ML20009F277
| ML20009F277 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 07/21/1981 |
| From: | PUBLIC SERVICE CO. OF NEW HAMPSHIRE |
| To: | |
| Shared Package | |
| ML20009F275 | List: |
| References | |
| NUDOCS 8107300235 | |
| Download: ML20009F277 (140) | |
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Change Since Annual Growth Rate
- 1980 1979 1975 1980 i
Operating Revenues $ 351,247,479 20.0 % 13.9 % , 1 Operating Expenses S 303,940,535 22.4 % 14.8 % Earnings Per Share of Common Stock $ 2.77 8.2 % 1.1% Common Shares Outstanding ( Average) 16,539,113 30.8 % 22.9 % l Gross Investment in Utility Plant $1,272,551,216 22.0 % 20.9 % l Construction Expenditures 232,852,693 20.9 % 42.7% Prime Peak Load (Net Kilowatts) 1,143,000 (2.4)% 2.4 % i Prime Kilowatt-Hours Sold (Thousands) 5,641,501 0.7 % 4.5% Number of Customers (Year-End) 289,383 2.7 % 2.4% Annual KWH per Residential Customer 7,178 (1.9)% 0.6%
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Earnings Per Average Common Share and Dividends Paid Per Common Share (In Dollars)
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CGenemlIn nnation Annual Meeting of Shareowners have questions about the Annual Dividend Reinvestment Plan Agent All shareowners are urged to attend Report or the Company, please write The First National Bank of Boston the Annual Meeting to be held on to Russell A. Winslow, Clerk and PSNH Dividend Reinvestment and Thursday, May 14,1981, at 9:30 a.m., Secretary, Public Service Company Common Stock Purchase Plan Eastern Daylight Saving Time, at f New Hampshire, P.O. Box 330,
, P.O. Box 1681 The Carousel Ballroom, Bedford, Manchester, New Hampshire 03105. Boston, MA 02105 New Hampshire (Route 3 - Daniel Webster Highway- I mile North Stock Exchange Listing Other Information of the interchange of the Everett Public Service Company of New At December 31,1980, there were Turnpike, Interstate 293, and New Hampshire common stock and $25 59,158 owners of the Company's Hampshire Route 101). During the par value preferred stock are listed common stock. Shareowner in-
- meetmg there will be opportunity to on the New York Stock Exchange. quiries regarding change of address, discuss matters of interest pertain- Tbe Company's symbol on the ex- dividends, stock transfer require-ing to the Company. che nge is PNH. ments, lost or stolen certificates or other account information should be Description of Business Dividend Reinvestment and directed to The First National Bank Public Service Company of New Common Stock Purchase Plan of Boston, Shareholder Services Di-Hampshire is the largest electric During 1978 the Company insti- vision, P.O. Box 644, Boston, Massa-utility in New Hampshire, supplying tuted a Dividend Reinvestment and chusetts 02102.
electricity to approximately 83% of Common Stock Purchase Plan for the population of the State of New its shareowners and employees. Transfer Agents Hampshire. The Company distri- Through the Plan, shareowners can The First National Bank of Boston
- putes and sells electricity at retail in purchase shares of the Company's 100 Federal Street C dOO cities and towns in the State of common stock without the payment Boston, Massachusetts 02110 New Hampshire, six border towns in of any brokerage commission or ser-the State of Vermont, and 13 border vice charge. We hope shareowners Manufacturers Hanover Trust towns in the State of Maine. The will find the Plan a convenient way Company Company also sells electricity at to increase their ownership in Public 4 New York Pla a wholesale to six other utilities. Service Company of New Hamp. New York, New York 10015 shire. If you desire more information Annual Report and Statistical concerning the Plan, please com. Registrars Supplement plete and return the post card The First National Bank of Boston This 1980 Annual Report has been attached in the back page of this 100 Federal Street approved by the Board of Directors. annual report. Boston, Massachusetts 02110 The 1980 Statistical Supplement Morgan Guaranty Trust Company (with comparative statistics for the of New York last 10 years) will be available in 30 West Broadway early April. If you want a copy, or New York, New York 10015 PUBLIC SERVICE ~
camp.ny omo. H.mp.e . About the Cover Corporate Offices masterful engineering achievement. the Seabrook Station cooling tunnels Public Service Company of
%)di circulate 800.000 gakas per minute of seawater through the plant 's New Hampshire condensers. These tu an 22 foot diameter tunnels were bored through solid 1000 Elm Street, P.O. Box 330 rock under the marsh, harbor. and ocean floor in order to minimize ecological Manchester, New Hampshire 03105 effects to these arcas. Telephone (603) / ." $000 1
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Letter to Sliaivowiiers arid Emplo; ces Q, e . ... . e m-.-, e , , . , . .. r n 1980 the Company continued , l~ _/ to strive toward its overall objec- ! ( ']' i tive of meeting customers' energy l < .. 1 -
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surate with a fair return for the k ~.s p? ] y, 4 .-
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latory climate. Yet we have ac-
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nflation. We sought and obtained I ; ; , .y, a' -
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l- ship in Seabrook Station from
^g . .. --", 50 to about 35 percent. We under- t g{# .. "- ,l :-O g .' '; %. y t.
;- took broad financing initiatives
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- : . ..[g,. , s that raised $204.5 million and W.C. Tallman. Chairman. and R.I. Harriwn. Preudent 9pc9c3 g97 gg g gcy c,p gg,y mg7 ket, the European financial community.
The Company's earnings per share for the year 1980 were $2.77 com-pared to $2.56 for 1979 and $3.25 for 1978. The partial recovery in 1980, moving earnings closer to those in 1978, was achieved despite severe inflationary pressures and a substantial increase in the number of shares of common stock out- , standing. Revenues for 1980 rose l nearly 20 percent over 1979; how-ever, operating income was up less than 7 percent. Rapidly increasing l l i l Ol l l
1 M a a NO IOSTAGE NO POSTAGE I. NECESSARY NLCESSARY IF MAILED IF MAILED IN Tile IN Tif E UNITED STATT.S UNITED STATES BUSINESS REPLY CARD - BUSINESS REPLY CARD - FIRST CLASS PERMIT NO. 3736 BOSTON, MA. FIRST CLASS PERMIT NO. 3736 IOSTON, MA. POSTAGE WILL BE PAID BY ADDRESSEE POSTAGE WILL BE PAID BY ADDRESSEE - - The First National Bank of Boston The First National Bank of Boston Transfer Agent- PSNH PSNH Dividend Reinvestment and """""""" - P.O. Box 644 - Common Stock Purchase Plan -
- Boston, MA 02102 -
P.O. Box 1681 - Boston, MA 0110S - - ___-- ,- e
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t a L_ m (, .. Dividend , vestment and Common Stock Purchase Plan Is th:2 a duplicate mailing? Owners of Common Stek of Public Service Company of New flampshire Are you receiving two or more copies of the Annual Report and other (the " Company") and employees of the Company may purchase newly shareowner publications at your address due to multiple shareowner ac-issued Common Stock of the Company pursuant to its Dividend Rein- counts! If you wish to avoid this duplication, please complete this form. vestment and Common Stock Purchase Plan. Tb obtain a prospectus con- A sepa-c form should be completed for each account you wish elimi-taining more complete information on the Plan, please fillin and return nate future publication mailings.This authorization will not affect this card to The First National llank of Iloston. distr i of dividends or proxy materials. It is your respansibility to
. notif ompany in writing should you wish these maihngs resumed.
Print na. shown on back cover ui Annual Report Nam street City state Zap code Street City state Zip code signature (s)
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i l 4 1 operating expenses and unprece, systems for line operations, the In addition to Seabmok, the dented high interest costs arising establishment of two-man line Company is continuing with the I from continuing high levels of in- crews and improved work meth- planning and construction of i fintion substantiate the need for ods, and the introduction of a other proiccts which, in the long
, additional rate relief. On imuary maintenance control system for term, offer potential cost savings 14,1981, the Company filed a re- generating station maintenance. to our customers. These include quest with the New Hampshire Overall, these programs have the conversion of Schiller Station Public Utilities Commission avoided the need for a total of 516 from oil to coal, hydroelectric de-(NHPUC) for an emergency sur- jobs; and, on a ten-year basis, will velopment projects and other charge designed to increase an- result in expected savings of ap- projects which must be under-nual revenues by approximately proximately 95 million dollars. taken to maintain or improve S35 mihlon, or 10E On February The second front we are actively safety, reliability, and oil inde-i 27, after three days of hearings, pursuing is to build Seabrook pendence objectives.
the NHPUC denied the Com- Units I and 11 as quickly as we Important as it is to build Sea-pany's request; in part, citing a possibly can, and to retain owner- brook, it is equally important to need for further information, ship of as much of it as we can, delay the building of other new and m part mdicating a desire to w thin the limits of our financial - plants after Seabrook because of see more stringent economies
, ability to do so. It is clearly in the their high capital requirements achieved by the Company. In re- best interest of customers we and the attendant impact on elec-sponse the Company has filed a serve to own as much of Seabrook tric rates. Therefore, the Com-nmotion for a rehearing of the as we can. The Company is but- pany's strategy also calls for
( sNHPUC's order in the matter of tressed in this view by statements utilizing load management, effec. V het emergency rates and has.
, of aumerous independent groups. tive and innovative pricing, and begun implementation of a six- Most recently, the Citizens' Energy conservation to defer needed new l
step program to reduce controlla- Pol cy Advisorv Group to the New capacity as long as possible. hi-ble expenses. The six-step pro . Hampshire House Science and novative pricing and conservation gram is descnbed m more detail Technology Committee found: should be able to assist the con- { in Management's Discusdon and sumer in lessening the impact of
- Analysis of Financial Condition " Financing
- The Seabrook higher prices which the Company and Results of Operations on plant will benefit the citizens niust necessarily charge if it is to Page 22. of New Hampshire most if(1)
, carry out its responsibilities in the the plant is completed and inflationary chmate of today. We In seeking to overcome the im-pacts of inflation, the Company bmup to fuH dectne pm- are studying ways to avoid con-has been implementing ways to duction as soon as possible. struction of any new base load
' and if (2) as much ownership plants until the end of the cen-ensure that we operate as effi- as financially possible is re- ciently as possible. Over recent , tury, and we are also looking tained y compames within at possible minimal- or non-years, numerous measures have this state. investment capacity sources such
! been taken to improve operating efficiency, including consolida- as Canadian hydro power.
tion of district and division of- To deal with the multiple and in-fices, increased use of computers terlocking factors which bear on i in customer service and customer the Company's two-part strategy, accounting, the introduction of we have recently established a top improved management control a
O level Electric System Strategic Also, a Corporate Strategic Plan- From 1978 to date over $490 mil-Planning Committee charged ning Department was recently es- lion of outside capital has been with the following respon- tablished to develop a framework secured. Utility operating ef-sibilities: for anticipating and responding to ficiencies have been achieved, "The Committee's mission social, political, economic, tech- blunting the impact of rampaging is to develop and recommend n I gic 1, and regulatory factors. inflation. Management has been a comprehensive integrated The department will unite Com- challenged and tested to extreme electric system plan, with pany efforts to implement that limits. All members of the framework, formulating short- Company team have responded appropriate contingency and long-term goals and a com- to the need for strong and plans to optimally match load and capacity for a M- prehensive plan to reach them. dedicated efforts. year planning period based In addition, during the year the The road that stretches ahead of on the following criteria and Company's Board of Directors, us is not without obstacles, but goals: acting to ensure continuity in we've never been better equipped a Completion of Seabrook management and to achieve an to overcome them. Units I and II as quickly as orderly succession in the top possible management of the Company,
- Minimization of future made a maior change. On May 8, capital expenditures 1980 the Board elected W.C.
Preservation of flexGliity Tallman, Chairman, and R.J. Har-to respond to uncenain rison, President. Subsequently, W.C. Tallman future conditions the Board also filled two vacan- Chairman and
- Minimization of cost of cies in the senior management Chief Executive O//icer service group by electing Charles E. Bay-
- Maintenance of reasonable less as Financial Vice President -
system reliability and D. Pierre G. Cameron, Jr., /
- Responsiveness to the local as Vice President and General ,
socio-political environ. Counsel. ment while considering re- In the course of the last several R.J. Harrison gional and national goals." years, your Company has encoun. President tered formidable challenges. The largest construction project in the State's history is progressing well considering the financial con-straints of the last year. Financing for Seabrook and other needed facilities has been accomplished in extremely difficult markets. O 4
I 1 i 1 . De.ar m Review l ___-- g ; nusually warm weather,in L1 combination with heiAtened p conservation efforts and a witcult ; economy for the industria m tor, y resulted in essentially no gna th in L ) sales in 1980. Indicative of the ?
- weather sensitive nature of kil- y hour sales, the month of December, l 1980, a bitterly cold month, saw prime sales increase by 11.6 percent, although on an annual basis, sales Y <
were up only 0.7 percent. The fol- j lowing tabulation sets forth com- Q parative s: les results for 1979 and N 1 % 0: y S Prime Energy Sales (Thousands of Megawatt-flours) \ > percent
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1980 1979 Increase N i , i Residen;ial 1,815 1,804 07 h Industrial 1,834 1,846 (0.7) k Other 1,992 1,953 2.0 h } { , 5,641 5,603 0.7 ! Revenues from these sales, however, T l were up 20.3 percent, to $327.9 mil-lion. This increase is attributable to o a rate increases approved by various The 345 KV transmission lines lead from Seabwok Station to points in Newington regulatc ry bodnes durmg the year, and Londonderry. NH and Tewksbury. A1A. and frr m the operation of the fuel adjustinent clause which passes through to customers the increases in the cost of fuel burned for generat- will prevail, the company expects common equity, and full normaliza-ing electricity. sales to increase about 4.2% per year tion of inter-period tax timing dif-through 1990. ferences on a pr~ mtive basis. In an The economy of the area served by earlier order in tna same proceeding, the Company continues to expand at In January,1981, the Company er_ perienced a record prime peak load the Commission ordered the Com-a more rapid rate than the economy pany to refund about SI1.3 million to of the nation as a whole. Reflecting of 1,208 MW. The previous record had been set just a week earlier. The customers over a three-year period. continued high levels of population This amount represented Construc-growth, the number of customers 1,208 MW represents a 3% increase j over the 1979 record. The Company tion Work in progress (CWIp) related ' continued to increase. At year-end charges which had been billed to 1980, the Company had 289,383 cus- currently estimates that peak de. l mand for electricity will increase customers after the effective date of tomers, a 2.7% increase over 1979 legislation which prombited such ! year-end customers of 281,787. Dur- about 4% per year through 1990. CWIp charges. Such refunds will be ing the 1970's, New fiampshire Rate Relief accelerated at the start of the ad-population increased by 24.8% the justment periods associated with re-second highest growth rate for any On June 9,1980, the New If amp-duction in the Company's ownership state east of the Mississippi River. shire public Utilities Commission of the Seabrook station discussed Demographic experts expect to see a granted the Company an increase in below. continuation of this growth for the its New flampshire retail rates of remainder of the century, at least. As $18.3 million en an annual basis, an In other rate actions, the Federal a result of this expected growth, and 8.4% increase Major findings by the Energy Regulatory Commission on assummg normal weather patterns Commission were a 15.9% return on February 8,1980 issued an order al-
l 1 i i i lowing a two step increase which million from a Eurodollar loan in Due to the rapid increase in the cost l had been requested by the Company September. of fossil fuels, and particularly oil, l to become effective as propo.,ed, sub- The Eurodollar loan, t' e Company's this shift in generation mix toward j iect to refund. The first step, $3.6 f rst, was negotiated w rh six Euro_ more nuclear will have a dramatic million on an annual basis, became pean banks. It provided a lower pact on what the Company's cus- ! effective on January 22,1980, and the interest rate than was available tomers would otherwise have had to l second step of S0.7 million became domestically and introduced the pay for electricity.1)uring 1980, effective on Apnl 1,1980. On July 31, Company to the European financial when the nuclear portion of the 1980 the Alame Public Utilities community, opening a whole new Company's generation mix was only < Commission granted the Company a capital market. 8.4%, nuclear-generated electricity rate increase of $0.6 million or 17% saved customers over $11 million. on an annual basis to the Company's Power Generation - Present The Company would have had to customers in Alame. bum about one million additional and Future barrels of oil to n cet electnc Financing During 1980, the Company's generating needs if nuclear power During 1980, the Company raised gener ting mix was as follows: were not available. At year-end 1980, i about $204.5 million: $52 million Fuel Percent the cost of a barrel of oil was almost from the sales of General and Re-
- Oil ;31 i
funding Alortgage Bonds in January Coal 34.4 and December, $61.8.nillion from Nuclear The management of the company is 8.4 sales of common stock m February Hydro 4.1 greatly concerned about the cost in-and July, about $2.7 million from creases which the consumers it i I sales of common stock through the ,when both units at Seabrook are on line, nuclear generated electricity is serves have had to endure. The root I Company's Dividend Reinvestment cause of the problem is the cost of i and Common Stock Purchase Plan, expected to be about 69 L, coal 21%, g; g g g3 oil 6%, and hydro 4%. +
$60 million from sales of preferred f the average residential bill 1 l stock in April and October, and S28 in 1972 to 35 percent of the same bill in 1975, and to 50 percent of the same bill in 1981. Going along with
_, _ _ __ the severe impact of fossil fuel costs I are all of the general inflationary ef- i ! fects which impact the Company's l
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expenses like those in all industries. I
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* . - .. Seabrook project as a whole is now 33% complete, with Unit I and prop-auRS g , i erty and equipment common to both l 1 .N -
Units over 46% complete , d Unit 11 j 8% complete (with work nm -limited , i
, D to the containment liner alooc). In '
4 - g carly 1981 the boring of the cooling i j - i f(N.M F water intake tunnel was completed (over 3 miles in length) and, assum-l I g ing current construction sciwdules, which contemplate resumption of the p pre- Alarch,1980 levels, can be met
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) during the rest of 1981, the boring of l Part of the SeabnAk Station cuculating water system, the second f three vertical the cooling water discharge tunnel shaft s dnlled mto the ocean floor as shown where it intersets 6tt the intake tunnel. will be completed and the reactor ves-After over IM00 feet of tunnelhnn this horizontal tunnel was within inches of the '~cl and steam generators, as well as i
exact center of the vertical shafts. the permanent dome for the contain n
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< Unit I, will be set. J g
The Seabrook Station Training - a Center opened in November, and ' 0 i began providing Seabrook Station . l control-room operators with the best available training in the nation. The center has a computerized simulator which is an exact duplicate of the plant's actual control room. Al- '. though the primary purpose of this - ;
) intensive training facility is to en- "
L sure safety, there are major cost sav-ings associated with it. ' is esti- j;. . mated that the plant's annual " I availability will be increased by up to 2%, which translates into sub- C
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stantial dollar savings when mea- '4 , j suied against the high cost of oil. q-i
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! The Company is movmg ahead agsres- , savelv wah its hydro redevelopment ' program Here. Garvins Falls. one of the . :~ earbest plants m the state.18 undergoing '*< reconstruc tion and the addition nf two ,
'G new horcontal tube-type generators. : ;
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Director Franklin Hollis s A Director for nearly 42 years, dlingof thelegalaffairs of the Franklin Hollis died on December Company with thoroughness,
/ 6,1980. He was senior partner in dedication and wisdom. Rate mat- i 4 .. p' the Concord law firm of Sulloway, ters, labor negotiations, taxes, I
? Hollis & Soden. financings, sitings of power plants :
Chairman Tallman said of him, and many other legal matters re- l ceived his careful attention during l
" Franklin Hollis' wise counsel a half century of dedicated service ;
and true friendship will be greatly to this Company and to the utility missed by all his friends and as-industry." ; l sociates at Public Service Com-l pany. Allof us who have known Hollis, 76, had served as president ( I
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him will always remember his fine legal mind, his quiet good of Exeter and Hampton Electric Company and of Concord Electrie
.m humor, and his quick readiness to Company and was a director of l contribute his talents to any mat. those and several other com-ter in which he was needed." panies. He had been member and A memorial resolutiori, passed chairman of both the Concord 3' School Ikiard and the State lloard t4 Ek by the lloard of Directors of the l L S A, - Company stated that he "contrib- of Education. l Frankhn Hollis,1Y041980 uted immeasurably to the han-T
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" Oii The Company is attempting to re- Public Service Company of New Hampshire 35.23497% I duce oil dependency on a number of The United Illuminating Company 17.50000 fronts besides building Seabrook Sta- Massachusetts Municipal Wholesale l tion. Currently in the planning stage Electric Company 11.59340 l ts the conversion of three umts at New England Power Company 9.95766
[ Schiller Station in Portsmouth from l oil to coal. These conversions are es. Central Maine Power Company 6.04178 i timated to take two years to com. The Connecticut Light and Power Company 4.05985 plete, at a cost of about $21 million, Commonwealth Electric Cmapany 3.52317 assuming flue gas desulfurization Montaup Electric Company 2 89989 equipment will not be required. In Ilangor Hydro-Electric Company 2.17391 November, the company began its l , first maior hydro redevelopment New Hampshire Electric C,ooperative, Inc. 2.17391 project at Garviris Falls on the Mer. Central Vermont Public Service Corporation 1.59096 rimack River in Bow, New Hamp- Maine Public Service Company 1.46056 shire. One other hydro station, Fitchburg Gas and Electric Light Company 0.S6519 i Eastman Falls, will be redeveloped Taunton Municipal Lighting Plant 0.43479 and applications have been filed to l Vermont Electric Cooperative, Inc. 0.41259 construct three new small stations. i Hudson Light and Power Department 0.07737 Adjustment in Seabrook Ownership l j Following issuance of orders by the , , , - I Massachusetts Department of Pub- ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - - - - - - - - - - - - - - - - - 1 tic Utilities in October,1980, and February,1981, approving the acque .-
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I sition of additional ownership inter-g;N ests in the Seabrook Project by sev- h' m
~
l ',,m ' " eral Massachusetts electric utilities, ' ~ the adjustment periods for reduction ' i of the Company's ownership interest _m to approximately 35% began in part. ~ When the Massachusetts Mumeipal wholesale Electric Company com- , .. , pletes its financing for its increased 1 . jy" M y ownership share, the New Hamp- - , T shire Electric Cooperative, Inc., re- 'A _ ceives approval from the New Hampshire Public Uti'ities Com- .. .. - - - - - mission for the finannag of its new ownership share, ano local approvals y = , are received by the Taunton Munici- := c
-31 S .
s:1 pal Lighting Plant, the adjustment t 1p W -~ i.*.~ Q T ~~ period will be fully effective and the ;- ;- " Company will experience al,proxi- M % ; , ~ _- Y, ~_ " ~ 4 mately a 12-month moratorium on 'P - construction costs for the Seabrook Project. When the full adi ustment I period is completed, and assuming l no additional transfers, the Owner-ship Shares in the Seabrook Project An oil tanl<er on the piscataqua River at Portsmouth NH dehvers oil ta the Com-will be as shown above: pany's Schiller Station. This facility is being considered for redevelopment to burn coalin three ofits four oil-fired units.
Common and Pmi nn{ Stock Dividends andMnfietPrices Dividends and Stock Prir es __ Dividends Paid Per Share V Calendar Quarter- 1980 Calendar Quarter- 1979 Security First Second Third Fourth First Second Third Fourth Common Stock 50.53 $0.53 50.53 $0.53 S0.53 $0.53 S0.53 S0.53 Preferred Stock (1) 3.35% 0.84 0.84 0.84 0.83 0.84 0.84 0.84 0.83 4.50 1.125 1.125 1.125 1.125 1.125 1.125 1.125 1.125 5.50 1.375 1.375 1.375 1.3'5 1.375 1.375 1.375 1.375 7.92 1.98 1.98 1.98 1.98 1.98 1.98 1.98 1.98 l 7.64 1.91 1.91 1.91 1.91 1.91 1.91 1.91 ! .91 11.00 0.6875 0.6875 0.6875 0.6875 0.6875 0.6875 0.6875 0.6875 9.00 2.25 2.25 2.25 2.25 2.25 2.25 2.25 2.25 11.24 0.7025 0.7025 0.7025 0.7025 - - 0.654 0.7025 17.00 - 0.338 1.0625 1.0625 - - - - 15.00 - - - 0.175 - - - - High and Low Sales Prices on New York Stock Exchange Calendar Quarter- 1980 Calendar Quarter- 1979 Security First Second Third fourth First Second Third Fourth High Low High Low High Low High Low High Low High Low High Low High Low Common Stock 17 13 17 % 13 % 17 % 14 % 16 % 13 % 21 % 19 % 19 % 17 % 19 % 17 % 18 % 15 Preferred Stock (2) 3.35% 25 % 19 25 19 25 21% 21% 18 31 % 30 % 31 30 31 28 28 25 4.50 33 25 31 28 34 31 31 25 % 43 40 42% 39 40 % 39 % 37 % 33 5.50 52 52 61 61 62 62 62 59 77 76 77 77 Notouoted 60 60 7.92 58 44 59 47 60 53 50 45 72 72 73 68 72 65 65 57 7.64(3) - - - - - - - - - - - - 11.00 22 17 % 22 % 18 22 % 18 % 20 % 16 % 26 % 25 26% 24% 26% 24h 25% 20 9.(X)(3) - - - - - - - 11.24 22 % 18 % 23 % 17 % 23 % 19 % 20 % 17 % - - 27 25 % 27 % 24 % 24 % 20 % 17.00 - - 31% 30 32 28 30 26 - - - - - - - - 15.00 - - - - - - 24 % 22 - - - - - - - - e (1) Allpreferred stock series have a par value of S100, except the i1.00% 11.24%,17.00% and 15.00% which have a par value of $25. (2) Prices for the 3.35%, J.50%. 5.50% and 7.92% dividend serb are the range of bid prices on the "Over the Counter" market which were supplied by the National Quotation Bureau, Inc. (3) Series privately placed and therefore not traded. O
Statements o ' Earnings andRetainedEarnings For the Year Ended December 31, 1980 ia Io's el (Thousands of Dollars) Operating Revenues ' Note l) $351,247 s 2 92. s l a $ 2 en. ' ; l Operating Expenses Operation Fuel 137,969 t 11,411 'l y n Purchased and laterchanged Power 49,279 m tni 4 ; 122 Other Operating Expenses 39,695 ;6.ano 11 Ivo Maintenance 21,395 10 l'1 l'.;u2 Depreciation 17,425 I ; ts7 14 ? ;2 Federal and State Taxes on Income (Note 3) 22,472 1 ;.unn Iv non Other Taxes, Principally Property Taxes 15,705 14,n il 13 s s -; Total Operating Expenses 303,940 lb.W6 ! I 2.4 I ; Operating Income _ 47,307 44,128 b .',;s Other Income and I) eductions Allowance for Equity Funds Used During Constrr.ction (Note 4) 34,48' I ;. I ss '.s23 Equity in Earnings of Affiliated Companies 877 '7n s70 Other - Net 1,492 12'o os; Total Other Income and Deductions 36,8;6 i'.2 U esi Income Before Interest Charges 84,163 61 M; W019 Interest Charges Interest oa Long-Term Debt 39,711 2s.24' 21.o 'A Other Interest 21,847 14,46; s.2nl Allowance for Borrowed Funds Used During Construction (Note 4) (37,242) i 2 i . 'na ; ' ' n .H Net Interest Charges 24,316 2n o in 21.-l2 Net Income 59,847 in. ' I 9 3e W Retained Earnings at Beginning of Year 76,649 'l I40 h ~ 2 -; 136,496 i i ! .,;0 9; 2;2 Dividends Preferred Stock, at Required Annual Rates 12,822 ' von 63v1 Common Stock 34,840 2' ! t t i 7 nos Total Dividends Paid 47,662 ;i.21o 21 no2 Retained Earnings at End of Year S 88,834 s 7o..o40 5 71. I in Weighted Average Shares outstanding 16,539,113 12.64 t o S v,2~t22o Earnings Per Share of Common Stock $2.77 s1 o ;; 1; Dividends Per Share of Common Stock S2.12 311' il .o 1 See accon'panying Notes to Financial Statements. O o
BalanceSlieets Assets December 31, 1930 1979 p ~ _ __ . .- -_ _ __ _ .- - ._ _ -. - - . _ _ - _ _ - - i' < (Thousands of Dollars) Utility Plant at Original Cost Electric Plant S 548,401 5 ;21.41; Less Accumulated Provision for Depreciation 161,703 147,494 386,698 7 ".017 Unfinished Constructior. l Principally Nuclear Generating Projects)(Note 10) 724,150 ;Is WU Net Utility Plant 1,110,848 w 09' lnvestments Nuclear Generating Companies 9,651 2 62' Real Estate Subsidiary 4,944 3306 Other, at Cost 184 lhi TotalInvestments 14,779 11.31' Current Assets Cash 3,729 2,! U Accounts Receivable 42,385 2 N ,00 ' Unbilled Revenue 10,160 s Jul Deferred Collection of Fuel Costs 16,373 Il "; Refundable FederalIncome Tax - ; 197 Fuel, Materials and Supplies, at Cost 37,122 12 W2 Prepayments 2,867 1 'n Total Current Assets 112,636 02.osn Other Assets Deferred Collection of Fuel Costs 9,776 -- Other 6,189 S ;S 7 Total Other Assets 15,965 s . W
$ 1,254,228 s I oIo.3' i
Capitalization and Liabilities a Capitalization Common Stock Equity Comm m Stock-55 Par Value Authorized: 27,000,000 Shares Outstanding: 13,2C3,922 Shares (1979- 13,969,133 Shares) S 91,020 s 69346 Other Paid In Capital 207,578 166 hi Retained Earnings (. . ate 5) 88,834 'n.649 Total Common Stock Equity 387,432 412 '60 Preferred Stock (Note 6) With Mandatory Redemption Requirements 120,000 nn hun Without Mandatory Redemption Regt.;rements 51,316 42.>l4 Long-Term Debt - Net (Note 7) 398,856 344 slo Total Capitalization 957,604 '~n 10 ; Current Liabilities Notes Payable -llanks (Note 8) 108,350 114, I on Long-Term Debt to be Retired within 24,467 ;;, 4 One Year (Note 7) Accounts Payable 61,847 0 01 Accrued Taxes 6,181 (09; Accrued Interest 15,302 11,24" Other 2,759 1.M Total Current Liabilities 218,906 l'l.02" Deferred Credits Accumulated Deferred Investment Tax Credits 23,761 29~1~ Accm iulated Deferred Taxes on Income 53,380 NN Other 577 4%
! \ Total Deferred Credits 77,718 m6 -
C, Commitments and L,ontingencies (Note 10) SI,254,228 3i olo 'C See accompanying Notes to Financial Statements.
/
StatCiiiciiis ofCliati17es iti 1itiaticialPosition For the Year Ended December 31, 1980 1979 lo7s (Thousands of Dollirs) Source of Funds From Operations Net Income S 59,847 S 40,719 5 36.;07 Principal Non-Cash Charges (Credits) to Income Depreciation 17,42.5 li487 14,' 2 Allowance for Equity Funds Used During Construction (34,487) { l 5, I ss) i 7,x2s1 Deferred Taxes and Investment Credit Adiustments 17,941 2 4,%'n 7,0 ) 4 Total from Operations 60,726 M,ol4, ;o,4 ;; From Outside Sources j Sale of Long-Term Debt 81,000 no.000 60.n00 Sale of Preferred Stock 60,000 ;0,n00 - Sale of Common Stock 64,615 79'16 24,.109 1 Change in Short-Term Borrowings (5,750) 2s.'73 10,212 Advance Payments from 'oint Project Participants - l o,n 2 s _- Total from Outside Sources 199,865 200,i19 I I 4,;2 i Decrease in Working Capital 30,010 -
.u ilo Total $290,601 52';,111 S l os.4 sn Application of Funds Property Additions $232,853 Slo 2 en s171 ;19 Allowance for Equity Funds Used During Construction (34,487) i I 4, I s s) t732<
Dividends Paid 47,662 34,210 21,092 Reduction of Long-Term Debt 26,153 1,214 1947 Repayment of Advances from i loint Project Participants 6,033 -- - Increase in Working Capital - is una __ Deferred Collection of Fuel Costs 9,776 - - Other Applications- Net 2,61i U n' 2 ' 16 Total $290,601 5251?; SloN4sn increase (Decrease) in Working cash $ 1,592 s les s noe Capital Other than Short-Term Receivables 14,288 suo , wn Debt and Advances Inventories 5,120 112 W 17n7 from Participants Long-Term Debt to be Retired Within One Year (23,912) IW6 1 40' Accounts Payable (17,636) 21 1lo ; u,12 ;) Accrued Taxes (3,088) v'o s ( ! 1,4 'u) Other l6,374) 1. n s 7 i,41; Total $ (30,010) 5 is und S ; 4 O lo!
=. -_-- -
-- _ - = - = = = = = = = = _
Statenients ofOllierPaidhi Capital For the Year Ended December 31, 1980 Io'o Iv's l (Thousandsof Dollars) l Other Paid-In Capital Balance at Beginning of Year $166 26; : ins, n s vo,too Excess of Proceeds Over Par Value on Issuance of Common Stock issued 4,234,789 Shares in 1980; 4,182,164 Shares in 1979 and 1,342,45; Shares in 1978 44,264 0, ins 17 ~s n s Preferred Stock Issuance Expenses (2,951) i1. 1U iai Balance at End of Year _ _ _ _ S2()7,S 78 s l <.n 2 s , 51n,2t2 See accompanying Notes to Financial Statements.
l . l Notes to h,.nalicial 6,taternents . m __. _ _ - - - _ . _ I y 1.
SUMMARY
OF ACCOUNTING POLICIES ( Regulations and Operations Deferred Collection of Fuel Costs I The Company is subject, as to rates, accounting and The Company implemented a new retail fuel adjust-other matters, to the regulatory authority of the New ment clause on April 1,1980, which was designed to Hampshire Public Utilities Commission (NHPUC), the eliminate the lag between the time increased fuel costs Federal E rgy Regulatory Commission (FERC) and, to a are incurred by the Company and the time such costs are lesser ex.cnt, the public utilities commissions in other billable to customers. Under the new clause, estimated New England states where the Company does business. changes in fossil fuel costs are billed to customers on a investments monthly baeis at a rate which is determined quarterly. The Company follows the equity method of accountmg Differences, if any, between estimated and actual costs for its investments in nuclear generating companies and are recogmzed in determining fuel adjustment clause in its wholly-owned real estate subsidiary. The Com. billing rates for the second subsequent quarter; accord-pany's investment .a this subsidiary is principally in the ingly, such differences are deferred and amortized to form of advanec3. Tl e Company's ownership interests expense as collected from customers. in nuclear generating companies are: At April 1,1980, the unbilled fuel costs under the Company's old fuel adjustment clause were approxi-Ownership mately $18,700,000 which the NHPUC is permitting the Company Percent Company to collect over a three-year period ending May 31,1983. I Yankee Atomic Electric Company ~ 7% Connecticut Yankee Atomic Operating Revenues Power Company 5% Revenues are based on billing rates authorized by appli-( cable federal and state regulatory commissions which l Maine Yankee Atomic Power Company 5% are applied to customers' consumption of electricity. Vermont Yankee Nuclear Power The Company records estimated unbilled revenue at the Corporation 4% end of accounting periods.
= _ _ = = =_ = = = = = = = = =
3 3
/ } In the case of each of the nuclear generating com-( / panies, pursuant to provisions of purchased power con-The tax effect of differences between pretax income in the financial statements and income subject to tax, tracts which are regulated by the FERC, the Company is which are the result of timing differences, are accounted entitled to its ownership percent of total p' ant output f as prescribed by and in accordance with the ratemak-and is obligated to pay a similar share of each company's ing policies of the NHPUC. Accordingly, provisions for operating expenses and return on invested capital. Ap- deferred income taxes a e recognized only for specified proximately 7.4%,9.3% and 10.9% of the Company's timing differences. Tax reductions attributable to other total energy requirements were furnished by these com- timing differences are flowed through to net income as panies in 19S0,19'9 and 1978, respectively. reductions of income tax expense. See Notes 2 and 3.
Utility Plant Investment tax credits carned are deferred and amor-Provision for depreciation of utility plant is computed on tired to income over the lives of the related properties. a straight line method at rates based on estimated ser- Allowance for Funds Used During Construction vice lives and salvage values of the several classes of Allowance for funds used during construction is the es-property. The depreciation provisions were equivalent to timated cost, during the period of construction, of equity overall effective rates of 3.48%,3.23% and 3.19% of de- funds and borrowed funds used for construction pur-preciable property for 1980,1979 and 1978, respectively. poses which are not currently recovered from customers Maintenance and repairs of property are charged to through revenues. See Note 4. maintenance expense. Replacements and betterments Earm.ngs Per Share
; are charged to utility plant. At the time properties are retired. the cost of property retired plus costs of removal Earnmgs per share are based on the average number of
[ common shares outstanding, af ter recognition of pre-less salvage are charged to the accumulated provision for depreciation. ferred dividend requirements. n I 1
- 2. OPEl ATING REVENUES For the period December 3,1977 through May 6,1979 NHPUC% order is based on a test year caded May 31, the Company's New Hampshire retail rates were based 1979 and in part on an increase in the depreciation rate in part upon the inclusion in the Company's rate base of for distribution plant and noi malization of the tax ef-a portion of the costs of construction work in progress fects of all timing differences applicable to post 1970 (CWIP) associated with maior generating projects. The utility plant additions. Increased provisions for deprecia-inclusion of CWIP in rate base increased revenues from tion and deferred income taxes have been recorded in the customers to cover the costs of financing such CWIP. On Company's financial statements commencing April 1, May 7,1979 a New Hampshire statute prohibiting the 1980.
inclusion of CWIP in rate base became effective. By The Company is accounting for the combined effect order dated August 29,1979 the NHPUC excluded CWIP of the April 10 supplemental order and the lune 9 final from the CompanC, rate base as of May 7,1979, but decision as one rate order, and therefore, the $11,300,000 determined that the Company's rates would remain un- refund is b ing netted against the rate increase of changed pending an investigation to determine the $18,355,00 - r the period of the refund which com-Company s revenue requirements and to establish fair menced June I,1980. Accordingly, commencing June 1, and reasonable rates. On August 31,1979, the Company 1980 and continuing until all regulatory approvals for filed a new retail:ariff with the NHPUC designed to the commencement of the reduction ot the Company's increase revenues by about $18,500,000 on an annual ownership interest in the Seabrook piant are received, basis. This filing was suspended by the NHPUC and the net increase in annual revenues (based on a test year consolidated with its rate investigation into the elimina- ended May 31,1979) will aggregate approximately tion of CWIP from rate base. $14,600,000. The NHPUC granted the Company an emergency On July 29,1978 the Company began billing new temporary surcharge effective December 28,1979 de- rates to its wholesale-for-resale customers designed to signed to increase annual revenues by approximately increase annual revenues by approximately $2,400,000
$11,970,000, and the temporary surcharge was increased (about 7.7%) based on a 1978 test year. In January 1980, to $18,500,000 effective April 1,1980 by order of the the Company reached an agreement in principle with NHPUC. On April 10,1980, the NHPUC issued a sup- these customers pursuant to which, in part, the Com-plementai ader in the combined proceeding requiring pany's revenues would be reduced by approximately the Company to refund to its customers approximately $450,000 on an annual basis and rate refunds would be $11,300,000 based on a finding that during the period made retroactive to July 29,1978. Pursuant to the frora May 7,1979 to Llecember 28,1979 the Company's agreement, which was approved by FERC, the refund rates were based in part on CWIP and, in addition, that required by the rate settlement was deferred and is being the Company was accruing AFUDC on CWIP previously made over a six month period ending lune 30,1981. The included in rate base. The April 10 supplemental order Company recorded the after-tax cost of this refund in requires that the refund be made over a 36-month period 1980.
commencing June 1,1980, and that when all regulatory on December 21,1979, the Company filed with FERC approvals for the reduction of the Company's ownership new rates for its wholesale-for resale customers designed interest in the Seabrook plant are received, the period for to increase revenues by approximately $4,294,000, or the refund will be cut in half and the rate of refund dou- 10.1%, on an annual basis. A first step emergency in-bled. The Company and two intervenors have appealed crease of approximately S3,567,000, or 8.4%, was al-the April 10 order to the New Hampshire Supreme lowed to become effective on January 22,1980, and a Court. Pending disposition of this appeal, the refunds second step additional rate increase of approximately are being made to customers. S727,000 became effective on April 1,1980. As a result of On June 9,1980, the NHPUC issued its final decision these increases, operating revenues for 1980 increased in the combined proceedmg which granted the Company approximately S3,855,000. These increases are being col-an increase in its New Hampshire retail rates of approx- lected under bond and are subject te . possible refund imately 518,355,000, superseding the surcharges. The upon a final rate decision by the FERC. 9
l
) 3. INCOME TAXES f(
1 The components of income tax expense are as follows: In accordance with the requirements of the NHPUC,
,979 provisions for deferred income taxes are recognized for 393g 3973 the following timing differences:
(Thousands of I)ollars) 1980 1979 1978 Federal Operatmg Income $ 15 $(13,952) $10,166 (Thousands of Dollars) Other income and Deductions 145 324 (46) A portion of Depreciation and 160 (13,628) 10,120 Amortization of Plant Facilities * $ 4,203 $ 834 $ 858 State, Included in Operating Accrued and Unbilled Fuel Income 4,518 2,983 2,468 Adiustment Charges (5,957) I,322 1,049 Deferred Fuel Costs 4,174 - - Total Current Income The Interest component of Taxes 4,678 (10,64;) 12,588 Allowance for Funds Used Deterred Federal During Construction 17,093 9,987 3,713 Operating Income 24,516 7,634 5,727 In.estment Tax Credit Applied Other Income and Deductions 2 7 (s) to Deferred Taxes 4,383 (4,383) - 24,518 7,641 ,519 Other 2 7 18) Deferred State $23,898 $ 7,767 1;,612 93 Operatmg Income (620 126 Total I)eferred Income
- Current income tax reductions are attributable to (l) the tax Taxes 23,898 7,767 5,612 depreciation permitted under the Class Life ADR System of the Investment Tax Credit 1971 Revenue Act in excess of the tax depreciation permitted (5,957) 18.275 1,412 under the Guidelme Lives provisions of the 1969 Revenue Act,
_A_diustment (2) the amortization of certain pollution control facilities over Total Income Tax five year periods, and (3) commencmg April 1,1980 all timing Expense $22,619 $ 15,397 $19,612 differences applicable to post 1970 utility plant additions Investment tax credits of approximately $15,200,000, The principal reasons for the differences between total
) $18,500,000 and SI1,400,000 were generated for 1980, (V' 1979 and 1978, respectively. There are limitations on the income tax expense and the amount calculated by apply-ing the Federal income tax rate to income before income amounts of such credits which can be used, however, tax are as follows:
and based e bese limitations as of L)ecember 31,1980 the Company nas investment tax credit carry forwards 1980 1979 1978 available for use in subsequent years of approximately (Thousands of Dollars) S29,800,000, of which $14,600,000 expires in 1986 and Income Before Income Tax $82,466 $s6,116 $56,119 S15,200,000 expires in 1987 Federal Statutory Rate 46% 46% 48% Expected Tax Expense 37,914 25,813 26,937 Increases (Reductions) in Taxes Resulting from Overheads Charged to Construction and Expensed for Tax Purposes (16,071) (8,334) (4,544) Excess of Tax Over Book Depreciation (Note l) 742 (1,976) (2,265) State Taxes Net of Federal income Tax Benefits 2,105 1,679 1,332 Unbilled Revenues (901) (549) (629) Other Deductions, each less than 5% of Expected Tax Exp_ense (1,190) (1,236) (1,219) Total Income Tax Expense $22,619 $15,397 $19,612 l' _s
- 4. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)
AFUDC is the estimated cost, during the period of con- to the cost of the plant being constructed with off-struction, of funds invested in the construction program setting credits in the statement of earnings. Since the ! which is not recovered from customers through current credits are not cash items, cash for interest and divi- i revenues. Such allowance is not realized in cash cur- dends may need to be provided in whole or in part by rentiv but under the rate-making process the amount of additional financing during the construction period. As the allowance will be recovered in cash over the service described in Note 2 above, as of May 7,1979, the Com-
- ife of the plant in the form of increased revenue col- pany was precluded from basing its rates upon CWIP in lected as a result or ' igh er plant costs. The NHPUC, for the rate base. Therefore, as of May 7,1979, consistent the period December 3,1977 through May 6,1979, per- with the August 29,1979 rate order, the Company began mitted the Company to include in rate base a portion of recording AFUDC for CWIP previously included in the the costs of CWIP associated with maior generating proi- Company's rate base, thereby nereasing AFUDC by ap-ects. Therefore, AFUDC for this period did not include proximately $5,500,000 for 1979.
the cos: of funds invested in the construction program The equity funds component of AFUDC equalled which were provided by revenues of the Company. 57.6% of net income for 1980. The Company capitalized when CWIP is not included in rate base, the cost of AFUDC at annual rates of 9%% for 1978,10"o for 1979 funds invested in CWIP { interest on debt and return on and 12% for 1980. equity) is not provided by revenues and AfUDC is added
- 5. DIVIDEND RESTRICTION Pursuant to terms of the General and Refunding Mort- dends paid ar declared on the preferred stock of the gage Indenture, dividends may not be paid on the com- Company ducing such period plus $32,000,000. At De-mon stock in excess of net income accumulated after cember 31,1980, retained earnings of $62,109,000 were lanuary 1,1978 less the aggregate amount of all divi- not subject to dividend restriction.
l l l
- 6. PREFERRED STOCK The Articles of Agreement authorize the Company to lbl Without Mandatory Redemption Requirements issue 1,350,000 shares of Preferred Stock, $100 Par Value Shares i and 5,000,000 shares of Preferred Stock, S25 Par Value. Dividend Par value outstandmg 19s0 1979 '
The dividends of all series outstanding are cumulative. Preferred Stock outstanding is as follows: (Thouundmf DollarW l 3.3;% 5100 102,000 s10.200 s10,200 (a) With Mandatory Redemptio Requirements (( Sly ,j Dividend Par Value Outstandmg 1960 1979 ) II 979}4K'I) y , (Thousands of Dollars) ~ ~ - -1 1.(X n, 5 2; 600.(XX) l i,000 1;.000 7.64 % S100 120,000 $ 12,(XX) $ 12,00() 5;l,316 $;2314 9.00 % SilX) 180,(N X) 18,(XX) 18,(X X) = = = - = = = = = - =---=-r-- -- - =
$24 g) 5 jo 30[ The annual Sinking Fund requirements for Preferred Stocks with mandatory redemptio i requirements are 15.00 % $ 25 1,200,(X X) 30 (XX) _
"' " ~
$12Ib500 $60,(XX) '
_ = _ = , _ = - - -
- = _ = - - == = __ _ S 1,0S0,000,1984 - S 1,560,000 and 1985 - $'6,060,000.
O 1 1 1
f ( {) 7. LONG-TERM DEBT Mertgage Ihmds First Mortgage ihmds (Thousands of Dollars) 5 10,337 $ 10'483 Series A - 10%%, Due 1993 60,(XXI 60,(XX) Series H - 3%%, Due 1984 60,000 Series I - L%, Due 1986 6,926 6 972 Series 11 - 12 %, Due 1999 60,(XX) 21,786 Series C - !4%%, Due 2(XX) 30,(XX) - Senes M - 4%%, Due P>o2 21'952 Senes N - 6% %, Due 1996 15,719 15'847 Series D - 17 %, Due 1990 23,(XX) - Promissory Note, Due January 7, Senes 0 - 6%%, Due 1997 13'951 14,076 1982, with interest at i16% of a Senes P - 7% %, Due 1998 14'036 14'237 9 %, Due 2(XX) 18 922 19,162 specific bank's prime rate Senes G - plus 0.25% 25,000 Serie3 R - 7 %%, Due 2(X)2 19,223 19,398 25.0fX) o %, Due 2004 Eurodollar Term Loan, Due August 25, Series S - 19,493 19,628 1982, with interest at the rate of Senes T - 12 %%, Due 1981 24,301 719 Series U - 10%%, Due 198; 14,674 24'970 %% over the London interbank Series V - 9% %, Due 2006 14,83; 14'000 offered rate for three or six month Eurodollar deposits 28,(XX) 15'000 Senes W - 10% %, Due 1991 10,(XX)* Series X - 12 %, Due 1999 9,302- 10'302 Pollution Control Revenue lionds 9' 9%, Duc December 1984 5,800 5'800 213,505 215,746 426,003 347,244 Less - First Mortgage llonds (*) Total Long-Term Debt deposited with Trustee of Less: Long-Term Debt to be the General and Refundmg Retired Within Mortgage indenture as One Year 24,467 555 additional security for Unamorti:cd Premium " General and Refundmg and Discount 2,680 1,860_ Mortgage llonds 19,302 19,302 3 7, g 47 y,4 g 3 Total First Mortgage Long Term Debt - Net $ 198,856 $344,829 Ikmds 194,203 196,444 Due to certain restrictions in the Company's First (~N Mortgage Indenture, no significant amount of First ( ) Mortgage llonds may be issued thereunder until an operating license is obtained for Seabrook Unit # 1, not anticipated before late 1982.
=-
r,
- 8. SHORT-TERM BORROWINGS The Company uses borrowings from banks as an interim Information regarding short-term borrowings is as method of financing construction of new facilities. At follows:
December 31,1980, the Company had line of credit 1980 1979 1978 a3reements with New Hampshire banks aggregating (Thousands of Dollars) 54,600,000 and a revolving credit agreement with other Maximum bort Term commercial banks which permits the Company to bor- Horrowings $134,3;0 s t 14,100 588,113 row up to $130,000,000 through November 16,1981 sub- Average Amount Out-ject to periodic review by the banks; amounts outstand- standing (Based on in> "nder the agreement mature on November 17,1981. Month End Halmces) 106,(H8 87,056 66,911 The company pays commitment fees on the revolving ^"erage Interest R At Year End 23.17 % 16.43% 12.64 % credit agreement and maintains compensating balances During the Year 18.13 % 15.15% 11.36 for certain line of credit agreements. The effective cost of borrowing under the revolving credit agreement, in. On February 11,1981 the Company sold 2,200,000 ciuding fees and assuming the available credit is fully shares of common stock. proceeds of $31,504,000 were utilized, is 116% of the prime interest rate of a specified used to reduce short-term bank borrowings. bank. A f ) (/
I
- 9. PENSION PLAN The Company has a non-contributory pension plan cov- report as of January 1,1980, the actuarial present value ering full-time employees who have met a minimum of accumulated plan benefits aggregating $34,296,000 service requirement. The Company's policy is to fund (S32,498,000 vested and $1,798,000 non-vested) current pension costs accrued. Costs were $3,450,000, exceeded the net assets available for benefits of
$2,800,000 and $2,400,000 in 1980,1979 and 1978, $27,439,000 by S6,857,000. The assumed ra,e of return respectively, atJ include amortization of past sem :e used in determining the actuarial present value of ac-costs over 25 years. Ilased upon the most recent actuarial cumulated plan benefits was 3.0%.
umannnm umam-mm~~mma.~ ~mmmmem== ===mm---:==m m
- 10. COMMITMENTS AND CONTINGENCIES The Company's ownership interests and its share of In March 1980,in view of the unsettled state of the total expendnures included in Unfinished Construcdon capital markets and the very high cost of external funds, for the jointly-owned nuclear facilities i which it is the Cmupany decided to reduce the level of construction participating are as follows: at the Seabrook plant until the capital markets stabilized and the regulatory approvals for increased ownership ownershm percent 19so 1979 interests in the plant (the principal condition necessary for the start of the Adiustment Period) were obtained.
iThousands of I)olhrsl Most approvals have now been obtained. As a result, the Scabrook # 1 and #2 N u x X)oS, 56M300 5470,300 Adjustment Period for utilities acquiring an ownership I mternt of GM, commencd on January o., .M1
._11_ _s _ -ne#3 _._ . _ -
. - - ' and the Adjustment Period for the Massachusetts 5713f00 5;o9,200 Municipal wholesale Electric Company (MMWEC)
, which is acquiring an additional ownership interest of The Company has for some time been expenene- 6.00091 % commenced on February 28,1981. Ilowever, ing difficulties in obtaining external financing for its until MMWEC has completed its initial financing, the cor.struction program and in maintaining cash flow Company has agreed to assume the r rtion of the Sea-adequate to fund this program and the costs of current brook plant costs applicable to MMWEC's additional business operations. In March 1979, in anticipation of ownership interest. These costs will be reimbursed, with legislation adopted m New Ilampshire eliminating interest, to the Company by MMWEC upon completion CWIP frorn rate base (see Note 2) and the resultant diffi- of its initial financing. If Y MWEC is unable to complete culty of financing a 50% interest in the Seabrook plant, its financing by lune 30,1981, M' VEC's Adiustment the Company decided to sell all of its Pilgrim #2 and Period will not commence until the first business day Millstone #3 ownership interests and to reduce its own- af ter consummation of MMWEC's imtial financing.
ership interest in the Seabrook plant by offering 22"6 to Approvals are still pending regarding the remaining other New England utihties. As a result of its offer, the 2.50836"6 ownership interest committed for by other Company has commitments from other utilities to ac- utilities. quire ownership interests of 14.76503 % in the Seabrook The Company's construction program expenditures plant and has contracted (subject to receipt of necessary (excl .iding AFUDC) are estimated to be approximately regulatory approvals) for the sale of approximately two- $39,600,000 for 1981 and S639,100,000 for 1982 through thirds of its interest in Millstone #3. The Company has 1986 assuming (l) the Company's ownership interest in received expressions of interest from other utilities for Seabrook is reduced to approximately 35"6 with all Ad-the balance of its interest in Millstone #3. No ex- justment Periods commencing by May 1,1981, l2) its pressions of interest have been received by the Company interest in Millstone #3 is sold by September,1981 and with respect to its offer of its interest in Pilgrim # 2. (3) the reduced level of Seabrook construction continues Each utility acquiring an ownership interest in the through March,1981. The cost estimate for the Sea-Seabrmk plant will acquire its mterest gradually over an brook project is currently under review. There can be no Adjustment Period. During the Adiustment Period, the assurance that the remainmg approvals and finan,iag accepting utilities will shaic pro rata the costs othe vise required by other utilities which are necessary for the attributable to the Company's ownership interest until proposed reduction in the Company's interest in the their aggregate investment in the 3eabrook plant has Seabrook project to about 35% will be obtained and the been increased by approximately 15% and the Com- :ompany's ability to obtain necessary financing m iy be pany's investment decreased to approximately 35% of adversely affected if other utilities acquire significantly the total mvestment of all participants. less than 1;"; of the Seabrook plant. I m --_ _____ _ _ _ _ _ _ _ _ _ _ . _ _ . . ~ _ _ _. _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _
I S-e " Management's Discussion and Analysis of Fi- Construction of the Seabrook project has required
,/^'pancial Condition and Resi its of Operations - Con- numerous approvals and permits from various state and
', "f truction Program and Financing Requirements" for a Federal regulatory agencies. The process of obtaining discussion of the NHPUC denial of the Company's re- these approvals and permits has been long and complex, quest for emergency rate relief in February,1981; Com- has been :onsistently opposed by a number of interven-pany actions to conserve cash in light of the NHPUC ing groups, has included demonstrations at the Seabrook order; 1981 external financing requirements, and the site and has been plagued by lengthy delays which have necessity of increased rates to permit the issuance of resulted in greatly increased costs. One court appeal bonds. At I)ecemb'r 31,1980, based on earnings and from Federal regulatory approvals is pending and further capitalization tests f various agreements and inden- appeals are possible. The Company is unable to predict tures the Company could have issurJ approximately what effect financing problems or further administrative
$86,700,000 of preferred stock (divu end rate of 14.5% or court decisions relating to Nuclear Regulatory Com-assumed), approximately $76,3(10,0()() of additional mission or Environmental Protection Agency actions short-term unsecured indebtedness and approximately may have on the Company's ability to complete the
$28,850,000 of General and Refunding Mortgage Bonds Seabrook project or on the ultimate cost thereof.
(interest rate of 14.5% assumed).
- 11. UNAUDITED QUARTERLY INFORMATION The following quarterly information is unaudited, and, 51,000,000 which reduced ernings per share of common m the opinion of management, is a fair summary of re- stock by Sn 04. Other variations between quarters reflect sults of operations for such periods. The fourth quar- the seasonal nature of the Company's business and the ter of 1979 includes a rate refund of approximately effect of rate increases in 1980.
Three Meths Ended December 31, September Y lune 30, March 31, n
/ \ 1980 1979 1980 ic '9 1980 1979 1980 1979 \ <
d (Thousands except per Share Amounts) Operating Revenues 594,542 573,957 577,980 S72,919 $75,527 565,866 $103,198 $80,072 Operating Income 11,598 10.077 9,114 10,291 10,382 9,302 16,213 14,758 Net Income 15,128 9,i18 14,974 11,049 12,546 8,33; I7,199 12,217 preferred Dividend Requirements 4,469 2,422 3,686 2,420 3,449 1,952 2,418 1,586 Earmngs Available for Common Stock 10,659 6,696 11,288 H,629 9.097 6,383 14,781 10,631 Average Shares of Common Stock Outstanding 18,173 13,931 17,701 13,460 15,562 11,823 14,690 11,319 Earnings per Share of Common stock 5 039 5 0.48 5 0.64 5 0.64 $ 0.59 5 0.54 5 1.01 $ 0.94 e i
)
J J
w 1 mnemuse _ ---r _ u ;r __ _ w_ - - - -
- 12. UNAUDITED INFORM ATION 3 ON THE EFFECTS OF CHANGING PRICES The following statement of earnings adjusted for chang- Since the utihty plant is not expected to be replaced ing prices for the year ended December 31,1980 should predsely in kind, current cost does not necessarily rep-be viewed as an estimate of the effects of changing prices resent the replacement cost of the Company's productive on the operations of the Company: capacity. The current year's provisions for depreciation Constant Current on the constant dollar and current cost anmunts of util-Conventional Dollar Cost ity plant were determined by applying the Company's llistontal Average Average depreciation rates to the indexed plant amounts. Current Cost 19so Dollars 1980 Dollars cost amounts reflect the changes in specific prices of utility plant from the date acquired to the present, and (Thousands of Dollars)
Operatmg revenues $351,247 53;1,247 5 H l .247 differ from constant dollar amounts to the extent that the general rate of inflation has increased more rapidly Operation and mam-248.338 248,3 b 248,338 than specific prices ($80,206,000). At December 31, teaance cwense Depreciation expense 17,425 36.308 41,821 1980, current cost of property, plant and equipment, net Federal and state of accumulated depreciatic L was $1,761,285,000 while taxes on income 22,472 22,472 22,472 historical net cost was 51,110,848.000. Other taxes 15,70; 15,705 15,7(); Fuel inventories, the cost of fuel used in generation, interest ex: ense and the energy component of purchased power costs
- net 24,316 24.316 24.316 have not been restated from their historical cost in nom-Other income and = inal dollars. Ibgulation limits the recovery of fuel and deductions - net (3 6,s ; 61 (3 6.8 ; 61 (36.8;6) purchased power costs through the operation of adjust-291,400 310,283 315.796 ment clauses to actual cost incurred during the period.
Income from con- For this reason fuel inventories are effectively monetary tmuing operations assets. iexcludmg reduc- Income taxes have not been adjusted. Only historical tion to net recoverable costs are deductible for income tax purposes so any re-costi _ _ _ _ 5 ;9.847 5 _ 43 ) 964- _ 5 _3; 4 ;1 ' amm d hwm hw wdd br hk mdg Reducnon to net Under the rate-making prescribed by the regulatory recoverable cost si96
,8431 Si91.340! commissions to which the Company is subject, only the l Gain from dechne in historical rost of utility property is included in the rate '
purchasing power of net base upon which the Company is allowed to earn a fair amounts owed 71,627 71,627 si2; 2161 Sil9,m31 n.tm Tbfm & W of Nm md b Rm d Net _. __ constant dollars or current cost that exceeds the histori-Ef tect of mcrease in general cal cost of plant is not presently recoverable in rates, and pnce level S186,703 is reflected as a reduction to net recoverable costs. While Increase m pecific pnces (current costi of the rate-moking process gives no recognition to the cur-property, plant, and equipment held rent cost of replacing property, plant, and equipmem, dunng the year 106,417 based n past practices the Company believes it will be Excess of increase in general pnce levtl allowed to earn on the increased cost of its net invest-over increase in specific pnces 5 80.206 ment when replacement of facilities actually occurs. To reflect properly the economics of rate regulation in
'Includmg the reduction to net recoverable cost, the income the statement of earnings adjusted for changing prices, ilossi from contmuing operations on a constant dollar and a current cost basis would have been $m 879L the re, duction of utility plant to net recoverable cost shotod be offset by the gain from the decline in purchas-ing power of net amounts owed. During a neriod of infla-tion, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain fr~n the decline in purchas-ing power of net amounts owed is primarily attributable Constant dollar amounts shown represent historical to the substantial amount of debt which has been used cost stated in terms of dollars of equal purchasing power, to finance property, plant, and equipment. Since the de-as measured by the Consumer price Index for all Urban preciation on utility plant is limited to amounts based Consumers (Cpl-U). The current cost of plant was de- on historical costs, the Company does not have the op-termined by indexing surviving plant by the llandy- portunity to realize a holding gain on debt and is limited Whitman Index of public Utility Construction Costs. to recovery only of the embedded cost of debt capital.
e Five-Year Compat: on of Se:ected Supplementary Financial Data ! Adiusted for Effects of Changing Prices i \. (In Average 1980 Dollars) l Year Ended December 31, (Thousands except per Share Amounts) 1980 1979 1978 1977 1976 0 perating revenues $351,247 $332,402 5329,355 $292,067 5284,686 Ilistorical cost information adjusted for general inflation
- Income from contmutng operations (excluding reduction to net recoverable cost) 40,964 30,584 -
Income per average common share (after dividend requirements on preferred stock and excluding reduction to net recoverable cost) 1.63 1.67 Net assets at year-end at net recoverable cost 419,048 392,638 i Current cost information* Income from continuing operations (excluding reduction ' a net recoverable cost) 35,451 23,664 Income per average common share (after dividend requirements on preferred stock and excluding reduction to net recoverable cost) 1.12 Excess of increase in general price level over increase in specific prices 80,206 71,415 Net assets at year-end at net recoverable cost 419,048 392,638 General information Gain from decline in purche ing power of net amounts owed
- 71,627 69,525 Cash dividends declared per common share 5 2.12 $ 2.41 S 2 15 $ 2.56 5 2.69 Market price per common share at year-end $ 13.73 $ 16.90 $ 23.72 5 27.19 $ 30.44 Average consumer price index 246.8 217.4 195.4 181.5 170.5
*Information not required for years prior to 1979.
Report Independent Certi
- fPubGcAccoimtants The Board of Directers Public Service Company of New Hampshire:
e have examined the balance sheets of Public ser- In our opinion, the aforementioned financial state-C gvice Company of New Hampshire as of December 31, present fairly the financial position of public ments 1980 and 1979 and the related statements of earnings and Service Company of New Hampshire at December 31, retained earnings, changes in financial position and 1980 and 1979 and the results of its operations and the other paid in capital for each of the years in the three- changes in its financial position for each of the years in year period ended December 31,1980. Our examinations the three-year period ended December 31,1980, in con-were made in accordance with generally accepted audit- formity with generally accepted accounting principles ing standards, and accordingly included such tests of the applied on a consistent basis. accounting records and such other auditing procedures as we considered necessary in the circumstances. Boston, Massachusetts O February 18,1981, except for Note 10, which is as of
\
March 6, !981. PEAT, MARWICK, MITCHELL & CO. 21
i Mwaipnents Dis =ssion andAnalisis o ^ Construction Program and Financing Requirements . The magnitude of the Company's construction program der, the N'ipUC also alleged that the Company had not has contmued to cause the Company somt difficulty in provided sufficient information or not taken necessary obtaining external f mancing and in maintaining cash steps to reduce controllable expenses. The Company has flow adequate to f und this program and the costs of its iled for a rehearing of the NH1'UC's order and has insti- ; current business operations. The major portion of the ated the following measures - a hiring freeze; a salary Company's construction program has been its 50% treeze for all senior executives; a defenal of $8 million in ownership interest in the 23(X) MW nuclear generating non-Seabrook related censtruction projects; a deferral of plant in Seabrook, New Hampshire. As descrited in S2.5 million in maintenance projects; the elimination, ' Note 10 of Notes to Fmancial Starements, the Company subject to union negotiations, of the employee electric has commitments from other utihties, subject to certain rate discount, and strict limits oa business travel and conditions, which will reduce its interest to about 35%. other business expenses. Manageinent believes that in March,1980, in view of the unsettled state of the the steps outlined above are not in the best interests of capital markets and the very high cost of external funds, maintaining reliable mvice to customers. Further peri-the Company decided to reduce substantially the level of odic rate increases are essential to pennit the financing construction on the Seabrook plant. It is anticipated th : of the Company's construction program. this reduction will continue until all regulatory approv- The Company's permanent financing requirements for als necessary for the reduction of the Company's owner- the balance of 1981 are estimated to be approximately ship interest have been obtained and the Adiustment Sl(X),(XX),(XX) assuming that approximately $117,350,tXX) penods with respect thereto have fully commenced. of short-term bank borrowings are outstanding at the The Company's reduced 1981-1986 construction pro- end of the year. These financing requirements give effect gram is estimated at $698,700,0(X) excluding allowance to the austenty measures outlined above and the receipt for funds used dunng construction of approximately of the proceeds of approximately Sil,5(X),(X10 from the
$583,500,(XX). Financmg of this construction program sale of 2,200,(XX) additional shares of common stock in and the refinancing at matunty of certain long-term debt February,1981, and are based on the following assump-and the meeting of required sinking fund payments to- tions:(1) all Adiustment periods for the reduction in the gether aggregating $156,545,000 during this period rep- Company's interest in the Seabrook project to about resent a maior undertakmg for the Company. The abihty 3;% commence by May 1,1981, [2) the Company takes of the Company to complete this program is dependent steps in April 1981 toward resumption of a normal level upon receipt of adequate and timely rate increases of construction on the Seabrook plant, and (3) a rate in-throughout the period. If it receives such rate increases crease of approximately S35 million on an annual basis the Company estimates that approximately is made effective in a timely manner. A rate increase is $480.000,000 will be generated from internal funds required to produce additional carnings necessary for the (pnncipally after 1983). This estimate of internal funds is issuance of additional General and Refunding Mortgage substantially higher than heretofme estimated due prin- llonds in the fourth quarter of 1981. The required rate capally to a change in the treatment of allowance for increase co 'i result from favorable action by the borrowed funds used dunng construction. In the opinion NHpUC or. ...c Company's motion for re iearing of the of management, such revised treatment is consistent emergency rate request denial or from accelerated action with gene rally accepted accounting pnnciples. The on the Company's permanent rate case expected to be Company expects to finance the balance of its require- filed in early April 1981.
I ments from external sources. The Cempany's 198, foiancing requirements are ex-In order to provide the Company with sufficient earn- petted to be met by the issue of additional shares of ings for the issuance of General rid Refunding Mortgage Common Stock, bank or similar debt and, in the fourth Bonds needed dunng 1981, the Company filed on January quarter, by General and Refunding Mortgage llonds. The 14,1981, a request with the New flampshire public sire and timing of these issoes will depend on market Utihties Commission (NilpUC) for an emergency sur- factors, timing of commencement .' 6e needed rate in-charge designed to increase annual revenues by approx- crease, the status of the reduction of the Company's imately $35,500,000 (about 10.2%). On February 27, ownership interest in the Seabrook project to about 1981, the NilpUC denied the Company's request since 3;%, and other factors. The Company's !inancing plans m its opinion the Company's request did not reflect the for the 1982-1986 period are expected to include, subject favorable impact on the Comp my's financial situation to change as circumstances warrant, additional shares of resulting from the February,1981 approval of Massachu- common and preferred stock, long-term debt, and nuclear setts Municipal Wholesale Electric Company's in- and fossil fuel f mancing. creased participation in the Seabrook project. In its or-O
i i
~ ~
FinancialCondition and Resultso 0pemtions Results of Operations Net operating revenues (operating revenues less fossil ($1,936,000). Income taxes decreased in 1979 as com-fuel costs which are recovered under fuel adjustment pared with 1978 primarily because of a reduction in the
; clause provisions of the Company's tariffs) increased by Federal income tax rate ($1,124,000) and an increase in , 10.6% and 2.6%, respectively for 1980 and 1979 as com- the tax effect of overheads charged to construction and pared with the respective preceding years. Substantially expensed for tax purposes (53,790,000).
l all of the increase in 1980 resulted from rate increases to Allowances for equity funds and borrowed funds used
; ratail and wholesale customers. KWII sales increased by during construction increased signif' antly in 1980 and , approximately 4.1% in 1979 which accounted for sub- 1979 due principally to the Company's increasing in- ; stantially all of the increase in 1979 net operating vestment in the Seabrook project. The amounts also re- .
revenues. flect the higher cost of funds (interest on debt and return j The electric neeb of the Company's customers have on equity) and resultant increased rates used in capitaliz-increased at a comcound annual rate of growth of ap- ing such allowances. proximately 4.5% during the six years ended December Net income has increased significantly over the three 31,1980. Although KWH sales were essentially flat in year period 1978 through 1980. Earnings per share of j 1980 as compared with 1979, management is projecting common stock have not kept pace, however, due to an average annual rate of increase of 4.2% at least stock issues necessary to finance the Compaay's con- , through 1990. This is anticipated to be the highest in- struction program which have increased preferred divi-crease of any maior electric utility in New England fur- dend requirements and the average number of common nishing estimates to the New England power pool. shares outstanding. Fuel expense and purchased and interchanged power Inflation continues to affect every aspect of the Com-expense increased significantly in 1980 and 1979 due pany's business as is evidenced in particular by the in-
- principally to higher average unit costs of oil and coal. creasing costs of fuel, costs of construction and the costs 4 The average unit cost of oilincreased by 46% and 29%, of funds necessary to finance the Company's construc-respectively for 1980 and 1979 and the average unit cost tion program. Management has computed certain data of coalincreased by 5% and 6%, respectively. on the effects of inflation which are presented in Note 12 Federal and state taxes on income increased in 1980 as of Notes to Financial Statements. Such data has been
- 4 compared v'ith 1979 because of (1) the ta
- c effect of higher prepared and presented in conformity with guidelines j pretax financial statement income ($12,121,000) which established by the Financial Accounting Standards lloard was offset by an increase in the tax effects of overheads and should be viewed as experimental and only approx-t charged to construction and expensed for tax purposes imations of cc:tain effects of inflation on operations of (S7,737,000), and (2) the effects of additional normaliza- the Company.
tion of depreciation permitted by the NHpUC in 1980 l J, i i M
e
- -__=--
Q[ggfg7y Ilugh C. Tuttle Treasurer, Tuttle Afarket Gardens, Inc. Christina D. Campbell,58(30) Assistant Secretary Peter 11. O'Donnell,33(9) William A. Adams, Jr. Executive Vice President Richard E. West Anistant Treasurer Afanches ter. N.ll Retired Robert G. Ouellette,49(28) Robert 1. llottoms U"'*IY EA0 nt ! and General Afanager Assistant Comptroller Distributor 1.F. AlcElwain Lo. Nashua, N.fl. Linda Cedar flornes Lancas ter, N.H. David S. Williams Prendent, International PacMngs Corp. Honomty Directors George A. Dort, lt. Bristol, N.II. President Thomas II. Iluckley Dort Woolen Company, Retired Newport, N.H. -. Formerly Director, Priscilla K. Frechette ,TCClitil'C OfICC15 vice Pre'sident and ComPtroner Director Burton W. Delaney s Kingsbury Afachme Tool Corp., William C. Tallman,60(34) *
- pegireg Keene, N.H. Chairn,an and Chief Formerly Director. Executive Executive Officer Vice President -
Harlan L. Goodwin Chairman of the Board Robert J. Harrison,49(?3) Albert W. Ilamel The First National Bank of President General Afanager > Portsmouth William A. Adams,lt. 55(31) Hamel Auto Body, Inc. Port smouth. N.H. Executive Vice President Af anches ter. N.H. Robert J. tiarrison David N. Merrill,56(31) Alarston IIcard ( President Executive Vice President Retired % Afanchester, N. fl. Formerly Chairman, Amoskeag Charles E. Bayless,38' National Bank. Afanchester, N.H. Davn.d N. Merrill Financial Vice President Executive Vice President William S. Moore Af anchester. N.H. D. Pierre G. Cameron, Jr.,46 Retired Vice President and General Counsel Formerly Director. Financial Ann R. Moody \, ice I,redtfen t Vice President Raymond E. Closson,60(33) Edgcomb Steel of New England. Inc. Vice President Nashua. N.H. hn C. Duffett,53126) Byron C. Radaker* It; 1 ice President gy((ypg gy q Chairman and Henry 1. Ellis,60/34) William C. Tallman Chief Executive Officer Vice President Chairman Congoleum Corporation gggge,,yg 3 g gy Portsmouth, N.H. Warren A. Harvey, a_4(33) ce re ( ent obert J. Harrison lohn 1. Reilly, Jr. I President and Treasurer lohn 1. Reilly, Inc. Elroy L. Littlefield,62(33) Vice President f,U'l'"' , ,3 g gg Af atichester. N.H. James L. Nevins,46f12) Charles E. Bayless I f5"""'5"IY5U*',0'"' WiUtam M. Scranton Vice President U## ^ "I'" ' Effective 3181 William T. Frain, Jr.,39(16) Becde ElectricalInstrument Comptroller D. Pierre G. Cameron, f r. Company. Inc. Vice President and Penacook, N.H. lohn 1. Lampton,36(9) General Counsel reasurer ec e 24 80 WiFiam C. Tallman Chairman and Chief Russell A. Winslow,46(19) Ralph H. Wood Executive Officer Clerk and Secretary Vice President and Manchester, N.H. General Counsel Resigned cffective 5:180
- Eifcctive 3181 *
- Figures denote age and (years of sen ice) as of 12 3180
Ten 9sarCompamtiveSummaty Financial Date 1980 1979 1978 1977 1976 1970 (Thousands except Per Share Amounts) Operating Revenues $351,247 $292,814 $260,751 $214,787 $196,674 $ 71,754 Fuel and Purchased Power Expense 187,248 147,502 115,418 108,310 91,349 15,957 Net income 59,847 40,719 36,507 21,722 20,995 10,750 Shares of Common Stock Outstanding (Average) 16,539 12,643 9,275 7,680 6,372 3,826 Eamings Per Share of Common Stock (Average) $2.77 $2.56 $3.25 $2.16 $2.53 $2.46 Divideinds Per Share of Common Stock $2.12 $2.12 $1.94 $1.88 $1.86 $1.60 Non-Taxable Portion 100 % 68 % - 17 % - 16 % Net Utility Plant in Service 386,698 377,017 373,338 364,704 358,923 238,676 Unfinished Construction 724,150 516,880 346,382 196,825 103,484 5,741 Total Assets 1,254,228 1,010,787 812,101 640,207 540,341 277,062 long-Term Debt 398,856 344,829 287,252 233,110 217,298 142,458 Preferred Stock With Mandatory Redemption Requirements 120,000 60,000 30,000 30,000 12,000 - Without Mandatory Redemption Requirements 51,316 52,514 53,562 54,075 55,012 29,700 Common Stock Equity 387,432 312,760 228,307 191,357 162,941 79,712 Total Capitalization 957,604 770,103 599,121 508,542 447,252 251,870 Notes Payable - Banks 108,350 114,100 85,325 55,113 - 11,700 Operating Statistics Customer Data (Average) Total Customers 187,221 279,581 274,959 268,217 261,346 217,496 KWil Per Residential Customer 7,178 7,317 7,283 7,230 7,279 5,625 Cents Per KWH-Residential 6.69 5.78 5.57 4.77 4.60 2.64 Prime Sales (Thousands of MH11) Residential 1,815 1,8G4 1,766 1,710 1,677 1,074 Industrial 1,834 1,846 1,743 1,568 1,539 1,184 Commercial and Other I,992 1,953 1,875 1,763 1,698 1,153 (y, Total Prime Sales 5,641 5,603 5,384 5,041 4,914 3,411 Generating Capability . MW C<ul 456 456 456 456 456 459 Oil 774 774 766 754 754 353 Hydro 52 48 48 48 48 48 Nuclear (Yankees) 98 98 97 94 94 41 Peik Load Net MW 1,145 1,173 1,117 1,125 1,113 739 Annual Prime 1.oad Factor 60.9 % 58.6 % 59.5 % 55.2% 54.4 % 57.1 % See Page I " General Information" conceming availability of a Statistical Supplement to this report. v
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f [') SECURITIES AND EXCIIANGE COMMISSION WASIIINGTON, D. C. 20549 FORM 10-K A* amended by Fornt o dated April 13,1981 ANNUAL ItEPOltT PUllSUANT TO SECTION 13 Olt 15(il) OF TIIE SECUllITIES EXCIIANGE ACT OF 1934 For the fiscal year entleil Coninnission file nuniber Deceniber 31,1980 1 6392 Public Service Company of New Hampshire (Exact name of r--istrant as specified in charter) NEW IIAMPSIIIIIE 02 0181050 (State or other Juriuliction (I.It.S. Employer of incorporation or Organization) Identification No.)
?.000 ELM STitEFT, MANCllESTElt, NEW IIAMPSilIllE 03105 (Address of 1*rincipal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 603(369-1000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Clan Which Iterisiered (-) (* Common Stock, $5 Par Value Preferred Stock, $25 Par Value,119 Dividend Series New York Stock Exchange New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,11.249 Dividend Series New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,15% Dividend Series New York Stock Exchange Sinking Fund Preferred Sicch, t25 Par Value,17% Dividend Series New York Stock Exchange General and Refunding 3Iortgage Bonds, Series B 129 due 1999 New York Stock Exchange General and Refunding 31ortgage Bonds, Series C 14%% due 2000 New Ycrk Stock Exchange l Securities registered pursuant to Section 12(g) of the Act: , , Title of Clau Preferred Stock, $100 Par Value, 3.35% Dividend Series Preferred Stock, $100 Par Value,4.50% Dividend Series Convertible Preferred Stock, $100 Par Value,5.50% Dividend Series Preferred Stock, $100 Par Value,7.92% Dividend Series Sinking Fund Preferred Stock, $100 Par Value,7.64% Dividend Series Sinking Fund Preferred Stock, $100 Par Value,0.00% Dividend Series General and Refunding 31ortgage Bonds, Series D 17% due 1990 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject ta such filing Icquirements for the past 90 days. Yes V No . I Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class Outstanding at December 31,1980 ( Common Stock, S3 Par Value 18,203,922 Shares
Item 1. HUSINESS Public Service Company of New IIampshire (the " Company") is the largest electrie utility in New IIampshire. It cperates a single integrated system furnishing electric service in 3Ianchester, Nashua, Portsmouth, Berlin, Dover, Keene, Laconia, Franklin, Rochester, Somersworth and 187 other New Hampshire municipalities, including about 83% of the total population of the State. It also sella electricity to other utilities and distributes and sells electricity in 6 towns in Vermont and 13 towns in 3faine. The area served at' retail has a population of about 782,000. As a member of the New England Power Pool, the Company is required to meet predetermined capacity obligations, which the Company expects to satisfy through its own generating facilities, through participation in jointly owned generating facilities, and through purchases of capacity and energ/ rom f other sources. The area served by the Company has experienced relatively rapid population and economic growth in the last several years and the electric needs of the Company's customers have increased (evidenced by average annual increases of 5.6% and 4.3% in the Company's annual peak load during the ten. year and five-year periods, respectively, ending October 31 19S0). There is some controversy concerning the rate of growth the Company will experience in the future. During the year ended December 31, 1980, the Company's grovdt in KWII sab w.s about 0.69. The Company, in its annual forecast of the needs of its customers made in January,1981, projected an average annual rate of increase of approximately 4.2% at least through 1990, which is anticipated to be the highest increase of any mabr electric utility in New England furnishing estimates to the New England Power Pool. The Company is the lead owner of a nuclear steam electric generating power plant under con-struction at a site located in Seabrook, New IIampshiro ("Seabrook project"), from which the Com. pany proposes to meet the needs of its customers commencing in the mid 1980's. The plant will have two Westinghouse pressurized water nuclear reactors (each with a rated capacity of 1,150 mega. watts), utilizing ocean water for condenser cooling purposes. Assuming the reduction in the Com-pany's original 50% ownership interest described below is completed, the Company will have an ownerslup interest of approximately 35% in the Seabrook project; other principal owners are The United Illuminating Company (17.5%), the 3fassachusetts 3tunicipal Wholesale Electric Company (11.6%), New England Power Company (9.95%) and twelve other New England utilities with smaller participations. The Company is also a participant in the Pilgrim #2 and 31illstone #3 projects, proposed nuclear power plants to be constructed in 3fassachusetts and Connecticut, respectively. At December 31,1980, the Company had invested approximately $663,500,000 (including allowance for funds used during construction of approximately $129,100,000 and nuclcar fuel of $41,700,000) in the Seabrook project. As of the same date, the Seabrook project as a whole was 33% complete, with Unit #1 and property and equipment common to both Units 46% complete; Unit #2 was 8% complete with work limited during most of 1980 to the containment liner alone. 4 Industry ProMems The Company has experienced and may in the future experiene'e in varying degrees a number of problems common to the electric utility industry. These problems include obtaining adequate r.nd timely rate increases, financing large construction programs on reasonable terms during a period of high inflation and unsettled capital markets, uncertainties caused by increasing political involvement in utility regulation, compliance with environmental regulations, high costs of fossil fuel, delays in
}
j licensing and constructing new facilities, opposition to nuclear power and reduced levels of sales due to the ef!'ects of energy conservation. 1
. - _ - _ _ - _ _ - _ _ _ _ - - _ _ _ .i
Events in 1979 at the Three 3!ile Island Nuclear Unit No. 2 in Pennsylvania ("T3tl") have prompted a tigorous reexam* nation of safety related equipment and operating procedures in all nuclear faciuties. Based upea a preliminary engineering review, the Company believes that most of the new requirements pron.ulgated by the Nuclear Regulatory Commission ("NllC") in response to T311 are already n flected in the design of the Seabrook project; other requirements will result in design changes which will increase the capital cost of the Seabrook project by approximately $2,000,000. While the ultimate effect of the many reexaminations, studies and legislative prolmals generated by the T311 situation cannot be predicted, they could cause delays in construction and costly modifications of both the operating and planned nuclear plants in which the Company has an interest. Construction Program The Company's construction program, which consists primarily of expenditures in connection with its interest in the Seabrook project, has for some time been so large that obtaining the substan-tial financing required to enable the Company to maintain this program and continue its business operations has been and remains a major challenge for the Company. See " Financing" below under this Item 1. Reduction in Feabrook Project Own<rship. In 1979 the Company decided to rnluce its ownership interest in the Seabrook project aml obtainni commitments from nine other utilities, some of whom were alremly participants, to acquire from it ownership interests totaling 14.76503 9 These com-mitments were subject to receipt of required approvals and in two instances to receipt of initial financing for the ownership acquisition. Each utility acquiring such an ownership interest does so gradually over an Adjustment Period, paying pro rata the costs otherwise attributable to the Com-pany's ownership interest until such acquiring utility's investment in the Seabrook project (exclu-sive of any ownership interest already held by it) equals the percentage for which it has committed. The Company's percen% will decrease accordingly. This perimi during which the acquiring utili-ties are paying the Con pany's share of construction costs is expected to continue for about 12 months after all Adjustment Perials become effective. After the conclusion of all Adjustment Perimis, the Company will resume paying all of its then reduen1 share (35.23497SF) of Seabnsok project costs. The accepting utilities have receival their required approvals and their Adjustment Perials have commenced, except for Taunton 31unicipal Lighting Plant ("Taunton") and New Ilampshire Electric Cooperative, Inc. ("NII Coop"). The Company and 3f assachusetts 31unicipal Wholesade Elec-tric Company ("3DIWEC"), which is to acquire from the Company an additional 6.00091 % interest, have agreed that, commencing on February 28,1981 (when 3DIWEC's Adjustment Period began) and continuing until 3DIWEC has completed its initial financing, the Company will pay 3DlWEC's share of costs otherwise attributable to that portion of the Company's ownership interest being acquired by 3DIWEC, subject to the condition described below. Upon completion of its initial finane-ing,3DIWEC will reimburse the Company for these costa, together with interest at the rate of 13SE per annum through 3farch 31,1981 and thereafter at the Company's rate of allowance for funds used during construction. If 3DIWEC has been unable to complete its financi .g by June 30, 1981, 3DIWEC's reimbursement obligation, including interest, will be cancelled and 3DlWEC's Adjust-ment Period will not commenee until the first business day after consummation of 3DIWEC's initial financing. The Company has been informed that 3DIWEC expects to complete such initial financing prior to June 30,1981. Taunton is seeking the approvals from the Taunton City Council and the V nicipal Lighting Plant Commission of the City of Taunton for its acquisition of a 0.334457F additiont ownership inter-est. Taunton's Adjustment Period will commence on the last day of the month in which it receives such approvals. Ilowever, if its Adjustment Period has not commenced by June 30, 1981, Taunton shall not acquire any additional interest in the Seabrook poject. 2
l \
- f. g The NII Coop has received the agreement of the Rural Electrification Administration for its i financing of its ownemhip intenst of 2.17391% and has filed an application with the New Ifampshire (d Public Utilities Commissim ("NHPUC") for appioval of such acquisition. Its Adjustment Period will commence when it obtains such financing.
When all Adjustment Periods are completed and assuming that no additional ownership trans-fers occur, ownership interests in the Seabrook project will be as follows: Public Service Company of New IIampshire 35.23497 9 The United Illuminating Company 17.50000 3fassachusetts 31unicipal Wholesale Electric Company 11.59340 New England Power Company 9.95766 Central 3faine Power Comr.my G.N178 The Connecticut Light and Power Company 4.059S5 Commonwealth Electric Company 3.52317 3fontaup Electric Company 2.89989 Bangor Ilydro-Electric Company 2.17391 New IIampshire Electric Cooperative, Inc. 2.17391 Central Vermont Public Service Corporation 1.59096 3faine Public Service Company 1.46056 Fitchburg Gas and Electric Light Company 0.86519 Taunton 3funicipal Lighting Plant 0.43479 Vermont Electric Cooperative, Inc. 0.41259 IIndson Light and Power Department 0.07737 Reduction in Level of Seabrook Project Construction. In 3farch,1950, in view of the unsettled state of the capital markets and the very high cost of external funds, the Company's Board of Diree-tors decided that the overall level of construction of the Seabrook project should be reduced substan-tially in order to lessen the Company's external financing requirements. The Company plans to resume full construction when 3131WEC's initial financing for its inemased interest has been com-pleted. In 1980, the NHPUC ordered the Company to delay work on Unit #2 of the Seabrook pro.iect until receipt of the regulatory approvals necessary for the reduction in the Company's ownership interest in the Seabrook project and commencement of such reduction and prohibited use of proceeds of future financings for further construction of Unit #2 until commencement of such reduction. Ilowever, in its orders authorizing the Company's last three securities issues, the NIIPUC autho-rized the Company to use the proceeds therefrom to meet existing obligations for progress payments and nuclear fuel payments associated with Unit #2, on the undentanding that the Company would use its best efforts to seek deferrals of such payments on reasonable terms. Ofer of Pilgrim and Millstone Interests. In an additional effort to reduce its ongoing construc-tion program expenditures, the Company in 3farch,1979, offered to other utilities its ownership interests in the Pilgrim #2 and 31illstone #3 projects. No expressions of interest were received by the Company with respect to its offer of its interest in the Pilgrim #2 project. The NIIPUC has ordered the Company to cease any and all payments to the Pilgrim #2 project effective immediately or show cause why such payments should not cease. IIearings have been held before the NIIPUC, at which the Company has taken the position that, until clarification of the status of the construction permit application for the Pilgrim #2 project pending befon the NRC, all required contract pay-ments (estimated to be approximately $434,000 during 19$1) should continue to be made. The Com-pany cannot predict what the outcome of this proceeding will ultimately be nor its impact, if any,
) upon the Company's contractual commitments with respect to the Pilgrim #2 project.
3
The Company has contracted for the sale of approximately two-thirds of its 3.8910 9 interest in the 3Iillstone =3 proje<t to Taunton and Connecticut 31unicipal Electric Energy Cooperative (" Conn. Coop"), subject to the receipt of necessary regulatory approvals, including that of the NRC. Proceeds from the sale are required to be ' iosited with the Trustee under the terms of the Com-pany's First 3Iortgage Indenture. The ( 1.any has received expressions of interest in purchasing the balance of the Company's interest in t m 3fillstone #3 project. Only a nlatively rmall portion of the Company's construction program is attribt.able to the Company's interest in the 31illstone =3 project ($46,554,000 for the period 1%1-1986). Construction E.rpenditurcs. assuming a reduction in the Company's Seabrook project ownership < to 35.234979, its share of the total cost of the Seabrook project upon completion, including the initial cores of nuclear fuel, is estimated at $936,200,000 (excluding any allowance for funds used during construction ("AFUDC") (see Note 4 of Notes to Financial Statements), which allowance { is estimated to be $456,500,000). The foregoing estimate of AFUDC reflects the results of a recent ' NIIPUC onler permitting the Company to compute AFUDC net of federal income taxes, the method utilized by the Company prior to 1975. This change in method of computation resulted in a decrease in total estimated AFUDC associated with the construction of the Seabrook project from $r39,000,000 to $456,500,000. This change will have no significant effect on the Company's net income, and will not reduce the Company's external financing requirements described below under " Financing and Rato Relief" The Company's aggregate construction program for the six. year period 1981 through 1986, which will be subject to continuing periodic review and adjustment throughout the period, is currently estimated to be about $803,600,000 (excluding AFUDC), assuming its ownership interest in the Seabrook project is reduced to 35.23197 9 as described above, the Adjustment Periods referred to above have all commenced by 3f ay 1,1981, and the Company's entire ownership interest in the 31ill-stone #3 project is sold in 19S2. The following table sets forth the Company's estimated construction expenditures for the period 1981-1986 before the reduction of its original 509 ownership interest in ( the Seabrook project and after its projected reduction to 35.23497%, and is based on current construe-tion schedules and cost projections (excluding AFUDC): Estimated Construction Ex penditures 1981 1986 (Millions of Ibilars) Original Projected 50 % 33.23497 % Ownerwhip Ow nership Generating Facilities Company's Share of the Seabrook Project Plant $ 750.9 $386.2 Nuclear Fuel 159.2 100.2 l Total 910.1 486.4 l Participation in the P;lgrim #2 and 31ill., tone #3 Projects l Plant 76.7 15.8 Nuclear Fuel 6.1 2.8 Total 82.8 48.6 Other Generation 44.1 44.1 Total Generating Facilities 1,037.0 579.1 Transmissier Pvilities 88.7 88.7 l Distribution and General Facilities 135.8 135.8 ! Total $1,261.5 $803.6 4
l l The following table shows the aggregate amount for each of the years 1981 through 1986 of the Company's estimated construction program before and after adjustment to reflect the reduction of the Company's ownership interest in the Seabrook project to 35.23497 9 , and is based on the same additional assumptions as in the immediately preceding table. If any substantial variation occurs in the commencement of the Adjustment Periods referred to above, expenditures for the Company's construction program would be increased in 1981 and decreased in 1982. Original Projected 50 7, 35.23497 % Ownerehlp Ownership 1981 $ 233,600,000 $ 57,100,000 1982 261,800,000 158,700,000 1983 267,600,000 197,000,000 1984 190,700,000 143,500,000 1985 2G1,900,000 160,700,000 / 1986 102,900,000 86,600,000
, Total $1,261,500,000 $S03,600,000 Actual construction expenditures could vary from these estimates because of changes in the Company's plans and load forecasts, cost fluctuations, delays and other factors. It is also possible that additional expenditures may be required to meet regulatory and environmental requirements at the Seabrook project and at the Company's other generating facilities. See " Industry Problems" ebove e and see also " Environmental Matters" and " Conversion from Oil to Coal" below.
The complexity of present-day electric tdii:v technology and the time required for the construe-tion of generating facilities and for the completi n of the necessary licensing and neguintory proceed-ings, which have become increasingly extensive, have compelled the Company, as well as other electric utilities, to make substantial investments in the construction of such facilities before the licensing and O' regulatory proceedings are final. While it is possible that future developments could lead to cancella-tion of the Seabrook project, tl'e Company considers such a possibility unlikely not only because the necessary construction permits .md approvals have been received, although cert, of them are subject to further court appeal and administrative proceedings, and construction is proceeding, but also because of the projected need for power in the Company's service area and in New England generall and the further need to reduce dependency on imported oil. Ilowever, if the Seabreok project v .e cancelled, the Company estimates that at the present time its sham of the total costs would be sub-stantially more than its investment; the precise amount would depend upon a number of factors, including the amount of termination charges and salvage and the msults of negotiations in connection with contract terminations. The Company would apply to regulatory authorities for approval to amortize its share of total costs over an appropriate futum period and to recover such costs through the Company's retail and wholesale rates. While the Company cannot predict whether and to what extent regulatory authorities would permit such recovery, construction of the plant was authorized by the NIIPCC based upon its finding that the Seabrock project was required to meet the demand for electric power. Financing Financing of the Company's 1981-1986 construction program estimated at $803,600,000 plus AFUDC of $409,100,000 (assuming its ownership interest in the Seabrook project is reduced to about 359 as described above), and the refinancing at maturity of certain long-term de and the meeting of required sinking fund payments together aggregating $156,545,000 during t% 'od, represent a major undertaking for the Company. Assuming the receipt of adequate and t ette increases, the Company estimates that during the period 1981-1986 approximately $435,000,4 be provided by operations (principally after 1983) after deducting total estimated preferrt common stock
;Q dividend requirements. See " Construction Program and Financing Requiremen n item 7 below.
iQ Approximately $760,000,000 is expected to be financed from external sou- - dming this period. 5 ./
During 1980, the Company raised approximately $2N,500,000 in the aggregate, as follows: $ $51,995,000 from the sale of General and Refunding Mortgage Bonds in January and December, $61,837,000 from the sale of shares of Common Stock in February and July, approximately $2,700,000 from the sale of shares of Common Stock through the Corapany's Divider.d Reinvestment and Com-mon Stock Purchase Plan, $60,000,000 from the sale of shares of Preferml Stock in April and Oc-tuber, and $29,000,000 from a Euralollar term loan in September. In February,1981, the Company raised $31,504,000 from the sale of 2,200,000 shares of Common Stock. The Company's financing rmuirements during the balance of 1981 (including ref.nding of ap-proximately $24,000,000 of First Ertgage Bonds, Series T) am estimated to be approximately $107,000,000, assuming that 3I31WEC obtains financing for its increased Scabnek pniject ownership interest before June 30,1981, and that approximately $118,000,000 of short. term bank emdit is out-standing at the end of the year. These 1981 financing requirements are expected to be met by the issue of additional shares of Common Stock during May, approximately $20,000,000 of additional bank debt during the second quarter, and, in the fourth quarter, by General and Refunding brtgage Bonds. The size and timing of these issues will depend on market factors, timing of commencement of the Adjustment Periods for the reduction of the Company's interest in the Seabmok project to about 359, adequate and timely rate increases and other factors. In order to provide the Company with the revenues necessary for it to obtain the required ex-ternal f'mancing, and in particular to obtain sufficient revenues to satisfy the earnings test contained .in the Company's General and Refunding Lrtgage Indentun', dated as of August 15,1978 (the "G&R Indenture"), for the issuance of the General and R(funding Lrtgage Bonds m>cded during 1981 (see "Ertgage Bonds" below under this caption), the Company filed a request on January 14, 1981 with the NHPUC for an emergency surcharge designed to increase annual revenues by approxi-mately $35,500,000. The NHPUC dcnied the Company's request on February 27,1981, after several days of hearings (see Item 7, " Management's Discussion and Analysis of Financial Condition and Results of Operations") and the Company's request for rehearing has been denied. Without a rate increase during the seecud quarter of 1951, based on the earnings test in the Indenture, only a limited amount of General and Refunding Lrtgage Bonds could be issued in the fourth quarter of 1981, except for General and Refunding brtgage Honds which can 1,e issued without compliance with the earnings test to refund the First Ertgage Bonds, Series T, which mature in October,1981. The Company's ability to issue General and Refunding Ertgage Bonds in adequate amounts and in a timely fashion is considered by the Company to be an essential part of itz, financing program. The Company's financing plans for the 1981-1986 peri,,d include the issuance of common stock, preferred stock and long-term debt, nuclear and fossil fuel financing and intermediate-term debt financing. The continued success of the Company's financing plans is dependent upon a number of l factors, including the Company's ability to obtain adequate and timely rate increases, conditions in the capital markets, economie conditions, and the Company's level of sales. Cot,t increases, delays and changes in regulatory proceedings and requirements, market conditions and other factors have in the past necessitated revisions in the Company's construction program and in the timing and amount of the Company's projected financings; these factms may require similar revisions in the future. Ertgage Bonds. Due to certain restrictions in the Company's First Ertgage Indenture, no significant amount of First Wrtgage Bonds may be issued thereunder until an operating license is obtained for Unit el of the Seabmok project, not anticipated before hne 1982. Because of the restrie-tions in tho Company's First Ertgage Indenture, the Company entered into the G&R Indenture, constitutii.g a second mortgage on the Company's properties to secure General and Refunding Ertgage Bomls, pursuant to which the Company has issued and sold an aggregate of $173,000,000 of such Bonds. The G&R Indenture requires that, in onler to issue additional General and Refunding Ertgage Bonds (other tnan for certain refundings), the earnings coverage of interest on the out-6
standing Fint Mortgage 1 onds and General and Refunding Mortgage Bonds he 2.0. Approximately
$26,100,000 of General and Refunding Mortgage Bonds are issuable under the earnings coverage test calculated at December 31,1980 (167c interest rate assumed).
Bank Financing. The Company has an aggregate of $134,350,000 of short-term bank credit, con-sisting of lines of credit aggregating $4,350,000 with New Hampshire banh. and a revolving credit agreement with a group of eight comnercial banks under which the Company may borrow up to
$130,000,000 through November 16,19 31 subject to periodic review by the b.mks; amounts outstandinte under the agreement mature on Nov(mber 17,1981. The Company believes that the' continued avail-ability of such credit to November 13, 1981 and any extension thereafter will depend principally upon the success of the Company's financing program described above, and the occurrence of no adverse developments in rate and other ivgulatory proceedings or in the program to reduce the Company's ownership interest in the Seabronk project. )
The Company has a $25,000,000 term credit due January 7,19S2 with seven of the comrercial banks participating in the revolving credit and a $28,000,000 Eurodollnr term loan from European tenders due August 25,1982. As of December 31,19S0, the Company was permitted under its Articles of Agreement to incur approximately $184,700,000 of short-term unsecured indebtedness without obtaining the approval of holdem of the Preferred Stock. The NHPUC has tpproved up to $146,500,000 of short-term borrowings. Pnfernd Stock. Under the Company's Articles of Agreement, additional Preferred Stock may be issued without the affirmative vote of the holders of a majority of either class of the Preferred y Stock provided that the ratio of earnings to fixed charges and preferred dividends, including divi-dends on Pmferred Stock to be issued, is at least 1.50. For the year ended December 31,19S0, the ratio of earnings to fixed charges and prefermd dividends computed under the method prescribed by the Company's Articles of Agreement was 1.93; and based thereon, the Company could issue, with-out such vote of the holders of the Preferred Stock, approximately $78,600,000 of Preferred Stock (167c annual dividend rate assumed).
, New England Power Pool A New England Power Pool Agreement ("NEPOOL"), to which the major investor-owned utilities in New England, including the Company, and certain municipal and cooperative utilities are parties, has been in effect since 1971. This Agreement provides for joint planning and operation of generating and transmission facilities and also incorporates generating capacity reserve obligations and provisions regarding the use of major transmission lines and payment for such use.
Substantially all planning, operation and dispatching of electrie generating capacity for New England is done on a regional basis under NEPOOL. At the time of the 1980-1981 NEPOOL wintes peak, the New England utilities had about 21,212 MW of installed capacity to meet the New England peak load of about 15,502 MW. The Company's capability responsibility under NEPOOL involves carrying an allocated share of a New England capacity requirement which is determined for each period based on certain regional reliability criteria. It is expected that the Company's capacity will be snfficient, through its own generating facilities, through its participations in certain jointly-owned generating facilities, and
; through purchases of capacity and energy from other utilities, to meet its NEPOOL obligations in the v foreseeable future.
7
joint Projects The Company is a part owner with other New England chetric utilities of four nuclear generat-ing comr "~,. The Company owns a 7Sh interest in Yankee Atomic Electric Company, a 5[L inter-est in Cinnecticut Ya. kee Atomic Power Company, a SSE interest in 3Inine Yankee Atomic Power Compas _nd a 4SF interest in Vennont Yankee Nuclear Power Corporation, each of which owns an operatirg nuclear generating plant with present net capabilities of 175 31W,580 31W,830 31W and 528 31W, respectively. The stockholders of each of the four nuclear generating companies are en-titled to the entire output of the plant in proportion to their nspective ownerships, subject to certain sales agreements with other utilities, and are obligated to pay for such output their proportionate shmar of the generating company's operating expenses and return on invested capital. They are also obligated M pay, when called upon by the generating comp %, tueir proportionate shares of each gen-erating compaw - mpital requirementa not onwWd f rom outside financing. { The Company is participating on a tenancy-in-common basis with other New England utilities in the ownership of five other generating units. One of thoe, Wyman Unit #4, a 600 31W oil tired generating unit in 3faine in which the Company has a 3.14337; interest, conunenced operation at full capacity in February,1979. Three of the other units which are under construction are as follows: Gimpany Sliare 1%timated G>mtruction Co.:(2)(3) Scheduled Completion Capacity Capacity Total Per Type I ate (l) (MW) Percent (2) (MW)(2) (Million.) KW Seabrook #1 & #2 Nuclear 1984 & 1986(2) 2,300 35.23497 810.4 $1,392.7 $1,719 (New IIampshire) _. Afillstone #3 Nuclear 1986 1,150 3.8910 44.7 121.0 2,707 (Connecticut) (1) Twese completion dates have been deferred from time to time in the past, and additional deferrals msy occur due to licensing delays, economic conditions and other factors. Due to the time required for the construction of generating facilities and the completion of licensing and regulatory proceedings relating thereto, substantial investments in the above units wi!! be required prior to the completion of licensing and regulatory proceedings. There is no I assurance that all necessary approvals, pennits or licenses will be obtained, or if obtained, will not be modified on revoked. See " Industry Problems" above under this item 1. (2) Gee " Reduction in Seabrook Project ownership" above under this item 1 for information con-cerning the proposed m!uction of the Company's ownership interest in the Seabnnk project to 35.234979E and " Offer of Pilgrim aml 3fillstone Interests" under this item 1 for infonnation con-cerning the sde of the Company's interest in the 3fillstone #3 project. (3) Including the cost of the initial nuclear fuel and AFUDC on the estimated costs of unfinished construction not included in the Company's rate base. AFUDC was discontinued on December 3,1977 on the portion of unfinished construction incluthst in rate base. For purposes of this table such portion of unfinished construction has been excluded from rate base effective 3f ay 7, 1979 and it has been a.ssumed that AFUDC will be capitalized thereafter on all unfinished con-struction. See the discussion of the recent change in the calculation of APUDC in " Construction Program - Construction Expenditures." Estimated construction expenditures for the 3tillstone #3 project used in calculating the esti-mated cost per KW are based upon information furnished by the lead sponsor, which has advised the Company that the construction budget is continuously under review in light of increased costs due to deferrals, delaya and other factors. The estimated expendituits and completion dates of the 8
nuclear units may also be affected by the licenaing and regulatory proceedings relating to each O unit and to nuclear power generally and may also le affected by events and conditions which cannot now be predicted. The Company also has a 3.47007c ownership interest in the fifth of these generating units, the Pilgrim =2 project, a 1,150 MW nuclear plant planned to 'ae constructed in Massachusetts. The Pil-grim =2 project has not yet received a construction permit from the NRC, and due to uncertainty regarding the timing of licensing for the Pilgrim #2 prQet, the lead sponsor has not reviewed that project's construction budget for some time. Accordingly, the Company does not have a current cost estimate for the Pilgrim #2 project. See " Offer of Pilgrim and Millstone Interests" under this item 1 for information concerning the Company's continued participation in the Pilgrim #2 project. Seabrook helear Project As described below, the Seaorook project has required numerous approvals and permits from various state and federal regulatory bodies consisting principally of a certificate authorizing construe-tion of the plant (which incorporates related state per...its) from the NIIPUC under New Hamp. shire's power plant siting law; approval of the once-through cooling system for the Seaorook project by the Environmental Protection Agency (" EPA"); and construction permits from the Nuclear Reg-ulatory Commission ("NRC"). All of these approvals and permits have been obtained and, except as described below, there are no appeals or proceedings relating thereto. The process of obtaining these approvals and permits has been long and complex, has been con-sistently opposed by a number of intervening groups, has included demonstrations at the Seabrook site, and has been plagued by lengthy delays which have resulted in greatly increased costs for the project. Court appeals from these federal regulatory approvals have been decided in the Company's favor, but one appeal described below is still pending and further appeals are possible. The Company is unable to predict what effect adverse legislative action, financing problems, work stoppages or further administrative or court decisions relating to actions of regulatory agencies, including the proceeding recently remanded by the NRC described below, may have on the completion of the Sea-brook project, on the cost of the Seabrook project or on the Company. NHPUC. The state siting proceedings began in 1972, involved lengthy hearings during 1972 and 1973 and culminated in issuance of the requisite certificate on January 29,1974. A subsequent appeal to the New Hampshire Supreme Court resulted in a remand for further findings but did not invali-date the certificate. The supplemental findings were issued on December 30,1975; no further appeals were taken. The certificate was modified to nfleet the extension of the cooling water intake tunnel A ordered by the EPA, transmission line relocations ordered by the NRC, and certain other trans- ' mission line relocations. The Company has also applied for a modification of the certifeete with respect to an additional minor transmission line rehication, and hearings have commenced. NRC. The NRC proceedings commenced with the docketing of the application for construction permits on July 9,1973. The hearings before an Atomic Safety and Licensing Board (the " Licensing Board"), in which seven interrenors in opposition participated, consumed over sixty days during 1975 and 1976 and culminated on June 29,1976 in the issuance by the Licensing Board of its Initial Deci-sion (one member dissenting), approving the issuance of construction permits for the Seabrook project. The NRC issued the permita on July 7,1976, and construction commenced shortly thereafter but was subsequently suspended in 1977 and 1978 for periods of seven months and three week , respectively, as a result of administrative proceedings and court appeals. The Initial Decision was affirmed by an NRC Atomic Safety and Licensing Appeal Board (the
" Appeal Board") (with one member dissenting) and by the NRC. On August 3,1979, the dissenting member of the Appeal Board issued his dissenting opinion which relates to the seismic issue; and the majority issued a supplemental opinion in response to the dissent on September 6,1979. One 9
_ _ _ _ _ _ _ _ _ _ _ - _ - _ _ _ _ _ _ _ _ - _ _ _ _ _ - _ _ - _ _ _ A
intervenor filed with the NRC a renewal of its petition for review of the seismie issue; on September 25,1980 the NRC remanded the issue to the Appeal Board for a further limited evidentiary hearing, and the Appeal Board has scheduled commencement of the hearing for April 6,1981. In December, 1980, the Appeal Board denied an intervenor's motion requesting suspension of the construction permits pending the outcome of this remanded matter. The Company cannot predict the outcome of the hearing. There is presently pending before the United States Court of Appeals for the First Circuit an appeal by intervenors from a decision of the NRC; the appeal challenges the NRC's refusal in 1976 to suspend the Seabnmh project construction permits despite a court decision in litigation not involving the Company which set aside the NHC's rule with respect to the environmental effects of reprocessing spent fuel and disposing f nuclear waste. (Xatural llcsources Def(nae Council,Inc. v. XIIC, D. C. Cir. Nos. 74-1385 and 74-1586, which was reversed and remanded by the United States Supreme Court on April 3,1978 in Vermont Yankte Xucicar Poncer Corporation v. Xatural It< sources D<fense Council, Inc., No. 76-419). Effective September 4,1979, the NRC (one member dissenting) promulgated its final rule (which superseded the interim rule in place since 31 arch,1977) covering the environmental impact of reprocessing spent fuel and disposing of nuclear waste. A petition for review of the final rule is pending before the United States Court of Appeals for the District of Columbia Circuit (State of Xerc York v. XI!C., D.C. Cir. Nos. 79-2110 and 79-2131). The Company believes that the environ-mental effects of the fuel cycle, determined in accordance with the new rule, are too small to affect the environmental cost-benefit evaluation of the Seabrook project. On May 2,1979 an interrenor filed a ruluest with the NRC staff for issuance of a show cause order as to why the construction permits should not be suspended or revoked because of the NRC's failure to require development of evacuation plans beyond the low population zone and to evaluate the con-sequences of certain types of accidents including the possibility of such evacuation. On February 11, 1980, the NRC Director of Nuclear Reactor Regulation issued a decision denying that petition, and the NRC review period has expired. Following expiration of the review period on that decision, in re- , sponse to a letter from an interrenor filed during that period which further elaborated its interpreta-tion of the evacuation issue, the NRC directed the NRC staff to pnress the letter as a new request for a show cause order on the same issue, and that staff review is currently in progress. In connection with obtaining the Company's operating licenses for the Seahnnk project, it will be necewary for the New Hampshire Civil Defense Agency and the Federal Emergency Management Agency to develop I satisfactory emergency response and evacuation plans. Before the Seabn>ok project can be put into operation, the Company must obtain the requisite operating license from the NRC. The Company intends to file the necessary applications themfor well in advance of the projected in-service date for Unit =1; however, the Company cannot predict the extent of the regulatory proceedings which will result or their outcome. See " Industry Problems" above under this Item 1. EP.L. Under the Federal Water Pollution Control Act, as amended, the EPA has jurisdiction over discharges from the cooling system of the Seabrook project. In August,1974, the Company applied to EPA for approval of the once-through cooling system utilizing ocean watet. After adjudicatory proceedings, a court appeal and a further hearing resulting from a court remand, the EPA Adminis-trator on August 4,1978 reaffirmed his previous approval of the once-through cooling system and that decision was affirmed by the United States Court of Appeals for the First Circuit on May 2,1979. Other. The Company is also involved in proceedings or disputes concerning title to a portion of the Seabrook site and the use of the Company's water wells on the Seabrook site. The Company believes that neither of these matters will have a materially adverse effect upon the seabrook project. Insurance. The Federal Price-Anderson Act provides, among othcr things, that the maximum liability for damages resulting from a nuclear incident would be $560 million, to be provided by 10
l private insurance and governmental source.s. As required by NRC regulations, prior to operation of g
\ the Seabrook project, the owners of the Seabrook project will insure against this exposure by pur-chasing the maximum available private insurance (presently $160 million), the remainder to be cov-cred by retrospective premium insurance and by an indemnity agreement with the NRC. Under a recent amendments to that Act, owners of operating nuclear facilities may be assessed a retrospective
, premium of up to $5 million for each reactor owned in the event of any one nuclear incident occurring ! at any reactor in the United States, with a maximum assessment of $10 million per year per reactor owned. As a part owner of other operating New England facilities (see " Joint Projects" under this
- Item 1 above), the Company would be obligated to pay its proportionate share of any such assess-ments, which pmsently amounts to a maximum of $1,050,000 per incident. While it is not yet possible to evaluate the claims being asserted as a result of the T31I incident, the Company does not anticipate any assessments being levied under these provisions as a result of that incident.
i i Re;;ulathm The Company, as to retail rates, security issues, and various other matters, is subject to the regulatory authority of the NIIPUC. As to pmperties and business in 3faine and Vermont, the Company is subject to the regulatory authority of the Public Utilities Commission of 3faine
- and the Vermont Public Service Board, respectively. Additionally, both the Connecticut Depart-ment of Public Utility Control and the 3fassachusetts Department of Public Utilities have limited jurisdiction over the Company based on the Company's ownership as a tenant-in. common of portions of the 3fillstone #3 and Pilgrim #2 projects. See " Joint Projects" above under this Item 1. The Company is also subject, as to some phases of its business, including account.s, certain rates, and licensing of its hydro-electric generating plants, to the jurisdiction of the Federal Energy Regula-tory Commission ("FERC") under the Federal Power Act. The various nuclear generating units in which the Company has an ownership interest are subject in their construction and operation to h
V the broad regulatory jurisdiction of the NRC under the Atomic Energy Act of 1954, particularly in regard to public health, safety, environmental and antitrust matters. See also " Environmental 3 fat-ters" below under this Item 1. Fuel Supply For the year ended December 31,1980, the Company's firm net output was derived 539 from oil,359 from coal,8% from nuclear, and 4% from hydro. As indicated above under this Item 1 under the caption "New England Power Pool", substantially all of New England's generation and transmission systems, including those of the Company, am operated as if they were a single system. Oil. The New England electric utilities, including the Company, make greater use of fuel oil for generation of power than utilities in any other region of the country. 3fost fuel oil supplies of the New England utilities are derived from foreign sources and are subject to price increases and inter-ference by foreign governments. The Company has a contract expiring on December 31,1981 with a supplier for fuel oil for the Company's two large oil. burning plants. The storage capacity for the Company's two large oil-burning plants is approximately 30 days operating at full load, and inven-tory varies substantially depending upon oil shipments. During the 52-week period ending 3farch 21, 19S1, the average inventory was approximately 15 days operating at full load. The Company's two smaller oil. burning plants have limited storage capacity. See " Conversion from Oil to Coal" and
" Environmental Alatters" below under this Item 1.
Coal. Coal for the Company's only coal. burning plant, the two unit 3ferrimack Station, is presently being furnished from West Virginia sources under a contract which expires in April,19S3. The con-tract generally provides that a 45-day supply of coal is to be maintained for th2 Company, that the base price of the coal may be changed by the seller annually but that the Company's disagreement with the change will result in termination of the contract at the end of the contract year, and that 11
the price of the coal is subject to certain adjustments for changes in the seller's costs. The Com. pany's policy is to maintain a 60-day supply of coal on hand for the 3ferrinutek Station; at 3farch 21, 1981, an 86-day supply was on hand. The plant, with 119 31W and 337 31W units, presently requires a total of approximately 1,000,000 tons of coal per year. Future annual tonnage raluirements of the Company may be more or less than that figure depending upon a number of variables including par-ticularly the relative cost and availabi!ity of coal and other fuels and possible conversion of units presontly burning oil. See " Conversion from Oil to Co:d" and "Envinmmental 31atters" below under this Item 1. The Company's approximate average costs of oil nd coal for 1973 through 1990 were as follows: Coal Oil Per Oil Per Coal Per Coal Per Spot Price llarrel 31illion IITU Ton 311111on llTU Per Ton 1973 $ 3.75 $0.61 $13.7S $0.51
- 1974 11.32 1.83 21.97 0.82 $40.67 1975 11.49 1.88 32.55 1.24 37.50 1976 10.95 1.77 34.33 1.25 35.27 1977 12.97 2.09 35.54 1.31
- 1978 12.13 1.95 39.09 1.47 38.54 1979 15.62 2.51 41.39 1.53
- 1980 22.86 3.67 43.57 1.60 42.55
'No spot purchases by the Company during the period. As of 31 arch 23,1981, the price of oil under the Company's lor.g-term contract was approximately $33.26 per barrel.
.Vuclea r. The cycle of production of nuel ar fuel consists of (1) the mining and milling of uranium ore, (2) the conversion of uranium concentrate to uranium hexafluoride, (3) the enrichment of the uranium hexafluoride, (4) the fabrication of fuel assemblies and (5) the reprocessing, storage, or disposal of spent fuel.
With respect to the Seabrook project, the Company has long. term contracts for enrichment. The Company also has contracts for conversion services and for the fabrication of the initial cores and six reload regions (each region consisting of one-third of a complete core). These contracts are expected to meet the Company's requirements for fuel cycle services as follows: enrichment through 200S, conversion through 1987, and fabrication through 1986. The Company has contracted for all of the uranium concentrates required to commence operation of the Seabrook project and is actively seeking additional sources thereof, which it expects will be available when needed. A dispute as to the intent or enforceability of one agreement has resulted in the supplier instituti:rg litigation against the owners of the Seabrook project, including the Company, for alleged breach of contract (alleging damages of about $5,000,000 of which the Company's share woubl be about $1,250,000) and unlawful restraint of trade (seeking treble damages); a counterclaim and a separate action have been filed against the supplier based upon its wrongful influencing of the market price. An agreement in principle has been reached in settlement of this litigation which will result in cancellation of the existing agreement, dismissal of the litigation, and cash payments to the supplier by the Seabrook project participants over a two year period. The Company has no contractual arrangerrents for reprocessing spent fuel and there are no reprocessing facilities currently operating in the Un: ~1 States. If reprocessing is not available when required for the Seabrook project, the spent fuel can be stored on site pending reprocessing or dis-12
posal. The Company cannot pivdict at this time what difficulties will be encountered regarding (,>) disposal of nuclear wastes. Tu NRC, along with other federal agencies, is in the process of develop-ing regulations and guideline,in this area. The Company expects to develop plans for the disposal of its nuclear wastes after promulgation of these regulations and such plans will be subject to regulatory approvals. The Company has been advised by the companies operating, planning or constructing the other nuclear generating stations in which the Company has an interest that they have contracted for certain segments of the nuclear fuel production cycle through various dates. The Company has further been advised by the sponsors of the four operating nuclear generating stations that they have or will have storage capacity to meet the spent fuel storage needs of the u'its through various dates ranging from 1985 to the late 1990's. Contracts for other segments of tha fuel cycle will be required in the future, and their availability, prices and terms cannot now be predicted. Conversion from Oil to Coal In July,1979, the NHPUC instituted an investigation to determine whether any of the five Schiller Station units should be converted from burning oil to burning natural gas or coal, and on Mrch 17,1980, ordered the Company to begin converting three 50 SiW units to coal. The Eco-tomic Regulatory Administration of the United States Department of Energy (" DOE") on No-vember 19, 1979, had issued a notice of proposed prohibition orders under the Power Plant and Industrial Fuel Use Act of 1978 prohibiting such three units at the Company's Schiller Station from burning oil or natural gas as their primary fuel. There has been no recent action by DOE; it is still possible, however, that DOE will issue its own order prohibiting the burning of oil or natural gas and will thereby require such conversion. The Company estimates that if such conversion does not require the installation of flue tas de. sulfurization facilities (scrubbers) to meet interstate air quality standards, the units can be converted !t at an estimated cost of approximately $21,000,000 (in 1979 dollars, excluding AFUDC); if scrubbers are ivquired, this cost would increase substantially. Studies are under way to determine whether scrubbers would be required. Assuming that coal containing such sulfur content as may be mandated is available at reasonable prices, the Company is prepared to commence the conversion of the three units if scrubbers are not necessary uid expenditures for such conversion have been included in the construction program described abom under " Construction Program" The Company intends to vigor-ously oppose the installation of scrubbers for the units, and expenditures for scrubbers are not included in the construction budget. Any such conversion will reduce the capability of the units. On August 14,1980, the NHPUC ordered an investigation to determine whether or not the gene-rating unit at Newington Station should be converted from oil to natural gas and/or its substitutes and/or coal. The Company is studying the availability of such alternative fuels and the construction expenditures required for any such conversion. Preliminary studies indicate that a conversion of this unit to burning coal could involve a very major reconstruction of the station, possibly including a new boiler and flue gas desulfurization facilities and that such reconstruction could result in expenditures in excess of $300,000,000 in 1980 dollars. No amounts for such expenditures have been included in the construction program described above under " Construction Program". Hearings in this investiga-tion have not yet commenced; the Company intends to vigorously oppose the making of such expendi-tures. The DOE has classified the existing Newington unit as "non-coal capable" and has not issued any order relative to this unit. National Energy Policy The federal Public Utility Regulatory Policies Act of 1978 requires state utility regulatory commissions to consider and make determinations with respect to certain issues of utility regulation. Accordingly, in mid-August,1980, the NHPUC instituted rule. making proceedings with respect to g ) compensation for intervenors, advertising, master metering and information to customers, and adopted
'n.J 13 l
rules regarding the latter three areas at the end of October,1980 Additionally, the NIIPCC is utilizing Pha.se 11 of the 1979 rate proceeding (see " Rate Proceedings-New Ilampshire Retail" un-der Item 3 below) to make the rate structure examination specifi~l ' this Act and hearings have commenen!. The Company cannot predict the effect of this Act or. + pmecedings or its operations. IIowever, the Company's present policies of empha. sizing conservation and h>ad mamtgement and post-poning as long as possible the need for new capacity other than the Seabrook project are consistent with the apparent objectives of the Act. Environmental Masters The Company is subject to regulation with regard to air and water quality and other environ. mental considerations, by various federal, state and local authorities. The Company cannot forecast the effect of all such regulations upor. Its generating, transmission and other facilities, or its operations. The application of federal, state and local standards to protect the environment, including but not limited to those hereinafter described, involves or may involve review, certification or issuance of permits by various federal, state and local authorities. Such standards, particularly in regard to emissions into the air and water, thermal mixing zones and water temperature variations, may halt, limit or prevent operation, or prevent or substantially increase the cost of construction and operation of installations and may require substantial investments in new equipment at existing installations. They may also require substantial investments above the figures stated under " Construction Program" for proposed new projects. Air Quality Control. Pursuant to the Federal Clean Air Act of 1970, as amended, the State of New IIampshire acting through the New IIampshire Air Resourees Commission (" AltC") has adopted regulations containing standards limiting emissions of particulates, sulphur oxides and nitrogen oxides, which are generally designed to achieve and maintain Federal primary ambient air quality standards. The Company believes that its fossil fuel generating units are being operated in compliance with ARC's regulations. Pursuant to the 1977 amendments to the Clean Air Act, ARC has proposal lists showing those areas of New llampshire which have attained or failed to attain national ambient air quality standards, and revised the State implementation plan, which the EPA has accepted. It does not appear that the revised State implementation plan will require the Company either to modify operations at any of its fossil fuel generating plants or expend funds for additional air pollution control equipment. While coal now available and expected to be availaHe in the future for the Company's Merrimack Station presently meets all applicable requirtments, if more stringent requirements become effective which could not be met by such coal, the Company might have to install sulphur removal equipment at substantial capital cost or take such other actions as may be required by regulatory authorities. The installation of such equipment would increase operating costs and reduce the net capability of the units. As described under " Conversion from Oil to Coal" above, the convendons of Schiller Station and Newington Station from oil to coal could require the Company to make substantial expenditures for air quality control facilities. The ARC has commissioned a study of the impact of the Schiller conversion. Water Quality Control. The Company has received from EPA, or from the Maine Department of Environmental Protection in the case of one generating station located in the State of Maine, all permits required under the Federal Water Pollution Control Act, as amended, for discharges of thermal and other effluents from its generating stations. Such permits have varying expiration dates and the Company has made and expects to make timely applications for renewal. The EPA issued effluent limitations guidelines for steam electric power plants based on application of the best practicable control technology (to be met by July 1,1977) and of the best available technology eco-nomically achievab!e (to be met by July 1,1984), and alternate efiluent standards with respect to - 14
rm thermal discharges from steam electrie power plants. The guidelines and standards impose rigorous ( ) limitations upon the industry. An industry group filed an appeal in a Federal Court of Appeals challenging the guidelines and standards, and the Court of Appeals remanded the guidelines and standards to the EPA for reconsideration of certain of them. The Company is in compliance with the July 1,1977 guidelines. The discharge permit for the Company's Newington Station has contained conditions requiring installation of some type of closed-cycle condenser cooling system if an exemption is not obtained. The Company applied for such an exemption, and the EPA has issued a deterinination that the existing once-through cooling system at the plant meets the requirements of the Federal Water Pollu-tion Control Act. Failure to receive such an exemption would have required the Company to make substantial capital expenditures to install the closed-cycle condenser cooling system. The Company has an ongoing requirement in the discharge permit for its 3Ierrimack Station to monitor the effect of the plant's operation on the 3ferrimack River. The Company has thus far been able to show as required by the permit that the plant's present once-through cooling system does not inte-fere with resident fish in the affected portion of the 3ferrimack River. The permit requires that additional biological studies be performed by the Company at such time as significant numbers of migratory fish are restored to the 31errimack River for the purpose of showing as required by the permit that the present cooling system does not interfere with migratory fish. The Company's construction and operation of the Seabrook praject, including environmental con-siderations, is subject to regulation by the NRC and the EPA. See "Seabrook Nuclear Project" above under this Item 1. Resource Conservation and Recovery etct. Pursuant to the Resmirce Conservation and Re-covery Act of 1976, the EPA has issued regulations relative to the generation, transportation and /3 disposal of certain wastes. The Company has reviewed the application of these regulations to its () operations and has complied with the EPA criteria for the required interim status permits. Other Environmental Expenditures. The Company's capital expenditures for environmental protection facilities amounted to approximately $14,800,000 for 1979, the major portion of which was for facilities to reduce the thermal effect of the discharge of the Seabrook plant condenser cooling systems, and approximately $8,700,000 during 1980. For the years 1981,1982 and 1983, there will be approximately $12,400,000, $7,200,000 and
$1,200,000, respectively, of further expenditures for these pollution control facilities. The foregoing amounts are included in the construction expenditures set forth above under this Item 1 under
" Construction Program". Any expenditures associated with the conversion at the Newington Station or the installation of scrubbers at Schiller Station referred to under the caption " Conversion from Oil to Coal" above under this Item 1, would be in addition to these amounts.
Employees, Salaries and Wages The Company has approximately 1,900 employees, of whom 33% are represented by unions with which the Company has contracts. Such contracts became effective June 1,1979, and will expire on July 31,1981. The contracts reflect a 7.5% general wage increase effective June 3,1979 and an addi-tional 7.9% increase effective June 1,1980. Increases comparable to the increases to union-represented employees have been granted to non-represented employees. 11unicipalities and Cooperatives New IIampshire law permits municipalities to engage in the 1,roduction and sale of electricity, including the power to condemn the plant and property of any existing public utility which is located
- p. in the municipality, and to finance through the issuance of revenue bonds the ownership of new generating units of at least 25 31W and new transmission facilities of at least 69 KV.
(d 15
New IIampshire Electric Cooperative, Inc. ("NII Coop"), a cooperative association financed by the Itural Electrification Administration, as well as five small municipal electric utilities, operate in areas adjacent to areas served by the Company. The NII Coop purchases most of its electricity from the Company and is subject to regulation by the NIIPCC as a public utility. The NII Coop has agreed to purchase a 2.17391% interest in the Seabrook project. See "Iteduction in Seabrmk Owner-ship" under this Item 1 above. Seasonal Nature of Ilusiness Although the number of kilowatthoun of electricity sold by the Company in its territory has historically been somewhat less in the summer and fall than during the winter and spring, the Com-puny's electric revenues and operating income are dependent on a variety of other factors which are not necessarily seasonal, including contract sales of system and unit power to other ebetric companies, changes in the Company's rates and charges, the extent and naturc of transactions invalving the New England Power Pool and general economic conditions. Item 2. PitOPEllTIES The electric properties of the Company form a single integrated system including transmission facilities which are part of the New England wide transmission grid. On January 12,1981, the Company experienced a maximum one-hour prime peak load of 1,208 net 31W (pending final adjust-ment), and the Company had available to meet such load 1,18131W of its own generating capacity, 98 31W from its participations in the four Yankee nuclear generating companies described under " Joint Projects" in Item 1 above and 267 31W of purchased capacity. Because the generation and transmission systems of the ma,;ar Ne:v England utilities, including the Company, are operated as if they were a single system, the ability of the Company to meet its load is dependent on the ability of the New England utilities to meet the New England load. See "New England Power Pool" under Item 1 above. The Company has one coal-fired 456 31W electric generating station (3ferrimack Station), from which the company has agreed to sell to another utility 100 31W on a single unit basis from Unit #2 through Ap< ,1998, and four oil-fired electric generating stations with an aggregate effecti"e capa-bility of a 31W, consisting of the Newington plant (420 31W), the Schiller plant (180 31W) and two smat 3r plants. See " Conversion from Oil to Coal" r.nd " Environmental 31attem" under Item 1 above. The Company also has other generating facilities with an aggregate effective capability of 165 31W as follows: hydro-electric (5131W), combustion turbine (11131W) and diesel (3 31W). The Company has participations with other New England uti'ities in five generating units recently completed, under construction or in design stages, including the two Seabrook units. See " Construe-tion Program", " Joint Projects" and "Seabrook Nuclear Project" under Item 1 almve. On December 31,1980, the Company had about 1,699 pole-miles of overhead transmiuion lines, 9,260 pole-miles of overhead distribution lines, minor underground distribution and transmission facilities, and 239 transmission and distribution substations having an agregate capacity of 5,393,723 KVA. The Company owns office buildings in 3fanchester, Portsmouth and Keene. It rents space in an ofYice building in 3fanchester for its principal offices under a 30-year lease expiring in 2002. Annual base rentals under this lease are approximately $1,245,000, subject to annual escalation. In 1980 the Company paid approximately $1,572,000. The Company also owns other structures used as service buildings, storehouses and garages, and leases space for offices and other purpcses at various locations in its service ama. 16
r O Item 3. LEGAL PROCEEDINGS I i Rate Proceedings - New Hampshire Retail On June 9,1980, the NHPUC granted the Company an increase in its New Hampshire retail rates of approximately $18,355,000 on an annual basis based on a test year ended 3 fay 31,1979 and. on certain pro forma adjustments since that date. The NHPUC order allowed the Company an overall rate of return of 12.49% based on a 15.9% return on common equity and an attrition allowance. The order also allowed an increased depreciation rate for distribution plant (from 3% to 3.98%), adopted full normalization of the tax effects of all timing differences with respect to property placed in service after 1970, allowed a secondary rate increase of approximately $3,500,000 on an annual basis, which became effective as of January 1,1981, for the 7.9% wage increase negotiated as of June 1,1980, and authorized a secondary rate increase which will become effective April 16, 1981, based on any increased property tax expenses between 3farch 31,1980 and 3farch 31,1981. In the fall of 1980 the NHPUC indicated that it believed that the June 9 order provided the Company with an opportunity to earn a reasonable rate of return over a reasonable time period and that requests by the Company for rate increases during such a period would receive a negative response. However, due to record high interest rates and rapidly increasing expenses arising from continuing high levels of inflation, the Company believes that its present level of rates will not provide the earnings necessary to ensure the interest coverages which will enable it to issue sufficient General and Refunding 3fortgage B nds. Consequently, on January 14,1981, the Company requested the NHPUC to grant an emergency rurcharge promptly; however, on February 27,1980, the NHPUC denied the Company's request. The Company's response to this denial is discussed in Item 7,"3 fan-agement's Discussion and Analysis of Financial Condition and Results of Operations".
- m On April 10,1980 by supplemental order issued in the 1979 retail rate proceeding described above, the NHPUC ordered the Company to refund to its customers approximately $11,300,000, this refund ' [v} to be credited on bills rendered on or after June 1,1980 and to be spread over a 36-month period.
The NHPUC's April 10 and June 9 orders must be considered together and the effect of the April 10 refund order is to reduce during the period of the refund commencing June 1,1980 the increase granted by the June 9 order to approximately $14,600,000 on an annualized basis, based on a test year ended 3 fay 31,1979. The April 10 onler also provides that after receipt of mgulatory approvals for the reduction of the Company's ownership interest in the Seabrook project, which is the principal condition to commencement of the Adjustment Periods (see " Construction Program" under Ite,m 1 above), the period for the refund will be cut in half and the rate of refund doubled. The NHPUC based its order for a refund on its finding that during the period from 3 fay 7,1979 (the effective date of legislation which prohibited the inclusion of construction work in progress ("CWIP") in rate base as described below) to December 28,1979 (the date of the NHPUC's emergency rate order issued in connection with the Company's 1979 retail rate proceeding), the Company's rates were based in part on CWIP and, in addition, that the Company was accruing AFUDC on CWIP previously included in rate base. For the accounting treatment of the supplemental order of April 10 and the order issued June 9,1980, see Note 2 of Notes to Financial Statements under Item 8. The Company's motion for reconsideration of the NHPUC's April 10 order has been appealed by the Company and two inter venors to the New Hampshire Supreme Court. 1 The June 9,1980 order of the NHPUC culminated a series of orders and proceedings affecting the level of the Company's New Hampshire retail rates which had commenced with the passage in 1979 of a New Hampshire statute prrhibiting the inclusion of expenditures far CWIP in rate base, granted to the Company at us request by the NHPUC in 1978. After pa.ssage of the statute, the NHPUC excluded CWIP from the Company's rate base as of 3 fay 7,19;9. At the same time, the NHPUC allowed the Company's existing rates to remain in effect, deternming that rates could not be changed without an investigation to establish new rates which would provide a just and reasonable rate of return for the Company. } 17
The NIIPCC's order of June 9,1980 reserved final decision as to the proper allocation of the Company's revenue requirement among and within classes of the Company's retail euste ners for Phase II of that rate case, which is to address those matters. See " National Energy Policy" under Item 1 above. In an order issued in 31 arch,1980 in the same procceding, the NIIPCC permitted the Com-pany to implement on April 1,1980 a new fuel adjustment clause designed to collect on a current basis all fossil fuel costs above base cost, including the energy portion of the cost of purchased power; hear-ing and prior approval by the NIIPUC is required with respect to each month's fuel adjustment rate. The Company previously had a fuel adjustment clause designed to recover such costs after a two months' lag. As a result of the chango in its fuel adjustment clause, the Company will collect through an adjustment to its new fuel adjustment elause the asset carried on its balance sheet in respect of the unbilled fuel cost above base which would otherwise not be collected. This nuet amounting to $18,700,000 at March 31,1980 is being collected over a three-year period commencing June 1,1980. In January,1975, the NIIPUC ordered an investigation into the rate structures of the electric utilities under its jurisdiction. Hearings began in July,1975 and continued from time to time through 1978. While that investigation has not been ofileially terminated, the proceeding has involved only the proper distribution of rates among the various customers and customer chtsses and not overall revenue requirements. Pursuant to an interim order of the NIIPCC issued in January,1977, the Company performed peak-load pricing rate experiments involving certain of its customers and reported the results to the NIIPUC. Legislation was enacted in 1978 requiring the Company to offer time of day and seasonal rates on an optional basis, and such rates have been made available to its residential customers and have been submitted for its other customers. Rate Proceedings -Other On April 28,1978, the Company filed new rates with FERC proposed by the Company to be effee-tive on May 29,1978 that would increase revenue from the Company's wholesale-for-resale customers by approximately $2,400,000 or 7.77c on an annual basis based on a 1978 test year; the new rates went into effect subject to refund on July 29,1978. A settlement agreement regarding these new rates and several other matters pending befom FERC has been approved and is described below. The Company has also filed with FERC a petition requesting the inclusion of CWIP in rate base. After trial of the CWIP issue, the Administrative Law Judge issued an initial decision on January 25,1979, which authorized the Company to inchide in rate base CWIP asswiated with major generating facilities and which allowed the Company a return on common equity of 139. That decision has been appealed to FERC. The Company cannot place wholesale rates based on CWIP into effect unless and until FERC issues a final favorable decision on the CWIP iswue. In another proceeding before FERC, the Company's right to collect through a surcharge approxi-mately $1,850,000 of accrued but unbilled fuel clause revenue was contested by certain wholesale-for-resale customers, and FERC ruled against the surcharge and ordered the Company to refund appro:.i. mately $1,622,000 with interest, the balance not having hm billed. The Company amortized the after-tax cost of this refund over the twelve-month pe6i ended December 31,1980. On December 21,1979, the Company fikd with FERC new rates for its wholesale-for-resale cus-tomers that would increase revenues fmm such customers by approximately $4,294,000, or 10.1rc, on , an annual basis. The Company proposed that the new rates be made effective in two steps parallel to the two increases the Canpany was permitted to make in its retail rates in New Hampshire. The Com-pany requested that the first step emergency increase of approximately $3,567,000, or 8.49, he allowed to become effective on January 22,1980, after a one-day suspension. The Company requested a second 9tep additional rate increase of approximately $727,000 to be allowed to become effective on April 1, 1980, after a short suspension. On February 8,1980. FERC issued its order permitting each of the two increases to become effective as proposed, subject to refund. On January 22, 1950, the Company and its wholesale-for-resale customers filed with PERC an agreement which settled several aspects of the pending FERC proceedings described above. With 18 t
s respect to the rates being billed subject to refund before January 22, 1980, it was agreed that those i rates would be reduced by $450,000 on an annual basis and that refunds retroactive to July 29, d 1978, based on the agreed rate level, would be made; the Company amortized the after-tax cost of the refund over 1980. Pursuant to the agreement, which was approved by FERC, the refund required by the rate settlement was deferred and is being made over a six-month period ending June 30,1981. In addition, the wholesale-for-resale customers agreed not to oppose the Company's request for prompt effectiveness of the two-step increase described above. On July 31,1980, the 3faine Public Utilities Commission granted the Company a retail rate merease of approximately $635,000 or 17% on an annual basis with respect to its 3Iaine customers. The Company and Central 3Iaine Power Company have agreed in principle on the purchase of the Company's retail properties and business in 3Iaine, subject to preparation of appropriate documenta-tion and receipt of regulatory approvals. In 1979 the Company obtained from its 3faine customers approximately 1.4% of its operating revenues. Rates essentially identical to those in effect in New IIampshire prior to December 3,1977 were placed in affect in Vermont on 3Iay 1,1975. On 3Iarch 13,1981, the Company submitted a letter of notification to the Vermont Public Service Board regarding submission of a request for an annual increase in rvtail rates of approximately $350,000. The Company and Green 3Iountain Power Cor-potation have agreed upon the sale of the Company's retail business and properties in Vermont for approximately $727,000 (the price to be adjusted to reflect changes occurring after fiscal 1978), subject to the receipt of necessary regulatory approvals. Revenues from the Company's Vermont busi-ness in 1979 amounted to approximately $740,000, or about 0.25% of the Company's operating revenues. Nuclear Regulatory Commission Construction Permits See "Seabrook Nuclear Project" under Item 1 above for a discussion of administrative and legal (g) proceedings concerning the Seabrook nuclear project. ,G Conversion of Generating Units From Oil to Coal See " Conversion from Oil to Coal" under Item I above for a description of proecedings relating to this subject. Item 4. SECURITY OWNERSHIP OF CERTAIN IIENEFICIAL OWNERS AND 31ANAGE31ENT Information in response to this item as to the beneficial ownership shares of the ('ompany's Com-mon Stock, $5 par value, by all directors and nominees and by all directors and officers of the Company a.s a group is set forth on pages 3 5 and 9 of the Company's definitive proxy statement, dated April 6,1981, used in connection with the Annual 3Iceting of Stockholders to be held 31ay 14,1981. Sueh information is hereby incorporated herein and specifically made a part hereof by reference. Item 5. 31ARKET FOR THE CO31 PANTS CO31310N STOCK AND RELATED SECURITY IIOLDER 31ATTERS The Company's Common Stock is traded on the New York Stock Exchange, where the high and low sales prices during 1980 and 1979 were as follows: Ifigh low Iligh low 1980 1979 First Quarter 17 13 First Quarter 21 % 19 % Second Quarter 17 % 13 % Second Quarter 19 % 17 % Third Quarter 17 % 14 % Third Quarter 19 % 17 % Fourth Quarter 15 l Fourth Quarter 16 % 13 % 18 % 19
1 The Company has paid regular quarterly dividends on its Common Stock since 1946 when its Common Stock first became publicly held. Quarterly dividends of 53( per share were paid duting 1980 and 1979. Subject to the prior rights of shares of the Preferred Stock, $100 par value, and the Preferred Stock, $25 par value, to dividends and to the limilitions set forth in the next succeeding paragraph of this item 5, shares of Common Stock are entitled to dividends when and as declared by the Board of Dirwtors out of any remaining funds legally available therefor. Future dividends will be depend-ent on the Company's future earnings, its cash position, financial condition and other factors. The Article < of Agreement contain certain limitations, applicable so long as any shares of the Preferred Stock are outstanding, on the Company's right to declare dividends on the Conunon Stock out of not income (similar limitations are contained in certain indentures supplemental to the First Mortgage, applicable so long as any bonds of Series II through V are outstanding), or in the event Common Swk Equity (as definal) is less than 257c of Total Capitalization (as defined). Pursuant to terms of the Company's General and Refunding Mortgage Indenture, dividends may not be paid on the Common Stuck in excess of the Company's Net income accumulated after .lanuary 1,1978 less the aegregate amount of all dividends paid or dee:ared on the Preferred Stock of the Company dur-ing such period plus $32,000,000. At December 31,1980, $62,109,000 of Hetained Earnings was not subject to dividend restriction. At December 31,1980, there were 59,158 owners of the Company's Common Stock. Item 6. SELECTED FINANCIAL DATA 1980 1979 1978 1977 1976 (Thousands escept Per Sharc Amounts and Itation) Operating Revenues $ 351,247 $ 292,814 $260,751 $214,787 $196,674 Fuel and Purchased Power Expense 187,248 147,502 115,418 108.310 91,349 Net Income 59,847 40,719 36,507 21,7"" "O,995 Earnings Per Share of Common Stock 2.77 2.56 3.25 2.16 2.53 Dividends Per Share of Common Stock 2.12 2.12 1.94 1.88 1.86 Unfinished Construction e 24,150 518,850 346,382 196,825 103,484 Total Assets 1,254,228 1,010,787 812,101 640,207 540,341 Long-Term Debt 398,856 344,829 287,252 233,110 217,298 Preferred Stock With Mandatory Redemption Requirements 120,000 60,000 30,000 30,000 12,000 Total Capitalization 957,6(M 770,103 599,121 509,542 447,252 Notes Payable- Banks 108,350 114,100 85,325 55,113 - Shares of Common Stock Outstanding (Averace) 16,539 12,643 9,27a e,680 6.372 Ratio of Earnings to Fixed Charges 2.30 9 09 2.87 2.38 2.61 Item 7. MANAGEMEN'I'S DISCUSSION AND ANALYSIS OF FINANCIAL
- CONDITION AND RESULTS OF OPERATIONS Construction Program and Financing Requirements The magnitude of the Company's construction program has continued to cause the Company some difficu!ty in obtaining external financing and in maintaining cash fh,w adequate to fund this program and the costs of its current business operations. The major portion of the Company's con.
struction pu ram has been its 507c ownership interest in the 2300 MW nuclear generating plant in 20
- - - - - - - - _ . - . g p Seabrook, New IIampshire. As described in Note 10 of Notes to Financial Statements, the Company has commitments from other utilities, subject to certain conditions, which vill trduce its interest to about 35%
In 3farch,1980, in view of the unsettled state of the capital markets and the very high cost of external funds, the Company decided to reduce substantially the level of construction on the Sea-b ook plant. It is anticipated that this reduction will continue until all regulatory approvals neces-rary for the reduction of the Company's ownen; hip interest have been obtained and the Adjustment Periods with respect ihereto have fully commenced. The Company's reduced 1981-1986 construction program is estimated at $803,600,000 excluding allowance for funds used during construction of approximately H09,100,000. Financing of this construction program, and the refinancing at maturity of certain long-ter'n debt and the meeting of required sinking fund payments together aggts sating $156,545,000 during this period represent a major undertaking for the Company. The ability of the Company to complete this program is dependent upon receipt of adequate and timely rate increases throughout the perid. If it receives such rate increases the Company estimates that approximately N35,000,000 will be provided by opera-tions (principall: afte: 1983) after deducting total estimated preferred and common stock dividend requirements. Of Gis amount, approximately $143,000,000 represents allowance for borrowed funds used during construction. The Company expects to finance the balance of its reouirements of approxi-mately $760,000,000 from external sources. In order to provide the Company with sufficient earnings for the issuance of General and Re-funding 31ortgage Bonds needed during 1981, on January 14, 1981, the Company filed a request with the New IIan pshire Public Utilities Commission (NIIPUC) for an emergency surcharge designed
, to increase annual revenues by approximately $35,500.000 (about 10.27c). On February 27, 1981,
) the NIIPUC denied the Company's request since in its opinion the Company's request did not reflect the favorable impact on the Company's financial situation resulting from the February,1981 approval of 3fassachusetts 3Iunicipal Wholesale Electrie Company's increased participation in the Seabrook project. In its order, the NHPUC also asserted that the Company had not provided sufficient infor-mation or not taken necessary steps to rednee controllable expenses. The Company has filed a motion for rehearing of the NHPUC's order, which motion was denied on March 26,1981, and has instituted the following measures-a hiring frene; a salary frecre for all senior executives; a deferral of
$8,000,000 in non-Seabrook related construction projects; a deferral t,f $2,500,000 in maintenance projects; the climination, subject to union negotiations, of the employee Jeetric rate discount; and strict limits on nusiness travel and other business expenses. 31anagement believes that the steps out-lined above are not in the best interests of maintaining reliable service to customers. Further periodic rate increases are essential to permit the financing of the Company's construction program.
The Company's permanent financing requirements for the balance of 1981 are estimated to be approximat :ly $107,000,000 assuming that approximately $118,000,000 of short-term bank borrowings are outstanding at the end of the year. These financing requirements give effect to the austerity measuces outEned above and the receipt of the proceeds of approximately $31,500,000 from the sale of 2,200,000 additional shares of common stock in February,1981, and are based on the following assumptions: (1) all Adjustment Periods for the reduction in the Company's interest in the Seabrook project to about 35?c commenee by 3 fay 1,1981, (2) the Company takes steps in April 1981 toward resumption of a normal level of construction on the Seabrook plant, and (3) a rate increase of approximately $35,000,000 on an annual basis is made effective during the second quarter. A rate in. crease is required to allow the Company to earn an adequate rate of return and to produce additional earnings necessary for the issuance of additional General and Refur. ding 3fortgage Honds in the fourth quarter of 1981. The Company will file for rate relief in early April and ask for accelerated a treatment by the NHPUC. 21
The Company's 1981 finanemg requirements are expected to be met by the issue of additional shares of Common Stock, bank or similar debt and, in the fourth quarter, by General and Refunding Mortgage Bonds. The size and timing of these issues will depend on market factors, timing of com-mencement of the needed rate increase, the status of the reduction of the Company's ownership interest in the Seabmok project to about 359, and other factors. The Company's financing plans for the 1982-1986 period are expected to include, subject to change as circumstances warrant, additional shares of common and preferred stock,long-term debt, and nuclear and fmsil fuel financing. Restdts of Operations Net operating revenues (operating revenues less fmsil fuel costs which are recovered under fuel adjustment clause provisions of the Company's tariffs) increased by 10.69 and 2.69, respectively for 1980 and 1979 as compared with the respective preceding years. Substantially all of the increase in 19S0 resulted from rate inemases to retail and whWesale <ustomers. KWII sales increased by approximately 4.19 in 1979 which accounted for substantially all of the increase in 1979 net operat-ing revenues. The ehetric nee is of the Company's customers have increased at a compound annual rate of growth of approximately 4.59 during the six years ended December 31,1980. Although KWII sales were essentially flat in 1980 as compamd with 1979, management is projecting an average annual rate of interest of 4 29 at least through 1990. This is anticipated to be the highest increase of any major electrie utility in New England furnishing estimates to the New England Power Pool. Fuel expense and purchased and interchanged power expense increased significantly in 1980 and 1979 due principally to higher average unit costs of oil and coal. The average unit cost of oil increased by 46% and 299, respectively for 1980 and 1979 and the average unit cost of coal in-creased by 59 and 69, respettively. Federal and state tares on income increased in 1980 as compared with 1979 because of (1) the tax effect of higher pretax financial statement income ($12,121,000) which was offset by an increase in the tax effcets of overheads charged to construction and expensed for tax purposes ($7,737,000), and (2) the effects of additional normalization of depreciation permitted by the NIIPUC in 1980 ( $1,936,000) . Income taxes decreased in 1979 as compared with 1978 primarily because of a redue-tion in the Federal income tax rate ($1,124,000) and an increase in the tax effect of overheads charged to construction and expensed for tax purposes ($3,790,000). Allowances for equity funds and borrowed funds used during construction increased significantly in 19SO and 1979 due principally to the Company's increasing investment in the Seabrook project. The amounts also reflect the higher cost of funds (interest on debt and return on equitv) and resultant increased rates used in capitalizing srrh allowances. Net income has increased significantly over the ti ree year period 1978 through 1980. Earnings per share of common stock have not kept pace, however, due to stock issues necessary to finance the Company's construction program which have increased preferred dividend requirements and the average number of common shares outstanding. Inflation continues to affect every aspect of the Company's business as is evidenced in particular Sy the increasing costs of fuel, costs of construction and the costs of funds necessary to finance the Company's construction program. Management has computed certain data on the effects of inflation which are presented in Note 12 of Notes to FS.ozcial Statements. Such data has been prepared and presented in confonnity with guidelines establishec by the Financial Accounting Standards Board and should be viewed as esperimental and only approurrations of certain effects of inflation on operations of the Company.
=
O
O ltem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PUBLIC SERVICE COMPANf OF NEW HAMPSHIRE STATEMENTS OF EARNINGS Year Ended December 31, 1980 1919 1978 (Thousands of Dollars) Operating Revenues (Note 2) $351,247 $292,814 $260,751 Operating Expenses Operation Fuel 137,969 111,411 71,996 Purchased and Interchanged Power 49,279 36,091 43,422 Other 39,695 36,409 31,490 Maintenance 21,395 19,271 17,502 Depreciation 17,425 15,487 14,752 Federal and State Taxes on Income (Note 3) 22,472 15,066 19,666 Other Taxes, Principally Property Taxes 15,705 14,651 13,585 Total Operating Expenses 303,940 248,386 212,413 Operating Income 47,307 44,428 48,338 Other Income and Deductions p Allowance for Equity Funds Used During Construction (Note 4) 34,487 15,188 7,828 g j Equity in Earnings of Afliliated Companies 877 770 870 Other -Net 1,492 1,279 983 Total Other Income and Deductions 36,856 17,237 9,681 Income Before Intarest Charges 84,163 61,665 58,019 Interest Charges Interest on Long-Term Debt 39,711 28,247 21,073 Other Interest 21,847 14,465 8,201 Allowance for Borrowed Funds Used During Construe-tion (Note 4) (37,242) (21,756) (7,762) Net Interest Charges 24,316 20,946 21,512 Net Income 59,847 40,719 36,507 Preferred Dividend Requirements 14,022 8,380 6,391 Earnings Available for Common Stock $ 45,825 $ 32,339 $ 30,116 Average Shares of Common Stock Outstanding (Tbot. sands) 16,539 12,643 9,275 Earnings Per Share of Common Stock $2.77 $2.56 $3.25 Dividends Per Share of Common Stock $2.12 $2.12 $1.94 Ratio of Earnings to Fixed Charges 2.32 2.29 2.87 See accompanying Notes to Financial Statements. im i i \u) 23
1 PUBLIC SERVICE CO31PANY OF NEW liA31PSIllllE ' i BALANCE SIIEETS ASSETS Decemiser 31, Decemtecr 31, 1980 1979 (Tliousand.of Dollars) Utility Plant, at Original Cost Electric Plant $ 548,401 $ 524,415 Less Accumulated Provision for Depreciation 161,703 147,398 386,698 377,017 (Jnfinished Construction (Principally Nuclear Generating Projects) (Note 10) 724,150 518,880 Net Utility Plant 1,110,848 895,897 Inymtmenta Nuclear Generating Companies 9,651 9,627 Real Estate Subsidiary 4,944 3,506 Other, at Cost 184 184 Total Investments 14,779 13,317 Current Assets Cash 3,729 2,137 Accounts Receivable 42,385 28,097 Unbilled Revenue 10,160 8,202 Deferred Collection of Fuel Cmts 16,373 13,775 Refundable Federal Income Tax - 5,197 Fuel, Materials and Supplies, at Cost 37,122 32,002 Prepayments 2,867 3,576 Total Current Assets 112,636 92,986 Other Assets Deferred Collection of Fuel Cmts 9,776 - Other 6,189 8,587 Total Other Assets 15,965 8,587
$1,254,228 $1,010,787 9ee accompanying Notes to Financial Statements.
O 24
r PUBLIC SERVICE COMPANY OF NEV' Lt.lPSHIRE BALANCE SHEETS CAPITALIZATION AND LIABILITIES December 31, December 31, 1980 1979 (Thou nd.or poline.) Capitalization Common Stock Equity Common Stock-$5 Par Value Authorized: 27,000,000 Shares Outstanding: 18,203,922 Shares (1979 - 13,969,133) $ 91,020 $ 69,846 Other Paid-In Capital 207,578 166,265 Retained Earnings (Note 5) 88,834 76,649 Total Common Stock Equity 3S7,432 312,760 Preferred Stock (Note 6) With 3fandatory Redemption Requirements 120,000 60,000 Without 31andatory Redemption Requirements 51,316 52,514 Long-Term Debt-Net (Note 7) 398,856 344,829 Total Capitalization 957,6M 770,103 Current Liabilities d Notes Payable-Banks (Note 8) 108,350 114,100 Long-Term Debt to be Retired Within One Year (Note 7) 24,467 555 Accounts Payable 61,847 50,244 Accrued Taxes . 6,181 3,093 Accrued Interest 15,302 11,249 Otner . 2,759 1,788 Total Current Liabilities 218,906 181,029 Deferred Credits Accumulated Deferred Investment Tax Credits 23,761 29,717 Accumulated Deferred Taxes on Income 53,380 29,482 Other 577 456 Total Deferred Credits 77,718 59,655 Commitments and Contingencies (Note 10)
$1,254,228 $1,010,787 See accompanying Notes to Financial Statements.
O U 25 m.,ii i iii
l l l PUBLIC SERVICE COMPANY OF NEW IIAMPSIIIRE STATEMENTS OF CIIANGES IN FINANCIAL POSITION O Year Ended December 31, 1980 1979 1978 (TI,ousands of Dollars) Source of Funds From Operations Net Income $ 59,847 $ 40,719 $ 36,507 Principal Non-Cash Charges (Credits) to income Depreciation ... 17,425 15,487 14,752 Allowance for Equity Yunds Used During Construction (34,487) (15,188) (7,828) Deferred Taxes and Investment Credit Adjustments 17,941 24,996 7,024 Total from Operations 60,726 66,014 50,455 From Outside Sources Sale of Long-Term Debt 81,000 60,000 60,000 Sale of Preferred Stock 60,000 30,000 - Sale of Common Stock 64,615 79,716 24,309 Change in Short-Term Borrowings (5,750) 28,775 30,212 Advance Payments from Joint Project Participants - 10,628 - Total from Outside Sources 199,865 209,119 114,521 Decrease in Working Capital 30,010 - 33,510 Total $290,601 $275,133 $198,486 Application of Funds Property Additions $232,853 $192,566 $173,539 Allowance for Equity Funds Used During Construction (34,487) (15,188) (7,828) Dividends 47,662 35,210 24,092 Reduction of Long-Term Debt 26,153 1,214 5,947 Repayment of Advances from Joint Project Participants 6,033 - - Increase in Working Capital - 58,0M - Deferred Collection of Fuel Costa 9, f76 - - Other Applications-Net 2,611 3,267 2,736 Total $290,601 $275,133 $198,486 Increase (Decrease) in Working Capital
- Cash $ 1,592 258 $ (3,050)
Receivables 14,288 509 5,596 Inventories 5,120 11,259 3,707 Long-Term Debt to be Retired Within One Year (23,912) 4,676 3,397 Accounts Payable (17,636) 28,419 (33,125) Accrued Taxes (3,088) 9,256 (11,470) Other (6,374) 3,687 1,435 Total Increase (Decrease) In Working Capital * $(30,010) $ 58,064 $(33,510)
- 0ther than Short-Term Debt and Advances from Participants.
See accompanying Notes to Financial Statements. 26
PUBLIC SERVICE CO3tPANY OF NEW IIA 31PSHIRE ip) 'a STATE 31ENTS OF RETAINED EARNINGS Year Ended December 31, 1980 1979 1978 (Thousands of Dollars) Balance at Beginning of Year $ 76,649 $ 71,140 $58,725 Net Income 59,847 40,719 36,507 136,496 111,859 95,232 Deduct Dividends Declared Preferred Stock, at Required Annual Rates 12,822 7,966 6,394 Common Stock 34,840 27,244 17,698 Total Dividends 47,662 35,210 24,092 Balance at End of Year (Note 5) $ 88,834 $ 76,649 $71,140 STATE 31ENTS OF OTHER PAID-IN CAPITAL Year Ended December 31 (, 1980 1979 1978 (Thousands of Dollare) Balance at Beginning of Year $166,265 $108,232 $ 90,409 Excess of Proceeds over the Par Value on the Issuance of Common Stock Issued - 4,234,789 Shares in 1980, 4,182,164 Shares in 1979 and 1,342,455 Shares in 1978 44,264 59,468 17,868 Preferred Stock Issuance Expenses (2,951) (1,435) (45) Balance at End of Year $207,518 $166,265 $108,232 See accompanying Notes to Financial Statements. b 27 i
PUllLIC SEltVICE CO31PANY OF NEW IIA 31PSillitE NOTES TO FINANCIAL STATE 31ENTS
- 1. SuuuAny or AccouxTixo PoLicin; Itegulation and Operations: The Company is subject, as to rates, accounting and other matten, to the regulatory authority of the New Hampshire Public Utilities Commission (NIIPl'C), the Federal Energy Regulatory Commission (FEllC) and, to a lesser extent, the public utilities corimis-sions in other New England states where the Company does business.
Investr ents: The Company follows the equity methml of accounting for its investments in nuclear generating companies and in its wholly-owned real estate subsidiary. The Company's invest-ment in this subsidiary is principally in the form of advances. The Company's ownership interests in . nuclear generating companies are: Ownership Company Percent Yankee Atomic Electric Company 7?i Connecticut Yankee Atomic Power Company 59 3faine Yankee Atomic Power Company 5% Vermont Yankee Nuclear Power Corporation 49 In the case of each of the nuclear generating companies, pursuant to provisions of purchased power contracts which are regulated by the FEllC, the Company is entitled to its ownership percent of total plant output and is obligated to pay a similar share of each company's operating expenses and return on invested capital. Approximately 7.49, 9.39 and 10.9% of the Company's total energy requirements were furnished by these companies in 1980,1979 and 1978, respectively. Utility Plant: Provision for depreciation of utility plant is com uted s on a straight line method at rates based on estimated service lives and salvage values of the several classes of property. The depreciation provisions were equivalent to overall effective rates of 3.489, 3.239 and 3.19% of depreciable property for 1980,1979 and 1978, respectively. 3Iaintenance and repairs of property are charged to maintenance expense. Replacements and betterments are charged to utility plant. At the time properties are retired, the cost of property retired plus costs of removal less salvage are charged to the accumulated provision for depreciation. Deferred Collection of Fuel Costs: The Company implemented a new retail fuel adjustment clause on April 1,1980, which was designed to eliminate the lag between the time increased fuel costs are incurred by the Company and the time such costs are billable to customers. Under the new clause, estimated changes in fossil fuel costs are billed to customers on a monthly basis at a rate which is determined quarterly. Pifferences, if any, between estimated and actual costs are recognized in deter. mining fuel adjustment clause billing rates for the second subsequent quarter; accordingly, such differences are deferred and amortized to expense as collected from customers. At April 1,1980, the unbilled fuel costs under the Company's old fuel adjustment clause were approximately $18,700,000 which the NIIPUC is permitting the Company to collect over a thne-year period ending 3 fay 31,1983. Operating Iterenue's: Revenues are based on billing rates authorized by applicable federal and state regulatory commissions which are applied to customers' consumption of electricity. The Com-pany reconis estimated unbilled revenue at the end of accounting perimls. Income Tires: The tax effect of differences between pretax income in the financial statements and income subject to tax, which are the result of timing differences, are accounted for as prescribed by and in accordance with the ratemaking policies of the NIIPUC. Acconlingly, provisions for de-ferred income taxes are recognized only for specified timing differenees. Tax reductions attributable 28
i n PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
/
t NOTES TO FINANCIAL STATEMENTS-(Continued) ; 1
- 1.
SUMMARY
OF ACCoUNTINo POUCIES-(Continued) to other timing differences are flowed through to net income as reductions of income tax expense. See Notes 2 and 3. I Investment tax credits earned att deferred and amortized to income over the lives of the related properties, sillotcance for Funds Used During Construction: Allowance for funds used during construction is the estimated cost, during the period of construction, of equity funds and borrowed funds used for construction purposes which are not currently recovered from customers through revenues. See Note 4. Earnings Per Share: Earnings per share are based on the average number of common shares outstanding, after recognition of preferred dividend requirements. Ratio of Earnings to Fixed Charges: Earnings represent the aggregate of net income, less un-distributed income of unconsolidated companies, plus provisions for federal and state taxes on income and fixed charges. Fixed charges represent interest, related araortization and the interest component of annual rentals.
- 2. Ortrur No REvrNuts For the period December 3,1977 through 3 fay 6,1979 the Company's New Hampshire retail rates were based in part upon the inclusion in the Company's rate base of a portion of the costs of construction work in progress (CWIP) associated with major generating projects. The inclusion of (q
V CWIP in rate base increased revenues from customers to cover the costs of financing such CWIP. On 3tay 7,1979 a New Hampshire statute prohibiting the inehtsion of CWIP in rate base became effective. By order dated August 29, 1979 the NHPUC excluded CWIP from the Company's rate base as of 3 fay 7,1979, but determined that the Company's rates would remain unchanged pending an investigation to determine the Company's revenue requirements and to establish fair and reason-able rates. On August 31, 1979, the Company filed a new retail tariff with the NUPUC designed to increase revenues by about $18,500,000 on an annual basis. This filing was suspended by the NHPUC and consolidated with its rate investigation into the elimination of CWIP from rate base. The NHPUC granted the Company an emergency temporary surcharge effective December 28, 1979 designed to increase annual revenues by approximately $11,970,000, and the temporary sur-charge was increased to $18,500,000 effective April 1,1980 by order of the NHPUC. On April 10, 1980, the NHPUC issued a supplemental order in the combined proceeding requiring the Company to refund to its customers approximately $11,300,000 based on a finding that during the period from 3 fay 7,1979 to December 28, 1979 the Company's rates were based in part on CF" and, in addi-tion, that the Company was accruing AFUDC on CWIP previously included in rate base. The April 10 supplemental order requires that the refund be made over a 36. month period commencing .Iune 1, 1980, and that when all regulatory approvals for the reduction of the Company's ownership interest in the Seabrook plant are received, the period for the refund will be cut in half and the rate of refund doubled. The Company and two intervenors have appealed the April 10 order to the New Hampshire Supreme Court. Pending disposition of this appeal, the refunds are being made to customers. On .Iune 9,1980, the NHPUC issued its final decision in the combined proceeding which granted the Company an increase in its New Hampshire retail rates of approximately $18,3.%,000, superseding the surcharges. The NHPUC's order is based on a test year ended 3 fay 31,1979 and in part on an increase in the depreciation rate for distribution plant and normalization of the tax effects of all tim. ing differences applicable to post 1970 utility plant additions. Increased provisions for deprecia-p tion and deferred income taxes have been recorded in the Company's financial statements commene-Q ing April 1,1980. 29
PUllLIC SEltVICE CO31PANY OF NEW IIA 31PSilll(E NOTES TO FINANCIAL STATE 31ENTS -(Continued)
- 2. OIurr No llEVENUEs - (Continued)
The Company is accounting for the combined effect of the April 10 supplemental order and the June 9 final decision as one rate order, and therefore, the $11,300,000 refund is being netted against the rate increase of $18,355,000 over the period of the refund which commenced June 1,1980. Ae-cordingly, commencing June 1,1980 and continuing until all regulatory approvals for the com-mencement of the reduction of the Company's ownership interest in the Seabrook plant are received, the net increase in annual revenues (based on a test year ended 3tay 31,1979) will aggregate approxi. mately $14,600,000. On July 29, 1978, the Company began billing new rates to its wholesale-for-resale customers de-signed to increase annual revenues by approximately $2,400,000 (about 7.7%) based on a 1978 test year. In January 1980, the Company reached an agreement in principle with these customers pur-suant to which, in part, the Company's revenues would be reduced by approximately $150,000 on an annual basis and rate rvfunds would be made retroactive to July 29, 1978. Pursuant to the agree-ment, which was approved by FEllC, the refund required by the rate settlement was deferred and is being made over a six month period ending June 30, 1981. The Company recorded the after-tax cost of this mfund in 1980. On December 21,1979, the Company filed with FEllC new rates for its wholesale-for-resale cus-tomers designed to increase revenues by approximately $4,294,000, or 10.17c, on an annual basis. A first step emergency increase of approximately $3,567,000, or 8.4Fc, was allowed to become effective on January 22,1980, and a second step additional rate increase of approximately $727,000 became effective on April 1,1980. As a result of these increases, operating revenues for 1980 increased approximately $3,855,000. These increases are being collected under bond and are subject to pos-sible rcfund upon a final rate decision by tho FEllC.
- 3. INCol:E TAXES The components of income tax expense are as f.!!cw 1980 1979 1978 (Thousands of 1)ollars)
Federal Operating Income $ 15 $(13,952) $10,166 Other Income and Deductions 145 324 (46) 160 (13,628) 10,120 State, Included in Operating Income 4,518 2,983 2,468 Total Current Income Taxes 4,678 ] 10,645) 12,588 Deferred Federal Operating Income 24,516 7,634 5,527 Other Income and Deductions 2 7 (8) _4,518 7,641 5,'> 19 Deferred State Operating Income (620) 126 93 Total Deferred Income Taxes 23,898 7.767 5.612 Investment Tax Credit Adjustment (5,957) 18,275 1,412 Total Income Tax Expense $22,619 $ 15,397 $19,612 Investment tax credits of approximately $15,200,000, $18,500,000 and $11,400,000 were generated for 1980,1979 and 1978, respectively. There are limitations on the amounts of such credits which can 30
m PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES TO FINANCIAL STATEMENTS- (Continued)
- 3. INCOME TAXES- (Continued) be used, however, and based on these limitations as of Decemh2r 31,1980 the Company has invest.
ment tax credit carry forwards available for use in subsequent years of approximately $29,800,000, 1 of which $14,600,000 expires in 1986 and $15,200,000 expires in 1987. In accordance with the requirements of the NHPUC, provisions for deferred income taxes are recognized for the following timing differences: 1980 1979 1978 A portion of Depreciation and Amortization of Plant Facilities * $ 4,203 $ 834 $ 858 Accrued and Unbilled Fuel Adjustment Charges (ri.%7) 1,322 1,049 Deferred Fuel Costs 4,174 - - The Interest Component of Allowance for Funds Used During Construction 17,093 9,987 3,713 Investment Tax Credit Applied to Deferred Taxes 4,383 (4,383) - Other 2 7 (8)
$23,898 $ 7,767 $ 5,612
' Current income tax reductions are attributable to (1) the tax depreciation permitted under the Class Life ADR System of the 1971 Revenue Act in excess of the tax depreciation permitted under the Guideline Lives provisions of the 1969 Revenue Act, (2) the amortization of certain pollution control facilities over five year periods, and (3) commencing April 1,1980 all timing differences applicable to post 1970 utility plant additions.
The principal reasons for the differences between total income tax expense and the amount cal-culated by applying the Federal income tax rate to income before income tax are as follows: 1980 1979 1978 (Thousands of Dollars) Income Before Income Tax $82,466 $ 56,116 $56,119 Federal Statutory Rate 46 % 46 % 48 % Expected Tax Expense 37,934 25,813 26,937 Increase (Reductions) in Taxes Resulting from Overheads Charged to Construction and Expensed for Tax Purposes (16,071) (8,334) (4,544) Excess of Tax Over Book Depreciation (Note 2) 742 (1,976) (2,265) State Taxes Net of Federal Income Tax Benefits 2,105 1,679 1,332 Unbilled Revenues (901) (549) _(629) Other Deductions, each less than 5% of Expected Tax Expense (1,190) (1,236) (1,219) Total Income Tax Expense $22,619 $ 15,397 $19,612
- 4. ArroWANCE Foa Fusos USED Dua No CossracCTroN (AFUDC)
AFUDC is the estimated cost, during the period of construction, of funds invested in the con-struction program which is not recovered from customers through current revenues. Such allowance is not realized in cash currently but under the rate-making process the amount of the allowance will be recovered in cash over the service life of the plant in the form of increased revenue collected as a result of higher plant costs. The NHPUC, for the period December 3,1977 through May 6,1979, permitted the Company to include in rate base a portion of the costs of CWIP associated with major
- generating projects. Therefore, AFUDC for this period did not include the cost of funds invested
- 4 V ) in the construction program which were provided by revenues of the Company.
31
PUBLIC SEltVICE CO31PANY OF NEW IIA 31PSIllllE NOTES TO FINANCIAL STATE 31ENTS - (Continued) ;
- 4. ALLOWANCE Fon FUNos USED DURING CONSTRUC'rION ( AFUDC) - (Continued)
When CWIP is not included in rate base, the cost of funds invested in CWIP (interest on debt and return on equity) is not provided by revenues and AFUDC is added to the cost of the plant f being constructed with off-setting credits in the statement of earnings. Since the credits are not cash items, cash for interest and dividends may need to be provided in whole or in part by additional financinc during the coastruction period. As described in Note 2 above, as of May 7,1979, the Com-pany was precluded frora basing its rates upon CWIP in the rate base. Therefore, as of 3Iay 7,1979, consistent with the August 29, 1979 rate order, the Company began recording AFUDC for CWIP ! previously included in the Company's rate base, thelvby increa. sing AFUDC by annroximately $5,500,000 for 1979. l The equity funds component of AFUDC equalled 57.69 of net income for 1980. The Company ) capitalized AFUDC at annual rates of 9%9 for 1978,109 for 1979 and 129 for 1980.
- 5. DIvmEND RESTRICTION l
Pursuant to terms of the General and Rafunding Mortgage Indenture, dividends may not be paid on the common stock in excess of net income accumulated after January 1,1978 less the aggre-gate amount of all dividends paid or declared on the preferred stock of the Company during such perim! plus $32,000,000. At December 31,1980, retained earnings of $62,109,000 were not subject to dividend restriction. 6 PRtreRann STocx The Articles of Agreernent authorize the Company to issue 1,350,000 shares of Preferred Stock, $100 Par Value and 5,000,000 shares of Preferred Stock, $25 Par Value. The dividends of all series outstanding are cumulative. Preferred Stock outst4mding is as follows: (a) With 3f andatory Redemption Requirements Shares Dividend Par Value Outstanding 1980 1979 (Thou. ands of Dollars) 7.64 % $100 120,000 $ 12,000 $12,000 9.00 % $100 180,000 18,000 18,000 11.24 % $ 25 1,200,000 30,000 30,000 17.00 9 $ 25 1,200,000 30,000 - 15.00 % $ 25 1,200,000 30,000 -
$120,000 $60,000 (b) Without Mandatory Redemption ihquirements Shares Disidend Par Value Out tanding 1980 1979 (Thousands of Dollars) 3.35 9 $100 102,000 $ 10,200 $10,200 4.50% $100 75,000 7,500 7,500 5.50 % $100 36,163 3,616 4,814 (1979-48,142) 7.92 9 $100 150,000 15,000 15,000 11.00 % $ 25 600,000 15,000 15,000
$ 51,316 $52,514 The annual Sinking Fund requirements for Preferred Stocks with mandatory redemption re-quirements are as follows: 1981 - None, 1982 - $1,0S0,000, 1983 - $1,0S0,000, 1984 - $1,560,000 and 1985 - $6,060,000.
32
PUBLIC SERVICE COMPANY OF NEW ILOIPSHIRE (N i NOTES TO FINANCIAL STATEMENTS- (Continued)
- 7. LONa-Tran Drur 1980 1979 First Mortgage Bonds Series II- 3%%, Due 1984 $ 10,337 $ 10,483 Series I- 3%%, Due 1986 6,926 6,972 Series M- 4%9c, Due 1992 21,786 21,952 Series N- 61/g%, Due 1996 15,719 15,847 Series 0- 6%%, Due 1997 13,951 14,076 Series P- 7%%, Due 1998 14,036 14,237 Series Q- 9 %, Due 2000 18,922 19,162 Series R- 7%%, Due 2002 19,223 19,398 Series S- 9 c/,, Due 20M 19,493 i r,628 Series T-12%%, Due 1981 24,301 24,719 Series U-10%%, Due 1985 14,674 14,970 Series V- 9%%, Due 2006 14,835 15,000 Series W-10%%, Due 1990 10,000* 10,000*
Series X - 12 %, Due 1999 9.302' 9,302' 213,505 215,746 O Less-First Mortgage Bonds (*) deposited with Trustee
\ of the General and Refunding Mortgage Indenture as additional security for General and Refunding Mortgage Bonds 19,302 19,302 Total First Mortgage Bonds . 194,203 196,444 General and Refunding Mortgage Bonds Series A- 10%%, Due 1993 60,000 60,000 Series B - 12 %, Due 1999 60,000 60,000 Series C- 14%%, Due 2000 30,000 -
Series D - 17 %, Due 1990 23,000 - Promissory Note, Due January 7,1982, with interest at 116% of a specific bank's prime rate plus 0.25% 25,000 25,000 Eurodollar Term Loan, Due Augus'. 25, 1982, with interest at the rate of %% over the Lowlon interbank offered rate for three or six month Eurodollar deposits 28,000 - Pollution Control Revenue Bonds 99, Due December 1984 5,800 5,800 Total Long-Term Debt 426,003 347,244 Less: Long-Term Debt to be Retired Within One Year 24,467 555 Unamortized Premium and Discount 2,680 1,860 27,147 2,415 Long-Term Debt-Net $398,856 $344,829 The annual Sinking Fund requirements with respect to First Mortgage Bonds, which may le p met by the payment of cash or bonds or, up to one-half of their amounts, by the certification of addi-( tional property, are as follows: 1981 - $2,636,318, 1982 - $2,052,984, 1983 - $2,052,984, 1984 - 33
PUllLIC SERVICE CO31PANY OF NEW IIA 31PSIIIHE NOTES TO FINANCIAL STATE 31ENTS - (Continued)
- 7. Losc-Tran Ursr- (Continued)
$2,052,984,1985 - $1,928,846, and 1986 - $1,678,846. Annual Sinking Fund requirements with re-spect to General and R. funding 3fortgage Bonds during the six years through 1986 are $5,460,000 payable in ca.sh in 1983 through 1986. Long-term debt maturities, excluding the aforementioned Sinking Fund requirements, are as fol-lows: 1081 - $24,135,000, 1982 - $53,000,000, 1983 - None, 1984 - $15,973,000, 1985 - $14,250,000, and 1986 - $6,753,000. Under the terms of the First 3fortgage Indenture and the General and Refunding 31ortgage In-d mture, substantially all utility property of the Company is subject to the liens thereof. Due to certain restrictions in the Company's First 31ortgage Indenture, no significant amount 01 First Afortgage Bonds may be issued thereunder until an operating license is obtained for Seabrook Unit =1, not anticipated before late 1982.
- 8. Suonr-Tenu Bonnowlsos The Company uses borrowings from banks as an interim method of financing construction of new facilities. At December 31, 1980, the Company had line of credit agreements with New Hampshire banks aggregating $4,600,000 and a revolving credit agreement with other commercial banks which permits the Company to borrow up to $130,000,000 through No, ember 16, 1981 subject to periodic review by the banks; amounts outstanding under the agr(ement mature on November 17,1981. The Company pays com'nitment fees on the revolving credit agreement and maintains compensating bal-ances for certain line of credit agreements. The effective cost of borrowing under the revolving credit agreement, including fees and assuming the available credit ia fully utilized, is 1169 of the prime interest rate of a specified bank.
Information regarding short-term borrowings is as follows: 1980 1979 1978 Cl housands of I)ollars) 3Iaximum Short-Term Bori , wings $134,350 $114,100 $88,113 Average Amount Outstanding (Based on 31onth-End Balances) 106,038 87.056 66,911 Average Interest Rate At Year End 23.17 9 16.43 9 12.64 9 During the Year 18.13 9 15.15 9 lI.36"c On February 11, 1981 the Company sold 2,200,000 shares of co:nmon stock. Proceeds of $31,5M,000 were used to reduce short-te m bank borrowings.
- 9. Possios l u x The Company has a non-contributory pension plan covering full time employees who have met a minimum service requirement. The Company's policy is to fund current pension costs accrued. Costs were $3,450,000, $2,800,000 and $2,400,000 in 1980,1979 and 1978, respectively, and include amortiza.
tion of past service costs over 25 years. Basui upon the most recent actuarial report as of lanuary 1, 1980, the actuarial present value of accumulated plan benefits aggregating $34,296,000 ($32,498,000 vested and $1,798,000 non-vested) exceeded the net asset available for benefits of $27,439,000 by $6,857,000. The assumed rate of return used in determining the actuarial present value of accumulated plan benefits was 5.09 34
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES TO FINANCIAL STATEMENTS - (Continual)
- 10. Couunn!ENTS AND CoNTINGENCIM The Company's ownership interests and its share of total expenditures included in Unfinished Construction for the jointly-owned nuclear facilities in which it is participating are as follows:
i Ownership Percent 1980 1979 (Thousands of Dollare) Seabrook #1 and #2 50.0000 % $663,500 $470,300 Pilgrim #2 3.4700 14,400 11,900 3Iillstone #3 3.8910 35,600 27,000
$713,500 $509,200
- The Company has for some time been experiencing difileulties in obtaining external financing for i ts construction program and in maintaining cash flow adequate to fund this program and the costs of current business operations. In 3farch 1979, in anticipation of legislation adopted in New Hamp-shire eliminating CWIP from rate base (see Note 2) and the resultant difficulty of financing a 50%
interest in the Seabrook plant, the Company decided to sell all of its Pilgrim #2 and Millstone #3 ownership interests and to reduce its ownership interest in the Seabrook plant by offering 22% to other New England utilities. As a result of its offer, the Company has commitments from other utili. ties to acquire ownership interests of 14.76503 % in the Seabrook plant and has contracted (subject to receipt of necessary regulatory approvals) for the sale of approximately two-thirds of its interest in Millstone #3. The Company has received expressions of interest from other utilities for the balance Q of its interest in Millstone #3 No expressions of interest have been received by the Company with respect to its offer of its interest in Pilgrim #2. Each utility acquiring an ownership interest in the Seabrook plant will acquire its interest grad-ually over an Adjustment Period. During the Adjustment Period, the accepting utilities will share pro rata the costs otherwise attributable to the Company's mvnership interest until their aggregate investment in the Seabrook plant has been increased by approximately 15% and the Company's investment decreased to approximately 35% of the total investment of all participants. In March 1980, in view of the unsettled state of the capital markets and the very high cost of , external funds, the Company decided to reduce the level of construction at the Seabrook plant until the capitel markets stabilized and the regulatory approvals for increased ownership interests in the l plant (the principal condition necessary for the start of the Adjustment Period) were obtained. Most spprovals have now Seen obtained. As a result, the Adjustment Period for utilities acquiring an anership interest of 6.25576% commenced on January 31,1981 and the Adjustment Period for the Massachusetts Municipal Wholesale Electric Company (3D1WEC) which is acquiring an additional ownership interest of 6.00091 % commenced on February 28, 1981. However, until 3D1WEC has completed its initial financing, the Company has agreed to assume the portion of the Seabrook plant costs applicable to 3D1WEC's additional ownership interest. These costs will be reimbursed, with interest, to the Company by 3D1WEC upon completion of its initial financing. If 3DIWEC is unable to complete its financing by June 30,1981,3D1WEC's Adjustment Period will not commence until the first business day after consummation of 3D1WEC's initial financing. Approvals are still pending i regarding the remaining 2.50836% ownership interest committed for by other utilities. I The Company's cor.struction program expenditures (excluding AFUDC) are estimated to be approximately $57,100,000 for 1981 and $746,500,000 for 1982 through 1986 assuming (1) the Com-v*b pany's ownership interest in Seabrook is reduced to approximately 359 with all Adjustment Periods 35
PUllLIC SEltVICE CO31PANY OF NEW IIA',lPSIIIIIE NOTES TO FINANCIAL STATE 3tF2iTS - (Continued)
- 10. Cosotrr31ENTS AND CoNTINGENClm- (Continued) commencing by 31ay 1,1981, (2) its interest in 31illstone #3 is old in 1982 and (3) the reduced level of Seabrook construction continues through 31 arch,1981. Thero can be no assurance that the remaining approvals and financing required by other utilities which are necessary for the proposed reduction in the Company's interest in the Seabrook project to about 35?c will be obtained and the Company's ability to obtain necessary financing may be adversely affected if other utilities acquilt significantly less than 15% of the Seabrook plant.
See "3Ianagement's Discussion and Analysis of Financial Condition and liesults of Operations-Construction Program and Financing Itequirements" for a discussion of the NIIPUC denial of the Company's request for emergency rate relief in February,1981; Company actions to conserve cash in light of the NIIPUC order; 1981 external financing requirements, and the necessity of increased rates ti. nermit the issuance of bonds. At December 31,1980, based on earnings and capitalization tests of vario, agreements and indentures the Company could have issued approximately $SG,700,000 of preferreu ".oek (dividend rate of 14.5% assumed), approximately $76,300,000 of additional short-term unsecured indebtedness and approximately $28,850,000 of General and llefunding 3fortgage llonds (interest rate of 14.5% assumed). Construction of the Seabrook project has required numerous approvals and permits from various state and Federal regulatory agencies. The process of obtaining these approvals and permits has been long and complex, has twen consistently oppmed by a number of intervening groups, has included demonstrations at the Seabrook site and has been plagued by lengthy delays which have resulted in greatly increased costs. One court appeal from Fedtral regulatory approvals is pending and further appeals are possible. The Company is unalde to predict what effect financing problems or further administrative or court decisions relating to Nuclear Itegulatory Commission or Environmental Pro-tection Agency actions may have on the Company's ability to complete the Seabrook project or on the ultimate cost thereof.
- 11. UNAUDITED QUARTElu' INFOR31ATION The following quarterly information is unaudited, and, in the opinion of management, is a fair summary of results of operations for such periods. The fourth quarter of 1979 includes a rate refund of approximately $1,000,000 which reduced earnings per share of common stock by $0.0L Other variations between quarters reflect the seasonal nature of the Company's business and the effect of rate increases in 19 '
Three 3tonth Ended December 31, September 30, June 30, 5farch 31, 1980 1979 1980 1979 1980 1979 1980 1979 (Timu ande except Per Share Amounts) Operating Revenues $94,542 $ 73,957 $77,980 $72,919 $75,527 $65,866 $103,198 $s0,072 Operating Income 11,59s 10,077 9,114 10,291 10,382 9,302 16,213 14,758 Net Income 15,128 9,118 14,974 11,049 12,516 8,335 17,199 12,217 Preferred Disidend Requirements 4,469 2,422 3,656 2,420 3,449 1,952 2,418 1,586 Earnings Available for Common Stock 10,659 6,696 11,258 N,629 9,097 6,383 14,781 10,631 Average Shares of Common Stock Outstanding 18,173 13,931 17,701 13,460 15,562 11,823 14,690 11,319 Earnings Per Nhare of Common Stock $ 0.59 $ 0.48 $ 0.64 $ 0.64 $ 0.59 $ 0.51 $ 1.01 $ 0.94 30
fG PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE (v) NOTES TO FINANCIAL STATEMENTS-(Continued)
- 12. UNAUDITED INFoRMATIoN ON Tile EFFECTS oF CHANGINa PRICES The following statement of earnings adjusted for changing prices for the year ended December 31,1980 should be viewed as an estimate of the effects of changing prices on the operations of the Company:
Constant Current Conventional Dollar Coot Historical Average Ascrage Coet 1980 Dollars 1980 Dollars (Thousands of Dollars) Operating revenues $351,247 $351,247 $351,247 Operation and maintenance expense 248,338 248,338 248,338 l Depreciation expense 17,425 36,308 41,821 Federal and state taxes on income 22,472 22,472 22,472 Other taxes 15,705 15,705 15,705 Interest expense-net 24,316 24,316 24,316 Other income and deductions-net (36,856) (36,856) (36,856) 291,400 310,283 315,796 Income from continuing operations (excluding redue-tion to net recoverable cost) $ 59,847 $ 40,964* $ 35,451'
) Reduction to net recoverable cost $(96,843) $(91,330)
Gain from decline in purchasing power of net amounts owed 71,627 71,627 Net $(25,216) $(19,703) Effect of increase in general price level $186,703 Increase in specific prices (current cost) of property, plant, and equipment held during the year 106,497 Excess of increase in general price level over increasa in specific prices $ 80,206
' Including the reduction to net recoverable cost, the income (loss) from continuing operations on a constant dollar and a current cost basis would have been $(55,879).
Constant dollar amounts shown represent historical cost stated in terms of dollars of equal pur-chasing power, as measured by the Consumer Price Index for all Urban Consumers (CPI.U). The current cost of plant was determined by indexing surviv'ng plant by the IIandy-Whitman Index of Public Utility Construction Costs. Since the utility plant is not expected to be replaced precisely in kind, current cost does not necessarily represent the replacement cost of the Company's productive capacitv. The current year's provisions for depreciation on the constant dollar and current cost amounts of utility plant were determined by applying the Company's depreciation rates to the indexed plant amounts. Current cost amounts reflect the changes in specific prices of utility plant from the date acquired to the present, ,g and differ from constant dollar amounts to the extent that the general rate of inflation has increased
- i ; more rapidly than specific prices ($80,206,000). At December 31, 1980, current cost of property, 37
PUllLIC SERVICE CO31PANY OF NEW IIA 31PSillllE NOTES TO FINANCIAL STATE 31ENTS - (Continued) O
- 12. UNAlmmV INFOR1t ATioN ON THE EPPECTS OF CHANQNo Piucr.s- (Continued) plant and equipment, net of accumulated depreciation, was $1,761,285,000 while historical net cost was $1,110,848,000.
Fuel inventories, the cost of fuel used in generation, and the energy component of purchased power costs have not been restated from their historical cost in nominal dollars. llegulation limits the recovery of fuel and purchased power costs through the operation of adjustment clauses to actual cost incurred during the period. For this reason fuel inventories are effectively monetary assets. Income taxes have not been adjusted. Only historical costs are deductible for income tax pur-poses so any restatement of income taxes would have little meaning. Under the rate-making prescribed by the regulatory commissions to which the Company is sub-ject only the historical cost of utility property is included in the rate base upon which the Company is . wed to earn a fair return. Therefore, the cost of plant stated in terms of constant dollars or current cost that exceeds the historical cost of plant is not presently recoverable in rates, and is reflected as a reduction to net recoverable costs. While the rate-making process gives no recognition to the current cost c
- replacing property, plant and equipment, based on past practices the Company believes it will be wiowed to earn on the increased cost of its net investment when replacement of facilities actually occurs.
To reflect properly the economics of rate regulation in the statement of earnings adjusted for changing prices, the reduction of utility plant to net arcoverable cost 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 experi-ence a gain. The gain from the decline in purchasing power of net amounts owed is primarily attrib. utable to the substantial amount of debt which has been used to finance property, plant and equip-ment. Since the depreciation on utility plant is limited to amounts based on historical costs, the Com-pany does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital. 38 O
,m PUBLIC SERVICE CO31PANY OF NEW IIA 3tPSIIIRE i \
tU) NOTES TO FINANCIAL STATE 3 TENTS-(Continued) Five Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices (In Aserage 1980 Dollars) Year Ended December 31, 1980 1979 1978 1977 1976 (Thousands except Per Share Amounts) Operating revenues $351,247 $332,102 $329,355 $292,067 $284,686 IIISToRICAL COST INFOR31ATION ADJUSTED FoR GENERAL INFLATION
- Income from continuing operations (excluding reduction to net recoverable cost) $ 40,964 $ 30,584 income per average common share (after dividend requirements on preferred stock and excluding reduction to net recov-erable cost) $ 1.63 $ 1.67 Net assets at year-end at net recoverable cost $419,048 $392,638 CURRENT COST INFOR11 ATION*
,f3 . . t V) Income from cont.inuing operations (excluding reduction to net recoverable cost) $ 35,451 $ 23,664 Income per average common share (after dividend requirements on preferred stock and excluding reductim to net recov-erable cost) $ 1.30 $ 1.12 Excess of increase in general price level over increase in specific prices $ 80,206 $ 71,415 Net assets at year-end at net recoverable cost $419,418 $392,639 GENERAL INFOR3tATIoN Gain from decline in purchasing power of net amounts owed' $ 71,627 $ 69,525 Cash dividends declared per common share $ 2.12 $ 2.41 $ 2.45 $ 2.56 $ 2.69 3farket price per common share at year-end $ 13.73 $ 16.90 $ 23.72 $ 27.19 $ 30.44 Average consumer price index 246.8 217.4 195.4 181.5 170.5
'Information not required for years prior to 1979.
'! O V 39
IlEPOllT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Tric BOARD OF DIREMRS Prnue SERVICE CO31PANY OF NEW IIA 31PslHRE We have examined the balance sheets of Public Service Company of New IIampshire as of De-eember 31,1980 and 1979 and the related statements of earnings, retained earnings, changes in financial position and other paid-in capital for each of the years in the three-year period ended December 31, 1980. Our examinations were made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the aforementioned financial statements present fairly the f.nancial position of Public Service Company of New IIampshire at December 31,1980 and 1979 and the results of its operations and the changes in its financial position for each of the years in the three-year period ended December 31,1980, in conformity with generally accepted accounting principles applied on a consistent basis. In connection with our examinations of the aforementioned financial statements, we also examined the related financial statement schedules listed in the index under Item 11. In our opinion, such supporting schedules present fairly the information set forth therein. Boston, 31a.uachusetts February 18,1981, except for Note 10, which is as of April 14,1981. PEAT, 31 ARw!CK, 3IITCIIEIL & CO. 40 O
Item 9. Directors and Executive Oficers of the Company Information as to the names and ages of the directors of the Company, all of whom are also
~
nominees for election as directors, all positions and offices with the Company held by such persons, their current terms of office and length of service, and their individual principal occupation and employment for the past five years are set forth at pages 3-5 of the Company's proxy material, dated ) April 6,1981, for use at the Company's Annual 3Ieeting of Stockholders to be held on 3 lay 14,1981. Such information is hereby incorporated herein and specifically made a part hereof by reference. Information is set forth below as to the names and ages of the executive officers of the Company, including certain executive officers who are also directors of the Company, their positions as officers of the Company both current and for the past five years, their length of service with the Company, and in the case of 31essrs. Bayless and Cameron, a brief explanation of their respective prior five years business positions and responsibilities. Age and (Years of Name Position Service) William C. Tallman Chairman and Chief Executive Officer since 3Iay 1980; 60 (34) President (1965-1980) Robert J. Harrison President since 31ay,1980; Financial Vice President (1978- 49 (23) 1980); Vice President and Treasurer (1977-1978); Vice President (1973-1977) William A. Adams,Jr. Executive Vice President (1) 55 (31) David N. 3Ierrill Executive Vice President (1) 56 (31) Charles E. Bayless Financial Vice President since 31 arch,1981; Director of 38
' Special Corporate Projects, Consumers Power Company,
)
V Jackson,31ichigan (1978-1981); Director of Nuclear Fuel Supply, Consumers Power Company (1976-1978); Attor-ney, Legal Department Consumers Power Company (1972-1976)(2) D. Pierre G. Cameron, Jr. Vice Pmsident and General Counsel since September,1980; 46 Treasurer and Assistant Secretary, Baltimore Gas and Electric Company, Baltimore,31aryland (1979-1080); As-sociate General Counsel-Corporate, Baltimon Gas and Electric Company (1971-1979)(3) Raymond E. Closson Vice President since November,1978; Assistant to the Presi- 60 (33) dent (1978); Division 31anager-31anchester (1968-1978) John C. Duff'ett Vice President since November,1978; Director of Division 53 (26) Operations (1975-1978) Henry J. Ellis Vice President since December,1976; Director of Engineer. 60 (34) ing (1968-1976) Warren A. Harvey Vice President sinw December,1976; Director of Produe- 54 (33) tion (1970-1976) Elroy L. Littlefield Vice President since December,197a; Comptroller (1968- 62 (33) 1979) James L. Nevins Vice President since November,1978; Director of Employee 46 (12) Relations (1975-1978) 41
Age and (Years of Name Position Senice) William T. Frain, .Ir. Comptroller since 1)ecerntwr,1979; Assistant Comptniller 39 (16) (1971-1979) John J. Lampron Treasurer since June, 1978: Assistant Treasurer (1975- 36 (9) 1978) Ilussell A. Winsimv Clerk and Secretarv(1) 46 (19) (1) lias held same pusitions for at least 5 yeam. (2) As 1)irector of Special Corporate Projects for Consumers Power Company, 3Ir. Ilayless was re-sponsible for specialized financing projects, including nuclear fuel leases, leveraged and single investor leases, pollution control financing and acceptance facility agreements. As 1)irector of Nuclear Fuel Supply,31r. Ilayless was responsible for the procurement of nuelcar fuel and related services for Consumers Power Company and as an attorney in that company's Legal 1)epartment 31r. llayless was engaged in the legal aspects of such matters as licensing and fuel contracts for nuclear power plants as well as various financial transactions relating to fuel leases, building sales and leasebacks, acceptance facility agreements and conventional debt and equity financings. (3) As Treasurer and Assistant Secretary of Italtimore Gas and F,hetric Company, 31r. Cameron had supervisory responsibility for the Finance 1)epartment of llaltimore Gas and Electric Com-pany, including all financial planning, cash management, stockholder records, insurance, em-playee benefit plan administration, and financial documents (statistical reports) activities. As Associate General Counsel Corporate for llaltimore Gas and Electric Company, 3fr. Cameron had both supervisory and primary responsibility for alllegal aspects of equity and debt finane-ings including pollution control financings, proxy solicitation / annual meeting preparation, neg+ tiation and preparation of major construction and equipment procurement contracts and Federal government agency liaison. Item 10. Management Remuneration and Transactions Information in response to this item is set forth on pages 6 9 of the Company's definitive proxy statement, dated April 6,1981, used in connection with the Annual 3fecting of Stockholders of the Company to be held Afay 14, 1981, and is hereby incorporated herein and specifically made a part hereof by reference. 42 O
p PART IV V Item 11. Exhibits, Financial Statement Schedules, and Reports on Form 8 K The following documents are filed as a part of this report: Financial Statements (see item 8): Statements of Earnings, Years ended December 31,1980,1979 and 1978 Balance Sheets, December 31,1980 and 1979 ! Statements of Changes in Financial Position, Years ended December 31,1980,1979 and 1978 Statements of Retained Earnings, Years ended December 31,1980,1979 and 1978 Statements of Other Paid-In Capital, Years ended December 31,1980,1979 and 1978 Notes to Financial Statements Report of Independent Certified Public Accountants Financial Statement Schedules 1 Schedule V-Utility Plant, Years ended December 31,1980,1979 and 1978 Schedule VI- Accumulated Provision for Depreciation, Years ended December 31, 1980, 1979 and 1978 Schedule VIII-Valuation and Qualifying Accounts, Years ended December 31, 1980, 1979 and 1978 All other schedules are omitted as the required information is not applicable or is includal V in the financial statements or related notes. Exhibits The exhibits which are filed with this Form 10-K or which are incorporated herein by refer-ence are set forth in the Exhibit Index which appears in Part IV of this report at pages 49 through 54. Reports on Form 8-K No Reports on Form 8.K were filed during the fourth quarter of 1980. L) 43 ,
PUBLIC SERVICE COMPANY OF NEW IIAMPSIIIRE SCIIEDULE V - UTILITY PLANT Years Ended December 31,1980,1979 and 1978 Col. A Col. H Col. C Col. D Col. E Col.F Other Balance at Changes - Balance Beginning Additions Hetire. Add at End Classification of Period at Cost ments (Deduct) of Period (Thousands of Dollars) YEAR ENDED DECEMBER 31,1980 Intangibles $ 45 $ - $- $- $ 45 Generating Plant - Steam 188,792 1,499 93 - 190,198 Generating Plant-IIydm 15,445 334 39 - 15,740 Generating Plant - Other 8,393 - - - 8,393 Transmission 113,976 10,821 334 19 124,482 Distribution 175,844 13,241 2,797 - 186,288 General 20,071 1,688 334 - 21,425 Plant IIeld for Future Use 1,849 - - (19) 1,830 Unfinished Construction 484,086 187,865 - - 671,951 Nuclear Fuel 34,794 17,405 - - 52,199 TOTAL $1,043,295 $232,853 4,597 $- $1,272,551 YEAR ExoEn DECEMBER 31,1979 Intangibles $ 45 $ - $- $- $ 45 Generating Plant - Steam 187,9S8 1,126 322 - 188,792 Generating Plant- Hydro 15,401 55 13 - 15,445 Generating Plant - Other 8,381 12 - - 8,393 Transmission 111,578 2,788 390 - 113,976 Distribution 165,206 13,061 2,423 - 175,844 General 17,234 3,053 216 - 20,071 Plant IIeld for Future Use 1,876 (27) - - 1,849 Unfinished Construction 334,199 e49,8S7 - - 484,086 Nuclear Fuel 12,183 22,611 - - 34,794 TOTAL $ 854,093 $192,566 $3,364 $- $1,043,295 YEAR Exoro DECEMBER 31,1978 Intangibles $ 45 $ - $- $- $ 45 Generating Plant - Steam 182,156 6,128 296 - 187,988 Generating Plant -Ilydro 15,376 32 10 5 15,403 Generating Plant - Other 8,378 3 - - 8,381 Transmission 108,946 3,090 467 9 111,578 Dir+ribution 155,210 12,318 2,322 - 165,206 General 15,072 2,410 248 - 17,234 Plant IIeld for Future Use 1,885 - - (9) 1,876 Unfinished Construction 188,557 145,642 - - 334,199 Nuclear Fuel 8.26S 3,915 - - 12,183 TOTAL $ 683,893 $173,538 $3,343 $ 5 $ 854,093
.4
= . . . .
PUHLIC SERVICE COMPANY OF NEW IIAMPSIIIRE SCIIEDULE VI- ACCUMULATED PROVISION FOR DEPRECIATION Years Ended Decemiser 31,1980,1979 and 1978 Col. A Col. B Col. C Col. D Col. E Col. F Additions Other Balance at Charged to Change - Balance Beginning Costs and Hetire. Add at End Description of l'eriod Expenses ments (Deduct) of l'eriod Accumulated provision for de-preciation of electric plant: 1980 $147,398 $17,425 $3,591 $471( A) $161,703 1979 134,373 15,487 3,328 866(A) 147,398 1978 122,364 14,752 3,305 562(A) 134,373 1980 1979 1978 ( A) Represents: Depreciation charged to automotive clearing $ 726 $ 729 $ 665 i Depreciation on plant units acquired 17 121 - Net salvage (272) 16 (108) Non-operating reserve transfer - - 5 o $ 471 $ 866 $ 562 1 ( l w n 45
l PUllLIC SEllVICE COMPANY OF NEW ILDIPSIIIItE SCIIEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31,1980,1979 and 1978 Col. A Col.H Col. C Col. D Col. E Additions Balance at Charged to Charged Balance Beginning Cats and to Other at End Description of Period Exper.ses Accounts Deductions of Period Reserves Deducted From Related Assets: Provision for Uncollectible Accounts 1980 $330 $714 $- $724(A) $320 1979 320 552 - 542(A) 330 1978 317 535 - 532(A) 320 Accumulated Provision for Depre-elation of Non-Operating Property 1980 $526 $ 7 $- $- $533 1979 519 7 - - 526 1978 517 7 - 5(B) 519 Reserve Included Under " Deferred Credits - Other"- Reserve for Injuries and Damages 1980 $302 $210 $ 81(C) $194(D) $399 1979 357 120 114(C) 289(D) 302 1978 270 120 101(C) 134(D) 357 (A) Accounts written off, net of recoveries. (B) Non-operating reserve transferred to operating. (C) Charged principally to construction and retirement accounts. (D) Losses charged to reserve. t l 46 O 1 r
SIGNATURES l Purwaant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ; the Itegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto ! duly authorized. ! PUBLIC SERVICE CO31PANY OF NEW HA31PSIIIRE By: W. C. TALLMAN W. C. TAuJfAN, Chairman Date: March 30,1981 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has twen signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date Chairman and Chief W. C. TALL. VAN Executive Ofileer; Director 31 arch 30,1981 W. C. TAUJI Ah (Principal Executise Officer) R. J.. HARRISON President; Director Starch 30, 1981 R. J. HARRISON O) ( C. E. BAYLESS Financial Vice President 31 arch 30,1981 C. E. BAYMES (l'rincipal Financial Officer) W. T. FRAIN, JR. Comptroller Mmh 30,1981 W. T. FRAIN, Ja. W. A. AEAMS, JR. Di ator Marrh 30,1981 W. A. ADAars, Jn. i Director 31 arch 30,1981 Roer.ar J. Bormsts Director March 30,1981 Gronon A. Dona, Ja. Director March 30,1981 ParscrILA K. Farcin:rrn Director March 30,1981 i HARIAN h. GooDw!N Director March 30,1981
-( D. N. MERRILL D. N. Menunu,
- 47
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Siginature Title Date Director 3farch 30,1981 ANN R. 31ooor Director March 30,1981 BraoN C.HADAKER JOHN J. REILLY, JR. Director Matrh 30,1981 JonN .I. Roniv, JR. \VILLIAM M. ScRANTON Director March 30,1981 WlIIIA3131. SCRATION Huon C. TUTTLE Director March 30,1981 11U011 C. Ttrrriz RICHARD E. WEST Director March 30,1981 RICIIARD E. West Director March 30,1981 D Avm S. WIILIA51S 9 P l 48
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l A EXIIIBIT INDEX The following designated exhibits are, as indicated below, either filed herewith or have heretofore been filed with the Securities and Exchange Commission under the Secu:ities Act of 1933, the oecurities Exchange Act of 1934 or the Public Utility IIolding Company Act of 1935 and are referred to and inc(rporated herein by reference to such filings. SEC Form 10-K Exhibh Docket l' age Nos. Exhibit 3. Articles of Incorporation and by-lases Incorporated herein by reference: 3.1. Articles of Agreement, as amended. . 2.2.1 2-61924 3.2. By-laws, as amended. 2.2(b) 2-68168 Exhibit 4. Instruments defining the rights of security holders, including indentures Incorporated herein by reference: 4.1. C neral and Itefunding 3Iortgage Indenture dated as of August 15, 1978 between the Company and New England IIerchants Na-tional Bank, Trustee. 2.32 2 628T ., 4.1.1. First Supplemental Indenture to the General and Refunding 3tortgage Indenture dated as of September 15,1979. 2.32 2-654h t 4.1.2. Second Supplemental Indenture to the Gen-eral and Refunding 3Iortgage Indenture dated as of January 15, 1980. 2.5 2 66334 4.1.3. Third Supplemental Indenture to the General and Refunding 31ortgage Indenture dated as of December 1,1980. 2.3.3 2-69947 4.2. First 3Iortgsge dated as of January 1,1943 between the Company and Old Colony Trust B-1 2-5076 Company, Trustee. (22-221) 4.2.1. First Supplemental Indenture to the Com-pany's First 3Iortgage dated as of December 1,1943. A.la 70-684 4.2.2. Second Supplemental Indenture to the Com-pany's First 3fortgage dated as of June 1, 1947. 7.3 2-7066 4.2.3. Third Supplemental Indenture dated as of January 1,1948. 7.4 2-7324 4.2.4. Fourth Supplemental Indenture dated as of October 1,1948. 7.5 2-7658 4..!.5. Fifth Supplemental Indenture dated as of June 1,1949. 7.6 2-7985 4.2.6. Sixth Supplemental Indenture dated as of June 1,1951, 7.7 2-8969 4.2.7. Seventh Supplemental Indenture dated as of September 1,1953. 4.9 2-10426 49
SEC l'orm 10.K Exhibit 1)ocken l' age Nos. 4.2.8. Eighth Supplemental Indenture dated as of November 1,1954. 2.10 2 11246 4.29. Ninth Supplemental Indenture dated as of June 1,1956. 2.11 2-13619 4.2.10. Tenth Supplemental Indenture dated as of October 1,1957. 2.12 2 15260 4.2.11. Eleventh Supplemental Indenture dated as of July 1,1959. 2.13 2-17162 4.2.12. Twelfth Supplemental Indenture dated as of November 1,1960. 2.14 2-20451 4.2.13. Thirteenth Supplemental Indenture dated as of July 1,1962. 2.15 2-25452 4.2.14. Fourteenth Supplemental Indenture dated as of January 1,1966. 2.16 2-25452 4.2.15. Fiftee..th Supplemental Indenture dated as of October 1,1966. 2.17 2-25452 4.2.16. Sixteenth Supplemental Indenture dated as of June 1,1967. 2.18 2-26592 4.2.17. Seventeenth Supplemental Indenture dated as of November 1,1963. 2.19 2 30554 4.2.18. Eighteenth Supplemental Indenture dated as of November 1,1970 4.20 2-38646 Oh 4.2.19. Nineteenth Supplemental Indenture dated as of June 15, 1972. o.22 2-50198 4.2.20. Twentieth Supplemental Indenture dated as of 3farch 1,1974. 2.23 2-50198 4.2.21. Twenty-First Supplemental Indenture dated as of October 15,1974. 2.24 2-51999 4.2.22. Twenty-Second Supplemental Indenture dated as of December 1,1974. 2.25 2-54646 4.2.23. Twenty-Third Supplemental Indenture dated as of March 1,1975. 2.26 2-54646 4.2.24. Twenty-Fourth Supplemental Indenture dated as of October 15,1975. 2.27 2-57'!89 4.2.25. Twenty-Fifth Supplemental Indenture dated as of October 15,1976. 2.28 2-59516 4.2.26. Twenty-Sixth Supplemental Irvienture dated as of November 1,1976. 2.29 2-59516 4.2.27. Twenty-Seventh Supplemental Indenture dated as of May 1,1978. 2.30 2-61924 4.2.28 Twenty-Eighth Supplemental Indenture dated as of August 15, 1978. 2.31 2 62856 4.2.29. Twenty-Ninth Supplemental Indenture dated as of September 15,1979. 2.33 2 65427 50
SEC Form 10-K Eshible lhicke l'rse Non. 4.2.30. Thirtieth Supplemental Indenture dsted ax of January 15, 1980. 2.4.30 2 66492 j 4.2.31. Thirty-First Supplemental Indenture dated as of December 1,1980. 2.4.31 2-69947 Exhibit 10. Material Contracts incorporated hercin by reference: 10.1. Directors and Oflieers 1,iabdity and Company Reimbursement I.iability Policy with The llome Insurance Company. For other ar-rangements for indemnification of directors and officers of the Company, see item 15 and Article N, Section 7 of the Company's By. laws contained in Exhibit 3.2 hereto. 4.1 2 69370 10.2. Directors and Officers Liability Insurance En-dorsement with Associated Electric & Gas Insurance Services Limited covering the same risk as Exhibit 10.1. 4.2 2 66334 10.3. Form of New England Power Pool Agreement dated as of September 1,1971 a.s amended to November 1,1975. 4.8 2-55385 10.4. Agreement dated October 13, 1972 for Joint Ownership, Construction and Operation of Pilgrim Unit No. 2 among Boston Edison Company and other utilities including the Company. 5.3(d) 2-45990 10.4.1. Amendments Nos. I and 2 to Exhibit 10.4 dated September 20, !973 and September 15, 1974, respectively. 5.14 2-51999 10.4.2. Amendment No. 3 to Exhibit 10.4 dated De-cember 1,1974. 13 45 2-51449 10.4.3. Amendments Nos. 4 and 5 to Exhibit 10.4 dated February 15, 1975 and April 30,1975, 13-52-A respectively. 13-52-B 2 53819 10.4.4. Amendment No. 6 to Exhibit 10.4 dated June ' 30,1975. 13-45(a) 2-54449 10.4.5. Amendment No. 7 to Exhibit 10.4 dated No-vember 30,1975. 5.9(f) 2-55748 10.4.6. Addendum to Exhibit 10.4 dated as of Octo- 0.1 j Annual Report her 1,1976. 1-2301-2 for 1976 10.5. Agreement for Sharing Coats Associated with Pilgrim Unit No. 2 Transmission dated Octo-ber 13,1972 among Boston Edison Company and other utilities including the Company, f3(e) 2-45990 10.5.1. Addendum to Exhibit 10.5 dated as of Janu- Report 1.5.1 f Annual ary 17,1975. 1-2301-2 for 1975 51 l 1 m i-
l SEC Form 10-K Exhibit Ihicket Pase Nos. 10.5.2. Addendum to Exhibit 115 dated as of Octo- 10~,,
' Annual Iteport her 1, IST6. i 1-2301-2 for 1976 10.6. Agreement dated ca of May 1,1973 for Joint Ownership, Construction and Operation of New IIampshire Nuclear Units among the Company and other utilities. 13-57 2-48966 10 6.1. Amendments to Exhibit 10.6 dated May 24, 1974, June 21,1974 and September 25, 1974. 5.15 2 51999 10.6.2. Amendments to Exhibit 10.6 dated Octuoer 25,1974 and January 31,1975. 5.23 2-54646 10.6.3. Sixth Amendment to Exhibit 10.6 dated as of April 18,1979. 5.4.3 2-64294 i
10.6.4. Seventh Amendment to Exhibit 10.6 dated an om April 18, 1979. 5.4.4 2-64294 10.6.5. Eighth Amendment to Exhibit 10.6 dated as of April 25,1979. 5.4.5 2-64815 10.6.6 Ninth Amendment to Exhibit 10.6 dated as of June 8,1979. 5.4.6 2-64815 10.6.7. Tenth Amendment to Exhibit 10.6 dated as of Oc'ober 10,1979. 5.4.2 2-66334 10.6.8. Eleventh Amendment to l'xhibit 10.6 dated as of December 15,1979. 5.4.8 2-66492 10.6.9. Twelfth Amendment to Exhibit 10.6 dated as of June 16, 1980. 5.4.9 2 68168 10.6.10. Thirteenth Amendment to Exhibit 10.6 dated as of December 31, 1980. 10.6.10 2-70579 10.7. Transmission Support Agreement dated as of May 1,1973 among the Cor.pany and other utilities with respect to New IInm. shire nu-clear unita. 13-58 ' ' 966 10.8. Sharing Agreement- 1979 Conecticut Nu-elear Unit dated September 1,1973 to which the Company is a p.irty. 6.43 2 50142 10.8.1. Amendment to Exhibi; 10.8 dated August 1, 1974. 5.45 2-52392 10.8.2. Amendment to Exhibit 10.8 dated December 15, 1975. 7.47 2-60806 10.9. Coal Sales Agreement dated September 1, 1977, between the Company and Consolida-tion Coal Company. 5.17 2 61287 3 10.10. Agreement for the Sale of Itesidual Fuel Oil dated December 31, 1979 between the Com-pany and C. II. Sprague & Son Company. 5.8 2-66334 52
l SEC Form 10-K Eshibit Docket Pase Nos. 10.11. Agreement executed on January 23,1973 for the design and furnishing of the nuclear steam supply systems for the Company's Seabrook plant betweer the Company and Annual Report C Westinghouse Electric C .rporation. 1-6392 for 1972 10.12. Agreement dated Nov aber 1,1974 for Joint Ownership, Construe wn and Operation of William F. Wyman f nit No. 4 among Central Maine Power Comt .ny and other utilities in-eluding the Compeay. 5.16 2-52900 10.12.1. Amendment to Exhibit 10.12 dated June 30, 1975. 5.48 2-55458 10.12.2. Amendment to Exhibit 10.12 dated as of August 16, 1976. 5.19 2-58251 10.12.3. Amendment to Exhibit 10.12 dated as of December 31,1978. 10.13. Transmission Support Agreement dated No-vember 1,1974 anwng Centrai Maine Power Company and other utilities including the Company. 13-57 2-54449 10.14. Transmission Support Agreement dated August 9, 1974 between the Connecticut Light and Power Company and other utilities including the Company. 5.24 2-54646 10.15 Pension Plan of the Company, as amended Dj Annu 1 Report effective as of June 1,1977. { 16392 for 1977 10.16. Revolving Credit Agreement dated as of De-cember 28, 1977, among the Company and E
^"""*
seven Banks. 1 16392 for 1977 10.16.1. Amendment No. I to Exhibit 10.16 dated as of May 24,1978. 5.15.1 2-62856 10.16.2. Amendment No. 2 to Exhibit 10.16 dated as of June 30,1978. 5.15.2 2-62856 10 16.3. Amendment No. 3 to Exhibit 10.16 dated as of October 24,1978. 5.15.3 2-62856 10.16.4. Amendment No. 4 to Exhibit 10.16 dated April 24,1979. 5.14.4 2-64294 10.16.5. Amendment No. 5 to Exhibit 10.16 dated as of June 25,1979. 5.14.5 2-64815 10.16.6. Amendment No. 6 to Exhibit 10.16 dated as of September 9,1979. 5.14.6 2-06334 10.16.7. Amendment No. 7 to Exhibit 10.16 dated as of January 8,19S0. 5.14.7 2 66334 10.16.8. Amendment No. 8 to Exhibit 10.16 dated as of June 30,1980. 5.14.8 2 68168 53 L ._ _... _
I SEC Form 10.K Exhibit pocket p.g, No., 10.16.9. Amendment No. 9 to Exhibit 10.16 dated as 10.16.9 2-70579 of December 1,1980. 10.17. Term Loan Agreement dated as of Decabe r 28, 1977, among the Company and se m pj Annual Iteport 16392 for 1977 Banks. ( 10.17.1. Amendment No. I to Exhibit 10.17 dated as of December 26,1978. 5.16.1 2 62856 10.17.2. Amendment No. 2 to Exhibit 10.17 dated as of Decemher 28,1979. 5.15.2 2-66334 10.17.3. Amendment No. 3 to Exhibit 10.17 dated as 10.17.3 2 70579 of December 1,1980. 10.18. Eurodollar Loan Agreement dated August 25, 1930. 5.16 2 69370 10.19. Employee Stock Ownership Plan and Trust. 10.19 2-70579 Exhibit 12. Statement re computation of rastos Filed herewith: 12.1. Calculation of Itatios of Earnings to Fixed Charges. 55 9 54 O
l EXIUBIT 12.1 PUBLIC SERVICE COMPANY OF NEW IIAMPSIIIRE CALCUIATION OF RATIOS OF EARNINGS TO FIXED CIIARGES Year Ended Decembee 31, 1980 1979 1978 1977 1976 (Thousands of Dollars) Net Income $ 59,847 $40,719 $36,507 $21,722 $20,995 Add: Provision for Taxes Based on Income 22,619 15,397 19,612 8,286 9,643 Fixed Charges 62,681 43,614 30,083 21,766 18,945 145,147 99,730 86,202 51,774 49,583 Deduct: Undistributed Earnings of Affiliated Companies (48) (92) (109) 14 103 Earnings Available for Fixed Charges $145,195 $99,822 $86,311 $51,760 $49,480 Fixed Charges Interest on Long-Term Debt $ 39,711 $28,247 $21,073 $18,980 $17,932 Other Interest 21,847 14,465 8,201 2,029 290 Interest Component of Rental Charges 1,123 902 809 757 723 Total Fixed Charges $ 62,681 $43,614 $30,083 $' 1,766 $18,945 Ratios 2.32 2.29 2.87 2.38 2.61 55
g 2,500,000 Shares P ublic Service Company of New Hampshire Common Stock [O ($5 Paa VALUE) Outstanding shares of the Common Stock arv, and the shares offered hereby will be, listed on the New York Stock Exchange. The last reported sale price of the Common Stock on such Exchange on 3f ay 4,1981, was $14.875 per share. See " Financing and Rate Relief" for a description of the Company's financial difficulties. TIIESE SECURITIES IIAVE NOT BEEN APPROVED OR DISAPPROVED BY TIIE SECURITIES AND EXCIIANGE CO3DIISSION NOR IIAS TIIE CO3D11SSION PASSED UPON TIIE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO TIIE CONTRARY IS A CRDiINAL OITENSE. Price to i ,$ Proceeds to Puhtle Commisdom(l) Company (2) Per Share $14.875 $R67 $14.205
$37,187,500 $1,675,000 $33,512,500 Total (1) The Company has agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933.
(2) Before deduction of expenses payable by the Company estimatal at $106,000. The shares of Common Stock are offered by the several Underwriters when, as and if issued by the Company and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that certificates for such shares will be ready for delivery at the offices of Kidder, Peabody & Co. Incorporated,10 IIanover Square, New York, New York on or about 31ay 12, 1981. Kidder, Peabody & Co. Blyth Eastman Paine Webber Incorporated Incorporated The date of this Pruspectus is 3 fay 5,1981. E
4 IN CONNECTION WITII TIIIS OFFERING, TIIE UNDERWHITERS MAY OVER. ALLOT [ OH EFFECT TRANSACTIONS WlIICII STABILIZE OR MAINFAIN TIIE 5tARKET PHICE O! TIIE COMPANY'S COMMON STOCK AT LEVELS AllOVE TIf0SE WillCll 311GIIT OTilElt. WISE PHEVAIL IN TIIE OPEN MARKET. SUCII THANSACT!ONS 31AY llE EFFECTED ON TIIE NEW YOltK STOCK EXCIIANGE, TIIE OVElt.TillXOUNTER MARKET Olt OTilElt-WISE. SUCII STAlllLIZING, IF CO3DIENCED, MAY llE DISCONTINUED AT ANY TDIE. Kidder, Peabody & Co. Incorporated and lilyth Ea tman Paine Webber Incorporated, a-Itepre-entatises of the Underwriters, have advi-ed the Company that on May 4,1981 they made a stabilizing purchase of 1,200 share of the Company'* Common Stock at S14.875 per share. AVAILAHLE INFORMATION Public Service Company of New llampshire (the " Company") is subject to the informa. tional requirements of the Securities Exchange Act of 1934 and in accordance therewith file
- reports and other informatic.a with the Securities and Exchange Commission. Information for the year 1980 ami prior years concerning directors and officen of the Company, eemuneration an/ any material Inte ests of such penons in tran= actions with the Company, 5. disclosed in proxy statements distributed to stockholden of the Company and filed with the Commi sion.
, Such reports, proxy statements and other information can be inspected at the office of the Commi.sion at Room 6i01 at 1100 L Street, N.W., Washingte n, D. C.: Hoom 1100, Federal Building, 26 Federal Plaza, New York, N.Y.: Suite 1710, Tist man Building,10960 Wilshire lloulevard, Im Angeles, Californiat and Hoom 1228, Everett McKinley Dirkmen lluilding. 219 South
Dearborn Street,
Chicago, Illinois. Copies of such material may al*o be obtained at pre *cribed rates from the Public Reference Section of the Commission at 500 North Capitol
. Street, N.W., Washington, D. C. 20549. Certain of the Company's securities are listed on the New York Stock Exchange,20 Broad Street, New York, New York where reports, proxy mate.
!- rial and other information concerning the Company may also be inspected. INCORPORATION OF CERTAIN DOCUMENTS HY REFERENCE The following documents heretofore filed with the Commission are hereby incorporated in this Prospectus by reference: l
- 1. The Company's Annual Report on Form 10.K for the year ended December 31,1980, as amended.
- 2. The Company's def' m itive proxy statement dated April 6,1981 in connection with its Annual Meeting of Stockholders to be held on May 14,1981.
All documants filed by the Company with the Commission pursuant to Section 13,14 or 15(d) of the Securities Exchange Act of 1034 after the date of this Prospectus and prior to the termination of this offering of Common Stock shall be deemed to be incorporated in this Prospectus by reference and to be a part here/ t from the date of filing of such documenta. The Company hereby undertakes to provide without charge to each penon to whom a copy of this Prospectus has been delivered, on the written request of any such penon, a copy of any l ['; or all of the documents referred 12 above which have been or may be incorporated in thi. Prospectus by reference, other than exhibits to such documents. Written requests for such copies should be directed to the Office of the Treasurer, Public Service Company of New Ilamg> shire, P.O. Box 330, Manchester, New Hampshire 03105. 2
- - - - - - - , - - . e- -, - - - - , ,, . - - -
TIIE ISSUE IN BRIEF Q k elseuhere in this Prospectus and by the detailed info s. n n I notes appearing in the docunwnts incorporated in this Prospectus
" Financing and Rate Relief".
by reference
. See especially
[ Common Stock Offend Expected Cl<cing Date Common Stock Listed 1981 Price Range (through 3 fay 4,1981) Current Dividend Rate Tile OFFERING Book Value of Common Stock at March 31,1981 New York Stock Exchange 2,500,000 Shares 3Iay 12,1981 (Symbol: PN11) 14 %-16 %
$2.12 annually
$20.65 per share tion program is very substantial, all of the Company's e e treated as a return of capital for Federalincome tax purposes and accordingly a.r-will able as ordinary income. Based on currest estimates, substantially onall of the 198 Common Stock tvi!) also be treated in this manner.
Business PUBLIC SERVICE COMPANT OF NEW IIAMPSIIIRE Energy Sources (12 months ended December 31,1980) Electrie utility Oil-539, Caal-359, Estimated 1981-1986 Construction Expenditures (see " Construction Program"): Nucle Assuming proposed reduction of ownemhip interest in the Seabrook plant to appmximately 357c
$803,600,000 FINANCIAL INF0llMATION (Thousands except Per Share Amounts)
Twebe Mjoa _ Year Ended December 31, March 31,1981 1980 Operating Revenues 1979
$371,991 $351,247 Net Income $292,814 59,550 59,847 Earnings Available for Common Stock 40,719 43,140 45,825 Average Shares of Common Stock Outstanding 32,339 17,706 16,539 Per Share of Common Stock 12,643 Earnings Dividends . $2.44 $2.77 $2.56
$2.12 $2.12 Capitalization and short-term debt as of March 31,1981, $2.12 the sale of the additional Common Stock offered hereby (aggregating $35 512 5 Actual Adjusted Long-Term Debt (including current matu- As Adjusted Percentage rities)
$ 423,193 $ 423,193 Preferred Stock 40.2 9 171.29a 171,299 Common Stock Equity 16.3
_ 421,,o1 _ _ 456,80g 43.5
$1,015,893 $1,051,300 Short-Term Debt 100.07<
~~ ' 9,10U
$ 11 - ik 83,55'7 3
THE CO31PANY The Company was incorporated in New Ilampshire in 1926. The mailing address of the Com-pany in 1000 Elm Street, Post Office Box 330,31anchester, New Ilampshire 03105 and the Company's telephone number is (603) 669-4000. [ The Company is the largest electric utility in New Ilampshire. It operates a single integrated system furnishing electric service in 31anchester, Nashua, Portsmouth, Berlin, Dover, Keene, Laconia, Franklin, Rochester, Somersworth and 187 other Nc,v Hampshire municipalities, including about 83% of the total population of the State. It also sells electricity to other utilities and distributes and sells electricity in 6 towns in Vermont and 13 towns in 5faine. The area served at retail has a popula-tion of about 782,000. USE OF PROCEEDS The proceeds to the Company from the sale of the additional Common Stock will be used to reduce short-term bank borrowings which were incurred principally in connection with the Company's con-tinuing construction program, the principal portion of which is expenditures in connection with its interest in the Seabrook project described below, and also in connection with the Company's enrrent business operations. On the date of issue of the additional Canmon Stock, short term borrowings are expectal to be approximately $125,000,000. - U**WUCTION PROGRA31 The Ccmpany is the lead owner of a 2t00 31W nuclear generating power plant under construction at a site L.,cated in .?eabrook, New IIampshire (the "Seabrook project"), with two 1,150 31W units recently rescheduled for completion in February,1984 and 31ay,1986, respwtively. At February 28, 1981, the Company had invested approximately $686,200,000 (including allowance for funds used during construction of approximately $143,500,000 and nuclear fuel of $41,200,000) in the Seabrook project. As of the same date, the Seabrook project as a whole was 339 complete, with Unit #1 and property and equipment common to both Units 46% complete; Unit #2 was 89 complete with work limited bring most of 1980 to the containment liner alone. The Company's construction program, which consists primarily of expenditures in connection with its interest in the Seabrook project, has for some time been so large that obtaining the substantial financing required to maintain this program and continue itr business operations has lwen and re-mains a major challenge for the Company. See " Financing and Rate Relief" below. Reduction in Seabrook Project Ownership. In 1979 the Company decided to reduce its 509 e ener-ship interest in the Seabrook projat and obtained commitments from nine other utilities, some o' whom were already participants, to acquire from it ownership interests totaling 14.76503% T) a com-mitments were subject to receipt of required approvals and in two instances to receir of initial financing for the ownership acquisition. Each utility acquiring such an ownership interest does so gradually over an Adjustment Period, paying pro rata the costs otherwise attributable to the Com-pany's ownership interest until such acquiring utility's investment in the Seabrook project (exclu-sive of any ownership interest ahtady held by it) equals the percentage for which it has committed. The Company's investment will decrease accordingly. This period during which the acquiring utili- [, ties are paying the Company's s, hare of construction costs is expected to continue for about 12 months 4 L
after all Adjustment Periods become effective. After the conclusion of all Adjustment Periods, the Company will resume paying all of its then reduced share (35.23497%) of Seabrook project costs.
' The accepting utilities have received their required approvals and their Adjustment Periods have additional interest, and New IIampshim Electric Cooperative, Inc. ("NII Coop"). The NII Coop has received the agreement of the Rural Electrification Administration for financing of its ownenhip interest
[ , commenced, except for Tau of 2.17391% and the approval of the New IIampshire Public Utilities Commission ("NIIPUC")* for such acquisition. Its Adjustment Period will commence when it obtains such financing. The Company and 3fassachusetts 31unicipal Wholesale Electric Company ("3DRVEC"), which is to acquire from the Company an additional 6.00091 % interest, have agreed that, commencing on February 28,1981 (when 3DIWEC's Adjustment Period began) and continuing until 3DBVEC has completed ita initial financing, the Company will pay 3DRVEC's share of costs otherwise attributable to that portion of the Company's ownership interest being acquired by 3DnVEC, subject to the con-dition described below. Upon completion of its initial financing,3DnVEC will reimburse the Com-pany for these costs, together with interest at the rr.te of 13% per annum through 3farch 31,1981 and thereafter at the Company's rate of allowance for funds used during construction ("AFUDC"). If 3DIWEC has been unable to complete its financing by June 30,1981,3DIWEC's reimbunement obliga+ ion, including interest, will be cancelled and 3DRVEC's Adjustment Period will not commenee until the first business day after consummation of 3DRVEC's initial financing. The Company has , been informed that 3DIWEC expects to complete such initial financing prior to June 30,1981. Reduction in Level of Seabrook Project Construction. In 3farch,1980, in view of the unsettled state of the capital markets and the very high cost of external lunds, the Company's Board of Direc-tors decided that the overall level of construction of the Seabrook project should be reduced substan-tially in order to lessen the Company's external financing requirements. The Company plans to
- resume full construction when 3DIWEC's initial financing for its increased interest has been completed.
Ofer of Pilgrim and Millstone Interests. In an additional effort to reduce its ongoing construc-tion program expenditums, the Compt.ny in 31 arch,1979, offered to other utilities its ownership inter-mts in the Pilgrim #2 and 3Illlstone #3 projects. No expressions of interest were received by the Company with respect to its offer of its intenst in the Pilgrim #2 project. The Company has con-tracted for the sale of approximately twSthirds of its 3.8910% interest in the 3fillstone #3 project, subject to the receipt of necessary regulatory approvals, and has received expressions of interest in purchasing the balance. Proceeds from the sale are required to be deposited with the Trustee under the terms of the Company's First 3Iortgage Indenture. Only a relatively small portion of the Com-pany's construction program is attributable to the Company's interest in the 31illstone #3 project ($46,554,000 for the period 1981-1986). Construction Expenditures. Assuming a reducticn in the Company's Seabrook project owner-ship to 35.23497 9 , its share of the total cost of the Seabrook project upon completion, including the initial cores of nuclear fuel, is estimated at $936,200,000 (excluding AFUDC, which is estimated to be [,
$456,500,000). The foregoing estimate of AFUDC reflects the results of a recent NIIPUC order per-5 b
l mitting the Company to change its method of recording the borrowed funds (interest) component of AFUDC and its associated income tax effects to conform to the methodology followed by a majority of utilities. For the period 1975 through 1980, the Company's financial statements set forth separately an item for capitalized interest at a gross rate and an item for deferred income taxes associated with l E the deductibility of construction interest for income ax purposes. The NIIPUC order requires the [; Company to net these two items, and the Company has commenced recording AFUDC calculated net of deferred income taxes as of January 1,1981. The only efr'et on net income resulting from the change will be a reduction in the amounts of state franchise taxts payable by the Company in future yean. This change in method of computation also resulted in a decrease in total estimated AFUDC associated with the construction of the Seabrook project from $639,000,000 to $456,500,000, but will not reduce the Company's external financing requirements described below under " Financing and Itate Itelief". The Company's aggregate construction program for the six-year period 1981 through 1986, which is subject to continuing review and adjustment, is currently estimated to be $803,600,000 (excluding AFUDC), assuming its ownership interee:t in the Seabrook project is reduced to 35.234979 as de. scribed above, the Adjustment Periods referred to above have all commenced by 31ay 1,1981, and the Company's entire ownership interest in the 3fillstone #3 project is sold in 1982. This estimate,
- based on recently completed projections, represents an increase over earlier projections due prin.
cipally to inflation, delay in completion dates resulting from reduction in construction levels and
- other factors. The following table sets forth the Company's estimated construction expenditures for the period 1981-1986 before the reduction of its original 509 ownership interest in the Seabrook project and after its projected reduction to 35.234979, and is based on current construction schedules and cost projections (excluding AFUDC):
Estimated Construction Expenditure. 1981 1986 (Millions of Dollars) Original Projected 50 % 35.23497 %
, Ownership Ownership Generating Facilities Company's Share of the Seabrook Project Plant $ 750.9 $386.2 159.2 100.2 Nuclear Fuel Total 910.1 486.4 Participation in the Pilgrim #2 and 31illstone #3 Projects Plant 76.7 45.8 Nuclear Fuel 6.1 2.8 Total 82M 48.6 Other Generation 44.1 44.1 Total Generating Facilities 1,037.0 579.1 Transmission Facilities 88.7 88.7 135.8 135.8 Distribution and General Facilities Total $1,261.5 $803.6 The following table shows the aggregate amount for each of the yean 1981 through 1986 of the Ej '
Company's estimated construction program before and after adjustment to reflect the reduction of 6 r
the Company's ownership interest in the Seabrook project to 35.23497 % , and is based on the came additional assumptions as in the immediately preceding table. If any substantial variation occum in the commencement of the Adjustment Periods referred to above, expenditures for the Company's con-f struction program would be increased in 1981 and decreased in 1982. Original Projected [* 50 % 35.23497 % Ownership Ownership 1981 $ 233,600,000 $ 57,100,000 1982 261,800,000 158,700,000 1983 267,600,000 197,000,000 1984 190,700,000 143,500,000 1985 204,900,000 160,700,000 1986 102,900,000 86,600,000 Total $1,261,500,000 $803,600,000 Actual construction expenditures could vary from these estimates because of changes in the Company's plans and load forecasts, cost fluctuations, delays and other factors. Delays and cost increases could result from, among other things, expiration and renegotiation of labor contracts for the Seabrook project; several contracts expired on April 30,1981 and them could be strikes if new contracts are not reached. It is also possible that additional expenditures may be nquimi to meet regulatory and environmental requinments at the Seabrook project and at the Company's other generating facilities. FINANCING AND RATE RELIEF Financing of the Company's 1981-1986 construction program estimated at $803,600,000 plus the borrowed funds component of AFUDC of $143,200,000 (assuming its ownership interest in the Sea-brook project is reduced to about 35% as described above), the refinancing at maturity of certain
- long-term debt and the meeting of required sinking fund payments together aggregating $156,545,000, and the financing of working capital and other uses estimated at $71,100,000 represent a major under-taking for the Company. Asstning the receipt of adequate and timely rate increases, the Company estimates that during the period 1981-1956 approximately $434,445,000 will be provided by operations (principrdly after Seabrook Unit #1 is included in rate base, now anticipated to be in early 1984) after deducting total estimated preferred and common stock dividend requirements. Approximately
$740,000,000 is expected to be financed from external sources during this period, of which approxi-mately $580,000,000 would be financed during the period 1981-1983.
The Company's financing plans for the 1981-1986 period include the issuance of common stock, preferred stock and long-term debt, nuclear and fossil fuel financing and intermediate-term debt financing. The continued success of the Company's financing plans is dependent upon a number of factors, including the Company's ability to obtain adequate and timely rate increases, conditions in the capital markets, economic conditions, and the Company's level of sales. Cost increases, delays and changes in regulatory proceedings and requirements, market conditions and other factors have in the past necessitated revisions in the Company's construction program and in the timing and amcunt of the Company's projected financings; these factors may require similar revisions in the future. [j The Company has a total of $134,350,000 of short-term bank credit, consisting of lines of credit aggregating $4,350,000 with New Hampshire banks, and a revolving credit agreement with a group 7 L
of eight commerciv banks under which the Company may borrow up to $130,000,000 through Novem-ber K, C31 subs teto periodic review by the banks; amounts outstanding under tfie agreement mature on November 17, 1981. The Company believes that the continued availability of this bank [ credit to November 16, 1981 and any extension thereafter will depend principally upon the success of the Company's financing program, and the occrrrence of no adverse developments in rate and other regulatory proceedings or in the program to mluce the Company's ownership interest in the Seabrook project. The banks party to the revolving credit agr ement have ag tel to increase the credit to
$150,000,000 and to extend the maturity to January 7,1982, subject to appropriate doeuraentation.
As of 3f arch 31,1981, the Company was permitted under its Artiehs of Agrt+ ment to incur approximately $191,400,000 of short-term unsecund indebtedness without obtaining the appmval of holders of the Preferred Stock. The NilPCC has approved up to $190,000,000 of short-term bormw-ings. The Company's financing requirements during the balance of 1951 (including nfunding at ma-turity of approximately $24,000,000 of First 31ortgage Bonds, Series T) are estimated, after the sale of the additional Conunon Stock offered hereby, to be approximately $50,000,000 (to be met by the issue of General and Refunding 3fortgage Bonds in the fourth quarter), essuming that 3131WEC obtains financing for its increased Seabrook project ownership interest before June 30,1981, that the
$20,000,000 increase in the Company's revolving credit agreement is effective, and that approximately
$11S 000,000 of short-term bank credit is outstanding at the end of the year. Without the proceeds frem the issue of the additional Common Stock or the additional bank credit described above, the Company estimates that it will have utilized all of its presently available bank credit before June,1981.
In order to provide the Company with sufficient mvenues to satisfy the earnings test required for the issuance of General and Refunding 31ortgage Bonds needed during 1981, on January 14,1951, the Company filed a request with the NIIPUC for an emergency surcharge designed to increase ann al revenues by approximately $35,500,000. On February 27,1981, the N11PUC denied the Company's request since in its opinion the Company's request did not reflect the favorable impact on the Company's financial situation resulting from the February,1981 approval of 3131WEC's increased participation in the Seabrook project. The Company's motion for rehearing was denied on 3farch 26,1981. In its February order, the NIIPUC asserted that the Company had not taken necessary steps to reduce controllable expenses. The Company has since instituted the following measures-a hiring freeze; a salary freeze for all senior executives; a deferral of $8,000,000 in non-Seabrook related construction projects; a deferral of $2,500,000 in maintenance projects; the elimination, subject to union negotiations, of the employee electric rate discount; and strict limits on business travel and other business expenses. 31anagement believes that the steps outlined above are not in the best inter-ests of maintaini .g reliable service to customers. On April 2,1981, the Company filed with the NIIPCC a request for permanent rates designed to increase annual nvenues by appoximately $34,900,000 (about 9.7%) together with a request for temporary rates at the increased hvel to be effective at the earliest possible date. On 3!ay 1,1981, the NilPCC granted the Company temporary rates (which will be colheted subject to refund) desigm,1 to increase annual revenues by $17,435,268, effective with bills sent out for services rendered on or after 3 fay 1 1981. The NIIPCC based its decision on the overall rate of return of 13.69 (15.99 s on common e,quity) allowed in its most recent rate decision in June,1980; in its April,1981 request , for increased rates, the Company requested the NilPCC to allow an 18.659 return on common equity. The Company estimates that the additional revenues provided by the temporary rates will enable the [ Company to issue somewhat less than the $50,000,000 of General and Refunding 3fortgaec Itonds 8
planned for the fourth quarter of 1981 unless the NIIPUC grants the Company increa. sed permanent rates. The Company's ability to issue General and Refunding 31ortgage Bonds in adequate amounts and in a timely fashion is considered by the Company to be an essential part of its financing program. j [, NECESSITY OF ADEQUATE RATES, REQUIRED APPROVALS AND FINANCING If continued rate support is not granted in sufficient amounts and in a timely manner or if the reduction in the Company's interest in the Seabrook project to about 35fc' does not continue in due course, the Company may be unable to obtain the external financing necessary to finance its ownership interest in the Seabrook project. Adequate rates, timely reduction of its Seabrook interest, and timely financing (including the additional Common Stock offered hereby) am all essential to enable the Company to maintain its construction program and continue its business operations. RECENT RESULTS OF OPERATIONS Information with respect to the results of operations for the twelve months and three months ended 3famh 31,1981 and 1982 's as follows: Twebe Months Ended Three Months Ended March 31, March 31,
- 1981 1980 " 1981 1980 (Thousands except Earnings Per Share)
Operating Revenues $371,991 $315,940 $123,942 $103,195 44,163 45,883 13,069 16,213 Operating Income 59,550 45,701 16,902 17,199 Net Income
- Preferred Dividend Requirements 16,410 9,212 4,806 2,415 Earnings Available for Common Stock 43,140 36,489 12,096 14,781 Average Shares of Coramon Sto"r Outstanding 17,706 13,514 19,402 14,690 Earnings Per Share of Common Stock $2.44 $2.70 $0.62 $1.01 The foregoing information is unaudited and, in the opinion of management, includes all adjust-ments (consisting only of normal recurring accruals) necessary to a fair statement of results of oper-ations for such periods.
l Earnings per share for both the twelve months and the thrw months ended 31 arch 31,1981 decreased from corresponding periods during 1980. This decline in earnings reflects the effects of con-l tinuing inflationary pressure on the Company's operating expenses and interest costs as well as increased preferred dividend requirements and a substantial increase in the number of average shares of common stock outstanding. Operating expenses row 279 in the first quarter, while operating mvenues increased only 209 The decline in earnings performance emphasizes the importance and need for the permanent rate relief now being sought by the Company. See " Financing and Rate Relief" regarding a tempo-rary rate incret.ae of approximately $17,400,000 granted by the NIIPl'C, effective 3far 1,1981. [, 9
~
L
4 CO.TD10N STOCK DIVIDENDS AND PRICE RANGE The Company has paid regular quarterly dividends on its Common Stock since 1946 when its Common Stock first became publicly held. The Company's annual dividend increased from $1.64 to l
$1.72 in 1975, to $1.86 in 1976, to $1.88 in 1977, and $2.12 in 1978. A quarterly dividend of 53( per share was paid on February 14,1981, indicating a continuation of an annual dividend rate of $2.12
( h paid in 1979 and 1980. The shares of the additional Common Stock offered hereby will not be entitled to the 3 lay,1981 dividend. Future dividends will be dependent on the Company's future earnings, its ca.sh position, it.s financial condition and other factors. The Company has determined that 10096 of the Company's 1980 Common Stock dividends and approximately 74% of the Company's 1980 Preferred Stock dividends will be treated as a return of capital for federal income tax purposes and accordingly will not be taxable as dividend income. The return of capital will have the effect of rulucing the tax basis of a stockholder's sharts and, to the extent it exceeds such basis, will be taxable to stockholders as a capital gain. The Company currently estim .tes that substantially all of the 1981 dividends on Common Stock will also be treated in this manaer. The following table indicates the high and low sales prices of the Company's Common Stock as reported in The Wall Street Journal as composite transactions: Hiah low rsgh Low 1979 1980
, First Quarter 21 % 19 % First Quarter 17 13 Second Quarter 19 % 17 % Second Quarter .17% 13 %
Third Quarter 19 % 17 % Third Quarter 17 % 14 % Fourth Quarter 18 % 15 Fourth Quarter 16 % 13 % 1981 First Quarter 16 % 14 % Second Quarter (through 3 fay 4) 16 % 14 % The last reported sales price on the New York Stock Exchange on 31ay 4,1981 was 14T's. The book value of the Common Stuck at 31 arch 31,1981 wa.s $20.65 per share. After the sale of the addi. tional Common Stock offered hereby, the Imk value per share at that date on a pro forma basis wouhl have been $19.94. The Company has a Dividend Reinvestment and Common Stock Purchase Plan under which holders of its Common Stock may automatically reinvest their dividends, make optional cash invest. ments of an aggregate of from $25 to $5,000 per quarter, or both, in additional shares of Common [ Stock without payment of any brokerage commission or service charge. Participation in the Plan is offered only by means of a separate prospectus available upon request from the Company. 10
DESCRIPTION OF CO3DION STOCK g The authorized capital stock of the Company consist.s of 27,000,000 shares of Conunon Stock, $5 g/ par value (the " Common Stock") and two classes of Preferred Stock consisting of 1,350,000 shares of Preferred Stock, $100 par value, and 5,000,000 shares of Preferred Stock, $25 par value. The two classes of Pnferred Stock rank on a parity with each other and are hereinafter referred to collectively as the " Preferred Stock" Each class of the Preferred Stock may be issued in one or more series. E,f -Dividend liights. Subject to the prior rights of the Preferred Stock and to the limitations descrilxd below, the Common Stock is entitled to dividends when and as declared by the Board of Directors out of any remaining funds legally available therefor. Each series of the Preferred Stock is entitled, when and as declared by the Board of Directors, to cumulative quarterly dividends at the annual rate per share designated in its title in preference to the Common Stock and any other junior stock. Sinking fund requirements on each of the five out-standing Series of the Sinking Fund Preferred Stock are on a parity with dividend requirements on the Preferred Stock. The Articles of Agreement contain certain limitations, applicable so long as any shares of the Preferred Stock are outstanding, on the Company's right to declare dividends on the Common Stock
- out of net income (similar limitations are contained in certain indentures supplemental to the First 3fortgage, applicable so long as any bonds of Series H through V are outstanding), or in the event Common Stock Equity (as defined) is less than 259 of Total Capitalization (as defined). Pursuant to terms of the Company's General and Refunding 31ortgage Indenture, dividends may not be paid on the Conunon Stock in excess of the Company's Net Income accumulated after January 1,1978 less the aggregate amount of all dividends paid or declared on the Preferred Stock of the Company during
- such period plus $32,000,000. At 31 arch 31,1981, $64,550.000 of Retained Earnings was not subject to dividend restriction.
Voting Rights. Each sham of Common Stock is entitled to one vote and this class of capital stock has general voting rights. Under New Hampshire law and the Company's Articles of Agreement, an amendment to the Articles of Agreement containing the terms of any new series of the Preferred Stock requires for approval the favorable vote of the holders of at least two-thirds (%) of the shares of Common Stock voting at the meeting called for the purpose of considering such an amendment. If and when dividends payable on any class of the Preferred Stock are in arrears in an amount equal to four or more quarterly dividends on all series of the class, the holders of the Preferred Stock of all series of such class voting as a single class or voting with holders of one or more other classes of the Preferred Stock, as a single class, if such holders have the right to participate in such election, have the right to elect a majority of the Board of Directors. The affirmative vote of certain percentages of the Preferred Stock is required for (1) authoriza. l tion of any additional prior or parity preferred stock or securities convertible into such stock, except 11
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g to refund all of the Preferred Stock; (2) issuance of stock having a preference as to dividends or q a.ssets over the Preferred Stock, or securities convertible into such stock, execpt to refund funded indebtedness; (3) any prejudicial change in the terms and provisions of such stock; (4) issuance of any shares of Preferred Stock or other prefernd stocks ranking on a parity as to dividends or assets l with the Preferred Stock, or securities convertible into shares of such preferred stocks, unhw to E F refund preferred stocks or funded indebtedness o; unlesa certain requirements are met as to net income and as to the amount of capital, premium and surplus; (5) issuance or assumption of un-secured indebted.1cm in excem of specifled amounts; or (6) merger or consolidation of the Company with or into another corporation unlem such merger or consolidation or the issuance or assumption of securitics to be issued in connection therewith is authorized by any Federal regulator authority having jurisdiction. iWuidation Rights. Upon any liquidation, dissolution or winding up, after payment of the Company's obligations and after payment in full to holders of the Preferred Stock, the nmaining net ameta of the Company shall be distributed ratably to the holders of the Common Stock. In case of involuntary liquidation the $25 Preferred Stock is entitled to $25 per share and the $100 Preferred Stock to $100 per share, in each case plus accrued dividends, or in case of voluntary liquidation, to the redemption price applicable to the particular series, and no more, in preference to the Common Stock. Other Hights. Holden of the Common Stock have preempdw rights to purchase each future issue of Common Stock, warrants carrying righta to Common S:ock or securities convertible into Common Stock which is offered for sale for cash other than (i) by a public offering or (ii) to or through underwriters or investment bankers who shall have agreed promptly to make a public offering thereof, or (iii) to employees of the Company or (iv) to holders of the Common Stock under a dividend reinvestment and common stock purchase plan. The Common Stock is not liable for further calls or to assessment. Transfer Agents and Registrars. The transfer agents for shares of Common Stock are The Fi st National Bank of Boston and 3fanufacturers Hanover Trust Company, New York, New York, and the registrars are The First National Bank of Boston and Morgan Guaranty Trust Company of New York. LEGAL OPINIONS The validity of the additional Common Stock will be passed upon for the Company by Afessrs. Sulloway Hollis & Soden, Concord, New Hampshire, and by Messrs. Ropee & Gray, Boston, 5f assa-chusetts, and for the Underwriters by Messrs. Choate, Hall & Stewart, Boston, Massachusetts; the last two firms, as to the organization and existence of the Company, approvals of state commissions and legal conclusions affected by the laws of New Hampshire, Vermont, Maine and Connecticut, may rely upon Messrs Sulloway Hollis & Soden, who in turn may rely upon counsel in Vermont, Maine and E Connecticut. 12
EXPERTS The financial statements and related schedules in the Annual Report on Form 10-K, as amended, f of Public Service Company of New IIampshire incorporated by reference in this Registration State-ment have been incorporated herein in reliance upon the nport of Peat, 3farwick, 31itchell & Co., independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. [* Afessrs. Sulloway Hollis & Soden have reviewed the statements made in the Company's Annual Report on Fonn 10-K, as amended, incorporated herein by reference, as to matters of law and legal conclusions under the captions " Regulation" and "31unicipalities and Cooperatives" in Item 1 "Busi-ness", under the caption " Hate Proceedings-New Ilampshire Retail" in Item 3 " Legal Proceed-ings", and the statements made herein as to matten of law and legal conclusions under the caption
" Description of Common Stock". 3fessrs. Ropes & Gray have reviewed the statements made in the Company's Annual Report on Form 10 K, as amended, incorporated herein by refennee, as to matters of law and legal conclusions under the subcaptions "31ortgage Bonds" and " Preferred Stock", under the caption " Financing"in Item 1 " Business", under the captions "New England Power Pool" and "Seabrook Nuclear Project" in Item 1 " Business", and concerning the jurisdiction of the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, and the 31assachusetts Department of Public Utilities under the caption " Regulation" in Item 1 " Business" and the state-ments made herein as to matters of law and legal conclusions under the caption " Description of Com-mon Stock". Such statements are included or incorporated herein by reference, as the case may lx, on the authority of such firms as experts.
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UNDERWRITING The names of the several Underwriters and the respective numbers of shares of the additional Common Stock which they have severally agreed to purchase from the Company, subjwt to the terms y and conditions specified in the Underwriting Agreement filed as an exhibit to the Registration State- [ ment, are as follows: Number of Number of Shares of Shares of [4 Name Stock Name Stock 346.500 Dain Bosworth Incorporated 22,500
'Mder, Peabody & Co. Incorporated 346,500 Eppler, Guerin & Turner, Inc. 22,500 Blyth Eastman Paine Webber Incorporated Bache IIalsey 8tuart shields Incorporated 46,500 Fahnestock & Co. 22,500 The First Boston Corporation 46,500 First of Michigan Corporation 22,500 46,500 Gruntal & Co. 22,500 Bear, 8tearns & Co.
Drexel Burnham Lambert Incorporated 46,500 Janney Montgomery Scott Inc. 22,500 Goldman, Sachs & Co. 46,500 Josephthal & Co. Incorpsrated 22,500 E. F. IIntton & Company Inc. 46,500 Ladenburg, Thalmann & Co. Inc. 22,500 lehman Brothers Kuhn Loeb Incorporated 46,500 Legg Mason Wood Walker, Incorporated 22,500 Mcdonald & Company 22,500 Merrill Lynch, Pierce, Penner & Smith Incorporated 46,500 Philips, Appel & Walden, Inc. 22,500 L. F. Rothschild, Unterberg, Tombin 46,500 Piper, JaEroy & Hopwood Incorporated 22,500 Halomon Brothers 46,500 Prescott, Ball & Turben 22,500 Shearson Loeb Rhoades Inc. 46,500 Rauscher Pierce Refenes, Inc. 22,500 8mith Barney, Ilarris Upham & Co- The Robinson.Ilumphrey Company, Inc. 22,500 Incorporated 46,500 flotan Mosle Inc. 22,500 Warburg Paribas Becker Incorporated 46,500 Butro & Co. Incorporated 22,500 Wertheim & Co., Inc. 46,500 Wheat, First 8&urities, Inc. 22,500 Dean Witter Reynolds Inc. 46,500 Birr, Wilson & Co., Inc. 8,000 Adrest, Inc. 31,000 B. C Christopher & Co. 8,000 Alex. Brown & Bons 31,000 Faherty & Faherty Inc. 8,000 A. G. Edwards & Bonn, Inc. 31,000 Ferris & Company, Incorimrated 8,000 Moseley, Hallgarten, Estabrook & First Albany Corporation 8,000 Weeden Inc. 31, 2 First Mid America Inc. 8,000 Oppenheimer & Co., Inc. 31,000 lierzfeld & Stern 8,000 Thomson McKinnon Becurities Inc. 31,000 J. J. B. Hilliard, W. L. Lyons, Inc. 8,000 Tucker, Anthony & R. L. Day, Inc. 31 000 Interstate securities Corporation 8,000 Bacon, Widpple & Co. 22,500 Investment Corporation of Virg;nia 8,000 , Bateman Eichler, Hill Richards Incorporated 22,500 Jesup & Lamont Securities Co., Inc. 8,000 l William Blair & Company 22,500 Johnston, Lemon & Co. Incorpor6ted 8,000 l Blunt Ellis & Loewi Incorgerated 22,500 Edward D. Jones & Co. 8,000 Boettcher & Company 22,500 Laidlaw Adams & Peck Inc. 8,000 J. C. Bradford & Co., Incorporated 22,500 Morgan, Olmstead, Kennedy & Gardner Bruns, Nordeman, Rea & Co. 22,500 Incorporated 8,000 Burgess & Leith Incorporated 22,500 Newhard, Cook & Co. Incorporated 8,000 Butcher & Binger Inc. 22,500 Parker /Ilunter Incoiporated 8,000 [, Crowell, Weedon & Co. 22,500 Wm. C. Roney & Co. 8,000 14 L
Number of Number of Shares of Shares of Stock Name Stoet Name 8,000 Emmett A. Larkin Company, Inc. 4,500 H. Rowland & Co., Incorporated 8,000 A. E. Masten & Co., Incorporated 4,500 Wagenseller & Durst, Inc. 8,000 The Milwaukee Company 4,500 Wedbush, Noble, Cooke, Inc. Anderson & Btrudwick, Incorporated 4,500 P. I. Putnam & Company, Inc. [ Barrett & Company Winiam M. Cadden & Co., Inc. Robert C. Carr & Co., Inc. Evans & Co., Incorporated 4,500 4,500 4,500 4,500 Barclay Putnam Division Raffensperger, IIughes & Co., Inc. Scherck, Stein & Franc, Inc. I. M. Bimon & Co. 4,500 4,500 4,500 4,500 4,500 E. W. Smith Co. 4,500 First A51iated Securities, Inc. 4,500 8mith, Moore & Co. 4,500 First Equity Corporation of Florida 4,500 Stix & Co. Inc. 4,500 Oradison A Company Incorporated Bernard IIerold & Co., Inc. 4,500 Edward A. Viner & Co., Inc. 4,500 IIowe, Barnes & Johnson, Inc. 4,500 Total 2,500,000 The Undenvriting Agreement provides that the several Underwriters am required to take and pay for all of the shares of the additional Common Stock offered hereby if any are taken. The obliga-tions of the Underwriters are subject to certain conditions precedent. The Company has been advised by Kidder, Peabody & Co. Incorporated and Blyth Eastman Paine Webber Incorporated, as Representatives of the several Underwriters, that the Undenvriters propose to offer the additional Common Stock to the public initially at the offering price set forth on the cover page of this Pmspectus and, through the Representatives, to certain dealers at such price less a con-
. cession of not in excess of 50( a share, and that the Underwriters and such dealers may reallow a dis- ! count of not in excess of lof a share to other dealers. The public offering price and the concessions and dwounts to dealers may be changed by the Representatives.
l l l l [ 15
( g [ No dealer, salesman or any other person has been authorized to give any information ] or to make any representations other than those contained in this Prospectus and, if U PUBUC SERVICE given or made, such information or repre- g% sentahons must not be relied upon as hasing been authorized by the Company or the Un-derwriters. This Prospectus does not consti-tute an offer to sell, or a solicitation of an of-fer to buy, any of these securities by any Un- 2,500,000 Shares derwriter in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. The delivery of this Prospectus does not imply that the in. Common Stock formation herein is correct as of any time subsequent to its date. ($5 Par Value) TABLE OF CONTENTS Page Available Information 2 PROSPECTUS Incorporation of Certain Documents by Reference 2 , The Issue in Brief 3 The Company 4 Use of Proceeds 4 Kidder, Peabody & Co. Construction Program 4 Incorporated Financing and Rate Relief 7 Necessity of Adequate Rates, Required Blyth Eastman Paine Webber Approvals and Financing 9 Incorporated Recent Results of Operations 9 Common Stock Dividends and Price Range 10 Description of Common Stock 11 31ay 5,1981 Legal Opinions 13 Experta 13 Underwriting 14 [ E
RECEIVE
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MAY - 1 M DR 81-87 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE I
. 00.. - -
Appearances: Martin Gross , Esquire , Philip Ayers , Esquire, - i I Eaton Tarbell. Esquire for Public Service Company of New Hampshire; r,erald t l
- q Eaton, Esquire on behalf of the Community Action Program; Gerald Lynch, j Esquire on behalf of the Legislative Utility Consumers" Council; Dom .
. I D'Ambruoso, Esquire for the Business and Industry Association.* .
. 00..
- REPORT ,
!f On April 2,1981, Public Service. Company (hereinaf ter refe'rred to
.; s.
as "PSNH" or the " Company") filed a request for temporary and permanent rate h l relief in the amount of $34,962,094. The Commission ' suspended the proposed !
; tariff pages pending hearings and investigation. A hearing was scheduled 3 on April 21, 1981 on PSNH's temporary rate request. g The temporary rate statute, RSA 378:27, was enacted in 1941 by the -
i j legislature. The New Hampshire Supreme Court h,as interpreted this statute
! on numerous occasions.
In State v. New England Telephone and Telegraph Co., t
] 103 N.H. 394, 173 A.2d 810 (1959), the Supreme Qourt,found that the i
I
;l legislature enieted this statute to pr'otect utilities ay,ainst confiscatory .!
i rates. ,
. I l I The Supreme Court noted in New England Tel, and Tel. Co. v. State', I 95 N.H. 515,' 68 A,2d 114 (1949) that temporary rates are to be established
!j under this statute with expedition and without such investigation as is~
, i .
required for the determination of permanent rates. Thus temporary rates j } require a lesser burden of proof and investigation compared to either per ' ( i.
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[a)81-87 . manent or emergency rates. Public Service Company, DR 81-6,' Report and Second Supplemental Order No. 14,766, page 1. . . e i t The burden of proof required by the tempora,ry statute can be satisfied by the filing of reports with the Coi=nission unless there appears to be reasonable grounds to question the figures in such-reports. In denying PSNH's request for temporary and emergency rates two 8 months ago,Ithe Commission noted that while temporary rates have a lesser burden of proof, they are not available simply ,for the asking. In that .- prior proceeding, the Commission was provided estimated data. Estimated 1 data as to jurisdictional allocations and return are a perfect example of __ i the type of information envisioned by RSA 378:27 to b'e quesc(oned and j l ; x l for which the request may be denied, j This time PSNH has filed an actual jurisdictional study reflecting l a 1980 test year and providing a calculation of the earned rate of ret' urn for i i each aspect of its business. For PSNH's Vermont and Maine jurisdictions l l there is now evidence that these portions of the business are not carrying :.., . I I
, their fair sha're. PSNH has, however, taken steps to correct this situation with a major increase filed in Vermont and an agreement to sell its Main,e ,
I operations. S'uch action responds to the Commission's concerns 'xpress,ed e in DR 81-6 as well as DR 79-187. . Is its New Hampshire jurisdiction the return is higher but still' l - j l below that found reasonable in the last proceeding. The next question to be l evaluated is v,hether managm..ent has done all that was necessary to minimize costs. Our review'of PSNH's Form I reveals actual reduction in major. - G ' expense categories.. Further, PSNH has eliminated more expenses in response
! to our rejecti~on of the emergency rate increase. These factors demonstrate i l a positive response and satisfy the 1e'sser burden of proof required for ,
l . t
n _3_ . temporary rates. Whether the more extensive inquiry required in a (')/
\_s pe rmanent rate decision will yield the same, result depends on the data
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i ' l the Commission receives from all parties. ~ I . . The question that must be considered before the conclusion of the
; proceedings is what has caused the need for an increase aespite recent rate i
awardsandmanage$e,nt cuts in expenses. Two identifiable causes have
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; already surfaced; t'he state franchise tax and expenses as,sobiated with cable
. television rentals of poles.
y . , A portion of the state f ranchise tax relates to earnings. A
! portion of PSNH's earnings are not cash earnings b~ut rather can be viewed as i
promises to pay in the future. Yet, the state franchise tax is leveled on , these non-cash earnings. The tax associated with these non-cash, AFUDC earnings was $861,132 in 1978, S2,095,551 in 1979 and $5,262,571 in 1980.
'T This 3.1 million dollar increase since the last rate case is total.ly J
unreasonable. Even worse is that when the AFUDC costs are placed in rate base af ter 1984, the earnings from the return on this rate base entry will also have an associated f;anchise tax. The result, double taxation and higher l electric rates. . House Bill 449, sponsored by Representative Arnold Wight, would t eliminate this unfairness and lower electric rates. If the legislature is . l , l serious about cutting electric rates, they have an excellent opportunity to
. reduce rates by 5.2 million dollars. .
I r l
! Another aspect increasing electric rates'is the widening ,
; differential between the expenses associated with cable television pole i
I l j attachments and the revenues derived f rom.the rental fees charged. The fees , r l are set by the Federal Communications Commission (FCC) and as is typical of lO '
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l i i l . I - I federal regulations, it is slow in responding to changed economics . The expenses associated with maintaining poles has risen, yet the pole rental revenue collected from cable television companies has remained statibnary. - ! If these expenses are not reflected by an increa's e in pole rental revenue , the electric cortsumer pays and thereby subsidizes the cable television customer. When.. so much concern is being voiced about the high c'osts of energy it is extraordinary that this state would' elevate ?the rights of the l l cable television viewer over that of a poor person trying to heat his or her [ home. l This situation could have been remedied by passage of House Bill l 531* which would have transferred authority for setting pole rental rat'es from - , . kr the FCC to this Commission. PSNH estimated that the failure of pole rental revenues to match expenses has cost ratepayers $311,63d. When similar figures
- e compiled for the other electric utilities and the twelve telephone
- utilities, a major subsidy for the cable television industry emerges. The Commission believes that reducing PSNH rates by $311,630 is far more important ,
than holding down cable television costs. The Cpmmission would' request the legislature to reconsider its rejection of this legislative proposal. 1 Compassionandkogicbothdictatethatsocietyshould.placeahigherprior.ity
, l on keeping people warm instead of telev'ision sets. . .
Hopefully the legislature will act to remove these two barriers
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; which together would lower rates by approximately 5.5 million dollars.
l
. ! The' Commission finds that based on the records of the Company, l
-l submitted by Witness Long and the testimony of witnessesHarrison and Litt'lefield,'
e a temporary rate increase is jus,tified. I
- sponsored by Representative Barbara Bowler i .
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The level of the increase is raised by all parties. PSNH initially sought an increase of $34,962,094 on April.2, 10" liuring the interim, the Commission issued its decision in DA 81-94 which changed the accounting practice allowed PSNH. The result of the change in accounting reduces *the increase requested by $1,342,151. All parties agree th'at* the amount requested
, , should be reducell,'by this amount. This 1.3 million dollar figure relates to a reduction in expenses. .
There are other expenses which have been placed in question as to temporary rates. Two of these expense items relate to expenses which will occur after August of 1981. One is a pro-formed' payroll expense and the" other is a pro-formed property tax adjustment. Both the Commission Staf f - and the LUCC questioned the reasonableness of including these expenses in I temporary rates. The Commission agrees that such expenses do not merit I inclusion in rates at this time. The Commission has demonstrated that it is prepared to recognize these expenses where reasonable after'they have occurred, , our most recent recognition being the secondary step increases for these items in DR 79-187. Temporary rates are not desfgned to reflect potential I increases in the,- future. Consequently, the $776,276 pro forma for real estate
! taxes and the $1,729,123 pro ferma for payroll takes w'ill be removed from the.
temporary rate request.
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The next area of controversy,- is the proposal by Public Servic'e Company to increase its return on commun' equity to 18.65%. Both the . ( munity Action Program and the LUCC argue that temporary rates cannot . include a higher.. return on common equity from tha't found in the last proceeding, The Commission at,rees. -
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i . Temporary rates are to be established with expedition and without such investigation as required for setting permanent rates. New England Tel.
& Tel. Co. v. State AS N.H. 515, 68A.2d.114.(1949). The rate of return -
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calculation and especially the retura on common equity aspect require - significant investigation and proof. A commission canno't obtain, a just , and reasonable ritorn on common equity from just examining the records of a given utility. Rather, a complex analysis of the utility in question compared to other enterprises of corresponding risps is required. Expert testimony is necessary and judgment plays an important role. The New Hampshire Supreme Court has reedgnized this complexity - by finding that during a temporary rate proceeding this Commission can give consideration to a rate of return found to be reasonable in an earlier . proceeding without finding its present reasonableness. Public Service Co. v. State 102 N.H. 66, 150 A.2d 810 (1959). The Commission will not accept ' D PSNH's proposal for a 18.65 return on common equity for purposes of . temporary rates. , Rather, the Commission will substitute the return on common equity found to be reasonable in the last proceeding. DR 79-187, Report and Order ' dated June, 1980.
'Ihe Commission neither accepts or rejects the' testimony offered
- on this subject. Rather, the Commission frefuses to read any return on
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co= mon equity testimony during a/porary rate proceeding. All parties have the r'ight ' to explore this topic through testimony, Eliscovery and cross examination. In its testimony, PSNH raises the possib'ility of further lines of I credit by its bankers if the results are f avorable' from this Commission decision. The recent history involving PSNH and its bankers do:not . subs t antiat e , this assertion. PSNH's bankers have been slow to provide O
~ .. ooe.e=
.e . - - , - -
i
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. the necessary lines of credit for PSNH to function. Furthermore, the rates charged are high relative to others within the industry. The rate of progress ! by PSNH's bankers can only be described as glacial. If the Commission is to seriously res' pond to such assertions, the banks will have to ~ '
I respond in a favorable fashion sometime in the very near future. ,
! The ush of our previous finding as to return on common equity leads
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to an overall ra'te of return of 13.6%. . j PSNH also seeks a 1% attrition factor in its temporary . ate request.
. , e f Commission Staff, CAP, and th- LUCC all object to this. The Supreme Court I
i established the standard for utilities as far as permanent rates are concerned. l Nes England Tel. & Tel. v. State 113 N.H. 92, 302 A.2d.813 (1973). The
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standard set forth in that case requires recognition of attrition if established-- by a utility. In Granite ytate Electric 119 N.H. (1979). The Court further defined the standard by requiring elaborate findings to support a i utilities allowance. Thus , the standard in New Hampshire is that an attrition will be recognized if proven by a utility and that such proof supports the adjustment requested. To restate the standard, not only must a utility prove attrition but it. also must carry the burden as to quantifying the adjustment. Hampton Water Company 64 NHPUC (1979) . - - The duration of a temporary rate proceeding does not allow for , the necessary offers of proof that would lead to a quantified attrition - adj us tment. Furthermore, an attrition factor is'an adjustment made at the , end of a perm nent , rate proceeding to provide a greater likelihood..that the , utility will earn the return set by the Commission. Consequently, an l l attrition adjustment would not proper ratemaking at this time. The Commission believes that t'he test year filed by PSNH } ov' ides
, the greatest access of' information because of its characteristic calendar l \ .
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year. Consequently, much of the information usually obtained by data ( requests are available in reports routinely, filed with the Commission.
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This access to information will necessitate .a tighter hearing
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schedule. Furth'ermore, since temporary rates have been established it is necessary to expedite the proceedings. This case will fe finished prior to July 14,1981 and,.the hearing schedule will be conducted accordingly. i The CoEmiission will allow temporary rates in t,he; amount of
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$17,435,268. The calculation for these rates is as follows:
! NH Rate Br.: e, Adjusted to Net of Tax AFUDC S362,430,797 Less: Working Capital Adjustment Due to Es t . Rate Increase -
(1,319,793 x 12.5% x NH Portion 80.52%) 132,837 Adjusted Rata Base 362,297,960
]
Cost of Capital (Using 15.9% Commo- Equity and
- No Attrition) x 13.6%
N.H. Net Operating Income Requirement 49,272,323 i Less Adj. Net Operating Income 40,293,883 l Required Increcse in Net Operating Income 8,978,640 i l l Tax Effect ( 51.497%) - 17,435,268 l The Adjusted net operating income has been calculated as follows: R& vised Net Operating _ culation Net Operating Income (Adj .) Net Method S 39,327,499 Plus: Salary E ljus tment , 0 & M Expense: t Total Company $716,650 . y x NH Allocator 87.5% 627,069
! Real Estate Taxes 397,185
! x NH Allocator 85.43 339,315 .
t s Adjusted Net Ope ating Income 40,293,883 n ' V t r l
l l I i . j _e_ j . . jh The rate increase approved here refers to the overall increase l t, / U . } for the New Hampshire retail rates and does not endorse any.particular method of allocating those revenues to class. In making such allocations the Commission believes that consideration must be given.co cost of service principles and to rate design objectives.such as 'conseivation.* For this reason, thei Commission has examined the issue of rate design under the _ i temporary rates and made the determinations specified in.the remaining l sections of this report. , RATE DESIGN ' A. Introduction i
. I The primary issues in rate design are the allocation of revenue .-
responsibility to class and subclass and the setting of specific charges with- ! I in those classes. In DR 79-187, the company's previous rate case, the Commission established Phase II to allow for a detailed review of rate design
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and for the consideration of the ratemaking standards of the Public Uti,lity Regulatory Policies. Act (PURPA). The proceedings are now under way and will culminate in an order pertaining to rate design"sometime this summer. The rate design established will be based on a thorough and complete record and
. . i on a careful consideration of the objectives of fairness and equity, -
l efficiency, conservation, consistency and other objectives of rate desii;n. , However, the Company has applied for a rate increase and, in particular, a, temporary rate increase, prior to the establishmeht of a complete l , record in DR 79-187, Phase II. The granting of'a temporary rate increase - will require the allocation of the increased revenues to class and the .; assignment of these r.evenues to specific elements in the tariff. The ch l, O - V G e
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l _lo_ of methods used to allocate or to assign the increased revenues constitutes
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i rate design and must be carefully considered by this Commission. The. . methods chosen must achieve, to the extent possible, "the ob,jectives of rate design and must ,not undermine or erode these objectives. "Ihis Co==ission -
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does not have the luxury of waiting for the completion of DR 79 .187, Phase , IItomakeadefe'rminationonratedesigninDR81-87. Temporary rates must be established immediately, based on the best sources of~ data and information ~ l
; available and: based on the considered judgment of the Commission.
l l B. Allocation of Increased Revenues
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.i The Company has proposed an across-the-board percentage increase in the revenues collected from each class. However, we nete in the Company's own Time-Dif ferentiated Accounting Cost (TDAC) Study submitted in DR 79-187, !
O Phase II, that the calculation of the estimated actual rate of return by class " C/ I indicates serious inter-class subsidies. Fcr example, the study indicates I that the small commercial customers under the General Service Rate are being overcharged I by a substantial amount. An across-the-board percentage ; increase not only fails to address the issue of inter-class subsidies, it actually increases the subsidy. Therefore, the Commission finds that an . l across-the-board percentage increase id an unacceptable method of allocating,- the increased r enues to class. However, the Commission notes 'that the' Company's TDAC . study is , not the only evidence that will be submitted L. DR 79-187, Phase II, and that , j the assumptions used in any accounting cost study are subject to considerable j udg nent . The judgment the Company has .used in its TDAC study has not yet O
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b/ ! l i, e e e e
i . j . .
!. I j , .
i been subject to review in the record of DR 79-187, Phase II. In addition, Om the study is based on calendar year 1979 and is not specifically applicable to the test year in DR 81-87. For these reasons, the Commission cannot adopt the Company's TDAC study as the sole means of determining the allocation-of increased revenues to class. , The C$dmission finds that the allocation of the revenue increase to class must be based on a compromise that spreads the.. crease across all classes while, heavily weighting the Company's TDAC study. By tiis means, the inter-class subsidies will tend to be, reduced, while leaving considerable *
- room for error and foi further refinements in DR' 79-187, Phase II. In
- a . . ;
particular, the compromise means that the General Service Customers will . receive a substantially lower percentage increase, tha;tTransmissionGeneral customers will receive a slightly higher percentage increase, and that outdoor lighting customers will receive the highest percentage increase. The compromise approved by the Commission is specified in Table' I, Summary of Rate ! ~ i Changes, PSNH Tariff 25, and is based on an allocation of the revenue increase according to these percentages: Residpntial 45% , 1 General 4% . - i t i Primary General 22%, ,
, , l
~ 1 Transatission General 25% ;
Outdoor Lighting 4% - { t e e
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l I . -. DR 81 Table I -- Summary of. Rate Changes PSNH Tariff 25 , Average Revenue at Re' venue at - Change In % Rate Class Cus tomers Present Rates Temporary Rates Revenue Increase .
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Residential 246,360 S150,107,327 157,953,198 ~7,845,871 5.2 (Rate D) , General Service - 31,731 58,330,446 59,027,B37 697,411 1.2
. 1 (Rate G) -
j . { Primary General 1,226 72,598,479 76,434,238 3,835,759 5.3 (Rate GV) Transmission General'
- 85 71,577,275 . 75,936,092 4,358,817* 6.1 (Rate TR)
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Outdoor Lighting 13,430 7,862,170 8,559,580 697,410 8.9 (Rate ML) Total 279,575* 360,475,697 377,910,965 17,435,268 4.8
*Does not include 13,257 private area light customers already counted under other rates. ,
In addition to inter-class subsidies, the Company's TDAC study also indicated that ssrious intra-class subsidies exist. The Commission is aware l l of the apparently severe intra-class subsidy in tiie General Service Class
- apparently due tp the lo ser rates for Space Heating and Uncontrolled Water Heating, and addresses that issue in the section on tariff provisions. For
, the Residential Class, the Commission examined' the TDAC study and data on ,
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1980 clast consumption and revenue filed by the Company as a data response to PURPA Staff Data Request, Set Number 4, Request 3, in DR 79-187, Phase II., Again, the Commission,. determined that an'across-the-board percentage increase ,
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, was unacceptable. Based in part on the Company's TDAC study, the Commission finds that the increased revenues within the residential class should fall more heavily on the Space Heating customers and the Uncontrolled Water Heating customers. There is no evidence to' indicate that the lower rates for these sub-classes substantially meet the objectives of rate design in todaf's environJnent. The allocation of the revenue increase to the residential sub-classes is designed to increase space and'9ater heating sub-class average revenues per kwh by approximately twice thd increase of the power and light sub-class average revenue per kwh. The sub-class "other"
; does not include the categories which the Commission feels should be exempted from the in... ease and is assigned an increase somewhere between the space heating and power and light increases. The allocation of increased revenues -
within the residential class shall be based on the foll'owing percentages: Power and Light 39% N Space Heating 35% l Uncontrolled Water . Heating 24%
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Other 2% C. Tariff Provisions The remaining issues in the design of rates under the temporary , rate increase pertain to the review of t,he specific rates and terms of - service and the assignment of the additional revenues to specific charges in the tariff. The assignment of revenue's to par'ticular charges.cannot be. , completed with.out a detailed analysis of the bill'ing determinants for tF ose , charges, but the, basic rate design principles to be followed in making those assignments can be specified. The Commission has examined the existing tariff and other available information and has conside/ red the many important objectives of rate mak'ing. The Commission finds that the additional revenues e
l- . . from the temporary rate increase should be assigned in specific manners to the tariffs for the different classes, and,that several changes in the terms and conditions of certain rates are required. The specific changes and revenue increase assignments approved by the Commission are as follows: - Residential *
- 1. Close out th,e, Space Heating rate and the G-Opti.on Space Heating Rate to new cus tome r's.'
l 2. Close out the Uncontrolled Water Heating rate to new customers.
- 3. Offer service to new space heating and uncontrolled water heating customers under the standard Residential rate. *
- 4. Do not apply any increase to the Controlled Water Heating rate, the ,.
Optional Seasonal summer rate, the Optional Time-of-Day Off Peak rate.
- 5. Assign the revenue increase to the energy charge portion of each rate.
() 6. .For existing space heating customers, set the energy charge f.or the first block equal to the temporary residential energy charge.
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General Service
- 1. Close out the Space Heating rate to new customers.
- 2. Close out the Uncontrolled Water Heating rate to new customers.
- 3. Offer service to new space ., eating and uncontrolled water heating custcmers un er the standard General Service rates. ,
- 4. Set the Space Heating rate energy charge equa,1 to the energy charge for i -
i , the high use block under the residential Spac,e Heating rate, including - C-Option Space Heating taken by residential customers. . l 5. Set the UncoHerolled Water Heating rate cuergy charge for all kilowatt . hours equal to the energy charge for residential Uncontrolled Water, * (}
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Heating. ' l . l l L * .
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- 6. Do not assign any increase to the Controlled Water Heating rate.
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, 7. Assign any remaining revenue increase to the highest use block of the General Service tariff, or apply any overcharge resulting from th'e above
~l requirements to the two lowest use energy blocks of the tariff. " l Primary General Service .
l ! 1. Assign the tintire increase to the energy charge by first eliminating the i j - two-block differential and raising the resulting energy charge as needed. j
- Transmission General Service I r
- 1. Assign the increase on a mills per kilowatt hour basis equally to all
, portions of the energy charges. '
i s. l-Lighting Service .
- 1. Assign the increase to each element of the tariff on the basis of wattage.
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"Ihese requirements are based on the Commission's .judgmen't as to the best means of furthering the objectives of rate design, including fairness I
, and equity, efficiency, conservation, consistene,y and others. It is the judgment of the, Commission that the requirements are necessary and justified I based on all the information available at this time. .It is expected.
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however, that the final decision in DR 9-18 , Phase II, based as it will- . i be a complete and thorough record, will substan-ially improve upon these requirements. The rate design approved under th'e temporary rate increase , represents a 'further preliminary. step in implementing a new and updated rate l-i design for the ' Company. The decision in DR 79-187, Phase II to flatten 'the rates for residential service represented the first' step.
. l Our Order will issue accordingly.
Concurring: . V May 1, 1981 ' J. Michael Love Paul R. McQuada: Francis J. Riordan C01DilSSIONERS e n
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' DR 81-87 .
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
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SUP.PLEMENTAL 0RDER N O. 14,877. - Upon consideration of the foregoing report, uby th is made a part hereof; it is . . ORDERED...that a new tariff for temporary rates. as. authorized in the aforementioned report, be filed to raise additional r'eitenue 1,n the sum j . of $17,435,268'to.become effective with all bills for services rendered on 4 l or af ter May 1,1981; dnd it is ', I FURTHER ORDERED, that the Public Service Company of New Hampshire - w shall file a bond pursuant to RSA 378:30 in such'a form'and wit,h such sureties, - if any, as the Commission may determine, to secure the ' epaymerit r to the 1 customers of the utility of the difference between the amounts collected under i
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such temporary rates and the rates which the Commission' finds should have ! i i i
! been in effect during the continuance of such temporary rates. And it is
! FURTHER ORDERED, that the Public Service Company of New Hampshire give public notige by publication in a newspaper having general circulation in the territory served by the Company in accordance'vith'the Tariff Filing ,
Rules of this C6m. mission. ...l - By order of the Public Utilities Commission of New Hampshire this l
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. first day of May, 1981. ,
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i . ,y . \ tW A Vincent J ,. Iacopino A i.
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Executive Director and Secretary
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- O BANGOR HYDRO-ELECTRIC COMPANY Units No. 1 and No. 2 Seabrook Nuclear Power Station Seabrook, New Hampshire Information furnished pursuant to S 50.33 of Commission's Rules and Regulations with respect to the particular Applicant named above as part of Final Safety Analysis O Report and Operating License Application for the above Units. ;
July 1981 I O
I. ORGANIZATION AND CONTROL i (a) Name of Applicant Bangor Hydro-Electric Company ("BHE" or the " Company") (b) Address of Applicant 33 State Street, P.O. Box 932, Bangor, Maine 04401 (c) Description of Business of Applicant Bangor Hydro-Electric Company is a public utility engaged in the generation, purchase and transmission of electric energy for distribution and sale to approx-imately 76,000 customers. BHE's service area covers approximately 4,850 square miles in eastern Maine. It is the second largest electric utility in Maine. Approximately 2% of the Company's KWH sales are to
~ ~ other utilities for resale. The maximum peak electric ' demand experienced during 1980 was 219.5 megawatts on December 15, 1980, at which time the Company had available 279 megawatts of generating capacity. The Company is a participant in the New England Power Pool, and the Company's generating units and those in which it has an interest are centrally dispatched by the Pool. The Company occasionally purchases power from the New Brunswick Electric Power Commission, and is currently negotie'.ing with New Brunswick for a nine year contract ror the purchase of 30 megawatts of capacity and energy from New Brunswick's Pt. LePreau Nuclear Unit No. 1, presently anticipated to commence commercial operation in early 1982.
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For a more specific description of BHS, reference O)
\s, should be made to Items 1 and 2 of its Form 10-K for 1980 which is submitted herewith as Exhibit A.
(d) Corporate Organization BHE is a corporation organized under the laws of the State of Maine. As of March 31, 1981, BHE had 7798 domestic shareholders owning 2,082,240 common shares and 13 foreign shareholders owning 6920 common shares. (e) Corporate Officers and Directors The names and residence addresses of BHE's directors and principal officers are as follows: Directors
"' Name Residence George D. Carlisle Bangor, Maine John F. Grant Bangor, Maine Thomas A. Greenquist Brewer, Maine Robert N. Haskell Bangor, Maine John T. Maines Brewer, Maine James G. Sargent Hampden, Maine Earle R. Webster Bangor, Maine Officers Robert N. Haskell Bangor, Maine Chairman of the Board Thomas A. Greenquist Brewer, Maine President Gerald F. Hart Brewer, Maine Vice President-Engineering John P. O'Sullivan Brewer, Maine Vice President & Treasurer l
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Bangor, Maine r'~) Paul A. LeBlanc Vice President-Administration (_f Robert S. Briggs Bangor, Maine Vice President and General Counsel William H. Beardsley Orono, Maine Vice President-Rates & Research Carroll R. Lee Brewer, Maine Assistant Vice President-Engineering Carroll A. Brochu Brewer, Maine Assistant Treasurer Robert S. Briggs Bangor, Maine Clerk John P. O'Sullivan Brewer, Maine Assistant Clerk All of the directors and principal officers of N h BHE are citizens of the United States of America. BHE is not owned, controlled or dominated by an alien, foreign corporation or foreign government. II. FINANCIAL QUALIFICATIONS Under the Joint Ownership Agreement, BHE is responsible for its Ownership Share of the operation and maintenance cost of the Units which, when the pending transactions described herein have been consummated prior to commercial operation, will be 2.17391% of those costs, and a similar percentage of the ultimate cost of decommissioning the Units. Based upon the estimates set forth above under Part IV of the General Information, BHE's share of these costs should gg amount approximately to $3,261,000 and $3,261,000 for the first five years of operations of Units 1 and 2, respectively; 4 and approximately .$ 913,000 to $1,8 70,000 for the decommissioning of the two Units. In addition, BHE's share of fuel expenses during-the period would be $11,152,000. As evidence of its financial qualifications to meet those costs, BHE submits herewith: (i) 1980 Annual Report on Form 10-K, including the 1980 Annual Report to Stockholders. (Exhibit A) (ii) 1981 Quarterly Report on Form 10-0 (Exhibit B) (iii) Prospectus, dated December 10, 1980, relating to 250,000 shares of Common stock, $5 par value. (Exhibit C) (iv) Order dated August 8, 1980, of the Maine Public Utilities Commission in BHE's most recent rate proceeding. (Exhibit D) III REGULATORY AGENCIES AND PUBLICATIONS f)
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(a) Regulatory Agencies The following regulatory agencies have jurisdiction over the rates and servies of BHE: Maine Public Utilities Commission Federal Energy Regulatory Commission (b) Publications The following trade and news publications are used by BHE for official notifications, and/or are otherwise appropriate for notices regarding this unit: Bangor Daily News 491 Main Street l Bangor, Maine 04401 3 (O
x/- ,,I H A i-Juhr,Jo, Epl.A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1980 Commission File No. 0-505 BANGOR HYDRO-ELECTRIC COMPANY (Exact name of registrant as specified in its charter) MAINE 01-0024370 (State of incorporation) (I.R.S. Employer ID No.) 33 State Street, Bangor, Maine 04401 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 207-945-5621 Securities regir . red pursuant to section 12(g) of the Act: Common Stoca, $5 Par value (2,803,600 shares outstanding at December 31, 1980) 7% Preferred Stock, $100 Par value 4 1/4% Preferred Stock, $100 Par Value 4% Preferred Stock, Series A, $100 Par Value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter' period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes w/ No The aggregate market value on March 19, 1980 of the voting stock held by non-affiliates of the registrant was $22.9 million. The information required by Items 4, 9 and 10 is incorporated by reference from the registrant's proxy statement which will be filed with the Securities and Exchange Commission within 120 days of the close of the registrant's fiscal year ended December 31, 1980.
FORi 10-K TABLE OF CONTENTS / CROSS REFERENCE SHEET PART I
- 1. Business f']
s_/ Item Annual Report, page 3 Item 2. Properties Annual Report, page 4 Item 3. Legal Proceedings Annual Report, page 23 (note 10 to Financial Statements) I Item 4. Security Cwnership of Certain Proxy Statement Beneficial Cwners and Management PART II Item 5. Market for the Registrant's Annual Report, pages 1, 27 Common Stock and Related Security Holder Matters Item 6. Selected Financial Data Annual Report, page 28 Item 7. Management's Discussion and Annual Report, page 11 Analysis of Financial Condition and Results of Operations Item 3. Financial Statements and Annual Report, pages 13-26 gg Supplementary Data and Schedules A and B
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] PART III Item 9. Directors and Executive Annual Report, inside Officers of the Registrant front cover, and Proxy Statement Item 10. Management Remuneration and Proxy Statement Transactions PART IV Item 11. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Financial Statements of the Company Report of Independent Public Annual Report, page 26 Accountants Balance Sheet - December 31, Annual Report, page 14 1980 and 1979 Statements for the Years ended December 31, 1980 and 1979:
r~N Capitalization Annual Report, page 16
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FORM 3 0-K TABLE OF CONTENTS / CROSS REFERENCE SHEET - Continued Income Annual Report, page 13 Retained Earnings Annual Report, page 16 Sources of Funds for Plant Annual Report, page 17 Additions Notes to Financial Statements Annual Report, page 18 (b) Schedules Schedules V, VI & VIII Annual Report, page 25 Maine Yankee Atomic Power Company Schedule A Financial Statements for the years ended December 31, 1980 and 1979 Maine Electric Power Company, Inc. Schedule B Financial Statements for the years ended December 31, 1980 and 1979 (c) Exhibits See Exhibit Index (d) Reports on Form 8-K No reports on Form 8-K were filed during the last quarrer of 1980 ) ___ _ _ _ _ _ _ __-__ _ _ ______ __ _ _ _ _ - __}}