting the net effect of an increase in increases in property tax rates assessed on the kwh sales of 1.87% and wholesale and retail rate System's increased utility plant in service.
ircreases granted during 1978 of $6.1 million, Allowance for Funds Used During Construction:
partially offset by reduced fuel clause revenues The accounting practice of capitalizing as part of resulting from tho use of lower cost fuel in 1978
, construction costs an allowance for funds used and a decrease in unbilled revenues. during construction (AFUDC) is in accordance with Operating Expenses Other Than Taxes: Operat. ion the uniform system of accounts prescribed by regu-and maintenance expenses increased 25.3% in latory authorities and results in the inclusion in 1979 over 1978. Virtually all of the increase was due income (and in construction work in progress, for the to the escalation in the cost of fuel during 1979. The purpose of establishing rates for utility charges to price per barrel of oil increased from a level of customers) of amounts considered by regulatory s11.42 per barrel in January to almost $19.00 per authorities as an appropriate cost of funds used barrel at year-end The decrease in operation and during construction but which do not represent maintenance expenses of 8.2% in 1978 as cash income. The AFUDC increased by 59.9% in compared to 1977 is due primarily to a substantial decrease in the cost of fuel, as a result of the use of 1979 over 1978 and 97.7% in 1978 over 1977 priman.ly due to increases in the AFUDC rate and higher sulphur residual oil to generate electricity.
Tiiis decrease was partially offset by an increase in construction expenditures. See Note A of Notes to maintenance and other operating expenses. The Consolidated Financial Statements.
increase in maintenance expenses in 1978 over 1977 Interest Charges:The increases of 24.5% in 1979 is due to the continuation of the acceleration of over 1978 and 11.8% in 1978 are primarily due to previously deferred maintenance programs which increases in both short-term borrowings and in the began in 197G and unusual storm related mainte- prime borrowing rate. See Note A of Notes to Con-nance expenses caused by the 1978 blizzard. solidated Financial Statements.
Tcxes: For an explanation of changes in Federal Net income: The changes in net income for the two income taxes, see Note B of Notes to Consolidated year period result from the changes in revenues tnd Financial Statements. The decrease of 4% in 1979 expensec as explained above.
31
Trustees !
Trustee Since Oliver F. Ames (C) 1973 Director, Fiduciary Trust Company, and private trustee, Boston.
Samuel C. Brown (F) 1967 l Executive Director, Massachusetts Health and l Educational Facilities AutN:rity, Boston. I Robert 1. Dexter (A,P) 1978 President, Abington Mutual Fire j Insurance Company, Abington, Massachusetts.
)
John F.G. Eichorn, Jr. 1971 i President and Chief Executive Officer of the l Association.
Peter B. Freeman (F) 1979 Business and Financial Consultan' Providence, Phode Island Nathan H. Garrick, Jr. (A,C) 1963 Independent Consultant to The Boston Company Inc., Boston.
Robert E. Maguire 1976 Executive Vice President of the Association.
Wesley W. Marple, Jr. (A,F) 1976 Professor of Finance, Northeastern University, Boston.
Thomas A. Rodgers, Jr. (C,P) 1975 President, Globe Manufacturing Co., Fall River, Massachusetts.
Margaret M. Stapleton (F) '1977 Second Vice President, John Hancock Mutual Life Insurance Company, Boston.
D. Reid Weedon, Jr. (P) 1972 Senior Vice President, Arthur D. Little, Inc.,
Cambridge, Massachusetts.
A-indicates member of Audit Committee C---Indicates member of Compensation and Nominating Committee F-Indicates member of Finance Committee P-Indicates member of Pension Trust Committee i
I 32
Le9end
.i MASSACHUSEng
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- ' :/ . 3f E Generating Stations of Other Systems
- w_ ,<' 4 "'.z 2e,
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EASTERN UTILITIES ASSOCIATES ANNUAL REPORT 1979 t
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