ML19350C785

Annual Financial Rept 1980

ML19350C785
Person / Time
Site:	Millstone, 05000496, 05000497
Issue date:	03/16/1981
From:	Ellis W HARTFORD ELECTRIC LIGHT CO.
To:
Shared Package
ML19350C763	List: ML19350C762 ML19350C779 ML19350C785 ML19350C790
References
NUDOCS 8104060694
Download: ML19350C785 (31)

Text

.

'O ANNUAL s

l REPORT 1980 l

l NORTHEiAST UTLITIES THE HARTFORD ELECTRIC LIGHTCOMPANY 810406069q

DIRECTORS WILLIAM B. ELLIS LELAN F. Sit LIN, JR President and Chief Operating Officer, Chairman of the Board and Chief Executive Officer.

Northeast Utikties Northeast Utikties WALTER F. FEE PETER M STERN Executive Vice President.

Vice President.

Northeast Utilities Service Company Northeast Utilities Service Company DONALD C. SWITZER E. JAMES FERLAND Vice Cha;rman, Vice President and Chief Financial Officer, Northeast Utilities Northeast Utilities WALTER F. TORRANCE, JR.

LEON E. MAGLATHLIN, JR.

Senior Vice President, General Counsel and Senior Vice President.

Assistant Secretary, Northeast Utihties Service Company Northeast Utilities Service Company HERBERT W. SEARS ANTHONY E. WALLACE*

Senior Vice President.

Executive Vice President.

Northeast Utikties Service Company Northeast Utihties Service Company OFFICERS LELAN F. SILLIN, JR.

FRANCIS L. KINNEY Chairman and Chief Executive Officer Vice President DONALD C. SWITZER JACK R. McCLENDON Vice Chairman Vice President and General Manager-Gas WILLIAM B. ELLIS LEONARD A. O'CONNOR President and Chief Operating Officer Vice President and Treasurer WALTER F. FEE WALTER T. SCHULTHEIS Executive Vice President Vice President E. JAMES FERLAND PETEP M. STERN Executive Vice President and Chief Financial Officer Vice President ANTHONY E. WALLACE*

CHARLES S. BEACH Executive Vice President Regional Vice President-Western WILLIAM G. COUNSIL W. LINDSEY BOOTH Senior Vice President Regional Vice President-Eastern LEON E. MAGLATHLIN. JR.

THOMAS F. BRENNAN

. Senior Vice President Regional Vice President-Central HERBERT W. SEARS EMilB. GROSS Senior Vice President Reg;onal Vice President-Southern WALTER F. TORRANCE, JR.

ALBERT E. MAGEE Senior Vice President. General Counsel and Regional Vice President-Northern Assistant Secretary ROBERT W. BISHOP PHILIP T. ASHTON Secretary Vice President WARREN F. BRECHT ROY M. SEGER Vice President and Controller Assistant Secretary CARROLL A. CAFFREv ROBERT C. ARONSON Vice President Assistant Treasurer RAYMOND E. DONOVAN MICHAEL K. UPPER Vice President Assistant Treasurer

• Retired effective January 1,1981

t The Hartford Electric Light Company March 16,1981 To The Stockholders:

The Annual Report of Northeast Utilities, which provides coverage of the entire Northeast Utilities system, including The Hartford Electric Light Company, has been_ mailed to all HELCO preferred stockholders. This report

.is brief for that reason.

The financial statements and statistical data included in this report show the re_sults of operations of the Company in 1980.

As you will note, the Company's earnings showed an increase during 1980, but remained _ significantly below the rate of return found necessary by

the Connecticut Department of Public Utility Control (DPUC). Additional revenues g'ene. rated by a S43 million annual rate increase, approved by the DPUC in October of 1980, were partially offset by the effects of rapid

- inflation, the portion of higher fossil fuel costs not recoverable through the fuel adjustment clause, nuclear operation and maintenance costs associated with directives issued by the Nuclear Regulatory Commission and continuing high st. ort-term interest rates. The Company expects to file for increased electric and gas rates by mid 1981.

~ Latsr this year, the Company plans to sell additional First Mortgage Bonds. The timing and amount of this issue will be determined at a later date.

Sincerely -

& $$h, f.

Presidentl

. Chairman

The Hartford Electric Light Company MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Introduction

.This section is managen ent's assessment of the Company's operating resu.s and their relationship to financial trends. This discussion also assesses the economic condition of the Company by focusing on four particular areas of significance:

• Results of Operations

• Construction Program

• Financing

• FinancialCondition Our financial statements should be read with the understanding that, as a utility, our construction program and related financing requirements arise from our responsibility to provide cost-effective, reliable service to our customers. Also, regulatory agencies may create requirements in the application of accounting procedures for a regulated utility which are not applicable to nonregulated companies. Among the differences are requirements affecting when and how certain revenue and expense items are recognized.

R:sults of Operations The following is a summary of year-to-year changes in the principalitems affecting earnings:

Increase or(Decrease) 1980 vs.1979 1979vs 1978 Amount Percent Amount Percent iDouar Amounts e Thousands)

Operating revenues

$68,827 23.1

$38.895 15.0 Cost of fuel and purchased power 43,960 45.3 27,615 39.8 Other operation expenses 11.829 18.4 5.939

_10.2 Maintenance (36)

(0.2) 3.277 19.3 Taxes other than income taxes 4,820 16.2 3.518 13.4 AHowance for funds used during construction 3.656 37.9 1.534 18 9 Interest and other charges (excluding allowance for funds used dunng construction) 5,065 16.1 2.128 7.2 Net income 4.905-14.4 (799)

(2.3) 2 w.

The recovery of fuel costs comprises an increasingly large percentage of total revenues. Fuel recovery revenues increased $38 million in 1980 and $17 million in 1979. Fuel cost recoveries have increased because of continued oil and gas price escalation. In 1979, the average cost of oil to the NU system,was approximately

$18 per barrel. In 1980, average oil costs rose to $27 per barrel and it is anticipated these costs will continue to escalate in the future. The components of the change in revenues in the past two years are as follows:

1980 1979 (DOfiar Amounts m Thousands)

Fuelcost recoveries

$38,300 55%

$17.040 44 %

Rate increases 29,583 43 13.253 34 Sales increases 6,059 9

5.690 15 Miscellaneous (5,115)

(7) 2.912 7

Total Revenue

' Increase

$68.827 100 %

$38.895 100 %

Rate relief granted to HELCO in the latter part of 1980 will further increase 1981 revenues by an es:imated $46 million.

Sales contributed little to the overall revenue increases, and are not expected to contribute significantly in the near future. Electric sales increased 2.0 percent in 1980 and 2.2 percent in 1979. Gas sales increased 4.7 percent

' in 1980 and 7.6 percent in 1979.

Higher fossil fuel prices are substantially recovered

- from customers. Other cost increases, caused by high inflation, largely those for labor and materials, have a

' greater impact on earnings since they are not recovered

- from customers in a timely manner. Nuclear generating costs have also risen as a result of directives issued by the Nuclear Regulatory Commission. Despite increased operating costs, the nuclear units continue to offer a substantial savings over oil-fired units. For an analysis of

.the impact of inflation on the Company see Note 13.

" impact of Changing Prices", of Notes to the Financial Statements.

The Connecticut gross receipts tax on higher revenues

increased in 1980 and 1979. In Connecticut,5 percent of

- all utility revenues is paid to the state as a gross receipts tax. Local property taxes have also risen in each of these.

' two years.:

3

' Allowance fcr bids used during construction (AFUDC), which represents the estimated cost of capital invested in construction work in progress (CWIP),

increased $5.9 million in 1980. This increase is due to the combined effect of several factors. First, the average balance of CWIP increased from $136 million in 1979 to S172 million in 1980, due primarily to the Millstone ill

- nuclear unit construction project. In addition, during the year 1980, the Company adopted a number of accounting changes for AFUDC, including the net-of-income tax method, the practice of compounding AFUDC semiannrally and the use of the rate calculated in accordance with Federal Energy Regulatory Commission guidelines. The net result of these accounting changes was that net ir ::ome for 1980 was not materially affected The adoption of net-of-income tax accounting for AFUDC produced substantial variations among accounts used.to report income tax expense. This change was largely responsible for the SG.9 million increase in taxes

~ applicabl6 to operating income. See Note 5," income Tax Expense", of Notes to the Financial Statements for the detail of income tax provisions.

~lnterest expense increased $4.9 million (14.4 percent) l in 1980 and $0.8 million (2.3 percent) in 1979.-The 1980 increase was due principally to higher short-term borrowings although higher interest rates also contributed

to the increase. In 1979, higher short-term borrowings and higher interest rates contributed about equally to the increase in interest expense.

C::nstruction Program' Millstone 111 continues to be the most significant item in l the construction program. Expenditures for this unit

-comprise ~almost 83 percent of total planned expenditures l for new production facilities.'in a' dition to production.

d Lfacilities,Jover S175 million will be spent in the next five years on such projects as transmission and. distribution

~

- lines, gas lines and other facilities' necessary to m'aintain 4

x reliable service.

^

l

~

7

W

Construction expenditures (including AFUDC but excluding nuclear fuel)in the period 1981 through 1985 are estimated below:

Electric Generating Facilities Other Total (Triousancs ot Dotiais) 1981

$69,510 S24,343

$ 93.853 1982 68.882.

43,533 112,415

-1983 70.776 29,602 100.378 1984 77.141 32,396 109.537 1985' 65.401 44.708 110.109 During 1980, a new cost estimate was completed for Millstone Ill. The figures above reflect that revision which increased the cost of the Company's ownership share from S377 million to $473 million. Construction

expenditure estimates reflect the cancellation in December 1980 of plans for a two-unit nuclear project in Montague, Massachusetts.

In January 1981, the NU system offered to sell to other

. utilities a minimum of an 8.7 percent ownership interest

'(approximately 100 MWs) in Millstone ill and invited

. expressions of interest in amounts in excess of 100 MWs.

' A determination of whether more than 100 MWs will be sold is to be made following receipt of responses to the offer and will be based on the then financial outlook of

' each of the system companies and the amount of interest

~

expressed by the utilities. All sales are subject to federal

and state regulatory. approvals and it is unlikely that any.

sales could be completed _ by the end of 1981.

Thd Company estimates that its expenditures for nuglear fuel (including 'AFUDC) will be $24 million for the

' period 1981 a1985. Fuel for Millstone I and 11 is financed by Northeast Nuclear Energy Company (NNECO). The i investment in nuclear fuel located in the Millstone i and 11

reactors is financed by _NNECO through capital m-.

37

' contributions or advance's from Northeast Util;iies and the.

issuance of secured notes and barik' borrowing's. Up to l S50 million of investment on nuclear fuelin process for-

~

< Millstone l and il'may bel financed by NNECO pursuant to i a fuel suppy trust agree' ment, under.which the trust owns

'and finances the nuclear fuel before it is placed in the -

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.m.

__,____.__._._____m._-_.__m__

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f' reactor. The trust obtains funds by the sale of commercial paper and/or bank loans. NNECO is obligated to i

purchase the nuclear fuel from the trust when specific events occur. The Company, The Connecticut Light and Power Company (CL&P) and Western Massachusetts l

Electric Company (WMECO) presently contemplate I

entering into a fuel supply trust agreement to finance their share of the nuclear fuel costs for Millstone Ill. Nuclear fuel costs are expected to be recovered through rates as the fuelis consume'J in the reactor.

I I

i

(-

Fin 0ncing -

In addition to the construction program, the Company's financing requirements during the period 1981 -1985 l

include $44 million to meet long-term debt maturities and sinking-fund requirements of senior securities.Of this amount, $27 million will have to be refinanced in 1982.

The Company finances current construction expenditures and other requirements in excess of internally generated funds through short-term borrowings,

.first mortg' age bonds, preferred stock, leasing equipment and capital contributions from the parent company.

External funds are expected to provide at least half of the Company's 1981 financing requirements. The sale of 25-to-30-year mortgage bond _ securities and preferred stock without sinking funds may become increasingly difficult

as indicated by recent trends in the capital markets.-

In addition to their customary _ short-term borrowing arrangements, the Company,- CL&P,'and WMECO entered into a revolving credit / term loan agreement with a group of banks in August 1980.This agreement provides additionallines of short-term credit and should allow greater flexibility to the financing program. The aggregate credit limit for all three companies under the agreement is $140 million. As of December 31,1980, the Company had borrowed $7.5 million under the terms of

- the agreement.-

As of Dece'mber 31,1980, ths Company's short-term -

Edebt totaled $74 million. This represented 9.4~ percent of capitalization; which was above the industry averag'e.The

Company's 1981 financing program is' aimed at a =

~

~ substantial reduction of_ short-term debt by year-end r

1981.'

pm 1

6

~

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(

1 i

The Company's ability to maintain the construction program is dependent on its obtaining timely and adequate rate relief and financing on satisfactory terms.

Fin ncialCondition The Company sought rate relief in May 1980 of $65.8 million and,in October, the Department of Public Utility Control authorized relief of $43.0 million. Recent rate

- decisions in Connecticut indicate an improving regulatory awareness ( ' the Company's needs. The positive features of the October decision were the acceptance of net-of-income tax accounting for AFUDC, normalization

-of certain book versus tax timing differences and

- recognition that inflation has an impact on the Company's ability to earn its allowed rate of return. Despite these positive developments, the revenues allowed have been inadequate to enable the Company to achieve its financial goals:

- The rate increase granted in 1980 is expected to increase earnings coverage ratios enough in 1981 to substantially support the Company's planned financing

' program. However, these coverage ratios may be adversely affected by several factors over which the Company has little control. Unexpected operation and maintenance expenditures could adversely affect

~

eamings and coverages. Such expenditures may be largely outside of the Company's direct control, since

'they co'uld.be called for to maintain reliable service and

meet regulatory requirements.

. increased financing costs for inventories and working -

o L capital requirements have been adversely impacting the.

Company's liquidity. Rapidly rising oil prices have -

~ significantly increased the funds required to maintain normal fossil fuel inventory levels over the past two years.

(In Connecticutisubstantially all of the fossil fuel costs

. which are above those established in base rates and are not recovered through energy adjustment clauses are J deferred until recovery is' permitted by the DPUCcThe 1

-Lamount of fos ill fuel' costs deferred depends on both the-

~

~

price and the quantity of fuel consumed to meet energy

' re'quirements. Oil consum' tion is affected by the p

performance of the nuclear units. Low performance of the :

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=

nuclear generating plants increases oil consumption and the use of replacement power. As a consequence, there is an increased need for cash to finance these nigher costs. In addition, Connecticut law prohibits inclusion in fuel adjustment charges of the 5 percent gross receipts tax resulting in less than full recovery of the increased cost of fossil fuel. For the year ended December 31,1980.

this unrecovered sum amounted to SI.6 million.

Since August 1.1979, the Company's retaii rate

- schedule has included a generation utilization adjustment clause (GUAC). For the twelve months ended July 31, 1980. because the nuclear units operated at more than a 70 percent capacity factor, customers were entitled to a credit of SI.3 million which is being refunded over the twelve-month period, commencing September 1980. For the period August 1 through December 31,1980, since the nuclear units operated Et less than a 70 percent capacity factor. the operation of the clause has resulted in the deferral of $8.7 million. Assuming the nuclear plants achieve no more than a 70 percent capacity factor for the remainder of the twelve month period ending July 31, 1981, any deferred balance will be collected from customers over tt twelve-month period commencing

. September 1981. Whi'e this is the effect of the GUAC,it should be noted that, at current oil costs, the nuclear units are beneficial to consumers wnen they operate at a composits capacity factor of only 20 percent.

AFUDC has become a higher percentage of net

- income throughout the electric utility industry. For the Company, this percentage has increased from 28.8 percent in 1978 to 35.2. percent in 1979 and to 42.9 percent in 1980. In 1986, when Millstone til is removed from construction work in progr_ess and placed in rate base, the AFUDC as a percentage of net income should-be reduced.

The Company's required expenditures for construction,

.; nuclear fuel, and maturities and sinking-fund redemptions

~ f outstanding securities present the Company with o

unprecedented needs for capital at a time when m

inadequate rate relief, low earnings coverages and extremely difficult securities markets all limit the ability of 8'

the Company to fund its short-term borrowings in an orderly and timely way. Further, constraints on the Company's short-term borrowing capabilities could limit access to such funds. Moreover, rapidly rising fuel costs and increased financing costs for working capital requirements could further reduce the Company's internal generation of funds below levels sufficient to support external financing needs. Thus, many factors, both irdernal and external to the Company affect its ability to meet cash requirements. However, the most important variable continues to be adequate and timely rate relief. Rate increase applications are expected to be filed in Connecticut by the Company and CL&P by mid-1981. Absent adequate rate relief, the companies may be forced to make further deferrals or abandonments of proposed projects as well as to further reduce their ownership interest in Millstone Ill.

9 k-

The Hartford Electric Light Company STATEMENTS OF INCOME For the Years Ended December 31, 1980 1979 1978 gw a mauowa Operating Revenues (Note 2)

$366,744

$297.917

$259.022 Operating Expenses:

Operation -

Fuel 130,128 74.096 58.880 Purchase and interchange power, net (5,795) 10.728 598

'3as purchased for resale 16,564 12.113 9.844 Other 75,981 64.152 58.213 Maintenance 20,180 20.216 16.939 Depreciation 26.704 26.552 23.344 Federal and state income taxes (Note 5) 12,783 5.867 7.171 Taxes other than Meome taxes 34.597 29.777 26.259 Total cperat'ng expenses 311,142 243.501 204.248 Operating in:ome 55.602 54.416 54.774 Other Incorne:

A lowar.e for equity funds used during construction 7,958 4.956 4.370 Equity in earnings of regional nuclear generating companies 950 1.302 1.044 Other, net 60 (31) 211 income taxes applicable to other income-credit (Note 5) 5.595 206 69 Net other income 14.563 6.433 5.694 locome before interest charges v.165 60.849 60.468 Interest Charges:

Interest on long-term debt 30,263 29,445 28.365 Other interest 6,337 2.090 1.042 Allowance for borrowed funds used durisig construction.

net of the income tax effect of $5,426.000 in 1980 (5.336)

(4.682)

(3.734)

Total interest charges 31,264 26.853 25,673 N t income

$ 38.901 5 33.996 S 34.795 The accompanying notes are an integral r 3rt of these financial statements 10

3 T3e Hartford Electric Light Company

- STATEMENTS OF SOURCES OF FUNDS FOR CROSS PROPERTY ADDITIONS For the Years Ended December 31, 1980 1979 1978 (Thousanos of Donars)

Funds Generated From Operations

' Net income

$38,901 533.996

$34,795 Principal noncash items:

- Depreciation 26,704 26.552 26.344

' Deferred income taxes, net 8,268 2,464 2.413 Amortization of deferred charges and other noncashitems 1,128 1,149 1,689 Amortization of energy adjustment claut.es 1,865 720 210 Allowance for equity funds used during construction (7,958)

(4.956)

(4.370)

Total funds from operations 68,908 59,925 61,081

~ Less - Cash dividends paid on:

Common stock 22,615 18,879 24.871 Preferred stock.

7,883 6.626-6.626 Net funds generated from operations 38,410 34.420 29.584 Funds Obtained From Financing

- Proceeds from issuance of:

Preferred stock -

24,660 Long-term debt - _

9,940 39,701 increase (decrease) in shcrt-term debt 40,096 33.695 (27,475)

Total 74,716 33,695 12,226 Less - Reacquisition and retirements of long-term debt and preferred stock 12,C U 440 4.335 Net funds from financing -

62,049 33.255 7.891

' 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 10 be redeemed within one year):

~ Cash and special deposits (3,933) 3,501 (901)

Receivables and accrued utility revenues

-(25,958)

(11,886)

(5.499)

Fuel, materials and suppkes 3,559 (12,690)

(1,883)

Accounts payable 21,103 13,118 4,503 Accrued taxes (560)

(1.166) 2,436

' Revenues'to be refunded to customers.

1,970 Other, net 326

- (3.807) 1,370 Net change -

(5,463)

(12,930) 1,996 -

~

Deferred. unusual operating expense (Note 4)

' (1,130).

Energy adjustment clauses, net '

(20,212)-

(3,375)

-(287)

Other, net.

(1,828) 80 42 Net other sources (uses) of funds (28,633)

(16225) ~

1.751.

T(til Funds For Construction From Above Sources 71,826 51,450 39226 Allowance.For Equity Funds Used During Construction.

- 7,958 4.956 4,370

' GROSS PROPERTY ADUlTIONS

$79,784

$56.406 -

$43.596 Composition Of Gross Property Additions:

Electric utihty plant

$71,466 552,525

-S42,167 3,293

~ 1,856 1,090

~ Gas utihty plant.

5,025 2.025 339 3

Nucl:ar fuel -

. Total ~-

$79,784

$56.406.

$43.596

~

l-The accompanying. notes are an integral part of these financial statements.

11

The Hartford Electric Light Company CALANCE SHEETS At December 31, 1980 1979 (Thousands of Doi:ars)

Assets Utility Plant, at original cost:

. Electric '

$792,441

$771,797 Gas.

38,265 34.443 830,706 806.240

.Less: Accumulated provision for depreciation 226,159 201,943 604,547 604.297

' Construction work in progress (Note 11) 192,745 151,706 Nuclear tuel in process, net 9,374 3,345 Total net utility plant.

806,666 759,348

.Other Property and Investments:

Investments in regional nuclear generating companies, at equity 11,518 11.553 Other, at cost 3,734 3.264 15,252 14.817

' Current Assets:

~

' Cash'and special deposits (Note 6j.

4,464 531

- Receivables, less accumulated provision for uncollectible accounts 0; $924.000 in 1980 and $825,000 in 1979 48,166 31,881

.-Receivables from affiliated companies 14,505 10.118

~

' Accrued utility revenues ~

19,599 14,313 Fuel,' materials and supplies, at average cost

'26,026

.29,585 Prepayments, and other 1,828 :

909 114.588-87,337

.t

' Deferred. Charges:-

Unamortized debt expense ;

934 956

['

Energy adjustment clauses, net -

-22,541-4,063 b~

Canceled nuclear project (Note 3) 7,277-j Deferred unusual operating expenses'(Note 4) -

.1,130 Other 1 2,554 2,837'

34,436 7,856-

. Total A'ssets -

$970,942

- $869.358

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iThe accompanying notes are an integral part of these financial' statements.'

,T 12 '

= -. :

=

. =

At December 31, 1980 1979 (Thousarcs of oodarsi Capitalization and Liabilities Capitalization:

Common stock - $12.50 par value. Authorized 4,500,000 shares: outstanding 3,291,916 shares

$ 41,149

$ 41,149 Capital surplus, paid in 109,172 109.457

, fletained earn;ngs -

134,041 125,648 Total common stockholder's equity 284,362 276.254

Cumulative preferred stock - $50 par value. Authorized 3,000,000 shares; outstanding 2,313,165 shares.

Not subject to mandatory redemption - 1,624,000

shares outstanding (Note 7) 81.200 81,200 Subject to mandatory redemption - 689,165 shares outstanding (Note 8):

33,973 9,500

- Long-term debt, net (Note 9) -

384,769 376,802

. Total capitalization '

784,304 743,756

. Current Liabilities:.

Notes payable to canks (Note 6).

17,500 Commercial paper (Note 6) '

56,291 33,695 Long-term debt due within one year (Note 9) -

2,185 12215 Preferred stock to be redeemed within one year (Note 8)

. 487 500 Accounts payable 15,241 9,149

. Accounts payable to affiliated companies 37,809 22.912 Accrued taxes '

16,637 17,197

Accrued interest 7,276 6,712

. Other '

4,657' 2,498 158,083 104.878 Li Deferred Cre' its:

~

d

' Accumulated deferred income taxes 12,286 2,885

~

Accumulated deferred investment tax credits 14,756 15,774

- Other 1,513 '

2,065 28,555 20.724 Commitments and Contingencies (Note 11)

._ Total Capitalization and Liabilities -

$970,942

$869,358

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3.-

The Hartford Electnc Light Company STATEMENTS CF COMMON STOCKHOLDER'S EQUITY Capital Common Surplus.

Retained Stock Paid in Earnings Total (Thousand5 Of oOQfs) 8: lance at January 1,1978

$41.149 S109.457

$113.859 5264.465 Met income for 1978 34.795 34.795 Cash dividends on preferred stock (6.626)

(6.626)

C:sh dividends on common stock (24.871)

(24.871)

Habnce at Dece% ?$ G78 41.149 109.457 117.157 267,763 Net incom.s for 1979 33.996 33.936 Cash dividends on preferred stock (6.626)

(6.626)

Casn dmdends on common stock (18.879)

(18.870)

Bal:nce at December 31,1979 41.149 109.457 125.648 2M 254 Net income for 1980 38.901 38.931 Cash dividends on preferred stock (7.883)

(7.88J)

Cash dividends on common stock (22.615)

(22.615)

Loss on the retirement of preferred stock (10)

(10)

R: versal of issuance expense associated with the ret:rement of the 11.52% Senes of preferred stock 35 35 Discounts and expenses associated with the issuance of the 10.48% preferred stock 1980 Senes (320)

(320)

Balince at December 31,1980 (a)

$41.149

$109.172

$134 041

$284.362 (a) At December 31,1980. retained carnings of $41,292.000 were avadab e for payment of cash dmdends on common stock under the pr7 visions of the Company's First Mortgage Indenture and Deed of Trust.

Th; nccompanying notes are an integral part of these financial statements.

14

The Hartford Electric Light Company N DTES TD FINANCIAL STATEMENTS 1.

Summary Of Significant Accounting Policies Gen:rcl: The Hartford Electnc Licht Company (the agenc;es and other utihties covenng interconnections Company), The Connecticut Light and Power Company intercnange of electnc power and sales of utihty property (CL&P) Western Massachusetts Electnc Company are subject to regulation by the Federal Energy Regu!atory (WMECO) and Holyoke Water Power Company are the Commission (FERC) and /or the Secunties and Exchange operating subsidiaries composing the Northeast Utilities Commission (SEC) The Company is subject to further system (the system) and are wholly owned by Northeast regulation for rates and oiher matter s by the Connecticut Utikhes (NU). Other wholly owned subsidiaries of NU Department of Pubhc Utihty Control;DPUCL and fouows provide substanhal support services to the system.

the a nounting pokcICS presCnbeo by that commiss1on Northeast Uhhties Service Company (NUSCO) supphes As a pubhc utihty. the Company is granted the nght to centrakzed accounting, data processing. engineenng.

function as a monopoly in a prescobed service temtory financial, legal, operational, planning, purchasing.

Accompanying this powlege is the responsioihty to administrahve and other services to the system provide adequate and reliable serv 1Ce to customers.

companies. Northeast Nuclear Energy Company The DPUC has the responsibihty to estabhsh rates at (NNECO)is responsible for the construction and IcVels sisfficient for the Company to recover costs of operation of nuclear generating 'acihhes, and for iinancino providing service and to permit the Company the nuclear fuel for such facihties. The system also has twc opportunity to earn a fair return on investment in meeting subsidiary realty companies. The Rocky River Realty their responsib:htles, the regulatory agencies may create Company and The Quinnehtuk Company.

differences in the apphcahon of accountirg procedures All transactions among af fikated companies are on a for a regulated company compared to those of recovery os cost basis which may also include amounts nonregulated companies.

representing a return on equity, and are subject to approval of various federal and state regulatory Revenues: Revenues are based or authonzed rates commissions having jurisdichon.

pphed to custcmer consumption of utihty services. Rates The Company and CL&P have consolidated their may not be increased without a formal proceeding before operations by means of a transfer of au Company regional the DPUC. The Company accrues an estimate for energy personnel (other than production personnel) to CL&P.

d hvered but unbil!ed at the end of accounting penods.

CL&P is responsible for meeting the local service needs of customers of both companies and bi!!s the Company for work performed for the Company on a recovery of cost Nuclear Fuel: The Company. CL&P and WMECO own basis The Company and CL&P have been investigating Millstone I and 11 as tenants in common. NNECO owns the th2 feasibihty of a corporate merger,in which CL&P would nuclear fuel for such units. The cost of NNECO's nuclear be the surviving corporabon.

fuel is amortized to operabon expense on a unit-of-The Company is part of a New England bulk power production method at rates based on estimated kilowatt-system providing for purchases and sales of electric hours of energy to be provided and is billed to the inergy through a regional dispatch control agency. In companies based on their percentage ownership in the addition, the Company is a part owner with other system units. The amount of nuclear fuel expense charged 'o the

nd New England electnc utihhes of the common stock of Company, based on its 28 percent ownership, aggregated four regional nuclear generating companies. These

$8.602.000 $7.155.000 and $5,497.000 in 1980,1979 and companies, with the Company's ownership interest shown 1978, respectively. This includes a current provision in parentheticahy, are; Connecticut Yankee Atomic Power 1980 and 1979 for estimated spent nuclear fuel cisposal Company (9.5 percent) Yankee Atomic Electric Company costs on the Millstone units. As approved by the DPUC.

(9.5 percent), Maine Yankee Atomic Power Company (4 the estimated spent fuel disposal costs pertaining to fuel percent), and Vermon' Yankee Nuclear Power amortized poor to 1979 are being amortized over a ten-Corporation (3.5 percent). The Company's investment in year period. Storage for spent fuel at the Minstone nuclear these companies is accounted for on an equity basis. The station, including the f acil. ties currently under electricity produced from these facilities is cc;m.utted to construction at Millstone Ill, are expected to be sufficient the participants based on their ownership bterests and is until at least the mid-1990s.

billed pursuant to contractual agreements.

Depreciation: The provision for depreciation is computed Public Utility Regulation: NU is registered as a hold;ng using the straight-kne remaining hfe method which is company under the Pubhc Utihty Ho! ding Company Act of based upon estimated service lives of depreciable utihty 1935f nd it and its subsidiaries, including the Company, plant in service and estimated removal costs less ar subject to the regutatory provisions Ol the act.

expected salvage, as approved by the DPUC. The Arrangements among the system companies, outside depreciation rates for the r 'veral classes of electnc plant 15

The Hartford Electric Light Company NDTES TO FINANCIAL STATEMENTS are equivalent to a composite rate of 3 4 percent in 1980 method Effective January 1.1980. the method of and 1979 and 3.5 percent in 1978. For the several classes accounting for AFUDC was changed from the gross-rate of gas plant, the composite rate is equivalent to 2 7 method 10 'he net-of-income tax method. which more permt in 1980.1979 and 1978. These rates are apphed appropnately reflects the cost of financing the Company's to the average plant in ser fice during the year. Other than construction programs Management beheved that for major 'acihties which are depreciated from the tilde implementing this change pnor to receiving rate such facihties are placed in service At the time recognition would reinforce the Company's effort !J obtain depreciable property is rehred from service, the original appropnate ratemaking treatment The early adophon of cost, plus cost of remottiless salvage of such property,is this method for hnancial report ng purposes resu!!ed in a charged to the accumulated provision for depreceahon.

reduchon of net income of $3 6 mdhon for the penod from January 1,1980 to the approvalin October 1980.

Nuclear Decommissioning: A study completed in 1979 The AFUDC rate in 1978 and 1979 under the gross-rate indicates that complete removal commencing at the hme method was 9 percent. The effective AFUDC rate fcr 1980 of retirement is the most viable and economic method of under the net-of-income tax method was 8 3 percent decommissioning the Millstone I and il nuclear units in (11.6 percent on the gross-rate method). which was which the Company has a 28 percent ownership interest.

calculated in accordance with FERC guidehnes and The Company's share of the total estimated included semi-annual compounding on major decommissioning cost, in 1979 level dollars. is $37.4 construction projects.

m lhon. In October 1980, the DPUC allowed the Company The net re ait of the AFUDC rate increase.the semi-to increase the amount of decommissioning costs annual compoun. sng and the early adoption of the recovered through depreciation expense. The Company change to net -of-income tax method had no material commenced recording the increased depreciation effect on net income for the year ended Decemoer 31.

expense on November 1,1980.

1980.

Mrintenance: The cost of maintenance, repairs and Retirement Plan: The Company participates in the replacements of minor items of prcperty is charged to Northeast Utihties Service Compar.y Retirement Plan (the maintenance expense. Replacements and renewals of Plan). The Plan, which covers a!I regular employees is items considered to be units of property are charged to noncontributory. The system's policy is to fund annually the utility plant accounts.

the actuarially determined contribution, which includes that year's normal cost, the amortization of prior years' Federalincome Taxes: The tax effect of timing actuariallosses over fifteen years and the amortizabon of differences (differences between the periods in which pnor service cost over a period of fort'/ years. The transactions affect income in the financial statements and Company's allocated portion 0; the system's contnbution, the periods in which they affect the determination of part of which was charged to utihty plant, approximated income subject to tax) is accounted for in accordance

$600,000 in 1980. S800,000 in 1979 and $600.000 in with the ratemaking treatment of the DPUC. In a 1980 rete 1978.

. order, the DPUC approved, for certain timing differences, The actuarial present value of accumulated plan the adoption of the change from flow-through to benehts and plan net assets available for benef ts for the normalization accounting by the Company. It is expected system's plan are presented below; that. for years pnor to the adoption of normalizabon, the deferred taxes not provided for currently will be collected January 1.

1980 1979 in customers' rate < hen such taxes become payable.

(See Note 5 for the detail of income tax expense.)

Benet.ts:

Vested

$219,709 5182.447 Allowance for Funds Used During Construction: The Nonvested 21,537 17.293 allowance for funds used during construction ( AFUDC)

$241.246 5199.740

- represents the estimated cost of capital funds used to Net assets available finance the Company's construction program. These for benet:ts

$232.031 5192.603 costs. which are one component of the total capitahzed

- cost of construction, are not recognized as part of the rate b se for ratemaking purposes unt I f acihties are brought The assumed rate of return used to determine the into service. AFUDC is recovered over the service hfe of actuarial present value of accumulated plan benehts was pl:nt in the form of increased revenue collec% ~ )

6 5 percent for both 1980 and 1979.

result cf higher depreciation expense.

In October 1980. the DPUC, in its rate order, granted the Energy Adjustment Clauses: The Company's retail Company approval for the use of the net-of-income tax electric and gas rates include adjustment clauses under 16

The Hartford Electoc Light Corroany NOTES TO FINANCIAL STATEMENTS which certain fossd fuel and purchased power costs and 3.

Canceled Nuclear Project purchased gas costs, respectively, above or befo.v base in December 1980. NU can eled its Ucatague Nuclear rate levels, are charged er credited to customers As Project whrch consisted of tv s proposed 1.150 MW prescribed by the DPUC, substantially all of the costs not nuclear units in Monta, Massachusetts The decision currently recovered under the adjustment clauses are resulted porranly from NU's wish to reduce the financial deferred until recovery is permt!!ed burden of its construction program, and because of the Effective August 1,1979. the Comrdny implemented.

rospect that its ccnservation program would be with DPUC approval, a generatiori ; uization adjustment successful in accomphshing NU's oil d,splacement goals clause (GUAC). This clause levels the effect on fuel costs for the 1980s and 1990s. The Company has a 21 percent caused by vanations from a 70 percent nuclear interest in tne project. representing an investment of generation factor. At the end of a twelve-month penod approximately 581 mdhon(including AFUDC). The ended July 31 of each year, any deferred balance Montague site remains viab!c for an electnc generating resubng from the actual nuclear generation f actor being un!! including coal or nuclear umts Apphcat:on to recover bclow or above 70 percent, for that penod will be either certain project costs of approximately $7 3 mdhon wdl be collected from, or refunded to. custome s over the made to the appropriate regulatory authonty. It is the subsequent twelve-month period. The uause does not opinion of management that these c)sts are properly permit automatic collection from cu%omers to the extent recoverabic. The remain:ng costs of approximate ly that the factor is less than 55 percent in the twelve-month

$800,000 incluoed in utihty plant. are expected to be penod. For the twelve-month period ended July 31,1980.

apphed toward a future generahng facihty.

the nuclear capacity factor was 71.2 percent which resulted in a balance of $1.3 mdlion to be refunded over the succeeding twelve months. For the penod August 1.

1980 to December 31.1980. as a result of nuclear 4 Deferred Unusual Operating Expense outages, the nuclear capacity factor was 53 6 percent, resulting in a deferral of 58.7 mdlion. If the nuclear plants in the latter part of 1980. Mdistone I was scheduled for a achieve less than a 70 percent capacity factor for the ten-year inspection and refuehng outage to be twelve month period ending July 31,1981. any deferred accomphshed within a ten-week period The outage was balance would be co!!ected from customers under the extended because of tne sinngency of NRC requirements operation of the clause over the twelve-month penod ad the resu! Sng length of time necessa y for the proper commencing September 1981.

implementation of their mandates Certan operation and The components included in the energy adjustment maintenance expenses ircurred. and expected to be clauses, net, as of December 31,1980 and 1979, are as incurred. in connection with this t. tage are abnormal The follows:

Company requested and receiveo, ermission from the DPUC to defer the abnormal costs t, ng incurred.

1980 1979 pending consideration in the next rate proceeding for ance d Dewu recovery over a specified period.

Fuel and Purchased Power

$12.812

$6247 Purchased Gas 1,016 818 GUAC 8.713 (3 003 Total

$22,541

$4.063 5.

Income Tax Expense The delad of federal and state income tax provisions is 2.

Rat] Matters set forth below' in October 1980, the DPUC granted the Company 1980 1979 1978 nnnua! retad electric and gas rate increases of $43 mdlion.

gmy m,w The fevel granted was 65 4 percent of the 565.8 mdlion the Current income taxes:

- Company requested. The new rates went into ef fect in Federal S(1,115) 51.709

$2.844 State 35 1.488 1.845

- October 1980. The Connecticut Division of Consumer

' Counsel has appeaied the DPUC decision, a!!eging error Total current (1.080) 3.197 4.689 on the part of the DPUC solely with respect to approval of Deferred incorne taxes. net Investment tax credits (1,133) 2.687 3.106 tax normah2ation cnd the net-of-income tax method of Fede' '

(

accounting for AFUDC. The Company also has appealed e

8 the decision solely with respect to the allowed return on Total deferred 8.268 2t64 2 413 common equity. Although the outcome of the appeals i<.

Ta o

P

- not y 1 determinable management does not anticipate DC 5.426 that the final outcome wdi have a material effect on the Totalincome ta xes

$12.614 55.661

$7.102 operations of the Company.

17' u

The Hartford Electric Light Company NOTES TO FINANCIAL' STATEMENTS Such provision (credit) is included in the accompanying At December 31,1980, the Company had unused and consolidated statements of income as follows:

unrecorded investment tax credits amounting to pproximately $5.5 million, which are available to off set 1980 1979 1978 federalincome tax provisions for the years through 1987.

tThousanas e Duam Operating expenses T

$12,783

$5.067

$7.171

' Other income -

(5,595) r206)

(69)

.: Taxes on debt portion of AFUDC.

5,426 Totalincome taxes

$12,614

$5.661

$7.102

- Deferred income taxes are composed of the tax effects t of timing differences as follows:

6.

Short-Term Debt

'1980 1979 1078 The Company utilizes bank loans and commercial tineusanos e Douars, paper to finance temporanly its continuing construction

' investment tax credits

$ (1,133)

$2.687

$3.106 program. The system companies have joint bank credit

L'berahzed depreciation 52 lines with terms calling for interest rates equal to the prime Settlement credits-rate or Qe prime rate plus a fraction thereof, at the time of borrowing. The credit lines expire at various times in 1981 Ene a us mentclauses

' 7, 1

33 -

Unbilled revenues

'(409)

.(420)

(425) ar'a, a!! hough these lines are generally renewable, the

. Canceled nuclear project c1,952 continuing availability of the unused lines of credit is Deterred unusual operating subject to review by the banks involved. At December 31, expense 501 1980, the amount of unused available borrowing capacity

- Other.

(74)

^(301) f301) under the credit lines availabie to ine Company was Deferredincometaxes, net

.$ 8.268

$2.464

$2.413

$219.2 million, however, substantially all of these joint credit lines are also available in other cptem companies.

The Company's maximum amount of short-term (The principal reasons for the difference between total.

borrowings as currently authorized by the SEC is $100 million.

tan expense and the amount calculated by applying the.

In addition to their customary short-term borrowings z federalincome tax rate to pretax income are as follows:

from banks and from the sale of cor amercial paper, the Company, CL&P and WMECO entered into a Revolvino 1980'

'1979

'1978 Credit / Term Loan Agreement (the Agreement) wiin a group of banks in August 1980.The aggregate credit limit Expected tax at 46% of pretax ;

income in 1980 and 1979 for Ml tree companies under the Agreement is $140 and 48%in 1978 4

' $23,697. $18,242. $20.110

. millo The,

,imum borrowing limits of the Company, Tax effect of differences:

CL&P and WMECO under the Agreement are $60 million,

$80 million and $45 million, respectively. The companies 1 Additionaldepreciation for.

- (4.843) ' ' (5.407) are obligated to pay a commitment fee of one-half of 1 tax purposes -.

(4,618).

wa e I

u8

. percent per annum on their proportionate shares of the -

n unborrowed portion of the aggregate commitment. Loans

recognized for tax

.. purposes,

- (3,t 61) - (4l433) ' (3,890) -

under the Agreement bear interest at rates which vary -

from 100 percent to 106 percent of the higher of the lead 2 Overhead costs of. ~

Lconstruction-expensed '

. 1(894)

' above an average offering rate for three ' month

' for tax purposes.

(1,248)

-0,036)

- bank's prime rate cr one-half of 1 percent per annum O' I U'

U' certificates of der asit of major United States money Io ed ffIa 716).

- (810).

market banks. At Jecember 31)1980, the amount of i companies'!osses -

(981).

('

unused available borrowing capacity under the.

. Cost of removal-

expensed for i LSta tax, net of federal..

l(609)

,.(604)

- Agreement for the Company was $52.5 million.

a tax purposes..

.(66d)

' Essentially all of the cash of the Company represents 937 compensating balances in support of the Company's lines-t Other. net

-(662)J

-023)

1797)

' of credit; however, the compensating balances are not.

' Totalincome taxes:

$12,614

$5.661'

$7.102

subject to contractual restrictions on withdrawal,

, d Effectiveincometax ratei 24% :.

' 14%

17%o

' Additionalinformatior) with respect to short-term debt is '

.as follows:

118

Th3 Hartford Electric Light Company NOTES TD FINANCIAL STATEMENTS 1980 1979 1978 s f A, f: s -

Weighted a verage interest rate ter borrowings outstanc<ng at end ct pen 00 (exclud.ng effect of ccmpensating ba:ances)

Notes Payab:e t; 6s 21 4%

-n Commercial Paper 19 7 14 5 Maornum amount of borromr'gs outstand.ng dur;ng the pencd Notes Payable to Banks

$17.500

$ 8 000 S -

Commercial Paper 56.291 33 695 39800 Average dady borromngs donng the period fictes Payable to Banks S 7.649

$ 909 5 -

Commercia! Paper 30,734 12 351 8,365 Werghted average interest rate curing the penod (based on the dad / amounts outstancing and exciuding offect of compensating balances)

Notes Payable to Banks 20 3%

31 1 %

Commercial Paper 15 4 12 5 85 Range of matunties at December 31 (.o dayst Notes Payable to Banks 14-15 Commercial Paper 5-37 2 50 7.

Pr:;ferred Stock Not Subject To Mandatory Redemption Details of preferred stock not subject to mandatory redemption outstanding at December 31.1980.1979 and 1978 are as follows:

Current Shares Descriptron Redempt:on Pnce Outstancing Par Value deusam cf oc+.rs; 3 90% Series of 1949 550 50 160.000

$ 8 000 4 50% Series of 1956 50.75 104,000 5.200 4 96% Senes of 1S58 50 50 100.000 5.000 4 50% Series of 1963 50 50 160.000 8.000 528% Senes of 1967 52 09' 200.000 10.000 6 56% Senes of 1968 52 26*

200.000 10.000 9.36% Senes of 1970 53 21*

200.000 10.000 7 60% Senes of 1971 53 51*

200.000 10.000 9 60% Senes of 1974 54 66*

300.000 15 000_

Total prcferred stock not subject to tir ndatory redemption 1.624.000 581.200

• Redemphon pr,ce reduces o *uture years All or any part of each outstanding series of preferred stock may be redeemed by the Company at any time at 1st bhshed redemption prices plus accrued dividends to the date of redemption.

19 u

The Hartford Electric Light Company N3TES TO FINANCIAL STATEMENTS 8.

Preferred Stock Subject To Mandatory Redemption Details of preferred stock subject to mandatory redemption outstanding are as follo.vs:

Par Value Shares December 31.

Current Outstanding at Description Redemption Pace December 31.1980 1980 1979 1978

'IN S.thh L f O.M A t 11.52% Series of 1975 554 32' 189.165 S 9,460 510.000

$10 000 10 48% Series cf 1980 5524' 500 000 25.000 689.165 Less preferre J stock to be redeemed within one year 487 500 Total preferred stock subject to mandatory redemption

$33.973 S 9.500 510 000

• Redemption poce reduces in future years The 10.48% Series of 1980 preferred stock (10.48%

lo case of default on sinking fund payments. no Series) requires a sinking fund sufficient to retire a payments may be made on any junior stock by way of minimum of 20.000 shares (or a maximum of 40.000 dividends or otherwise (other than in shares of junior shares) at $50 per share each year commencing July 1, stock) so long as the default continues The Company's 1936. The 11.52% Series of 1975 preferred stock (11.52%

preferred stock provisions would prohibit the redemption Series) requires a sinking fund sufficie:it to retire a of less than all of the preferred stock outst anding or the minimum of 10.000 shares (or a maximum of 20.000 purchase of shares of preferred stock of E.ny series shares) at $50 per share each year commencing October pursuant to any sinking fund requirement if the Company 1,1980. During 1980, the Company reacquired 10.835 is in arrears with respect to payment of dividends on any shares of which 10.535 shares were retired. The losr., on outstanding shares of preferred stock. All o, part of either the retirement, after applying the related issuance the 10.48% Series or the 11.52% Series may be redeemed expanses, was charged to retained earnings. No shares by the Company at any time at established redemption were reacquired during 1978 or 1979 There were no prices plus accrued dividends to the date of redemption.

Changes during the year in the 10 48% Series.

except that during the initial five-year redemption period, both Series are subject to certain refunding limitations.

20

The Hartford Electric Light Company NZTES T1 FINANCIAL STATEMENTS 9.

Long-Term Debt Details of long term debt outstand.ng are as fo!!ows:

December 31 1980 1979

,T* Ann?S vs First Mortgage Bonds.

23/4% Senes C.

due1980 S 10.000 25/8% Senes due 1982 5.050 5.292 31/65 Senes D.

due 1984 7.336 7.431 5%

Senes.

due 1987 15.000 15.000 43/8% Senes E.

due 1988 18.000 19 000 41/4% Senes.

due 1993 15.000 15.000 41/2% Senes.

<1ue 1994 12.000 12.000 55/8% Senes.

due '997 20,000 20000 61/2% Sones.

due 1993 10.000 10.000 71/8% Senes.

cue 1998 25.000 25.C00 91/4% Senes.

due 2000 20.000 20,000 75/8% Senes.

due 2001 30.000 30 000 71/2% Series.

due 2002 35.000 35 000 71/2% Senes due 2003 40.000 40.000 91/i% Senes due 2004 30.000 30.000 11 %

Series.

due 1962 20.000 20 000 i11/2% Senes.

due1995 28.095 30 000 93/8% Series.

due 2008 40.000 40 000 13 35% Senes, due1990 10.000 Total First Morgage Bonds 380.481 382.723 PoHutton Contro! Notes:

5 90% due 1998 3.262 3 262 6 50% due 2007 4.130 4.130 Less due within one year Onclud.ng 595.000 of reacquired First Mortgage Bonds in 19 79) 2.185 12.310 Unamortized premium and descount. net (919) t 1.003)

Long term debt. net

$384.769 S376 802 Long-term debt maturities and cash sinking fund

10. Leases requirements on debt outstanding at December 31.1980, The Company has entereo into lease agreements for re as follows: 1981. S2.185.000,1982. $26.787.000.

the use of substation equipment. data processing and 1983. 51.975.000; 1984. S8.911.000, and 1985' office equipment, vehicles and office space. Since lease S t.875.000. in add tion. there are annual 1 percent sinking 2

m e 6 emq mm and improvement fund reqwrements currently amounting capitahzation of these leases is not required Had the to $?.981.250. S2.962.500. 52.743.750. S2.725.000 and Company capitalized the leased property at the beginning

' 12.706.250 for the years 1981 through 1985 respectively~

We lease m me eM on mm haWes bach sinking and improvement f und requirements may be expenses or net income would not be material.

satished by the depos t of cash or bonds. or by Rental payments charged !O operations. including CE ttification of property additions.

rental payments on cap:talizable leases, amounted to All or any part of each outstanding series of first

$2.971.000 for 1980. 52.392.000 for 1979, and $2.462.000 mertgage bonds may be redeemed by the Company at for 1978.

any 1 me c t estabhshed redemption prices plus accrued Future minimum rental payments. excluding executory interest to the date of redemption, except that certain costs such as real estate taxes. state use taxes, sents are, during their respective initial five-year insurance and maintenance. under long-term redemption periods subject to certain refunding nomaveWe leases are apheh as fohs: 1981 limitations. The 11 E% Senes bonds requires a sinking

$2.200.000; 1982. S t.800.000; 1983. $ 1.700.000.1984, fund suff tcient to retire a minimum of $1.875.000 in

$1.600,000; 1985. $1.200.000; and for the years pnnopal: mount each year commencing October l' subsequent to 1985, an aggregate of $10.800.000.

1980.

Essenti fly all utihty plant is subject to the lien of the

mortgage indenture.

21 L~

e

,The Hartford Electric Light Company NDTES TO FINANCIAL STATEMENTS

11. - Commitments and Contingencies NuclearInsurance: The Prce-Anderson Act currently limits public liabikty from a single accident at a nuclear Construction Program: The Company is engageo in a power plant to $560 million. If the total damages resulting continuous construction program and currently forecast n

fr m the accident exceed the private pociinsurance construction expenditures, including nuclear fuel, to be coverage of $160 milkon then the system companies approximately $96 million in 1981 and $611 million for the Would be required to pay their share of the excess. That years 1981-1986.

share, for the system companies, would be a maximum of

The construction program is subject

o periodic review

$5 million for each of the two operating Millstone units.

' and revision, and actual construction expenditure may plus their pro rata share of a maximum of $5 million for

. vary from such estimates due to factors such as revised e ch of the other operating nuclear units in which they

. load estiniates, inflation, the availability and cost of h ve an ownership interest. Therefore, the system

-capital, and the granting of timely and adequate rate relief c

ssessM fm h po@n d

by regulatory commissions, as well as actions by other ownership interests in the four regional nuclear regulatory bodies. it is expected that compliance with -

gmm Mg companies (described in Note 1)in the event present and developing tegulations established by NcMan,ncidst

^ various at:thorities in the a<eas of nuclear plant licensing The Company has also purry we 4 from Nuclear L and safety, fand use, water and air quahty, and other Electric insurance Limited (WL) replacement power

' environmental matters may require additional capitaf nsurance with respect to its ownership interest in expenditures and increased operating costs. Substantial Millstone I arw1 !! and Connecticut Yankee (CY). This capta! and operating expendatures have been budgeted insurance provides for established payments to partially

~

- by the Company in response to known and anticipated offset the extra expense which would be incurred in

' requirements of the U.S. Nuclear Regulatory Commission

~

btaining replacement power after a nuclear unit has E(NRC) flowing from its analyses of the Three Mile Island.

been out of operation for more than six months because accident. However, additional expenditures may be f a direct physicalloss peril, subject to certain

' required as a result of futther Company, indust' / and NRC :

usbns. The insuring agreement provides that, in the L analyses. In addition, uncertainties related to the event NEIL,s losces or costs in any policy year exceed the s reprocessing or permanent storage of nuclear fuel may Zum ate &nds avadaMo E,inseds am

' require revisions in future nuclear fuel costs.

subject to retrospective premium adjustments to cover At December 31,1980, construction work in progress such excess losses and costs to the extent of five times

- (CWIP) included an investment of $153 million for an 18.2 the annual premium paid by each insured. The maximum

? perce~nt interest in Mi!! stone Ill.

adjustment payable by the Company with respect to all of

~

1The Millstone 111 nuclear unit is being constructed for a its. insured units, assuming continuation of the present 1986 in-service'date.Th'e anticipated cost of the annual premium, is approximately $5 million for each Company's 18.2 percent ownership share of the unit will

. p at e be $473 million. As part of the effort to reduce required 1 financing for their 65 percent ownership of the remaining -

Financial Arrangements for the Regional Nuclear construction cost of Miftstone Ill, the Company.CL&P and Generating Company: The owners of CY, including the

? WMECO have made of fers to sell,in aggregate. an :

. Company, have agreed to an interim financing

ownership interest of at least 100 MWs in the unit to other

. arrangement, under which each of the civners would utilities:The companies have reserved the right to. '

purchase its pro rata share of up to $40 million of CY's

. allocate the total reduction ~among them, and to reduce :

subordinated notes, of which the Company's portion

their ownership interests furtheridepending on the extent -

.would be $3.8 million. The Company expects that it may L of acceptance of the offer and the financial outlook of j be asked to provide additional equity capital and/or other ieach of the companies at the end of the offering period?

. types of financial support for one o' more of the four regional nuclear generating compa 'ies.

J Responses to the offer are due on or before July 6,1981 c

+

There is at present no assurance that the companiesE 1 proposal to reduce their ownership interest in Millstone ill J can be accomplishedi ~

' = Coal Conversion: The provisions'of the Power P} ant and 1 i

dndustrial Fuel Use Act of.1978 couid require the iconversio.n of up to threefof the Company's oil-fired units (

4

/ to coal at an approximate cost to the Company of $369 ~

million;The Company has opposed conversion under r r

pending government proceedings stipulated by the act -

ynd proposes not to convert these three oil-fired electric j generation units,to coal.r

?-

k

.~=w L L.

J.

L -

. - w.

The Hartford Electric Light Company NTTES TO FINANCIAL STATEMENTS

12. Segments of Business The following summarizes information relating to the Company's electric and gas operations.

For the Years Ended December 31, 1980 t979 1978

.Tmsa,as er osa s Operating information.

Operat ng revenues-Electoc S339 999 5277.643

$241.584 Gas 26.745 20 274 17 438 Total

$366.744 5297.917

$259 022 Operating expenses excluding proviston for income taxes-Electnc S275.012

$219.688 5182.200 Gas 23.347 17946 14.877 Total

$298.359

$237.634 5197 077 Pretax operat:ng income-Eicctric

$ 64.987 5 57.955 5 59,384 Gas 3.398 2 328 2 561 Total S 68.385 5 60 283 5 61.945

. rovision (cred.t) for income taxes-Electric

$ 12.308 S 5736 5 6.879 Gas 475 131 292 Total

$ 12.783

$ 5867 5 7.171 Operating income-Electnc 5 52.679 S 52.219 5 52.505 Gas 2,923 2.197 2.269 Total 5 55.602 S 54.41 6 5 54.774 Depreciation enpense-Electnc S 25.718

$ 25.672 S 25.496 Gas 986 880 848 Total S 26.704 5 26.552 5 26.344 C pitalexpenditures:

Electric

$ 76.491 5 54.550 5 42.506 G:s 3.293 1.856 1.090 Total S 79.784 5 56.406

$ 43.596 investment information at December 31.

Identife ble assets (a) -

Elsctric

$781,449

$735.603

$708.158 G:s 29.939 27.527 26 296 Nona!!ccable assets 159.554 106.228 83.400 Total Assets S9/0.942 5869 358 5817.854

( ) Inctuces constructron work in progress. matenats and supphes and anoc led common utinty plant 23

The Hartford Electric Light Company NOTES TO FINANCIAL STATEMENTS

13. Impact of Changing Prices (Unaudited) as an estimate of the approximate effect of inflation, rather than as a precise measure. Fixed assets. nuclear fuel and The following supplementary inrvrmatien was prepared related depreciation and amortization expense appearing on the basis prescribed by the Financial Accounting in the historical cost financial statements have been Standards Board in Statement of Financial Accounting restated to show the effect of both generalinflation Standards No. 33, " Financial Reporting and Changing (constant dollar amounts) and changes in specific prices Prices", for the purpose of providing certain information (current cost amounts). Restatement of other items would about the effects of changing prices. Since inflation not rmteriaily affect the restated amount of operating accounting is experimentalin nature,it should be viewed income Statement of Income Adjusted For Changing Prices For The Year Ended December 31,1980 Conventional Constant Dollar Current Cost Historical Average Average Cost 1980 Dollars 1980 Dollars waons et omius>

Operating revenues

$367

$367

$367 Fuel 130 130 130 Purchase and interchange power, net (6)

(6)

(6)

Gas purchased for resale 17 17 17 D: preciation 27 55 58 Other openation and maintenance expense 96 96 96 Federal and state income taxes 13 13 13 Interest expense 31 31 31 Taxes other than income taxes 35 35 35 Other income 15 15 15 Net income (excluding adjustment to net recoverable costi S 39

$ 11(b)

S 8 increase in specific prices (current cost) of fixed assets and nuclear fuel held dunng the year (a) 5109 Adjustment to net recoverable cost

$(60) 4 Effect of increase in general price leve' (170)

Excess of increase in general price level over increase in specific prices after adjustment to net recoverable cost

$(57)

Gain from decline in purchasing power et net amounts owed S 61 S 61 (c) At December 31.1980, current cost of fixed assets and nuclear fuel, net of accumulated depreciation was $1.5 billion, while historical cost or net cost recoverable through depreciation was $800 miikon.

(b) Including the adjustment to net recoverable cost, the net loss on a constant donar basis would h ue been $49 million in 1980.

24

The Hartford Electric Light Company NOTES T3 FINANCIAL STATEMENTS l

Five-Year Comparison Of Selected Supplementary Financial Data Adjusted For Effects Of Changing Prices pn Am p N Dem f cu H.W.a! A wv% t Years Ended December 31 1980 1979 1978 1977 1976 m um u w.n Oper: ting revenues-Histoncal

$367

$298

$259

$243

$232 Constant dol!ar 367 338 327 330 336 Net income (excluding reduction to net recoverable cost):

Histoncal

$ 39

$ 34 Constant donar 11 11 Current cost 8

1 Net essets at year-end:

Rstoccal

$284

$276 Constant dolfar/ current cost 272 297 Excess of increase in general price I;v:1 over increase m specific prices cft:r adjustment to net recoverable cost:

Current cost

$ 57

$ 39 G1in from decline in purchasing power of net amounts owed

$ 61

$ 70 Aver:g2 consumer price index 246 8 2174 1954 181 5 1705 Constant dollar amounts represent historica! costs market prices. Both the constant dollar and current cost stated in dollars of coual purchasing power, as measured amounts of land have been estimated by using the CPI-U.

by the average level of the Consumer Price Index for all The current year's depreciation expense for both Urban Consumers (CPI-U) dunng the year. With the constant dollar and current cost methods was determined cxception of CWIP, the data for plant was determined by by applying the Company's depreciation rates to indexed applying the appropriate CPI-U to the historical cost of plant amounts.

plant.

Accumulated depreciation of p! ant under both methods Constant dollar restatement adjusts transactions was estimated by multiplying the respective cost data by a originally recorded in dollars of varying purchasing power percentage representing the expired life of existing into dollars of equal purchasing power. The restated facilit es at December 31,1980.

amounts do not purport to be appraised value.

Fossil fuelinventories and the cost of fossil fuel used in rJ plicement cost, current value, or the individual prices of generdon have not been restated from their historical p;rticu!ar goods and services in the currerit market; nor cost as regulation permits the recovery of fuel costs Tr they indicative of the Company's future capital through the operation of adjustment clauses. For this requir:rnents.

reason, fuelinventones are considered monetary assets.

Currint cost amounts reflect the changes in specific As presenbedin Statement of Financial Accounting pric ~ s of plant from the date the piant was acquired to the Standards No. 33, income taxes were not adjusted pr;sent. They are based on estimates of the costs to The excess of the increase in general pnces over the

" cquire or produce today, assets identical to those increases in specific pnces of plant indicates that, for the owned, or assets hving the same service potential as the year 1980, gcneralinflation was greater than the increase sets owned.

in specific prices of plant as measured by the Handy-The current cost of plant and equipment was Whitman Index of Public Utihty Construction Costs.

determined by indexing the historical cost of plant by the The results of operations, under both current cost and applic ble Handy-Whitman Index of Pubhc Utility constant dollar restatements, show a dechne from the Construction Costs Nuclear fuel accounts reflect the historical net income. This is the result of increased

> current replacement cost of such fuel based on current depreciation expense on inflation-adjusted assets. In 25

~

The Hartford Electnc Lght Company N9TFS TO FINANCIAL STATEMENTS addition, the Company will eventually have to repla,e :ts inflation erodes the value of the dollar. Generally during assets at a pnce many times greater uan the ornynal peaods of increasing inflabon. holders of monetary assets E cost. without having the opportu'uty to recover the suffer a loss of purchasing po Aer. While holders of replacement value of its assets tnrough historical cost monetary liabirties expenence a garn. The gain from the i

depreciation expense.

decline in purchasing po Aer of net amounts o Aec is An adjustment to income taxes would also be attribt, table to the substantial amount of debt used to necessary to reflect the true impact of inflation. Present finance property. plant and equ:pment However th:s income tax regulations do not give effect to the dechne in

" gain" is not a revenue item and, therefore, cannot be purchasing power of the dollar. Atthough a decline in considered add.tional f unds for reinvestment or dividend income would resu!!in tower income tax, this is not taken distribution.

into account in the adjusted income statements.

Auditors' Report To the Board of Directors of The Hartford Electric Light Company:

We have examined the balance sheets of The Hartford Electric Light Company (a Connecticut

. corporation and a wholly i wned subsidiary of Northeast Utilities) as of December 31,1980. and 1979. and the related statements of income, common stockholder's equity and sources of funds for

' gross property additions for each of the three years in the period ended December 31,1980. Our examinations were made in accordance with genera!!y accepted auditing stanc.?rds and, accordingly,incicJed such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the financial statements referred to above pres 6nt fairly the financial posttion of The Hartford Electric Light Company as of December 31,1980, and 1979 and the results of its 1

operations and the sources of funds for gross r perty additions for each of the three years in the period ended December 31,1980,in conformhy with generally accepted accounting principles.

whic% except for the change (with which we concur) in accounting for the a!Iowance for funds used during construction as indicated in Note 1 of Notes to Financial Statements, have been applied on a consistent basis.

ARTHUR ANDERSEN & CO.

Hartford Connecticut, February 20c1981.

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s The Hartford Electric L:ght Company 3

STATFZENTS GF CUARTERLY FINANCIAL DATA Quarter Ended 1980 March 31 June 30 September 30 December 31

< 1 - a s en mt n-:,, s.

Operatrng Revenues

$94.115

$78.626

$91.412

$102.591 Operating locome

$16.296

$12.128

$13.266

$ 13.912 Net fncome

$11.338 S 7.110

$ 8.915 5 11.538 1979 Operating Revenues

$ 76186 565.766 S77 511 5 78 454 Operating income

$15.702 S 9 341 S15.967 5 t 3 406 Net income

$10.720 S 4 416 510 829 5 8 031 SELECTED FINANCIAL DATA Year Ended December 31, 1980 1979 1978 1977 1976 tT % se as of o a rs>

Operating Revenues

$366.744

$297.917 5259 022 5242.846 5232.461 Operat;ng income 55.602 54.416 54.774 55,165 59.461 Net income 38.901 33.996 34 795 36.752 39.432 Total Assets 970.942 869.358 817.854 793 192 783 526 Long Term Debt (excluding current maturities) 384.769 376.802 339 047 349 484 349.703 Preferred Stock Subject to Mandatory Redemption (excluding current maturities) 33.973 9.500 10 000 10.000 10 000 I

27

The Hartford Electric Light Company STATISTICS Operahng Revenues Utihty Plant Decemcer 31.

.tr-cawns u oc #s swuw9eosru Elector Gas Total 1980

$1.032.825

$339.999

$28.745 S366.744 1979 961.291 277.643 20274 297917 1978 910.381 241.584 17.438 259022 1977 870.671 227.794 15.052 247 846 1976 832 468 219.444 13.017 232.461 1975 798.544 212 572 11.396 223.968 1970 465.124 92.547 7.375 99 922 Average Average Annual Annual Cubic feet Resident;al Electnc Gas kWh Sates Residentral of Gas Sales Cub:c Feet Customers Customers Employees

(%Ihons) kWh Use (a)

(Mihons) of Gas Used (Average; (Average)

(December 31) 1960 5,805 6,919 5,213 72.106 303.119 31,362 186 1979 5.091 6.924 4.979 73.187 300.013 30.801 184 1978 5.567 6.963 4 627 75.753 295.387 30.909 187(b) 1977 5.424 6.942 4.490 76.554 291.671 31.001 951(b) 1976 5.283 6.930 4 598 77.981 288 055 31.012 1.395 1975 5 066 6.703 4.384 71.853 285.881 31.091 1.544 1970 4.346 6256 4.822 79.132 268.755 32.328 1.775 (a) 8 ssed on residential equrva!ent customers. reflecting total dwethng units (b) Decreases are due to the consobdation of the Company s and CL&P's operahor..

28

Address General Correspondence in Care Of:

Northeast Utilities Service Company Investor Relations Department P.O. Box 270 Hartford, Connecticut 06101 Tel. (203) 666-6911 General Office Selden Street, Berkn, Connecticut First Mortgage Bonds Trustee and Interest Paying Agent The First National Bank of Boston, Corporate Trust Department P.O. Box 644, Boston, Massachusetts 02102 Preferred Stock Transfer and Dividend Disbursing Agent

- Hartford National Bank and Trust Company, Stock Transfer Department 150 Windsor Street, Hartford, Connecticut 06115 Registrar United Bank and Trust Company, Hartford, Connecticut 06103

' Hartford National Bank and Trust Company (10 48% only)

. Dividend Payment Dates 5.28%,9.60%,10.48% and 11.52% - January 1, April 1. July' 1 and Octobe'r 1 4.50%. 4.96%,6.56% and 9.36% _ February 1, May li August 1 and November 1

- 3.90%; 4.50% (1963) and 7.60% - March 1, June 1, 3ptember 1 and December 1

,fi s

The' data contained in this, Report is submitted for t'he sole purpose of providing information to '-

[ ;;-'present stockholders about the Company /

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