ML20009F279
| ML20009F279 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 02/02/1981 |
| From: | BANGOR HYDRO-ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML20009F275 | List: |
| References | |
| NUDOCS 8107300237 | |
| Download: ML20009F279 (200) | |
Text
{{#Wiki_filter:_ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ,.,
.,+.. . mm . m m - ~ ,- A
,3..
~~~ _ Jgm :.
f h.4
'~
= ^=
M=H 91 ~. g
&. 3,#%m& :.
., Y , f^ .
" Hydro 41er -
sw a , , ,
$hf .-
~
- .i.R /jwN
~'
RR1 :'
- x;)
.
- g.< A .
i !..;%gshi ; r m .,.A
..vpp... -u.syg:n ww
-g
.. ~
y,.
. ~ . . , ) T tn> ,g
% I- b,,;,*
l
, , .:..p 2 fa.
~
.m.
O Lr n: W ,? , x. I / . %, s
~m ,
b+'
- w[l. 3 w n t. ., n p+'.J. 3 tr% e 2 ,.r m m p &:
%-Q 3 J ,__w
- 3. .
rfl e.. n. 1 -~wr~r s l
%j gap _ . .A. g3p I# #'S tijkm- ,
w and. _ . _ . ;y q,9q( ,*
) r57
_J P %_ WW[,: --- m i- l! h G v.- a, , g .5f:hg;dIMin_g$g${%p@&$g 0 y .y t g i . u y 4 gl?hj? pn . de T s$ ,, Y - L
,u
.p.Il 11$
, --r -1 ,__,_e.N.eg _. s,. +(.
g, . o _ u. - s . . z , ,
.q .7.,.. ;.
% .. , g ,
w .. Q x -~7,,
. ll,.
.s.* qu r g
i ti i U w b
., +
-. ...S'/w,'/;y~;;.w.s.:>
- 2. %
. , +
s-a kg; " M,;c
,. 3 :lj 7' ,4QQ,, , &p
- .. ~ :~cV m yen- _- wesg (
ee wy e, p ', y" a t
~
- _i n ,Al n ,
Annual Report 1980,.3 me:m c. ww-
. a.hw-w d. r
- rh.t wy4MW ru *l \.y'gi:fg5 .-
_f E
' " ' ~
- x_m' - e -~' ,-{TC~h,h O. . _ ,.. :.x: ,g. u.
}-Q ::\ , , .% '; Q'u s .\ -
N
.[\
m- '
'A geg gyL-
/
- 9107300237 8107?1 PDR ADOCK 05000443 x
. I PDR
P* '^b MaaMewAraJ9F j s .- . , s g .%- j 2 , E
. . 2
]
= ,e I, y -,
, r
.g .
s .
~-N a ,- a ".
-%' t
*u; l3.;
^
.e , -L , .
~
r .i. $ 2-
~
+ .:f; %
~ '
7 ' _;. . . . . , 7;. ' - + - t
- h. 2
~ '
!my- ,
~
I, f, ' ~ t y. , <
*, % ,h ' ,
" ,' %
- Y
#4 .? f-
=.n.
b
- Y ' * ^^ "
- y ; 'es
, ,_y, ~
7.y , , 4
;g y;-
O C ' ~' ' dd ~ ^ >, .1[ r,-
~y,
-(
t , J
.x<
se '
+ _.
~ "
Q
- - N -
n.r 1
%Q r gl ,J . itq
<J,
- v .
m . m' 7 s;;J
'. ' ~ , ,
, s I .
_ ': , , " y ci '.,% l I ' '
, ,#E ' ' ,
~ ?
l a f ';' f. l
" ,. ~ * * {'f' ,
E
* ^ l .~,: * , ..[ ', '4 , ', n'- ;-
, y
" ' * "-21 5 a r.
s . -
% ..'*6 ,
, 1 :s
, :s -
'v
.q. ,
- s. ,
I L 1 n > r 8 L['s 5 p i-c _,9* 1 4 7-2 _J h 2- , , , , . , , , , , , , , , ,. . ,, , ,, , . , , .. ,, ,, M" l E
pkLEMEiBEiErh_--- , 1 O 7 Directors, Officers and Managers inside front cover 1980 Year at a Glance 1 _ Letter to the Stockholders 2 The Company's Business 3 - Properties and Power Supply 4 Power Supply Planning 5 System Map 5 The Seabrook Project 6 Rates, Research and Conservation 7
- Regulatory Activity 7 Employees and Management Changes 8 Stockholders 8 _'
Area Economy 8 Matters of General Concern to the Company and the Industry 9 Management's Discussion and Analysis of Financial Statements 11 Statement of Incame 13 Balance Sheet 14 Statement of Retained Earnings 16 Statement of Ctpitalization 16 ', - Statement of Sources of Funds for Plant Additions 17
- Notes to Financial Statements 18 Auditors
- Report 26 The 1980 Revenue Dollar 27 Two Yest Stock Prices 27 Six Year Statistical Summary 28 O
Yearat a Glance r s
. 1 1 * \
, .t -
&~. )
'Q X -
+ -
4
- 9. :
9 -=A D,4;.'
#X A"O w,, .
_ . :w, 9
- 4 4 1 %
To the Stockholders of Bangor Hydro-Electric Company h Financially,1980 was another difficult year for Bangor Ilydro-Electric Company. Earnings per common share in 1980 of $1.0G results in a 7.6Fe return on common shareholder's equity, significantly less than the 14Fo return allowed by the Maine Public Utilities Commission in the Company's latest rate order. It was clear in the latter part of 1979 that the Company was in need of rate relief. The rates established in 1976 and based on 1975 operating results could no longer support the higher operating and capital costs we were experiencing. Accordingly, after the completion of a seven month cost-of-service study, the Company filed for both permanent and emergency rate relief in February 1980. . With the promise of expedited proceedings in the permanent rate request, the Company withdrew its emergency rate filing in June, and on August 8, the Commission granted a S4.7 million rate increase. Oper-ating profits have shown marked improvement since the new rates became effective. Ilowever, the operations of the last five monthswere not able to turn the depressed results of the first seven months into satisfactory earnings for the entire year. Another reason for the low earnings in 1980 was interest expense on short-term debt. Increases in both the rate of interest and the amounts of the borrowings resulted in short-term interest expense being some $1 million higher in 1980 than in 1979. The amount of this increase not recovered in carnings though AFDC or from the resultant reduction in income tax expense decreased earnings by S.28 per common share. Even the August 8 rate increase did not allow for the unprecedented high level of short ' rm debt costs experi-enced throughout 1980. We are committed to an aggressive and timely pursuit of adequate electric rate. in order to avoid a repeat of the unsatisfactory results of 1979 and 1980. Our current financial projections indicate that another rate filing will be necasary in 1981. The Company sold 250,000 shares of common stock on December 10,1980 at $10.125 per share, raising, after expenses, S2,286,000 of new equity capital. The proceeds were used to reduce short-term borrowings ' incurred in connection with the construction program. In September 1980 a referendum question calling for the termination of current and future nuclear power generation in Maine, and the consequent shutdown of Maine Yankee, was defeated by the voters of Maine. Efforts have begun by certain individuals and groups to initiate another referendum vote on the same or a similar proposal. We continue to believe that Maine Yankee is a safe and economic source of base load power, and that nuclear power in general is a safe and economic method of generating electricity. We also believe that those involved in the nuclear industry and the electric utility industry must continue the effort begun in the 1980 campaign of informing the public about nuclear power. Ir: 1981,it appears that another referendum will confront the voters. A petition drive was successfulin placing befere the legislature and the voters a proposal calling for combining the Office of Energy Resources and the Public Utilities Commission, and providing for the election of the Commissioners. Presently the Public Utilities Commission members are appointed by the Governor and confirmed by the Maine Senate. Because of the quasi-judicial nature of the office and the need for expertise and experience, in our opinion this proposal would not be in the best interests of good regulation.
'Ihis year we have attempted to integrate into this report most of the requirements of Form 10-K filed with the Securities and Exchange Commission in order to provide you with more comprehensive information. We encourage you to carefully review it, and we invite your comments.
The directors and officers of the Company gratefully acknowledge and appreciate the cor ?inued support of you the stockholders. Respectfully submitted, ID Ok / m '/ t R. N. liaskell T. A. Greenqui ' Chairman of the Board President February 2,1981 2
he Compony's Business of generating capacity, including MW of capacity purchased from 118 MW from Company-operated other utilities. The Company is a public utility generating units,50 MW from the Over the last five years, the Com-engaged in the generation, purchase, p mpany's 8.Wc ownership inkrest pants generd rak rwenues p and transmission of electric energy in the William F. Wyman Unit No. mereased from $23.8 milhon m for distribution and sale to its 41 cated on Cousin's Island in Yar- 1976 to $29.5 milhon m 1980. m uth, Maine,61 MW from the Fuel charge revenues, which repre-76,000 customers, including approx Company's entitlement in Maine sent a cost pass-through to custom-imately 2,000 summer seasonal customers. The Company's service Yankee Atomic Power Company's ers and do not contribute to the area covers about 4,850 square nuclear generating facility, and 50 Company's earnings, are accounting miles having a population of approx-imately 190,000 persons and cover-ing portions of six counties in East-ern Maine. In 1980,30% of the Company's kilowatt-hour ("KWil") 3 sales were to residential customers, ,,, 17% were to commercial custom-ers,44% were to industrial cus-f
~
tomers,6% were to governmental agencies,1% were to street and area *- I. . . lighting customers, and 2% were to , j other utilities for resale. Some of ' f the more important industries - / served are those engaged in the ~ [ O. manufacture products, chemicals, oflumber pulpand and paper ' woodworking, and footwear. Of L_ the industrial sales,42% went to the Company's largest single cus-k ' ./ a ex -
/
tomer, IMC Chemical Group, Inc. . r ("IMC"), which is served on an .
/
interruptible basis. In 1980, IMC . accounted for 6% of general rate *
't y ,
revenues,137c of electric operating 4( revenues and 19% of the Company's KWil sales. In 1975 IMC instituted / [ ,- 7_ j~ I proceedings which are still pendmg ,, before the Maine Public Utilities 't s d Commission requesting that it be r i U served by another utility; a more - complete discussion of this matter ( is set forth in note 10 to the finan- I' cial statements. The Company's KWil sales are generally higher during the winter f months. The winter peak electric demand is usually about 20% higher than the summer peak. The maxi-mum peak electric demand upon [ F the Company's system experienced / O during ("MW")1980 was 219.5 on De.cember megawatts 15,1980.At , that time the Company had 279 MW 3
of Maine Yankee's output and, Kilowatt flours Sold Fuel Sources of Power along with the assignment of about 0.4% from another of Maine 1600 1600 Yankee's sponsors, provides the 1400 _ .. 1400 - Company with about 61 MW. E E The Company also owns 14.2% 1200 j 1200$ of the common stock of Maine 1000 5
' - 1000 A Electric Power Company, Inc.
e 'W $ ("MEPCO"), which owns and Industrial 800 ~$ 6y . 600 .3 operates a 345 kilovolt ("KV")
~ D $ transmission line running from 600 x 60 g $ Maine Yankee's location in Wis-Commercial --
400 Nuclear 400 S casset, Maine, to the Maine-New
'
- Brunswick, Canada border where Residential 200 " "" #
Hvdro Brunswick Electric Power Com-1976 1977 1978 k979 1980 1976 k977 k978 k979 k980 a di o e failities it operates and the generating units in which it has ownership interests, for an increasingly significant utilizes water storage. The Company the Company's current power portion of total electric operating also has one oil-fired steam-electric supply includes generating capac-revenues - from 24% in 1976 to 5G% generating station in Veazie, consist- ity purchased from other utilities. in 1980 - reflecting the escalating ing of three units with a combined The largest purchase is from Boston cost of fuel oil used in the genera- capacity of about 60 MW, and four. Edison Company's Mystic Unit No. I tion of electricity. teen internal combustion generating 7, an oil-fired plant, under a ten During the period 1976 through units located at five stations having year contract which began in 1975. 1979, the Company's KWII sales a total capacity of 24 MW. Other The amount of capacity purchased grew at an average annual com- propertin consist of about 560 varies during the term of the con-pound growth rate of approximately miles of transmission lines,2500 tract; it is currently at 40 MW, and 7%. Total KWil sales were approxi- miles of distribution lines, sub- will rise to as much as 95 MW in the mately 1.3% lower in 1980 than in stations, offices, garages, ware- last years (late 1982 to late 1984). 1979 due to substantially lower houses, vehicles, tools and equip- The Company also is entitled to 2.7 interruptible sales (primarily to ment. MW from the New Brunswick Elec-IMC) during the year. " Firm" (that In addition, the Company has an tric Power Commission's Coleson is, non-interruptible) KWil sales 8.3% ownership interest in William Cove oil-fired units pursuant to a were approximately 5.3% higher F. Wyman Unit No. 4 ("Wyman 4"), contract which will terminate in in 1980 than in 1979, but much if a 600 MW oil-fired generating unit 1985. not aP of this increase was attrib- in Yarmouth, Maine, constructed The Company and most of the utable to substantially higher sales and ope ated by Central Maine other electric utilities in New Eng-to certain industrial customers Power Company. This source pro- land belong to the New England whose own hydro-electric gener- vides the Company with another 50 Power Pool ("NEPOOL"), which ation was reduced in 1980 due to MW of generating capacity. provides substantially all of the co-low water conditions. The Company owns 7% of the ordination and dispatching of elec-common stock of Maine Yankee tric generating capacity for New Properties and Atomic Power Company, which England. Each member is respon-wns and operates an 830 MW sible for providing its own gener-POWCT $Upplu" steam-electne generating facility ating capacity requirements, but The Company owns eight hydro- (" Maine Yankee") that uses nuclear NEPOOL dispatches the generat-electric generating facilities with a energy from a pressurized light ing units on an economic and total capacity of 34 MW. Seven are water reactor as a source of heat reliability basis, as if New England "run of the river" units located to provide the steam. This owner- were one large electric system. The - along the Penobscot River system, ship interest entitles the Company Company interconnects with the and one is on the Union River and to purchase approximately 6.9% New England and New Brunswick 4
7% ("jystems at the 345 KV substation meet its customers' needs for energy 28% nuclear and 55% oil. The recent in Orrington, where the Company's on a reliable basis by providing a rise in the price of residual oil to system connects with MEPCO's sufficient amount of generating more than $34 per barrel and antici-transmission lir.e. Through this capacity to avoid power curtail- pated future increases make it im-interconnection the Company re- ments or interruptions. The second perative that the Company reduce ceives its enti*.lemen;s from gener- is to supply these needs on the most its dependence upon oil for gener-ating units outside the Company's economical basis possible. The Com- ation. service territary, and is able to pany's long-range energy forecast In order to meet the anticipated purchase energy th;ough NEPOOL is currently being re-evaluated and increased demand for electric energy or directly from other utilities from is expected to result in a forecast in and reduce the Company's depend-time to time on a short-term basis. the range of a 2% to 3% annual in- ence upon oil for generation, current In this manner. the Company is able crease in firm energy demand during power supply plans include promo-to obtain N least expensive energy the 1980's. In order to satisfy this tion of a sound conservation program, available at any given time. rate of growth and to replace exist- joint ownership in the Seabrook nu-ing sources which will expire, the clear units, a long term purchase mpanfs need for new capacity fmn a nuclear plant in New Bruns-POWOT Supply PlGMning is expected to be 110 to 150 MW wick and development and redevel-The Company has two principal and by 1990. opment of hydro-electric resources. related goals in its power supply The current mix of electric energy The Company will have a 2.17% planning program. The first is to supply is approximately 17% hydro, ownership interest in the Seabrook pmy , . -- w -- ww , _- e. , , n.r.wmeme- ,-w.= -, c '
~ .j, ,
[ . y ;
,m ' aggwAY J. u m -
.j# b ' ~i'>s _
~
. '" [ '
( ~ N
~
^{_ , f ~ -
y ' Oggg ,
-j
'Hveboasowic 320W f ,-
,p/.4% .gggggg g g gg~~
}h HOUILAf00 .,- ~x ;O _>,.1 M *- < _m ygg .. b[. %u M '
emus
- z'@a"n )
g gygggggggg ,
);j M ""'" "
,J
,k y .
f p" penas geseriej,gg0W? 4 ~ - {'"($/ ILLINoCKE. MEDWAY "9 5
..... gg.',
m { [.] ] q
- 2,392 M i
""/C _ ~
MATTAWAMK 4 -'s q ,~ , . . ]-i j ' SA$TgMN ., n .
. L __
1 Sessmeneerts._ W '. Mi g# . ' ' h.% [f - , s i k d MILO ESTER ] g M INCOLN q s .M
'~
.ga
; 3C JV-j
' ([ i#
%t
~
vn ELLMORTM . . Nye w eeserts 8,seg n :
<lj
[e' + i ( p* HOW ND E F ENFIELD
;p agt.ggggftv %~ , fc 4"3;->p' -
7; ;-L ;, C
% -. w, w
an.mn w gggunn'" < ; s ; (CORINTH ILFORD - %{&p
~
4 UNION RIVER PEM%OKE pWQi f.
. Sess>Siseerle f m W '
A: s ,' -
#STILLWA ER f NOf CO-OP EASTPO Ya
'ggDMWM~
r c3 BANGOR p 9 E,e LUB p hd 5
/ # Ewer ~ seeings) N- '
oP / ST MACHIAS ..o gi
' ' CIWWeGT 7{9 JONf3 OR
' g (gg l
' WR (
p ~ E.FRANFLI y 1 pq 7 , IAacets Malteon
- p. Js *. , '
s Ell 8 A HAR8W'eGTOps . PLEGEN& p c .. . .,
.-"va e
, jl
[jk[Od4E HI 9 ^%[] p" : G N ' STATION - GOE0580fl0
.*: :3US57ATION - g a g BAR DM M ]i IRANE8888880" LU8E U incoroonneettene jJ_ l b N E Mane 0H ~,.,%
l
;-- c pnsesesPAL sNTEncONNECreoes ,
- y. .=szw.Hanson
;o '
2)4
. iMi TRANERAIM8008 L880E a OTHER UTILITIES . ' t STONINGTON-DEER 88Lih v ' ' aseen 1 TRA8000AfSSION LHIE .- MEpix) - 4
~ POWER CO.
w,nad E' y ig: a-x u s &L_ m p - unwu;x;L - : aang l 5
nuclear units being built by Public will entitle the Company to 8.6 51W, The cost of the project is current Service Company of New llampshire, or 4.3 h!W per unit. In 1979, Public ly estimated to be $2.4 billion. This currently scheduled for operation Service Company of New flampshire, estimate includes the initial nuclear in the mid-1980's. This will provide the lead owner of the project with fuel but does not include the allow-the Company with 50 megawatts of a 507e interest, determined that due ance for funds used during con-non-oil fired capacity. Currently to difficulties experienced in finan- struction ("AFDC"). The Com-under negotiation is a purchase of cing its share of the project it should pany's sh.tre of this cost is estimated 30 A1W of capacity from the Point reduce its ownership interest. The at $52.2 million, to which will be LePreau nuclear gen rating plant Company and other utilities agreed added an estimated $30 million of owned by the New Brunswick Elec- to purchase approximately 15?e of AFDC. The Company's ir estment tric Power Commission. This pur- the project from PSNil, over a buy. in the project at December 31,1980 chase would be from late 1981 in period more particularly de- was $4.3 million, excluding AFDC through late 1990. The Company scribed in note 10 to the financial of $1.1 million. has just completed a comprehensive statements. The Company's share Reference shot.!d be made to evaluation of the potential for of this purchase is about 1.8% or note 10 to the financial statements hydro-electric development within 41.4 A1W. The buy-in period com- for a discussion of regulatory and its service territory and the results menced January 31,1981 and is licensing activities and other matters indicate that it is possible to expand estimated to continue for approxi- concerning the project. the hydro-electric energy production mately 13 months. of the Company. The Company is increasing its efforts in promotion of energy conservation through a Residential Conservation Program.
% {
p If the energy load growth of the i Company is contained to the 2% , , t annual increase through its conser-vation program, and the Company ,. 4 l e is successful in implementing its A > cur ent power supply expansion .+ s N plan, the expected mix of genera- y - tion in 1990 would be approximate- 7 ly 24% hydro,53% nuclear (owned . 4 and purchased), and 23% oil. This would accomplish the Company's s power supply goals of reliable and ' j! economical electric service and re- . sult in a significant step in reducing , its dependence upon oil for genera-tion. - y The Seabrook Project > - The only generating facility under I construction in which the Company , c s, .: is currently involved is the Seabrook ~w t% ., N . . ._}; j nuclear project consisting of two - g g h h ";N % li 1 Q~ 1150 51W generating units. Although 3 x- gkt u'Ar ' still officially scheduled for comple- ;, \~? s_ tion in 1983 and 1985, this sched-ule is being revised as discussed in g jJ ( f ( ' [7 m - note 10 to th a financial statements. In 1978 the Company purchased
~
\ m w .
Pass ve solar design. One of several examples of this type of energy saving residential a .37% interest in the project, which construction in the Company's service territory. 6
a rate design portion. The process- expected increases in the cost of oil. OteS. nesearch & ing f the revenue portion was expe- The current fuel cost adjustment COGSerVation dited and agreement was reached on factor was applied for in late Octo-In 1980 the rate department was re- the amount of additional revenue ber 1980 and became effective organized into a division of rates required. Accordingly, on August 8, January 1,1981. and research and a division of con- 1980, several months ahead of the On December 22,1980 the Com-servation and consumer services. statutory deadline, the Company pany filed with FERC for an in-The rate division has developed was permitted to increase its basic crease in its wholesale rates of about in-house capabilities to consider rates by 18%, or about $4.7 million $194,000 annually, or about 16%. declining block rates, cost based annually. The agreement approved Sales to other utilities account for rates, seasonal and time-of-day rates by the MPUC is based on a 14% re- about 2% of the Company's reve-as vehicles for achieving conserva- turn on common equity, an overall nues. tion and the efficient use of facil- rate of retum of 10.65%, and an at- In July 1980 the Company filed ities and capital. The information trition allowance of 0.38%. The rate with FERC for a preliminary permii, developed by this group is the basis design portion is continuing, and to study a proposed 30 MW water of the Company's presentation in the MPUC will take up as a part of power project known as the Basin the rate design proceedings current- this portion of the proceedings Mills Project, on the Penobscot ly before the Maine Public Utilities several issues which must be consid- River in Orono. This application Commission. This division has also cred under the Public Utility Regula- conflicts with an application filed initiated a load study by installing tory Policies Act of 1978. by non-utility developers with re-recording demand meters on all As of January 1,1980, the Com- spect to a smaller project upstream wholesale cu;tomers and all indus- pany began to operate under the from the Basin Mills site in that the trial customers with loads of one MPUC's new fuel clause regulations, Basin Mills Project would inundate megawatt or more, as a first step in the upstream site. A preliminary meeting the requirements of the permit would assure priority to the blic Utilities Regulatory Policies capital Mix ($ millions) site in the event the studies con-Act of 1978. u a pro % AouM M as Short Term Debt O Preferred Stock The division of conservation and built. No indication has been re-I'mg Term Debt c Common Stock consumer services has as its goal the ceived as yet as to when FERC promotion of conservation and wise 100 will act upon these conflicting use of electricity. Included in its ef. applications. forts are the implementation of a res- ... 80 During 1980 the Company re-idential conservation service home . ceived the last of the licenses re-audit and alternate energy evaluation .
-1 E 60 quired from FERC on its eight program and the development and .
hydro-electric projects. As water implementation of a corporate con- power project licenses expire, the 40 servation plan. This division also Federal government has the right works with customers on solar and to take over and maintain 1.he pro-wind energy applications. / 20 ject upon payment to the Company of the lesser of its " net investment" or the fair value of the property t^k"" negulatory Activity 1976 1977 1978 1979 1980 "d "Y S"ver^"c" d^* ReS' less certam amounts earned by the The Company is regulated by several Company in excess of specified State and Federal agencies, most rates of return. If the Federal gov-notably the Maine Public Utilities which provide for the estimation of ernment does not exercise its right, Commission ("MPUC"), the Depart- fuel costs over a forward-looking FERC may issue a new license to ment of Energy and the Federal twelve month period to derive a the Company or to a newlicensee Energy Regulatory Commission uniform fuel adjustment factor for if the Company is compensated as (" FE RC"). customer billing. During the year, if the Federal government had taken In early 1980, the Company filed the Company applied for and re- over the project. The Company's for a rate increase with the MPUC. ceived three upward adjustments to water power licenses will expire at This proceeding was divided into a the factor from the MPUC,in re- various times during the period revenue determination portion and sponse principally to larger than 1987 to 2000. 7
Employees and Black has had nine years of experi- mation and authorization forms, Management Change 5 ence with the Company in various contact Carroll A. Brochu, Assist-accounting assignments. Ile is a ant Treasurer,33 State Street, At December 31,1980 the Company graduate of Ilusson College and is Bangor, Maine 04401. had 367 employees. Of these 185 currently a candidate for a masters are represented by the International degree in business administration. Brotherhood of Electrical Workers, Area Economy including linemen, electricians, meter department personnel, ware. St CkholdOIS The economy of the Company's house personnel, garage mechanics As of December 31,1980, the total service territory is based upon and station operators. A new two number of outstanding shares of diverse activities. Paper and paper year contract with the union em. common stock was 2,083,600. This products industties, lumber and ployees took effect January 1,1981. represents an increase of 271,577 wood products, and footwear and rbis contract calls for an 81/2% over year-end 1979. There are 7,653 textile manufacturers have been the wme increase in the first year and common shareholders, residing in basic employers. More recently, an d% wage increase in the second each of the fifty states as wil as light industry such as research and some foreign countries. Residents development firms and electronic year, and some increases in fringe of Maine account for 60% of the components manufacturers have benefits. Company's shareholders and own contributed to the economy. The One of the Company's most im-53% of the outstanding shares, area is also fortunate to have many portant assets is its people, and through the years the Company Approximately 625 shareholders major educational centers such as are participating in the Company's the University of Maine with its has recognized that this asset re-Dividend Reinvestment and Com- main campus at Orono and smaller quires continuous renewal through m n Stock Purchase Plan. Under facilities in Bangor and Machias, careful selection and development the Plan, common dividends may be and other business, vocational and of personnel. It was attention to the automatically reinvested and/or environmentally oriented post- _
" people asset" which resulted in the pti nal cash payments of between secondary schools. Fish, fish by-internal development of and, in
$25 and $5000 may be made for products and marine resources play 1980, the promotion of, three i.. . an important role in the coastal the purchase of additional common viduals to key positions. areas, and recreation and tourism stock without brokerage commis-In April 1980 Carroll R. Lee was smns or senice charges. For infor- is a major industry year-round.
elected to the position of Assistant Vice President-Engineering. Mr. Lee began with the Company in 1970 as an assistant engineer. In 1979 he I % . , ..
'p> ~ ;s L % 'Wyy,A _Ih _. g;1 g ;
- s, IE9 s
~
~ ~
- 5 became Assistant to the President .'l .-
with the responsibility for the Com-pany's planning and power supply. s h "
.% s ;
} YY4
,. W ' ~ y[ k He is a graduate of the University of l(ik Qd "i .
(' . h %.; g ;, . i .e" ' Maine, with bachelors and masters f% $ ' %* .-" %p 3~~ j degrees in electrical engineering and 4 }. 4 i a masters degree m business admin- e .- 1 . ); g , .,
'*i A' J - '1 ' '
~ '
istration. ; Y! Effective January 1,1981, William -- ~ * ' II. Beardsley was named Vice Presi- \ - -
~
dent in charge of the newly created 'y . 6 E t@ Department of Rates and Research. ,. Mr. Beardsley came to the Company g .
- , ,_ Jq in 1976 from Green Mountain Power 3
'g. ; L' ..
~~ ' UI Company. Ile is a graduate of Earl- 3 ham College and earned his doctorate 2 -
--? / '
N. 2t in environmental engineering at ' 4 {
~ ' '
Johns llopkins University. .* y David R. Black was named Con- Itecent advancements within the Company. (I to r) Carroil R. Lee, Assistant VP-troller on November 12,1980.Mr. Engineering; David R. Black, Controller; William II. Beardsley, VP-Rates and Research. 8
l l l I i claIters of General with environmental and nuclear reg- grams to meet customer demand, i' ulati ns, the availability and cost of and is attempting to do so at reason-Concern to the Company fuel u, and unmtainties due t able costs during this period of and theindustry increased political involvement in inflation and unsettled capital l The electric utility industry is exper- the industry. These problems are markets. iencing problems in a number of being experienced in varying degrees In the nuclear power area, the l areas, including inflation and its by different companies within the Three Mile Island incident in March effects upon construction and oper- industry. In addition, most of the 1979 prompted a rigorous reexamin-ating costs, obtaining adequate and industry, including the Company, ation of safety related equipment timely rate increases, compliance must finance large cor.struction pro. and operating procedures in all nu-cle ir facilities. In response to various studies, the Nuclear Regulatory
' Commission ("NRC") required that
# 9,1 '-
~ , >
' y~
3,e 1f- i k.s s'.. 4y
-i
" ' I,4 , certain operating modifications nuclear plants be made to and those I
- $[ '. )4 -l s
s .- ' i' s % s k ',' - under construction. Maine Yankee W
- 4 Atomic Power Company has advised j
l k-
.O .[' i __ e 4 a the Company that the near term
- c. modifications required by the NRC b _ , 1,.,, L_ have been made or are being met on
.v i - * ' - - schedule, and PSNII has advised the
.fM [,
j, %T v' ' ,, 4,f
- I % Company that these near term mod-
.u.4e- e 1 ifications have already been incor-
" T. ' v" .p ' - porated into the design of the f'
-a"" !g , ,
Seabrook Project. The impact of U~* ~ '
. t i - . T.M ' )4 E'. .f the long-term modifications upon these plants is still being evaluated.
5 . 4- .. . _ These modifications, other possible L&.h.
- Maine's largest college campus. The Unive sity of Maine at Orono has a student enrollment of approximately 11,000 and ; ulty of about 600.(UMO Photo)
Wl ;t I T i< q? J i 'G:t q ; f,,s s i ,e
.n -y,
. , .9 I pl - v.
l .', i i .
~'
Wy "v: . g . ^7 l .. 9 /* il e- g ec- : ; 2 ll V a V? T W.-_
< t 6 ,
,m. , . '. E 1 -
r s :. o , f .,x-w ,
= @ . '
^
= d 7. q , 9.- M~ -,['
t
> -w -
k a, % w . t u . Pleasure craft abound in Northeast liarbor Manufactured housing is big business in the Company's service l area. IIere, logs are pre-cut at a log home plant in Bangor. on Maine's Mount Desert Island. I 9
. _ - _ = - _ _ _ _ _ _ . . _ - - . - - - - . _ _ - -_ . - _ - - - - _ _ . - - - - - _ _ _ _ _ - - _
l 1 1 i l l p, / ,; _ , y supply of fuel oil for generation, an
.s,wm
^
p we are not aware of any such supply , I
"' Z l' a mL problems at other facilities from i C which the Company receive energy.
l' ! a'~ Federal legislation and regulations l g _ Q ,, {M enacted in response to the policy of i 2 - m 7,s,,e .i . reducing dependence on foreign oil l
~
affects the use of oil for the gener- : ation of electricity, despite the ade- {N~ ~**[Y[. quacy of supply. Under the Power-I l
~
i plant and Industrial Fuel Use Act (
.N k -
of 1978, new generating facilities sur/ c cannot use oil as a fuel, and exist- (
/". ing oil-fired facilities may be re- l quired to convert to coal. It does 4
not appear that c3al conversion would be required at any Company-operated facility or at Wyman 4. I
! , , .. y -:. ..
Ilowever, no assurance can be given Sandra Colbert, Consumer Itelations Specialist, helps a customer, that conversion will not be required at some time in the future. , The satisfactory resolution of reexaminations, or legislative and reg- In the environmental area, th" these and other issues concerning ulatory proposals arising out of this Company, like other industries, is the Company and the electric incident could require costly modi- subject to regulation at the Federal, utility industry depends in large fications to nuclear plants including State and local level. Present and part upon the direction in which : Alaine Yankee and Seabrook, or developing standards, particularly political and regulatory involvement ' could interfere with their operations with regard to emissions and dis- n energy matters proceeds. Assum-or cause de:ays in construction. charges into the air and water and ing that a reasonable energy policy The method of disposal of spent the disposal of all types of waste for the United States is eventualb' nuclear fuel is another uncertainty. materials, could increase the cost settled upon, we believe that the Unde ihe Carter Administration, of construction ar i operation of problems facing the industry and the Federal gover1 ment suspended new facilities and could require sub- the Company a re manageable and indefinitely the n processing of stantial investments in new equip- can be overcome. spent fuel. Witho it reprocessina ment at existing facilities. We are l and abser.t apprcel from the Fed- not currently aware of any such eral government to permanently operational or financial impact dispose of spent fuel, or of the upon the facilities which the Com-method to be utilized, commercial pany owns or in which it has inter-nuclear power facilities must con- ests, but development in this tinue to temporarily store the fuel evolving area must be monitored i on site. The spent fuel pool at Alaine continually. Yankee will be filled in 1987, and The Company and most other after 1981 will not accommodate a utilities in the nortbaastern United full core removal. Alaine Yankee States are heavily dependent upon has fihxl with the NItC for per- fuel oil from foreign sources for mission to increase the storage generation of electricity, supplies of capacity by providing more compact which are subject to interruption fuel storage. The Attorney General and unpredictable price increases. < of the State of Alaine and a citizens' This dependence will continue until group have intervened in opposition, alternative sources of energy have and no prediction can currently be been implemented. To date the given as to the outcome of Alaine Company has experienced no diffi- - Yankee's request. culty in maintaining an adequate 10
. - - . _. .~ _ _ . _ _ _ _ _ _ _ __
IIANGolt ilYDito-ELECTRIC COMPANY
! )
VManagement's Discussion and Analysis of Financial Statements Itesults of Operations- 1978-1980 Electric operating revenues over this three year period have shown significant increases as a result of higher fuel costs incurred by the Company and then billed to customers through the fuel clause. The price of a barrel of oil delivered to the Company hat increased from $13.21 at January 1,1978 to $24.86 at January 1,1980 and to
$34.20 at January 1,1981.
As explained in note 1 to the financial statements, deferred fuel accounting was adopted in December 1979 at the inception of the new fuel clause. The $3,806,901 of unbil ed fuel which was deferred in 1979 will be billed over the three year period ending December 31,1982. As also explained in note 1 to the financial state-ments the fuel clause in effect prior to 1980 was calculated usir.g fuel costs which, on the average, were three months old. Thus the fuel charge revenues in 1978 and 1979 do not fully reflect the impact of the increases in oil prices in those years. The increase in general rate revenues in 1980 has been largely due to the 18% increase in the basic rates effect-ive august 8,1980. Operating expenses during this period have been impacted by a number of factors in addition to fuel costs. Purchased power expense reflects a 30 AlW reduction in a purchased power contract with Boston Edison Com-pany effective November 1,1979. On November 1,1980, the contract was increased 10 hlW to a level of 40 AlW. Increases in the operation and maintenance expenses are due primarily to inflation and wage increases. Other factors increasing operation and maintenance expenses include costs attributable to the Company's interest in Wyman 4 which became operational in December 1978 ($473,000 in 1979 and $263,000 in 1980) and an Inter-nal Itevenue Service adjustment, recorded in 1978 but attributable to a prior period, which reduced 1978 other operation expense by $300,000. Expenses were higher than normal at Wyman 4 in 1979 due to start-up problems. Interest expense and dividends on preferred stock have increased sharply over the 1978-1980 period, due to ' V the requirement for additional funds for the Company's construction program and for working capital, as well as the significant increase in the cost of those funds. Average short-term borrowings were $2,500,000 in 1978,
$9,300,000 in 1979 and $13,100,000 in 1980, at average short-term interest rates of 0.8%,13.2%, and 17.1%
respectively. On August 31,1979 the Company issued $7,000,000 of 101/4% First hlortgage Bonds, and on Alay 1,1980 the company repaid $2,000,000 of 2 3/4% First hlortgage Bonds which matured. Also on August 31,1979 the Company sold 30,000 shares of 91/2% Preferred Stock. The amount of AFDC accrued during 1980 and 1979 is below that recorded in 1978, due to the cuamence-
- ment of the commercial operation of Wyman 4 in December 1978.
l Earnings of $1.06 per common share for the twelve months ended December 31,1980 is comparable to 1979 l earnings per share of $1.05 before the addition of $.58 per share from a ch nge in an accounting principle, both ! of which are below 1978 earnings of $1.77 per common share. Aside from the effects of the revenue and expense items discussed above, the decline in net income and earnings per common share during this period is attribut-j able in large part to the fact that the Company's investment in Wyman 4 was not included in its rate base, from l which the Company's general rate revenue is derived, until August 1980. After the accrual of AFDC ceased in December 1978, the Company recorded no return on this $15 inillion investment until it was included in rate base. Operations have shown a marked improvement as a result of the basic rate increase effective August 8,7.980. In spite of the fact that earnings are traditionally higher in the fourth quarter as a result of higher sales, the August 8 basic rate increase played an important part in the improvement in earnings during the latter part of 1980. During 1980, earnings of $.51 per common share for the fourth quarter compares with earnings of $.29 per common share in the first quarter, a loss of $.02 per common share in the second quarter, and earnings of
$.28 per common share in the third quarter.
Impact of inflation b As noted above, inflation has increased the Company's operating expenses and costs of capital. Inflation also
) increases costs of the Company's construction program and the replacement of its plant and equipment. Under V the rate-making practices prescribed by the regulatory commissiens to which the Company is subject, only the allocation of the Company's historical costs is included in the cost of service and rate base usd to establish the 11 l- _
Company's rates and hence its earnings. While the rate-making process gives no recognition t the current impact of inflation on the Company's rate base,it does allow the Company to earn on and recover the increased cost of net investment when the replacement of property, plant and equipment actually occurs. Liquidity and Capital Resources The Statement of Sources of Funds for Plant Additions reflects the Company's liquidity position. In 1980, funds available from internal sources totaled $1,469,336. This was an improvement over 1979 when the internal uses of funds exceeded the internal generation of funds by $2,216,345. Both 1980 and 1979 were less satisfactory than 1978 when $2,000,816 of funds were available from internal sources. These significant variations in liquidity occurred largely because fuel costs of $5.5 million and $1.6 million in 1979 and 1980 respectively were not recovered through the fuel adjustment clause in those years. In addition, liquidity has been adversely effected by the increasing level of accounts receivable also resulting from increases in the fuel adjustment clause. The Company's fuel adjustment rate is designed to collect previously unhiled fuel costs as well as to recover current fuel costs over a projected twelve month period. Ilowever, while th Cc.opany utilizes (subject to approval by the Maine Public Utilities Commission) what it considers realistic estimates of future increases in the cost of fuel,in fact the estimates were below the increases the Company has experienced. The Company expects to be able to recover these unbilled fuel costs through the fuel adjustment clause. Also contributing to the Company's adverse liquidity position were the lower earnings in 1979 and 1980 as outlined in the Results of Operations section. Timely and adequate rate increases will be imp snt to improv- ' ing the Company's cash flow in future years. A major factor which will affect the Company's cash position over the next few years is the financing of the construction program. Construction expenditures over the next five years are estimated at $75,000,000, con-sisting of $ 17,600,000 for the Company's commitment in the Seabrook nuclear units and $28,000,000 of as yet uncommitted generation, transmission and distribution expenditures. With the increasing amounts of construction expenditures and with the current policy of the Paine Public Utilities Commission of excluding construction work in progress from rate base, the Company expects that allowance for funds used during construction ("AFDC") (see note 1 to the financial statements) will become an increasing portion'o'f net income during the coming five year period. Since AFDC is not a cash income item. this will result in an increasing reliance on external financing. In order to assist in the financing of this construction program,in August 1980 the Company entered into a
$30,000,000 five year revolving credit facility with a group of seven banks. The agreement establishing the re-volving credit also gives the Company the option to convert any unpaid balance at the end of the five years into a three year term loan. This financing arrangement doubles the amount of short-term funds previously available to the Company, assures the availability of these funds through 1988, and provides the Company with some flexibility in the long-term capital markets. Borrowings under the revolving credit will be converted into long-term financing through issuances of additionallong-term debt, preferred stock and common equity.
O 12 l
. _. ----. . - _ ~ - - - - _ - - - . . , _ - . _ _ . _ _
BANGOlt !!YDito.ELECI'IIIC COMPANY , b-Statement of income 7"ithe] ear _s,_Enini,pecemp31, ,L_ _n__,__. IMO 1979_ 1978 Electric Operating Revenues (Note 1): General rate revenue S29.518,5 M $27,340,857 $26,252,939 i Fuel charge revenue 3 7.1;15.3l16 24,407,471 '16,373,857 Sgbq9 p i2 $51,748,328 $42,626,796 } 6perating Expenses:
- Fuel for generation (Note 1) S37,231,901 $23,365,489 $17,568,718 l Purchased power (Note 8) 7.M 58,71 1 9,689,425 9,194,030 Other operation 7.114,7 N 6,266,570 5,156,183 Maintenance I A99,83G 2,077,141 1,456,350
! Depreciation and amortization (Notes 1 and 9) 3,111,502 2,814,541 2,200,513
; Taxes-
- Local property and other L857,620 1,822,225 1,514,646 I Income (Note 2) _ _ 43H.329 722,874 1,128,430 i F G O,015.9 l_3 $46,758,265 $38,218,870 Operating income
- 6,G78,019 $ 4,990,063 $ 4,407,926 Other Income and (Deductions):
Allowance for other funds used during construction (Note 1) - - 531,293 Other, net of applicable income taxes _ 00519) (5,886) (14,117) Income Before Interest Expense a G,667.200 $ 4,984,177 $ 4,925,102 Interest Expense: 2 First mortgage bonds (Note 5) s 2,5.13.642 $ 2,088,957 $ 1,872,034
' Other (Note 6) 2,265,G32 1,243,365 304,734 i Allowance for honowed funds used during construction (Note 1) J797.989) (792,693) (643,149) 5_3.981,2M5 $ 2,539,629 $ 1,533,619 l
Income Before Cumulative Effect of a Change in Accounting Principle s 2,085,915 $ 2,444,548 $ 3,391,483
- Cumulative effect on prior periods (to December 31,1978) of changing to a different method of recording revenue
! net of related income taxes of $1,034,000 (Note 1) _ _ 1,043,000 - Net Income S 2,083,915 $ 3,487,548 $ 3,391,483 Dividends on Preferred Stock __7 3UJ O 546,420 450,570 Earnings Applicable to Common Stock $ 1,950,3 !5 $ 2,941,128 $ 2,940,913 1 Earnings Per Common Share, based on weighted average number of shares outstanding of 1,833,979 in 1980, 1 1,801,906 in 1979 and 1,658,985 in 1978: Before cumuh.tive effect of a change in accounting principle S 1.06 $ 1.05 $ 1.77 l Cumulative effect on prior periods (to December 31,1978) of
~
changing to a different method of recording revenue (Note 1) -
.58 -
Net S 1.06 $ 1.63 $ 1.77 Pro forma earnings assuming the new metho<t of recording
- revenue were applied retroactively:
Applicable to common stock S 1,950,345 $ 1,898,128 $ 3,045,475 Per share ( ,.lf)g $ 1.05 $ 1.83 F iN The accompanying notes are an integral part of these financial statements. l i 13
-.- _._.._ _._- ._.~--.~._-__._...,__ ,,_ _ _.
BANGOlt IlYDito EIEUrltIC COMPANY Balance Sheet December 31, 150 1979 Assets investment in Utility Plant: Electric plant in service, at original cost (Notes 8 and 12) 07 X 9,.iG1 $95,017,710 Less-Accumulated depreciation (Notes 8 and 12) O 929.0 $ 32,459,170 5CUi10.10:1 $62,558,540 Construction in progress, including $5,424,864 in 1980 and $3,697,502 in 1979 for construction of jointly-owned generating unit (Notes 9,10 and 12) n.293,s39 . 3,824,265 919,906,215 $66,382,805 Investments in corporate joint ventures (Notes 1 and 8)- Maine Yankee Atomic Power Company UISD,37 2 4,683,022 Maine Electric Power Company, Inc. _ 171 700 . 178,898 S 71. 7 67.10 ~
$71,244,725 Other Investments, principally at cost S 50.1.59i $ 520,395 Current Assets:
Cash 1,0 31. t 61 $ 1,122,801 Accounts receivable - Customers, net of reserve 6.871,2.11 5,098,511 Income tax refund - 563,287 Unbilled revenue receivable (Note 1) J 377,336 2,549,199' inventories, at average cost - j Material and supplies 2,127.271 1,840,857 Fuel oil I ,3 32,'IM 7 1,286,905 Prepaid expenses 391,108 359,103 Deferred fuel costs (Note 1) _7_,0971M t 5,484,688 S2 2.21 U.932 $18,305,351 Deferred Charges: Cost of cancelled NEPCO nuclear units (Note 9) ' 1,793,896 $ 2,015,306 l Other _ _3 6G,G26 424,054 i s 2.3fl0@21 2,439,360 499.N 12,7 57 $92,509,831 l The accompanying notes are an integral part of these financial statements. 14
I BANGOR IIYDRO-ELECTRIC COMPANY l t I f'?ccember 31, - 19h0 1979 Stockholders' Investment and Liabilities Capitalization (see accompanying statement): Common stock investment (Note 3) 827,517,135 $25,694,645 Preferred stock (Note 4) 1,731,000 4,734,000 Redeemable preferred stock (Note 4) 5,000,000 5,000,000 First mortgage bonds, exclusive of a current maturity in 1979 and sinking fund requirements (Note 5) 32,175,000 32,345,000 Total capitalization S69,226,185 $67,773,645 Current Liabilities: 2 Current maturity of long-term debt (Note 5) S -
$ 2,000,000
, Notes payable to banks (Note 6) '2,100.000 7,550,000 812,100,000 $ 9,550,000 I Other current liabilities - C'arrent sinking fund requirements $ 170,000 $ 170,000 Accounts payable 7,395,901 5,116,931 Dividends payable 901,447 856,598 Accrued interest 676,735 664,954 Accrued current and short-term deferred taxes (Note 2) 59,671 15.2,347 Customers' deposits 63,967 73,859 Accrued pension plan contribution (Note 7) 445,000 410,000
$ 9,715,671 $ 7,444,689
.bj $21.815,671 $16,994,689 A./
- Commitments and Contingencies (Notes 8,9, and 10)
Deferred Credits and Reserves (Note 2): Accumult.*.wl deferred income taxes S 4,868,905 $ 4,227,113 l Unamortized investment tax credits 3,728,976 3,418,326 Other _ 2_03.020 96,058
$ 8,800,901 $ 7,741,497
- $99.81 ,757 $92,509,831 U
15
ilAh' Goll llYD30-ELECTillC COMPANY SfC $la id C[ MGin' G UG ill!' O c For the Years Ended December 31, 1979 1978 Italance at lleginning of Year ,J $ 8,599,913 $ 8,026,517 Add: Net income > D!' 3,487,548 3,391,483 Equity reserve for licensed hydro projects (Note 1) - 136,262 i ;, $12,087,461 $11,554,262 Deduct: Cash dividends declared on-Preferred stock J $ 546,420 $ 450,5'i0 Common stock - $1.52 per share in 1980 and 1979 and $1.46 per share in 1978
.s . 2,742,338 2,503,779
. m $ 3,288,758 $ 2,954,349 Italance at end of Year '
$ 8,798,703 $ 8,599,913 2> ; ; w ii dL. O pKli:d mi December 31, _ ] a: 1979 Common Stock Investment:
Common stock, par value $5 per share - Authorized--5,000,000 shares in 1980, 2,500,000 shares in 1979 Outstanding--2,083,600 shares in 1980,1,812,023 snares in 1979 i ' < t S 9,060,115 Amounts paid in excess of par value ' 7,835,827 Retained earnings P 8,798,703
), i
$25,694,645 Preferred Stock, non-participating, cumulative, par value $100 per share, authorized 250,000 shares in 1980 and 100,000 shares in 1979 (Note 4):
Subject to mandatory redemption requirements - 91/2%, Callable at $109.00 in 1980 and $109.50 in 1979, 30,000 shares authorized and outstanding '
'< $ 3,000,000 91/4%, Callable at $106.15 in 1980 and $106.77 in 1979, 20,000 shares authorized and outstanding wUN 2,000,000 v9 $ 5,000,000 Not redeemable or redeemable solely at the option of the issuer -
77c, Noncallable,25,000 shares atr;horized and outstanding 2:+ M a $ 2,500,000 41/47c, Callable at $100,4,840 shares authorized and outstanding a ; TN 484,000 4%, Series A, Callable at $110,17,500 shares authorized and outstanding 1. , :> 0.0 ;U 1,750,000 L i3 ; 0 e . $ 4,734,000 First Mortgage Bonds (Note 5): l 2 3/47c Series due 1980
$ 2,000,000 31/4% Series due 1982 1.00mt ou 1,000,000 31/8% Series due 1984 i EU".M 1,000,000 31/4% Series due 1985 W O,0 M 1,500,000 4% Series due 1988 'M:
- 2,500,000 4% Series due 1993 W o.O W 3,500,000 6 3/4% Series due 1998 . W 0,0 U 0 2,500,000 81/4% Series due 1999 , M ,0 D o 3,500,000 101,27e Series due 2000 0,o' o 4,800,000 91/4% Series due 2001 " <0,0 0 0 2,805,000 8 3/5% Series due 2003 ' rWo 2,350,000 101/4% Series due 2004 . WuX 7,000,000
%> t '> $34,515,000 Less - Sinking fund requirements and a current maturity in 1979 ~nm 2,170,000 1 h :r 932,345,000 -
Total capitalization WY +
$67,773,645 The accompanying notes are an integral part of these financial statements.
16
BANGOR liYDRO-ELECTRIC COMPANY m !, ~!U
; i h 'f U l!il' [O T Y : ;! ,' ' t u lii N ! .
\For the Years Ended December 31 '~ ~' ~~ ~
~ ~ ~ ~ ~
1979
~' ~~~
1978
~~ ~
- ' Sources of Funds:
Internal sources - Operations - Net income before cumulative effect of a change in acounting principle 91.4 $ 2,444,548
- 3,391,483 Items no; aurrently requiring or (providing) funds-Depreciation ad amortization 1i1 x 2,814,541 2,200,513 Deferred income taxes G ll ,7 m 1,480,932 470,488 Investment tax credit, net ;Io.G:m 980,478 923,637 Allowance for other funds used during construction - - (531,293)
Funds provided from operations e n.7 m.e $ 7,720,499 $ 6,454,828 Cumulative effect on prior years (to December 31,1978) of a change to a differert rathod of recording revenue (Note 1) - 1,043,000 - t 6,7 WMn S 8,763,499 $ 6,454,828 Other sources (uses) of funds-Sinking fund requirements - i170.000: $ (170,000) $ (170,000) Dividends declared !n.601. N ; (3,288,758) (2,954,349) Other, net !2i M 89,687 74,206 9 6.G liu m : $ (3,369,071) $ (3,050,143) Change in net current assets, exclusive of interim financing - Cash, receivables and unbilled revenue , ! i ,W.G .B:n $ (2,363,720) $ (3,122,661) Deferred fuel costs i 1.Y; ' ;4 7 ) (5,484,688) - , ~ Other current assets W.0,901 ) (1,084,148) (83,265) Accounts payable > ' v ', 0 982,261 1,807,113 Other current liabilities e 7 N3, 309,522 54,944
- i 1.C IM l $ (7,640,773) $ (1,343,869)
Funds available from (required for) internal sources '
- 1. m 9.: . , , $ (2,246,345) $ 2,060,816 External sources -
Notes payable to banks - wo.0co S 500,000 $ 2,750,000 Retirement of first mortgage bonds 0.nten 3 Proceeds from issuance of - First mortgage bonds - 7,000,000 2,500,000 Preferred stock (30,000 shares in 1979) - 3,000,000 - Common stock - Public offering (250,000 shares in 1980 and 300,000 shares in 1978) 2, Lono - 4,288,010 Dividend reinvestment plan (21,577 shares in 1980 and 14,145 shares in 1979) ; s.O t i 194,626 - Employee stock ownership plan (8,051 shares in 1979 and 3,800 in 1978) _ _ _ y __ 110.547 56,696 Funds from external sources s 5,u n i ,01, $10,805,173 $ 9,594,706 Funds Available For Plant Additions > G.3Gn. : n $ 8,558,828 $11,655,522 Funds Used For: Wyman Unit #4 :m Pb $ 1,313,818 $ 3,157,502 NEPCO Nuclear Units (Note 10) 379,991 1,227,495 Seabrook Nuclear Units (Note 10) !,7r~ W 1,504,070 2,196,333 Other plant additions .?.5m : , 5,360,949 5,074,192 Funds Used For Plant Additions xO mn;17 $ 8,558,828 $11,655,522
= . -'
The accompanying notes are an integral part of these financial statements. 17
llANGOlt l'YDIto ELEUrlt!C COMPANY Notes to financial SIGIOmOnts Note 1. Summary of Significant Accounting Policies Electric Operating Reecnues Prior to 1979, Electric Operatir.g Revenues were recorded when billings, based on cycle m madings for either a one or two month period of consumption, were rendered to customers. Due to the cyc. ig process, a portion of the electricity used by the Company's customers during a fiscal period re-mamsunbu. at the end of that period. In general, this "unbilled" amount of revenue was not recorded as revenue prior to 1979. ( In the first quarter of 1979, the method of recording Electric Operating Revenues was changed to recognize revenues as electricity is used by the Company's customers, including electricity delivered but not yet billed at the end of the accounting period. This accounting change was made in order to better match the recognition of electric revenues with the recognition of the costs of providing the electric service. The cumulative effect of this accounting change on prior years (to December 31,1978) amounts to $1,043,000 (after reduction for income taxes of $1,034,000) and was included in income in 1979. The pro ferma amounts shown in the Statement of Income reflect the effect of retroactive application of the new method of recording revenue as if the new method had been followed throughout the periods. Deferred Fuel Accounting Under the fuel clause which became effective for the Company on January 1,1980, the Company is allowed to recover its fuel costs on a current basis. The fuel charge is based on the Company's projected cost of fuel for a twelve month forward-looking period. Over- or under-collections resulting from dif-ferences between estimated and actual fuel costs for a period are included in the camputation of the estimated fuel costs of the succeeding fuel adjustment period. As a result of these provisions in the existing fuel c!ause, the Company adopted deferred fuel accounting in December of 1979. Under this accounting method, fuel costs are expen,ed when they are billed. Unbilled retail fuel costs are classified on the balance sheet as deferred fuel costs. Under the fuel adjustment clause in operation prior to 1980, Fuel Charge Revenue was generally recorded when the cost of fuel was billed to customers. Operating Expenses were charged for the cost of fuel as incurred, which preceded the billing of fuel adjustment revenues by an average of three months. Consequently,in periods j of rising fuel costs the Company's earnings were adversely affected by the amount of fuel costs incurred in excess of fuel bilhngs. As part of its order implementing the nov fuel regulations, the Maine Public Utilities Commission ("MPUC") authorized the Company to collect, over a three-year period beginning January 1980, the fuel costs incurral which were unrecovered at December 31,1979 due to the operation of the previous fuel clause. Accordingly,in December 1979 the company deferred $3,806,901 of fuel expenses, which amount represents the balance of unrecovered fuel costs which will be collected over the period January 1,1980 through December 31,1982. The after tax effect of this deferral was to increase 1979 earnings by $1.0G per common share. Equity Alethod of Accounting The Company accounts for its investments in the common stock of Maine Yankee and MEPCO on the equity method of accounting and records its proportionate share of the net earn-ings of these companies (substantially all of these earnings are paid out in dividends) as a reduction of pur-chased power costs. See note 8 for additional information with respect to these investments. Depreciation of Electric Plant and hiaintenance Policy Depreciation oielectric plant is provided using the straight-line method at rates designed to allocate the original cost of the properties over their estimated service lives. The composite depreciation rate, expressed as a percentage of average depreciable plant in service, was approximately 3.2% during the periods presented. The Company follows the practice of charging to maintenance the cost of repairs, replacements and renewals of minor items considered to be less than units of property. Costs of additions, replacements and renewals of items considered to be units of property are charged to the utility plant accounts and any items removed are retired from such accounts. The original costs of units of property retired and removal costs, less salvage, are charged to the reserve for depreciation. Equity Reserve for Licensed Hydro Projects The Federal Energy Regulatory Commission ("FERC") requires that a reserve be maintained equal to one-half of earnings in excess of a prescribed rate of return on the Com-pany's investment in licensed hydro property beginning with the twenty-first year of project operation undcr license. As required by an order of the FERC, which was effective January 1,1978, the Equity Reserve pro- - vided for licensed hydro projects was reclassified from Other Deferred Credits and Reserves to Retained Earning: Allowance for Funds Used During Construction The Company reflects as an element oi the cost oi construction l of major units of depreciable property an allowance for funds (including common equity funds) employed during l 18
the construction period ("AFDC"). Under the rate-making processes of applicable regulatory agencies the Com-pany is permitted to recover these amounts. not currently, but over the usefullife of the constructed property. Further, the unrecovered cost of constructed property, including the allowance, is an element of raw base on _ which the Company is permitted to earn a return.
) The amount of the allowance recorded is determined by multiplying the portion of the average monthly dollar m calance of construction in progress financed by short-term borrowings by the weighted average interest rate applicable to short-term borrowings for the month and multiplying any remainder of the monthly dollar balance of construction in progress by the weighted average cost of debt and ec,uity as of the begmsg of the yet c. For 1980 and 1979, the average monthly short-term borrowings exceeded the average monthly balmce of construc-tion in progress and, as a result, the allowance rate for these two periods is the average interest rate of short-term borrowings during these periods.
The average rate produced by the Company's computations was 17.1% for 1980,13.2% in 1979 and 8.4% in 1978. Note 2. Income Taxes In 1980 and 1979, the Company experienced net losses for tax purposes. These losses resulted priricipally from thr* significant transactions which increased income for ace',unting purposes but not for tax purposes. The ta provisions related to two of these items which have been dassified as short-term deferred taxes to correspond to the accounting for the related assets are as follows: 1980 1979 Federal State Federal State Deferred fuel costs $ 672,693 $110,071 $2,346,349 $383,928 Unbilled revenues 354,277 57,970 1,090,547 178,444
$1,026,970 $168,041 $3,436,896 $562,372 The provision related to the third timing difference which has been classified as deferred income taxes pur-suant to an order from the FEllC is as follows:
I 1980 1979 Federal State Federal State Costs (amortization) of cancelled NEPCO Nuclear Units (Note 9) $ (55,205) $ (1,229) $ 681,548 $103,717 The losses for tax purposes have resulted in net operating loss and investment tax credit carrybacks, sad carr/- overs which, subject to review by the Internal Itevenue Service, will be used to reduce income taxes otherwk payable in future years. The carryovers and the periods in which they may be utilized are as follows: 1980 Federal State Net operating loss carry forward Through 1986 $1,778,604 $265,850 Through 1987 795,496 121,054
$2,574,100 $386,904 Investment tax credit carry forward Thrcugh 1985 1,187,814 -
Through 1986 942,583 - Tlfrough 1987 505,589 -
$2,635,986 _
The rate-making practice followed by the MPUC in the Company's most recent ( August 1980) rate order permitted the Company to recover as a part of the cost of service deferred Federal income tax arising from the use, for income tax purposes, of accelerated depreciation of certain property added subsequent to 1969. The income tax effects of other property related timing differences between pretax accounting income and taxable 7 ncomei generally are,in effect, flowed through to the Company's customers. Although this accounting differs
) from generally accepted accounting principles followed by non-rate-regulated companies, which are required
--' to record deferred taxes related to all timing differences, the Company expects that deferred taxes not recorded will be collected through customer rates in the future when such taxes become payable. 19
The individual components of Federal and State income taxes reflected in the Stetement of Income for 1980, 1979 and 1978 are as follows: l Year Ended December 31, 1980 1979_ 1978 Tax benefits carried back and forward: Federal $ (1,106,737) $ (4,283,431) $ (453,08 State (118,869) (500,387) 102,120
$ (1,225,606) $ (4,783,818) $ (350,960)
Deferred - Short Term Federal $ 1,026 970 $ 3,436,896 $ - State 168,041 562,379
$ 1,195,011 $ 3,999,268 $ -
Deferred - Other Federal $ 643,020 $ 1,377,215 $ 467,928 State (1,229) 103,717 2,560
$ 641,791 $ 1,480,932 $ 470,488 Investment tax credits, net $ 310,650 $ 980,478 $ 923,637 Employee stock ownership plan investment tax credit 40,664 106,165 95,964 Total Provision $ 962,510 $ 1,783,025 $ 1,139,129 Charged to other income (24,084) (26,198) (10,699)
Allocated to the cumulative change in accounting principle (Note 1)
- (1,033,953) -
Charged to operating expense $ 938,426 $ 722,874 $ 1,128,430 The table below reconciles a provision calculated by multiplying income before Federal income taxes by the statutory Federal income tax rate to the total provision for Federal income tan 1980 1979 1978 Amount % Amount % Amount % Federal income tax provision at statutory rate $1,656 46% $2,348 46% $2,110 48% Irss permanent reductions in tax expense result-ing from statutory exclusions from taxable income: Dividend received deduction related to earnings of associated companies 198 5 207 4 208 4 Equity component of AFDC - - - - 255 6 Preferred dividends paid deduction 34 1 34 1 34 1 Amortization ofinvestment tax credit 96 3 80 1 36 _1, Federal income tax provision before effect of timing differences $1,328 37% $2,027 40% $1,577 36% Less timing differences that are floved through for ratemaking and accounting purposes: Interest component of AFDC 367 10 365 7 309 7 Deduction of certain costs (primarily pension costs and payroll taxes) for tax purposes that are in-cluded in the cost of electric property 58 2 29 1 2'. 1 One-half year depreciation convention 916 5 Other (12) - 16 - (9) - Federal income tax provision $ 915 25% $1,617 32% $1,034 23% Under the Federal income tax laws, the Company receives investment tax credits at a rate of 10% on qualified property additions. Investment credits received are deferred and amortized over the life of the related property. Due to the adoption of a Tax Reduction Act Stock Ownership Plan (see note 3), the Company receives an additional 1% investment tax credit which is used to fund the Plan. Note 3. Capital Stock The Company issued and sold for cash (approximately $2,286,000) 250,000 common shares in December 198 The Company has an employee stock ownership plan which qualifies as a Tax Reduction Act Stock Ownershil Plan. Annual contributions to the Plan by the Company are in the form of common stock of the Company having a market value equal to an additional 1% investment tax emlit allowed by Federal tax law, less adminis-1 20
trative expenses. T'u Company also has a Dividend Reinvestment and Common Stock Purchase Plan through which shareholders may purchase common stock without payment of brokerage commissions or service charges. In connection with these plans, the Company has reserved 130,J00 shares of common stock. N
' Note 4. Preferred Stock General Authorized preferred stock consists of 250,000 shares, par value .$100 per share, of which there are out-standing 97,340 shares. The remaining 152,660 authorized but unissued shares (plus additional shares equal in number to such presently outstanding shares as may be retired) may be issued with such preferences, restrictions or qualifications as the Board of Directors may determine. The callable preferred stock may be called in whole or in part upon any dividend date by appropriate resolution of the Board of Directors.
With the exception of the 20,000 shares of 91/4% Preferred Stock and the 30,000 shares of 91/2% Preferred Stock, the outstanding preferred stock has general voting rights of one vote per share. Redeemable Iteferred Shares The 91/4% Preferred Stock and the 91/27, Preferred Stock are subject to man-datory redemption through the operation of sinking funds at the redemption price of $100 per share plus divi-dends accrued. The Company will set aside in cash annually (1) on December 1 in each year commencing with December 1,1982, an amount sufficient to redeem 1,000 shares of the 91/4% Preferred Stock and (2) on August 1 in each year commencing with August 1,1985, an amount sufficient to redeem 2,000 shares of the 91/2% Preferred Stock. The aggregate annual amcunts of preferred stock redemption requirements for each of the five years follo.ving 1980 are as follows: 1982-1984, $100,000; and 1985, $300,000. Note 5. First Mortgage Bonds Under the provisions of the indenture, substantially all of the Company's plant and property has been mort-gaged to secure the First Mortgage Bonds. Additional bonds may be issued under the First Mortgage Bond Inden-ture, subject to certain restrictions and provisions specified in the indenture and supplements thereto. Sinking fund requirements and current maturities of long-term debt for the five years subsequent to December s31,1980 aggregate $4,630,000 as follows: Sinking Fund Current Requirements Maturities Total 1981 $ 170,000 $ - $ 170,000 1982 170,000 1,000,000 1,170,000 1983 170,000 - 170,000 1984 170,000 1,000,000 1 C,000 1985 450,000 1,500,000 1,u60,000
$ 4,630,000 Note 6. Notes Payable to Banks On August 22,1980, the Company entered into a $30 million Revolving Credit and Term Loan Agreement with a syndicate of seven banks. Under the Agreement, the Company may borrow up to $17.4 million until the start of the Company's commitment to purchase an additional 41.4 megawatts of the Seabrook nuclear units (January 31,1981 - see Notes 9 and 10). At that time, the credit available to the Company under this Agreement increases to $30 million. The revolving credit portion of this facility terminates on June 30,1985, at which time the indebtedness may be converted to a term loan to be paid down by the Company over a three year period ending June 30,1988.
The interest rate on the revohring credit is tied to the prime rate. For the periods ending lune 28,1981, June 28,1983 and June 29,1985, the interest rates are 106%,108% and 110% of the prime rate respectively. In addition, the Company is obligated to pay a commitment fee of one-half of one percent on the unused portion of the commitment and an additional fee of 4% of the prime rate applied to the available credit. The interest rate under the term loan portion of the facility is 115% of the prime rate. Under both the revolving credit por-tion and the term loan portion, there is an additional interest charge of one-quarter of one percent on amounts oatstanding in excess of $20 million. The Company plans to use the borrowings under this Agreement to initially finance construction and for
' ' other corporate purposes. The Company intends to refinance such borrowings with the proceeds from sales af long-term debt and equity securities. ~'
Under the terms of this Agreement, the Company is prohibited from incurring over $1 million of other unsecured borrowings. 21
Prior to August 22,1980 the Company arranged for its short + . borrowings under separate lines of credit j with individual banks. Certain information related to short-term borroivings is as fellows: Total credit waihb's ' end of period $17,400,000 $15,300,0 Unused credit at end of period $ 5,300,000 $ 8,050,000 Horrowings outstanding at end of period $12,100,000 $ 7,250,000 Effective interest rate (exclusive of fees) on borrowings outstanding at end of period 22.87o 15.570 Average daily outstanding borrowings for the period $13,129,000 $ C,291,000 Weighted daily average annual interest rate 17.17o 13.27o flighest level of borrowings outstanding at any month-end during the period $16,050,000 $14,250,000 Note 7. Supplementary Income Statement Information The Company has a noncontributory pension plan covering substantially all of its employees. The Company funds pension costs accrued. Pension cost was $445,000 in 1980, $410,000 in 1979 and $408,600 in 1978, including amortization of unfunded prior service costs (approximately $1,076,800 as of January 1,1980) over a twenty year period. As of January 1,1980, the date of the latest actuarial review, pertinent pension plan information was as follows: The actuarial present value of vested accumulated plan benefits $5,952,800 The actuarial present value of nonvested accumulated plan benefits 152,000
$6,104,800 Net assets available for benefits $7,977,989 Assumed rate of return on plan investments 5 1/27o Alaintenance expense, depreciation, and local property and other taxes not based on income which were charged to operating expenses are stated separately in the income statement. Rents and advertising costs are not significhnt. No royalty or research and development expenses were incurred, j Note 8. Capacity
'Ihe Company owns 7?o of the common stock of 51aine Yankee and 14.27o of the common stock of A1EPCO.
Under purchased power arrangements, the Company is entitled to purchase 7.37o of the output of hiaine Yankee, and is obligated to pay a like percentage of Alaine Yankee's costs regardless of the level of electrical output. The Company is also entitled to approximately 27o of a purchased power contract between h1EPCO and the New Brunswick Electric Power Commission. To the extent that 51EPCO's revenues from transmission services are insufficient to meet its expenses, the Company and the other participants pay MEPCO's costs based upon their relative system peaks. Information relating to the above purchased power arrangements and the operations of Ahine Yankee and MEPCO is as follows: MAINE YANKEE MEPCO Power Sales Contract Term 1973-2003 1976-1985 Capacity Entitlement 61 MW 2.7 MW 1980 1979 1978 1980 1979 1978 Operations: (Dollars in Thousands) As reported by investee-Operating revenues $ 84,245 $ 68,867 $ 70,373 $111,604 $ 98,122 $ 59,860 Depreciation $ 8,319 $ 8,279 $ 8,173 $ 735 $ 735 $ 736 Interest and Preferred Dividends 16,586 14,458 12,550 1,270 1,238 1,201 Other, net 52,767 39,480 42,948 109,453 95,994 57,760
$ 77,671 $ 62,217 $ G3,671 $111,458 $ 97,96_7 $ 59,697 I Earnings applicable to common stock $_ 6,574 $ 6,650 $ 6,702 $ 146 $ 155 $ 163 Amounts reported by the Company-Purchased power costs S 4,556 $ 4,199 $ 4,217 $ 590 $ 587 $ 551 ,
Equity in net income (468) (468) (479) (24) (24) (39
$ 4,088 $ 3,731 $ 3,738 $ 566 8 563 $ 512 22
Financial Poution: As reported by investee-Plant in service $246,921 $240,061
$237,884 $ 18,588 $ 18,617 $ 18,617 Accurautated depreciation (61,803) (54,105) (46,449) (7,207) (6,482) (5,746)
(_) Other 111,606 101,149 74,520 19,719 10,669 7,941
* (,/ Total Assets $296,724 $287,105 $265,955 $ 31,100 .$ 22,804 $ 20,812 Less-Preferred stock 11,980 13,070 13,696 - - -
Long-term debt 134,823 139,373 128,818 9,900 10,560 11,220 Other liabilities and deferred credits 82.869 _ 67,805 56,657 20,027 10,997 8,267 Net assets $ 67,052 $ 6S,85j $ 66,784 $ 1,173 $ 1,247 $ 1,325 Company's repo ed equity-Equity in net assets $ 4,694 $ 4,680 $ 4,675 $ 167 $ 177 $ 188 Adjust Company's estimate to actual (5) 3 4 5 2 -
$ 4,689 $ 4,683 $ 4,679 $ 172 $_ 179 $ 188 The Company owns 8.333% (50 MW) of the 600 MW Wyman 4 unit. The Company's proportionate share of the direct expenses of this unit is included in the corresponding operating expenses in the Statement of Income for the years 1978 (from December 1),1979 and 1980. Included in the Company's utility plant are the following amounts with respect to this unit:
December 31, December 31, 1980 1979 Electric plant in service $16,530,858 $16,207,360 Accumulated depreciation (1,025,456) (523,008)
$15,505,402 $15,684,352 Note 9. Construction
.O The Company is engaged in an ongoing construction program including an investment in the Seabrook Nuclear l lJnits ("Seabrook"), a jointly-owned electric generating facility being built by the Public Service Company of D$ew Ilampshire ("PSNil"). At December 31,1980, the Company owned .37% (8.6 megawatts) of Seabrook and had contracted to purchase another 1.8% (41.4 megawatts) of that plant. The Company's participation in the
.37% interest and in the 1.8% interest are summarized below:
Existing Under Contract Total (Dollars in Thousands) Company's Ownership Percentage .37% 1.8% 2.17% Utility plant under construction at December 31,1980: Constructian and nuclear fuel costs exclusive of allowance for funds $4,295 $20,896 $25,191 Estimated Aor completion: Cormruction and nuclear fuel costs exclusive of allowance for funds 4,679 22,308 26,987 Total $8,974 $43,204 S52.178 The above estimates for completion are based on the latest estimates of the project's cost furnished by PSNil. See also note 10, " Contingencies - Seabrook" for a further discussion of this project. One of the projects in which the Company had an ownership interest was the New England Power Company nuclear units originally planned for Charlestown, Rhode Island, at the site of an abandoned naval base. Efforts to obtain the site were unsuccessful, and the lead owner's parent company determined that the capacity from the units was not required to meet its system's fifteen year corporate plan. Accordingly, on December 17,1979, theit ' owner announced the cancellation of the project. In its most recent rate order, the Company has re-ceived approval from the MPUC to recover over a five year period its investment in the project, less any salvage credits. Note 10. Contingencies I / N>Scabrook As disclosed in note 9 above, the Company is participating as a joint owner in the nuclear generating plant being constructed in Seabrook, New llampshire, by PSNIl as the lead owner. 23
l l PSNil has for some time been experiencing difficulties in obtaining ebrnal financing for its construction program, including its 507c ownership in the Seabrook project. Consequently m Lrch 1979 PSNII began efforts to reduce its ownership interest to 28'I. These efforts have resulted in commitments only sufficient to reduce PSNII's interest to approximately 357c. The additional 1.87c interest which the Company has rontracted to pur-chase is a part of this transaction. The purchase is to be accomplished over an Adjustment Period during which the purchasing utilities pay the costs of the project otherwise attributable to PSNil until each purchaser's investment in the project equals the percentage for which it has committed. The Adjustment Period did not commence as soon as anticipated due to the inability of some of the purchasers to obtain timely regulatory approvals. In December 1980 the participants agreed that the Adjustment Period should begin on January 31,1981 for those purchasers, including the Company, which had the requisite regulatory approvals. Completion of the transaction with respect to these purchasers would reduce PSNil's ownership interest to 447c, and during the Adjustment Period these purchasers are paying about one-half of the costs of the project otherwise attributable to PSNII. The Adjustment Period for the rest of the purchasers will commence when necessary regulatory approvals and financing have been obtained. The Company estimates that the Adjustment Period which began on January 31,1981 will continue for approximately thirteen months, during which time the Company will pay approximately $27 million in con-struction costs over and above the costs for its existing .377c interest. In Alarch 1980, PSNil reduced the level of construction at the project due to the delay in the commencement of the Adjustment Period and the unsettled capital markets. It is anticipated that construction will continue at the reduced level at least until the Adjustment Period for all purchasers has commenced, and possibly longer. As a result of this and other factors, the scheduled completion dates of the two units of 1983 and 1985 have been affected. As yet no new completion dates have been determined, but pending such determination the Company, for its planning purposes, is estimating the completion dates to be 1984 and 1986. Construction of the Seabrook units 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 and has been opposed consistently by a number of intervening groups. Opposition to the project has included demon-strations at the Seabrook site. The project also has been plagued by lengthy delays which have resulted in greatly increased costs. Court appeals and administrative proceedings are continuing, and further appeals and proceedings are possible. PSNIl has indicated that the reduction of its ownership interest to 357o and adequate and timely rate increases (including favorable action upon a January 1981 request for emergency rate relief, which request was denied on February 20,1981) are necessary in order to maintain the ability to obtain the external funds necessary to finance its share of the project, and to avoid suspension of construction or other measures which might adversely affect the completion and cost of the project. The Company cannot predict what action will be taken if emergency rate relief for PSNil is not forthcoming or whether PSNII's financing problems will be resolved, nor can it predict what effect those financing problems or further regulatory, administrative or court proceedings will have upon the completion of the project or upon its cost. Indian Cases Tne Company is a defendant in a class action brought on July 17,1972, in the United States Dis-trict Court, District of Maine, Northern Division, by the Penobscot Nation of Indians seeking $5 million in com-Iwnsatery damages and a like amount in punitive damages for loss of lands taken by flowage resulting from the damming of the Penobscot Iliver by the Company's predecessors in title, allegedly in violation of the Indian Trade l and Intercourse Act of 1790. The Company is also the <lefendant in an action brought simultaneously in that court based upon the same 1790 law by an individual alleging that he is a Penobscot Indian seeking $200,000 in damages for trespassing and requesting removal of existing transmission lines. Proceedings in both cases were stayed pending the outcome of certain Indian land claim cases against the State of Maine. During 1980, ongoing negotiations between the Indians, representatives of the State and Federal governments, and the large landowners cu'minated in a settlement of the Indian land claims under the terms of which the claims are extinguished in return for monetary compensation t _1 options for the purchase of land. Counsel for the Indians and for the Company are currently examining the effect of the land claims settlement upon the cases against the Company. In the opinion of management, the outcome of these cases will not have a materially adverse effect on the financia! condition of the Company. DfC On August 11,1975, IMC, the Company's largest single customer, located within the Company's service territory in Orrington, brought a complant before the MPUC requesting that the MPUC order Central Maine Power Company to provide electric service to IMC. After court resolution of certain preliminary issues, the matter is now in order for further proceedings at the MPUC. If the MPUC were to grant the request, the Company would apply for rate relief to make up for the loss of revenue from the basic rates applicable to this customer. Ilow-ever, the loss of this customer would reduce the Company's cost of fuel and purchased energy which is passed on to all customers including IMC. In the opinion of management, the magnitude of this reduction in fuel and purchased energy costs wouhl offset substantially all of any base rate increase to other customers. 21
Note 11. Unaudited Quartcrly Financial D:.ta l Unaudited quarterly financial data pertaining to the raults of operations are shown below: [] Quarter Ended
'V March 31 June 30 Sept.30 Dec.31 (Dollers in thousands except per share amounts) 1980 Electric Operating Revenues $16,165 $14,630 $16,896 $19,003 Operating income 1,585 1,196 1,675 2,222 Net Income 715 140 685 1,146 Earnings (Loss) Per Share of Common Stock * .29 (.02) .28 .51 1979 Electric Operating Revenues $12,436 $11,845 $12,509 $14,958 Operating heome 395 1,439 543 2,613 Net Income (Loss) (Note 1) 873 817 (95) 1,893-Earnings (Loss) Per Share of Common Stock * (Note 1) .42** .39 (.13) .95**
- Individual quarters recomputed based on weighted average of common shares outstanding during the year.
** See note 1 to the financial statements.
Note 12. Supplementary Balance Sheet Information The activity in the plant accounts, accumulated depreciation and certain reserve accounts is presented below: Property, Plant and Equipment _and Construction in Progress
- A Redrements 4 i Balance - Charged to V Beginning Additions - Reserve for at Cost Depreciation ' Transfers Balance End of Year
_of Year Plant in Service - ! Intangibles-organization expense $ 30,570 $ -
$ 30,570
- Production plant Steam 24,705,850 - 34,953 424,609 25,095,506 Ilydro-Electric 11,010,287 -
25,194- 704,351 11,689,444 Internal Combustion 4,461,307 - 1,036,071 2,804 .3,428,040 Transmission property 15,166,573 - 13,329 201,333 15,354,577 i Distribution property 34,667,432 - 220,068. 2,146,690 36,594,054 General property 4,975,691 - 237,364 608,986 5,347,313 Total Plant in Service $95,017,710 $ - $1,566,979 $ 4,088,773 . $ 97,539,504 Construction in Progress 3,824,265 6,560,347 - (4,088,773) 6,295,839
$98,841,975 $6,560,347 $1,566,979 $ - $103,835,343 1979 . Plant in Service -
Intangibles-organization expense $ 30,570 $ -
$ 30,570
. Production plant Steam 22,433,809 - 932 2,243,907 24,705,850 Ilydro-Electric 10,648,614 - 32,676 394,349 11,010,287 Internal Combustion 4,490,141 - 3,214 -10,654 4,461,307 l Transmission property 12,826,773 - 13,853 2,346,447 15,166,573 l Distribution property 32,413,218 - 214,914 2,469,125 34,667,432 p General prr perty 4,553,742 - 286,033 707,983 4,975,691 I Total Plant in Service . $87,396,867 $ - $ 551,622 $ 8,172,465 $ 95,017,710 Construction in Progress - 5,453,208 8,558,828 -
-(10,187,7_71) 3,824,265
$92,850,075 $8,558,828 $ 551,622 $ (2,015,306)* $ 98,841,975
- Cancellation of NEPCO Nuclear Units (Note 9).
25
N:te 12. Contmsed Accumulated Depreciation of Property Plant and Equipment Balance beginning of period $ 32,459,170 $ 30,065,676 Additions: Provisions charged to income .,363,832 2,814,541 Salvage 112,670 161,586 Other 40,983 35,088
$ 35,576 355 $ 33,076,891 Deductions:
Property retirements 1,566,942 551,162 Removal costs 80,615 66,559 Balance end of period $ 33,929,098 $ 3?,159,170 Reserves For Doubtful Accounts and Insurane e_ Additions Balance at Charged to Charged to Balance at Beginning Costs and Other End of Period Expenses Accounts Deductions of Period 196o Reserve for doubtful accounts S 44,000 $313,935 $116,139 $369,074 $105,000 Reserve for insurance $ 96,058 $ 22,000 $ ,
$ 25,621 $ 92,437 1979 Reserve for doubtful accounts S 85,000 $187,920 $ 40,894 $269,814 $ 44,000 Reserve for insurance $ 80,503 $ 42,000 $ - $ 26,445 $
Auditors' Repor! To the Stockholders and Board of Directors of Bangor Hydro-Electric Company: We have examined the balance sheet of BANGOR HYDRO-ELECTRIC COMPANY (a Maine corporation) and statement of capitalization as of December 31,1980 and 1979, and the statements of income, retained earnings and sources of funds for plant additions for the three years 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 financial statements referred to above present fairly the financial position of Bangor Hydro-Electric Company as of December 31,1980 and 1979, and the results of its operations and its sources of funds for plant additions for the three years ended December 31,1980, in conformity with generally accepted account-ing principles, which, except for the change (with which we concur)in the method of recording Electric Operad ing Revenues as indicated in Note 1 to the financial statements, have been applied on a consistent basis. Boston, Massachusetts, ARTIIUR ANDERSEN & CO January 23,1981 26
1 The !?evenue Dollar where it came from... where it went... mw. fs 54 s street hghtmg 1.5c Q~ .. ..-. ether utahtwo IR - 1 { S - 5 5c ,['[n[*""' puhhc agmws 5 N - k . 4.1 commoh dmdend 4 %* %. T *',] - -- 4 Sc maten and
; . , . , , , .4 mmortu.auon e mmunal 2124 QM,fCQ]Q1 3.24 taxes 79 interest and prefernd dmdend
. , . '* w, .g W? E - mages and f~fO o
c [d S [\
,-1 3
j <
I..x - [. 7 10.0C employees benefits
.m ._...f,,,.._
" : y f;; <.
4 e~ s s- 2 L, p . . 1- f ' 'o - gmh Q / :. ,.m-: - # I ,a 1, % W]/t mdustr al power 35.4C - - { ., 'j. ".' T[ .
.[
;p kf v;' y* v }.: 1 e yT.
.. 4 " Fj
. gg- ;b, y0-q4.
- <*^ ' ' p. _
7" ,pll l~& - o .
,y - }4
'R / * ' . ' ,
f{ ., f, -}f
,0k#. ! ' y'sp
'kp A 'f4'.
S M . . .".?
-r.,D ; 'y % D 64 84 fuel and C . _. c. -
!- ; ',d purchawd power d m> f te h f 4( - M@ a,iRk si# $;4. p$1]:; W. 'gr i et1:;
reudenual 35 6c - U t; - p A, k g =
<W1 g,j i N
'pk : ;y +;,p-aN3 m q. ,N.1
;;; fp..;., i;ff&ng
; e _ W'Qmp gg 2% w a u a.,- eaxM ast Gan %lwent &r M;L+.: A.
,. ';;;=C?r,@ O;a 2 ?h I K: ,bgC/g;em The Company's common stock is traded over-the-counter and is quoted on National Association of Securities Dealers Automatic Quotation System ("NASDAQ") under the symbol BANG. The table below sets forth the high and low bid prices for the common stock as reported by the National Quotation Bureau, Inc. The prices shown represent prices between dealers and do not include retail markup, markdown or commission.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Iligh Low Ifigh Low Iligh Low Iligh Low 1980 12.750 9.250 12.750 9.750 12.750 11.000 11.000 9.500 1979 14.875 13.875 14.750 13.125 14.750 12.625 12.625 11.250 Cash dividends of $.38 per share on common stock were declared in each quarter of 1980 and 1979. Txbility of Dividends The Company estimates that 100 percent of the dividends on both common and preferred stock paid in 1980 i ill be considered nontaxable for Federal income tax purposes. The primary reason that this has occurred is he difference between the tax return and financial statement treatment accorded certain 1980 transactions. These dividend distributions should be used to reduce the tax cost basis of the shares upon which the dividends were paid. 27
Six Yect 5tetistical Summartj FROM 1975 TilROUGli1980 Wo 1979 1978 1977 1976 1975 Electric Plant (000) Tota: Electric Plant 8 10x M G $ 103,704 $ 97,717 $ 86,026 $ 79,018 $ 72,4 Depreciation Reserve 33,929 32,459 30,066 28,239 26,588 24,9L Net Electric Plant s 71.767 $ 71,245 $ 67,651 $ 57,787 $ 52,430 $ 47,497 Capital Structure (000) Bonds s 32,3 l a $ 34,515 $ 27,685 $ 25,355 $ 27,950 $ 25,000 Redeemable Preferred Stock 5.000 5,000 2,000 2,000 2,000 - ) Preferred Stock 1,711 4,734 4,734 4,734 4,734 4,734 Common Stock 10,118 0,060 8,949 7,430 6,169 6,168 Premium on Common Stock 9.019 7,836 7,668 4,843 2,388 2,405 Retained Earnings 7,u o 8,799 8,600 8,027 7,637 8,250 Total Capitalization s 69,390 $ 69,944 $ 59,636 $ 52,389 $ 50,878 $ 46,557 Capital Structure Ratios Bonds 16.6 49.4 46.4 48.4 54.9 53.7 Preferred Stock yg 13.9 11.3 12.8 13.2 10.2 Common Stock Equity 39.1 36.7 42.3 38.8 31.9 36.1 Summary of Operations (000) Operating Revenue 8 cc 691 $ 51,748 $ 42,627 $ 38,294 $ 31,336 $ 32,314 Fuel & Purchased Power 15.091 33,055 26,763 22,548 18,143 17,974 Operation & Maintenance 9,015 8,344 6,612 6,687 6,334 6,067 Depreciation & Amortization 1111 2,814 2,201 2,095 2,029 1,962 Taxes 2,79G 2,545 2,643 2,894 1,819 2,952 Other Income (expenses) 1,178 (456) 855 407 167 (140) Bond Interest 2.511 2,189 1,872 1,718 1,633 1,132 Net Income : 2,c80 $ 3,438* $ 3,391 $ 2,759 $ 1,545 $ 2,087 Common Stock Number of Stockholders-End of Year 7,6,33 7,635 7,479 6,841 6,184 6,1 Shares outstanding-End of Year 2,0sa c00 1,812,023 1,789,827 1,486,027 1,233,710 1,233,710 Shares outstanding-Average 1,H:4979 1,801,906 1,658,985 1,317,816 1,233,710 1,139,960 Earnings per Common Share-Average 8 1.06 $ 1.63* $ 1.77 $ 1.75 $ .95 $ 1.60 Divident Nhred per Common Share s 1.52 $ 1.52 $ 1.46 $ 1.41 $ 1.34 $ 1.29 Production Sources in KWil (000) llydro Generation 228,038 246,052 213,195 245,821 254,813 232,341 Fuel Generation is I,Isc 77,209 15,910 11,498 113,119 118,386 Purchased Power 1,010,1S1 1,112,676 1,108,416 977,400 818,361 717,162 Total generated & purchased 1,122,70:i 1,435,937 1,337,521 1,234,719 1,186,293 1,067,889 Sales In KWil(000) Residential 391,172 383,945 369,989 349,869 335,692 308,253 Commercial 120,133 219,196 213,777 198,384 186,271 170,291 Other 688,690 723,252 646,765 580,679 557,167 501,045 ! Total 1 Jm9,595 1,326,393 1,230,531 1,128,932 1,079,130 979,589 ) Ravenue from Electric Energy Sales (000) Residential s 23,817 $ 18,698 $ 16,171 $ 14,994 $ 12,306 $ 12,618 Commercial 13,190 10,433 9,013 8,207 6,649 6,705 Other 29,0!i 22,328 17,152 14,764 12,222 12,830 Total s 66,322 $ 51,459 $ 42,336 $ 37,965 31,177 $ 32,153 Residential Customer Use Average number of customers 65,76S 64,958 64,666 62,371 60,975 59,131 Kilowatt hours per customer 5,932 5,952 5,721 5,609 5,505 5,213 Revenue per customer S 353Ss $ 286.75 $ 250.07 $ 240.40 $ 201.82 $ 213.4 Revenue per kilowatt-hour 5.97: 4.82c 4.37c 4.29c 3.67c 4.0L -
- Includes cumulative effect of a change in accounting principle of $1,043,000 ($.58 per share) and $658,729 ($.36 per share) attributable to the amount of fuel that would have been deferred at December 31,1978 had the new fuel regulations been effective at that date. See note 1 to the financial statements.
28
.J d("
[h
~m.y m.
_= 7 ., ,
- = ec~Zi 2; M:ws *v7TMx. ~ b. gvg-- - ] j !. ? I!
g) a '
~
3
===tp .. .
u , - ,3s , M 41]" gw= l P-]~:*,4 .3 M - f ' r- ! U e, 1 < 1
*- L
<, mang ~ , e l[ . ',4 Q.
___ me ,
=
T -
$$mK= P u z.
E W. M- xl'd
- PP~' e C. About the Cover
. ?s!"?' /7 'i ' -
A line of generating units at is '# the Company's 8.4 MW hydro t'nw. ~ N ;'N --
%N_- station on the Penobscot T ' g: \ D. , u River at Veazie, rendered en 1(2 ;
- N ~
~'
acrylics by Arthur Taylor or
! Lee, Maine. Hydro-electric '\_
y ryv&R;r. . 37 . . . . __
,g/;
*bf ? -7.1'PMo, .
cy,.j,' 'M , g-N9;<.3 g/pft ' 9i generation comprises an im-f k uss. .:,c;;;; '. O u.a.k W::.,a f.s 1. f- s
+
' (-, N.1/'
.~
'GM~-mM# Portant part of the Company's
~ generation mix.
l l IIANGOR !!YDitO-ELELTRIC COMPAN Y BULK RATE 33 STATE STREET U. S. POSTAGE 11ANGolt, MAINE 01401 PAID , Bangor, Mair Permit No.6i 1 l O O
O CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports appearing, or incorporated by reference, in the Annual Report on Form 10-K for the year ended December 31, 1980, of Bangor Hydro-Electric Company in its Registration Statement on Form S-16 (File No. 2-62910). ARTHUR ANDERSEN & CO. O Boston, Massachusetts March 23, 1981 / (
SIGNATURES l Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to o signed on its behalf by the undersigned, thereunto duly authorized. A March 23, 1981 /s/ T.A. Greenquist Thomas A. Greenquist President and Director i Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on bshalf of the registrant and in the capacities and on the dates
~
indicated.
/s/ George D. Carlisle /s/ John T. Maines George D. Carlisle John T. Maines Director Director
/s/ John F. Grant /s/ James G. Sargent John F. Grant James G.- Sargent Director Director O/s/ R.N. Haskell /s/ Earle R. Webster l Robert N. Haskell Earle R. Webster Chairman of the. Board Director of Directors (Principal Executive Officer)
/s/ John P. O'Sullivan /s/ David R. Black John P. O'Sullivan David R. Black l Vice President & Treasurer Controller (Chief Financial Officer) (Chief Accounting Of ficer)
Each of the above signatures is affixed as of March 23, 1981
W9112BMA0PSX h { MAINE YANKEE ATOMIC POWER COMPANY INDEX TO FINANCIAL STATEMENTS AND SCHEDULES i O
- 1. Financial Statements:
Report of Independent Public Accountants. Statement of Income for the three years ended December 31, 1980. Balance Sheet at December 31, 1980 and 1979. Statement of Capitalization at December 31, 1980 and 1979.
! Statement of Changes in Common Stock Investment for the three years ended December 31, 1980.
Statement of Sources of Funds for Acquisition of Nuclear. Fuel and Construction of Electric Property
- for the three years ended December 31, 1980.
3 Notes to Financial Statements.
- 2. Schedules:
V Electric Property and Nuclear Fuel. i VI Accumulated Provision for Depreciation and Amortization of Electric Plant and Nuclear Fuel. IX Short-Term Borrowings. All other schedules are omitted as the recuired [: -) information is inapplicable or the information is a oresented in the Financial Statements or related notes. l i l l l. I l. I\ . l l
.. __...-._____,,,__.r_,.. _
____,._,__,_..,_.,,._,.._,___m. _
Maine Yanken Atomic Power Company Form 10-K-1980 m . [y) r s -i . ..w .,. ~. a. .s. ., e :mr -w-s. i .n..~.,..uu l
- u. . e. r. .. . m. : . .
t REPORT OF INDE?IEEh7 ?UBLIC ACCOUh7 ANTS To Naine Yankee Atecic Power Cocpany: We have exacised the balance sheet and state =ent of capitali::stice of Maine Yankee A ccie ?cwer Company (a Maine corpo ratica) as of Deces-i . ber 31, 1980 and 1979, and the related statements of incoce, changes in ec:=on stock investment and sources of funds for acquisition of nuclear j fuel and construction of electric property for the three years ended Dece:ber 31, 1980, and the supporting schedules as listed on the ace ==- panying index. Our examinations were made in accordance with generally 4
- p accepted audi ing standards and, accordingl7, included such tests of k the accounting records and such other auditing procedures as we ec sid-ered necessary in the circu= stances.
In our cpinion, the financial state =ents referred to above presen: fairly the ficaccial position of Maine Yankee A :cic Pcwer Ccepany as i of Dece=ber 31, 1930 and 1979, and the results of its operatices and its sources of funds for acquisition of nuclear fuel and constructica of l electric property for the three years ended Dece=ber 31, 1930, and the supporting schedules present fairlf the information required to be se l forth therein, all in ccafor=ity with generallf accepted accounting principles applied on a consistent basis. m s . 'w" . AREJR ANDERSEN & CO. l t Boston, Massachusetts, ' /St February 6, 19S1. i
~ I Mzina Yankse Atomic Powar Company l Form 10-K-1980 saine Yankee Atemic Power Company ,fs l( STATEMENT OF INCCME ! (Dollars in Thousands Except Per Share Amounts)
- Year Ended December 31, 1
1980 1979 1978 ELECTRIC OPERATING REVENUES $84,245 $68,867 $70,373 OPERATING EXFENSES Fuel (Notes 1 and 10) 24,024 15,319 17,411 Operation 18,370 14,193 10,684 l Maintenance (Note 1) 4,392 2,544 4,496 Depreciation and Amortization (Notes 1 and 10) 8,319 8,279 8,173 Taxes Federal and State Income (Note 2) 7,305 7,864 8,703 Local Property 3,801 3,750 4.094 Total Operating Expeases 66,211 51,949 53.561 OPERATING INCCMI 18,034 16,918 16,812 0TER INCCME (EXPENSES) Allowance for Other Funds Used: During Construction (Note 1) 25 3 76 50 ll/~')s (_, For Nuclear Fuel (Note 1) 1,118 1,547 1,341 Other (145) (113) (6) INCCME 5EFORE INTEREST CHARGES 19,260 18,428 18.197 INTEREST CHARGES Long-Term Cebt (Notes 4 and 5) 14,171 13,307 11,534 Other 1,480 205 '9 Allowance for Borrowed Funds Used: During Construction (Note 1) . (409) (133) (90) For Nuclear Fuel (Note 1) (3.490) (2.602) (1.023) Total Interest Charges 11.752 10.777 10,470 NET INCOME 7,508 7,651 7,727 Dividends on Preferred Stock 934 1,001 1.025 EARNINGS APPLICA3EE TO CCMMON STCCK S 6.574 5 6.650 5 6.702 I SHARES CF CCMMON STCCK OITISTANDING 500.000 500,000 500.000 i l EARNINGS PER SHARE 0F COMMCN STCCK 313.15 313.30 $13.'0 fx 't I / DI7IDENUS DECL.GIO ?IR SHARE OF CCMMON STOCK $13.19 513.25 313.40 The acccmpanying notes are an integral part of these financial statements.
M in2 Ycnkte Atomic Powtr Ccapany Fcem 10-K-1980 Maine Yankee Atomic Power Coceany l d BALANCE S*EET (Dollars in Thousands) ASSETS December 31, 1980 1979 ELECTRIC PROPERTY, at Original Cost (Notes 4 and
- 10) (Sch. V) S246,921 S200,061 Less: Accu =ulated Depreciation and Amortization (Note 1) (Sch. VI) 61.803 54.105 185,113 185,956 Construction '4ork in Progress 9,124 S 951 Net Electric Property 194.242 194.907 NUCLEAR TUEL, at Criginal Cost (Notes 1 and 10)
(Sch. V) Nuclear Fuel in Reactor 74,346 52,564 Nuclear Fuel-Spent 51,314 42,557 Nuclear Fuel-Stock 4.395 35,679 131,055 130,300 Less: Accumulated A=orti:ation (Note 1) (Sch. VI) lh Original Cost 91,023 76,443 Permane:: Disposal, Net 24.345 15.i01 15,137 33,956 Nuclear Fuel i: Process 70.240 40.394 Net Nuclear Fuel 35.42, 19.350 Net Electric Property and Nuclear Fuel 279.669 274.257 CURRENT ASSETS Cash (Note 3) 62 139 Accounts Receiva'cle 9,544 6,474 l Materials and Supplies, at Average Cost 3,746 3,503 l Precav=ents 1,042 949 1 1 Total Current Assets 14.394 11.065 2EIF.REF.I) CHARGIS A','D OT'ER ASSETS 3.001 1.733
$297.064 5237.105 j The accocpanying notes are an integral part of these financial state =ects.
O l
l Mains Yankee Atomic Powar Company Form 10-K-1980
- (
Maine Yankee Atemic Power Como_anv. BALANCE ShTIT (Dollars in Thousands) , OTCC:G't.DERS ' INVESTMENT AND LIA3ILITIIS December 31, 1980 1979 CAPITALIZATION (See Separate Statement) Common Stock Investment S 67,052 S 66,857 Redeemable Preferred Stock 11,980 13,070 Long-Term Debt 101.598 105,923 Total Capitalization 180.630 185,850 NOTES PAYABLE TO .'f?A FUEL CCMPANY (Note 5) 33.225 33.450 CURRENT LIA3ILITIES Notes Payable to Banks (Ncte 3) (Sch. IX) 16,000 3,9 25
' Current Sinking Fund Requirements (Note 4) 1,084 1,322 Accounts Payable 2,600 3,412
- [t -}-
s Bank Checks Outstanding 671 - Dividends Paya'cle 2,000 1,919 Accrued Interest and Taxes 2,877 2,739 Other Current Liabilities 53 47 Total Current Liabilities 25.285 13,364 COMMITMDITS AND CONTINGENCIIS (Note 3) DEFIERED CRIDITS Accumulated Deferred Income Taxes (Note 2) 47,004 45,224 Unamortized Investment Tax Credits (Note 2) 8,166 7,346 Unamortized Gains on Reacquired Debt (Note 1) 2.754 1,371 Total Deferred Credits 57.924 53,941 5297.064 3287.105 The accompanying notes are an integral part of these financial state =ents. O
Maine Yankee Atomic Power Ccapany Form 10-K-1980 Maine Yankee Atemic Power Company STATEMENT OF CAPITAI.IZATICN (Dollars in Thousands) December 31. 1980 1979 COMMON STOCK IhTESTMEh~f Common Stock, $100 Par Value, Authorized and Outstanding 500,000 Shares S 50,000 $ 50,000 Other Paid-in Capital 16,805 16,305 Capital Stock Expense ( 25 5 ) (231) Gain on Cancellation of Preferred Stock 316 110 Premiums on Preferred Stock 180 196 Retained Earnings 6 27 _ 67.052 e6.357 REDEEMA272 '727 ERRED STOCK - 7.48% Series,
$100 Par Value, Authorized 170,000 Shares, Cutatanding 119,305 at Dece=ber 31, 1980 and 130,700 at Dece=ber 31, 1979 (rote 19) 11.930 13.070 EONG-TERM DE3T (Note 17)
First and General Mortgage 3 cads Series A - 9.10 % due May 1, 2002 55,050 53,161 Series 3 - 3 1/2% due May 1, 2002 37,034 38,91.' Series C - 7 5/3% due May 1, 2002 10,752 10,342 Less: Current Siaking Fund Requirements (1,084) (1,322) Unamortized Debt Discount, Net of Premium (154) (169) 101,598 105.923 Total Capitali:stice $130.630 5135.350 The accenpanying notes are an integral part of these financial statements. O
Meina Yankee Atomic ?0 war Company Form 10-K-1980 Maine Yankee Atomic Power Company STATEMENT OF CHANGES IN COMMON STOCK INVESTMENT For the Three Years Ended December 31, 1930 (Dollars in Thousands) Amount at Retained Shares Par Value Other. Net Earnin2s Total 3alance December 31, 1977 500,000 $50,000 $16,769 $ S66,769 Add (Deduct) Net Income - - - 7,727 7,727 Cash Dividends Declared on - Common Stock - - - (6,700) (6,700) Preferred Stock - - - (1,025) (1,0 25 ) Capital Stock Expense - - 13 - 13 Balance Dece=ber 31, 1978 500,000 50,000 16,782 2 66,784 Add.(Deduct) Net Income - - - 7,651 7,651 r g 's Cash Dividends (_,) Declared on - Common Stock - - - (6,625) (6,625) Preferred Stock - - - (1,001) (1,001) Rede=ption of Preferred Stock - - 35 - 35 Capital Stock Expense - - 13 - 13 3alance Dece=ber 31, 1979 500,000 50,000 16,S30 27 66,357 Add (Deduct) Net Ince=e - - - 7,508 7,508 Cash Dividends Declared on - Ccomon Stock - - - (6,595) (6,595) Preferred Stock - - - (934) (934) i Redemption of Preferred Stack - - 206 - 206 Capital Stock Expense - - 10' - 10 Salance December 31, 1980 500.000 350.000 $17.046 $ 6 $67.052 The acconpanying notes are an integral part of these financial state ents.
/ %./
.Trina Yank:e Atomic Power Company Form 10-K-1980 Maine Yankee Atemic Power Ceccany STATE 2fE'IT OF SOURCES OF FUNDS FOR ACQUISITION OF NUCLEAR FUEL AND CONSTRUCTION OF ELECTRIC PRCPERTY (Dollars in Thousands)
Year Ended Dece=ber 31. 1980 1979 1978 FUNDS PROVIDED Internal Sources From Operations Net Inccce $ 7,508 S 7,651 S 7,727 Amorticati. :f Nuclear Fuel 24,024 15,319 17,411 Depreciati;_ and A=orti:stion 3,319 S,279 3,173 Deferred Income Tax and Inves::ent Tax Credits, Net 2,600 6,913 7,583 Allowance for Other Fuads Used for l Nuclear Fuel and During Constructica (1,371) (1,623) (1.391) l 41,080 36,54e 39,503 Less: Sinking Fund Require =ents: Long-Ters Debt 5,078 4,350 5,555 Preferred 5 cck 1,090 626 - Dividends on Preferred Stock 934 1,001 1,025 Dividends on Conmon Stock 6,595 6,625 6,700 Other, Net (567) 505 46 27,950 22.937 26,177 (Increase) Decrease in Working Capital, lf Exclusive of Nctes Payable to 3acks and Sinking Fund Require =ents Casa and Receivables (2,993) 425 (616) Other Curren: Assets (336) (466) (66) Other Current Liabilities 34 (533) (7,776) (3,245) (574) (3.45d) Net Available from Internal Sources 24.705 22,363 17,719 External Sources Increase (Decrease) in Notes Payable: MYA Fuel Ccmpany (225) 15,300 3,750 Eanks 12.075 3.925 - Net Available from External Sources 11,350 19.725 3.750
$36,555 312,083 526.id9 FUNDS USED FCR ACQUISITICN CF NUCLEAR FUEL AND CCNSTRUCTION 0F ELECTRIC PROPERTY Acquisition of Nuclear Fuel S30,101 $35,2G4 325,732 Allowance for Other Funds Used for Nuclear Fuel (1,113) (1,547) (1,341)
Construction of Electri: Property 7,325 3,167 2,123 A11ovance for 0:her Funds Used 2uring Constructica (253) (76) f50) l 3q-0.323 e,3.aq.O e as 3 . f 3 .3 -0.*0Z The accccpanying notes are an integral part of these financial statements.
t Maine Yankee Atc=10 ?cwer Cc=pany Fons 10-K-lc80 t d Maine Yankee Atemic ?cwer Cc=cany NOTES TO FINANCIAL STATD.ENTS
- 1.
SUMMARY
OF SIGNIFICANT ACCCUNTING FOLICIES The Ceccany: The Ccepany cwns and operates a pressurined-water nuclear-pcwered electric generating plant with a current net capacity of appecximately 330
=egawatts. The plant ce==enced cc=cercial cperatien en January -1, 1973 . The follcwing New England electric utilities cwn all of the Ccapany's cc==cn stock:
Ownership Secnsor/?articicant Interest Central Maine ?cwer Cecpany 38% New England ?awer Company 20 The "onnecticut Light and ?cwer Cc=pany 3 3 anger Hydec-Electric Ccmpany 7 A Maine Public Service Company 5
'( Public Service Ccepany of New Hampshire 5 Ca= bridge Electric Light Cc=pany a Montaup Electric Cc=pany 4 The Eartford Electric Light Cc=pany 4 Western Massachusetts Electric Cc= pan / 3 Central Vermont Public Service Corporal'.cn 2 1005 l For a period of thirty years, cc==encing en January 1, j 1973, in acccedance with the ?cwer centracts and, subject to certain 11=itations, each parcicipant shall receive its entitlement percentage of plant cutput and is obligated to pay its entitlement percentage of the Ccepany's total costs, including a return on invested capital regardless of I
I the level c: Operation c' -"a .-lar t . Reculation: The Cc=pany is subject to the regulatory authority of the Federal Energy Regula: cry Cetmission { (FE3C), the Nuclear Regula: cry Cc= mission (N3C) and the i Public Utilities Cc:missien of the State of Maine (PUC) as Oc acccunting, operations and other catters. i Eecreciaticn: Cepreciation is provided using a ec=posite
.,f s recaining life =ethed designed te fully depreciate electric i, glan: over the period endies May 1, 2002. "nder the ix l
l
~ - - . - , - , , - . , , , . - --e.. ._r, ., .p+y-g- y---w,_ ,y ,--,-.-,y,. _ _ - - - - _ , , y_ . - , . , -- --,--,,,.y,5-,,,_-.
Maine Yankee Ate:ic Power Cc:pany For: 10-K-l?80 Maine Yankee Atemic ?cwer Cc cany NOTES TO FINANCIAL STA~DfE ES 1
- 1. St.MMARY CF SIGNIFICANT ACCCUNTING PCLICIES (centinued)
Cecreciation: (centinued) cc=pesite =ethod, at the time depreciable ;reperty is retired, the original cost, plus cost of removal, less salvage, of such property is charged to accu =ulated depreciation. Cece:missioning: me NFC currently reccgnizes three decc issioning =etheds - cc:plete dis =antling and removal, in-place encapsulation er " ente =b=ent" and :othballing - or - a ec:binatien of these metheds. ((USAEC Regulatory Guide 1.36, Termination of Ccerating Licenses for Nuclear Fe200cc (1973).) Althougn the Cc pany presently does not provide , for nuclear plant decc issioning costs, it is censidering i=ediat e dis =antling as the cost desirable and probably the only acceptable =ethed of decc=issioning its nuclear reac tor. Based on a study performed by Stone and 'debster Engineering Ccrporatica and Nuclear Energy Services, Incorporated, the esti=ated cost of dec,::=issioning utilising this =ethodology is 357,600,000 in 1980 dollars. Accordingly , the Cc=pany preposes to bill cut througn May 1, 2002, under the ter:s and conditiens of its ?cwer Centract and pending FISC approval, an a=ount equal to the current estimate of the ecst of decc=issioning. Se Cc=pany fully reccgnizes the relative uncertainty Of the future cost of decc=issicning, the changing technology of decc=issioning or new requirements of the law and, therefore, reccgnizes the need to constantly scniter and adjust, if necessary, the a: cunt of collecticn. De ferred Tharges: 2e Cc: par.y has adepted the ;olicy of ceferring and accrti:ing over a five year pericd the ecsts of unusual and irregularly recurring studies and inspecticns. Bis is in response to recent events and ceders requiring the Cc:pany to undertake significant analyses of specified operating design precedures and equi;:ent. Acercicacion of u elaa r ruel:
. 2e ces; cf :.uclear fuel in the reactor, plus the esticated ecs: of dispecal Of that nuclear fuel, is accrtized 50 Fuel Icpense based en the
l Maine Yankee Atcmic ?cwer Company Form 10-K-1980 l kw Maine Yankee Atc=ic sewer Cc=cany NOTES TO FINANCIAL STATEMENTS
- 1. SmMARY OF SIGNIFICANT ACCOUNTING FOLICIES (continued)
Ascetizatien of Nuclear Fuel: (centinued) ratio of energy produced during the period to the esti=ated total core capability with a correspending credit to accu =ulated Acortization. During 1978 and 1979 the Company provided for permanent storage of nuclear fuel in reactor using an estimated cost of per=anent storage which was based en a study by the N3C. Specifically the disposal estimate provided was at a rate of $100/'<11cgram of uranium (KGU) criginally contained in the asse:blies in 1977 dollars escalated at 8% per year to the time of discharge free the reacter. Seginning in March 1980 the Cc= pony 's cest estimate for per=anent disposal of Nuclear Fuel in Peactor was increased .\ j to 3130/KGU originally contained in the asse=blies, V expressed in 1978 dollars, escalated at 3% per year tc the ti=e of per=anent disposal (currently esti=ated to be 1988). This esti= ate of the cost of per=anent disposal (3130/KGU) is based on a report issued by the Department of Energy . Sia repcet estimated the ccat of per:anent stcrage to be 3117/KGU sriginally centained in the { asse=blies (in 1978 dollars). Bis esticate did not include the cost of transportation to the disposal center, which has been esti=ated by the Cocpany to be 313/KGU. Se disposal cost for Nuclear Fuel in Reacter is being recovered fres participants, based on generation, over the period that the fuel is censumed. Brough 1988 the Cc=pany is also adjusting the dispcsal reserve collected for Spent Fuel to reflect the current dispesal cost esti= ate. This adjust:ent which a= cunts to approximately 330,000,060 is being recovered based en estimated electric kilewatt hour generation fec: March 1980 thecugh 1988. Se estimate of ecst of disposal of nuclear fuel is subject to a number of uncertainties including the timing of available stcrase capacity, the extent of future inflation, regulatcr/ requirements and the ecs of future services, fN all of wnich ay require periedic revisiens in future .xx. ,
) nuclear fuel accrtizatien rates. However, the Ccecany believes that its esticate is reasonable.
Maine Yankee Atcric Power Ceepany
.cr= 10-K-1980 l Maine Yankee Atc=ic ?cwer Cc=can!
NOTIS IO FINANCIAL STAT 24EN~S
- 1. SCMMARY OF SIGNIFICANT ACCOUNTING PCLICIIS (centinued)
Allewance for Funds Used Curine Ccnstruction (AFC) and Allowance fer runds Usec for Nuclear 7uel (AFN): ~he Cc=pany records the net cost of borrowed funds and a reasonable return on other funds used to finance construction and nuclear fuel acquisitien ;regra=s. ?.e a= cunt of the allowance recorded is cetermined by
=ultiplying the average scnthly dellar balance of Ccnstruction '4cek in Progress (C*i!? ) and Nuclear Tuel in Process (NFI?) by rates related Oc the ces; cf the capital used to finance the respective additions. ?.e felicwing table centains the weighted average rates used for the ;s:
recent three annual periods :
~
AFC A.=N cn C'4I? cn NFI? . 1980 7.26% 3 905 3-r v ,y
- t. 4, 0 ., c .c 4
1978 7.50 7.00 Una=crticed Oain cr- Loss en ?eaccuired Cebt: Gains and lesses en bcnds reacquired to satisfy sinking fund requirements of Firs; Mortgage Scnds have ben deferred and are being amorticed Oc ince=e over the : eraining criginal terms of the applicacle series as prescribed by :he "niform Syste of Acccunts of the FI3C.
- 2. m.lCe.y?..
. =s AL* ;L3..;e.e;
?.e ec=penents of
.re deral and state ince:e taxes reflected in :he state:ents of incese are as fc110ws:
G I l
Maine Yankee Ate ic ?cwer Cc pany l s For: 10-K-1980 s Wf
}
1 l Maine Yankee Atcmic ?cuer Cc=canv i NOTES TO FINANCIAL STATD!ENN
- 2. INCCME TAX EX?ENSE (continued)
Year Ended Dece:ber 31. 1980 1979 1973 (DcIlars in Thousands) Federal Current $ 3,2u2 3 602 3 625 Deferred (2,545) 5,264 4,835 hvest=ent Tax Credits, Net 5.368 812 1.986 c . ., 0 5 -5 0.07m 7 . ~,, =, c-State Carren: 1,361 . 733 ac. : Deferred 3) Sh2 752 1.140 1.166 1.237 V
} Tetal Federal and State ince e taxes 3 7.?C5 $7.864 38.703 The Cc pany provides deferred taxes for the tax effects of timing differences, ;rimarily accelerated depreciation and certain expenditures related Oc nuclear fuel, between t
pre-tax acccunting incese and taxable ince e. ? rice te l 1975 the cc pany did not provide fully for the tax effects cf ti=ing differences and began in 1976 te provide additional deferred taxes te recognize the tax effects cf these prier . iring differences through 1980. Svestment tax credias are deferred anc a:cetized ever the life cf the assets giving rise te such credits. At Cece:cer 31, 1979 the Cc pany had available a carryever of unused inves :en tax credits of appecxicately 35,300,0C0 te be applied Oc reduce Federal ince e taxes.
'"h e Cc=pany had provided fer, and deducted fer tax pur;cses, certain ecsts asscciated with nuclear fuel reprocessing and permanent s :cra.ge . 3 the recent exacinatica of the Cc pany's Federal ince:e tax returns fer years 1973 th.~: ugh 1977, the Eternal ?evenue Service examining agen disall:wed the curren deducticn of these p
ces s. The 2:ernal Sevenue Services pcsitien was l( sustained at the Appelate level which resulted in :he l Cc pany fully utilicing the 35,300,0C0 cf 1.tves::en: :ax credi available as of Dece:cer 31, !?T9 and paying
Maine Yankee Atc=ic ?cwer Cc=;any
?cem 10-K-1980 l
I f I Maine Yankee Ate =ic ?cwer Cc=can7 t NOTES TO FINANCIAL STATS ENTS
- 2. INCCME TAX E'(?ENSE (continued) additional Federal and State inccce tax assessments cu=ulative througn 1979 cf 32,723,530 exclusive of interest. 2ese assess =ents had no effec en total ince=e tax expense because the Cc=pany had provided inccme taxes for the effects of all timing differences.
Se fc11cwing table recccciles the statuccry inec=e tax rate to the rate determined by dividing the total Federal incc=e tax expense by ince=e before that ex;ense. Collare in ?.cusands
^
.' c. S 0 .' c. ~t c, .' c. ~. 3 A3 Cunt $ $5Cun0 5 550unt 5 Statu cry Federal inec=e .
tax rate 36,290 46.0 36,591 06.0 37,293 28.0 (Increase) 3 eductions in ' taxes resulting fec=: Deferred taxes not provided on certain
. *. . .* .. e w' .' .". a. .- a. .~. a
. 2.' 8 :
...' 31.' 9.0, "
-20 7. . 3 A=crticatien cf in-vest =ent tax credits (390) (6.5) a (678) (t.7) (573) (3 3) v w. . e .- 347 c., t. e, a o_.a U. 2 3. . '
Calculated rate 36.16: 45.15 36.678 36.55 37.3:6 u0.15
;e s . r . ;3 . Av. it.u. .. . n dv .
v .2, As d ~ e., t.. Se Oce;any had tank lines of credit tctaling 329,0C0,000 as Of Cece=cer 31, 1980, Of which 328,000,0C0 requires an annual fee cf 1/2 Oc 5/3 of 15 cf the line. 2ere are no ccmpensating talance requirements f:r :hese lines. De re=aining 31,CCC,000 dellar line requires a ec=;ensating talance of 10% of the line er 20% cf relating terrowings, ; whichever is grea:er. 1 j 1 2e Cc=;any had lines of credi; a Dece ter 31, 1979 Octaling 310,000,000.
- a t:h respect Oc 313,000,0C0 of the line, there was a required annual fee Of 5/3 cf 1%. There l are no ec=;ensa:ing talance requi.emen:s f:r these lines.
l l Maine Yankee Atc=le Power Ccepany 1 Form 10-K-1980 s1 Maine Yankee Atc=10 ?cwer Cemeany 1 i l NOTES TO FINANCIAL STATEMENTS 3 NOTIS PAYA3LI TO SANKS (continued) The ccmpensating balance require =ent for the re=aining
$1,000,000 dellar line was 10% of the line or 20% of cutstanding borrowings, whichever was greater.
- 4. FIRST MORTG AGE 3CNDS The annual sinking fund requirements of the First Mortgage Scnds currently outstanding a= cunt to S3,775,000 for each of the years 1981 througn 1985. Bonds repurchased a cunted to 33,739,000 at Dece=ber 31, 1930 and $3,436,000 at December 31, 1979 Under the ter:s of the Indenture securing the First Mertgage Eends, substantially all electric plant of the Cc=pany is subject to a first =cr: gage lien.
. '-O) \
5 MYA FUIL COMPANY Cn August 26, 1976, the Company entered into a Loan Agree =ent covering the issuance of up to S35,000,000 principal accunt Of promissory notes to MYA Fuel Cc=pany, a subsidiary of 3SC Ecidings, Inc. 3SC is owned by a l partr.ership cespesed of partners of Goldman, Sachs & Co. Certain infor:ation related to this lean arrange =ent is as { folleus for the years ended December 31: 1 1980 1979 (Dollars in Thousands) Precissory notes cutstanding $33,225 533,250 Average daily cutstanding borrewings $32,901 329,252 i Highest level Of borrowings $33,500 334,250 Annual interest rate at end l of perieds 20.58% 14.13% Iffective average annual interest rate 15 42% 13 33f. O .i 1%
--- ~ . , , . . . - - - - - . . , - ~ . . , , _ . , . , _ , , . - - , . - , - - . - - . . - - - . - , . . . . - - - . . - . . - . ,
-. - n _ ._
Maine Tankee Atc=ic Pcwer Cc=;any Form 10-K-1980 I 1 l t Maine Yankee Atecic ?cwer Cescany I l NOTIS TO ?!NANCIAL STATEMENTS 5 MYA FUIL CCMPANY (continued) me Loan Agree =ent provides that, in the absence of an Event of Default (as defined) er cccurrence of a Ter=inating Ivent (as defined) the ar ange=ent will extend to May 1, 2002, unless terminated by either party upon proper notice. D.e Cc=;2ny =ust provide 90 days written notice whils MYA Fuel Company :ust give at least three years written notice. In order for the arrange =ent to exteno beycad August 26, 1981, the PUC cust extend its present approval of the arrange =ent.
- 6. p .e0.
. _ _e7. a...:,
_ . e .e.9.. eve..
, 3_e3--c aCy 2e Cec;any ay redees, in whcie er in part, any of the 7.4e". Series Preferred Stock upcn not less than thirty cc
=cre than fifty days' notice at 3107.11 per share en ce before Oece cer 31, 1982, and at accunts decreasing to -
$100.00 thereafter; in each case plus accrued dividends.
Se Ccepany ust redeem and cancel 5,000 shares annually, at par, and at the election of the Cc ;any an additional E,000 shares may be redeeced and cancelled, at par, en each rede=ption date. D.e optional previsien is not cu=ulative. Preferred Stock repurchased and not cancelled a:cunted to 12,195 shares at Cececcer 31, 1980, 7,300 shares at Cece=ber 31, 1979 and 7,040 shares at Cece:ber 31, 1972. 7 ?INSION PLANS Se Cc:;any has two ncncentributcry pensien plans which cc rer substantially all full-time e=ployees. Se Oc=pany 's policy is to fund pensien ecsts accrued en an annual basis, including a cunts suffi-ient Oc acerti:e unfunded price service ecsts over 30 years.2e plans expenses appecx1=ated
$133.000 for 1980, 3132,000 for 1979 and 5130,000 fer 1973.
1 1 1 0
! Maine Yankee Atomic Power Cc=pany
-~s Form 10-K-1980 t i V
Maine Yankee Atemic ?cwer Cc=cany NOTES TO FINANCIAL STATDfENTS
- 7. PENSION PLANS (continued)
Januarr 1 1980 1979 l Actuarial present value of accu =ulated plan benefits: Vested 3173,C00 312u,000 Ncavested 166,000 118.000 333b000 32u2.000 Net assets available for benefits 3913,000 $656.000 The assumed weighte?. average rate of return used in N 'j determining the acrearial present value of accuculated plan benefita was 6.251
, 8. CC.W.ITMENTS AND COSTINGINC ZS Nuclear Fuel: The Cc=pany anticipates nuclear fuel expenditures of 33C,079,000 for 1981 (exclusive of AFN) and 5113,352,000 for the perice 1982 through 1985 (exclusive cf AFN).
The Co:pany has centracted fe." the puretase of all of its uranium concentrate require:enes thrcush 1986. The Cc=;any ( has conversion centracts thrcush 1983 and is presently l negotiatins for conversion ser< ices which are expected c meet recuire:en s .;r, ugh 1995. Uraniu: enrich =en: 3e."v ces are covered thrcugn 2002 under a centract with the
,epart=ent of Energy.
Nuclear fuel fabrica icn service require:ents a~a- - n yanas .
- -- ~ u. -e -
.-n l .. -9e-a c
s presently beins negotiated unich is an- a centrae: is expectee ;q 3,, i serv'ces througn 1968. The Cc=;an7 is excanding its c -s te spen; fuel stcrase facility :c provide' capacity :c
'en fuel througn 1983 wnile maintainin e a full cere d}schar,s cre l 0apability.
In additien, in Septe ber 1979 the ', sempany ;ed with .h e N?C a pre;csed change in its 0Pe"2 tin e license rela:ing :c increasing i:3 ex13:ing 37,n [}
\_/
uea stcrase capaci:y by ,crevidins :cre cc pac: fuel 1
_ . . _ ~ _ _ _ _ _ _- Maine Tankee Atc=ic Pcwer Cc=pany For= 10-K-1980 l Maine Yankee Atcric ?cuer Cc=cany l NOTES TO FINANCIAL STATEMENTS
- 3. COMMI-'4ENTS AND CONT!NCENCIES (continued) stcrage. An intervence has requested a hearing and the Cc=pany cannot predict the secpe of that proceeding, its duration or its cutccce. If the proposed change is not approved, the Ccepany will have to develop alternative plans which wculd involve fur:her approval by the NEC.
Constru. tion: De Cc=pany anticipates construction expenvAtures to a cunt to S15,400,000 for 1981 including 51',,207,000 tcwards the installatica cf a steam turbine driven feedpu=p and 33,200,000 fcr ec=puter equip =ent. Price-Andereen: ne Price-Andersen Act ~ quires each reae ce licensee to carry 3160 21111cn of 1:ary ;2blic liability insurance, supple =ented bv a candatory industry-wide pecgram of program, self insurar.cs . Unde:* the in the event of a nuclear ine' dent at any cperating reactor in the United States, eacn licensee ceuld be assessed up to 55 =illion with a limit of two assessments ;er reacter owned per calendar year in the event of =cre than ene incident. Sree Mile Island : De events during the spring of 1979 at One 2.ree Mile Island Nuclear Unit No. 2 in Pennsy',vania ("ti!") causcd widespread concern abcut nuclear generating plants and precpted the safety af a riscrcus reexs=ination of safety-related equipment and cperating precedures in al; nuclear facilities by their cwners and the NPC. The ccc=issien for:ed by President Carter to investigate the caus*s of the EC incident issued its report in l??9, recc: ending a nu ber of changes in NEC crganization and ;racticas, licensing of nuclear plants, plant operating practices, cperator training and Other safety-related atters and in 1980, a NFC-ce==1ss10ned repcrt centaining similar reccc.rendat'.. .:s was released. As a result, the NEC has pec=ulgated 1..:=ercus require =ents, including both near-ter= =cdificatienc a a.d lenger-ter design changes. Se Ccepany has made t.' e =cdifications
- equired to date by the NFC, but cannot predict what furt.':er =cdificatiens will be requirad, their c;st, er their effect en the Operation of the Maine Yankee plant.
i Maine Yankee Atc=le ?cwer Ccepany Fer= 10-K-1980
- I U
Maine Yankee Ateeic ?cwer C::cany NOTES TO FINANCIAL STATDiENTS 9 UNAUDITED QUA37IRLY FINANCIAL DATA Unaudited quarterly financial data pertaining te the results of operations are shown below. Ic80 Cuarter Ended March 31 June 30 Sectember 30 Dececher 31 ( Dollars in Thousands, Except Fer Share A= cunts) Electric Cre:: ting Revenues $18,911 - 324,065 319,673 321,591 -- Operating Ince=e 4,297 4,713 4,536 4,273 Ne t Incc=e 1,921 1,337 1,836 1,914 Earntngs ?er Share ,
'of Ccc=cn Stcck 3 35 3 22 3 21 3 37
\
'c7c Cuarter Ended March il June ?O Sectecce.- 30 Ceeee er ?1 l (OcIlars ip Thoucands, Except ?er Share A=cuntsi e
Electric Cperating
)
Revenues 316,592 315,324 317,626 319,265 Operating :necce 4,334 3,234 4,145 3,205 Net Ince=e 1,933 1,930 1,376 1,912 EarnLags ?er 3 hare of Cc==ca Stock 3 35 3 35 3 26 3 32 I h l i
Maina Yackse Atoaic Powar Company Form 10-K-1980 Maine Yankee Atomic Power Comcany NOTES TO FINANCIAI. STATEMENTS
- 10. SUPPI.EMENTARY INFORMATION TO DISCI.CSE THE EFFECTS OF CHANGING PRICES (UNAUDITED) :
l The following supplementa ry information is supplied in accordance with the requirements of the Statement of Financial Accounting Stan-dards No. 33 for the purpose of providing certain information about the effect of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure. Constant dollar-amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index for All Urban Consumers (CPI-U). Current cost amounts reflect the changes in specific prices of plant from the date the plant was acquired to the present, and differ from cocstant dollar amounts to the extent that specific prices have increased more or less rapidly than the general rate of inflation. The current cost of nuclear generating plant is estimated based on an engineering study of the current cost (per kilowatt) of replacing the present generating plant. This study was updated in 1980 resulting in an increased cost (per kilowatt) from SS71 to $1,276. This adjustment was reflected in January 1, 1980 beginning current cost. values. Nuclear fuel used in generation has been restated from historical cost using current aarket prices of uranium, conversion, enrich-ment and fabrication. Nuclear fuel expense -was developed by divid-ing the estimated current cost of the in-reactor fuel by the expected generation of the core times the actual generation produced during the year 1980. Depreciation expense for the current cost of productive capacity was developec by applying the depreciation rate to the current cost value adjusted by the ratio of average historical cost to year-end hi:torical cost. Since only historical costs are deductible for inco=e tax purposes, the incomu ax expense in the historical cost financial statements is act adjusted. Under the rate-=aking practices prescribed by the regulator / com-missions to which the Company is subject, ocly the depreciat:.cn of historical cost of utility property is included in the cost of ser-vice used to establish the Company's rates. Therefore, the cost of O
Mainn Yankan Atomic Power Company Form 10-K-1980 l l Maine Yankee Atomic Power Cocoany NOTES TO FINANCIAL STATE.ENTS ' i l l l
- 10. SUPPI.EMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES
! (UNAUDITED) (continued) l plant and nuclear fuel stated in terms of constant dollars or cur-rent cost that exceeds the historical cost of plant is not presently recoverable in rates , and is reflected as a reduction to net recov-erable costs. '4hile the rate-making process gives no recognition to the current cost of replacing property, plant and equipment, based on past practices the Company believes it vill be allowed to earn on and recover the increased cost of its net investment when replace-ment of facilities actually occurs. To properly reflect the economics of rate regulation in the State-ment of Income from Operations Adj us ted for Changing Prices, the ,, reduction of utility plant and nuclear fuel to net recoverable cost should be offset by the gain from the decline in purchasing power of net amounts owed as shown below. During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is
.]V primarily attributable to the substantial amount of debt which has been used to finance property, plant, equipment and nuclear fuel.
Since the depreciation on utility plant and amorti:stion of nuclear fuel s limited to amounts based on historical costs, the Company does not have t'e opportunity to realire a holding gain on debt and -- is limited to recovery only of the embedded cost of debt capital. I l t t ks)
Maine Yankee Atomic Power Company l Form 10-K-1980 Maine Tankee Atomic Power Comoany NOTES TO FINANCIAL STATEMENTS
- 10. SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFICTS OF CHANGING PRICES (UNAUDITED) (continued)
Statement of Income and Operations Adj usted for Changing Prices for the Year Ended December 31, 1980 (Dollars in Thousands) Constant Current Dollar Dollar Conventional Average Average Historical 1980 1980 Cost Dollars Dollars Operating Revenues $84,245 S84,245 3 34,245 Operation & Maintenance 22,762 22,762 22,762 Fuel Expense 24,024 23,351 33,117 Depreciation & Amorti:stion 3,319 15,951 41,419 Taxes 11,106 11,106 11,106 Interest Charges 11,752 11,752 11,752 Other, Net (1.226) (1,226) (1.226) Income (Loss) fros Operations (excluding reduction to net recoverable amount) $ 7.508 S(4.451) $(34.685) Increase in specific prices (current cost) of plant and Nuclear Fuel held dur-t ing the year * $ 34,845 ! Reduction to net recov- ! erable a=ount 3(20,757) (24,229) l Effect of increase in general price level (51.139) Net 9.477 Gain froc decline in pur-chasing power of net amounts owed S 24.791 324.791 3 4.034 334.268 1
Maina Yankee Atomic Power Cocmany Form 10-K-1980 l Maine Yankee Atomic Power Cecmany lV NOTES TO FINANCIAL STATE.E TS l 1 I I 10. SUPPLE.97ARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES l (UNAUDITED) (contiaued) . t
*At December 31, 1980 current cost of Plant and Nuclear Fuel, net of accu =ulated depreciation and amorti: stim was $1,031,135 while his-torical costs or net cost recoverable through rates was $279,669.
Five Year Comparison of Selected Supplementary Financial Data Adjust-l ed for Effects of Changing Pricas (Dollars in Thousands, Average 1980 Dollars) Years Isded eersber 31. 1980 1979 1974 1977 6776 Operating Revenues $ 34,145 Si3,;So $34,335 $39,23 $85,2 0 Eistoric.al Cost Isforsation Adjusted for General - Isflation has free operations
, escluding reductton v) to set recoverable ame.a t Las from operatic =s
$(a,451) 5 (670) per common saare (af ter preferred dividend require.sent) 3(10.77) $ (3.61)
Carrest Cost Information b sa free operations escluding reduction to set recoversale saoust $(24,625) $(26,755) bas- free operations per common share (after preferred dividend requ.irement) $(71.24) $ (55.79) Excess of increase .: useral price level over increase is specific pri:es af ter reduction to :et re-coversale asocat $9,477 $ (2,106) General Information Net assets at year end at recoverable amoust $64,042 3 71,77 Gais from decline is j purcassisc power of l set amouses swed $24,791 5 23,002 l Casa dividends per ceanoa saare $13.19 $15.04 516.72 513.23 319.;0 Average Consumer Price :sdez :46.3 217.4 195.a 131.5 170.5 I
- (-)
_ , _ - _ _ _ . . . . _ . , . . . -. .._..,,.,..m,._. . . _ . _ . . . _ . . . _ . _ . . _ . - . . , - . _ . - , . ~ _ _ _ _ . _ _ , . . . . . . _ _ . _ . _ . .
Schsdule V Maine Yankee Atomic Power Comoany ELECTRIC PROPERTT AND NUCLEAR FUEL For The Year Ended December 31, 1980 (Dollars in Thousands) Balance at Balance Beginning Additions Retirements Transfers and at End of Period _st Cost or Sales Other-Charges of Period - Electric Procerty Organization S 7 $
$ 7 Miscellaneous Intangible Plant 601 - - - 601 Land and land rights 522 - - -
522 Structures and improvements 57,527 356 9 - 57,874 Peactor plant 101,463 1,714 103,132 equipment - - Turbogenerator units 56,997 3,3.12 505 - 60,304 Accessory electric equipment 14,498 2 - - 14,500 Miscellaneous power plant equip. 5,123 380 273 - 5,230 v Substation equip. 3,239 1,388 - - 4,627 Miscellaneous electric property 74 - - - 74 Unfinished construction 3.951 173 - - 9,124 Total Electric Property $249.012 $ 7,325 $ 79_2 $
$256.045 Nuclear Fuel
- Nuclear fuel in reactor 3 52,564 $
S- $ 21,782 $ 74,346 Nuclear fuel in ' process 40,394 30,084 - (238) 70,240 Nuclear fuel - spent 42,557 - - - 9,25 7 51,814 Nuclear fuel - stock 35.679 17 - (30.301) 4,395
$171.194 $30.101 S- $
$201.295 O
V
l l Maine Yankee Atomic Power Company Form 10-K-l')80 s
- s_ Schedule V (cont.inued) l I
l Maine Yankee Atomic Power Comoa g ELECTRIC PROPERTY AND NUCLEAR FUEL For The Year Ended De_ ember 31, 1978 (Dollars in I?ousands) . Balance at Balance Beginning Additions Retirements Transfers and at End of Period _at Cost or Sales Other Charges of Period Electric Procerty Organination $ 7 $ - S 7 Land and land rights 522 - - - 522 Structures and improve =ents 55,861 166 2 - 56,025 Reactor' plant equipment 101,084 126 21 - 101,189
.OTurbogenerator units 56,658 947 - -
57,605 Accessory electric equipment 14,477 21 - - 14,498 Miscellaneous power plant equip. 4,607 130 12 - 4,725 l Substation equip. 3,239 - - - 3,239 Miscellaneous electric property 74 - - - 74 Cafinished ~ construction 2.537 738 - - 3.275 i Total Electric Property $239.066 $ 2.123 $ 35 S
$241.159 l Nuclear Fuel l
Nuclear fuel in t reactor S 39,312 $ - 3- $ 12,752 3 52,564 l Nuclear fuel in process 33,140 25,665 - (22,900) 35,905 Nuclear fuel - spent 33,202 - - 9,355 42,557 Nuclear fuel - s stock 4.064 67 - 793 4.92'4 N-- $110.213 525.732 S- S
$135.950
Maina Yankaa Atomic Powar Comptcy Form 10-K-1980 Schedule V Maine Yackee Atcmic Power Cocpany O TTC~RIC PROPERTT AND NUCI.ZAR Fi.iEI. For The Year Ended December 31, 1979 (Dollars in Thousands) Balance at 3alance 3eginning Additicas 7a*d-- ents Transfers and at End of Period at Cos: or Sales Other Charges of Peried Electric Prorerty 1 Orgaciratica 3 7 S S- S S 7 i Miscellaceous Intangible Plant - 601 - - 601 Land and land rights 522 - - - 522 Strue:ures and imp rovenents :o,0,3 1,0 0:. , a i ,5 2,< 3eactor alan: equip =ent 101,139 230 1 - 101,468 Turbogenerstar - units 37,605 - 608 - 56,997 Accessory elec:ric equip =en: 14,493 14,496 f Miscellaneous power plant equip. 4,725 405 2 - 5,123 Substatice equip. 3,239 - - - 3,239
- y. ,,
..:sce::aceous electric property 7' - - -
74 Cafinished cocstructica 3.275 5.676 - - 3.951 Total Electric Property 3241.139 3 3.467 5614 S
$249.012 Nuclear Fuel Nuclear fuel in reac:cr 3 52,564 $ -
3- S - 3 52,564 Nuclear fuel in process 35,905 35,167 - (30,673) 40,394 Nuclear fuel - spes: 12,557 - - - a2,557 Nuclear fuel - stoc.s ..c. 4 ei - ,0 . o- r 3 30.cer --
>1.9 .a,ta .e,-- - .9;; J -
3 - 3 '. 71. '* o, s O
Bainc Yenkaa Atemic Powar Comptny Form 10-K-1980 Schedule VI O V Maine Yankee Atemic Power Company ACCUMUI.ATED PROVISION FOR DEPRECIATION AND AMORTIEATION OF ELECTRIC PLANT AND NUCII.AR FUEL For The Years Ended December 31, (Dollars in Thousands) Additions Balance at Charged Salance Beginning to Costs Other at End 1980 of Period and Expenses Retirements Changes of Period Electric Property $54,105 S 8,319 $791 $171 $ 61,803 , Nuclear Fuel $91.344 S24.024 $- S- $115,363 1979 Electric Property S46.443 $ 3.279 5614 S (8) $54,105 s/ Nuclear Fuel $76,525 $15.319 S- $ -
$91.344 1978 Electric Property S38.313 S 8,173 $35 S (3) $46.443 Nuclear Fuel S59,114 $17,411 S- $ -
S76,525 See Ncte 1 of " Notes to Financial Statements" for the Ccmpany's depreciation and amorti:ation policies. m
!! :. i- . I Y.sot
<J:, SA;{l o 3FJn
,? n ,,, o o*
w!t.
!'L. . 1f r
y a l ee Fd i D a t Y u l s t.t e h 0 9 01 8 9 O-ees I". nt geg 5 I mh arn l'I 1 ugrei - l i et r oevnu - CWAI D _ r a e
. Y -
t g mne 2 9 8 1 I 9 Ai h E 11 en dt 9, , ngag 6 1 mat n 4 $ $ lu etr s. r i a ovuk CAOI y r n t a a n e p n u og Y mne i o 5 0 0 C Aih 5 0 0 s g )s D dt 1 3 9, r n dn n n i 3 e i n u a. g 0 9 u w a mn a t n 2 o X o s u uiai 4 $ $ P I r l xL r o oaikar c eol h Cf DI l O l ' i l l n u d m in i o l er A h e Cd t cT sr e us % % S e S a nt gee 1 e t mh art 5 2 k r ll ugre L i - n o l i et i 2 5 a h o oev n 2 1 Y S (D CWAI t s. e n n e i t m
- s. a e t 1 1 0 5 t I
ef 0 2 a nc or 0, 9, t mn a 6 3
- S uad e l l l nY 1 oaf $ $ a C1 1 i c
n a f n oms rg ) ) ) i F A y en 1 1 1 rTt ( ( ( no u t mgt o s s a uerr k k k s l t or n in i u e. oah o a k t CCS1 3 l i t I i i o t 0 9 8 o 8 / I t 9 9 -) 1 1 . 3
, , , e 1 1 1 t 3 3 3 o d d d lf er d e nb E m e
er d e nb E m e er d ei nt E m e S e e O rc rc rc ae ae ae ) eD eD eD 1 ( Y Y Y
Ownership, Construction and Operation of New () 10(x) Hampshire Nuclear Units Copies of forms of Form 10-0, 2nd Qtr. 1979, documents related to Exhibit A the Company's proposed purchase of an additional 1.80142% interest in the Seabrook Nuclear Units, consisting of PSNH's offer to sell ownership
- shares dated March 8, 1979, the Company's letter response thereto dated March 19, 1979, and the Sixth, Seventh, Eighth and Ninth Amendment to the Agreement for Joint Ownership, Construction and Operation of New
! Hampshire Nuclear Units, dated April 18, 1979, April 18, 1979, April 25, 1979, and June 8, 1979,
, respectively.
O l l I l V
SCHEDUIE B iO U MAINE EI.ECTRIC POWER COMPANY, INC. Index to Financial Statements and Schedules Financial Statements: Report of Independent Public Accountants. Statement of Inceme for the three years ended December 31, 1980. Balance Sheet at December 31, 1980 and 1979. Statement of Changes in Common Stock Investment for the three years ended December 31, 1980. Statement of Changes in Financial Position for the three years ended December 31, 1980. Notes to Financial Statements 1 Schedules: ( V Electric Property for the three years ended December 31, 1980. VI Accumulated Provision for Depreciation of Electric Property for the three years ended December 31, 1980. 4 All other schedules are omitted as the required information is inapplic-able or the information is presented in the financial statements or ! related notes. I l l { l
i l l c0 V REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of l Maine Electric Power Company, Inc. We have examined the balance sheet of Maine Electric Power Company, Inc. (a Maine corpo ration) as of December 31, 1980 and 1979, and the related statements of income, changes in common stock investment and changes in financial position for the three years ended December 31, 1980, and the supporting schedules as listed on the accompanying index. 1 Cur examinations were made in accordance with generally accepted audit-ing standards and, accordingly, included such tests of the accounting lp records and such other auditing procedures as we considered necessary G in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of Maine Electric Power Company, Inc. , as of December 31, 1980 and 1979, and the results of its operations and the changes in its financial position for the three years ended Decem-ber 31, 1980, and the supporting schedulos present fairly the informa-tion required to be set forth therein, all in conformity with generally accepted accounting principles applied on a consistent basis.
/ - .
ARThTR ANDERSEN & CO. 3cston, Massachusetts, February 6, 1981. i
. .. ..... .n. . . - ~ . _ . . . . . . . . - . . . - . . . - . . - . . . . - - . - . -
\ en Maine Electric Power Company, Inc. STATEMENT OF INCOME ! For the Three Years Ended December 31, 1980 (Dollars in Thousands Except per Share Amounts) Year Ended December 31, 1980 1979 1978 EI.ECTRIC OPERATING REVENUES $111,604 $98,122 $59,860 OPERATING EXPENSES Purchased Power (Note 1) 108,756 95,368 57,181 Operation 303 206 182 Maintenance (Note 1) 136 -153 44 Depreciation (Note 1) 735 735 736 Taxes Federal and State Income (Note 2) 152 162 197 Local Property and Other 216 217 229 Total Operating E:genses 110.298 96,841 58.569 ( OPEPATING INCCME 1,306 1,281 1,291 0*HER INCOME AND DEDUCTIONS, NET 110 112 74 INCOME SEFORE INTEREST CHARGES 1,416 1,393 1,365 INTEREST CHARGES Eong-Ters Debt (Note 3) 993 1,056 1,127 Other 277 182 74 Total Interest Charges 1,270 1.238 1.201 NET INCOME S 146 $ 155 $ 164 1 i Weighted Average Number of Shares of Common Stock Outstanding 12,161 12,923 13.677 EARNINGS PER SHARE OF COMMON STCCK S 12.00 S 12.00 S 12.00 DIVIDENDS DEC'ARED PER SH.M OF CCMMON STOCK 3 12.00 S 12.00 3 12.00 The ac:cepanying notes are an integral part of these financial statements. t I i
Maine Electric Power Comoanv, Inc. Og BALANCE SHEET (Dollars in Thousands) ASSETS December 31, 1980 1979 ELECTRIC PRCPERTY, at Original Cost (Notes 1 and 3) (Sch. V) S18,588 S18,617 Less: Accumulated Depreciation (Note 1) (Sch. VI) 7,207 6,482 11,381 12,135 CURRENT ASSETS Cash (Note 4) 828 129 Temporary Investments, at Cost which approximates market value - 275 Accounts Receivable Associated Companies 1,579 1,165 Other 17,054 8,852 Other Current Assets 156 154 Total Current Assets 19,617 10,575 DEFERRED CHARGES 102 94
$31,100 S22,804 STOCKHOLDERS' I.%7.STMENT AND LIABILITIES CAPITALI2ATION Common Stock Investment Common Stock, $100 Par Value, Authorized 20,000 Shares, Outstanding 11,733 in 1980 and 12,467 in 1979 , S 1,173 S 1,247 Retained Earnings - -
Total Common Stock Iavestment 1,173 1,247 Series A 9hf First Mortgage Bonds due in Annual Installments through August 1, 1996-Less Sinking Fund Requirements (Note 3) 9,900 10,560 Total Capitalization 11,073 11,307 CURRENT LIABILITIES Current Sinking Fund Requirements (Note 3) 584 660 Notes Payable - Banks (Note 4) 1,5 15 - Accounts Payable Associated Companies 36 90 Other 10 468 Dividence Payable 35 37 Accrued Purchased Power 15,350 7,547 Accrued Interest and taxes a27 466 Other 74 - To tal Oterent '.ia'r '.lities 13.031 9.263 DEFERRED CRIDITS Accumulated Deferred Incoce Taxes (Note 2) 1,813 1,696 Unamorttred Investment Tax Crecits (Note 2) 9 10 Unamortized Gain en Reacquired _ebt (Note 1) 169 23 Total Deferred Credits 1,990 1,729 331. 0._0 S22.30s The acecmcacying notes are an integral part of these finaccial statements.
Maine Electric Power Company, Inc. STATEMENT OF CHANGES IN COMMON STCCK INVESTMENT For the Three Years Ended December 31, 1980 (Dol'.ars in Thousands) Amount at Par Retained Shares Value Earnings Total Balance December 31, 1977 13,984 $1,398 s $1,398 - Add (Deduct) Net Income 164 164 Dividends Declared (164) (164) Redemption of Stock (736) (73) (73) Balance December 31, 1978 13,248 1,325 1,325 Add (Deduct) Net Income 155 155 Dividends Declared (155) (155) Redemption of Stock (731) (78) (78)
~
Balance December 31, 1979 12,467 1,247 1,247 Add (Deduct) Net Income 146 .A6 Dividends Declared (146) (146) Redemption of Stock (734) (74) (74) Balance December 31, 1980 11,733 $ _1,173 5 $1,173 The accompanying notes are an integral part of these financial statements. O
Maine Electric Power Company. Inc. STATEMENT OF CHANGES IN FINANCIAL POSITION For the Three Years Ended December 31, 1980 (Dollars in Thousands) Year Ended December 31. 1980 1979 1978 Funds Provided From Operations Net Income $ 146 $ 155 S 164 Depreciation 735 735 736 Deferred Income Taxas and Investment Tax Credit, Net 121 140 186 1,002 1,030 1.086 Funds Used Sinking Fund Requirements of Long-Term Debt 736 660 660
' Dividends on Common Stock 146 155 164 Redemptiot of Ccemon Stock 74 78 73 Other (157) (23) (5) 799 870 892 Increase in Working Capital, e::clusive of sinking fund requirements S 203 S 160 $ 194 Increase in Working C'apital, exclusive of sinking fund requirements-Cash, Receivables and
~
imporary Investments S 9,040 S2,730 $ (421) vcher Current Assets 2 7 4 Notes Payable (1,515) - - Other Current Liabilities (7,324) (2.577) 611 5 203 3 160 3 194 The ac:ompanying notes are an integral part of these financial statements.
Maine Electric Power Company, Inc. NOTES TO FINANCIAL STATE E TS
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES The Company: The Company owns and operates a 345,000 volt transmis-sion interconnection, completed in 1971, extending from Wiscasset, Maine to the Canadian border at Orient, Maine, where it connects with a line of The New Brunswick Electric Power Commission (New Brunswick) under a 25 year Interconnection Agreement. Under a Par-ticipation Agreement which terminates in 1996, all costs of the Com-pany (including a return on invested capital), to the extent not met by transmission revenues, are paid by the participating utilities (Participants), which include most of the larger companies in New England and a group of publicly-owned systems. Under a Power Pur-chase Agreement, New Brunswick provided to the Participants over the interconnection up to 400,000 kilowatts of base load power in 1930. Under an Acendment Agreement, effective January 1, 1981, New Bruns-vick will provide 133,000 kilowatts through October 31, 1985. The following is a list of those companies that purchase power from the Company and their respective entitlements: Percent of Entitlement Participant 1980 (400MW) 1981 (133MW) Bangor Hydro-Electric Company 2.395% 1.9962% Boston Edison Company 16.250 13.5429 Boylston Municipal Light Department .030 .0248 central Maine Power Company 10.274 5.8443 Danvers Municipal Light Department .371 1.1158 Eastern Maine Electric Co-operative, Inc. 2.583 7.7684 Fitchburg Gas and Electric Company .770 2.3158 Maine Public Service Company .344 6.2977 Marblenead Municipal Light Department .170 1413 Middleborough Municipal Light Department 769 1.1098 Middleton Municipal Light Department .056 .2320 Montaup Electric Company 5.792 4.6714 New England Power Company 22.500 13.3153 Newport Electric Corporation 2.260 1.3823 Peabody Municipal Light Department .546 .4549 Public Service Company of New Hampshire 26.250 20.8334 Shrewsbury Municipal Light Department .275 .3271 Union River Co-op .005 .0045 Vermont Electric Power Company, Inc. 7.509 16.5135 Wakefield Municipal Light Department .263 .3060 West Boylston Municipal Lighting Department .083 .2496 Total 100.000% 100.0000%
Maine Electric Power Company, Inc. I I NOTES TO FINANCIAI, STATEMENTS
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (-:entinued) The Company: (continued) The following Maine electric utilities own all of the Company's Common Stock: Cwnership Sponsor Interest Central Maine Power Company 78.15 % Bangor Hydro-Electric Company 14.19 Maine Public Service Company 7.49 Woodland Water and Electric Company .17 Total 100.00* , Regulation: The Company is subject to the regulatory authority of the Federal Energy Regulatory Commission and the Public Utilities Commission of the State of Maine as to operations, accounting and
~
other matters. Depreciation and Maintenance: Depreciation is provided using the composite and stra:.gnt-line methods et rates designed to fully depreciate all properties over the period ending Jul'f 1, 1996. Under the composite depreciation method, at the time depreciable properties are retired, the original cost, plus cost of removal, less salvage, of such property is charged to accumulated deprecia-tion. Unamortized Gains and Ecsses: Gains and losses on bonds reacquired to satisfy sinking fund requirements are deferred and amortized over the remaining original term of the Series A Sonds.
- 2. INCOME TAX EXPENSE The components of Federal and State income ta:<e s reflected in the statement of income are as follows:
i Maine Electric Power Comuany, Inc. NOTES TO FINANCIAL STATEMENTS
- 2. INCOMI TAX EXPENSE (continued)
Year Ended December 31, 1980 1979 1978 (Dollars in Thousands) Federal: Current S 30 $ 21 S 10 Deferred 105 121 162 Investment Tax Credit, Net (1) - (1) 134 142 171 State: Current 1 1 1 Deferred 17 19 25' 18 20 26 Total Income Taxes $152 $162 $197 The Company provides deferred Federal and state income taxes for the tax effects of timing differences between pre-tax accounting income and inecoe subject to tax. The deferred provision represents prin-cipally the tax effetts arising from the use of accelerated deprec-iation for income tr; purposes which currently exceeds the amounts provided in the statement of income. Investment tax credits are de-ferred acd amortined over the lives of the related properties. , The table below reconciles a provision calculated by multipiring income before Federal taxes by the statutory Federal income tax rate to the provision for Federal income taxes: 1980 1979 1978 Amount % Amount % Amount %
~
(Dollars in Thousands) Federal income tax pro.is-ion at statutory rate $129 06.0% $137 46.0% 3161 43.0% Dif ference in tax e_< pense: Depreciation and amor-tization for accounting purposes not allowed for tax purposes 22 4.0 22 7.6 22 6.7 Surtax exemption (19) (6.3) (19) (6.4) (13) (3.9) Other 2 .7 2 .6 1 .3 Federal inecae tax provision 3130 07.3% 3102 47.3% $171 51.1%
f, Maine Electric Power Comcany, Inc. NOTES TO FINANCIAL STATEMF.NTS
\
- 3. FIRST MORTGAGE BONDS Under the terms of the indenture securing the Firrt Mortgage Bonds, substantially all electric property of the Company is subject to a first mortgage lien.
The annual sinking fund requirement for First Mortgage Bonds is
$660,000.
- 4. COMPENSATING BALANCES The Company had lines of credit at year-end 1980 totaling $10,400,000.
With respect to $1,400,000, the average compensating balance is 15% of outstanding borrowings. The average ccmpensating balance require-ment for $2,500,000 is 10% of the line or 20% of outstanding borrcw-ings, whichever is greater. With respect to $1,500,000 the compen-sating balance requirement is 2% af the line plus 13% of outstanding borrowings. With respect to $3,000,000 there is no compensating balance requirement but there is an annual fee of 5/8 of 1% of the line with interest at 110% of prime. The remaining $2,000,000 has no compensating balance requirement but has an annual fee of 3/8 of 1% of the line on the unused portion. Certain informat, ion related to these lines is as follows: 1980 1979 1978 (Dollars in Thousands) Total lines of credit at end of periods $10,400 $8,400 $8,400 Borrowings outstanding at end of the periods 1,5 15 - - Average daily outstanding borrowings for the twelve ocaths endeo 1,574 1,179 765 Average aanual interest rate for the twelve months ended 16.1S% 13.65% 9.02% Highest level of borrowing at any time during the twelve months periods $10,250 S3,150 55,300
Schedule V Maine Electric Power Company, Inc. ELECTRIC PROPERTY (Dollars in Thousands) Balance at December 31, Classification 1980 1979 1978 , Intangible olant Organization 5 4 $ 4 S 4 Franchises and consents 4 4 4 Miscellaneous intangible plant 25 25 2 Total intangible plant 33 33 33 Transmission clant Land and land rights 914 914 914 Structures and improvements 180 180 180 Station equipment 3,040 3,040 3,040 Towers and fixtures 615 615 615 Poles and fixtures 9,029 9,029 9,029 Overhead conductors and devices 4,563 4,563 4,563 Total transmission plant 18,341 18,341 18,341 ? General clant Land and land rights 4 4 4 Structures and improvements 9 9 9 Tools, shop and garage equipaent 14 14 14 Ccmmunication equipment 187 216 216 Total general Flant 214 243 243 Total electric property $18,583 $18,617 $13,617
Schedule VI Maine Electric Power Company, Inc. Accumulated Provision for Depreciation and Amortization of Electric Property For the Years Ended Eecember 31, 1980, 1979 and 1978 (Dollars in Thousands) Additions Balance at Charged Balance Beginning to Profit Retire- Other at End of Period and Loss
- ments Changes of Period 1978 Electric property $5,011 S736 S- $ -
S5,747 1979 Electric property $5,747 $735 S- 3 - S6,482 1980 Electric property $6,482 S735 $29 $19 37,207
*See Note 1 of " Notes to Financial Statements" for the Company's depreciation policy.
EXHIBIT INDEX
'. Exhibits filed herewith Exhibit No. Description of Exhibit 10(a) Copy of Thirteenth Amendment dated as of December 31, 1980 to the Agreement for Joint Ownership and Operation of New Hampshire Nuclear Units 22 Subsidiaries of the Registrant B. Exhibits Incorporated herein by Reference Exhibit No. Description of Exhibit Incorporated by Reference To:
3(a) Articles of Incorporation Form S-1, Reg. No. 2-54452, of the Company Exhibit 3(a) (through 1975); Form S-7, Reg. No. 2-59747, Exhibit 2 (a) 2 (through 1977); Form 10-K, 1979, Exhibit C (through 1979); Form 10-0, 1st Qtr. 1980, Exhibit A 3(b) By-Laws of the Company Form S-7, Reg. No. 2-69904,
, Exhibit 4 4 (a) Mortgage and Deed of Form S-1, Reg. No. 2-54452, Trust dated as of Exhibit 4 (b) (1) , July 1, 1936, re First Mortgage Bonds 4(b) Supplemental Indenture Form S-1, Reg. No. 2-54452, dated as of December 1, Exhibit 4 (b) (2) 1945, amending the Mortgage 4(c) Supplemental Indenture Form S-1, Reg. No. 2-54452, dated as of April 1, Exhibit 4 (b) (3) 1963, re 4% Series Bonds, together with form of purchase agreement 4(d) Supplemental Indenture Form S-1, Reg. No. 2-54452, dated as of September 1, Exhibit 4 (b) (4) 1969, re 8 1/4% Series Bonds, together with form of purchase agreement 4(e) Supplemental Indenture Form 10-K, 1975, Exhibit B dated as of November 1, 1975, re 10 1/2% Series Bonds, together with form of purchase agreement
! , , 4 (f) Supplemental Indenture Form 8-K, 6/28/76, Exhibit A i dated as of June 1, 1976, re 9 1/4% Series Bonds 4(g) Form of Purchase Agreement Form 10-K, 1976, Exhibit C re 9 1/2% Series Bonds 4(h) Supplemental Indenture Form S-7, Reg. No. 2-61589, dated as of January 1, 1978, re 8.6% Series Exhibit 5 (a) (7) Bonds, together with form of purchase agreement 4(i) Supplemental Indenture Form 10-0, 3rd Qtr. 1979, dated as of August 1, Exhibit A 1979, re 10.25% Series Bonds, together with form of purchase agreement 4(j) Form of Purchase Agreement Form 10-K, 1976, Exhibit E re 9 1/4% Preferred Stock dated June 1, 1976 4(k) Form of Purchase Agreement Form 10-0, 3rd Qtr. 1979,
~
re 9 1/2% Preferred Stock Exhibit B dated August 15, 1979 4(1) Dividend Reinvestment and Form S-16, Reg. No. 2-62910, Common Stock Purchase Exhibit (b) (1) (D), (E) Plan, including contract with Agent therefor 10(a) Revolving Credit and Term Form S-7, Reg. No. 2-69904, Loan Agreement between Exhibit 10 (a) (1) the Company and the banks named therein 10(b) New England Power Pool Form S-7, Reg. No. 2-69904, Agreement dated as of Exhibit 10 (a) (3) September 1, 1971, with all amendments to date 10(c) Copy of Twelfth Amendment Form S-7, Reg. No. 2-69904, dated as of June 16, 1980 Exhibit 10 (a) (4) to the Agreement for Joint Ownership, Construction and Operation of New Hampshire Nuclear Units O V
10(d) Participation Agreement Form S-1, Reg. No. 2-54452, ()T (_ dated June 20, 1969 Exhibit 13 (a) (2) (a)-1 l between Maine Electric Power Company, Inc., ("MEPCO") and the Company 10(e) Firm Power and Trans- Form S-1, Reg. No. 2-54452, mission Supplement to Exhibit 13 (a) (2) (a)-2 Participation Agreement dated as of June 20, 1969 between MEPCO and the Company 10 (f) Power Purchase and Form S-1, Reg. No. 2-54452, Transmission Agreement, Exhibit 13 (a) (2) (d) Supplemental Par- , ticipation Agreement dated August 1, 1969 between MEPCO, the Company and other utilities 10(g) Power Purchase and Form S-1, Reg. No. 2-54452, Transmission Agreement Exhibit 13 (a) (2) (e) dated December 3, 1971 O' re Second Supplement to Participation Agreement dated as of June 20, 1969, with letter of transmittal attached 10(%) Power Contract dated Form S-1, Reg. No. 2-54452, May 20, 1968 between Exhibit 13 (a) (3) (a) Maine Yankee Atomic Power Company (" Maine Yankee") and the Company and other utilities 10(i) Stockholder Agreement Form S-1, Reg. No. 2-54452, dated May 20, 1968 Exhibit 13 (a) (3) (b) among stockholders of Maine Yankee, (including the Company). 10 (j ) Capital Funds Agreement Form S-1, Reg. No. 2-54452, dated May 29, 1968 Exhibit 13 (a) (3) (c) between Maine Yankee ( and sponsors, including the Company.
10(k) Maine Yankee Transmission Form S-1, Reg. No. 2-54452, Agreement dated April 1, Exhibit 13 (a) (3) (d) 1971 among the Company and other uti.'ities 10(1) Modification of Maine Form S-1, Reg. No 2-54452, Yankee Transmission Exhibit 13 (a) (3) (f) Agreement of December 1, 1972 1 10(m) Assignment Agreement Form S-1, Reg. No. 2-54452, dated June 1, 1973, Exhibit 13 (a) (3) (g) Houlton Water Company to the Company assigning a portion of Houlton's entitlement to Maine Yankee output 10 (n) Agreement for Joint Form S-1, Reg. No. 2-54452, Ownership, Construction Exhibit 13 (a) (4) (a) and Operation dated November 1, 1974 of Wyman Unit No. 4 among Central Maine Power i Company, the Ccmpany and other utilities t 10(o) Amendment No. 1 dated Form S-1, Reg. No. 2-54452, i June 30, 1975 to Exhibit 13 (a) (4) (b) Amendment O # November 1, 1974 10(p) Transmission Agreement Form S-1, Reg. No. 2-54452, dated November 1, 1974 Exhibit 13 (a) (4) (c) re Wyman Uni No. 4 among Central Maine Power Company and other utilities 10(q) Boston Edison Company Form S-1, Reg. No. 2-54452, contract, dated March Exhibit 13 (b) (1) 17, 1975 between Boston Edison Company and the Company relating to purchased power, Mystic Unit No. 7 10(r) Form of Federal Power Form S-1, Reg. No. 2-54452, Commission license Exhibit 13 (b) (4 ) for hydro-electric dam facility
) 10(s) Sample of binder Form S-7, Reg. No. 2-59747, relating to contingent Exhibit 5 (a) (4) liability for nuclear incidents 10(t) egreements relating to Form S-7, Reg. No. 2-61589, Secbrook 1 and 2, ExhiLit 5 (a) (3) it.cluding offering letter dated September 7, 1977 and the Company's response I thereto dated October 6, 1977, the g Agreement to Transfer Ownership Share between the Company and The Connecticut Light and Power Co., dated November 1, 1977 and a letter snendment thereto dated January 31, 1978, and the Joint Ownership - Agreement with Public Service Company of New Hampshire and other utilities as amended through January 31, 1975 10(u) Power Purchase Agreement Form S-7, Reg. No. 2-61589, dated December 15, 1977 Exhibit 5 (a) '4) between the Company and The Connecticut Light and Power Co., the Hartford Electric Light Company and Western Massachusetts Electric Company, concerning various gas turbine units 1)(v) Amendment No. 2 dated Form 10-K, 1976, Exhibit H(2) August 16, 1976 to Joint Ownership Agreement dated November 1, 1974 with Central Maine Power Company and others re j Wyman Unit No. 4 10(w) Coples of Tenth and Form 10-K, 1979, Exhibit D Eleventh Amendments, t dated October 11, 1979 and December 15, 1979, respectively, to the Agreement for Joint
- abrlt+eAs f ail sbuikerJ D, E1.h 6 q
', - SECURITIES AND EXCHANGE COMMISSION NASHINOTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 15 (d)
OF THE SECURITIES EXCHANGC ACT OF 1934 For the quarter ended March 31, 1981 Commission file number 0-505 BANGOR HYDRO-ELECTRIC COMPANY (Exact Name of Registrant as Specified in its Charter) Mair_e 01-0024370 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 33 State Street, Bangor, Maine 04401 ynddress of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code 207- 945-5621 None Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report Outstanding Ccmmon Stock, $5 Par Value - 2,009,160 shares at March 31, 1981 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 tha 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 che past 90 days. Yes X __ No
/~s h k
() t FORM 10-0 FOR THE QUARTER ENDED MARCH 31, 1981 PART I- FINANCIAL INFORMATION PAGE Cover Page 1 Index 2 S t a ':e men t of Income 3 Management's Analysis of Gu.st;srs n.;ome Statement 4-5 Balance Sheet - March 31, 1981 and December 31, 1980 6-7 Statement of Capitalization 8 Statement of Retained Earnings 9 Statement of Sources of Funds for Plant Additions 10 Financial Notes 11-12-13-14 PART II _OTHER INFORMATION I Cover Page 15 Items 1 5 16 Item 6 17 Signature Page 18 O i
' BANGOR HYDRO-ELECTRIC COMPANY STA TE**ENT OF INCOME 000's Omitted Except Per Share Amounts l (Una udi ted)
Three Months Ended y March 31, March 31, 1981 1980 ELECTRIC OPERATING REVENUES: General rate revenue $ 8,488 $ 7,395 Fuel charge 13,826 8,770 S 22,314 S 16,165 OPERATING EXPENSES: Fuel for generation $ 13,684 $ 8,859 Purchased power 1,979 1,921 Operation and maintenance 2,672 2,311 Depreciaticn and amortization 870 744 Taxes-Local property and other 505 441 State income 40 24 Federal incoma 402 281 S 20,152 S 14,581 OPERATING INCOME $ 2,162 $ 1,584 OTHER INCOME: Allowance for other funds used during construction 28 - Other, net of applicable income r taxes 7 2 S 35 $ 2 INCOME BEFORE INTEREST EXPENSE $ 2,197 $ 1,586 INTEREST EXPENSE: First mortgage bonds S 621 $ 638 Other 847 410 Allowance for borrowed funds used during construction (309) (177) S 1,159 S 871 NET INCOME $ 1,038 $ 715 DIVIDENDS ON PREFERRED STOCK 184 184 EARNINGS APPLICABLE TO COMMON STOCK $ 854 S 531
- === ::::::::
WEIGHTED AVERAGE NUMBER OF SHARES 2,087,986 1,815,854 EARNINGS PER COMMON SHARE, based on weighted average number of shares outstanding during the period f_____.41 _________ _f_____.29 COMMON SHARE ODIVIDENDSPER _!_____ 32 ________ _!______ 32 See notes to financial statements _3_
~
BANGOR HYDRO-ELECTRIC COMPANY HANAGEMENT'S ANALYSIS OF QUARTERLY INCOME STATEMENT i Management's Discussion and Analysis of Financial Statements contained in the Company's 1980 Annual Report on Form lO-K should be read in conjunction with the comments below. RESULT 3 0F OPERATIONS FIRST QUARTER 1981 VERSUS FIRST QUART. 1980 General Rate Revenue increased some.$1,093,000 or 14.8% due to the 18% general rate increase received on August 8, 1980. Somewhat offsetting the rate increase was a 3.5% decline in total kilowatt-hour sales. Fuel Charge Revenue increased some $4,920,000 or 56% as a i result of a higher fuel factor in use during the 1981 period. See note 1 to the financial statements of Form 10-X for a discussion of th.9 fuel clause. Although the actual cost of fuel for generation was about 5% lower in 1981 than 1980, the fuel expense recognized increased
$4,825,000 or S4%. This resulted from the fact that the fuel factor used to bill customers in 1980 was below that needed to accommodate the increased fuel costs being experienced in tha t period. Consequently, $4,078,000 of excess fuel costs O were deferred in 1980.
Operation and Maintenance Expenses reflect an increase in the opera ting expenses of the Wyman #4 generating station in l wh1ch the Company has an 8.3% interest as well as increases in Company expenses due to general infla tionary pressures. Amortization of the NEPCO nuclear units over a S year period commenced in August of 1980. Thus, the 1981 period contains
$88,000 of such amortization in contrast to no amortization l of this item for the first quarter of 1980.
l There was no " Allowance for Other Funds Used During Construction" in 1980 as, in tha t period, the average balance of notes \ payable for the entire year were estimated to be in excess l of the average balance of construction work in progress. l Consequently, the entire " Allowance for runds" was allocated to borrowed funds in 1980. The " Allowance for Borrowed Funds Used During Construction" increased by approximately $132,000 primarily because of the higher construction work in progress balances during 1981. This was due to the start of the adjustment period for the Company's purchase of the additional 1.8% interest in the Seabrook nuclear project.
- O i
Liquidity and Capital Resources () The Statement of Sources of Funds for Plant Additions reflec ts the Company's liquidity position. In 1981 the internal uses of funds exceeded the internal generation of funds by $797,000 as opposed to $2,505,000 in 1980. This improvement in internal operations is primarily attributable to recovery of $1,722,000 in deferred fuel costs in 1981 as opposed to the undercol'lection of $4,078,000 in fuel costs during the 1980 period. This improvement, however, was tempered by increases in other current assets, primarily accounts receivable as well as a decrease in accounts payable.. As noted above, the adjustment period for the Company's purchase of an additional 1.8% of the Seabrook nuclear project started in February 1981. This is the principal reason for the $2,930,000 increased level of investment in that project in 1981 over 1980. On April 3, 1981 the Company issued and sold through private placement $5,000,000 of 15 1/4% Firs t Mortgage Bonds. The Bonds are subject to a sinking fund at the rate of 10% beginning in 1987 and are due on April 1, 1996. I D 0
. _ _ _ . _ . . . _ . _ _ . _ _ ~ . - - -
O BANGOR HYDRO-ELECTRIC COMPANY BALANCE SHEET MARCH 31, 1981 AND DECEMBER 31, 1980 000's Omitted (Unaudited) ASSETS MARCH 31, DECEMBER 31, 1981 1980 INVESTMENT IN UTILITY PLANT: Electric plant, at original cost $98,68S $97,S39 Less-Accumulated depreciation 34,681 33,929
$64,004 $63,610 Construction in progress, including $2,826 at March 31, 1981 and $5,424 at December 31, 1980 for participation in jointly-owned
(" project 9,404 6,296
\/
Investments in corporate joint ventures: Maine Yankee Atomic Power Company 4,806 4,689 Maine Electric Power Company, Inc. 178 172
$78,392 $74,767 OTHER INVESTMENTS, principally a t cost $ S08 $ 504 CURRENT ASSETS:
Cash $ 1,727 $ 1,0S1 Accounts receivable, net of reserve 8,3S2 6,871 i Unbilled revenue receivable 3,220 3,378 Material and supplies, at average cost 3,946 3,460 Prepaid expenses 18 394 Deferred fuel costs S,608 7,0S7
$22,871 $22,211 DEFERRED CHARGES:
Unamortized cost of cancelled NEPCO nuclear units $ 1,705 $ 1,794 Other 584 567
$ 2,289 $ 2,361
$104,060 $99,843
======== =======
0 See notes to financial statements
O BANGOR HYDRO-ELECTRIC COMPANY BALANCE SHEET MARCH 31, 1981 AND DECEMBER 31, 1980 000's Omitted (Unaudited) STOCXHOLDERS* INVESTMENT AND LIABILITIES MARCH 31, DECEMBER 31, 1981 1980 CAPITALIZATION (see accompanying statement) : Common stock investment $ 27,436 $27,317 Preferred stock 9,734 9,734 First mortgage bonds, exclusive of sinking fund requirements 32,175 32,175
$ 69,345 $69,226 CURRENT LIABILITIES:
("hcurrent sinking fund requirements $ 170 $ 170 Notes payable to banks 17,100 12,100 Accounts payable 5,871 7,396 Dividends payable 978 905 Accrued interest 622 677 Accrued current and short-term deferred taxes (373) 59 Customers' deposits 62 64 Accrued pension plan contribution 565 445 S 24,995 $ 21, 816 DEFERRED CREDITS AND RESERVES: Accumulated deferred income taxes $ 5,023 $ 4,869 Unamortized investment tax credits 4,449 3,729 Other 248 203
$ 9,720 $ 8,801
$b_??_L?00
_ __ ___ ?_??L_O$_] See notes to financial statements O _7_
BANGOR HYDRO-ELECTRIC COMPANY STATEMENT OF CAPITALIZATION MARCH 31, 1981 AND DECEMBER 31, 1980 000's Omitted (Unaudited) MARCH 31, DECEMBER 31, 1981 1980 COMMON STOCK INVESTMENT: Common stock, par value $5 per share - Authorized--5,000,000 shares ou ts tandin g 2,089,160 shares in 1981 and 2,083,600 shares in 1980 $10,446 $10,418 Amounts paid in excess of par value 9,050 9,01 9 Retained earnings 7,940 7,880
$27,436 S27,317 PREFERRED STOCK, non-pttticipating, cumulative, par value $100 per share, authorized 250,000 shares Subject to mandatory redemption requirements-9 1/2%, Callable at $109.00, 30,000 shares authorized and outstanding $ 3,000 $ 3,000 9 1/4%, Callable at $106.15, 20,000 shares authorized and outstanding 2,000 2,000
$ 5,000
$ 5,000 Not redeemable or redeemable solely at the
% option of the issuer -
7%, Noncallable, 25,000 shares authorized and outstanding $ 2,500 $ 2,500 4 1/4%, Callable at $100.00, 4,840 shares authorized and outstanding 484 484 4%, Series A, Callable at $110.00, 17,500 shares authorized and outstanding 1,750 1,750
$ 4,734 S 4,734 FIRST MORTGAGE BONDS:
3 1/4% Series due 1982 $ 1,000 $ 1,000 3 1/8% Series due 1984 ',000 1,000 3 1/4% Series due 1935 1,500 1,500 4% Series due 1988 2,500 2,500 4% Series due 1993 3,500 3,500 6 3/4% Series due 1998 2,500 2,500 8 1/4% Series due 1999 3,590 3,500 10 1/2% Series due 2000 4,750 4,750 9 1/4% Series due 2001 2,820 2,820 8 3/5% Series due 2003 2,275 2,275 10 1/4% Series due 2004 7,000 7,000
$32,345 $32,345 Less-Sinking fund requirements 170 170
$32,175 $32,175 D
N) Total capitalization ff_9_1_34Q gg9g22Q See notes to financial statements _g_
t l
~
I, BANGOR HYDRO-ELECTRIC COMPANY STATEMENT OF RETAINED EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 1981 AND 1980 000's Omitted (Unaudited) MARCH 31, MARCH 31, 1981 1980 3 BALANCE BEGINNING OF PERIOD $ 7,880 $ 8,798 ADD - NET INCOME l',038 715
$ 8,918 $ 9,S13 J
DEDUCT: Dividends - Preferred stock $ 184 $ 184 Common stock 794 690
$ 978 S 874
~
<hLANCE END OF QUARTER 940 f, _ 8 ___
f__7_z_ _ _ . .___1Q39 l l l l l l l See notes to financial statements l l { t l l l
- l. :
BANGGR FYDRO-ELECTRIC COMPANY STATEMENT OF SOURCES OF FUNDS FOR PLANT ADDITIONS FOR THE THREE MONTHS ENDED MARCH 31, 1981 AND 1980 000's Omitted 8 (Unaudited) \ MARCH 31, MARCH 31, 1981 1980 SOURCES OF FUNDS: Internal sources-Operations-Net income $ 1,038 $ 715 Items not currently requiring or (providing) funds - Depreciation and amortization 870 744 Deferred income taxes 153 178 Investment tax credit, net 720 46S Allowance for other funds used during construction (28) - S 2,753 $ 2,102 Other sources (uses) of funds-Dividends declared $ (978) $ (874) Other, net (287) (204) S(1,265) $ (1,07 8) Change in net current assets, exclusive of interim financing-Ca t 's , receivables and unbilled revenue $(2,00S) $ 41
. Deferred fuel costs 1,722 (4,078)
Other current assets (110) (364) O~ Accounts payable (1,471) 974 Other current liabilities (421) (102) S(2,285) S(3,529) Funds available from internal sources 9 (797) S(2,505) External sources - Notes payable to banks $ S,000 $ 3,700 common Stock-Dividend Reinvestment Plan S8 62 Funds from external sources $ S,058 $ 3,762 E UNDS AVAILABLE FOR PLANT ADDITIONS $ _ _4 ,___ 2 61 $_1,2S7 FUNDS USED FOR: Uyman Unit #4 $ 4 $ 206 Seabrook 3,401 471 Other plant additions 884 580
$ 4,289 $ 1,257 Less: Allowance for other funds used during construction (28) -
O m bNDS USED FOR PLANT ADDITIONS Q_41 2fl f_1 1 222 See notes to financial statements 1 __ __ _ _ _ _ _ _ - . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . - a
BANGOR HYDRO-ELECTRIC COMPANY NOTES TO FINANCIAL STATENENTS MARCH 31, 1981 (~ Q; (Unaudited) (1) Accounting Policies The Company 's significant accounting policies are described in the Notes to Financial Scatements included in its 1980 Annual Report on Form 10-X filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows these same basic accounting policies but considers each interim period as an integral part of an annual period. Accordingly, certain expenses are allocated to interim periods based upon estimates of such expenses for the year. Income Tax expense is calculated using the statutory rates applied to pre-tax book Lacome, adjusted for non-tax allocated timing differences and permanent differences. The dividends received deduction related to earnings of associated companies and the exclusion from taxable income of allowance for funds used during construction are the principal permanent differences between book and taxable income. Since the implementation as of January 1, 1980 of the fuel clause regulation issued by the Maine Public Utilities " Commission (MPUC), fuel expense is r6 cognized when the
. customers are billed for that fuel. Any unbilled fuel costs are now deferred.
(2) Income Taxes The individual components of Federal and state income l taxes reflected in the Statement of Income for the three months ended March 31, 1981 and March 31, 1980 are as follows: 1981 1980 Federal State Federal State Current S 278,452 $ 168,936 $(2,254,876) $(288,262) Daferred-short term (745,490) (121,981) 1,897,408 310,468 Deferred-other 157,90S (5,098) 175,362 2,319 Investment Tax Credi t , net 720,000 - 465,000 ~ ~ Total provisions for income taxes $ 410,877 $ 41,857 $ 282,894 $ 24,525 Charged to other income (8,898) (1,455) (2,083) (340) Charged to operating expense $ 401,979 $ 40,402 $ 280,811 $ 24,185
- :::::::: ::::::::::: 22:22:22:
tO V FINANCIAL NOTES - (CONTINUED) (2) Income Taxes (Continued)
- The rate-making practice currently followed by the MPUC i permits the Company to recover, through customer rates, only
} Federal and state income taxes payable currently or met by
- the use of investment tax credit and deferred taxes when the 1 tax law, in effect, requires such treatment. The MPUC j allows as a cost of service only the deferred Federal income
- tax arising from the use, for income tax purposes, of accelerated depreciation of property added subsequent to 1969. The income tax effects of other minor timing differences between pretax accounting income and taxable income generally are, in effect, flowed through to the Company's customers.
Although this accounting differs from generally accepted accounting principles followed by nonrate-regulated companies,
- which are required to record deferred taxes related to all
- timing differences, the Company expects that deferred taxes not recorded will be collected through customer rates in the future when such taxes become payable. 1 In 1980 and 1979, the Company experienced net losses for tax purposes, resulting principally from three significant l
transactions which increased income for accounting but not for tax purposes. These losses for tax purposes resulted in net operating loss and investment tax credit carryovers i which, subject to review by the Internal Revenue Service, l will be used to reduce income taxes otherwise payable in i future years. Income tax provisions and accruals related to these items are classified in the above table as " deferred-short term" taxes. 1 I The following table reconciles a provision calculated by multiplying income before Federal income taxes by the statutory Federal income tax rate to the above provisions for Federal income taxes 4 i
- O (2) Income Taxes (Con tin ued)
Three Mon ths Ended March 31, 1981 1980 Amount t Amount ~ (Dollars in~ Thousands) Federal income tax provision at statutory rate $ 667 46% $ 459 46% Less permanent reductions in tax expense resulting from statutory exclusions from taxable income: Dividend received deduction related to earnings of associated companies 48 3 51 S Equity compone2t of AFDC 13 1 - - Preferred dividends paid deduction 9 1 9 1 Amortization of investment tax credit 30 ~~ 2 24 ~~ 2 Federal income tax provision before effect of timing differences S 567 39% $ 375 38% Less timing differences that are flowed-through for rate-maki O' urposes:ng and accounting Interest component of AFDC 142 10 81 8 Deduction of certain costs (primarily pension costs and payroll taxes) for tax
- purposes that are included in the cost of electric property 10 1 7 1 Other 4 -
4 1 Federal income tax provision S 411 28% $ 283 28%
===== == ===== ==
l (~') t FINANCIAL NOTES - (CONTINUED)
)
(3) Investment in Maine Yankee and Maine Electric Condensed financial information for Maine Yankee Atomic Power Company (Maine Yankee) and Maine Electric Power Company, Inc. (MEPCO) is as follows: MAINE YANKEE MEPCO (Dollars in Thousands) Opera tions For Three Months Ended March 31, March 31, March 31, March 31, 1981 1980 1981 1980 OPERATIONS: As reported by investee-Operating Revenues f__24 Q__28 _ _ _ _ _1_2 7 f _f _ _12,911f__43_ _ _ _ _ _1_S f _7 l _ __ ________ _ _ ___x__f_S Earnings applicable to common stock $ 1 $ 1 $ 35 $ 37
=====4=679 == =====4=677 == ========= =========
Company's reported equity - ^ s Equity in Net Income $ 117 $ 117 $ S$ 5 Add (deduct) - Effect of
- adjusting Company's estimate to actual - -
1 1 Amounts reported by Company S 117 $ 117 $ 6 S 6
========= ========= ========= =========
Financial Position For March 31, 1981 and December 31, 1980 4 March 31, Dec. 31, March 31, Dec. 31, 1981 1980 1981 -1980 FINANCIAL POSITION: As reported by investee - Total Assets $ 290,626 $ 297,064 $ 27,009 $ 31,100 Less-Preferred Stock 11,880 11,980 - _ First Mortgage Bonds and Long-Term Notes 133,130 134,823 9,900 9,900 Other Liabilities and Deferred Credits 78,538 83,209 15,936 20,027 Net Assets f__f_7_1 _0 7 2 f __ _ f _7x_f_S2 f___lg l73 l73 ____ __ _ __ _ _ _________ Q___l_ _____z___ Company's reported equity-Equity in net assets $ 4,695 $ 4,694 $ 167 $ 177 Add (deduct)-Effect of adjusting Company's
) estimate to actual a-Qunts re7arted by Company lli (S) 11 (S)
-f___4.
gg f_____17 _f_____172 _ - - - - _f f _f f ______-_f9 _ - __4 - -_-_-___2 - ________ O BANGOR HYDRO-ELECTRIC COMPANY I FORM 10-Q FOR PERIOD ENDED MARCH 31, 1981 PART II O O
.c.
m Item 1. Legal Proceedings (~ With the exception of the following, this item is the (_],< same as previously reported in the Company's Form 10-K for 1980. Indian Cases On April 22 and April 24, 1980, the Court entered orders granting the Company's motions to dismiss the two Indian cases. The Company's motion in the flowage case brought by the Penobscot Tribe was uncontested. However, the claimant in the transmission line matter argued against the dismissal, and the Company cannot predict what further action, if any, will be taken. Item 4. Submission of Matters to a Vote of Security Holders At the Company's Annual Meeting of Stockholders held on April 28, 1981, two stockholder proposals were presented and submitted to a vote of the stockholders. The stockholder proposals were. included in the Company's proxy statement furnished to stockholders and filed with the Commission. The first stockholder proposal, which would have required the Company to include in its annual and quarterly reports to stockholders a detailed report on the status of uranium I~ contracts, spent fuel storage facilities, and safety issues k- ') concerning nuclear power plants in which the Company has an interest, was defeated by a vote of 129,211 5/12 to 1,401 3/12. The second proposal, which would have required the Company to establish and maintain a nuclear information library, was defeated by a vote of 130,286 7/12 to 7,344 10/12. Item 5. Other Information { Seabrook Nuclear Units 1 In the Company's Form 10-K for 1980, the Company's participation in the Seabrook nuclear units being constructed by Public Service Company of New Hampshire (PSNH) is discussed (see page 6 of the Company's Annual Report and notes 9 and 10 to the financial statements). On April 14, 1981, PSNH announced a revised schedule for completion and cost estimate for the project. The completion dates are now estimated to be February, 1984 for unit 1 and May, 1986 for unit 2 (compared to the latest prior estimate of 1903 and 1985), and the' cost of the project is now estimated at $2.58 billion, including nuclear fuel but excluding AFDC. Based upon PSNH's revised cost estimates, the Company's share of such costs would be $56 million, exclusive of the Company's AFDC estimated at $32 million.
6 Subsequent to the denial in February of PSNH's request before the New Hampshire Public Utilities Commission for emergency rate relief, LSNH filed, on April 2, 1981, for a p(_/ permanent increase of approximately $34.9 million annually, with a request for temporary rates of that increased level as soon as possible. On May 1, 1981, the NHrCC granted PSNH's request for a temporary rate increase of approximately
$17.4 million annually, to be collected subject to refund.
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit A
- Form of Purchase Agreement and Supplemental Indenture relative to the First Mortgage Bonds, 15.25% Series due 1996.
(b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is submitted. O E d y 1-w,- ~ , .-,.e--,,.. . . - _ , - , _ - , - , - - - - . , - - - . . - - . . . - . . - _ , _ < . - - - - - - - - - - - - -- - -
4 BANGOR HYDRO-ELECTRIC COMPANY FORM 10-Q FOR PERIOD ENDED MARCH 31, 1981 The information furnished in this report reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANGOR HYDRO-ELECTRIC COMPANY (Registrant) ( .g". . 'y %)).0a vn , l 5/11/81 /s/ John P.D 'Sullivan Date Vice Presicent & Treasurer (Principal Financial Officer) I l v
PROSPECTUS
< p 250,000 Shares Bangor Hydro-Electric Company Common Stock p (Par Value $5 per Share)
He Common Stock of the Company is traded in the over-the-counter market. On December 9, 1980 the closing highest bid and lowest asked quotations as reported by the National Association of Securities Dealers Automated Ouctation System ("NASDAQ") were $9% and $10%, respectively. i' _ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION , PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPELTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Underwriting
,. Price to Discounts and Proceeds to f Public Commissione(1) Company (2)
Per Share $10.125 $.625 $9.50 p4 Total $2,531,250 $156,250 $2,375,000
~
(1) The Company has agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933. (2) Before deducting expenses estimated at $89,000.
; nese shares of Common Stock are offered by the several Underwriters named herein subject to i prior sale, when, as and if issued by the Company and accepted by the Underwriters, and subject to the approval of certain legal matters by Davis Polk & Wardwell, counsel for the Underwriters. ~ It is expected that certificates for such shares will be available on or about December 17,1980 at the ofBee of Smith Barney, Harris Upham & Co. Incorporated,120 Broadway, New York, New York 10005.
Smith Barney, Harris Upham & Co. Incorporated December 10,1980 -
IN CONYr:CTION WITH THIS OFFERINGo THE UNDERWRITERS LIAY OVERALLOT OR EFFECT TRANSACi' IONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF TIIE COMMON STOCK OF TIIE COMPANY AT A LEVEL ABOVE TIIAT WIIICll MIGIIT OTilERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. F' AVAILABLE INFORMATION Pangor Hydro-Electric Company (the " Company") is subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports and other informa-
, tion with the Securities and Exchange Commission. Infonnation for the year 1979 and prior years conecrnhlg directors and officers and their remuneration, principal holders of securitics, and any material interests of such persons in transactions with ti.e Company is disclosed in proxy statements distributed to shareholdem of the Company and filed with the Commission. Information filed with the Commission, including proxy statements and reports and other information, can be inspected and p copied at the public reference facilities maintained by the Commission at Room 6101,1100 L Street, , N.W., Washington, D.C.; Room 1100, Federal Building, 26 Federsl Plaza, New York, New York; Suite 1710, Tishman Building,10960 Wilshire Boulevard, Los Angeles, California; and Room 1228, , Everett McKinley Dirksen Building, 219 South
Dearborn Street,
Chicago, Illinois. Copies of such material may be obtained from the Commission at prescribed rates by writing to the Commission at 500 North Capitol Street, N.W., Washington, D.C. 20549. THE COMPANY The Company was incorporated under the general laws of Maine in 1924. Its principal office is located at 33 State Street, Bangor, Maine M401, and its telephone number is 207-945-5621. s The Company is a public utility engaged in the generation, purchase, transmission, distribution j and sale of electric energy. Its sales territory includes portions of the counties of Penobscot, IIancock,
- f. Washington, Waldo, Piscataquis and Aroostook in Er. stern Maine (See " Map of Territory Served").
ea USE OF PROCEEDS The net proceeds (estimated at $2,286,000) to be received from the sale of the 250,000 shares of common stock offered hereby (the " Additional Common Stock") will be used for the Company's con-6 tinuing capital construction program, including the repayment of a portion of the short-term notes 7 payable to banks which have been ir.trred as interim financing for the program. Short-term notes payable to banks amounted to $14.5 milhon at December 9,1980. See " Construction and Finane-ing" for information concerning the Company's capital construction program and the sources of funds for such pmgram. 2 I f, a,y s t , b, *,s ge
- h
l 1 TIIE ISSUE IN BRIEF The following material is qualified in its entirety by the detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. () Securities to be Offered . THE OFFERING 250,000 shares of Common Stock Use of Proceeds To reduce the short-term borrowings incurred for construe-tion Traded Over-the-Counter, reported on NASDAQ (Symbol BANG) 1980 Bid Price Itange (through Dec. 9) liigh 12 % 1,ow 9% Closing Price Quotation on Dec. 9,1980 Bid 9% Asked 10 % BANGOR HYDRO-ELECTRIC COMPANY Principal Business Electric utility, serving approximately 74,000 customers Service Area Eastern Maine, covering approximately 4,850 square miles b' with a population of approximately 190,000 1980 Energy Sources (Est.) Fossil (generated and purchased energy) 61%, Nuclear (purchased energy) 23%, IIydro (generated energy) 16% Constn:etion Expenditures (Est.) 1980 - $5.7 million; 1981-1984 - $71.2 million
- 1980 Rate Increase Effective August 8,1980, the Company received a basic rate
{t increase of 18% designed to yield additional revenues of
$4.7 million annually FINANCIAL INFORMATION (Dollars in Thousands, except Per Share Amounts) - Twelve Months / g ,,,, 7 , - , u.
(Us. edited) 1979 1978 1977 Electric Operating Revenues $64,085 - $51,748 $42,627 $38,294 3,803(1) 3,488(1)(2) 3,391 2,759
.e. Net Income ............
Emrnings Applicable to Common Stock 3,067(1) 2,941(1)(2) 2,941 2,308 i E rnings per Common Share . ...... 1.69(1) 1.63(1) (2) 1.77 1.75 _' Davidends Declared per Common Share 1.52 1.52 1.46 1.41 s September 30,1980(Unaudited) k As Adjung Ratio
% Capitahzation Outstanding Ratio
.^' $ 32,300 First Mortgage Bonds . $32,300 48.3 % 46.7 %
Preferred 8tock . .... 9,734 14.6 9,734 14.1 Common Stock Investment 24,788 37.1 27,147(3) 39.2 Total $66,s 2 100.0 % $ 69,181 100.0 % Short. term Bank Borrowings $15,000 $ 12,714
$ 13.03 Book Value per Common Share . $ 13.57 6- Connnon Shares 1,827,040 2,033,600(3)
(1) Includes the effect of deferring $3.8 million in fuel costs in December 1979 which increased
, earnings $1.06 per share (See Note 1 of Notes to Financial Statements of the Company).
(2) After the cumulative effect of a change in accounting principle which increased earnings by
$1,043,000 or $.58 per share in the first quarter of 1979 (See Note 1 of Notes to Financial Statements of the Company).
(3) Includes 6,560 shares issued October 20,1380 pursuant to the Dividend Reinvestment and Common Stock Purchase Plan. 3 -
PROBLEMS OF TIIE ELECTRIC UTILITY INDUSTRY The electric utility industry in general is, and for several years has been, experiencing problems in a number of areas, including the effects of inflation on operating and construction costs, obtaining adequate and timely rate increases, financing construction programs at reasonable costs during a period of high inflation nd unsettled capital markets, compliance with environmental and nuclear F, regulations, availability and cost of fuel, uncertainties caused by increased political involvement in utility regulation and the effects of energy conser' acion and general economic conditions. These prob. lems are being experienced in varying degrees by different companies within the inilustry. Events at the Three Mile Island Nuclear Unit No. 2 in Pennsylvania ("TAII") in 3farch 1979 have prompted a rigorous reexamination of safety related equipment and operating procedures in all nuclear facilities. The Company has an interest in Maine Yankee Atomic Power Company's nuclear generating facility located in Wiscasset, Maine (" Maine Yankee") (representing 23% of the Com-pany's current generating capacity) and an interest in the Seabrook nuclear generating units being constructed in Seabrook, New Hampshire (the "Seabrook nuclear units") by Public Service Company of New Hampshire ("PSNII") as the lead owner. The Company has been informed by Maine Yankee that the near-term modifications required by the United States Nuclear Regulatory Commission ("NRC") in response to studies of the TMI incident have been made. The owners of both plants in 1b which the Company has interests are still in the process of evaluating the impact of certain long-term modifications required by the NRC. While the ultimate effect of the reexaminations, studies and legislative proposals arising out of the TMI incident carnot be specifically predicted, they could inter-fere with or require costly modifications to operating nuclear generating plants, and prevent licensing of and cause delays in construction and costly modifications of those planned or under construction p (See " Construction and Financing" and " Business- Properties and Power Supply"). CONSTRUCTION AND FINANCING 1974-1979 Construction Costs
+
For the five years ended December 31, 1979, expenditures by the Company for construction totalled approximately $37.0 million, of which $20.5 million was for generation, $10.1 million for ' distribution and $6.4 million for transmission and other general construction. Such amounts do not include an allowance for funds used during construction ("AFDC") totalling $3.1 million over the
- ?- same period. See Note 1 of Notes to Financial Statements of the Company for an explanation of
/ accounting for AFDC. The Company's construction program for adding new generating capacity over the five years ended December 31,1979 consisted primarily of participation as one of the joint
.. owners in William F. Wyman Unit No. 4 ("Wynian 4"), a 600 megawatt ("MW") oil. fired generating O unit located in Yarmouth, Maine, constructed and operated by Central Maine Power Company as the
> lead owner (See " Business-Properties and Power Supply-Existing Facilities"), which project was completed in late 1978; in the Seabrook nuclear units (See " Business-Properties and Power Supply-Future Power Sources"); and in the New England Power Company nuclear units which were to have been built in Charlestown, Rhode Island, but which project was cancelled in December 1979 (See Note 9 of Notes to Financial Statements of the Company).
2 h- 1980-1984 Estimated Construction Costs The Company's construction program currently consists of its existing and anticipated interest referred to below in the Seabrook nuclear units and transmission, distribution and other general 4 9
. .n .~ ' e 'a .}
a A k ' b
. construction. Estimated construction expenditures (not including AFDC) for the period 1980 through 1984 based on current construction schedules and cost projections are as follows:
Estimated Construction Expenditures * (Thousands of Dollars) 1980 1981 1982 1983 1984 Total Generating Facilities Seabrook nuclear units $ 964 $24,136 $ 9,836 $ 6,302 $ 4,717 $45,955 Other generation 300 - 1,000 500 1,300 3,100 Transmission, Distribution & General 4,400 5,320 5,851 6,051 6,251 27,873 Total $5,664 $29,456 $16,687 $12,853 $12,268 $76,928 TJ
- Assumes acquisition of an additional interest in the Seabrook nuclear units commencing January 1, 1981, and completion of the Seabrook nuclear units in 1984 and 1986.
The Company's construction program is subject to continuous review and revision. The program f* may vary from the above projections due to factors, among others, such as changes in business con-ditions, rates of growth in the service area, construction and equipment delivery schedules, availa-bility and cost of capital, inflation, regulatory climate and problems relating to environmental con-siderations. Seabrook. The Company has an undivided interest of 0.37249% in each of the two generating units which comprise the Seabrook nuclear units. This interest will entitle the Company to approxi-mately 8.6 31W, or 4.3 31W per unit. The units have been scheduled for completion in 1983 and l i g
.'p 1985 respectively, but it is likely that these dates will be extended. In addition, the Company has agreed ? to purchase an additional 1.80142 % interest, or approximately 41.4 31W, from PSNil, for a total J interest of 2.17391%, or approximstely 50 31W. This purchase will take place over a buy-in period,
( the commencement of which is contingent upon regulatory approvals and certain other matters per-lN taining to other purchaser:: af Seabrook interests from PSNII (See " Business- Properties and Power
~~ Supply-Future Power Sources").
The cost of the two units is currently estimated to be $2.4 billion (assuming completion dates of 1984 and 1986), including initial nuclear fuel but excluding AFDC. The Company's share of such costs, assuming the additional interest is purchased, would be $52.2 million. Adding the Com-
,- pany's AFDC (estimated at $30 million) and deducting the Company's share of the estimated cost of ~
initial nuclear fuel ($2.4 million) the average cost per kilowatt ("KW") is estimated to be $1,596. These estimated costs may be increased as a result of several factors as described under " Problems of the Electric Utility Industry" and " Business-Properties and Power Supply- Future Power Sources". Tha Company's investment in the Seabrook nuclear units at September 30,1980 was $4.1 million, excluding AFDC of $S94,000. Other Construction. The remaining $31 million of estimated construction expenditures for 1980 1984 is for constructioa and *eplacement projects of a routine nature, and for the initial phases of other possible generation projects. 5
Financing In addition to the amounts set forth above with respect to the construction program, the financing program for 1980-1984 includes refinancing of $2 million of first mortgage bonds which matured in 3 fay 1980 and $2 million in other maturing first mortgage bond issues. For planning purposes the Company estimates that during the five year period 1980 through 1984, internal resources will prov
- approximately 12% of the amounts required to meet this financing program. The Company's ability to achieve its estimate of the amount to be derived from internal resources is dependent upon obtain-ing adequate and timely rate increases, the Company's level of sales, general economic conditions and other variable factors.
The balance will be provided initially by short-term bank borrowings which are expected to be refinanced from time to time during the five year period by the proceeds from sales of long-term debt, preferred stock and common stock. The Company has entered into a revolving credit and term
< loan agreement with a group of banks under which the Company may borrow, prior to the commence-ment of the above-mentioned Seabrook buy-in, up to $17.4 million, and after the commencement of the Seabrook buy-in, up to $30 million, from time to time through June 1985 to meet its interim financing needs. In June 1985 any unpaid balance may be converted into a term loan repayable in semi-annual installments over 36 months. Interest is payable at a premium over the prime rate, and varies over the b term of the agreement and with the amount outstanding. The Company may prepay amounta out- - standing under the agreement at any time without penalty. Borrowings under the revolving credit agreement were $14.5 million at December 9,1980 (See Note 6 of Notes to Financial Statements of 4 the Company).
The indenture securing the Company's first mortgage bonds provides that the Company may issue 6 additional bonds as long as net earnings (as defined in the indenture) of the Company are at least
*! twice the interest charge on bonds presently outstanding and those proposed to be issued for a period of twelve months out of the fifteen months preceding the issuance of such additional bonds. As of October 31,1980, the Company had the ability to issue approximately $18 million of additional bonds at an assumed interest rate of 159 per annum. The amount of additional bonds which may actually
- be issued under the terms of the indenture in the future will depend upon the level of net earnings as described above, the availability of adequate rate increases, interest rate levels and other factors. The ;
Company's Articles of Incorporation and By-Laws provide that the Company may issue additional - series of the authorized but unissued preferred stock and additional amounts of authorized but un-
'f issued common stock from time to time as the board of directors of the Company may determine. ~. Issuance of the Additional Common Stock as wcll as other common stock and securities which may ~
be issued by the Company is subject to prior approval of the 31aine Public Utilities Commission g ("31PUC").
- Except for the Additional Common Stock, no commitments for the issuance of any securities to finance the construction program or to repay amounts borrowed under the revolving credit and term loan agreement have been erdered into nor have the relative amounts of any securities to be issued been determined. The success of the Company's financing program is dependent upon a number of factors, including conditions in the capital markets and the factors referred to above affecting the Company's ability to generate funds from internal resources.
DIVIDENDS ON CO31310N STOCK Cash dividends hve been declared and paid on the Company's common stock in each year sir.ce 1925. It is the policy of the board of directors of the Company to declare dividends on a quarterly basis. The payment of future dividends will be dependent upon earnings, the financial condition
~
6 v- * .] h' ;t .'
. p.
* / .
4 p' e
- w
of the Company and other factors. The quarterly dividend was 32 cents per share in 1975; 33 cents in 1976; 35 cents in 1977; 36 cents for each of the first three quarters of 1978; and 38 cents there-after through the current date. The 1980 third quarter dividend was declared on September 22, k 1980, payable on October 20,1980 to shareholders of record on September 30,1980. t y Earnings of the Company for the year 1976 and for the first three quarters of 1980 were not sufficient to cover dividends declared and paid during those periods on the Company's comraon stock, nor on the Company's preferred stock in the second quarter of 1980. Dividends paid for those periods, to the extent not earned, were paid from retained earnings (See " Statements of Income"). The Company has implemented a Dividend Reinvestment and Common Stock Purchase Plan, under which newly issued shares of the Company's common stock may be purchased by holders of common stock through automatic reinvestment of common stock dividends, or with optional cash b payments of between $25 and $5,000 per quarter, or both, without payment of brokerage commissions or service charges. Such shares are offered only by means of a separate prospectus available imm the Company upon request. COMMON SHARE PRICE RANGE wie Company's common stock is traded over-the-counter and is quoted on NASDAQ under the symbol BANG. The table below sets forth the high and low bid prices for the common stock aa reported by the National Quotation Bureau, Inc. The prices shown represent quotations between dealers and do not include retail ruark-up, mark-down or commission. They may not represent actual transactions. Bid Price Bid Price Year High Iow Year High Imw
',. 1975 13 % 9% 1979
$# 1976 14 % 11 % First Quarter 14 % 13 %
! 1977 16 % 148/s Second Quarter 14 % 13 %
Third Quarter 145/8 12 % N 1978 Fourth Quarter 125/8 11 % N 1980 First Quarter . 15 % 14 7s Second Quarter 15 % 144s, First Quarter . 12 % 9% Second Quarter 12 % 10 Third Quarter 15 % 14 % Third Quarter 12 % 10 % Fourth Quarter 14 % 13Fs 11 j $ Fourth Quarter 9% t .- (through Dec. 9)
- ?
! On July 7,1980, NASDAQ discontinued the practice of reporting representative quotations on j , NASDAQ stocks and began reporting inside quotations. On December 9,1980, the closing highest l bid and lowest asked quotations for shares of the Company's common stock, as reported by NASDAQ, were $9% and $10%, respectively.
, The book value of the common stock at September 30,1980 was $13.57 per share. Upon the l sale of the Additional Common Stock, the book value per share at that date on a pro forma basis l would have been $13.03.
l 7 . l l l
CAPITALIZATION The capitalization of the Company as of September 30,1980 and as adjusted to reflect the issuance and sale of the Additional Common Stock offered hereby and the application of net proceeds of approximately $2,286,000 from the sale to the reduction of short-term borrowings is as follows: pr Outstanding Adjusted
- Amount Per Cent Amount Per Cent First Mortgage Bonds (less sinking fund require-ments of $170,000) $32,300,000 48.3 % $32,300,000 46.77c Cumulative Preferred Stock, $100 par value, 250,000 sharea authorized:
Subject to mandatory redemption require-ments $ 5,000,000 $ 5,000,000 Not redeemable or redeemable solely at the option of the Company 4,734,000 4,734,000 g Total Preferred Stock $ 9,734,000 14.6 % $ 9,734,000 14.1 % Common Stock Investment: Common Stock, $5 par value, g, $ 9,135,200 $10,418,000 <' 5,000,000 shares authorized Amounts paid in excess of par value 7,942,772 9,018,952 Retained earnings 7,710,169 7,710,169
' Total Common Stock Investment $24,788,141 37.1 % $27,147,121 39.2 %
I' Total Capitalization $66,822,141 100.0 % $69,181,121 100.0 % Short-term Notes Payable to Banks $15,000,000 $12,714,000 Number of Common Shares Outstanding 1,827,M0 2,083,600 96 N *Also includes 6,560 shares of common stock issued October 20,1980 pursuant to the Dividend Re-investment and Common Stock Purchase Plan. 8
,. , , , F-7 .
ry 1 ~
=>' b
STATEMENTS OF INCOME The following statements of income of the Company for the five years ended December 31,1979 7 have been examined by Arthur Andersen & Co., independent public accountants, as set forth in their report included elsewhere in this Prospectus. The statement of income for the twelve months ended September 30,1980, not examined by independent public accountants, reflects, in the opinion of the Company, all adjustments (which include only normal accruals) necessary to present fairly the opera-tinns for such period. These statements should be read in conjunction with the Company's financial statements and related notes included elsewhere in this Prospectus, Twehe Months Ended September 30, Year Ended December 31, 1980 1979 1978 1977 1976 1975 (Unaudited) Electric Operating Revenues (Note 1) $62,650,358 $51,748,328 $42,626,796 $38,293,892 $31,336,404 $32,313,653 Operating Expenses: Purchased power $ 7,986,897 8 9,689,425 8 9,194,030 $ 8,321,465 $ 7,251,820 $ 5,908,631 Fuel for generation (Note 1).......... 32,100,277 23,365,489 17,568,718 14,227,030 10,890,845 12,065,287 Other operation . . . . . . 7,085,393 6,266,570 5,156,183 5,324,278 4,904,124 4,817,268-Ds Maintenance (Note 1) 1,948,993 2,077,141 1,456,350 1,362,266 1,429,532 1,249,682
~
Depreciation (Note 1) 2,987,567 2,814,541 2,200,513 2,094,989 2,029,358 1,962,021 Taxes - Local property and other . . . . . . . 1,0 6,604 1,822,225 1,514,646 1,519,750 1,479,E 1,362,374 Federal and state income (Note 2) 1,635,787 722,874 1,128,430 1,374,580 339,983 1,589,770
$55,581,518 $46,758,265 $38,218,870 $34,224,358 $28,324,989 $28,955,033 Operating Income . . . . . . . . . . . $ 7,068,840 $ 4,990,063 $ 4,407,926 $ 4,069,534 8 3,011,415 $ 3,358,(20 It # Other Income (Deductions):
Allowance for other funds used during construction (Note 1) . . . - - 531,293 233,173 147,91, 4A 044 Other, net of applicable income taxes (17,063) (5,886) (14,117) (1,605) (16,"70) (15,899) Income Before Interest Expense $ 7,051,777 4 4,984,177 $ 4,925,102 $ 4,301,102 8 3,142,559 8 3,387,765 Interest Expense;
,' First mortgage bonds (Note 5) . $ 2,530,483 $ 2,088,957 8 1,872,034 8 1,717,751 8 1,633,372 $ 1,131,456 Other (Note 6) . . ..... ....... 1,841,628 1,243,365 304,734 269,835 163,165 231,015 Allowance for borrowed funds used during construction (Note 1) (753,232) (792,693) (643,149) (445,169) (199,464) (62,091) 8 3,618,879 8 2,539,629 $ 1,533,619 $ 1,542,417 TT,597,073 $ 1,300,380
- r. Income Before Cumulative Efect of a
'f Change in Accounting Principle . . . . $ 3,432,898 8 2,444,548 $ 3,391,483 $ 2,758,685 $ 1,545,486 3 2,087,385 Cumulative efet on prior periods (to
. December 31,1978) of changing to a diferent method cf recording revenue
( net of related income taxes of N $1,034,000 (Note 1) - 1,043,000 - - - -
% Net Income (Note A) . . . . . . . $ 3,432,898 $ 3,487,548 4 3,391,483 $ 2,758,685 $ 1,545,486 8 2,087,385 Dividends on Preferred Stock . 735,570 546,420 450,570 450,570 368,870 265,570 Earnings Applicable to Common Stock $ 2,697,328 8 2,941,128 8 2,940,913 $ 2,308,115 $ 1,176,616 8 1,821,815 Weighted Average Number of Bhares 1,818,449 1,801,906 1,658,985 1,317,816 ] 33,710 1,139,960 Earnings per common share based on weighted average number of shares
, , outstanding during the period: ' ." F Before cumulative efect of a change in accounting principle . . ...... $1.48 $1.05 $1.77 $1.75 8.95 $1.60 I Cumulative efect on prior periods i (to December 31, 1978) of chang-ing to a diferent method of record-ing revenue . - .58 - - - - Net (Note A) $1.48 $1.63 $1.77 $1.75 $.95 $1.60 Pro forma earnings applicable to com-mon stock assuming the new method ording revenue is applied retro-
$ 2,697,328 $ 1,898,128 8 3,045,475 $ 2,424,614 $ 1,314,914 8 1,744,717 Pro forma earnings per share $147 $1T05 $1.83 $1.84 $1.06 $1.53 Dividends declared per common share $1.52 $1.52 $1.46 $1.41 $1.34 $1.29 Numbered notes refer to Notes to Financial Statements of the Company. All such Notes and the Note on the following page are an integral part of these Statements of Income.
9
NOTE TO STATEMENTS OF INCOME (Unaudited) ( A) QUARTERLY FINANCIAL INFoRMATION (Unaudited) Unaudited quarterly financial inforn.ation pertaining to the results of operations for the nine months e September 30,1980 and for the years ended December 31,1979 and 1978 is shown below. Information for one quarterly period is not necessarily indicative of the results which may be expected for a twelve month period due to seasonal and other factors. Quarter Ended (Thousands except Per Share Amounts) 1980 1979 1978 September June Wrch December September June March December Sep. amber June hrch Electric Operating Revenues $16,896 $14,630 $16,165 $14,959 $12,509 $11,844 $12,436 $12,797 $9,597 $9,513 $10,715 Operating Income . 1,675 1,196 1,585 2,013 543 1,439 395 1,285 563 1,134 1,425 Income (Loss) before cumu-lative effect of a change in accounting principle . 685 140 715 1,893 (95) 817 (170) 958 447 853 1,133 p Net Income (less) 685 140 715 1,893 (95) 817 873 958 f47 853 1,133 Dividends on Preferred Stock 184 184 184 184 137 113 113 113 113 113 113
+ Earnings (Loss) Applicable to Common Stock 501 (44) 531 1,709 (232) 704 760 846 334 740 1,021 y s.
Earnings (Loss) Per Com-mon Share 3.27 $(.02) 8.28 8.95 $ (.13) $.39 $.42 8.51 8.20 3.45 S.61 Pro forma earnings (loss) . per share assuming the new
,' method of recording reve-nue (implemented in the Arst quarter of 1979) is applied retroactively $.27 $ (.02) 8.29 8.95 $ (.13) 8.39 $(.16) $.51 $.43 8.32
~ r.
;f The quarter ended September 30,1980 includes revenue from increased base cates approved by the MPUC effective August 8,1980; therefore, higher rates were earned for electricity sold in 54 of the 92 days in that quarter.
d"6 The quarter ended March 31,1979 inclur'es the cumulative effect on prior periods (to December 31, 1978) _~ of changing to a different method of recording revenue, resulting in an after-tax increase in earnings in such quarter of $1,413,000 or $.58 per common share (See the applicable portion of Note 1 of Notes to Financial Statements of the Company). The quarter ended December 31,1979 includes the deferral of $3,806,901 of previously expensed fuel costs.
; Such deferral was authcrized by the MPUC upon implementation of new fuel clause regulations which assured i the recovery of these costs by the Company over a three year period beginni2rg January 1,1980. The after-tax effect of this deferral was to increr.se earnings in December 1979 by $1.06 per common share (See the applicable portion of Note 1 of Notes to Financial Statements of the Company).
10
.g.-_..
q r
. $=7
;+ . n. .. -
,y
- 6
l l Pro arma Earnings Per Common Share l l On a pro forma basis, assuming the Additional Common Stock offered hereby had been outstand-ing for the ectire twelve months ended September CO,1980, and assuming that the estimated net ; { hproceeds of $2,2dG,000 had been applied to reduce short. term debt, Earnings per Common Share would have been $1.39 for such period.
. Recent Results of Operations Information with respect to the results of operations for the twelve months ended October 31, 1980 and September 30,1980 is e follows:
Twehe Twelve Monthe Months b Ended Ended October 31, September 30, 1980 1980 (Thousande except Per Share Amounts)
,, Operating Revenues $64,085 $62,650 4 .
Operating Income $ 7,565 $ 7,069 Net Income . $ 3,603 $ 3,433 Dividends on Preferred Stock $ 736 $ 736 Earnings Applicable to Common Stock $ 3,067 $ 2,697 Avrrage Shares of Common Stock Outstending 1,820 1,818 Earnings per Common Share $ 1.69 $ 1.48 The foregoing information is unaudited and, in the opinion of the Company, reflects all adjust-p ments (which include only normal accruals) necessary to present fairly the operaticns for such
;~ period.
The twelve month periods ended October 31,1980 and September 30,1980 contain the positive impact on earnings ($1.06 per common share) of the December 1979 deferral of $3.8 million of previously expensed fuel costs (See Note 1 of Notes to Financial Statements of the Company). Earn-
'; ings for the year ending December 31,1980 will not include the effect of this deferral.
The twelve mond. periods shown above partially reflect the 18c/c basic rate increase approved by the MPUC effective August 8,1980, which was designed to yield additional revenue of $4.7 million umtally. The twelve month perial ended October 31, 1980 contains 85 days of electricity sales at these higher rates compared to 54 days for the twelve month period ended September 30,1980.
. Earnings per share for the twelve uonths ended October 31,1980 increased $.21 over the twelve month period ended September 30,1980, due principally to the positive impact of the new higher rates.
, 11 .
N , , , - , ---
MANAGEMENTS DISCUSSION AND ANALYSIS OF TIIE STATEMENTS OF INCOME General As a result of the deferral in December 1979 of $3.8 million of previously expensed fuel costs (See Note ( A) above and Note 1 of Notes to Financial Statements of the Company), earnings a cable to common stock for that month were increased by $1.06 per common share. Earnings for the year ended December 31.1980 will not include the effect of this deferral.
" Electric Operating Revenues" consist of two components " General Rate Revenues" and " Fuel Charge Revenues" For the purposes of the period to period analysis below, the following table sets forth " General Rate Revenues" and " Fuel Charge Revenues" for the twelve months ended September 30,1980 and for the years ended December 31,1979,1978 and 1977:
Twelve Months Sep I r30, 1980 1979 1978 1977 (In Thousands of Dollars) General Rate Revenues $28,202 $27,341 $26,253 $24,598 b ~ Fuel Charge Revenues 34,448 24,407 16,374 13,696 Electric Operating Revenues $62,650 $51,748 $42,627 $38,294 f, Twelve Months Ended September 30,1980 Compared with the Year 1979
" Electric Operating Revenues" increased by $10.9 million or 219e attributable principally to an increase of $10 million or 419c in " Fuel Charge Revenues" as a ruult of higher fuel costs incurred by the Company and passed on to customers.
e, " Purchased poicer" expense decreased $1.7 million or 179c as a result of a 30 MW reduction in
.' the purchased power contract with Boston Edison Company effective November 1,1979.
" Fuel for generation" expense increased $8.7 million or 379c primarily as a result of substantial increases in the price of oil and replacement of hydro-electric generation lost due to low water
~f conditions.
- "Other o;>cration" expense increased $819,000 or 13r/o due to a general wage increasa effective January 1,1980 and other generel inflation.
3 " Depreciation" expense for the 1580 period includes the amortization of $68,000 of the invest-ment in the cancelled New England Power Company nuclear units (See Note 9 of Notes to Financial Statements of the Company).
" Taxes-Fedemi and state income" expense increased $913,0d) or 126c/c due to the increase in
- taxable income before the cumulative effect of the change in accounting principle (See Note 1 of
.l Notes to Financial Statements of the Company).
"Allottance for other funds used during construction" was nf accrued because the average bal-ance of short-term notes Layable exceeded the average balance of construction work in progress, with the result that the AFDC was limited to the borrowed component.
12 1
;, [ ', A [
* *i., . .
< t
. * - m
" Interest Expense: First mortgage bonds" increased $441,000 or 21% as a result of the August 31,1979 issuance of $7 million of 10%% bonds, offset somewhat by the May 1980 retirement of $2 million of 2%% bonds.
I h " Interest Expense: Other" increased $598,000 or 48% due to an increase in short-term borrow-ings and higher short-term interest rates. Average short-term borrowings were $11.1 million for the 1980 period compared to $9.3 million in 1979, and the average rate of interest was 16.4% in the 1980 period compared to 13.2% in 1979.
" Dividends on Preferred Stock" increased $189,000 or 34% reflecting the issuance on August 31, 1979 of 30,000 shares of 9%% preferred stock.
g 1979 Compared with 1978
- " Electric Operating Revenues" increased $9.1 million or 219 primarily as a result of an $8 million or 49% increase in " Fuel Charge Revenues" due to higher fuel costs incurred by the Company and passed on to customers.
" Fuel for generation" expense increased $5.8 : ' lion or 33% duc to substantial increases in the 8i price of oil, the amortization of $2.5 million of replacement energy costs as a result of two Maine Yankee shutdewns in 1979, and an increase in kilowatt-hour ("KWII") sales.
"Other operation" expense increased $1.1 million or 21% as a result of expenses of $251,000 attributable to Wyman 4 which became operational on December 1,1978, an Internal Revenue Service adjustment attributable to a prior period which reduced the 1978 expense by approximately $300,000, and increased wages and other infiationary pressures.
, " Maintenance" expense increased $620,000 or 43% principally because of $222,000 attributable f to Wyman 4 and increased wages and other inflationary pressures.
" Depreciation" expense increased $614,000 or 28% '.rgely as a result of depreciation attributable 4
to Wyman 4 of $485,000. S " Taxes-Local property and other" increased $307,000 or 20% due primarily to the tax at Wyman 4 as well as generally increased taxable property and higher property tax rates. l " Taxes-Federal and stufe income" decreased $405,000 or 369 because of a reduction in taxable mcome before the cumulative effect of the change in accounting principle as well as the lower federal tax rate.
? " Allowance for other funds used during construction" was not accrued because the average bal-l ance of short-term notes payable exceeded the average balance of construction work in progress, with j '
the result that the AFDC was limited to the borrowed component.
" Interest Expense: First mortgage bonds" increased $216,000 or 12% as a result of the August 31,1979 issuance of $7 million of 10%% bonds.
" Interest Expense: Other" increased $939,000 or 308% because the average short-term borrow-ings increased $6.8 million and the average interest rate increased from i F to 13.2%.
I 13 .
l
" Allowance for borrowed funds used during construction" increased $149,000 or 23% due to higher average short. term borrowings, and the higher average interest rate, offset somewhat by a reduction in the Company's construction s 'k in progress due to the completion of Wyman 4.
" Dividends on Preferred Stock" increased $95 , 000 or 217c reflecting the issuance on August 31, p7 '
- 1979 of 30,000 shares of 91/f/c preferred stmk.
1978 Compared with 1977
" Electric Operating Revenues" increased $4.3 million or 117c due to higher fuel costs passed on to customers and increased KWII sales.
" Purchased power" expense increased $873,000 or 109 due principally to a 10 MW increase in the purchased power contract with Boston Edison Company effective November 1,1977.
" Fuel for generation" expense increased $3.3 million or 23% due to below normal wate2 condi.
tions, a refueling shutdown at Maine Yankee, a reduction in the operation of Graham Station as a result of cooling water intake problems, and an increase in KWII sales.
" Taxes - Federal and state income" decreama $246,000 or 18c/c due principally to lower amounts b ~ of AFDC in 1978, the tax effects of which are required to be flowed through.
" Allowance for other funds used during construction" increased $298,000 or 128'/c as a result of increa. sed expenditures for construction in progress, primarily Wyman 4, the New England Power
. Company nuclear units and the Seabrook nuclear units.
To
+! " Interest Expense: First mortgage bonds" increased $154,000 or 9(/c as a rault of the refunding in January 1978 ef $2.5 million of bonds at higher interest rate.
" Allowance for borrowed funds used dw . construction" increased $198,000 or 44% as a result
, of increased expenditures for construction u. pregress, primarily for Wyman 4, the New England
.' Power Company nuclear units and the Seabrook nuclear units.
.p m
3 L i 14
^*
,a I/.?'"
,y l-
' (
- w.
l
7
, OPERATING STATISTICS Twelve Months Sept r 30, Year Ended December 31, 1980 1979 1978 1977 1976 1975 -
{ KWH Company Generated and Pur-chased (In Thousands): Hydro-Company generated 233,721 246,052 213,195 245,821 254,812 232,341 Nuclear - Maine Yankee . . . . . 325,736 326,506 402,951 388,704 447,9S0 340,246 Steam and internal combustion-Company generated 136,506 77,209 15,910 11,498 113,119 118?86 Purchased 729,993 786,170 705,465 588,696 37'!,000 382,G4 Total 1,425,956 1,435,937 1,337,521 1,234,719 1,187,911 1,073,577 less: System losses 108,439 99,812 103,048 101,563 103,624 87,294 System use 4,858 4,374 3,942 4,224 5,157 6,694 V 113,297 104,166 106,990 105,787 108,781 93,988 Total 1,312,659 1,331,751 1,230,531 1,128,932 1,079,130 979,5s9 Net Output (Percent cf Total): Hydro generation . ..... 16.4 % 17.1 % 16.0 % 19.9 % 21.5 % 21.6 % 8 team and internal combustion gen-eration ... 60.8 60.1 53.9 48.6 40.8 46.7 Nuclear generation 22.8 22.8 30.1 31.5 37.7 31.7 Total , h& , 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % KWH Bales (In Thousands): Residential . 384,842(A) 381,266(A) 369,989 349,869 335,692 308,253 Commercial . . . . . . . 221,137 221,071 213,777 198,384 186,271 170,291 Power (industrial) 593,918 608,451 532,007 469,632 448,463 399,432 Government agencies . 71,369 73,341 72,308 70,858 69,058 63,684 Electric utilities . . . . . . 28,848 30,701 31,220 29,311 29,246 27,766 Street and area lighting . 11,400 11,563 11,230 10,818 10,400 10,163 Total 1,311,514 (A) 1,326,393(A) 1.v30,531 1,128,932 1,079,130 979,589 Electric Operating Revenues 4 (In Thousands):
,{- Residential $22,327(B) 818,769(B) $16,171 814,994 $12,306 $12,618
., Commercial . . . . . . . 12,256 10,384 9,013 8,207 6,649 6,705 Power (industrial) 22,500 17,853 13,309 11,164 9,133 9,580 Government agencies . 3,046 2,523 2,147 2,021 1,691 1,794 3 Electrie utilities . . . . . . 1,199 1,056 892 817 675 707 g ( Street and area lighting . 981 874 804 763 723 749 Other revenues 341 289 291 328 159 161 i N Total $62,M0(B) 451,748(B) 442,627 $38,294 $31,336 ^332,314 l Pesidential Sales Averages:
Annual KWH used . 5,919 5,952 5,721 5,609 5,505 5,184
- Annual electric bill . 8 334 8 287 8 250 $ 241 $ 203 $ 213 l Revenue per KWH .... 5.64( 4.82( 4.37( 4.29( 3.67( 4.09(
j Number of Customers- Avg.
- Residential 65,519 64,958 64,666 62,371 60,975 59,462 l 1 Commercial . . . . . . . 8,101 8,276 7,944 7,623 7,359 7,137 i Power (industrial) 959 979 951 928 955 993 Government agendes . 79 77 76 74 74 75 Electric utilities . 8 8 8 7 7 5
, Total 74,666 74,298 73,645 71,003 69,370 67,672 Peak Load ( KW) . . . . . . . . . . . . . . . 222,000 222,000 215,900 198,300 195,400 177,800 Installed Capacity (KW)-Owned and Purchased 280,200 274,600 278,200 251,800 240,900 220,300 trad Factor 71.1 % 73.8 % 70.7 % 71.1 % 69.1 % 6? 6%
'I,
( Includes 1,145,300 and (5,358,000) of changes in unbilled KWH during 1980 and 1979, respec tively. l (B) Includes $561,000 and $142,000 of changes in unbilled revenues during 1980 and 1979, respec-tively. . l 15 1
MAP OF TERRITORY SERVED LEGEND ,
- o Substations e Hydro Generation A Internal Combustion Generation a Steam Generation y Nuclear Generation .
Transmission Lines Quebec - Maine ___ erincipai Interconnections i) MEPCO (' ~' 345 KV Millinocket Medway 1 New f, Brunswick .i
+' Milo Linco I M l I ' 4 Eastport
( /Oron A Banpor Veazie , J
.Orrington Brewe% Machias
-P Buckspop Ellsworth
.)
a Sedgwick Bar Harbor z [ g,y
./' Wiscasset, Maine Yankee Atomic Power Co.
g ., r' lA .O Atlantic )
' %,, 6 'q Yarmouth, Wyman Unit No. 4 Ocean s
16
,f..,,- 1,
* ', *?* , . ,* .
. . .. ~
~J f
m ( BUSINESS General The Compe.ny is a public v*il:ty engaged in the generation, purchase, transmission, distribution ( h and sale of electric energy, with a service area of 4,850 square miles having a population of approx mately 190,000 persons and covering portions of the counties of Penobscot, IIancock, Washington, Waldo, Piscataquis and Aroostook in Eastern 31aine. With minor exceptions which are not material, no other electric utility operates in competition with the Company in any city or town in which it operates. Its customers are residential, commercial, industrial and governmental. The Company also sells energy to other utilities for resale. The Company serves approximately 74,000 customers, exclud-ing summer seasonal customers. Some of the more important industries served are those engaged in the manufacture of pulp and paper products, chemicals, lumber and woodworking, and footwear. In 1979,29.0% of the Company's KWII sales were to residential customers,16.6% were to commercial customers,45.8% were to industrial customers [of which approximately one-half was to IMC Chemical Group, Inc. ("IMC")] and 8.6% were to municipal and other customers. In 1979 IMC, the Company's
, largest single customer (which is served on an interruptible basis), accounted for 7.9% of the Company's general rate revenues,15.2% of its electric operating revenues and 23.4% of its KWII sales. In 1975 DIC instituted proceedings before the MPUC requesting that it be served by arother D utility (See "Pending Legal Proceedings"). If the MPUC should grant the request, the Cor.pany would apply for appropriate rate relief (an increase in basic rates) as a condition of the order, and in the absence of such rate relief, the loss of this customer would have an adverse effect on the Company's earnings.
- The Compny's electric operating revenues, including fuel revenues, have increased over the lat five years from $32.3 million in 1975 to $51.7 million in 1979. KWII sold were 980 million in 1975
- and 1,326 million in 1979 (See " Operating Statistics"). The maximum one-hour prime peak load 4,, experienced to date by the Company's system was 222.0 MW on December 18, 1979. At that time
~J the Company had available to meet such load 274.6 MW, including 122.4 MW from Company operated
'.~
generating capacity, 51.3 MW from its entitlement from Wyman 4, 61.0 MW from its entitlement from Maine Yankee, snd 39.9 MW of purchased capacity. Because the generation and transmission g i, systems of the major New England utilities, including the Company, are operated as if they were a
% single system, the ability of the Company to meet its load is depender.t upon the ability of the New England utilities to meet the New England load (See "New England Power Pool").
During the period 1975 through 1979 winter demand has exceeded summer demand by approxi. mately 20%.
. During the period 1975 through 1979, the Company's KWH sales have grown at an average ~
annual compound growth rate of approximately 8%. The Company's most recent official forecast of KWII sales, completed in March 1980, indicated an annual compound g.wth rate of approximately U% for'the period 1980 through 1985. Ilowever, sales to date in 1980 indicate that this forecasted rue of growth will be revised downward in the Company's next efficial forecast. While firm KWII sales were approximately 3.8% higher in the ten months ended October 31, 1980 than in the same period in 1979, much if not all of this increase is attributable to substantially higher KWII sales to certain industrial customers whose own hydro-electric generation has been reduced in 1980 due to low water conditions, and total KWH sales inauding non-firm or interruptible sales (primarily to DIC) were approximately 1.9% lower than the same period in 1979. 17 -
New England Paw:r 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 joiat 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 electric generating capacity for New England is done on a regional basis under NEPOOL. At the time of the 1979-1980 NEPOOL wiraer peak, the New England utilitica had about 21,587 31W of installed capacity to meet the New England peak load of about 15,169 31W. 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 suflicient through its own generating facilitics, its participations and through purchases to meet its NEPOOL obligations in the foreseeable future.
Properties and Power Supply-Existing Facilities In order to meet its load growth and reserve obligations under NEPOOL, the Company, in addi-
+ tion to utilizing its own generating capacity, acquires capacity and energy through contracts with other utilities and through joint ownership of generating facilities. The Company estimates that it f, has sufficient generating capacity, through a combination of wholly owned and jointly owned gen-
+' erating facilities and purchased power contracts, to meet anticipated load growth through 1985. Be-cause a significant portion of the Company's capacity requirements through the mid-1980's is being met by purchased power contracts described below which expire during that period, the Company will have requirements for replacement of capacity now purchased in addition to provi6ina for continued
, growth.
The Company's KWII output, generated by its own facilities and purchased from others, for 1977,1978,1979 and its estimate for 1980 by type of facility is shown below. + P Source 1980 Est. 1979 1978 1977 Fossil Fuel 61 9 ' 607c' 54 9 49 9 Nuclear 23 7o' 23 9 ' 307o 317o f ' Hydro-Electric Total 16 9o 1009 179c 1009c 16Fo 1007o 209c 1007c
'31aine Yankee is usually shut down for six to eight weeks annually for refueling and scheduled maintenance. During 1979 and 1980,31aine Yankee was shut down for longer periods of time as a result of NRC ordered safety checks, unscheduled maintenance and fuel modifications, during which 7 periods " er generation was replaced by fossil generation.
Fossil Fuel Energy Sources. The Company purchases energy pursuant to an agreement with Bos-ton Edison Company from its 31ystic Unit No. 7, an oil-fired plant. Purchases under this contract began 18 L
- 6
7
' in mid.1975 at a level of 20 30V, increased to 60 ARV in 1977, are currently at 40 3nV, and will increase again to as much as 95 ARV in late 1983. The contract terminates in late '984.
The Company also purchases energy from Maine Electric Power Company, Inc. ("MEPCO"), ( h in which the Company has a 14.27c ownership interest. MEPCO owns a 345 kilovolt transmission line which runs from Wiseasset, Maine, to the border of New Brunswick, Canada, where it connects with lines of the New Brunswick Electric Power Commission ("New Brunswick"). The Company - connects with the 3fEPCO lines at Orringim, Maine. MEPCO does not generate electric energy; it purchases energy from Canadian sourcer and sells to, and for a fee, transmits energy for, its . ;, owners and other New England utilities. The Company is currently entitled to 9.6 MW of MEPCO's total entitlement of 400 MW provided
. under a untract with New Brunswick until October 31,1985, at which time the entitlement will be D reduced ta 4.8 MW through October 31,1986 when the contract terminates. However, this contract may be amended or terminated sooner than anticipated as a result of a dispute between MEPCO and the New England utilities (including the Company) that participate in the contract on the one hand, and New Brunswick and the Canadian federal government on the other (See "Pending Legal n Proceedings").
Tie Company also purchases energy from other utilities, and from New Brunswick through MEPCO, on a short-term basis from time to time when it is economical to do so to displace higher cost energy from other sources. The Company, as a tenant in common with other utilities, owns 8.333%, or approximately 50 MW, of Wyman 4. The Company is entitled to 8.333% of the energy produced and pays the same per-
, centage of the operating expenses. The Company also owns three oil-fired generating units located at j its Graham Station in Yeazie, Maine having a capacity of 59.7 MW and fourteen internal combustion . ?,
- ganerating units located at five stations having a total capacity of 24.2 MW.
h Under the Powerplant and Industrial Fuel Use Act of 1978, a "new" electric powerplant is prohibited from using oil as a primary energy source and is required to be constructed with the eyL ( capability to burn coal or alternate fuels. An " existing" oil-fired powerplant may be required by the 5; Department of Energy to convert to the use of coal or an alternate energy source, provided such plant has the capability to utilize coal or such alternate source or could have that capability, if
- financially feasible, without being subject to substantial physical modification or substantial reduction in rated capacity. The Company's Graham Station units qualify as " existing" powerplants, atd the
. Company believes that Wyman 4 qualifies as an " existing" powerplant. In view of the lack of
.' experience to date under this Act, no assurances can be given as to the ultimate status and treatment
-r of the Company's oil-fired units or Wyman 4 under the Act.
l ' Nuclear Energy Source. All nuclear generated energy sold by the Company is acquired from Maine i Yankee. Because the Company holds an equity ownership interest in Maine Yankee Atomic Power
. Company of approximately 7%, it is entitled to purchase approximately 6.9% of the output of Maine Yankee. In addition, en arrangement with one other participant which will terminate on June 1,
>- 1983 entitles the Company to another 0.4% af such output, for a total entitlement of approximately 61 MW. The Company is obligated to pay approximately 7.3% of Maine Yankee's operating expenses and capital costs.
. 19 -
i . I l 4
3frine Yankee uns shut down for twelve weeks in the spring of 1979 for NRC ordered safety checks, and in 1950 was shut down for a total of five weeks for unscheduled maintenance and fuel modifications and operated at a reduced level for about six weeks as a result of the replacen ent of a feedwater pump. These shutdowns were in addition to scheduled shutdowns for refueling and . maintenance. FI A petition calling for the termination of current and future nuclear power generation in 3Iaine for alleged safety and economic reasons, and the consequent shutdown of 3faine Yankee, was pre-sented to the 31aine Legislature in February 19S0. The Legislature referred te proposal to a vote of the electorate which was held on September 23,1980. The measure was defeated by a 59fo to 417c margin; however, the supporters of the proposal have indicated that they will seek another rcfer-
- endum vote on this or a similar proposal. The Company believes 3faine Yankee is a safe and eco-nomical source of base load power, and the Company will assist in taking all reasonable steps necessary to support the continued operation of the plant.
Hydro-Electric Energy Sources. All hydro-electric energy sold by the Company is generated at its wn facilities. The Company owns eight hydro-electric stations having a total capacity of 34 31W. The hydro-electric stations are used to the maximum extent possible, depending upon water avail-y ability. All of the Company's hydro-electric stations are liccused under the Federal Power Act (See
" Rates and Regulation").
2 Other Properties. The Company owns more than 560 miles of transmission lines and 2,500 miles of distribution lines to serve its customers. Other properties consist of office, garage and warehouse facilities at various locations in its service area.
} *-
Properties and Power Supply- Future Power Sources Seabrook. The only electric generating facilities planned or under construction in which the Con.. pany is currently involved are the Seabrook nuclear units. As noted in " Construction and Finane-ing", the Company has a 0.37249 % interest, or about 8.6 31W, in that project, and has contracted to purchase an additional 1.801427c interest, or 41.4 31W, for a total interest of 2.173917c, or approxi-mately 50 31W. The necessary approvals and permits for the construction of the Seabrook nuclear units have
,~ been obtained, and have been upheld by the courts on appeal by a number of opposition groups. Con-struction is currently in progress, although at a reduced level from that originally scheduled for 1980 (see below). Significant delays (including the suspension of construction for seven months in 1977 and p three weeks in 1978) resulting from actions by such opposition groups have greatly increased costs. Them
- ~ are still proceedings pending before the NRC Atomic Safety and Licensing Board relating to seismic issues, and appeals pending before various courts. In addition, further proceedings before the NRC relating to the licensing of the units will be required for operatioa, including a review of emergency response and evacuation plans for which other governmental agencies are in part responsible, and other proceedings and appeals are possible. The Company is unable to predict the outcome of suh proceedings or what effect current or further administrative or court proceedings may have on the cost or completion of the project or on the Company.
PSNII, which currently owns 507c of the Seabrook nuclear units, is experiencing continuing difficulties in financing its construction program. In view of these difficulties, PSNII initiated efforts 20
, F
.y , -
s-
- u
(
~
in 31 arch 1979 to sell a 225c ownership share to other utilities (the "3Iarch offer"). The total amount of the 3Iarch offer was initially accepted by a group of nine New England utilities (includ-ing the Company), but three utilities later determined that they could not take a part or all of k 6 the amount 1979 PSNIIaccepted, thereby reoffered the reducing remaining acceptances 10% interest, of thecommitments out of which 3Iarch offer were to about 129.for received In October approximately 2.6% (the " October offer"). The total of the 31 arch offer and the October offer is approximately 15%; accordingly the transfers, if consummated, would reduce PSNII's share of the Seabrook nuclear units to approximately 35%. The Company and the other transferees of interests in the Seabrook nuclear units under the 3Iarch offer and the October offer will acquire their interests gradually over an adjt.stment period (the " Adjustment Period"). During the Adjustment Period, the transferees will share pro rata the con. b struction costs otherwise attributable to PSNII's interest until the interests of the transferees have been increased and PSNII's interest has been decreased accordingly. The Adjustment Period for the trans-ferees under the 31 arch offer (including the Company) will begin only after receipt by all of the S accepting transferees of all required regulatory approvals and the obtaining of in9ial financing in the case of one such transferee. All necessary approvals have been received with the exception of 6 that of the 31assachusetts Department of Public Utilities ("31DPU"), from which agency three of
- I the transferees must receive approval in order to increase their shares in the Seabrook nuclear units, and one other transferee must receive a,pproval for financing its increased share. On October 30, 1980 the 31DPU issutd its order approving the increase in the ownership shares for the three trans-ferees requiring such approval. IIcarings have been completed with respect to the financing approval
< for the other transferee, but no order has yet been issued. The Adjustment Period for transferees under the October offer will not begin prior to that of transferees under the 31 arch offer, and if the
,9 Adjustment Period for any transferee under the October offer has not commenced by January 1, 1981, that transferee's commitment may be terminated by the transferee or by PSNH. The trans-
'i ferees and PSNII l ave agreed that appeals from orders of regulatory agencies approving the transfers
~
, shall not delay the commencement of the Adjustment Period unless the order or orders are stayed pending such appeal. Pending the commencement of the Adjustment Period, PSNII must continue pf ( to finance the construction of the project at the 50% level.
!~
On 3Iarch 20,1980, PSNII announced that due to the unsettled state of the capital markets and the high cost of external funds it would substantially reduce the overall level of construction of the Seabrook project in order to lessen PSNII's external financing requirements for 1980. The reduction of the level of construction will have the effect of increasing the costs of the units and may cause I- the scheduled completion dates to be further deferred. It is anticipated that the reduction will f' continue until the necessary regulatory approvals for reduction of PSNII's interest in the plant are obtained, assuming that the capital markets are reasonably stable at that time. As part of its ceder of June 9,1980 granting PSNII an increase in its retail rates, the New IIampshire Public Utilities Commission ("NIIPUC") ordered PSNII to delay work on Unit No. 2 of the Seabrook plant for three years, except for those areas common to both units. Upon rehearing,
~
the NHPUC amended its order to p ovide that such delay shall continue only until commencement of the Adjustment Period referred to above with respect to PSNII's reduction in its ownership interest. 21 - 1
In light of the reduction in construction activities ct the Sc:, brook nuclear units, cnd a ten-week ironworkers' strike in the summer of 1980, PSNil has advised the Company that it now appears that the most recently scheduled completion date for Seabrook nuclear units of 1983 and 19S5 will be extended, although the extent to which such dates will be extended will not be known befare the first quarter of 1981. h: Ofher Future Sources. The Company is considering a number of alternatives for the provision of necessary electric generation in the late 1980's and beyond. The Company is currently assessing the feasibility of obtaining additional hydro-electric generation from the Penobscot River basin, either by increasing the output of existing stations or by the construction of new stations at various unde-veloped sites. Other alternatives for additional electric generation may include coal-fired units, either wholly owned by the Company or jointly owned by the Company and other utilities. The Company is currently conducting preliminary negotiations with New Brunswick for the purchase of 30 5tw of generating capacity on a unit coatract basis from New Brunswick's nuclear generating unit under construction at Point Lepreau. In the event the Seabrook nuclear units are further delayed or cancelled, or if the Company does not purchase the additional 41.4 31W in those units as described above, or if other planned alternatives for additional generating capacity do not occur, the Company would attempt to meet its capacity requirements by purchasing capacity from other utilities. No arrangements for such pur-chases have been made, j, Fuel Supply Oil. New England utilities, including the Company, make greater use of fuel oil for generation of electricity than utilities in other regions of the country. 31ost fuel oil supplies for New England utilities are derived from foreign sources which are subject to interruption and to unpredictable price . increases. The foregoing factors, possible actions by the federal government, and events in the Sliddle East may have an impact upon the price or availability of fuel oil, w upon the Company's operations. The Company carries a supply of fuel oil sufficient to operate its Veazie plant at full capacity
,_ over a period of at least 8 days, even though such an extended period of operation at full capacity is
[* unlikely because of the Company's participation in NEPOOL. The Company does not have long term contracts for fuel oil. The Company believes that, due to a long association with its vendor, its needs will continue to be met without the necessity of contractual arrangements. There can be no assurance M the vendor will continue to be able to fulfill these needs. The Company has been advised by Central 3faine Power Company, the lead owner and operator of Wyman 4, that, subj et to unforeseen events and the factors set forth above wnh respect to the availability and use of fuel oil generally, it believes it will be able to obtain sufficient fuel oil with no more than the maxi mum permitted level of sulphur content to operate that unit.
/_ 3fost if not all of the energy the Company purchases under purchased power contracts and 7 through the operation of NEPOOL, other than purchases from 3faine Yankee,is produced from fossil fuel, principally fuel oil. The Company has no control over fuel supplies of other utilities from which it purchases energy.
22
- r. ,
The cost of fuel oil per Larrel, including transpartation charges and sales taxes, used by the Company at its Graham Station facility, for the past five years at year end was: 1975 - $11.47; 1976 - $12.71; 1977 - $13.21; 1978 - $12.71; 1979 - $24.86. The cost of oil dropped sharply during g the first four months of 1980, but has since increased significantly. As of November 29,1980, the efree tive date of the most recent price increase, the cost (including transportation charges and sales taxes) has risen to $34.18. The fuel component of oil-fired energy purchased by the Company for resale has been subject to similar cost increases. The Company's retail tariffs include a factor for the current recovery of estimated fuel costs, including the fuel component of purchased power, based upon projec-tions of such costs and KWII sales over a twelve month period, which factar may be amended at certain intervals to correct for actual experience (See " Rates and Regulation"). Nuclear Fuel. The cycle of production and utilization of nuclear fuel consists of the mining and b milling of uranium ore, the convmion of the resulting concentrate to uranium hexafluoride, the
~ enrichment of the uranium hexafluoride, the fabrication of fuel assemblies, the utilizat:on of the nuclear fuel and the disposition of spent fuel.
~
The Company has been aMsed by Maine Yankee that it has contracted for the purchase of all of
. its ur'anium concentrate requirements through 1983. In addition, Maine Yankee has contracted with f* a supplier for the purchase of up to 1.3 million pounds of uranium concentrates, deliveries of which,.
nlthough contingent upon the commercial operation of a processing facility currently under construc-tion, are scheduled for 1981 to 1992 and would fulfil all of its nuclear fuel requirements through 1986 and partially fulfill such requirements through 1992. Maine Yankee has a conversion contract through
, 1983 and has a contract with the Department of Energy for enrichment services through 2002. Maine , Yankee's fabrication requirements are covered through 1983, with a contract option for two additional years. As is the case throughout the nuclear industry, Maine Yankee has no contractual arrangements ; for the final disposition of spent fuel.
f In September 1979 Maine Yankee filed with the NRC a proposed change in its operating license
",-~
to increase its existing spent fuel storage capacity by providing more compact fuel storage. A Maine citizen's group intervened in the proceeding and requested a hearing, and the Attorney General of ( Maine filed a notice of intent to participate in any hearings. The Company cannot predict the scope of the proceeding, its duration or its outcome. l The present capacity of the spent fuel pool at the Maine Yankee plant will be filled in 1987 and after 1984 would not accommodate a full core removal. Maine Yankee is currently re-evaluating a ! proposed modification for its spent fuel pool, but its proposal will not differ substantially from designs heretofore implemented at other nuclear facilities, which essentially provide for more compact storage in the existing spent fuel pool. If the proposed modification i- not approved, Maine Yankee l will have to develop alternative plans which would involve further as al by the NRC. The Company has been advised by PSNII that it has contracted for all of the uranium concen. l trate required to commence operation of the Seabrook nuclear units and is actively seeking additional l sources, and has contracted for certain other segm; uts of the nuclear fuel production cycle through various dates, ranging from 1986 to 2008. There are currently no nuclear fuel reprocessing facilities in operation in the United States. l The Carter Administration has taken the position that the United States should defer indJnitely ( commercial reprocessing and recycling of spent nuclear fuel. The unavailability of such services l 23 - l I i
has led to the storage of spent fuel on site, as in the case of 3Icine Yenkee. If reprocessing facilities are not available when required for the Seabrook nuclear units and if no decision has been made to dispose of spent fuel without reprocessing, storage for the spent fuel from those units will also have to be arranged. Although the cost of such storage is not known at the present time, it is anticipated that such cost would be suhstantial. The Company cannot predict at this time what further difficulties will be encountered regarding disposal of nuclear wastes or the effects of any such difficulties upon k* the operations, operating costs or capital costs of nuclear generating plants in which the Company has an interest. Employees The Company ha.s 360 employees of whom 184 are represented by a local union affiliated with the International Brotherhood of Eleurical Workers (AFIrCIO). The present contract expires Decem-ber 31,1980. Negotiations between the Company and the union are currently in progress. g RATES AND HEGULATION The Company is subject to the regulatory authority of the 3IPCC as to retail rates, accounting, service standards, territory served, the issuance of securities and various other matters. The Com-pany is also subject as to some phases of its business, including licensing of its hydro-electric stations, accounts, rates relating to wholesa!e sales (which constitute approximately 2% of total operating revenues) and to interstate transmission and sales of energy and certain other matters, to the juris-
. diction of the Federal Energy Regulatory Commission ("FERC") of the Department of Energy i9 under Parts I, II and III of the Federal Power Act. Other activities of the Company from time to time are subject to the jurisdiction of various other state and federal regulatory ag(neies. Specific areas of regulation of the in.st sigaileance to the Company's operations are more fully discussed in the following paragraphs.
State Hegulation -Hates
- Basic Rate Increa.c In February 1980 the Company filed with the 3fPUC for a basic rate in-P crease of $5.4 million, and for interim rate relief pending the outcome of the basic rate increase pro-eeeding. The matter was divided by the 3IPUC into revenue and rate design categories, in order that the 31PUC would have more time to explore rate design issues and discharge the investigatory
. duties mandated by the National Energy Act with respect to certain asptets of rate design and rate f ~~
standards. Upon the agreement of all parties, tha petition for interim rate relief was held in abeyance and the revenue portion of the basic rate ; acceding was then processed on an expedited basis, and on July 22,1980 the 3IPUC approved a enulation entered into by the Company, the 3fPUC Staff and the interrenors providing that the Company be granted a basic rate increase of 18% designed to yield additional revenues of $4.7 million on an annual basis. The new rates became effective for ser-vice rendered on and after August 8,1980. 'Phe stipulation approved by the 3fPUC includes a 149
-- return on common equity, an overall rate of return of 10.65%, and an attrition allowaace of 0.38%.
The rate design portion of the proceeding is continuing, and will in part be combined with similar proceedings involving Central 3Iaine Power Company for a consideration of issues common to both proceedings. 24
?a
- has
f Fuel Clause. Regulations implemented by the MPUC with respect to the Company efective January 1,1980 allow the Company to neover currently the cost of fuel const4med in the Company's generating stations and the fuel component of purchased power by the application of a uniform factor j g in the monthly bills to the Company's retail customers. The factor is based upon the Company's pmjected cost of fuel and the fael component of purchased power for a twelve month forward-l* king period and must be approved by the 3iPUC after public notice and hearings. The Company may at intervals of not less than ninety days request chsnges in the uniform rate to reflect actual experiences during any period. In addition, the Company's fuel clause provides for ncovery over a thirty-six month period (from January 1,1980) of the unrecovered fuel costs ontstanding at the time the new clause became effective (See Note 1 of Notes to Financial Statements of the Company). Over- or under-collections resulting from differences bctween estimated and actual fuel costs for a period are included in the computation of the estimated fuel costs of the succeeding fuel adjustment period. I < During the NRC-ordered shutdown of Maine Yankee for twelve weeks in the sping of 1979, it was necessary for the Company to purchase more expensive replacement energy (principally oil-fired) from other sources. An 3iPUC investigation was commenced to examine responsibility for the shutdown and the costs associated tk. nwith, including the replacement energy costs. Pending the f, investigation the MPUC issued an order altering the then-applierble fut-1 clauses ni the Company
*/ and the other electric utilities involved in the investigation, to provide that the replacement energy costs would be collected over a twelve month period instead of the three month period that otherwise would have pertained, and by a later order the MPUC extended this recovery period to December 31, 1980. 'Ine Company estimated those replacement energy costs to have been approximately $3.4 mil-
. lion, of which approximately $270,000 was uncollected as of September 30,1980. The MPUC investi-gation was concluded in October 1980, and the recovery schedule described above was maintained.
,r The recovery of those replacement energy conta over the longer period than would have otherwise e been applicable has increased the Company's working capital requirements, necessitating a higher level
-I of short-term borrowing with resulting increased interest costs.
Under the federal Public Utility Regulatory Policies Act of 1978 ("PURPA"), the Company's fuel clause may be subject to periodic review by the MPUC to ensure that the clause provides incen-N I tives for efficient use of fuel and for maximum economies in operations and purchases that affect
? utility rates.
On October 31,1980 the Company filed with the MPUC a request to change its fuel clause factor, purenant to the regulations described above, as a result of increases in fuel costs in excess of what the
- Company had projected. If allowed, tire factor would increase fuel revenues for the twelve months 'g ended December 31,1981 by approximately $10.3 million in order to ncover cornsponding projected increased fuel costs over the same period.
Other State and Federal Regulation
~
Nuclear Regulatory Commission. The nuclear generating facility of Maine Yankee and the other nuclear f scilities in which the Company has an interest are subject to extensive regula-tion by the NRC. The NRC is empowered to authorize the siting, construction and operation of nuclear reactora after consideration of public health, safety, environmental and antitrust matters. Under its continuing jurisdiction, the NRC may, after appropriate proceedingn require modification 25 :
of units for which construction permits or operating licensr. have already been issued, or impose new conditions on such permits or licenses, and may require that the operation of a unit cease or that the level of operation of a unit be temporarily or permanently seduced. See " Problems of the Electric l'tility Industry" for a discussion of the impact of the T311 incident on 3faine Yankee and the other , nuclear facilities in which the Company has an interest. F' Pricruinderson tct. The federal Price-Anderson Act, as amended, requires each licensee of a nuclear generating plant to carry primary liability insurance of $160 million and establishes limits on the liability of ownerr, of such plants. In the event of a nuclear incident at any nuclear facility within the l'nited States, each licensee of a nuclear plant (including 3faine Yankee) may be assessed retrospective premiums of up to $5 million for each incident, not to exceed $10 million per year, for the purpose of providing a fund for paying injury claims made by the public in excess of primary coverage. If such an incident should occer,3faine Yankee could be assessed for its share of the cost of providing the fund, and the Company would ultimately bear approximately 79 (not to exceed approximately $350,000 Iw?r incident or approximately $700,000 per year in the event of more than one incident) of the costs assessed to 31aine Yankee. When operating licenses have been granted to the owners of the Seabrook nuclear units, the Company will be subject to similar assessments based on ita proportionate ownership of those units. While it is not yet Iw>ssible to evaluate the clairns being asserted as a result of the T3!I incid(nt, the Company does not anticipate any assessments being levied under the Act as a result of that incident. Federal Encruy R(grdatory Commission. All of the Company's hydro-electric projects are licensed by the FEllC. Three of the licenses will expire in 1987, one will expire in 1990, two in 1993, one fe in 1999, and one in 2000. The Unit <d States has the right upon or after expiration of a license to take over and thereafter maintain and operate a project upon payment to the licensee of the lesser of its " net investment" or the fair value of the property taken, and any severance damages, less certain amounts earned by the licensee in excess of specithd rates of return. If the United States does not exercise its statutory right, the FElle is authorized to issue a new license to the original licensee, or to a new licensee upon payment to the original licensee of the amount the United States would have been obligated to pay had it taken over the project. National Encruy stct. In 1978 Congress enacted the Naticnal Energy Act, which includes the Na-tional Energy Conservation Policy Act ("NECPA"), PUltPA and other measures dealing with the use of oil and gas as fuels, natural gas regulation and pricing, and energy taxes. NECPA will require the Company to assist customers with home energy audits and insulation and conservation measures, g and PUltPA requires the Company to collect and file data and estimates concerning cost of service and energy production. In addition, PUltPA sets forth certain standards for utility rates and utility practices which the 3ItTC must consider, which consideration will take place during the rate design portion of the Company's most recent 31PCC rate proceeding. PUltPA, along with certain federal tax legislation, also contains provisions tending to encourage the development of cogeneration and small power production facilities and the interconnection of such facilities with those of electrie utilities. The effect of these and other provisions of PUltPA, NECPA and tM National Energy Act upon the
" operations, operating costs and capital costs of the Company cannot as yet be determined.
Environmental Matters. The Environmental Protection Agency (" EPA") administers programs established under the federal Water Pollution Control Act (the ' Water Act") and the federal Clean 26 a ,
..~ : ,
J A;
. L 1
. ,.. . _ _ . - --- - - . - . .- - . . . _- .- -.. . _ . ~ - -
1 i Air Act af 1970 (the "Cican Air Act") sch affect the Company's thermal generating facilities, as well as the other thermal and nuclear facihths in which it has an interest. The Water Act estabhshes , a national objective of complete elimination of discharges of pollutants into the nation's water at:d The Clean Air Ad i k g creates a rigorous permit program designed to achieve these effluent limitations. l W empowers EPA to establish cican air standards which are implemented and enforced by state agen-cies. EPA has broad authority in administering these programs, including the ability to require - installation of pollution control and mitigation devices. ] The Company is also subject to regulation with regard to environmental matters and land use f by various state and local authorities. The application of federal, state and local standards to protect the environment, including but not limited to those described herein, involves or may involve review, , certification or issuance of permits by various federal, state atd local authorities. Such standards, j p particularly in regard to emissions into the air and water, thermal mixing zones and water tempera-ture variations, may halt, limit or prevent operations, or prevent or substantially increase the cost of construction and operation of installations and may require substantial investments in new equipment 4 at existing installations. l .
- As of late 1979 the Company held all discharge permits required under the Water Act for its b existing plcnts. In general, these water quality control permits as well as siting permits issued by the Maine Department of Environmental Protection ("DEP") require the subject plant to meet ~
prescribed environmental quality standards in its ongoing operations and impose monitoring require-ments on the Company intended to insure compliance with the stridards. l With respect to eflhient discharges, including' heat, from existing plants, the Water Act, as amended in December 1977, requires the application of the "best practicable control technology cur- " ^ ,: rently available" by July 1,1977 and the "best available technology economically achievable" by July
] g. 1,1984. In addition, the amended Water Act also requires that cooling water intake structures must
/' reflect the "best technology available fo .. inimizing adverse environmental impact". Regulations l a promulgated under the amended Water Act, unless waived, require non-exempt generating units to
.* une closed-cycle cooling systems such as cooling towers by July 1,1981. Certain of these regulations M I have been remanded for further deliberation by the EPA, and further administrative hearings and
% court proceedings are expected. -In addition, the amended Water Act calls for the promulgation of .
- additional pollution control technology requirer.ents relating to matters such as toxic pollutants and waste management practices. The Company believes that it is in compliance with the July 1,1977
' guidelines referred to above. Although the Company la currently unable to determine with certainty
, whether changes in cooling water intake structures or the installation of closed-cycle cooling systems i will be required, it does not believe that the guidelines will materially affect the operations ci its
- b. generating units or those in which it has an ownership interest. However, if changes were required,
'" the Company's expenditures could be substantial.
[ Pursuant to the Clean Air Act, the DEP has issued air quality standarda with respect to certain
- pollutants. One of the effects of these regulations is to restrict the ru4hur content of fuel oil burned in the Company's Graham Station facility in Yeazie to not more than 2.5%. For many years the Company has burned fuel oil with a sulphur content below 2.5% and to the best of its krmwledge a supply of such fuel will continue to be avsilable. These regulations also have the effect of restrict-ing the sulphur content of fuel oil burnc<i in Wyman 4 to not more than 0.7%, and similar regula-27 .
4 l._ _ _ _ _ _
tion 2 in other New England st tes restrict the sulphur content of fuel oil burned in varioua units from which the Company obtains or may obtain energy. The Company is unaware of any diffleulty in maintaining a continued supply of such fuel oil for Wyman 4 or other plants in New England, but the Company cannot predict the effect of these regulations upon the availability or the cost of fuel oil having an acceptable sulphur content. hi The Clean Air Act Amend nents of 1977 require, among other things, that the EPA promulgate New Source Performance Standards; that state clean air implementation plans contain emission limi-tations and other measures to prevent "signifleant deterioration" of air quality; that such plans prescribe new clard0eatin of non-degradation areas, and other measures limiting emissions and par-ticulates and requirirq, the promulgation of further regulations. The effect of these amendments upon existing re:tulatins or upon the Company cannot currently be determined. Other reguicm art currently beirg developed at the federal and state !evel dealing with the storage and handimg of hazardous wastes, and the disposal of all types of wastes. The Company cannot predict the effect of th ese regulations upon its operations, operating costs or capital ecsts. 1 D PENDING LEGAL PHOCEEDINGS Indian Cases The Company is a defendant in a class action brought on July 17, 1972, in the United States Disti et Court, District of 3faine, Northern Division, by the Penobscot Nation of Indians seeking ja $5 million in compensatory damages and a like amount in punitive aamages for loss of lands taken by flowage resulting from the damming of the Penobscot River by the Company's predecessors in title, allegedly in violation of the Indian Trade and Intercourse Act of 1790. The Company is also the defendant in an action brought simultaneously in that court based upon the same 1790 law by an individual alleging that he is a Penobscot Indian seeking $200,000 in damages for trespassing and requesting removal of existing transmission lines. Prveedings in both of the above matters have been stayed pending the outcome of two suits brought by the United States against the State of 3faine, one on behalf of the Passamaquoddy Tribe 0~ of Indians and one on behalf of the Pencheot Nation of Indians, seeking a total of $300 million in damages for divesting them of their aboriginal lands more than a century ago, allegedly in violation of the above mentioned 1790 Act. The area involved includes much of northeastern 3faine and g substantially all of the Company's service territory. In Starch 1980 the parties to the Indian cases against the state announced a proposed settlement under the terms of which the state and the Indian Tribes would enter into an agreement, to be enacted as a Private a:.J Special Law (the "3faine Implementing Act") specifying the jurisdiction of the state over the Indian Tribes and Indian lands; certain large landowners would grant purchase options to the Tribes, agreeing to sell 300,000 acres of land at fair market value; and Congress
- would enact a bill extinguishing the land claims, compensating the Tribes, ratifying the 31aine Implementing Act, and providing for other details. The state has adopted the 31aine Implementing Act and Congress has enacted the federal legislation, including the appropriation of the requisite funds ($81.5 million). The parties to the proceeding are in the process of implementing the settlement.
28
.- , r
~
a/ _ '
- A b
( The Company cannot currently determine the extent to which the Indian cases against the Com-pany will be terminated as a result of the settlement described above, but in the opinion of manage-ment the outcome of the elme mentioned casu r. gainst the Company will not have a materially adverse effect on the financial condition of the Company. g Wyman 4 On April 11, 1979 the DEP issued an order restricting the hours of operation of Wyman 4 to weekdays only, and from 6 A.31. to 11 P.31. only, as a result of alleged execssive noise emanating
- from the unit. Sound attenuating mufilers were fabricated to reduce the noise, and the installation of those mufflers was completed in late 1979. On September 4,1979, the DEP instituted a lawsuit in Kennebec County Su rior Court against Central 31aine Power Company as the lead owner of the g unit, seeking payment of civil penalties for each day of an alleged violation of the siting permit as a result of alleged excessive noise during operation. Central 3faine Power Company has advised the Company that it does not believe that substantial penalties will ik imposed.
IMC On August 11,1975, DIC, the Company's largest single customer, located within the Company's f3 service territory in Orrington,' brought a complaint before the 31PUC requesting that the 31PUC order Central 3faine Power Company to provide electric service to DIC. After court resolution of certain preliminary issues, the matter is now in order for further proceedings at the StPUC. If the 31PUC were to grant the request, the Company would apply for rate relief to make up for the loss of revenue from the basic rates applicable to this customer. IIouver, the loss of this customer would reduce the Company's cost of fuel and purchased energy which is passed on to all customers including
,- DIC. In the opinion of management, the magnitude of this reduction in fuel and purchased energy costs would offset substantially all of any base rate increase to other customers.
.- MEPCO vs. New Brunswick On September 18,1980 31EPCO commenced legal action against New Brunswick in the United g (
States District Court, District of 31aine, alleging that New B unswick's intention to pass through , 3- ~ to 3IEt 70 the increased cost of energy from New Brunswick's Coleson Cove oil-fired units resulting from the reduction or elimination by the Canadian federal authorities of the fuel oil subsidy for fuel j used to generate electricity for export to the United States would be contrary to the terms of the i pertinent contract between 31EPCO and New Brunswick. The legal action seeks declaratory relief to
; the effect that 31EPCO should be allowed to terminate the contract. The Company and other New
! .- England utilities, as participants and assignees of 31EPCO's rights under the contract, have joined i
?
in the suit with 31EPCO as additional plaintiffs. The parties to the proceedira, including the Com-l pany, have tentatively agreed upon a settlement reducing the amount of capacity purchased under the contract and shortening the term of the contract by at least onc year. FERC Permit Application On August 15,1980 the Compan: filed under the Federal Power Act with the FERC an appli-l cation for a preliminary permit in o..lcr to study the feasibility of constructing a new hydro-electrie l facility, the Basin 31 ills Project, on the Penobscot River in Orono and Bradley. This filing is a 29 - l l l t
competing cpplication to a prelimin ry permit filing made by a non-utdity developer on s site up-stream from the Basin 3 fills Project site that would be inundated if the Basin 3 tills Proret were to be constructed. The matter is in order for further proceedings at the FEHC, but no action has 3et been taken. The Company cannot predict the outcome of this proceeding. DESCRIPTION OF CO31310N STOCK Holders of common stock are entithd to participate in dividends as and when declared by the board of directors. No dividend may be paid on common stock until dividends on preferred stock (which are fully cumulative) have been paid or provided for to the da of payment of the proposed common atock dividend. The hohlers of common sto k have general voting rights of one-twelfth of one vote per share. Of the outstanding preferred stock,47,340 shares have general voting rights of one vote per share; the remaining 50,000 shares do not have general voting powers. On issues determined by general voting rights, it would be possible for votes represented by preferred stock to combine with votes represented by less than a majority of common stock so as to affect the rights of holders of all common stock. V The Company's By-Laws provide that holders of preferred stock have the power to elect two of the seven directors in the event of default in payment of four quarterly dividends or in the event of failure to make any required sinking fund payment with respect to preferred stock. To date there has been no such default. The By-Laws further provide that with respect to preferred stock f, hereafter authorized for issuance the board of directors may confer sp(cial voting rights (including, in the event of default in payment of di.idends, the power to elect a majority of directors) and the power to consent or object to any matter which the board of directors may specify. Neither the common stock nor any of the preferred stock has cumulative voting rights, which , means that the holders of stock with a majority of the voting power can elect all of the directors if they choose to do so, in which event the holders of the remaining stock, whether preferred or cominon, will not be able to elect any directors. The common stock has no conversion rights nor is it subject to any redemption or sinking fund -O provisions. Subject to the rights of senior securities, holders of common stock are entitled to pro rata distribution of aats upon liquidation. All common stock is, and the shares of the Additional Common Stock when issued and paid for will be, fully paid and non-assessable. The Company's g By-Laws forbid the purchase by the Company of common stock when there is any arrearage in pay. ment of dividends on preferred stock. The By-Laws of the Company provide that prior to the issuance of any stock having voting rights the board of directors shall determine whether such stock shall be subject to preemptive rights of the holders of outstanding stock. The board of directors has determined that the holders of presently outstanding stock shall have no preemptive rights with respect to the Additional Common Stock. 30 g ., < }
- M
f UNDERWRITING - Upon the terms and subject to the conditions contained in the Underwriting Agreement, the Underwriters named below have severally agreed to purchase 250,000 shares of Additional Common I h Stock from the Company. The number of shares of Additional Common Stock that each Underwriter has agreed to purchase is set forth opposite its name below: Numsber of Name Share. Smith Barney, Harris Upham & Co. Incorporated 72,000 Advest, Inc. 6,000 Bache Halsey Stuart Shields Incorporated 12,000 Bear, Stearns & Co. 12,000 Blyth Eastman Paine Webber Incorporated 12,000 [ Burgess & Leith Incorporated 6,000
. Butcher & Singer Inc. 4,000 Cowen & Co. 4,000 jt Drexel Burnham Lambert Incorporated 12,000 First Albany Corporation 4,000 Goldman, Sachs & Co. 12,000 E. F. Hutton & Company Inc. 12,000
, Janney Montgomery Scott Inc. 4,000 Kidder, Peabody & Co. Incorporated 12,000 Lehman Brothers Kuhn Loeb Incorporated 12,000 I g. Means Investment Company 6,000
/ Moseley, Hallgarten, Estabrook & Weeden Inc. 6,000
/ L. F. Rothschild, Unterberg, Towbin 12,000 Shearson Loeb Rhoades Inc. 12,000 g (
._ Tucker, Anthony & R. L. Day, Inc. . 6,000 Dean Witter Reynolds Inc. 12,000 Total 250,000 The Ct.mpany has been advised by Smith Barney, Harris Upham & Co. Incorporated, as the Rep.
_. resentative of the several Underwriters, that the Underwriters propose to offer part of the shares of f Additional Common Stock purchased by them directly to the public at the price set forth on the cover page of this Prospectus and part of such shares to certain dealers at a price which represents a con-cession not in excess of $.475 per share under the price to the public. The Underwriters may allow, and such dealers may reallow, a coricession not in excess of $.25 per share to other dealers. The Underwriters are committed to purchase and pay for all of the shares of Additional Common Stock if any are taken. The Company has agreed to indemnify the Underwritern sgainst certain liabilities, including liabilities under the Securities Act of 1933. 31 . _ _- , . . _. __m __
LEGAL OPINIONS Legal matters with respect to the Additional Osmmon Stock will be passed upon for the Company by Rolert S. Briggs, Esq., Vice President and General Counsel of the Company, and for the Under-writers by Davis Polk & Wardwell,1 Chase 3fanhattan Plaza, New York, New York. 3tr. Briggs , ' owns 290 shares of the Company's common stock either directly or jointly with his wife. EXPEllTS The financial statements of the Company as of December 31, 1979 and for the five years then ended and the financial statements of 3faine Yankee and 3ti;i'CO as of December 31,1979 and for the four years then ended included herein have been examined by Arthur Andersen & Co., inde-pendent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. D b f* 4 32 r-y O M I l l i
f t [TIIIS PAGE INTL?NTIONALLY LEFT BLANK]
. l-(D (
T 33
INDEX TO FINANCIAL STATEMENTS PAGE BANGOR HYDitO-ELECTRIC CO31PANY g.
. Report of independent public accountants 35 Statements of incoru. for the twelve months ended September 30,1980 and the five years ended December 31,1979 9 Bal nee sheets as of September 30,1980 and December 31,1979 36 Statements of capitalization as of September 30,1980 and December 31,1979 38 Statements of retained earnings for the twelve months ended September 30, 1980 and the five years ended December 31,1979 39 Statements of source of funds for plant additions for the twelve months ended September 30,1980 and the five years ended December 31,1979 40 Notes to financial statements 41 b MAINE YANKEE ATOMIC POWER COMPANY Report of independent public accountants 52 Statement of earnings for the twelve months ended September 30,1980 and
~
the five years ended December 31,1979 53 Balance sheet as of September 30.1980 and December 31,1979 54 ii Statement of capitalization as of September 30,1980 and December 31,1979 56 Statement of changes in common stock investment for the twelve months ended September 30,1980 and the five years ended December 31,1979 57 Statement of sources of funds for acquisition of nuclear fuel and construe-
, tion of electric property for the twelve months ended September 30,1960 and for the five years ended December 31,1979 59 Notes to financial statements 60
.' {
MAINE ELECTRIC POWER COMPANY, INC. 73 Report of independent public accountants Statement of carnings for the twelve months ended September 30,1980 and g the five years ended December 31,1979 73
..~
Balance sheet as of September 30,1980 and December 31,1979 74 Statement of changes in common stock investment for the twelve months ended September 30,1980 and the five years ended December 31,1979 75 Statement of changes in financial position for the twelve months ended
; September 30,1980 and for the five years ended December 31,1979 76 k 77 Notes to financial statements l 34
-" I 1
-]
y-c -
s REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO BANGoR llYDHO-E!.ECTRIC COMPANY: We have examined the balance sheet of BANGOR IIYDRO. ELECTRIC COMPANY (a Maine corporation) and statement of capitalization as of December 31,1979, and the statements of inceme (included elsewhere in this Prospectus), retained earnings and source of funds for plant additions
' for the five years ended December 31, 1979. Our examinations were made in accordance with gen-erally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances, b In our opinion, the financial statements referred to above present fairly the financial position of Bangor Ilydro-Electric Company as of December 31, 1979, and thh results of its operations and its source of funds for plant additions for the five years ended December 31, 1979, in conformity witi.
generally accepted accounting principles, which, except for the change (with which we concur) in the method of recording Electric Operating Revenues as indicated in Note 1 to the financial statements, h have been applied on a consistent basis. AnTrit n ANDERSEN & CO. Boston, Massachusetts, January 25,1980. 1 g.
- s m
4 J 35 I i
BANGOR IIYDRO. ELECTRIC COMPANY BALANCE SIIEETS ASSETS i Septemlier 30, Decemlier 31, 1980 1979 Investment in Utility Plant Electric plant in service, at ori ginal cost (Notes 8 and 9) $96,535,431 $95,017,710 Less - accumulated depreciation (Notes 8 and 9) 33,570,322 32,459,170
$62,965,109 $62,558,540 Constructicn in progress, including $4,964,810 in 1980 and
$3,697,502 in 1979 for construction of jointly-owned gen-erating units (Notes 9 and 10) 5,723,755 3,824,265
$68,688,864 $66,382,805 Investments in corporate joint ventures (Notes 1 and 8):
3faine Yankee Atomic Power Company 4,810,022 4,683,022 V 3faine Electric Power Company, Inc. 175,884 178,898
$73,674,770 $71,244,725 Other Investments, principally at cost $ 516,978 $ 520,395 Current Assets:
fe Cash $ 1,164,750 $ 1,122,801 Accounts receivable - Customers, i.et of reerve 5,379,730 5,098,511 Income tax refund 526,287 563,287 Unbilled revenue receivable (Note 1) 2,970,948 2,549,199 Inventories, at average cost--- 3faterials and supplies 2,149,691 1,840,857 - Fuel oil 1,188,343 1,286,905
,. Prepaid expenses 67,760 359,103 'f Deferred fuel costs (Note 1) S,518,178 5,484,688 / $19,965,687 $18,305,351 g Deferred Charges:
Unamortized cost of cancelled NEPCO nuelcar units, net of
.~~
related income taxes (Note 9) $ 1,251,576 $ 1,230,041 Other 611,842 424,054
$ 1,863,418 $ 1,654,095
$96,020,853 $91,724,566 h
The accompanying notes are an integral part of these financial statements. 36
- f. 7 a
U j
A r BANGOR HYDRO-ELECTRIC COMPANY BALANCE SIIEETS (h STOCKIIOLDEllS' INVEST MENT AND LIABILITIES September 30, December 31, 1980 1979 Capitalintion (see accompanying statement): Common stock investment (Note 3) $24,788,141 $25,694,645 Preferred stock (Note 4) 4,737,000 4,734,000 Red *mable preferred stock (Note 4) 5,000,000 5,000,000 First mortgage bonds, exclusive of a current maturity in 1979 [ and sinking fund requirements (Note 5) 32,300,000 32,345,000 Total Capitalization $66,822,141 $67,773,645 Current Liabilities: Current maturity of long-term debt (Note 5) $ - $ 2,000,000 tt Notes payable to banks (Note 6) 15,000,000 7,550,000
$15,000,000 $ 9,550,000 Other current liabilities-Current sinking fund requirements $ 170,000 $ 170,000 Accounts payable 4,477,381 5,116,931 Dividends payable 878,156 856,598 Accrued interest 611,567 664,954 ",. Accrued current and shcrt-term deferred taxes (Note 9 (490.207) 152,347 'f-Customers' deposits 69,337 73,859 Accrued pension plan contribution (Note 7) 333,900 410,000 f y
(
$ 6,050,134
$21,050,134
$ 7,444,689
$16,994,689 b Commitments and Contingencies (Notes 8,9, and 10)
Deferred Credits and Reserves (Note 2): Accumulated deferred income taxes $ 3,998,356 $ 3,441,848 Unamortized invcstment tax credits 3,967,326 3,418,326
- y. Other 182,896 96,058
$ 8,148,578 $ 6,956,232
$96,020,853 $91,724,566 The accompanying notes are an integral part of these financial statements.
37 .
l l l BANGOR IIYDRO ELECTRIC CO)1PANY STA'II.MENTS OF CAPITALIZATION j Septemlier 30 Decemlier 31, , , 1930 1979 g (UnauPed) Couxox Stocx Ixytsrurxt: Common s'ock, par value $5 per share-Authorized F 000,000 shares in 1980 and 2,500,000 shares in 1979 Outstanding- 1,827,(M0 shms in 1980 and 1,812,023 shares in 1979 .. ..
$ 9,135,200 $ 9,060,115 Amounts paid in excess of par nine 7,942,772 7,83;,827 Retained earnings 7,710,169 8,798,703
$24,78S,141 $25,694,645 Paa.rcnnro Stocx, non-participating, cumulative, par value $100 per share, authorized 250,000 shares in 1980 and 100,000 shares in 1979:
Subject to mandatory redemptiot, requirements-9%%, Callable at $109.00 in 1980 and $109.50 in 1979, l,' 40,000 shares authorized and outstanding . . .. . $ 3,000,000 $ 3,000100 9%9, Callable at $106.77, 20,000 shares authorized and outstanding 2,000,000 2,000,(X)0
- $ 5,000,000 $ 5,000,000 Not redeemable or redeemable solely at the option of the ,, issuer - *- 79, Noncallable,25,000 shares authorized and outstanding $ 2,500,000 $ 2,500,000 4%9, Callable at $100,4,840 shares authorized and out-standing . .. .. .. . .. 484,000 484,000 49, Series A, Callable at $110,17,500 shares authorized and outstanding 1,750,000 1,750,000 '. $ 4,734,000 $ 4,734,000 Fzasr MORTGAGE HoNDS:
23'9 Series due 1980 $ - $ 2,000,000 3%9 Series due 1982 1,000,000 1,000,000
.;- 3%G Series due 1984 1,000,000 1,000,000
, 3%W Series due 1985 1,500,000 1,500,000 49 9eries due 19S8 2,500,000 2,500,000 4% A-ies due 1993 . 3,500,000 3,500,000 2,500,000 2,500,000 g 6%9 & ries due 1998 8%9 Series due 1999 3,540,000 3,500,000
~
10%9 Series due 20O 4,800,000 4,800,009 9%% Series due 2001 2,820,000 2,865,000 8%% Series due 2003 2,350,000 2,350,000 10%9 Series due 20(4 7 7 0,000 7,000,000
$32,470,000 $34,515,000 Less-Sinking fund requhements, and a current maturity in 1979 170,000 2,170,000
$32,300,000 $J2,345,000
-7 Total Cg'.talization $66,822,141 $67,773,645 The accompanying notes are an integral part of these financial statements, 38
, !~
3 4 5 1
~
BANGOR HYDRO. ELECTRIC COMPANT STATEMENTS OF RETAINED EARNINGS (l Twebe h nthe Ended Year Ended December 31, Sept.30, 1980 1979 1978 1977 1976 _ 1975 (Unaudited) Balance at beginning of period . S 7,778,456 $ 8,599,913 $ 8,026,517 $ 7,637,078 8 8,249,896 8 7,899,569 Add-Net income for period . 3,432,899 3,487,548 3,391,483 2,758,685 1,545,486 2,087,3S5 Equity reserve for licensed g hydro projects (Note 1) - - 136,262 - - -
-- $11,211,354 $12,087,461 $11,554,262 $10,395,763 $ 9,795,382 8 9,956,951 Deduct -
Cash dividends declared on: Preferred stock-9%% -$9.50 per share . $ 285,000 $ 1,5,850 $ - S - 9%% -$9.25 per share . 185,000 185,000 185,000 185,000 103,300 - 7% -$7.00 per share . 175,000 175,000 175,000 175,000 175,000 175,000 4%% -$4.25 per share . 20,570 20,570 20,570 20,570 20,570 ?0,570 4% -$4.00 per share . 70,000 70,000 70,000 70,000 70,000 70,000
$ 735,570 $ 546,420 $ 450,570 $ 450,570 $ 368,870 $ 265,570 e Corrunon stock-$1.52 in 1980,
.P $1.52 in 1979, $1.46 in 1978,
/ $1.41 in 1977, $1.34 in 1976 j and $1.29 in 1975 $ 2,765,615 $ 2,742,338 8 2,503,779 $ 1,918,676 $ 1,653,172 8 1,471,4S8
( Equity reserve for licensed hydro 74 projects (Note 1) - - - - 136,262 -
> $ 3,501,185 $ 3,288,758 8 2,954,349 $ 2,369,246 8 2,158,304 $ 1,737,058 Balance at end of period . $ 7,710,169 $ 8,798,703 $ 8,599,913 $ 8,026,517 8 7,637,078 8 8,249,896 The accompanying notes are an ir.tegral part of these financial staMnents.
ae f 39 - k 12
a
\
t BANGOR HYDRO-ELECTRIC COMPANY STATEMENTS OF SOURCE OF FUNDS FOR PLAST ADDITIONS Twelve Months a Ended Year Ended December 31,
- Sept. 30, '
1980 1979 1978 1977 1976 1975 BOURCE8 OF FUNDS: Internal sources - Operations - Net income .... ....... $ 3,432,898 $ 2,444,548 8 3,391,483 $ 2,758,685 8 1,545,486 8 2,087,385 Items not currently requiring funds-Depreciation .... 2,987,567 2,814,541 2,200,513 2,094,989 2,029,358 1,962,021 p Deferred income taxes Investment tax credit, net ...... 1,634,092 1,110,750 1,480,932 950,478 470,488 923,637 230,693 570,941 272,678 376,000 312,374 289,983 Allowance for other funds used dur-Ing construction - - (531,293) (233,173) (147,914) (46,044)
. Funds from operations . . . . $ b,165,307 $ 7,720,499 $ 6,454,528 $ 5,422,135 $ 4,075,608 $ 4,605,719 Cumulative efreet on prior years (to Decem- , , ber 31,1978) of a change to a different method of recording revenue (Note 1) - 1,013,000 - - - -
f5 $ 9,165,307 $ 8,763,499 -$ 6,454,828 8 5,422,135 $4,0/5,608 8 4,605,719 Other sources (uses) of funds-Binkin,c fund requirements $ (170,000) $ (170,000) 4 (170,000) $ - Dividends declared (3,501,185) (3,288,758) g2,954,549) (2,369,246) (2,022,042) (1,737,058) Other, net (90,811) 89,687 74,206 121,230 (105,315) 211,474
$(3,761,996) $(3,369,071) $(3,050,143) $(2,248,016) $(2,127,357) $(1,525,584)
'e Change in net current ansets, exclusive of interim financing-Cash, receivables and unbilled revenue $ (2,268,006) $(2,363,720) $(3,122,661) $ 120,571 8 495,464 8 790,379
,k Deferred fuel costs (3,536,658) (5,484,688) -
q- Other current assets (442,879) (1,084,148) (83,263) 169,915 53,605 90,152 Mounts payable . . . (700,836) 982,261 1,807,113 194,303 418,035 (97,817)
. ?- 54,944 532,06r (433,884) (15,887)
.:. " Art current liabilities (531,628) 309,522
$ (7,490,007) $(7,640,773) $(1,343,869) $ 1,016,849 8 533,220 $ 766,827
[ Funds available from (required for) internal sources . $ (2,076,696) $(2,246,345) $ 2,060,816 8 4,190,968 $ 2,481,471 $ 3,846,962 N External sources (uses)-
~
g Notes payable to banks $10,450,000 lir 500,000 $ 2,750,000 8 1,800,000 $ (500,000) $ (350,0'
~
Proceeds from sale of-Common stock . . . . . . - - 4,288,010 3,680,431 - 1.966,643 First mortgage bonds . . . . . . . - 7,000,000 2,500,000 - 3,000,000 5,000,000 Preferred stock, 30,000 shares in......... 1979, 20,000 shares in 1976 . . . . . . . . . . . . . . . - 3,000,000 - - 2,000,000 -
~
Dividend reinvestment plan (21,577 shares - in 1980,14,145 shares in 1979) . . . 231,147 194,626 - - - (5,000,000) 1 Retirement of first mortgage bonds . . . . . . . (2,000,000; - - (2,500,000) - p Employee stock ownnhip plan - 9,051 shares in 1979, 3,800 6 ares in 1978 and 2,317 shares in 1977 - 110,547 56,696 3f,983 ~ - - S 8,681,147 $10,805,173 $ 9,594,706 8 3,016,414 $ e,500,000 $ 916,643
, Funds from external sources .
FUNDS AVAILABLE FOR PLANT ADDITIONS $ 6,604,451 8 8,558,828 $11,655,522 8 7,207,382 $ 6,931,471 3 4,763,605 FUNDS USED FOR: Wynan Unit #4 . . . . . . $ 655,399 $ 1,313,818 8 3,157,502 $ 4,466,107 8 3,873,189 8 2,026,547 379,991 1,227,495 66,410 283,069 - NEP 1 and 2 (Note 9) - Beabrook (Note 9) 1,715,025 1,504,070 2,196,333 5,360,949 5,074,192 2,674,865 2,825,213 2,737,058 Other plant additions 4,234,027 FUNDS USED FOR PLANT ADDITIONS $ 6,604,451 % 8.558,828 $11,655,522 $ 7,207,382 8 6.981,471 8 4,763,605
~
- The accompanying notes are an integral pan of these financial statements.
40
BANGOR HYDRO. ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Including Notes Applicable to Unaudited Period) g (1)
SUMMARY
or SromFICANT ACCoUNTINo PoWCIES Electric Operating Revenues - Prior to 1979, Electric Operating Revenues were recorded'when billings, based on cycle meter readings we either a one or two month period of consumption, were rendered to customers. Due to the cycle billing process, a portion of the electricity used by the Company's customers during a fiscal period remains unbilled at the end of that period. In general, this "unbilled" a ~:ount of revenue was not recordd as revenue prior to 1979. b In the first quarter of 1979, the method of recording Electric Operating Revenues was changed
~- to recognize revenues as electricity is used by the Company's customers, including electricity delivered but not yet billed at the eni af the accounting period. This accounting change was made in order to
- better match the recognition of electric revenues with the recognition of the costs of providing the electric service.
ft The cumulative effect of this accounting change on prior years (to December 31,1978) amounts to $1,043,000 (after reduction for income taxes of $1,034,000) and was included in income for the first quarter of 1979. The pro forma amounts shown in the Statements of Income reflect the effect of retroactive application of the new nethod of recording revenue as if the new method had been followed throughout the periods. Deferred Fuel Accounting - Under the fuel adjustment clause in operation prmr to 1980, Fuel Charge Revenue was generally recorded when the cost of fuel was billed to customers. Operating
, Expenses were charged for the cost of fuel as incurred, which preceded the billing of fuel adjustment revenues by an average of three months. Consequently,in periods of rising fuel costs the Company's f # earnings were adversely affected by the amount of fuel costs incurred in excess of fuel billings.
On December 28,1979 the 31aine Public Utilities Commission ("31PUC") promulgated new fuel p4 ( adjustment regulations to be effective January 1,1980. As part of its order implementing the new 3 fuel regulations, the 31PUC authorized the Company to collect, over a three year period beginning
- January 1980, the fuel costs incurred which were unrecovered at December 31, 1979, due to the operation of the previous fuel clause. Accordingly, in December 1979 the Company deferred
- $3,806,901 of fuel expenses, which amount represents the balance of unrecovered fuel costs which will be collected over the period January 1,1980 through December 31,1982. The after tax effect of
, this deferral is to increase earnings by $1.06 per co imon share for both the twelve months ended l 7 September 30,1980, and the year ended December 31,1979.
Equity Method of Accounting-The Company accounts for its investment = in the common stock
- of 3Iaine Yankee and 31EPCO on the equity method of accounting and records its proportionate share of the net earnings of these companies (substantially all of these earnings are paid out in dividends) as a reduction of purchased power costs. See Note 8 for additional information with respect to these investments.
Depreciation of Electn'c Plant and Maintenance Policy-Depreciation af electric plant is pro-vided using the straight.line method at rates designed to amortize the originai cost of the properties 41 . 1
f BANGOR HYDRO. ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Nates Applicable to Unaudited Period) II 7 (1)
SUMMARY
OF SIGNIFICANT ACOoUNTINo Poucits-(Continued) over their estimated service lives. The composite depreciation rate, expressed as a percentage c I average depreciable plant in service, was approximately 3.2% during the periods presented. The Company follows the practice of charging to maintenance the cost of repairs, replacements g and renewals of w items considered to be less than units of property. Costs of additions, replace-ments and renewals of items considered to be units of property are charged to the utility plant ac-counts and any items removed are retired from such accounts. The original costs of units of property retired and removal costs, less salvage, are charged to the reserve for depreciation.
- . Equity Reserve for Licensed Hydro Projects-The Federal Energy Regulatory Commission P ("FERC") requires that a reserve be maintained equal to one-half of earnings in excess of a pre-scribed rate of return on the Company's investment in licensed hydro property beginning with the twenty-first year of project operation under license. In 1976 the FERC required the Company to record, by charging retained earnings, the cumulative equity reserve arising in years 1960 through j 1976. As required by an order of the FERC, which was effective January 1,1978, the Equity Reserve
, provided for licensed hydro projects was reclassified from Other Deferred Credits and Reserves to Retained Earnings.
) $. AUowance for Funds Us d During Construction-The Company reflects as an element of the
/ cost of construction of major units of depreciable property an allo vance for funds (including common
.: equity funds) employed during the construction period ("AFDC"). While not currently providing
!s funds, under the rate-making processes of applicable regulatory agencies the Company is permitted to
#4 recover these amounts over the useful life of the constructed property. Further, the unrecovered cost
% of constructed property, including the allowarce, is an element of rate base on which the Company 1 is permitted to earn a return.
The amount of the allowance recorded is determined by multiplying the portion of the average ' monthly dollar balance of construction in progress financed by short-term borrowings by the weighted
} average interest rate applicable to short-term borrowings for the month and multiplying any remainder of the monthly dollar balance of construction in progress by the weighted average cost of debt and equity as of the beginning of the year. For the twelve months ended September 30,1980 and for
, 1979, the average monthly short-term borrowings exceeded the average monthly balance of construc-tion in progress and, as a result, the allowance rate for these two periods is the average interest rate f of short-term borrowings during these respective periods.
~
The average rate produced by the Company's computations was 16.3% for the twelve months ended September 30,1980,13.2% in 1979,8.4% in 1978, and 8% for 1977,1976 and 1975. { Effective January 1,1977, the FERC established a formula for computing the amount of AFDC applicable to borrowed funds and to other funds. IInd this formula been used in prior years, the effect on the total amount of AFDC recorded would not have been significant. Further, the FERC 42 l l
W BANCOR HYDRO. ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS- (Continued) { g (Including Notes Applicable lo Unaudited Period) (1) Sunnany or Sicstricm Accouxrixa Poucins-(Continued) required that the AFDC applicable to borrowed funds be reported as a reduction of interest expense. The statements of income for 1975 and 1976 have been adjusted to reflect a reclassification of borrowed funds as a reduction of " Interest Expense" as if the prescribed formula had been in effect. 1p (2) INCOME TAXES
~
The individual components of federal and state income taxes reflected in the Statements of Income for the twelve months ended September 30,1980 and the five years ended December 31,1979 are as follows:
. Twelve
(, Months Ended Year Ended Decemo I, Se >t. 30, 980 1979 1978 1977 1976 1975 Currently Payable
', Federal. $ -
$ (491,027) $ (453,080) $ 369,324 8 (297,738) $ 812,897 8 tate - (238,106) 102,120 166,238 801 177,001 S -
$ (729,133) $ (350,960) $ 534,562 8 (206,937) $ 989,898 Deferred - Short Ter u
, Federal 0(1,298,081) $ (355,508) $ -
3 - 4 - 8 tate 33,766 300,091 - - - - g ( $(1,264,315) $ (35,417) $ - 4 -
;. Deferred - Other Fedcral $ 1,528,424 4 1,377,215 $ 467,928 $ 245,497 $ 267,844 $ 259,012 State 105,668 103,717 2,560 (14,804) 4,834 53,362
$ 1,634,092 $ 1,480,932 $ 470,488 $ 230,693 4 272,678 8 312,374 Investment tax credits, net 4 1,110,750 $ 980,478 $ 923,637 $ 570,941 8 376,000 $ 289,983
,2. Employee stock ownership plan investment tax credit 168,265 106,165 95,964 59,027 - -
Total Provision 4 1,648,792 $ 1,783,025 $ 1,139,129 $ 1,395,223 $ 351,741 $ 1,592,255 Charged to other income (13,005) (26,198) (10,699) (20,643) (11,758) (2,485) Allocated to cumulative change in accounting principle (Note 1) - (1,033,953) .- - - - Charged to operating expense . $ 1,635,787 8 722 5 8 1,128,430 $ 1,374,580 $ 339,983 $ 1,589,770 43 . b
I BANGOlt IlYDRO ELECI' HIC CO31PANY NOTES TO FINANCIAL STATE 31ENTS- (Continued) (Including Notes Applicable to Unaudited Period) g (2) Ixcour T.txts-(Continued) For the twelve months ended September 30,1980 and for the year ended December 31,1979, the l Company experienced a net loss for tax purposes resulting principally from three significant trans-actions which increased income for accounting purposes but not for tax purposes. The loss for tax purposes resulted in net operating loss and investment tax credit carryovers which, subject to review g by the Internal Revenue Service, will be used to cduce income taxes otherwise payable in future
- years. The provisions and accruals related to these items, which have been classified (principally as short term deferred taxes) to cormspond to the accounting for the related assets, are as follows:
Twebe %nthe Ended September 30,1980 1979 Federal State Federal State f9 (Unaudited) Deferred fuel costs $ 1,512,982 $ 247,566 $ 2,346,349 $ 383,928 Unbilled revenues 239,817 39,240 1,090,547 178,444 A 1' Net operating loss carry forward (299,483) (253,010) (1,603,732) (262,281)
- Investment tax credit carry forwards
'. ; - Through 1985 (1,187,814) - (1,187,814) - Through 1986 (1,000,858) - (1,000,858) - Through 1987 (562,725) - - -
$(1,298,081) $ 33,766 $ (355,508) $ 300,091
( , The rate-making practice followed by the 31PUC in the Company's most recent ( August 1986' rate order permitted the Company to recover as a part of the cost of service deferred federal income tax arising from the use, for income tax purposes, of accelerated depreciation of certain property 3' added subsequent to 1969. The income tax effects of other prt,perty related timing differences between
'r . pretax accounting income and taxable income generally are, in effect. flowed through to the Company's customers. Although this accounting differs from generally accepted accounting principles followed by non-rate-regulated companies, which are required to record deferred taxes related to all timing differences, the Company expects that deferred taxes not recorded will be collected through customer rates in the future when such taxes become payable.
}
6 4
~
BANGOR IIYDRO-ELECTIUC CO31PANY NOTES TO FINANCIAL STATE 31ENTS-(Continued) (including Notes Applicable to Unaudited Period) (2) INCOME TAXES-(Continued) The table below reconciles the total provision for iederal income taxes to a provision calculated by multiplying income before federal income taxes by the statutory federal income tax rate: Twelve Months Ended Sept. 30, 1980 1979 1978 _ 1977 1976 1975 y Amount % Amount % Amount % Amovat % Amount % Amount %
.- (Unaudited) (Dollars la T:.ouwnd.)
Federalincome tax provision $1,509 30 % $1,617 32 % $1,034 23 % $1,244 31 % $ 346 IS% $1,362 40 % Permanent reductions in tax expense resulting from sta-tutory exclusions from taxable income: I* Dividend received dedue-tion related to earn-ings of associated companies 207 4 207 4 208 5 207 5 207 11 212 6 Equity component of...... AFDC . . . . . . . . . . . -- - - 255 6 112 3 71 4 --
. Preferred dividends
- paid deduction . . . . . 34 1 - - 34 1 34 1 34 2 34 1 Amortization of invest-ment tax credit 92 2 80 1 36 1 16 - 64 3 47 1 Other 36 1~
34 1~
~
4 Federal income tax provision
- (- before effect of timing dif-ferences $1,878 38 % $1,938 38% $1,567 36 % $1,613 40 % $ 722 38 % $1,655 48 %
,5
. Timing diferences that are flowed through for rate-making and accounting p' g
, purposes:
Interest component of
."- 96 5 AFDC 346 7 365 7 300 7 214 5 --
Deduction of certain........... costs (primarily pen-sion costs and payroll taxes) for tax pur-poses that are in. cluded in the cost of
'~
i electric property . . . . 30 1 29 1 27 1 24 1 23 1 - - One-half year deprecia-tion %svention - - - - 216 5 - - -- - - Othw 19 - 16 - (9) (1) 85 2 - 67 4-
- ~ -
Federal income tax provi-sion at statutory rate $2,273 46 % $2,348 46 % $2,110 48 % $1,936 48% $ 908 48 % $1,655 48 %
= _ _
Under the federal income tax laws, the Company receives invea" ment tax credits at a rate of 107o on qualified property additions. Investment credits received are deferred and amortized over the life of the related property. Due to the adoption of a Tax Reduction Act Stock Ownership Plan (see Note 3), the Company receives an additional 17o investment tax credit which is used to fund the Plan.
. 45 .
1 1 i 7 BANGOR HYDRO. ELECTRIC COMPANT NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Notes Applicable to Unaudited Period) ( (3) CAPrrAL STOCK The Company has an employee stock ownership plan which qualifies as a Tax Reduction Act
, Stock Ownership Plan ("TRASOP"). Annual contributions to the Plan by the Company are in the form of common stock of the Company having a market value equal to an r.dditional 1% i: cest-ment credit allowed by federal tax law, less administrative expenses. The Company also has a Dividend Reinvestment and Common Stock Purchase Plan through which shareholdem may pur-b - chase common stock without payment of brokerage commissions or service charges. In connection with these plans, the Company has reserved 130,000 shares of common stock.
(4) PatrEnato STOCK h*I General- Authorized preferred stock consists of 250,000 shares, par value $100 per share, of which there are outstanding 97,340 shares. The remaining 152,660 authorized but unissued shares (plus additional shares equal in number to such presently outstanding sharts as may be retired) may he issued with such preferences, restrictions or qualifications as the board of directom may determine. The callable preferred stock may be called in whole or in part upon ar.y dividend date by appropriate resolution of the board of directors. With the exception of the 20,000 shares of 9%% Preferred Stock and the 30,000 shares of 9%9 Preferred Stock, the r:utstanding preferred stock has general voting rights of one vote per share. j' Redeemable Preferred Shares-The 91/4% Preferred Stock and the 9%% Preferred Stock are subject to mandatory redemption through the operation of sinking funds at the redemption price of
$100 per shara plus dividends accrued. The Company will set aside in cash annually (1) on December E
g 1 in each yer.r commencing with December 1,1982, an amount suaicient to redeem 1,000 shares of
.; the 9%% Preferred Stock and (2) on August 1 in each year commencing with August 1,1985, an )
- amount sufficient to redeem 2,000 shares of the 9%% Preferred Stock.
The aggregate amounts of preferred stock redemption requirements for each of the five years following 1979 are as follows: 1980 - f 1981 1982
$100,000 1983 $100,000 1984 . $100,000 (5) Frasr MORTGAGE BONDS Under the provisions of the indenture, substantially all of the Company's plant and property has been mortgaged to secure the First Mortgage Bonds. Additional bonds may be issued under the First Mortgage Bond Indenture, subject to certain restrictions and provisions specified in the inden-
- ture and supplements thereto. .
~
46 n
i BANGOR IIYDRO ELECTRIC COMPANY NOTES 'IV FINANCIAL STATEMENTS- (Continued) [g (including Notes Applicable to Unaudited Period) (5) FinsT MORTGAGE BONDS-(Continued) Sinking fund requirements and current maturities of long-term debt for the five years subsequent to December 31,1979 aggregate $4,850,000 as follows: Sinking Fund Current Requirement Maturities Total b 19o0 $170,000 $2,000,000 $2,170,000 1981 170,000 - 170,000 1982 170,000 1,000.000 1,170,000 1983 170,000 - 170,000 f' 1984 170,000 1,000,000 1,170,000
$4,850,000 (6) NOrES PAYADLE m BANKS On August 22,1980, the Coinpany entered into a $30 million Revolving Credit and Term Loan
,, Agreement with a syndicate of seven banks. Under the Agreement, the Company may borrow up to j $17.4 million until the start of the Company's commitment to purchase the additional 41.4 megawatts
_. of the Seabrook nuclear unita (see Note 9). At that time, the credit available to the Company under this Agreement increases to $30 million. The revolving credit portion of this facility terminates on e6 ( June 30,1985, at which time the indebtedness may be converted to a term loan to be paid down by
;_ the Company over a th've year period ending June 30,1988.
The interest rate on the revolving credit is tied to the prime rate. For the periods ending June 28,1981, June 28,1983 and June 29,1985, the interest rates are 106%,108% and 110% of the prime rate respectively. In addition, the Company is obligated to pay a commitment fee of one-half of one percent on the unused portion of the commitment and an additional fee of 4% of the prime 4 rate applied to the available credit. The interest rate under the term loan portion of the facility is
?
115% of the prime rate. Under both the revolving credit portion and the term loan portion, there is an additional intettst charge of one-quarter of one percent on amounts outstanding in excess of $20 million. The Company plans to use the borrowings under this Agreement to initially finance construction
~
and for other corporate purposes. The Company inte eds to refinance such borrowings with the pro-ceeds from sales of long-term debt and equity secorities. Under the terms of this Agreement, the Company is prohibited from incurring over $1 million of other unsecured borrowings. 47 1
I BANGOR IIYINO.ELEC1' HIC COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Notes Applicalile to Unaudited Period) ( 3 (6) NoTrs PAYABLE W BANKS-(Continued) Prior to August 22,1980 the Co:ngsny arranged for its short term borrowings under separate I lines of credit with individual banks. Certain information related to short. term borrowings is is follows-Twelve b,. Monthe Ended Sept.30, 4 1980 1979 ( Total credit available at end of period $17,400,000 $15,300,N)0 iT Unused credit at end of period $ 2,400,000 $ 8,050,000 Borrowings outstanding at end of pv dod $15,000,000 $ 7,250,000 Effective interest rate (exclusive of fees) on borrow-ings outstanding at end of pericd 13.8 % 15.5 %
$f Average daily outstanding borrov.mga for the period $11,143,000 $ 9,291,000 3
Weighted daily average annual enteust rate 16.4 % 13.2 %
- Highest level of borre angs outstanding at any (f month-end during the period $16,800,000 $14,250,000 e
(7) St:PPLEMENTARY INLOME STATEMENT INFORMATION N The Company has a noncontributory pension plan covering substantially all of its employees.
% The Company funds pension costs acer.ted. Pension ecst was $43G,250 for the twelve months r ended September 30,1980, $410,000 in 1979, $408,600 in 1973, $262,300 in 1977 and 1976, and
$229,900 in 1975, including amortization of unfunded prior service costs (approximately $1,076,800 as of January 1,1950) over a twenty year period.
1- As of January 1,1980, the date of the latest actuarial review, pertinent pension plan information was as follows:
-{
, The actuarial present value of vested accumulated phn benefits $5,952,800 The actuarial present value of nonvested accumulated plan benefits $ 152,000
; Net assets available for benefits $7,977,989 Assumed rate of return on plan investments 5%%
3faintenance expense, depreciation, and h> cal property and other taxes not based on income which were charged to operating expenses are stated separately in the income statement. Re its and adver-
, tising costs are not significant. No royalty or research and development expenses - . m cred. ,
48 l
HANGOR HYDRO-ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS- (Continued) (Including Notes Applicable to Unaudited Period) (8) CAPACITY I b The Company owns 7e/c of the common stock of 3faine Yankee and 14.2??c of the common stock of 3fEPCO. Under purchased power arrangements, the Company is entitled to purchase 7.3% of the output of 31aine Yankee, and is obligated to pay a like percentage of 31aine Yankee's cocts regard-less of the level of electrical output. ':'he Company is also presently entitled to 2.4% of a purchased power contract between 3fEPCO and the New Brunswick Electric Power Commission. However, it is probabla that this contract will be revised (see "Pending Legal Proceedings"). To the extent that 31EPCO's revenues from transmission services are insufficient to meet its expenses, the Company and the other participants pay 31EPCO's costs based upon their irlative system peaks. Information re-ta lating to the above purchased power arrangements and the operations ol 31aine Yankee and 31EPCO is as follows: MAINE YANKEE MEPCO
. Power Sales Contreet Term 1973-2003 1976-1986 Capacity Entitlement 61 MW 9.6 MW Twelve Twelve ~f
- Months Monthe Ended Ended September 30, Septembec 30, 1980 1979 1978 1980 1979 1978 Orr.aArrows: (Dollars in Thousands)
As reported by investee-
< Operkting revenues 8 81,919 8 68,867 8 70,373 8103,758 $98,122 859,860 Depreciation 8 8,333 8 8,279 8 8,173 $ 735 8 735 8 736 Interest and Preferred Divider.da 16,218 14,458 12,550 1,264 1,238 1,201 Other, net 50,810 39,480 42,948 101,611 95,994 57,760 "l 8 75,361 8 62,217 8 63,671 8103,610 897,967 859,697 Earnings applicable to common stock 8 6,558 8 6,650 8 6,702 8 148 8 155 8 163 Amounts reported by the Company-g ( Purchased power costs . 8 4,541 8 4,199 8 4,217 8 588 3 587 8 551
. Equity in net income . (468) (468) (479) (24) (24) (39)
'~
$ 4,073 8 3,731 8 3,738 3 564 8 563 8 512 FINANCIAI, Postriox:
As reported by investee-Plant in service $240,186 8240,061 8237,884 8 18,617 318,617 818,617 Accumulated depreciation . (59,729) (54,105) (46,449) (7,033) (6,482) (5,746)
; Other 102.013 101,149 74,520 14,042 10,669 7,941 i Total assets $282,470 8287,105 8265,955 8 25,626 $22,804 820,812 Iass -
Preferred stock :/,286 13,070 13,696 - - - Ieng term debt 133,537 139,373 128,818 9,900 10,560 11,220 Other liabilities and deferred credits 69,573 67,805 56,657 14,553 10,997 8,267
-- Net assets . 8 67,074 8 66,857 8 66,784 8 1,173 8 1,247 8 1,325 Company's reported equity-Equity in net assats . 8 4,695 8 4,680 8 4,675 8 166 8 177 8 188 Adjust Compsny's estimate to actual . 115 3 4 10 2 -
8 4,810 8 4,683 8 4,679 8 176 8 179 8 .188 49
I BANGOR IIYDRO. ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Notes Applicable to Unaudited Period) { (8) CAPACITY- (continued) Complete financial statementa of 31aine Yankee and 31EPCO as of September 30,1980 and December 31, 1979 and for the five years ended December 31, 1979 are included elsewhere in this Prospectus. The Company owns 8.330% (50 31W) of the 600 31W Wyman 4 unit. The Company's propor-b tionate share of the di ect expenses of this unit is included in the corresponding operating expenses in the Statements of Income for the years 1978 (from December 1),1979 and the twelve months ended September 30,1980. Included in the Company's utility plant are the following amounts with respect 3 to this unit: September 30, December 31, 1980 1979 44 e-Electrie plant in service $16,507,802 316,207,360 Accumulated depreciation . (892,008) (523,008) 815,615,794 815,684,352 e (9) CONSTRUCTION The Company is engaged in an ongoing construction program including an investment in the 4 Seabrook nuclear units ("Seabwk"), a jointly-owned electric generating facility being built by the
-I l'ublic Service Company of New Ilampshire ("PSNII"). The Company now owns .37% (8.6 mega-
" ~, watts) of Seabrook and has contracted to purchase another 1.8% (41.s megawatts) of that plant.
~
The Company's participation in the .37% interest and its potential participation in the 1.SSc interest g are summarized below:
!~ "articipation in Seabrook ,
Under Exteting Contract Total
~
(Dollars in Thousands) Company's Ownership Percentage .37% 1.8% 2.17 % Utility plant under construction at September 30, 1980: [ Construction and nuclear fuel costs, exclusive of allow-ance for funds $4,070 $19,593 $23,663 Estimated for completion: Construction and nuclear fuel costs, exclusive of al-
~
lowance for funds . 4,904 23,611 28,515 Total ,
$8,974 $43,204 $52,178 The above estimates for completion are based on the latest estimates of the project's cost furnished by PSNII. See also Note 10," Contingencies-Seabrook" for a further discussivi of this project. .
' 50
7 BANGOR HYDRO-ELECTRIC COMPANY NOTES TO HNANCIAL STATEMENTS-(Continued) gg (Including Notes Applicable to Unaudited Period) (9) CoNsTaucTioN- (continued)
, One of the projects in which the Company had an ownership interest was the New England Power Company nuclear units originally planned for Charlestown, Rhode Island, at the site of the abandoned naval base. EtTorts to obtain the site were unsuccessful, and the lead owner's parent company determined that the capacity from the units was not required to meet its system's fifteen year corporate plan. Accordingly, on December 17,1979, the lead owner announced the cancellation of the project. In its most recent rate order, th Company has received approval from the 3fPUC to recover over a five year period its investment in the project, less any salvage credits.
3 (10) CoNTWGENCHE Seabrook. As discussed in Note 9 above, one of the jointly-owned generating stations in which
- f. the Company is participating is the nuclear generating pht being constructed in Seabrook, New IIampshire in which PSNII has a 50% ownership interest and acts i ' the principal or lead participant.
In response to the passage of a statute in New IIampshire prohibiting the inclusion of expendi-tures for construction work in progress in rate base, PSNII determined that it could not continue to
+
, finance a 50% interest in the Seabrook units, and in Starch 1979 it began efforts to reduce its owner-ship interest to 28%. PSNII's efforts have resulted in commitments only sufficient to reduce PSNII's
', interest to approximately 35%, which transactions can be consummated only after regulatory ap-J provals of all purchases are obtained. The Company has received the necessary regulatory approveh-f for its additional 1.8% interest. However, regulatory proceedings with respect to some of the user purchasers' interests have been delayed, and PSNII has indicated that the required approvals might
/
not be obtained before January 1981, or later. In the meantime, PSNII is attempting to continue to ( finance its 50% ownership interest in the Seabrook project.
% Construction of the Seabrook units has required numerous approvals and permits from various l
- i state and federal reg'datory agencies. The process of obtaining these approvals and permits has been long and complex and has been opposed consistently by a number of intervening groups. Opposition to the project has included demonstrations at the Seabrook site. The project also has been plagued sy j -
lengthy delays which have resulted in greatly increased costs. Court appeals and administrative pro-eeedings are cantinuing, and further appeals and proceedings are possible. The Company cannot predict whether PSNII's financing problems will be resolved, nor can it predict what effect those financing problems or further administrative ir court decisions or regulatory j actions may have upon PSNH'e, ability to complete the project or upon the cost of the project. See i "Businees-Properties and Pcwer Supply-Future Power Sources" for additional information con-cerning the Seabrook nuclear units and the Comgny's participation therein.
~
l Other. See "Pending Legal Proceedings" for a discussion of the Indian cases and proceedings involving IMO Chemical Group, Inc. l , 51 - I a , . -
t REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To 3fAINE YANKEE AToutc Powtn COMPANY: We have examined the balance sheet and statement of capitalization of 3faine Yankee Atomic
, Power Company (a 3faine corporation) as of December 31,1979, and the related statements of earn-ings, changes in common stock investment and sources of funds for acquisition of nuclear fuel and construction of electric property for the four yeam then ended. 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 circum-g stances.
In our opinion, the financial statements referred to above present fairly the financial position of Afaine Yankee Atomic Power Company as of December 31,1979 and the results of its operations and its sources of funds for acquisition of nuclear fuel and construction of electric property for the four years then ended, in conformity with generally racepted accounting principles consistently ye applied during the periods and on a basis consistent with the preceding year. Aarnua ANDERSEN & CO. Iketon, 3fassachusetts,
;y February 6,1980. .s l ,t
- = -
?
s t e e 52
I V MAINE YANiEE ATOMIC POWER COMPANT STATEMENT OF EARNINGS (g (Dollars in Thousands except Per Share Amounts) 12 Months . Septem e 30, 1980 1979 1978 1977 1976 1975 (Unaudited) Electric Operating Revenues $81,919 $68,867 $70,373 $65,659 $58,860 $61,731 Operating Expenses - Fuel (Notes 1 and 11) 21,651 15,319 17,411 14,663 11,686 14,538 g Operation 18,566 14,193 10,684 8,394 6.884 7,230 Maintenance (Note 1) 4,342 2,544 4,496 3,556 1,433 1,917 Depreciation and Amortization (Notes 1 and 11) 8,333 8,279 8,173 8,087 8,029 7,736
- Taxes 8,578 8,192 P Federal and State Income (Note 2)
Local Property 7,510 3,752 7,864 3,750 8,703 4,094 9,058 4,222 3,800 2,839 Total Operating Expenses 64,154 51,949 53,561 48,180 40,410 42,452 Operating Income 17,765 16,918 16,812 17,479 18,450 19,279
, Other Income (Expenses)
Allowance for Other Funds Used-For Nuclear Fuel (Note 1) 1,236 1,547 1,341 1,047 1,106 844
- During Construction (Note 1) 228 76 50 50 31 114
-[ Other Income Before Interest Charges (212) 19,017 (168) 18,373 (63) 18,140 (31) 18,545 (15) 19,602 (33) 20,204 Interest Charges g4 ! Long-Term Debt (Notes 4 and 5) 14,144 13,307 11,534 11,502 11,616 12,527
- Other 1,126 15G (8) 23 781 441 AllowanceforBorrowed FundsUsed-For Nuclear Fuel (Note 1) (3,382) (2,602) (1,023) (674) (561) (378)
During Construction (Note 1) (377) (133) (90) (90) (59) (193)
- 11,511 10,722 10,413 10.761 11,777 12,397 Net Income 7,506 7,651 7,727 7,784 7,825 7,807 A 1,122 ?. Dividenda on Preferred Stock 948 1,001 1,025 1,083 1,122 Earnings Applicable to Common Stock $ 6,558 $ 6,650 $ 6,702 $ 6,701 $ 6,703 $ 6,685 5_00,000 500,000 500,000 oy,000 Shares of Common Stock Outstanding 500,000 500,000 Earninga per Share of Common Stock $13.120 $13.300 $13.404 $13.402 $13.406 $13.370 Dividends Declared per Share of Common Stock $13.000 $13.250 $13.400 $13.4M $13.405 $13.380 The accompanying notes are an integra? part of these financial statements.
53
t f MAINE YANKEE ATOMIC POWER COMPANY BALANCE SHEET (Dollars in Thousands) b ASSETS Septerrib-r 30, Dewmber 31, 1180 1979 (Unaudited) ELECTRIC PROPERTY, at Original Cost (Notes 4 and 11) $240,186 $240,061 M Less: Accumulated Depreciation and Amortization (Notes 1 and 11) 59,729 54,105 4 180,457 185,956 Construction Work in Progress (Ncu 8) 13,969 8,951
- i. Net Electric Property 194,426 194,907 r- _
NUCULAR FUEL, at Original Cost (Notes 1 and 11) Nuclear Fuel in Reactor 74,346 52,564 , Nuclear Fuel-Spent 51,814 42,557 Nuclear Fuel-Stock 4,895 35,679 131,055 130,800 a,, Less: Accumulated Amortization-Original Cost 86,181 76,443 ~', Permanent Disposal, Net 21,680 15,401 23,194 38,956 N Nuclear Fuel in Process (Note 8) 48,410 40,394 I~ Net Nuclear Fuel 71,604 79,350 Net Electric Property and Nuclear Fuel 266,030 274,257 CURntNT Assers 1 Cash (Note 3) 205 139 I Accounts Receivable 6,294 6,474 Materials and Supplies, at Average Cost 3,667 3,503 Prepayments 2,322 949 Total Current Assets 12,488 11,065
' ~
DorERRrn CHARGE AND OTHER AssUm (Note 1) 3,952 1,783
$282,470 $287,105 The accompanying notes are an integral part of these financial statements.
54
MAINE YANKEE ATOMIC POWER COMPANY BALANCE SHEET ( h (Dollars in Thousands) STOCKIIOLDERS' INVESTMENT AND LIABILITIES September 30, December 31, 1980 1979 (Unaudited) CAPITAUZATION (See Separate Statement) b Common Stock Investment $ 67,074 $ 66,857 Redeemable Preferred Stock 12,286 13,070 Long-Term Debt 103,237 105,923 Other Long-Term Debt h 300 33,450 f '. Total Capitalization 212,897 219,300 CLmRENT LIABIUTIES Notes Payable to Banks (Note 3) - 3,925
, Current Sinking Fund Requirements (Note 4) 717 1,822 Accounts Payable 6,081 3,412 Bank Checks Outstanding 99 -
3 Dividends Payable 1,855 1,919 Accrued Interest and Taxes 8,179 2,739 Other Current Liabilities 87 47 4 1
% Total Current Liabilities 17,018 13,864 DErritRED CREDnB Accumulated Deferred Income Taxes (Note C) 42,325 45,048
,; Unamortited Investment Tax Credits (Note 2) 7,894 7,522 Unamortized Gains on Reacquired Del,t (Note 1) 2,336 1,371 Total Deferred Credits 52,555 53,941 COMMITMENTS AND CONTINGENCLES (Note 8)
$282,470 $287,105 The accompanying notes are an integral part of these financial statements.
55 -
l l r MAINE YANKEE ATOMIC POWER COMPANY STAT 31ENT OF CAPITALIZATION b
\(Dollars in Thousands)
September 30, December 31, 1980 1979 d Conmox STocx InvesrurNT g Common Stock, $100 Par Value, Authbrized and Outstanding s 500,000 Shares $ 50,000 $ 50,000 Other Paid-in Capital 16,805 16,805 Capital Stock Expense (262) (281) Gain on Cancellation of Preferred Stock 255 110 {
*/ Premiums on Preferred Stock 184 196 Retained Earnings 92 27 67,074 66,857 Rrotturnt.E Patrranrm STocx -7.489 Senus,
$100 Par Value, Authorized 170,000 Shares, Outstanding
, 122,855 at September 30,1980 and 130,70d Shares at De-cember 31,1979 (Note 6) , 12,286 13,070
) Less: Current Sinking Fund Requirements - -
12,286 13,070 g Loxo-Tenn Dent (Note 4)
- - First and General 3Iortgage Bonds Series A-9.10% due May 1,2002 55,717 58,161 Series B-8%% due 3 fay 1,2002 37,604 38,911 Series C-7%% duc 3Iay 1,2002 10,792 10,842
.i T
Less: Current Sinking Fund Requirements (717) (1,822) Unamortized Debt Discount, Net of Premium (159) (169)
~ 103,237 105,923 OTHER LONo-TEnM DEBT (Note 5)
Notes Payable to 31YA Fuel Company 30,300 33,450 Total Capitalization $212,897 $219,300 The accompanying notes are an integral part of these financial statements. t 56
MAINE YANKEE ATOMIC POWER COMPANY STATEMENT OF CHANGES IN COMMON STOCK INVESTMENT I h (Dollars in Thou ands) Amount at Other Paid Retained
, Shares Par Value in Capital Earnings Total Balance- December 31,1974 500,000 850,000 $16,653 8 6 $66,659 Add (Deduct)
Net Income - - - 7,807 7,807 g Cssh Dividends Declared on-
~ Common Stock - - - (6,690) (6,690)
Preferred Stock - - -- (1,122) (1,122) Capital Stock Expense - - 14 - 14
. Balance - December 31,1975 500,000 50,000 16,667 1 66,668 h Add (Deduct)
Net Income - - - 7,825 7,825 Cash Dividends Declared on-Common Stock - - - (6,703) (6,703) a e Preferred Stock - - - (1,122) (1,122) Capital Stock Expense - - 14 - 14 i
; Balance-December 31,1976 . 500,000 50,000 16,681 1 66,632 $ g. Add (Deduct)
> / Net Income .. .... - - - 7,784 7,784 Cash Dividends Declared on-( Common Stock - - - (6,702) (6,722) g Preferred Stock - - - (1,053) (1,083) Redemption of Preferred Stock - - 75 - 75 Capital Stock Expense - - 13 - 13 l Balance-December 31,1977 . 500,000 50,000 16,769 - 66,769 Add (Deduct) l .f Net Income . - - - 7,727 7,727 l Cash Dividends Declared on-Common Stock - - - (6,700) (6,700) ! Preferred Stock - - - (1,025) (1,025) Capital Stock Expense - - 13 - 13
}
Balance-December 31,19% - 500,000 $50,000 $16,782 $ 2 $66,784 (Continued on following page) 57 . l l ( I l 3 J
V MAINE YANKEE ATOMIC POWER COMPANT STATEMENT OF CHANGES IN COMMON STOCK INVESTMENT (Continued) b (Dollars in Thousands) Amount at Other Paid Hetained Sharco Par Value in Capital Earninse Total Balance - December 31,1978 500,000 $50,000 $16,782 $ 2 $66,784 ki Add (Deduct)
- - - 7,651 7,651 Net Income Cesh Dividends Declared on-
~
Common Stock - - - (6,625) (6,625) Preferred Stock - - - (1,001) (1,001)
+' Redemption of 14eferred Stock - - 35 - 35 Capital 8tock Expense - - 13 - 13 Balance - December 31, 1979 , 500,000 $50,000 $16,S30 $ 27 $66,857 12 Months Ended September 30,1980 (Unaudited)
Balance - 8eptember 30, 1979 500,000 $50,000 $16,825 $ 34 $66,859 r.
~'
Add (Deduct) Net Income - - - 7,506 7,506 Cash Dividends Declared on-Common Stock - - - (6,500) (6,500)
~
Preferred Stock - - - (948) (948) Redemption of Preferred 8tock - - 145 - 145 Capital 8txk Expense - - 12 - 12 Balance-September 30,19s0 500,000 $50,000 $16,982 $ 92 $67,074 h The accompanying notes are an integral part of these financial statements. 58
f MAINE YANKEE ATOMIC POWER COMPANY STATEMENT OF SOURCES OF FUNDS FOR ACQUISITION OE NUrTFAR FUEL AND CONSTRUCI' ION OF ELECTRIC PROPERTY
-( (Dollars in Thousands) 12 Months Ended Year Ended December 31, September 30, 1980 1979 1978 1977 1976 1975 (Unaudited)
Fcxos Paovwro Internal Sources From Operations Net Income $ 7,506 $ 7,651 $ 7,727 8 7,784 $ 7,825 $ 7,S07 b Amortization of Nuclear Fuel 21,651 15,319 17,411 14,563 13,240 15,029 Fuel Settlement Credit - - - - (1,554) (491) Depreciation and Amortization . 8,333 8,279 8,173 8,087 8,029 7,736 Deferred Income Taxes and Investment Tax Credit, Net (964) 6,918 7,583 8,868 8,413 8,192 Allowance for Other Funds Used for Nuclear Fuel and Durbg Construction (1,464) (1,623) (1,391) (1,097) (1,167) (958) $9 35,062 36,544 39,503 35,505 34,766 37,315 Less: Blaking Fund Requirements: Long-Term Debt 4,577 4,850 5,555 5,626 4,183 4,172 Preferred Stack 794 626 - 1,304 - - Dividends on Preferred 8tock 948 1,001 1,025 1,083 1,122 1,122 Dividends on Common Stock 6,500 6,625 6,700 6,702 6,703 6,690 Other, Net 1,437 505 46 (139) (1,208) (463) 20,606 22,937 26,177 23,929 23,636 25,794
- l- (Increase) Decrease in Working Capital, Exclu-( sive of Notes Payable to Banks and Binking Fund Requirements Cash and Receivables (269) 425 (616) (1,054) 1,519 P34 j Other Current Assets 621 (466) (66) (587) (598) (618)
N Other Current Liabilities 3,380 3,732 (533) (7,776) (8,458) 12,075 10,434 (4,354) (3,433) (6,178) (5,602)
> (574)
Net Available from Internal Bources 24,538 22,363 17,719 34,363 20,253 19,992 External Bources Increase (Decrease) in Notes Payable MYA Fuel Company 4,700 15,800 8,750 (11,950) 20,850 - Banks (1,100) 3,925 - (200) (5,700) (3,100)
. Series A Debentures . - - - - (15,000) -
I Net Available from External Bources 3,600 19,725 8,750 (12,150) 150 (3,100)
$25,138 $42,088 $26,469 $22,213 $20,403 $16,892 FUNos Uszo ron AcertsITrow or NecLzan FezL AND CoxararcTrox or ELEcrate l'ROPEaTY Acquisition of Nuclear Fuel $20,786 $35,244 $25,732 $20,969 $19,543 $12,786 Allowance for Other Funds Used for Nuclear Fuel (1,236) (1,547) (1,341) (1,047) (1,136) (844)
Construction of Electric Property 8,816 8,467 2,128 2,342 2,027 5,064 Allowance for Other Funds Used During Con-struction (228) (76) (50) (50) (31) (114)
$25,138 $42,068 $26,469 $22,213 $20,403 $16,692 The accompanying notes are an integral part of these financial statements. .
59
1 MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS (Including Notes to Unaudited Periods) g
- 1.
SUMMARY
OF SIGNmCANT ACCOUNTINo Poucas
- The Company: The Company owns and operates a pressurized-water nuclear-powered electric generating plant with a current net capacity of approximately 830 megawatts electric. The plant conunenced commercial operation on January 1,1973. The following New England electric utilities own all of the Company's common stock:
Ownership Sponsor /I*articipant Interest b - Central Maine Power Company 38 % New England Power Company 20 4 The Connecticut Light and Power Company 8 Bangor Hydro-Electric Company 7 f, Maine Public Service Company 5
*' Public Service Company of New Hampshire . 5 Cambridge Electric Light Company 4 Montaup Electric Company 4 The Hartford Electric Light Company . 4
, Western Massachusetts Electric Company . 3 Central Vermont Public Service Corporation 2
. Total 100 %
==
1 ;- For a period of thirty years, commencing on January 1,1973, in accordance with tho Power
- Contracts and, subject to certain limitations, each participant shall receive its entitlement percentage - of plant output and is obligated to pay its entitlement percentage of the Company's total costs, including a return on invested capital regardless of the level of operation of the plant.
Y Regulation: The Company is subject to the regulatory authority of the Federal Energy Regu-3 latory Commission (FERC), the Nuclear Regulatory Commission (NitC) and the Public Utilities Commission of the State of Maine (PUC) as to accounting, operations and other matters. Depreciation and Xaintenance: Depreciation is provided using a remaining life method designed to fully depreciate electric plant on a straight-line basis over the period ending May 1,2002.
- 4 Because of economic and regulatory uncertainties, the Company does not presently provide for nuclear plant decommissioning costs. The Company is currently studying the many alternative methods of decommissioning and the various funding options but cannot now predict what method of decommissioning will be adopted or its cost, which could be significant using present technology.
Minor renewals and betterments are charged to maintenance expense unless the item constitutes a retirement unit, in which case the new unit is charged to electric plant. At .ne time depreciable
, properties are retired, the original cost, plus cost of removal, less salvage, of such property is charged to the accumulated provision for depreciation.
An accounting policy is being adopted by the Company to defer and amorti, over a five year period the costa of unusual and irregular recurring studies and inspections. This is in response to 60
MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS- (Continued) gg (including Notes to Unaudited Periods)
- 1. SumrARY Or SIGNIFICANT AccouxTINo PoucIra-(Continued) recent events and orders requiring the Company to undertake significant analyses of specified operat-ing and design procedures and equipment.
Amortization of Nuclear Futl: The cost of nuclear fuel in the reactor, plus the estimated cost of disposal of that nuclear fuel, is amortized to Fuel Expense based on the ratio of energy produced during the period to the estimated total core capability with a corresponding credi; to Accumulated b' Amortization. Prior to June 10, 1977, the Company's estimated cost of disposal of nue'. car fuel was based on estimates of the cost of reprocessing, less salvage. Through May 1976, nucler.r fuel salvage values and reprocessing costs were based on the estimated market values and costs af reprocessing at the time that the fuel was expected to be removed from the reactor. From June ~t.1976 through June 9, ft 1977, nuclear fuel salvage values and reprocessing costs were based on the estimated market values and reprocessing costs at the time of reprocessing. As a result of federal energy proposals and other indications of a developing national policy with respect to the disposition of nuclear fuel, the Company changed its as<.nmptions as to the cost and the manner of disposal of nuclear fuel. Commencing June 10,1977, the C.>mpany began providing for permanent storage rather than reprocessing of spent fuel. The Company's estimate of the cost of per-manent storage was based on a study by the NRC. Specifically the disposal estimate provided was at a rate of $100/ kilogram of uranium (KGU) originally contained in the assemblies in 1977 dollars esca-I g. lated at 8% a year to the time of discharge from the reactor. Beginning in March 1980 the Company's cost estimate for permanent disposal of Nuclear Fuel in Reactor was increased to $130/KOU originally contained in the assemblies, expressed in 1978 dollars, escalated at 8% per year to the time of permanent disposal (currently estimated to be 1988). N ' The disposal cost for fuel in reactor is billed, based on generation, over the period that the fuel is
> consumed. Through 1988 the Company is adjusting the disposal reserve collected for Spent Fuel to reflect the current disposal cost estimate. This adjustment which amounts to approximately
$40,000,000 is being recovered based on electric genera'. ion from March 1980 through 1988.
This estimate of the cost of permanent disposal ($130/KOU) is based on a report issued by the Department of Energy in July 1978. This report estimated the cost for permanent storage to be
.a $117/KOU originally contained in the assemblies (in 1978 dollars). This estimate did not include the I
cost of transportation to the disposal center, which has been estimated by the Company to be $13/KOU cenained in the assemblics. The estimate of cost of disposal of nuclear fuel is subject to a number of uncertainties including the timing of available storage capacity, the extent of future inflation, regulatory requirements and the cost of future services, all of which may require periodic revisions in future nuclear fuel amortization rates. However, the Company believes that its estimate is reasonable. Allowance for Funds Used During Construction and Allowance for Funds Used for Nuclear Fuct (AFC): The Company records the net cost of borrowed funds and a reasonable return on other
^
- 61
I MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Notes to Unaudited Perioda) (
- 1. Sult>tAny : r SicNIFICANT ACCOUNT 1No Poucn:s-(Continued) funds used to finance construction and nuclear fuel acquisition programs. The amount of the allosance recorded is determined by multiplying the average monthly dollar balance of Construction Work In Progress (CWIP) and Nuclear Fuel In Process and Stock (NFIPS) by rates related to the cost of the capital used to finance the respective additions. The following table contains the weighted g average rates used during the twelve months ended September 30,1980 and for the most recent five annual periods:
AFC AFC on CWIP on NFIPS Twelve Months Ended September 30,1980 . 7.30c/c 8.719e f? 1979 7.40 7.68 1978 7.60 7.00 1977 7.87 6.98 1976 8.07 7.21 1975 8.46 7.35 Unamortized Gain or Loss on heacquired Debt: Gains and losses on bonds reacquired to satisfy sinking fund requirements of First Mortgage Bonds have been deferred and are being amortized 4 to income over the remaining original terms of the applicable series as prescribed by the Uniform System of Accounts of the FERC.
- 2. INCOlin tax ExrnNsn N The components of Federal and state income taxes reflected in the statements of income are as
% follows:
12 Months Ended Year Ended December 31, September 30, 1980 1979 1978 1977 1976 1975 (Unaudited) (Dollars in Thousands) I Current $6,402 $ 602 $ 625 $ 134 $- $- Deferred and Investment Tax Credits, Net (51) 6,076 6,831 7,594 7,410 7,042 6,351 6,678 7,456 7,728 7,410 7,042 State: Current 2,072 344 495 56 165 - Deferred (913) 842 752 1,274 1,003 1,150 1,159 1,186 1,247 1,330 1,168 1,150 Total Federal and state income taxes . $7,510 $7,864 $8,703 $9,058 $8,578 $8,192 62 l [
P MAINE YANKEE ATOMIC POWER COMPANT NO'rES TO FINANCIAL STATEMENTS-(Continued) (Including Notes to Unaudited Periods) g
- 2. INCOME tax EXPENSE- (Continued)
The Company provides deferred taxes for the tax effects of timing differences beween pre-tax accounting income and taxable income. Prior to 1975 the Company did not provide fu ly for the tax effect of timing differences and beginning in 1976 is providing additional deferred taxes to recognize the tax effect of these differences. These additional deferred taxes are recoverable under the terms of the power contracts described in Note 1. b' Investment tax credits are deferred tr.d amortized over the life of the assets giving rise to such credits. At December 31, 1979 the Ccmpany had available a carryover of unused investment tax credits of approximately $5,800,000 to be applied to reduce Federal income taxes. The Company had provided for, and deducted for tax purposes, certain costs associated with nuclear fuel reprocessing and permanent storage. In the recent examination of the Company's Federal i? income tax returns for years 1973 through 1977, the Internal Revenue Service examining agent dis-allowed the current deduction of these costs. The Internal Revenue Services position was sustained at the Appelate level which resulted in the Company fully utilizing the $5,800,000 of investment tax credit available as of December 31,1979 and paying additional Federal and state income tax assess. ments cumulative through 1979 of $2,728,530 exclusive of interest. These assessments had no effect on total income tax expense because the Company had provided income taxes for the effects of all timing differences.
.P The following table reconciles the statutory income tax rate to a rate determined by dividing the total Federal income tax expense by income before that expense.
g 12 Months M ' Ended _ September 30, 1980 1979 1978 1977 1976 1975 (Unaudited) Statutory Federal income tax rate 46.0 % 46.0 % 48.0 % 48.0 % 48.0 % 48.0 % (Increase) Reductions in taxes re-A. sulting from: Deferred taxes not provided on certain timing differences 2.9 2.9 2.8 2.7 .9 - Amortization of investment tax credit (6.0) (4.7) (3.8) (2.9) (2.2) (2.0) Other 2.9 2.4 2.1 2.0 1.9 1.4 Calculated rate 45.8 % 46.6 % 49.1 % 49.8 % 48.6 % 47.4 % 63 ,
I MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS- (Continued) (Including Notes to Unaudited Perieds)
- 3. NOTES PAYAnLE TO BANKS The Company had bank lines of credit totaling $29,000,000 as of September 30,1980, the majority of which requires an annual fee of % to % of 1% of the line. With respect to $28,000,000 of the lines there are no compensating balance requirement, the remaining $1,000,000 requires a compen-sating balance of 10% of the line or 40% of borrowing whichever is greater.
The Company had lines of credit at December 31, 1979 totaling $14,000,000. With respect to g $13,000,000 of the line, there is a required annual fee of % of 1%. The compensating balance require-ment for the remaining $1,000,000 is 10% of the line or 20% of outstanding borrowings, whichever is greater. Certain information related to these lines is as follows for the twelve months ended: September 30, December 31, 1980 1979 (Unaudited) } ?. (Dollars in Thousands) Total lines of credit $29,000 $14,000 Borrowings outstanding - 3,925 Averago daily outstanding borrowings 5,322 1,148 , IIighest level of borrowings 13,656 9,300 Annual interest inte at end of periods 13.00 % 15.25 % Average annual interest rate 16.60 % 15.40 %
- 4. Fmsr 3IoRToAGE BONDS The annual sinking fund requirements of the First Mortgage Bonds currently outstanding arnount to $4,775,000 for each of the years 1980 through 1984. Bonds repurchased amounted to $4,212,000 at September 30,1980 and $3,436,000 at December 31, 1979.
N Under the terms of tb Indenture securing the First 3Iortgage Bonds, substantially all electric
!~ plant of the Company is subject to a first mortgage lien.
- 5. 31YA FUEL COMPANY On August 26,1976, the Company entered into a Loan Agreement covering the issuance of up to $35,000,000 principal amount of promissory notes to 31YA Fuel Company, a subsidiary of BSC
- j. IIoldings, Inc. BSC is owned by a partnership composed of partners of Goldman, Sachs & Co. Cer-tain information related to this loan arrangement is as for .ws for the twelve months ended:
September 30, December 31, 1980 1979 (Unaudited )
@llars in Thousands)
Promissory notes outstanding
$30,300 $33,450 Average daily outstanding borrewings 32,704 28,252 IIighest level of borrowings 34,250 34,250 Annual interest rate at end of periods 12.45 % 14.18 %
Effective average annual interest rate 15.12 % 13.33 % 64
V MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS- (Continued) g (Including Notes to Unaudited Periods) (
- 5. MYA FUEL COMPANY-(Continued)
The Loan Agreement provides that, in the absence of an Event of Default (as defined) or oc-currence of a Terminating Event (as defined) the arrangement will extend to May 1, 2002, unless terminated by either party upon proper notice. The Company must provide 90 days written notice while MYA Fuel Company must give at least three years written notice. In order for the arrange-ment to extend beyond August 26,1981, the PUC must extend its present approval of the arrangement. U
- 6. REDEEMABLE PREFERRED STOCK 4
The Company may redeem, in whole or in part, any of the 7.4896 Series Preferred Stock upon not less than thirty nor n. ore than fifty days' notice at $107.11 per share on or before December 31, je 1982, and at amounts decreasing to $100.00 thereafter; in each case plus accrued dividends. Ikginning in 1978, 6,000 shares must be redeemed and cancelled annually, at par, and at the election of the Company an additional 6,000 shares may be redeemed and cancelled, at par, on each redemption date. The optional provision is not cumulative.
', r Preferred Stock repurchased and not cancelled amounted to 9,145 shares at September 30,1980 and 7,300 shares at December 31, 1979.
- 7. RETIREMENT INCOME PLAN
'; The Company has two noncontributory retirement income plans which cover substantially all
{ full-time employees. The Company's policy is to fund pension costs accrued on an annual basis, g ( including amounts sufficient to amortize unfunded prior service costs over 30 years.
% The plan expense approximated $219,000 for the twelve months ended September 30, 1980, l
! $182,000 for the year 1979, $130,000 for the year 1978, $121,000 for the year 1977, $86,000 for the ! year 1976 and $72,000 for the year 1975. Accumulated benefits and net assets for the pension plans as of January ',1980 are shown below: i f Actuarial present value of accumulated plan ! benefits: ! Vested . $173,000 l ' Nonvested 166,000
$339,000 Net assets available for benefits $913,000 l
l The weighted average assumed rate of return used in determining the actuarial present value of accumulated plan benefits was 6.2596. 65 : l l l
t MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS- (Continued) (Including Nates to Unaudited Periods) {
- 8. Conurrur.rrS AND COYrINGENCIES Nuclear Fuel: The Company anticipates nuclear fuel expenditures of $26,749,000 for 1980 (exclusive of AFC) and $85,144,000 for the period 1981 through 1984 (exclusive of AFC).
The Company has contracted for the purchase of all of its uranium concentrate requirements through 1983. In addition the Company has a contract with a uranium supplier for the purchase b of up to 1.3 million pounds of uranium concentrates. Deliveries of these concentrates are scheduled to begin in 19S1 and end in 1992, but delivery is contingent upon the commercial operation of a processing facility which is currently under construction. The Company has not included fuel expenditures or de!iveries for this contract in the information presented above. The impact en expenditures for the 1981 through 1984 period could amount to $25,422,000 and the uranium eva-f8 centrate regt irements ould be fulfilled through 1986 if contracted deliveries are fulfilled. The Company haa conversion contracts through 1983 and has a contract with the Department of Energy for enrichment services through 2002. Its fabrication requirements are covered through 1983, with a current contract option for two additional years. It has no contractual arrangement for reprocessing or permanent storage of spent fuel. The Company is expanding its on-site spent fuel storage facility to provide capacity to store such fuel through 1984 while maintaining a full core discharge capability. In addition, in September 1979 the Company filed with the NRC a proposed change in its operating license relating to increasing its existing spent fuel storage capacity by pro-
'r viding more compact fuel storage. An intervenor has requested a hearing. The Company cannot
; predict the scope of that proceeding, its duration or its outcome. If the proposed change is not
] approved, the Company will have to develop alternative plans which would involve further approval g by the NRC.
Construction: The Company anticipates construction expenditures to amount to $10,000,000 for 1980 inciading $3,000,000 towards a $6,300,000 contract commitment for the purchase of a spare turbine rotor.
, Price-A nderson: The 1975 amendments to the Price-Anderson Act changed the public liability
[ insurance requirements for the nuclear industry. Since August 1,1977, each reactor licensee is required to carry $160 million of primary public liability insurance, supplemented by a mandatory industry-wide program of self insurance. Under the program, in the event of a nuclear incident at any operating reactor in the United States, each lictnsee could be assessed up to $5 million with a limit of two assessments per reactor owned per calendar year in the event of more than one incident. Three Nile Island: The events during the 6pring of 1979 at the Three Mile Island Nuclear Unit No. 2 in Pennsylvania ("TMI") resulted in damage to the TMI plant and release of radioactivity into the environment and caused widespread concern about the safety of nuclear generating plants. The incident also prompted a rigorous reexamination of safety-related equipment and operating pro- , 66
MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS- (Continued) g (Including Notes to Unaudited Periods) (
- 8. ConurrMENTS AND CONTINGENCIES-(Continued) cedures in all nuclear facilities by their owners and the NRC. The commission formed by President Carter to investigate and report on the causes of the TMI incident issued its report on October 30, 1979, recommending a number of changes in NRC organization and practices, licensing of nuclear plants, plant operating practices, operator training and other safety-related matters and on January 13, 1980, an NRC-commissioned report containing similar recommendations was released. As a re-sult, the NRC has promulgated numerous requirements, including both near-term modification and longer-term design changes. The Company has made the modifications required to date by the NRC, but cannot predict what further inodifications will be required, their cost, or their effect on the operation of the Maine Yankee plant.
4*
*' 9. ANTI-NUCLEAR REFERENDUM The Con.pany owns the only nuclear power generating plant in Maine. By a referendum vote held on Sep+ ember 23, 1980, the Maine electorate rejected, by a margin of 59% to 41%, proposed legislation calling for termination of current and future nuclear power generation in Maine.
f. N-
=
4 \ O 67 l l l
\.
f MAINE YANKEE ATOMIC POWElt COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Notes to Unaudited Periods) {
- 10. UNAUDITED QUARTERLY FINANCIAL DATA Unaudited quarterly financial data pertaining to the results of operations are shown below:
Quarter Ended March 31 June 30 September 30 December 31 1980 (Dollars in Thousands Except Per Share Amounts) b Electric Operating Revenues $18,911 $24,065 $19,678 Operating Income 4,297 4,718 4,546 Net Income 1,921 1,837 1,836 Earnings Per Share of Common Stock 3.35 3.22 3.21 f, 1979 1 . Electric Operating Revenues $16,592 $15,324 $17,686 $19,265 Operating Income 4,334 f.,234 4,145 4,205 Net income 1,933 1,930 1,876 1,912 Earnings Per Share of Common Stock 3.35 3.35 3.26 3.34
- s 1978 Electric Operating Revenues $17,082 $17,179 $17,160 $18,952 ,,. Operating Income 4,219 4,052 4,148 4,393 f
Net Income 1,932 1,930 1,931 1,934 Earnings Per Share of Common Stock 3.35 3.35 3.35 3.35 1977 p Electric Operating Revenues $14,707 $15,471 $18,296 $17,185 Operating Income 4,322 4,325 4,442 4,390 Net Inco ie 1,956 1,947 1,939 1,942 Earnings Per Share of Common Stock 3.35 3.35 3.35 3.35 y 11. SUPPLEMENTARY INrORMATION To DISCLOSE TIIE ErrEcTS or CIIANGING PRICES (UNAUDITED) i The following supplementary information is supplied in accordance with the requirements of the Statement of Financial Accounting Standards No. 33 for the purpose of providing certain informa-tion about the effect of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure. Constant dollar-amounts represent historical costs stried in terms of dollars of equal purchasing power, as measured by the Consumer Price Index for All Urban Consumers (CPI-U). Current cost amounts reflect the changes in specific prices of plant from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than the general rate of inflation. '1he current cost of nuclear generating plant
~
68
i 1 9 MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued) g (including Notes to Unaudited Periods) {
- 11. SUPPLEMENTARY INronMATION TO DISCLOSE TIIE ErrEers or CIIANoINo Pmcrs (UNAUDITED) -
(Continued) is estimated based on an engineering study of the current cost (per megawatt) of replacing the present generating plant. Nuclear fuel used in generation has been restated from historical cost using current market prices of uranium, conversion, enrichment and fabrication. Nuclear-fuel expense was developed by h dividing the estimated current cost of the in. reactor fuel by the expected generation of the core times the actual generation produced during the year 1979.
> Depreciation expense for the current cost of productive capacity was developed by applying the
- depreciable rate to the current cost value adjusted by the ratio of average historical cost to year-end g historical cost.
Since only historical costs are deductible for income tax purposes, the income tax expense in the historical cost financial statements is not adjusted. Under the rate making practices prescribed by the regulatory commissions to which the Company
, is subject, only the depreciation of historical cost of utility property is included in the cost of service used to establish the Company's rates. Therefore, the cost of plant and nuclear fuel stated in terms of constant dollars or current cost that exceeds the historical cost of plant is not presently recover. ' able in rates, and is reflected as a reduction to net recoverable costs. While the rate-making process 'f gives no recognition to the current cost of replacing property, pir.nt and equipment, based on past practices the Company believes it will be allowed to earn on and recover the increased cost of its net investment when replacement of facilities actually occurs.
N I To properly reflect the economics of rate regulation in the Statement of Income from Operations
>"- Adjusted for Changing Prices, the reduction of utility plant and nuclear fuel to' net recoverable cost sheuld be offset by the gain from the decline in purchasing power of net amounts owed as shown below. During a period of infiation, holders of monetary assets suffer a loss of general purchasing
- power while holders of monetary liabilities experience a gain. The gain from the decline in pur-l ehasing power of net amounts owed is primarily attributable to the substantial amount of debt which
/ has been used to finance property, plant, equipment and nuclear fuel. Since the depreciation on l ? utility plant and amortization of nuclear fuel is limited to amounts based on historical costs, the l Company does not have the opportunity to realize a holding gain on debt and is limited to recovery l
- only of the embedded cost of debt capital.
f t i l . 69 - i i
I MAINE YANKEE ATOMIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Notes to Unaudited Periods) (
- 11. SUPPIEMENTARY INrOnMATION TO Discwsr Tne Errrcrs or CIIANOING PRICEH ( UNAUDITED) -
(Continued) STATEMENT OF INCOME FROM OPERATIONS ADJUSTED FOR CIIANGING PRICES For the Year Ended Decemler 31,1979 (Dollars in Thounands) Constant Current Dollar Dollar Conventional Average Average Ilistorical 1979 1979 Cost Dollars Dollars 4s Operating Revenues $68,867 $68,867 $ 68,867 Operation and Maintenance 16,737 16,737 16,737 Fuel Expense 15,319 18,147 28,518 Depreciation and Amortization 8,279 13,692' 26,299 '. Taxes 11,614 11,614 11,614 Interest Charges 10,722 10,722 10,722 Other, Net (1,455) (1,455) (1,455) Income (Loss) from Operations (excluding reduction to . net recoverable amount) $ 7,651 $ (590) $(23,568) Increase in specific prices (current cost) of plant and Nuckar Fuel held during the yeer* $ - $ 92,831 96 Reduction to net recoverable amount (24,833) (11,875) Effect of increase in general price level - (82,811) Net (24,833) (1,855) Gain from decline in purchasing power of net amounts owed 24,666 24,666 7 _
$ (167) $ 22,811
*At December 31,1979, current cost of Plant and Nuclear Fuel, net of accumulated depreciation and amortization was $741,512, while histcrical costs or net cost recoverable through ratea was $274,257.
e 70
1 MAINE YANKEE ATOMIC POWER COMPAST NOTES TO FINANCIAL STATEMENTS - (> . entinued) g (Including Notes to Unaudited Perioa,) (
- 11. SIIPPLEMENTARY INFORMATION TO DISCIASE THE EFFECrS OF CHAN0!No Palcrs (UNAIJDITED) -
(Continued) FIVE YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CIIANGING PRICES (In Thousands of Average 1979 Dollars) D Years Ended December 31, 1975 1976 1977 1978 1979 Operating Revenues $83,253 $75,051 $78,646 $78,296 $ 68,867
. IIistorical Cost Information Adjusted for l '- General Inflation Loss from operations excluding reduc-tion to net recoverable amount $ (590)
Loss from operations per common
- share (after preferred dividend re-quirement) $ (3.18) . Current Cost Information 'I ~~
Loss from operations excluding reduc-tion to net recoverable amount $(23,568) Losa from operations per common share 76 ( (after preferred dividend require-
- - ment) $ (49.14)
Excess of increase in general price level over increase in pecific prices after , reduction to net recoverable amount $ (1,ooS) l' . General Information f- Net assets at year end at recoverable amount $ 63,222 Gain from decline in purchasing power of net amounts owed $ 24,666 Cash dividends per common share . $18.G15 $17.092 $16.055 $14.909 $ 13.250 l Average Consumer Price Index 161.2 170.5 181.5 195.4 217.4 71 :
9 I REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To 3tAINE Erzernic PtWEa COMPANY, INC.: We. have examined the balance sheet of 3faine Electric Power Company, Inc. (a 3Iaine corpora-
, tion) as of December 31,1979, and the related statements of earnings, changes in common stock invest.
ment and changes in financial position for the four years then ended. 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 financial statements referred to above present fairly the financial position of b' 3faine Electric Power Company, Inc., as of December 31,1979, and the results of its operations and its changes in financial position for the four years then ended, all in conformity with generally ae-cepted acco.inting principles consistently applied during the periods and on a basis consistent with
+
the preceding year. ,4-.. Aarnua ANotastN & Co. Boston, 3fassachusetts, ', , February 6,1980. 1
.I s
5
)
er s e 6
- 72
t
'- MAINE ELECTRIC POWER COMPANY, INC.
STATEMENT OF EARNINC3 I (Dollars in Thousands Except Per Share Amounts) 12 Months
< Ended Year Ended December 31, 4 September 30, 1980 1979 1978 1977 1976 1975 (Unau lited)
Ex.zcTaic OrzaATINo RzvzNczs $103,758 $98,122 $59,860 $72,758 $35,144 $16,242 b OrzaATINo EzrzNsts Purchased Power (Note 1) 100,971 95,368 57,181 69,936 32,134 13,327 Operation 221 206 182 195 192 159 Maintenance (Note 1) 184 153 44 45 203 103 Depreciation (Note 1) 735 735 736 735 735 730
, Taxes Federal and State Income (Note 2) 139 162 197 221 214 212 Local Property and Other 213 217 229 239 258 245 Total Operating Expenses . 102,463 96,841 58,579 71,371 33,736 14,776 i
" OrzaATINo INCoMz 1,295 1,281 1/491 1,387 1,408 1,466 Oraza INooME AND DzDUCT!oNS, NET . 117 112 74 51 23 37 I
J INeoMs Bzrotz INTrazsr CHAaGES 1,412 1,393 1,: 65 1,438 1,431 1,503
.p g' INTrassT CHAaGES a Long Term Debt (Note 3) 1,010 1,056 1,127 1,192 1,224 1,298
> . Other 254 182 74 73 25 14 N Total Interest Charges 1,264 1,238 1,201 1,265 1,249 1,312 I~
NzT INeoME $ 148 $ 155 8 164 8 173 $ 182 $ 191 Warourto AvtaAGz NUMsza or SnAars or COMMON STocx OUTSTANDINo 12,345 12,923 13,677 14,413 15,149 15,885 EAaNINos Pra SHAnz or COMMON Stocx $ 2.00 $ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 12.00
~
't .
DIVIDzNDS DECLAnzD Pra SuAnz or COMMON STocx $ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 15.10 The accompar.ying notes are an integral part of these financial statements. 6
- 73 -
( I ._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _
I MAINE ELECTRIC POWER COMPANY, INC. BALANCE SHEET (Dollars ir Thousands) September 30, Decemi,cr 31, ASSETS 1980 1979 (Unaudited) { EI.rcTalc PaorraTv, at Original Cost (Notes 1 and 3) S18,617 $18,617 Less: Accumulated Depreciation (Note 1) 7,033 6,482 11,584 12,135 Ct:nnrNT Asstrs Cash (Note 4) 2,025 129 Temporary Investments, at Cost which approximates market value - 275 V Accounts Receivable-Associated Companies 2,160 1,165 Other 9,598 3,852
~
Other Current Assets 175 154
, Total Current Assets 13,958 10,575 g* DEFEnnED CIIAaGES 81 34
$25,626 $22,804_
CArITAUZATION
^
, Common Stock Investment Commor Stock, $100 Par Value, Anthorized 20,000 Shares, Outstanding 11,733 and 12,467 respectively $ 1,173 $ 1,247 Retained Earnings - -
',. Total Common Stock Investment 1,173 1,247-
)! Series A 9%% First Mortgage Bonds due in Annual Installments
, through August 1,1996-Less Current Sinking Fund Re-quirements (Note 3) 9,900 10,5C0 g Total Capitalization 11,073 11,807 a-CunnrNT LIAmMTIES Current Sinking Fund Requirements (Note 3) 584 660 Notes Payable-Banks 2,075 -
Accounts Payable Associated Companie<, 23 90 Other 111 468
;- Dividends Payable 36 37 Accrued Purchased Power 9,320 7,547 Accrued Interest and Taxes 436 466 Total Current Liabilities 12,585 9,268 Dortnaro Carorrs Accumulated Deferred Income Taxes (Note 2) 1,786 1,696 Unamortized Investment Tax Credits (Note 2) 10 10 Unamortized Gain on Reacquired Debt (Notc 1) 172 23 Total Deferred Credits 1,968 1,729 CoxurrMENTS AND CONTINGENCIES (Notes 5 and 6) .
$25,626 $22,804 The accompr.::ying notes are an integral part of these financial statements.
74 4
t MAINE ELECTRIC POWER COMPANT,INC. STATEMENT OF CHANGES IN COMMON STOCK INVESTMENT (Dollars in Thousands) Capital { Amount at Stock Retained Shares Par Value Expense Earnings Total - Balance December 31,1974 . 16,192 $1,619 $ (3) $ 49 $1,665 Add (Deduct) Net Income . - - - 191 191 Dividends Declared - - - (240) (240) Redemption of Stock (736) (74) - - (74) Balance December 31,1975 15,456 1,545 (3) - 1,542 g Add (Deduct) Net Income . - - - 182 182 Dividends Declared - - - (182) (182) Redemption of Stock ( _ 736) (73) - - (73) Balance December 31,1976 14,720 1,472 (3) - 1,469 Add (Deduct) Net Income . - - - 173 173 Dividends Declared - - - (173) (173) Redemption of Stock (736) (74) - - (74)
, Capital Stock Expense - - 3 - 3 Balance December 31,1977 13,984 1,398 - - 1,398 Add (Deduct)
Net Ircome . .
- - - 164 164 Dividends Declared - - -
(164) (164)
^ Redemption of Stock (736) (73) - -
(73)
" Balance December 31,1978 13,248 1,325 - - 1,325 g ( Add (Deduct)
Net Income . - - - 155 155
.:~ Dividends Declared - - -
(155) (155)
; Redemption of Stock (781) (78) -
(78) Balance December 31,1979 12,467 $1,247 $- $ - $1,247 [ 12 Months Ended September 30,1980 { (Unaudited) Balauce September 30,1979 12,467 $1,247 $- $ - $1,247 l Add (Deduct) Net Income - . - 148 148 l Dividends Declared - - - (148) (148) Redemption of Stock (734) (74) - - (74) Balance September 30,1980 11,733 $1,173 $- $ - $1,173 ( The accompanying notes are an integral part of these financial statements. l 75 : l l
i MAINE ELECTRIC POWElt COMPANY, INC. STATEMENT OF CIIANGES IN FINANCIAL POSITION (Dollars in Thousands) L 12 Months
# Ended Year Ended December 31, September 30, 1980 1979 1978 1977 1976 1975 (Unaudised)
Funds Provided From Operations b Net Income $ 148 $ 155 $ 164 $ 173 $ 182 $ 191
+
Depreciation 735 735 736 735 735 730
^
Deferred Income Taxes and Invest-ment Tax Credit, Net 119 140 186 213 132 159 i > 43 1,002 1,030 1,086 1,121- 1,419 1,080 4/ Funds Used Plant Construction and Replace-ment - - - 9 23 87 Sinking Fund Requirements of Long-Term Debt 736 660 660 600 720 660 Dividends on Common Stock 148 155 164 173 182 240
,; Redemption of Common Stock 74 78 73 74 73 74 f Other (161) (23) (5) (11) (12) (29) 797 870 892 845 986 1,032
. Increase (Decrease) in Working Capi-M- tal, exclusive of sinking fund require-
{~ ments $ 205 $ 160 $ 194 $ 276 $ 63 $ 48 Increase (Decrease) in Working Capi-tal, exclusive of sinking fund require-ments - Cash, Receivables and Temporary I Investments $ 153 $2,730 $ (421) $1,058 $4,982 $(1,076) Other current Assets (2) 7 4 (4) 44 13 , - Notes Payable (775) 65 (65) - Other Current Liabilities 829 (2,577) 611 (843) (4,898) 1,111
$ 205 $ 160 $ 194 $ 276 $ 63 $ 48 The accompanying notes are an integral part of these financial statements.
76 1
^
I MAINE ELECTRIC POWER COMPANY, LNC. NOTES TO FINANCIAL STATEMENTS (Including Notes to Unaudited Periods) (l .
- 1. SUntatAny or SIGNIFICANT ACCOUNTINo PouCirs The Company: The Company owns and operates a 345,000 volt transmission interconnection, completed in 1971, extending from Wiseas -t, Maine to the Canadian border at Orient, Maine, where it connects with a line of The New Bruns tick Electric Power Commission (New Brunswick) under a 25. year Interconnection Agreement. Under a Participation Agreement which also terminates in g 199fi, all costs of the Company (including a return on invested capital), to the extent not met by
~
transmission revenues, are paid by the participating utiliti s (Participants), which include most of the larger companies in New England and a group of publicly-owned systems. Under a Power Pur-4 chase Agreement, New Brunswick is providing to the Participants over the interconnection up to
*00,000 kilowatts of base load power for a ten. year period ending October 31,1986.
fg The following is a list of those companies that currently purchase pawer from the Company and their respective entitlements: Percent of Participant Enthlement Bangor IIydro-Electric Company 2.395 %
' ', Boston Edison Company Ifi.250 Boylston Municipal Light Department .030
;e 4- Central Maine Power Company 10.274
.371 T Danvers Municipal Light Department Eastern Maine Electric Cuperative, Inc. 2.583
*: .770 E Fitchburg Gas and Electric Company Maine Public S,ervice Company .844 M 2
( Marblehead Municipal Light Department .170 Middleborough Municipal Light Department .769 I~ .056 l Middleton Municipal Light Department , Montaup Electric Company 5.792 f 22.500 i New England Power Company Newport Electric Corporation 2.260 l } Peabody Municipal Light Department .546 C' Public Service Company of New IIampshire 26.250 Shrewsbury Municipal Light Department .275
' Union River Cup .005 j 7.509 Vermont Electric Power Company, Inc.
i l Wakefield Municipal Light Department .268 West Boylston Municipal Lighting Department .083 Total 100.000 %
' 77 .
I i l l
i MAINE ELECTRIC POWER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Notes to Unaudited Periods) [
- 1. SuuMAR7 OF SloNIFICANT ACCOUNTING PouCIss- (Continued)
The following 31aine electric utilities own all of the Company's Common Stock: Ownership Sponsor Intere t Central 31aine Power Company 78.15 %
. Bangor.Ilydro-Electric Company 14.19 10 Alaine Public Service Company 7.49 Wood!: aid Water and Electric Compauy .17 Total 100.00 %
s Regulation: The Company is subject to the irgulatory authority of the Federal Energy Regula-g, tory Commission and the Public Utilities Commission of the State of 31aine as to operations, accoun'.-
+- ing and other matters.
Depreciation and Xaintenance: Depreciation is provided using the straight.line method at rates designed to fully depreciate all properties over the period ending July 1,1996. 3finor renewals and betterments are charged to maintenance expense, unless the item constitutes a retirement unit, in which case the new unit is charged to electric plant. At the time depreciable properties are retired, the original cost, plus cost of removal, less salvage, of such property is charged
- L to the accumulated provision for depreciation.
P Unamortized Gains and Losses: Gains and losses on bonds reacquired to satisfy sinking fund re-quirements are deferred and amortized over the remaining original term of the Series A Bonds. g 2. INcouz tax ExPENsz y_ The co,iponents of Federal and state income taxes reflected in the statement of income are as follows: 12 Months Ended Year Ended December 31, September 30, 1980 1979 1978 1977 1976 1975
. (Unaudited) (Dollars in Thousands)
Federal: Current $ 20 $ 21 $ 10 $ 8 $ 71 $ 45 Deferred 103 121 162 183 112 131 Investment Tax Credit, Net (1) - (1) 1 2 8 122 142 171 192 185 184 State: Current - 1 1 - 11 8 Deferred 17 19 25 29 18 20 17 20 26 29 29 28 Total Federal and state income taxes $139 $162 $197 $221 $214 $212 78
MAINE ELECTRIC POWER COMPAlW, INC. NOTES TO IiNANCIAL STATEMENTS-(Continued) (Including Notes to Unaudited Periods) g
- 2. INCOME tax EXPENSE-(Co9inued)
The Company provides deferred Federal and state income taxes for the tax effects of timing differences between pre-tax eccounting income and income subject to tax. The deferred provision represents principally the tax effects arising from the use of accelerated depreciation for income tax purposes which currently exceeds the amounts pmvided in the accounts. Investment tax credits are deferred and amortized over the lives of the related properties. in The following table reconciles the statutory Federal h come tax ra+e to a rate determined by dividing the total Federal income tax expense by income before that expense. Twelve Months
+ Ended September 30, 1980 1979 1978 1977 1976 1975 ft (Unaudhed)
Statutory Federal income tax rate 46.0 % 46.0 % 48.0 % 48.0% 48.0 % 48.0 % Difference in tax expense: Depreciation and Amortization for ac-counting prcposes not allowed for tax purposes 8.1 7.6 6.7 6.2 5.9 5.8 Other (8.9) (5.8) (3.6) (1.6) (3.5) (4.7)
- Calculated rate 45.2 % 47.8 % 51.1 % 52.6 % 50.4 % 49.1 %
/~ 3. Fast MORTGAGE BONDS f Under the terms of the Indenture securing the First Mortgage Bonds substantially all electric g ( property of the Company is subject to a first mortgage lien.
j_ The annual sinking fund requirement for First Mortgage Bonds is $660,000.
- 4. COMPENSATINo BALANCES The Company had lines of credit at September 30,1980 totaling $10,400,000, including $8,400,000 of lines of credit available at December 31, 1979. The additional $2,000,000 has no compensating
.- balance requirement but has an annual fee of 88 of 1% of the line with interest at either prime plus
% of 1% or the London Interbank Borrowing Rate plus 34 of 1%, whichever is lower.
The Company had lines of credit at December 31, 1979 totaling $8,400,000. With respect to
$1,400,000, the average compensating balance is 15% of outstanding borrowings. The average com-
- pensating balance requirement for $2,500,000 is 10% of the line or 20% of outstanding borrowings, whichever is greater. With respect to $1,500,000 the compensating balance requirement is 2% of the
- line plus 13% of outstanding borrowings. With respect to the remaining $3,000,000 there is no compensating balance requirement but an annual fee of % of 1% of the line with interest between 110% and 115% of prime.
79 .
V MAINE ELECTRIC POWER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Including Notes to Unaudited Periods)
- 4. CoMrcNsATINo BALANCES- (Continued) ,
Certain information related to these lines is as follows for the twelve months ended: September 30,1980 December 31,1979 (Unaudited) (Dollars in Thousands) Totallines of credit $10,400 $8,400 Borrowings outstanding . $ 2,075 $ - D Average daily outstanding borrowings $ 1,481 $1,179 IIighest level of borrowing $10,250 $8,150 Annual interest rate at end of periods 13.00 9 - Average annualinterest rate . 15.76 % 13.65 % p 5. CoMMrrMENTS AND CON'rINGENCH3 Two actions have been brought in the United States District Court for the District of 3Iaine, Northern Division, by the United States of America against the State of 31aine one on behalf of the Passamaquoddy Tribe and the other on behalf of the Penobscot Nation of Indians. Each seeks
, damages of $150 million for alleged wrongs by the State in respect of Indian lands. It is possible that the complaints may be amended to assert claims with respect to the land itself or to seek damages, including damages from the present owners of the land, or both. Approximately 69% of the Com-pany's electric properties are located in the territory which may be involved in the claims. -$- The Attorney General of the United States has obtained a stay of the proceedings to permit de-C velopment of a comp ehena ative proposal for resolving the problems underlying the litigation J and various extra-judicir at proposals are being explored by the parties.
g In October,1980, the President of the United States signed into law federal legislation which 5 extinguishes the land claims of the Passamaquoddy Tribc and Penobscot Nations. IIowever, the extinguishment is contingent upon an appropriation of $81,000,000 by the United States Congress. The Company is unable to predict when or whether such appropriation will be made.
- 6. Powra SUPPLY
, In July,1980, The New Brunswick Electric Power Commission advised the Company that it would r be required to raise its charges to the Company for oil used to generate electric energy for the Company under a 400,000 KW unit power purchase agreement expiring 'in 1986. The increase would result from the reduction or elimination of compensation granted by the Canadian government for imported oil but only as applied to oil imported to generate energy for Canadian export and not for consumption in Canada. The increase in fuel charges would significantly increase the cost of power under the unit power agreement. The Company and the participating New England utilities have filed a complaint against the New Brunswick Commission in the United States District Court for the District of 31aine seeking a declaration that the Company may terminate the unit power agreement if the proposed increase in fuel charges is implemented as proposed. The Company is unable to predict the outcome of such proceeding at this time.
80 4
t No dealer, salesman or any other person has been authorized to give any information or to make any representations not contained in g this Piuspectus, and, if given or made, such bformation or representations must not he setied upon as having been authorized by the 250,000 Shares Company or by any of the Underwriters. This Prospectus does not constitute an cTer D of any securities other than those to which it relates or an oEer to sell, or a solicitation of Banvor O Hvdro-Electric
/ ^
an offer to buy, those to which it relates in any e jurisdiction to any person to whom it is not Lompany lawful to make such offer or solicitation in such jurisdiction. The delivery of this Pro-
- 4. spectus at any time does not imply that the Common Stock information herein is correct as of any time subsequent to its date.
TABLE OF CO.VIT.NTS Page Available Information * . The Company 2 Use of Proceeds 2 PROT.?ECTUS The Issue in Brief 3 Problems of the Electric Utility Industry 4 Dece:nber ,1980 Construction and Financing 4 Dividends on Common Stock 6
> Commca Share Price Range 7 Capitalization 8 Statements of Income 9 3fanagement's Discussion and Analysis of the Statements of Income 12 A Operating Statistics 15 3Iap of Territory Served 16 Smith Barney, Business 17 Rates and Regulation 24 Harris Upham & Co.
Pending Legal Proceedings 23 gny, orated Description of Common Stock 30 Undenvriting 31 Legal Opinions 32 Experts 32 Financial Statements 34 ,
f
**** Au ti F3hi. $ !, ?
- Li b 'r r) 0, E t h. 1.
.1, t,54 .,
(* *;/3
-' i f 41iGt AN I . CD%tWSS!ONE RS ph H. Cckier
- d[1
- Dianths A. Cani ban Lincoln Smith STATE OF MAINE PUBLIC UTILITIES COM511SSION 242 State Street State flouse Station 18 Augusta 31aine 04333 (207) 289-3831 August 8, 1980 Robert S. Briggs, Esq.
Vice President and Manager Bangor Hydro-Electric Co. 33 State Street P.O. Box 932 Eangor, Maine 04401 Re: BANGOR HYDRO-ELECTRIC COMPANY. Proposed Increase in Rates, Docket No. 80-38.
Dear Mr. Briggs:
Enclosed please find Order on the above-captioned matter. Sincerely, Michael K. Feener Secretary MKF/kdm Enclosure O
STATE OF MAINE August 8, 1980 PUBLIC UTILITIES COMMISSION ORDER BANGOR HYDRO-ELECTRIC COMPANY Re: Proposed Increase Docket No. 80-33 In Rates GELDER, Chairman; SMITH and CARRIGAN, Commissioners On February 25, 1980, the Bangor Hydro-Electric Company filed, under 35 M.R.S.A. 564 a proposal to increase its races. Pursuant to 35 M.R.S.A. 569, these 3roposed rates have been , suspended for a period of up to eigat months from march 26, 1980. The alternate hearings procedure (65-407 C.M.R. 11.6 (I)) has been ap slied to these proceedings and the direct testimony and ex aibits of the Bangor Hydro-Electric Company ("BHE") were filed on March 21, 1980. On April 29, 1980, a prehearing conference was held to consider petitions to intervene, to rule on such motions as the parties might bring before the Commission, and to discuss scheduling, discovery and other procedural matters. Petitions to intervene from IMC , -Chemicals, Inc., Comb &c, Inc., St. Regis Pa
) Town of Bar Harbor were granted on May 28, per 1980, Company, by the and the Examiners.
In response to a Motion to Bifurcate and Inatitute Investigation filed by the Commission Staff on April 28, 1980, the Commission on May 22, 1980, issued a Notice of Investigation, establishing a separate investigation of the cost of service and rate design of the Bangor Hydro-Electric Company. This investigation, established under the separate Docket No. 80-108, raises no new issues but allows full consideration to be given both to the standards enumerated in Section 111 of the Public Utility Regulatory Policies Act of 1978, 16 U.S.C. 52621 and to other rate design issues. The consulting assistance required by the Commission Staff, and the complexity of the issues to be addressed, make it likely that such an investigation'will extend beyond the nine-month duration of a Section 69 proceeding. In the Examiners' Procedural Order No. 2, the rate design investigation was consolidated with this race case for the purpose of compiling a record, with the understanding that Docket No. 80-108 might later be severed, in order to continue the rate design investigation after the revenue requirement issues had been resolved in Docket No. 80-38. The Examiners also established a procedural separation of revenue requiremenc and rate design issues in the consolidated proceedings, in order that revenue requirement issues could be tried separately, in advance of
. . s .
l 1 ? Docket No. 80-38 the rate design case. Hearings on the revenue requirement portion of - the case commenced in Bangor on June 9, 1980, and continued on June 10 and 11 at the Commission's offices in Augusta. At the June 9 hearing, the parties presented to the Commission a Stipulation Agreement, bearing a date of May 22, 1980, and setting forth an agreement on the appropriate rate design to be employed se the close of the Section 69 proceeding (80-38) , in order that the rate design case could be 3eard separately, af t er the close of the revenue requirement proceeding. As the Examiners had recognized in the Procedural Order on May 28, such an agreement by the parties makes it unnecessary for the Commission to decide whether it could lawfully segregate revenue requirement issues for early decision while rate design questions remain outstanding. The Stipulation Agreement resolves the rate design issue, for this purposes of the revenue requirement phase of these proceedings, ay providing that the revenue level found reasonable for the Company shall be collected, pending the conclusion of the rate design phase of the cases, "without any change in the Company's existing rate structure." Because all parties have agreed that the status quo may be preserved wich respect to rate design O while the revenue requirement is increased, the Section 69 proceeding may lawfully be disposed of as soon as the revenue requirement issues have been resolved, leaving for the conclusion of the rate design investigation any changes in the manner in which costs of service are allocated to the various customers of the Company. In light of this Stipulation, it is possible to reach a decision in Docket No. 80-38 without hearing rate design evidence, which will be reserved for further hearings in Docket No. 80-108. The rate design stipulation is attached hereto as Exhibit A. Because the rate i design issues are complex and ought to be resolved after l thorough analysis, we approve of the parties' willingness to l preserve the existing rate structure urtil a full hearing of l the cost of service and rate design iscaes can be completed. t Accordingly, we approve and accept Exhibit A as the basis for the design of rates filed in this 569 proceeding. l Cross-examination of the direct case of Bangor Hydro-Electric on revenue requirement issues was completed during the week of June 9, and cross-examination of the direct cases of the Staff and Intervenors on revenue requirement were eventually scheduled to commence on July 21, 1980. Prior to the hearings on the Staff and Intervenor cases, however, the Commission was informed by the parties that agreement had been (~N reached on all issues having any bearing upon..tne Company's
W. e ' Docket No. 80-38 l ( reasonable revenue requirement, with the exception of issues relating to the fuel adjustment clause to be implemented under 35 M.R.S.A. 5131 and 65-407 C.M.R. 34. The Commission received an unsigned draft of a Stipulation Agreement dated July 17, 1980, several days in advance of the scheduled hearing. The July 21 hearing, was, therefore, devoted to an explanation of the Stipulation by the parties in response to inquiries from the Commission and the Examiners. The pre-filed direct testimony of John G. Peters and Nancy MacDonald on behalf of the Staff was admitted into the record for the purpose of clarifying the Staff's basis for entering into the Stipulation Agreement, but no cross-examination of that testimony was conducted, and it was understood that the testimony was admitted at that time only for the limited purpose of explaining the Stipulation Agreement. Many of the items of agreement set forth in the Stipulation had already been orally stipulated during the course of hearings on BHE's direct case. Those issues, and others discussed in the written agreement, are resolved in a manner essentially consistent with the direct case prefiled by the Staff. At hearing, Examiner Libby identified an issue that had not
,been addressed by any of the parties. He inquired cs to the O treatment of the tax benefits of accelerated depreciation on post-1970 replacement property, for Federal Income Tax expense purposes. In response to this inquiry, the parties agreed to flow through those benefits, in accordance with prior Commission policy. A revised Stipulation, dated July 22, 1980, reflected that additional downward adjustment to the Company's revenue requirement, along with a number of minor corrections and revisions to the original draft. On July 24, 1980, the Commission rece5yed a memorandum prepared by the Staff as an explanation of the rationale underlying the Staff's agreement to the provisions of the written settlement of the case.
Signed copies of the July 22 Stipulation Agreement have been received from all parties to this case. The record of the hearings and the other. communications to be found in the file for this case make it clear that the parties engaged in extensive and thorough discov(ry and negotiation prior to entering into this comprehensive se celement of Bangor Hydro-Electric Company s request for an increase in races. Having examined the Stipulation with great care, and having also considered the Staff's memorandum and the responses made by the parties to the Commission's inquiries at hearing, we find that the Stipulation Agreement of July 22, 1980, represents a complete and fair resolution of all issues bearing upon the Company's revenue requirement, with the exception of l
Docket No. 80-38 O the reasonable cost of fuel and purchased power, which is to be considereJ in the implementation of t ie fuel adjustment rate under 35 h.k.S.A. 5131. Accordingly, we accept and approve this Stipulation Agreement, attached hereto and incorporated herein as Exhibit B, and we find it to be just and reasonable. Following the hearing at which the revenue requirement Stipulation Agreement was considered, the parties also engaged in negotiations concerning the reasonable fuel adjustment rate to be applied to kilowatt hours sold by the Company, in accordance with 35 M.R.S.A. 5131 and 65-407 C.M.R. 34. Pursuant to Section 131, the Commission is required in this proceeding to implement a new fuel adjustment rate, consistent with it? regulations promulgated for that purpose. Because this is the first general rate adjustment to take place since the enactment of the present version of Section 131, the Commission is at this time placing in effect the fuel adjustment mechanism prescribed by Chapter 34 of its rules. This task is greatly simplified, however, because BHE has had in effect since January of this year transitional fuel adjustment rates that very closely parallel the fuel adjustment mechanism now required to be implemented. Indeed, the Company has presented its sup porting data for this fuel adjustment in a O' manner consistent with the transitional fuel adjustment proceedings that have already been completed for this Company. On July 25, 1980, the Staff, with the knowledge of all other parties, presented orally the results of negotiations on the fuel adjustment rate. The Staff reported that the parties had reached agreement on the proper method for calculating the i fuel adjustment rate. The parties had agreed that computations l filed by the Company represented reasonable projections and calculations of fuel costs for the coming twelve months, except that further downward adjustments should be made to reflect (1) an extension of the anticipaced termination date for the Federal Entitlement Program 'from April 1 to June 1,1981, and (2) the use of an anticipated sales growth rate of 2%, rather than the 3% originally assumed by the Company in its computations.* l u t The agreement also provided that the calculations to adjust l for low hydro-electric generatica be reviewed to assure that ! they assume such low output only for 1980 and not for 1981. This review resulted in no change in the Company's figures, () l however. l
.
- l 0
4 Docket No. 80-38 The Commission gave its approval to the principles underlying a settlement of the fuel adjustment issue on the terms described by Staff, finding them to be consistent with the principles applied to the projection of fuel costs during the transitional period, a period during which we have had an opportunity to develop our understanding of the proper operation of a projected fuel adjustment clause. Our approval was conditioned upon the fact that all parties, including those who had not i actively participated in the fuel adjustment negotiations, would in fact consent to .this sattlement, and conditioned further upon our examination of the calculated results of this agreement. We have now received confirmation that all parties consent to this stipulated fuel adjustment. On July 31, 1980, the Bangor Hydro-Electric Company filed with the Commission a fourteen page set of Exhibits, attached j hereto as Exhibit C, which sets forth the calculation of the
! fuel cost adjustment in accordance with the agreement of the parties. We have examined these calculations and find them to be just and reasonable. Accordingly, we find that the reasonable fuel cost adjustment for the twelve-month period i
ending July. 31, 1981, is $.01260 per kilowatt hour, as shown on
, 'line four of page one of Exhibit C attached hereto. ,
l To this amount, as the parties agreed, an adjustment must be added to allow for the recoupment of Maine Yankee i replacement power costs in accordance with our temporary rate orders in Docket U. f3360. Out :emporary rate order in that
- Maine Yankee investigation calls for the recovery of those 4
costs over a period ending December 31, 1980. Accordingly, i that adjustment will cease to be applicable at the end of
- 1980. Of course, the Maine Yankee adjustment may be altered or eliminated prior to that time, depending upon our final decision in U. #3360. In this proceeding, however, we will set i the fuel adjustment rate on the basis of the situation as it 1
presently exists, and we will thus assume, for the purpose of this proceeding only, that the present temporary order will remain in effect. Acc.ordingly , for the period from the date of this order until December 31, 1980, the total fuel adjustment rate will be $.01377 per kilowatt hour, as shown on page 1 of Exhibit C. On August 4, 1980, the Commission received from BHE a revised schedule of rates and revised schedules containing Sections 12-F and 12-I of the terms and conditions of the Company. The Commission has examined these rates and revised rules and regulations, and finds them to comply with all O we have already given our approval. provisions The schedules of the stipulated filed by the settlement of t
Dc;ket No. 80-38 Company on February 25, 1980, are inconsistent with the approved just and reasonable settlement of this case, and we therefore find them to be unjust and unreasonable and will order that they shall not take effect. The rates received by the Commission on August 4, 1980, bearing an effective date of - August 6, and an issue date of August 5, 1980, and more fully and particularly described in the ordering paragraphs below, are just and reasonable and shall become effective for service rendered on or after August 8, 1980. We note, however, that the fuel cost adjustment rate sheet, Section 12-I of the Company's terms and conditions, simply states the dollar amount per kilowatt hour of the fuel cost adjustment that will be in ; effect until December 31, 1980, i.e. 5.01377 per kilowatt hour, which reflects the reasonable fuel cost adjustment plus the special Maine Yankee adjustment made pursuant tc U. f3360. While this she t gives ratepayers adequate notice of the rate to be charged for the coming months, it does not display the fuel adjustment rate that has been approved for the period following December 31, 1980 and continuing until the end of the first one year fuel adjustment period. Therefore, the Company should immediately file a revision of this sheet, to clarify the effect of our order in this proceeding, by showing not only the fuel cost adjustment to be in effect until December 31, i () 1980, but also the lower adjustment rate that will be charged for service rendered beginning on January 1, 1981. The Stipulation Agreement and the numbered Appendices j attached thereto provide a complete statement of the adjustments made to arrive at the rates approved herein. We find that the Staff memorandum further illuminates the rationale underlying that stipulation, and we accordingly include that memorandum as part of our decision; it is attached hereto as Exhibit D. Included in the Company's proposed rates of February 25, 1980, were numerous revisions to its terms and conditions. Those revisions have not been specifically addressed in the settlement that is approved herein, but they do not bear upon the determination of a revenue requirement. Accordingly, consideration of those terms and conditions may be reserved for the ongoing rate design investigaion being conducted under Docket No. 80-108. That investigation will continue for the purpose of completing a thorough examination of the Company's cost of service, rate design, and associated terms and conditions of service. While the record in Docket No. 80-38 has been closed with the recetpt of agreement on all revenue requirement issues, the record compilcd thus far in the i g-ss cansolidated proceedings will remain a part of. the - ) (,) investigation in Docket No. 80-108, which will continue until a {
4 J 1 Docket No. 80-33 () proper resolution of the rate structure issues has been made. The Company has also stated in in a cover letter to its rate filing of August 4, 1980, that it will file a voluntary dismissal of its temporary rate relief petition if the rates filed pursuant to the stipulation are approved. Such a voluntary dismissal will dispose of Docket No. 80-43 without any additional action on our part. The July 22 Stipulation provides for a deferred resolution of certain revenue requirement issues, based upon this Commission's decision in o'ther issues in other cases now pending before it. Exhibit B, page 2. Specifically, the proper rate base treatment of unrecovered replacement power costs associated with Docket No. U. f3360 is to be determined after a final decision has been rendered in that proceeding. For the purposes of this Stipulation, the parties have excluded those costs from rate base but have agreed that an amount equal to the average monthly balance between the time of a decision and December 31, 1981, shall be restored to rate base if the decision in U. f3360 determines that the replacement power purchasing practices of BHE during the shutdown were reasonable. Exhibit B, Page 2 paragraph II (A)(2), and Appendices 1 and 2. () Similarly, the parties have a withinvestmentsforcorrectionofreedthatamountsassociated
', a noise problem at Wyman Unit #4 shall be given the same rate base treatment in this
- case that the Commission decides upon in Central Maine Power Company's pending permanent rate increase application, Docket No. 80-25 Exhibit B, page 3, paragraph II(A)(6). In this
. instance, however, the costs in the rate base, parties pendinghave agreed toAccordingly, a decision. include those a downward adjustment would be made if the Commission decides to exclude some portion of those costs from rate base. Expenses relating to salt water intrusion at Wyman Unit #4 have been excluded from BHE's expense calculations in this settlement, with the proviso that those expenses will be treated consistently with the Commission's decision in Docket No. 80-25. Exhibit B, page 6, paragraph II(B)(5) . Again, an upward adjustment may be required if those costs are ultimately allowed in rates in the Ceatral Maine Power Company case. The parties have made these special reservations of three issues that are being litigated in other cases in order to
" avoid the expense and delay of duplicate litigation of identical questions of law and fact." This is a reasonable effort to promote economy in proceedings before this agency, N
and we find it acceptable, in light of the fac.t that Central Maine Power Company is the lead owner of the Wyman #4 Unit, and that Bangor Hydro-Electric Company is a
. . - - - - - . - .- - - - - - . - --._.....- - . - - . _ L ---- ---
g e Docket No. 80-38 O party to U. f3360 and thus is able to protect its own interests in connection with that matter. Provision must be made, however, for the further adjustment of Bangor Hydro-Electric Company's races, even prior to the resolution of rate structure issues, depending upon the outcome of the Maine Yankee and Central Maine Power proceedings. We find that the stipulated results reflected in the appendices to Exhibit 8 are just and reasonable at the present time, subject to any upward or downward adjustments that the results in U. #3360 and #80-25 may require. The Bangor Hydro-Electric Company will immediately be placed on the service list for Docket No. 80-25, and BHE will be expected to file any required adjustments to its rates, for review and approval by the Commission in a supplemental order, within ten days after the entry of a final order in either U. #3360 or 80-25. Accordingly, the Commission orders:
- 1. That the revised schedules of rates, rules and regulations
' filed by the Bangor Hydro-Electric Company on February 25, 1980, with an effective date of March 26, 1980, and more particularly designated below, are unjust and unreasonable and shall not become effective. The schedules herein found unjust and unreasonable and hereby disallowed consist of rate sheets designated as Class A-1, 15th revision, Class B-1, 13th revision, Class B-2, 10th revision ,
(cancellation), Class B-3, 8th revision (cancellation), Class C-1, 13th revision, Class D-1, 13th revision (cancellation), Class D-2,13th revision, Class D-3, 8th revision, Class D-4, 10th revision, Class D-5, 9th revision, Class E-2, lith revision (cancellation), Class G-1, 18th revision, Class G-2, 7th revision, Class G-3, 2nd revision (cancellation); and revised sections 1-A, 1-B, 1-B-2, 1-D, 2-C, 2-D, 2-E, 2-F, 2-G, 2-H, 3-B, 3-C, 3-D, 3-E, 3-F, 3-G, 3-H, 3-1, 3-J, 3-K, 3-L, 4-D, 4-F, 4-G, 4-H, 5-G, 5-H, 5-I, 5-K, 5-L, 6-B, 6-C, 6-D, 7-C, 8-H, 9-F, 9-G, 12-B, 12-C through 12-F, 12-G, 12-H, 12-I, and 12-J of the Bangor Hydro-Electric Company's terms and conditions.
- 2. That the above designated proposed revisions to the '
Company's terms and conditions shall be further considered by the Commission in its ongoing rate design investigation of Bangor Hydro-Electric Company, under Docket No. 80-108. O
Docket No. 80-38 O 3. Thet the Schedule of revised rates, rules and regulations filed by Bangor Hydro-Electric Company on August 4, 1980, bearing an effective date of August 6, 1980, and an issue date of August 5, 1980, and more particularly described immediately below, are just and reasonable and shall become effective for service rendered on and after August 8, 1980, provided, however, that the Bangor Hydro-Electric Company shall, within ten days after the entry of any final order in this Commission's Docket No. U. 3360 or its Docket No. 80-25, file such further revisions to its rates, tolls, charges, rules and regulations as may be necessarv in order to comply with the requirements and provisions of'the Stipulation Agreement attached hereto and incorporated herein as Exhibit B. Such filed revisions will be reviewed for consistency with the. settlement approved herein and shall become effective upon a finding by the Commission that they are in compliance with this Order. The tariff revisions filed on August 4, 1980, found just and reasonable herein and allowed to become effective hereby, consist of rate sheets designated as Class A, 16th revision, Class B-1, 14th revision, Class B-2, lith revision, Class B-3, 9th revision, Class C-1, 14th revision, Class D-1, 14th revision, Class D-2, fh s 14th revision, Class D-3, 9th revision, Class D-4, 11th revision, Class D-5, 10th revision, Class E-2, 12th revision, Class G-1, 19th revision, Class G-2, 8th revision, and Class G-3, 3rd revision; and sections 12-B through 12-I of the terms and conditions of the Bangor Hydro-Electric Company. On its official copies of each and every sheet of the above-described revisions, the Company shall alter the effective date to read August 8, 1980. The Secretary shall immediately inscribe the same change upon the copies of those sheets that have been officially filed with this Commission.
- 4. That the Bangor Hydro-Electric Company shall comply with all orders, directions, requirements, conditions, and other provisions contained in the body of this Order or in Exhibits A and B h'ereto.
- 5. That the Secretary shall send copies of this Order to:
Robert S. Briggs, Esq. John Supranovich Vice President and Executive Director General Manager COMBAT, Inc. Bangor Hydro-Electric Co. 189 Exchange Street 33 State Street Bangor, Maine 04401 P.O. Box 932 (g) Bangor, Maine 04401
a, Docket No. 80-38 O Harold C. Pachios, Esq. Peggy Wells Dobbins, Esq. Preti, Flaherty, & Beliveau St. Regis Paper Company 443 Congress Street 150 East 42nd Street Portland, Maine 04111 New York, New York 10017 Edward E. Ainsworth David H. Moskovitz, Esq. Town Manager and Jane S. Bradley, Esq. Town of Bar Harbor Staff Attorneys Municipal Office Maine Public Utilities Bar Harbor, Maine 04609 Commission 242 State Street State House Station 18 Augusta, Maine 04333 and to those interested persons, not parties to the proceeding, whose names also appear upon the service list for this case.
- 6. That the record in this case be closed, but that the record in Docket No. 80-108, which has to date been consolidated herewith for the purposes of compiling a record , shall remain open.for the purpose of receiving further evidence relating to the justness and reasonableness of the O structure and design of the rates, tolls, charges, rules and regulations of Bangor Hydro-Electric Company.
Dated at Augusta, Maine this 8th day of August, 1980. i BY ORDER OF THE COMMISSION l l Michael K. Feener Michael K. Feener Secretary A true copy. Attested: p g Michael K. Feene r , Secretary COMMISSIONERS VOTING FOR: Smith Carrigan COMMISSIONER DISSENTING: Gelder * , Chairman Gelder's dissenting opinion will be issued separately.
a .. t Docket No. 80-38
~/ Review of this Order by the Commission may be requested under Section 6(N) of the Commission's Rules of Practice and Procedure (65-407C.M.R.ll) within 20 days of the date of this Order by filing a petition with the Commission stating the grounds upon which reconsideration is sought.
Review by the Law Court may be requested by filing, within 30 days of the date of this Order, a Notice of Appeal with the Secretary of the Commission, pursuant to 35 M.R.S.A. Sec. 303, and the Maine Rules of Civil Procedure, Rule 73 et seq. Additional court review of constitutional issues or issues involving rates may be had by filing a complaint with the Clerk of the Law Court and with the Secretary of the Commission, both within 30 days of the date of this Order, pursuant to 35 M.R.S.A. Sec. 305. - l O
*e -
DOIIBIT A c ( . ( ' l STATE OF MAINE Docket No. 80-38 PUBLIC UTILITIES COMMISSION May 22, 1980 BANGOR HYDRO-ELECTRIC COMPANY Re: Proposed Increase in Rates STIPULATION AGREEMENT WHEREAS, Bangor Hydro-Electric Company filed with this Commission on March 21, 1980 a proposed increase in rates pursuant to 35 M.R.S.A. 5 64 and a petition for temporary rate relief pursuant to 35 M.R.S.A. 5 311; and WHEREAS, proceedings on the Company's request for temporary rate relief as well as the Staff's motion to dismiss that petition filed on April 28, 1980 have been deferred by agreement of the parties for action at-a future date; and WHEREAS, the Ccmmission Staff has mov'ed for an. order governing the proceedingsiconducted under 35 M.R.S.A.-569 to hear all revenue requirement issues (Phase I) separately from all other issues investigated thereunder and in any related proceedings (Phase II); and WHEREAS, the Commission Staff has moved for the institution of an investigation under 35 M.R.S.A. 5296 of matters relevant to rate design; Now, therefore, in consideration of the foregoing the pa'rties hereby agree as follows:
- 1. That the Public Utilities Commission should bifurcate the proceedings under 35 M.R.S.A. 569 so that revenue requirement issues may be heard separately from all other issues.
- 2. That at the conclusion of Phase I, the Commission should issue an Order determining the revenue level found by the Commission to be just and reasonable and authorizing Bangor Hydrc-Electric Company to file new rates to collect the amount so determined ; should said amount reflect revenues additional to the Company's present revenue level, such additional amounts shall be collected without any change in the Company's existing rate structure.
- 3. That at the conclusion of Phase II of the proceeding, Bangor Hydro-Electric Company's rates shall be s revised to be consistent with the Commission's Phase II J Order.
i
z D- a:- r O The Parties further agree that the purpose of this Stipulation is the voluntary resolution of rate design issues aending determination of Phase II of this case and that nothing aerein shall be binding upon them in subsequent proceedings involving Bangor Hydro-Electric Company or any other proceeding pending before the Commission or the Law Court of the State of Maine. Dated at Augusta, Maine, this twenty-second day of May, 1980. Jane S. Bracley, Esq. Public Utilities Commission Staff Attorney Davic H. Moskovitz, Esq. O. Public Utilities Commission . Staff Attorney o . l
- Rooert S. Briggs, Esq.
Attorney for Bangor Hydro-Electric Company Harolo C. Pacnios, Esq. Attorney for IMC Chemicals, Inc. Margaret W. Doooins, Esq. Attorney for St. Regis Paper-Company l l l
O e
.i. .
l , t 3-1 i Edward E. Ainsworrn Town Manager, Town .of I :r Harbor, Maine . l John Supranovien - Attorney for COMBAT, Inc. ' f [ . < i I !
- Separate executed copies have been received from e.ach party and are on file in case.
l . e s t-- --ersm,e--+,--an-em-m-rm.-w w ww , w 3, we w ,_ . w e
- m e er*-w w e-9-a seh . .em-Nnwww-e-=ir-e-mew--g-,,-,-.-p m-w-,-w-ww-e,. -*,e.rm--g
[ h
. i .
EXHIBIT B l STATE OF MAINE July 22, 1980 PUBLIC UTILITIES COMMISSION STIPULATION AGREEMENT BANGOR HYDRO-ELECTRIC COMPANY Re: Proposed Increase Docket No. 80-38 In Rates BANGOR HYDRO-ELECTRIC COMPANY Re: Petition for Temporary Rate Relief Docket No. 80-43
~
I. INTRODUCTION Pursuant to Rule 6(G)(2)'of the Rules of Practice and Procedure of the Maine Public Utilities Commission, the undersigned parties to the above-captioned proceeding hereby enter this Stipulation embodying thei" Agreement with respect to issues relating to the revenue requirement portion of this case. This Agreement was reached during negotiations between Bangor Hydro-Electric Company (hereinafter the Company), the Commission Staff (hereinaf ter the Staf f), and IMC Chemicals, (~T Inc. to which all parties were invited but in which not all v' chose to participate. With the exception of matters relating , to the implementation of a fuel clause, this Agreement disposes of all issues pertinent to the revenue portion of this i proceeding- - l r The parties make this Stipulation with the mderstanding that it shall be presented to the Commission fc. its approval. The Agreements contained herein are conditioned upon such approval and are made without prejudice to the parties' rights to raise any issue, whether or not addressed herein, in any future rate proceeding and, if this Stipulation is not approved by the Commission, in this rate proceeding. In the event that the Commission not approve this Stipulation, it shall be void and neither this Agreement nor any part thereof shall be offered or introduced'as evidence in any re~e proceeding. ! II. ADJUSTMENT PROVISIONS . l l As discussed more fully herein in relation to specific adjustments, the parties have agreed in certain instances only to.the method of treatment of such items, while the actual
)
e - ~ ~ -- -
.- G. g
= .
Docket Nos. 80-38 80-43 figures must await determination at a future date. This particularly involves matters related to the cost of fuel, which the parties have agreed will be determined shortly before the end of the revenue portion of this proceeding. The parties have also agreed that treatment of certain i adjustments proposed either by the Commission Staff or the Company be the same as that found appropriate by the Commission in certain other proceedings now pending before it in which such issues are also being litigated. In so doing, the parties seek to avoid the expense and delay of duplicate litigation of
- identical questions of law and fact where it is agreed that the interests of the parties hereto will be advanced by the respective parties in the other proceedings.
Accordingly, the part.es agree as follows: A. RATE BASE ITEMS
- l. Calcult. tion of Rate Base. The Company's rate base
.shall be computed on the oasis of 13 month-end amounts for a period beginning on December 31, 1978, and ending December 31, O 1979.
hereto. The revised figures are contained in Appendix 1 attached ,
- 2. Deferred Fuel - Maine Yankee Shutdown Inclusion in rate base of the unrecovered costs for replacea nt power during the Maine Yankee shutdown (3/79 - 6/79) shall de3end upon the Commission's decision in Docket U. 3360, P. U. C. t e:
- _ Investigation into Items to be Included in Fuel AIIustment
. Cnarzes as a Result of the Shutoown of the Maine Yankee Atomic ( Power Station. Should the Commission determine in that replacement proceeoing that the Company's practices the regarding's Company unrecovered i power were imprudent or unreasonable, balance of the fuel costs shall be excluded from rate base. If the Commission finds that these costs were reasonably incurred by the Company, the sverage monthly unrecovered balance shall be included in rate base. Appendix 1 does not include this figure in its calculations. If it is later determined that those amounts should be included, however, the rate base figure for such costs net of tax shall be the average monthly balance during the period beginning the month after such determination is made and ending December 31, 1981. The average monthly balances are shcwn in Appendix 2. ( 3. Unrecovered Fuel from Pre-1980 Fuel Clause. The amount in rate case representing this item has been changed to reflect the average monthly unrecovered balance (net of tax)
h-I Docket Nos. 80-38 80-43
. () over the period beginning September 1, 1980 and ending December 31, 1981. This amount is $1,129,011.
- 4. Materials and Sunolies. The Company proposed an upward adjustment to Materials and Supplies for the purpose of reflecting more current costs for its fuel inventory. The parties now agree that increased fuel costs are sufficiently accounted for in the Staff attrition analysis as revised herein and that the adjustment proposed by the Company should therefore be removed from rate base.
It is further agreed that the 66% of non-fuel inventory which constitutes materials and supolies used for construction shall be excluded from rate base. *The amount of materials and supplies to be included in rate base shall be S1,901,681. i .
- 5. Capital Recuirements'of PURPA. It is agreed that all
- capital items co be ootained ror compliance with the requirements of PURPA shall not be included in rate base.
- 6. Wyman Unit #4. Amounts associated with investments
,made in Electric Plant for correction of a noise problem with
() Wyman Unit #4 shall receive the same rate base treatment as the Commission determines proper for Central Maine Power Company in ' the pending matter of Central Maine Power Co., Re: Prooosed Increase in Rates, Docket No. 60-23. Because tne costs l associateo witn this problem have not yet been identified, they are included in the rate base calculations,.of electric plant l appearing on Appendix 1 herein.
- 7. Land Held for Future Use. Land held for future use is not includeo in ene Company's calculation of rate base and will not be so included.
x j Although the parties recognize that there may be a question i as to the appropriate treatment of such items, notwith- ! standing the Commission decision in Re Bangor Hydro-l Electric Cocoany, 16 PUR 4th 244 (Novemoer t, 197o), rather enan litigate enis question in this proceeding, the parties have agreed to continue to exclude construction related materials from rate base. The Company will attempt to resolve this issue by filing a request for an advisory ruling sometime in the near future. In the meantime, it is O agreed that no rate base treatment shall be given to such i (,) materials and supplies nor will the amount of inventory be l reduced to such an extent as to jeopardize the adequacy of service to Customers.
. __ . _ _ _ ._ _ .-.. _ ,. _-_ _._____..--_ _ _.. .-- .. - - _ _. ~-.,,- , - - . - - - - -
n) ' Docket Nos. 80-38 "N 80-43 (b
- 8. New England Power Comoany Nuclear Units. It is agreed that the CompJny's investment in tne cancelled NEPC0 nuclear units be excluded from rate base.
- 9. Unde recovery from 1980 Fuel Clause. The parties agree to the inclusion in rate base or an amount of $432,925, representing the underrecovery of fuel costs resulting from the January 1980 fuel clause. This amount was calculated on the basis of the average monthly balance (net of tax) for the period beginning September 1, 19P0 and ending December 31, 1981. This adjustment was proposed during the oral testimony of Mr. O'Sullivan on June 9, 1980 and was not included in the Company's pre-filed direct case.
- 10. Working Caoital.
- a. Comoutation in general. It is agreed that, in addition to any specitic cnanges discussed below with respect to working capital, three days shalt be added to the lead day figures on Company Exhibit 0-2-2 for all items except purchased pcwer (lines 1 and 9) and 0 & M labor (line 2) .*
l ' ' \
- b. Purchased Power. The amount of $200,000 l
' re'preser. ting decommissioning costs for Maine Yankee shall be '
subtracted from the computation of working capital for purchased power. Also subtracted from the computation of this item shall be $3,900 for Maine Yankee lobbying expenses. An upward adjustment has been made to reflect revisions in purchased power expenses as discussed in Paragraph II.B.6. aerein. In light of these changes, the working capital figure for this item now is S347,176. t I
, c. 0 & M Non-Labor. It is agreed that amounts representing uncollectible revenues and trimming expenses l should be subtracted trom the working capital calculation for this category. 90 days should be added to the Company's lead days calculation for Pension Costs changing that lead day figure from 256 to 346. With all of these adjustments, l including the addition of 3 lead days as discussed in subparagraph a. above, the appropriate figure for working capital on this category as shown on Appendix 3 is S(36,J23).
x It should be noted that Exhibit JP-9 submitted with the rs . pre-filed testimony of Staff witness John Peters contains (,' an error to the extent that 3 days was added to the working capital lead days calculation for labor expenses. The correct figure appears on Appendix 3 attached hereto.
i.D. Q. Docket Nos. 80-38 80-43 ,
\
- d. PURPA Expenses. The Company shall receive a working capital allowance tot only those PURPA expenses associated with Phase IA of its program.
It is further agreed that Phase IA expenses will be separated into labor and non-labor categories with the appropriate lead days applied thereto. Working capital for FURPA labor expenses is $7,034 and PURPA non-labor is $(198).
- e. Fuel Costs. The parties agrec that at a later time in the course or these proceedings, a new forecasted 12-month period will be reviewed for the purpose of implementing a new fuel adjustment clause. The projected fuel costs resulting from that implementation will replace the present figures on lines 3 and 9 of Appendix 3.
- f. Sales Tax, Lead days for this item shall be changed by adding 24.20 days to the 13-day figure now used, resulting in a total figure of 30.26, including the 3 additional days discussed in subparagraph a. above. The adjusted workir.g capital requirement for sales tax will be
-$31,641.
( g. Federal Income Taxes. It is agreed that amounts . attributable to the Company's test year deferred Federal Income Taxes, $762,073, which was originally included in its working capital calculation, be removed therefrom. The revised working l capital figure for ' income tax is $(84,356) .
- h. Procerty Taxes. The Company calculated lead days for the payment or property taxus on the basis of an April 1 to March 31 period, the midpoint being October 1. The parties now agree. chat the working capital allowance shall be calculated on the basis of a calendar year, the midpoint of which is July 1.
This changes the Company's original lead days figure from 2.7 to 105.65, resulting in a revised working capital allowance figure for that item in the amount of $(163,856) . B. OPERATING EXPENSE ITEMS
- 1. P.U.C. Assessment. An amount of $10,668 shall be added to test year operating expenses to reflect a full year's P.U.C. assessment. This adjustment does not appear in the Company's original pre-filed testimony but was discussed by Mr. O'Sullivan in his oral direct testimony on June 9, 1980, at i which time he submitted Exhibit 0-1-A reflecting this amount.
I l
- 2, Decreciation. The Company's proposed adjustment to l its depreciation expense shall be deleted. Instead, the
S D . Docket Nos. 80-38 80-43 , parties agree that increased depreciation expense is reflected
~
in the attrition analysis performed by the Commission Staff, as set forth in the pre-filed testimony of Nancy J. MacDonald and amended herein.
- 3. PURPA Exoenses. The Company's operating expenses for PURPA activities shall be adjusted to reflect only those expenses associated with Phase IA of those requirements.
Expenses associated with Phases succeeding IA are taken into account through the Staff's attrition analysis as discussed below.
- 4. Test Year Maintenance. The parties agree to the Company's pro forma upward adjustment of $40,000 to operating expenses for an intensified tree-trimming program. The parties also agree to normalize test year expenses resulting from excessive storm damage by downward adjustments of $10,000 to distribution and $10,000 to transmission maintenance expenses.
The combined effect of all of these trimming and storm damage adjustments is an increase to adjusted test year maintenance in the amount of $20,000. () 5. Wyman Unit #4. Because the matter of expenses re'.ating to the saltwater intrusion problem in Wyman Unit f4 will be litigated in the Central Maine Power case, Docket No. 80-25, the parties agree enat ene commission determination of that issue in Docket No. 80-25 will govern the disposition of that issue in'this proceeding. Costs associated with this expense are no?. included in the expense calculations reflected in the appendices attached hereto.
- 6. Purchased Power Excense. The parties agree that Maine Yankee lo'obying expenses in ene amount of $3,900 shall be excluded from the Company'u original figure for purchased power expense. Also removed from this figure, pending Commission determination of the Central Maine case, Docket 80-25, will be S200,000 for Maine Yankee cecommissioning costs. The parties agree to accept the same treatment of the decommissioning expense as the Commisslon finds just and reasonable in that Case.
It is further agreed that test year purchased power expense shall be adjusted upward by 5492,000 to reflect known changes in the capacity component of this expense resulting primarily from the Company's contract with Boston Edison which provides for an additional ten megawatts of power to be purchased in November of 1980. () In view of the foregoing agreements, the adjusted test year purchased power expense shall be 58,061,038. 1
d,. c.&< . Docket Nos. 80-38 80-43 0 7. Cancelled NEPCO Units. The parties agree to the amortization of tne loss or the investment, including amounts attributable to AFUDC, over a period of five years. The amount to be amortized annually shall be $213,904. Such amount differs from Company Exhibit 0-2-3 as a result of the sale of the associated uranium enrichment contract for $6,230,000 instead of the $4,000,000 estimated by the Company. S. The parties agree to flow through the benefits of accelerated depreciation on post 1970 replacement property. C. OPERATING INCOME
- 1. Revenue Loss. The parties recognize that the Company will experience a revenue los.s of $433,880 as a result of the closing of IMC Chemical's chlorate ?lant. It is agreed, therefore, that test year revenues se adjusted to reflect this loss. As with certain other adjustments discussed herein, this item does not appear in the company's pre-filed testi=ony, but was discussed by Mr. O'Sullivan in his oral testimony on June 9, 1980, and was reflected in Exhibit 0-1-A submitted on that 4 ate.
D. ATTRITION The Staff's attrition analysis as set forth in the pre-filed testimony of Nancy J. MacDonald is revised to remove all considerations of increases in purchased power expenses. Changes in the cost of purchased power are discussed in Paragraph II.B.6 above. The analysis is also revised to specifically include S150,000 of PURPA expenses to be incurred for phases subsequent to IA. It is further agreed that the estimated anual growth rate for operating revenues shall be changed from 3.5% to 2.48%. These modifications to Ms. MacDonald's testimony result in a revised attrition factor of
.38% and a revised retail attrition figure of $492,779. These calculations are reflected on Appendix 5, pages 1, 2, and 3.
E. RATE OF RETURN The parties agree that the fair rate of return shall be 10.65% as calculated in Appendix 6. III. EMPLOYEE DISCOUNTS () Although no adjustments to operatin; expenses will be =ade for costs associated with employee discounts, the Company agrees to phase out this program over a reasonable period of
~
.) 3)
Docket Nos. 80-38 80-43 , time and to submir to the Commission its plan for accomplishing this. IV. CONCLUSION Based upon the foregoing adjustments to the Company'o test year, it is agreed that, pending the outcome of Dockets 80-25 and U. 3360, and the establishment of a new fuel adjustment clause, the Company's retail revenue deficiency is reflected on Appendix 7. The parties further agree that upon Commission approval of this Stipulation and a revised Fuel Clause, the Company be allowed i= mediately to file rates generating operating revenues sufficient to cover this deficiency. Agreement between the parties as to rate design and allocation of the revenue requirement among customers was reached earlier in this proceeding and is set forth in a Stipulation Agreement signed by all parties and filed with the Commission on June 9, 1980. IN WITNESS WHEREOF, the undersigned parties have caused l (g this Stipulation Agreement to be executed by their duly (_) authorized attorneys, and this Stipulation Agreement is hereby respectfully submitted to the Commission for its consideration. a-Davic H. Moskovitz, Esq. Public Utilities Commission Staff Attorney l
, s# ,
, Jane S. Bradley, Esq.
Public Utilities Commission Staff Attorney l
~
Rooerr J. Briggs, Esq. Actseney for Bangor Hydro-Electric Co. 1 a Harold C. Pachios, Esq. Attorney for IMC Chemical, Inc.
s' ,
' n, l
i
. . 1 Docket Nos. 80-38 80-43 -
i Margaret W. Dobbins, Esq. Attorney for St. Regis Paper Company Edwarc E. Ainsworth Town Manager, Town of Bar Harbor, ME John Supranovich Executive Director Combat Inc. O l i
- Separate executed copies have been received from each party and are on file in case t
O
, , App ndbc 1 BANGOR HYDRO-ELECTRIC COMPANY I ')
k/ RATE BASE (13 MONTH AVERAGE ENDING 12/31/79) AMOUNT 1 ELECTRIC PLANT (SDR 2-2) S 90,265,655* 2 LESS: ACCUMULATED DEPRECIATION (31,432,741) 3 NET ELECTRIC PLANT 58,832,914 4 INVESTMENT IN MAINE YANKEE 4,742,618 5 INVESTMENT IN MAINE ELECTRIC POWER 187,567 6 MATERIALS AND SUPPLIES k 1,901,681 7 WORKING CAPITAL 2,571,786 UNRECGVERED FUEL FROM PRE 1980 FUEL CLAUSE 1,129,011 Y UNDER-RECOVERED FUEL FROM FUEL CLAUSE IN-APRIL 1980 432,925 LESS: NON-INVESTOR, SUPPLIED CAPITAL 10 CUSTOMER DEPOSITS S 81,358
- 11 DEFERRED FEDERAL INCOME TAXES DEPRE. 2,777,517 l
l 12 TOTAL NON-INVESTOR SUPPLIED CAPITAL $ (2.858,875) 13 RATE BASE S 66,939,627 l
- Includes the Investment in the Muffler Equipment Wyman #4 1
e
. . Appendix 2 g
BANGOR HYDRO-ELECIRIC COMPUTATION OF AMOUFIS OF DEFERRED FLE DUE TO M.Y.A. SHUrDC7dN 3/79 - 6/79* ESTIMATED KhE MONIH END AVERAGE MONIH RATE /FDNIH (RETAIL) RECOVERY BALANCE bONIELY BAL. July '80 610,058 August .00117 ,100,400,000 (117,468) 492,590 , 551,324 Sept. .00117 103,300,000 (120,861) 371,729 432,160 0.c t. .00117 102,800,000 (120,276) 251,453 311,591 Nou .00117 105,400,000 (123,318) 128,134 189,794-Dec. .00117 108,8'00,000 127,296 0 64,067 s o i
*These figures may require revision at the time of the decisica in U. #3360 to update the monthly balances in accordance with the Ccapany's actual experience ,
in KhE sales. O
~
i.recedia 3 REVISED laFKIiC CAPITAL All0LWCE LEAD llN; tCD10D w ir YrAn osiirn uc REvtrar trr (tEAD) CA91 AS A!UUSIED 11UtS tr,ti,Y MIUUttr ter (Iran) in; twys prylirt:Ii IAG IMYS IIAD IMYS 1AG rMYS T L. 6 - 3 LMYS COL. (7 x 3) 1 PUROLASED IUs1R $8,%1,038 $ $22,085 54.59 38.87 15.72 SNE $ 347.176 2 0 & H IMOt 4,864,8 % 13.328 54.59 8.70 45.89 SNE 611,522 3 0 & H R M-tAacit 3.2 % ,436 8,916 54.59 55.72 (1.13) (4.13) (36,823) 4 STATE & ttJtitCIPAL f1t0PfRIY TAXES 1,106.433 3,031 54.59 105.65 (51.06) (%.05) (163.856) 5 DirtoYtEttr TAXES 361,874 991 54.59 23.74 30.85 27.85 27.599 6 IErXRAL & STATE Ir m E TAKES 910,810 2,495 %.59 85.40 (30.81) (33.81) (84,3%) 7 PURPA EXPEFGES - IABUR 59,881 164 %.59 8.70 45.89 42.89 7.0% [11RPA EXPENSES - Rti-IAnon 17,431 48 54.59 55.72 (1.13) (4.13) (l'18) 8 FUEL - BIE GEFGATION 6,761,000, 54.59 18.523 15.40 39.19 36.19 670.347 9 IVEr. - rtrRalASED FUWDL 26,971,000 73,893 5t<.59 38.87 15.72 SME 1.161.600 10 SAtI.S TAXLS 806.000 2,208 %.59 37.26 17.33 14.33 31,641 11 WC RBytRED
$2.571,786 een .. O .
O O .
- - Pcga 1 of 2 PPD-F0ELMA INCOME STATEEE . , TEST YEAR ENDED 12/31/79 TEST YEAR ADJUSTS.!ES AS ADJUSTED PRO-FCPJ!A
_ PER COMPANY DEBIT CREDIT TEST YEAR OPERATIl0 INCOBE: BASE REVENUE S27,163,920(1h33,880 S -
$26,730,04')
FUEL CHAP.CE REVENUES - - - - CU>ULATIVE EFFECT OF UE31LLED REV. - - - - S27,1.63,920 S433,880 'S S26,730,040 OPERATIl0 EGENSES: FUEL FOR GENERATION S - 9 - - S - PURCHASED POWER 7,772,938 (27 492,000 (2)203,900
$ 8,061,038 STEAM OPERATION 574,760 - -
574,760 HYDRO ELECIRIC OPERATION 534,006 - - 534,006 I?EEMAL COMSUSTION OPERATION 68,892 - - 68,892 TRANSMISSION OPERATION 489,642 - - 489,642 DISTRIB WION OPERATION 939,964 - - 939,964 CUSICMER ACCOUNTI?G & COLLECTION 947,529 - - 947,529 GENERAL AND ADMINISTRATIVE 2,986,279 (3) 10,668 - 2,996,947 STEAM MAIIEENANCE ., , 416,276 - g)10,651 405,625 HYDRO ELECTRIC MAINIENANCE 276,529 - - 276,529 INIERNAL COMBUSTION MAINILENCE 33,274 - - 33,274
"'RANSMISSION MAINIENACE 144,855 - g)10,000 134,855 DISHIBITfION MAILEENANCE 1,244,827 - g)10,000 1,234,827 (v) S16,429,771 $502,668 $234.551 S16,697,888 DEPRECIATION S 2,904,659 (5)$ 90,118 5 -
$ 2,814,541 UNCOLLECTIBLE REVENUE 218,231 ,
218,231 IfEEREST ON CONSUMER DEPOSITS 2,903 1 - ! - 2,903 STATE AND MUNICIPAL TAXES 1,464,876 - - 1,464,876 E@LOYMElE TAXES 361,874 - - 361,874 AMORT'ZATION OF NEPCO 223,541 - (8) 9,637 213,904 PURPA EXPENSES 257,280 - (6179,968 77,312 OPERATItG EXPENSES S21,863,135 $502,668 S514,274 S21,851,529 NET OPERATItG INCCeE BEEURE TAXES S 5,300,785 S 4,878,511 INCOME TA'ES S 2,4770)S(67,352) S (64,375) NEr OPERATI!C IbrRE S 5,298.308 (10)S 11,921 S 4,955,307 (1) Adjusts Levenue Associated with Sale of I'fC Plant (S433,880) (2) To Remove S200,000 Decmmissioning Costs & S3,900 Below the Line Expenses for Purchased Power (3) To Paltect P.U.C. Assessment (4) To Reflect Increased Efficiency / Decreased Maintenance Due to Increased Triuming To Remove Depreciation Update Per Ccepany To Remove Everything Except Phase 1A
) Wyman f4 Salt Water Problen S5353 + -50.267. - 510,651 (3) To Reflect Increase in Sale Price of Uraniu:n Enrichment Contract (9) Per Page 2 (10) To Reflect Flow Through on Post 70 Replacement Property f
BANGOR HYDBO-ELECTRIC COMPANY INCOME 'AX CALCULATION ON
- TEST YEAR EARNINGS TEST YEAR OPERATING INCOME (AS ADJUSTED) BEFORE TAXES $4,878,511 INTEREST EXPENSE - L.T.D. 52,757,125
- S.T.D. 1,332,210 (4,089,335) 1979: ,
PERMANENT DIFFERENCES BETWEEN BOOK AND TAXABLE INCOME (385,287) TIMING DIFFERENCES BETWEEN BOOK AND TAXABLE INCOME WHERE DEFERRED TAXES ARE NOT CALCULATED (233,120). EXCESS OF BOOK DEPRECIATION OVER TAX DEPRECIATION ' FOR PRE 1970 ASSETS PREVi10USLY FLOWED THROUGH 14,015 FEDERAL TAXABLE INCOME S 18,4,784' 1979': () EXCESS OF TAX DEPRECIATION OVER BOOK FOR POST '69 ASSETS FLOWED THROUGH FOR STATE TAXES S(1,531,497) STATE TAXA.3LE INCOME ; ; S(1,346,713) STATE TAX @ .0495 (1,238)
@ .0693 (91,59 5),'
FEDERAL TAX LEE S100,000 26,750 REMAINDER 81,704' PLUS AMORTIZATION OF I.T.C. (80,496) PRO FORMA INCOME TAXES S (64 ,8 7 5,) ' INCOME TAXES PER COMPANY - 2,47_7_ ADJUSTMENT S (67,352) O l
Appindik 3 m BAf tO-EtBJIRIC Ur1 pat # P. g2 1 e f 3 (
\.
)
,/
DCrat1ER A S OF ATlitlTIOri 919 - Alu6T 31,1981 p) t
'L/
Test Ypar Ansit
- Adjusted hvount Amual Cc q otaal to Ad itated
$ Rate 1 Factor to 8/31/81 (A) (B) (C) (D)
. (E) (F) (C)
- 1. Operating Revenues
- 2. Itise Revenees 12/31/79 $30,717,110
- 3. other Revenues 2.48 1.0416 $21,994,686 289,058 1.00 1.0000 289,058
- 4. Fuel Billed anl thilled .
- 5. Total $31,006,168 $32.283,746 6 Operating Expenses
- 7. Fuel - -
- 8. Purchased Power - Energy - -
S. - Capacity 12/31/79 $ 8,061,038
- 10. Depreciation LOO 1.0000 $ 8,061,038 12/31/79 2.814.541 6.00 1.1020 3.101,624
- 11. Ibges 12/31/80 5,190.378
- 12. Fringe Benefits ' 8.00 1.0527 5,463.911 12/31s80 804,550 11.00 1.0721 862,558
- 13. Payroll Taxes 12/31/79 361.874 12.00 1.2079 437,108
- 14. State anl twicipal Taxes 12/31/79 1,464,876 2.00 1.0336
- 15. Otler 0 & H Expenses 1,514,096 '
12/31/79 3.154,272 8,00 1.1369 3,736 3 !
- 16. Total Operating Expense BIT -
$21,851,529 $23,176,427
- 17. 7 .
Incane Taxua - state assi Federal $ 2,062,071 $(99,250) t
$ 1,962,821
- sd. Het Operating incane $ 7,092,5_68 $ 7,144,498
- 19. Rate Base
- 20. Prajuction and Tcansmission Plant $52,354,080
- 21. 2.50 1.0420 $54,552,951 liistribution, General & Intangible Plant- 37,911,575 7.00 1.1194
- 22. Acunulated Depreciation 42,418,217 i (31,432,741) 6.50 1.1107 (34,912,345)
- 23. lbrecovered Fael (Pre 1980 - $1,129, 011; 1980 - $432,925) 1.561.936 1.00
- 24. Deferred Incme Taxes 1.0000 1,561,936 (2,777,517) 20.00 1.3551 (3,763,813)
- 25. Other Rate Base Itisna 8,979,551 4.80 1.0813 9,709,5q
- 26. Total $66,596,884 10.651 $69.586,534
- 27. Hate of Return
- 28. Attrition 10.271 Ts. Kevenue nequired .38 i 30.
- 31. l$2,126.946 70erived Tax due to Revenue Increase & (64,875) (current tax applicable to adjusted test year)
- 32. 3 53,586,092 ($3.154,272 x 1,1369) + $150,000 (lutPA) t revenue *1herequironent revised fueifor figures to which the parties have agreed affect wocking capital amounts now in rate base resulting in an ' increased the Cmpany. Ilouever, because the parties have agreed to a retail attrition amant of $492,779, in this attrition analysis will mt be adjusted to reflect the ef fects of the fuel fi'ing, and the mount designated here as Orlet Ratethe figures use Base Itans" will toruin unchanged for purposes of this case. -
749e73$g 5 Page 2 cf 3 ; O BANGOR HYDRO-ELECTRIC COMPANY ANALYSIS OF ATTRITION REVENUE REQUIRED Amount Test YvNr Adjusted to Adjusted 8/31/81 Rate of Return - 10.65% 10.27% Attrition ,
.38
- i Required Return -.Attrit[on (.0388 x 69,586,534)
S264,429 Revenue Deficiency - Attrition (: .5026) 526,122 to Reflect Revenue Growth from the Test O Adjust Year (: 1.0416) 505,109 - Portion Allocated to Resale (x .02441) (12,330) s , Retail Revenue Deficiency - Attrition Portion $492.779 I
~
l ([) l
Apperdix 5 Pcgs 3 of 3 () i 8 BANGOR HYDRO-ELECTRIC COMPANY ANALYSIS OF ATTRITION COMPUTATION OF INCOME TAXES Amount
, Net Before Tax Oparating Income - Test Year $9,154,639 Net Before Tax Operating Income - Attrition Year 9,107,319 Change in Before Tax Operating Income (47,320)
,f, e i e Adjustments to Operating Income for Tax Purposes Increase in Interest Expensel .
152,210 () Change in Taiable Income 199,530 , State Income Tax @ .0693 13,827 Federal Income Tax @ .46 85,423 Total Income Taxes 99,250 l l Increase in Interest Expense Growth in date Base S2,989,650 Debt Component (am t . x Debt Ratio =.4389) 1,312,157 Estimated Cost (ame. x .116) 152,210 I l
, l
... .. ,. , APPandix 6 l
*.. . l
~
. (_:) ,,
~
BANG 0R HYDRO-ELECTRIC COMPAbY WEIGHTED AVERAGE COST OF CAPITAL PROPORTION OF CAPITAL WEIGHTED TOTAL CAPITAL COSTS COSTS Short-Term Debt ! j.1154 ; 14.68% ', 1.69% Long Term Debt .4389 7.99 3.51 ( referred Stock .1238 7.62
.94 Co= mon Equity: >
.3219' .
14.00 4.51 Weighted Average i l Cost of Capital 10.657.
- - - - ,,o g- - , , , , , - -- -- -- ws.,,.
.__. . u -_ . __.:-- = . . _
Appendix 7 BANGOR HYDRO-ELECTRIC COMPANY ','. i INCREASED REVENUE REQUIREMENT RATE BASE $66,939,627 RATE OF RETURN .1065 RETURN REQUIRED 7,129,070 TEST YEAR RETURN AS ADJUSTED 4,955,307 i
I E F DEFICIENCY 2,173,763 i
l
. INCOME TAXES 2,151,273 1 O .
REVENUE REQUIREMENT 4,325,035
' 105,574 APPLICABLE TO SALES FOR RESALE (2.4417.)
l APPLICABLE TO RETAIL SALES 4,219,461 RETAIL ATTRITION AMOUNT $ 492,779 l TOTAL RETAIL REVENUE DEFICIENCY $ 4,712,240 l l t. l O - _ . _ , _ _ _ _ _ . . . . . . . . _ _ . . . - _ , _ . - - , . , _ , . _ . _ _ _ _ _ _ _ . _ . . - _ . . ~ . . _ _ _ _ _ - . _ . . . , - . _ . . , _ _ - _ , . - _ _ _ _ . . _
,J.-
EMIBIT T . - T 7
/r '
SANGOR ,VDpOK,x-. EECTRIC ~ REdh~9ANY l etecroic Licnr 49o noven s e o v ib 'hahr / IN 8 $7siwe
\C 33 State Street, P.O. Box 932, Bangor[ Maine 04401 NAINE el. 20759 PUS}8M562 July 30, 1980 Michael K. Feener, Secretary Maine Public Utilities Commission 242 State Street State House Station 18 Augusta, ME 04333 Re: Docket No. 80-38, 50- 43 Revised Fuel Filing
Dear Mike,
i Please find enclosed a complete new fuel adjustment filing package, reflecting the adjustments called for by the agreement of the parties embodied in Jane Bradley's letter (j of July 29. Very truly yours, Robert S. Briegs, Esq. l Vice President & General Counsel l l RSB:3 Enc. c.c. All parties Hearing Examiner & Commissioners t0 y . l l
RECE!VEb 19?0 JU!. 3; r.4 g. 37 MAINE PUSLIC UIll. COMM. BANGOR HYDRO "ZCTRIC COMPANT CALCN.ON OF FUIL COST ADJUST.ENT 12-MONTH PERIOD ENDING JULT 31, 1981
- 1. Projected Unit Fuel Cost (7)
$0.02602
+ 2.
Rac=nciliatien Factor (A) f
$0.00408
- 3.
Base Rate Unit Fuel Cost (3) $0.01750 4 Tual Cost Adjust =ent ;;
$0.01260
- 5. Maine Yankaa Replacanent Coat Adjust:nent
$0.00117
- 6. Total Fuel Cost Adjust =ent*
O $0.01-377 1 l
- Applicable through Dece=ber 31, 1980 t
I l l July 30, 1980 1
. - , _ . . c , _ - - . . , , . - - , - - , , --.,- *-.,e-._ - - - . - - - - - - .-,# ,, --,--,y- - - - - - - - - - - - - - --- - - - -
i BANGOR HYDRO-M'CIIIC COMPANT -
~
12-MONTH FUEL COST CALCULATION 12 MCNTE PERIOD ENDING JULT 31, 1981
- 1. Projected Fuel Cost Fuel for Generation (Gp) $ 6,751,000
+ Fuel Co=ponent of Purchased Power (?p)*
26,9 71,000 Fuel Attributable to Energy for Rasala (Rp)** (750,000) I:ieramental Fuel for Non-F1,rm Sales (Np) 0
$32,982,000
- 2. Projected IGH Sales ,
Maine Jurisdict1~enal (Sp) 1,'267,700,000 Non-Firm Sales (Xp) 0 1,267,700,000
- 3. Projected Unic Fuel Cost, 1 t '2 $0.02602 s
.s
- Includes adjust =ent of +$1,136,000 for below nor a1 hydro .
** Based upon projected 12 month sales of 29,300,000 IGH for wholesale and 1,267,700,000 IGH for retail and a loss factor of .984
- - - = -- -- - - - -- -
.i 1 3MGOR .E!"<20-mC 2IC COMPANY FUEL AND PURCASED ENERGY COST ADJUSTMEr FOR BELOW NORMAL HTDRO 1.
Nor=al hydro-electric generacien in storage, July 15, 1980 = 81,524 MWE
. lt
- 2. **
Actual hydro-electric ge'neraticIn in storage, July 15, 1980 = 49,076 MWE
- 3. Below nor=al storage
= 32,448 .WE Esti=ated replacement energy rate =
35 mills /r4E
- 5. Estimated replacement energy cost = $1,136,000 '
1 ? e l l . l l _ _ _ _ _ _ . _ . . . . _ _ _ - . - _ . . . _ . . _ . _ _ _ _ _ . _ . . . _ . _ . ~ . . _ _ _ _ _ _ . _ _ _ _ . . . _ - . _ _
4 OOO O OOOOO OOO O O O O
.2 OOO O OOOOO O C e OOOOO O O .O p"j E E *
- e os m.S =,'
e o m' e' m.~w m$ . $
- M peg WWW ^ e. N m P*
.' e N
. .O m j e
*F. *. *. O. Nl. e.s . c N en == =a e5 e e*
a=
- n m OOO O OOOOO O OO O OOO O O O eri
,t,o O O O O. O.s O. O. O O. O. m.
C "F O f ** en
*** O. O. m.
%, *e m) G4 m N e c on *P h *F @ m N
m m ee M en =* %g e. o.n
.=
==
**l N N Cec O OceCO
- M' OO O OOO O O O
O e O 8 ".
= O. O.e O. . . O. O. O e.
p M spq O. O. m
% at we m N .m me N e ce ae h g
- e g n au p=> ==
.e Q g
. . .e.
COO O 7 M M 0CO O DOCOO O O
>= QQO O OOOO O O
=
5 * * *
- OOOO
- O w ==.
P* M on 86
" "* O*N * *
- eWw M
M M *e e 058 p. yg ,eo N N m i e * ** at A .o 9 .=. e* me
**! #*1 ci OOO O OOOOO'
. COO O OOC 00 O O O e
*=
g C O O m C. O. O. O. O. C. O. C O.
- g. M m .e. Q .e se N M O. O. O. g e
er., "F er N ** g g .o m es P* M a. P n e e"* n se e' .** wi m. e. == N N
= OOO O O C*C C O O U
0CO O OOOCO O O O O O .es e g O. O. O. O. O. O. O. O. O.
=c es e W ==
es e o ce v'n O. O. ' ar.t T. neN * .e es os m e =eeos N **en = .cM ** es m me N
- yg
't
. ,t 31
- e. .
ee
.e N k' C00' C E OOO O COCCO OOO O O O e
=C O O O O O .O
= O. O. O. e a e =e Pm O. O. O. O. O. O. r%
y) e e m et P
** mem
- ee m ,,.
D km W Wi N N en e yg == n m j e* g 2 m. N P* ** N e. yg am k u, em M 6 3.s me OC O OCCCC u M CC C OOO O O O m Lt e, =C O O O O sg y C . C. O. O. O. O O. e Q w E O. O. O. es. a 3 =e: m, at ate v en N ae e P O yg m
,,e w >= "3 e P* =e m ce .n. e m ,, .
N et a
$ ON m o ==
5 "? n' Coe< e M ' N m ~ W .c O
~m w OOO O OceOO OOO O O O m Q og an O O g O. O. O. O. O. O. O.
** e.
u -= ma O ce M O. O. . . .
- O ,
O ae ao ce em w 96 M e ** eD m P* m pe ao p. w isa e. w *= ce e e y M eg 3 on A I et es == O eg .e ** W OO a *
- rO **' ee M O <a O ac ccO o as M O *C O C O O' O
.J e OOC O OOO O O O e
, Q- O OOO C* O O a
ma C % O* O. O= * * *
- O O. O e N.
W ee' == N Pm ** @ ** a g
- ee me t
la. r== =r ce m W e ce M" me fm. eg t ' O e P. N e == e -e
= .3, W{
~ e. "to. ==
ce ( . . . eCe O * ' = m OOO O C O 8 O 8, 8 OC O O 8 e. l O C. O. O. O. O. O. O. O.
- 1 C ** es M O. O. . =,=,
t U m .e M o. em O O oc - e.
==
- 0
'o"'
Ft ' Oi $8 i
- N e* "" -
I I g' e. es ew i as COO OO OOO O 8 OC8OO O 8 O O 8 en c. i O. O. O. 1 ,. .
. e .m, O O. e.O., O. O. O. en. .
e, N . l
.e.
set
.e, .
- e. *m e Q- .
e N s
,O, N
w e 88818 $. O. O.8 8
- 8,' 8 8 E C. 0 0J e4 ==
O. 8, O. m. O me e .ce e et on me wg =e O @ $9 eg, y n "P"e =e P= W) 40 se e6af og O e W as 4 . 1 i
.* et C
O U 1 o "e e M
- n. e e a e.
3 e.u n. c .ea .af Q 3 -
<J chUe 0 o .e ws =< em -4 E U% M > c aC 3 O e C 2 N b.
e U O he .J C 88 [ w ee .= 0 e .e e. e eoe-em8 e >. = 5"" i e. E eD
>= 6e U a0 e == a d k
e u
- a. c Aemer3h i
~3 .C e > *%. . .
l ** 3 0 me W3 WEEwE3 u O W3 O N e m ** r I s m l he G. a. -
- 3 Z
e
- O BANGOR HIDRO-ELECTRIC COMPANY PROJECTED GETERATION AND NEPCOL PURCHASES AUGUST 1980 - JULT 1981 ESTD'.ATED Estimated NEPCOL Purchases, G E ESTEd.ATED SOURCE SCHEDULED OtJN LOAD, 53 GENERATION, 51 ECONOMY OUTAGE _ _
TM (1_ Iydro 239,600 239,600 0 0 0 Ty=an #4 108,200 126,60d. , (18,400) 0 (18,400) 'raham 210,700 16,000 194,700 0 194,700 21cs21 2,900 1 6,400 (3,500) 0 _ (3,500) EU3 TOTAL 561,400 388,600 172,800 0 172,800 hi 9Jankee 465,400 400,500 0 64,900 64,900 7s 7 279,700 229,800 49,900 0 49,100 bicscu Cove 69,700 56,100 13,300 300 13,600 nr L:u=swick 30,200 30,200 0 0 _ 0 c3 TOTAL - 845,000 716,600 63,200 65,200 128,400 ( OTAL 1,4 C6, k . 1,105,200 226,000 65,200 301,200 o O
w ,
~ '
BANGOR ETDRO-ELECTRIC COMPAh7 PROJECTED ETERGT SALES AUGUST 1980 - JULT 1981 ' ENERGT SALES IN MEGAWATT-HOURS
- MCNTE RET 11L WHOLESALE NON-FIRM TOTAL August 1980 100,400 2,500 0 102,900 Sep tember 103,300 / 2,300 0 105,600 Oc cber 102,800 2,500 0 105,300 Nove=ber 10 5,400
- 2,500 0 107,900 December 108,800 2,500 0 111,300 Janusry 1981 115,600 3,100 0 118,700 February 114,900 2,600 0 117,500 1 March 113,'300 2,600 0 115,900 ril 104,700 2,200 0 106,900 May 102,400 2,300 0 104,700 Je=e 98,800 2,000 0 100,800 July 97,300 2,200 0 99,500 -
TOTAL 1,267,700 29,300 0 1,297, COO O 6
E.WGOR HTDRO-ELEC"RIC COMPANY PROJECZED UNIT YUEL COST ESTIMA!ES ASSUMPTICNS LIST 1. Energy sales growth win be approximately (1.10 in the 12 :nonth projection period versus the 12 :nonth historical period. Excluding IMC, energy sales growth will be approxf.=ately 2.0%.
- 2. Uni fuel prices will escalate as indicated on page 8.
- 3. Scheduled outages and forced outage rates will be as follows:
~,
Forced Unit Scheduled Outane Period ' Outare Rate,% Maine Yankee 4/25/81-6/13/81 11.3 Mysiic #7 5/9/81 and 9/12/81-9/26/81 10.0 dyman #4 6/27/81-8/01/81 20.0 Coleson Cove 1 4/04/81-5/23/81 9.1 Coleson Cove 2 10/10/81-10/31/81 9.1 Coleson Cove 3 6/06/81-6/27/81 9.1 ! Graha::i 3 6/20/81 1.2 Graham 4 4/19/81-4/26/C1 1.9 Graham 5 4/05/8!-A/12/81 2.3 l 4. Scheduled outage loader costs will average 30 =111s/r2. '
- 5. NEFCOL Saengs will average 4 mills /ra of economy purchases.
- 6. Maine Yankee fuel prica vill average 6.2 mills /ra.
- 7. Hydro redue:1cu will occur uniformly over August -
December period.
.w--- - - - - ,y-,. . - . . , . - , - . , .,.m_c. ,-w- . . - - - , - . . . - , . . - _ - , + . , w-- .--,------ .- ---,- - . - - , . - , - - .,
l j 1 I O BANGOR HYDRO-ELECTRIC COMPANI PROJECTED UNIT IW.L COSTS SOURCE MONTH WYMAN 4 MYSTIC 7 COLESON COT 2 GRAHAM ICU's Aug., 1980 $26.43/ bbl. $23.72/ bbl.,. $12.73/ bbl. $21.30/ bbl. $39.16/ bbl. Ssp t. $26.43/ bbl. $23.72/ bbl. $12. 73/ bbl. $21.30/ bbl. $39.16/ bbl. Oct. $27.84/ bbl. $25.09/ bbl. $14.43/ bbl. $22.27/ bbl. $40.10/ bbl. Nov. $2 7. 84/ bbl. $25.09/ bbl. $14.43/ bbl. $22.$/ bbl. $40.10/ bbl. Dac. $27.84/ bbl. $25.09/ bbl. $14.43/ bbl. $22.27/ bbl. $40.10/ bbl. Jan., 1981 $29. 33/bl.1. $26.53/ bbl. $19. 34/ bbl. $23.28/ bbl. $41.07/ bbl.
$29.33/ bbl. $26.53/ bbl. $19.34/ bbl. $23.28/ bbl. $41.07/ bbl.
Pr. $29.33/ bbl. $26.53/ bbl. $19.34/ bbl. $23.28/ bbl. $41.07/ bbl. :,1 Apr. $30.89/ bbl. $28.06/ bbl. $21.91/ bbl 3 $24;34/ bbl. $42.06/ bbl. May $20.89/ bbl. $28.06/ bbl. $21.91/ bbl. $24.34/ bbl. ~$42.06/ bbl. Juna $33.54/ bbl. $30.71/ bbl. $24.29/ bbl. $26.99/ bbl. $42.06/ bbl. July
$34.35/ bbl. $31.45/ bbl. $24.88/ bbl. $27.64/ bbl. $43.08/ bbl.
i . I I t l O
. ~
O BANGOR. HYDRO- m CIRIC COMPANY CALCULATION OF RECONCILIATION ADJUSTMENT 12 MONTH PERIOD ENDING JULY 31, 1981 A. Transitional Fuel Cost 3ecovery
- 1. Retail Net Unrecovered Fuel Cost, Dec. 31, 1979
- 2. Retail Recovery of (1) through July 31, 1980 $4,032,545
- 3. Net Unrecovered, July 31, 1980 746,482
- 4. Portion of (3) to be Recovered in Period
- 3,286,063 1,359,750 B. Current Period Fuel Cost Recovery
- 1. Unrecovered Retail Fuel Cost **, July 31, 1980
$3,809,432 t'
C. Total Reconciliation Adjustment $5,169,182 D. Projected r4E Sales - Maine Jurisdictional 1,26 7,700,000 Eg Reconciliaticu Adjust =ent Factor, C + D 0.00408 i Based upon ratio of current period ncnths to rena1=ing =enths in recovery period (12/29) er 41.38%'
** See Page L1.
t l ( l l l
- _ - - . _ _ . - - . . _ . - . . . _ _ . _ _ . _ _ ~ . . - - , , . . . - , _ . . _ . ~ . . . . . - , . _ _ _ - - . - _ . ~ ~ _ . - _ . _ . . . - - _ _ _ . , _ . - - _ , _ ~ . - . - . . -
p' s O ; BANGO'. EYDRO TT*CTRIC CCMPANT ECOVERT OF FUEL CI.AUSE TRANSITIONAL FUEL COSTS 1980 RETAIL RETAIL
- RETAIL MONTH ACCUM.
ra SALES FACTOR RECOVERY ECOVERY January 108,965,149 ,$0.00097
$105,696 $105,696 February 119,898,281 O.00097 116,301 221,997 March 114,884,367 0.00097 111,451 333,448 April 110,234,197 0.00097
- 106,927 440,375 May 100,540,208 0.00102 102,551 542,926 Juna 97,155,370
, 0.00105 102,013 644,939 l J ** 94,900,000 0.00107 101,543 746,482 i . 's u
Iseludes working capital credit adjust =est l ** Esti=ated O y 4 O
4 4
'BANGOR llYDRO-ELECTRIC COMPANY CURRENT PERIOD RETAIL FUEL RECOVERY JANUARY - JULY, 1980 JANUARY FEBRUARY MARCll APRIL HAY JUNE JULY *** TOTAL l Fuel Cost $3,773,863 $4,487,953 $4,674,131 $1,997,709 $1.914,297 $2,928,045 $2,343,000 $22,118,998 HWit Sales Re tail 108,965 119,398 114,884 110,234 Wholesale 2,630 100,540 97,155 94,900 746,576 2.637 2,637 2,205 1,966 2,084 2,600 TOTAL 16,759 J.
111,595 122,535 117,521 112,439 102,506 99,239 97,500 763,335 Y Fuel Costs ! Ratst1* $3,686,346 $4,392,916 $4,570,929 $1,959,159 $1,878,166 $2 067,540 $2,281,520 2 $21,636,576 ' Fual Revenue Retei1**
$2,511,215 $2,666,253 $2,534,400 $2,437,206 $2,42 0,555 $2,6i13,601 $2,643,914 $ 17,62 7,144
, Unrocovered $1,175,131 $1,726,663 $2,035,529 ($478,047) ($5 42,389) $25 3,939 ($362,394) $3,809,432 Based upon relative monthly KWil sales and loss factor of .984 Excludes H/Y and transitional recovery
*** Estimated
.w .
_ e ' e O
8 O BANGOR ETDRO-UCTRIC COMPANT BASE RATE UNIT FJEL COST TEST TEAR ENDED DECEMBER 31, 1979
- 1. Test Year Fuel Cost Fuel for Generation (Gt) $ 2,635,068
+ Fuel Cou:ponent of Purchased Powe3 (P t)
- 20,730,421
- Fuel Attributable to Energy for Resale (Rt)** (526,919)
- Incremental Fuel for NonfFirm Sales (Nt) (120,002)
$22,718,568
- 2. Test Year LT Sales '
Maine Jurisdictional (St) 1,301,137,342
- Non-Firs Sales (It) 2,836,100 1,298,301,342 3 1+2 0.BaseRateUnicFuelCost, $0.01750 I l
- Excludes $5,484,688 of deferred fuel expense
**3ased upon er.st year sales of 30,613,089 LT for wholesale
.. and 1,298,301,242 IGE for retail and loss factor of .984 1
4 l l L l
/
BANGOR ETDRO-EI.ZCTRIC COMPANT CALCULATION OF MAINE TANKIE REPLANT POWER COST ADJUSTMENT FACTOR
- 1. U.2recoverad Maine Tankee Replacement Cost, July 31, 1980 $610,058
- 2. Projected Retail E4H Sales, August, ifr80 - December. 1980 520,700,000
- 3. Maine Tankee Replacement Cost 7 actor,1 + 2 $0.00117 4
*=,
f e* 6 O O e l l l l 4 _m--w--- - - -g-m-~m-w---ww,--,e--e,,- m ew. m ---- -r , w-.--,-_ - , , - - - - _ _
7 .
~14- ,
i BANGOR HYDRO-ELECTRIC CCMPANT , RECCVE E OF FUEL CLAUSE MAINE TANKEE RECOVIE RETAIL RETAIL RETAIL ACCUMULAI'ID WMTE ' pH SALES FACTOR RECOVEE RECOVERY January 108,965,149 $0.00108 $117,682 $2,021,381 February 119,898,281 0.00108 129,490 2,150,871 March 114,884,367 ,0.00108 124,075 2,274,946 April 110,234,197 0.00108 119,053 2,393,999 May 106,540,208 0.00111 118,260 2,5 12, 259 Juas 97,155,370 0.00113 ' 120,391 2,632,650 July
- 94,900,000 0.00114 108,186 2,740,836 O '
Maine Yankee Unrecovered = $3,350,894 - $2,740,836 = $610,058
- Estinated
.~ . -
e 9 O
]':- IM w D b'
s EXHIBlT D j STATE OF MAINE July 24, ldi6E!VED PUBLIC UTILITIES COMMISSION , gg gg,, 7 BANGOR HYDRO-ELECTRIC COMPANY SG-Re: Proposed Increase in Rates Docket No.dMt-3LIC i. UTE . COMM. BANGOR HYDRO-ELECTRIC COMPANY Docket No. 80-43 Re: Petition for Temporary - Rate Relie'f MEMORANDUM OF COMMISSION STAFF I. INTRODUCTION The Commission Staff hereby submits this memorandum in support of the Stipulation Agreement presented orally to the Commission at a hearing held on July 21, 1980. The purpose of this memorandum is to present the Commission Staff explanation and rationale underlying its agreement to the specific stipulated provisions contained therein. It was the Staff's basic principle throughout the negotiations that it vould not accept a result le.,s favorable to the racepayer than it could reasonably expect to achieve in a fully litigated proceeding. II. ADJUSTMENT PROVISIONS O A. RATE BASE ITEMS
- 1. Calculation of Rate Base. In its original filing, the Company computed its rate base on the basis of average balances for a period of twelve months. The Staff recommended and the Company agreed to the recomputation of the rate base on the basis of 13 month-end amounts for the perioo beginning December 31, 1978 and ending on December 31, 1979. Consistent with current Commission practice, this method affords e more accurate measure of average rate base during the test year by
- reflecting the balance in existence on January 1, 1979 - the l first day of the test year - all the way through to the last day of the test year - December 31, 1979.
l .
- 2. Deferred Fuel - Maine Yankee Shutdown. The position of the Commission Starr in ene matter or U. s3360 is that l certain practices of Bangor Hydro and other part owners of Maine Yankee Atomic Power Station were imprudent and l unreasonable. That matter is still pending before the Commission. To avoid the unnecessary duplication of effort in litigating the same issues in this rate case, the parties agreed to rely on the Commission's determination of that issue in U. !3360. Pending such a determination by the Commission, l
g- no rate base treatment will be allowed. ( \_- l t I
Q :Th Should U. f3360 be decided favorably to the Company, th t calculation of the amount to be included in rate base is I designed to collect only those carrying costs incurred after the Commission's decision chrough the expected life of these rates (December 31, 1981).1
- 3. Unrecovered Fuel from Pre-1980 Fuel Clause. The last two transitional ruel clausec implemenced tor Bangor Hydro-Electric have provided for a return on the unrecovered fuel from pre-1980 clauses. This allowance is censistent with what was done in those two troceedings, buc permits the Company to recover only those carrying costs associated with amounts 4
unrecovered as of September 1, 1980.2
- 4. Materials and Supplies.
- a. Fuel. It Its original filing the Company proposed a pro forma upward adjustment ta its test year fuel inventory to reflect more current costs. The Staff took the position that this proposed adjustment as well as several others discussed below were similar to a partial attrition adjustment, and as such should be rejected. The parties agreed that this type of an adjustment would be subsumed within an attrition analysis, and the Company O withdrew the adjustment. -
- b. Construction Materials, and Sucolies. Through cross-examination or the company's witness, Jack O'Sullivan, r
- 1) The Staff has used December 31, 1981, as the end point of this amortization period because it preceives-this period to be ene likely extent of the rates set in this proceeding.
Our analysis of the Company's direct case and Staff Exhibits reveals that the Company will be experiencing significant growth in its capitalization in the next 2 years due primarily to its buy-in of Seabrook. In view of this , the Staff concluded that the Company uill most probably require new rates at the end of 1981 to cover this increased financing. After the decision in U. 13360 the figurec on Appendix 2 to the Stipulation will most likely require slight revision to reflect actual KWH sales experienced by the Company and the revised fuel costs resulting from the new fuel clause. ~
- 2) The period of amortization was chosen on the same basis as that described in footnote 1 above.
l
k-
%h 7 .
O it was established that 66% of the non-fuel invencory was characterized as construction-related materials. The Commission held in the last Bangor Hydro-Electric rate case that such items must net be included in rate base. The Company has brought to the attention of'the Commision Staff certain difficulties arising from the application of the Commission's prior ruling. Because items such as utility poles and wire presently fall within the definition of construction-related materials and supplies on which the Company can earn no return, it may be forced to reduce the level of its inventory of these items. This may prevent the Company from utilizing the beneficial prices attendant with bulk purchases and, with the diminished supply, may also seriously impair its ability to respond promptly to requests for line extensions. The Company indicates that these results contravene prudent management practice and may affect the adequacy of customer service primarily by: lengthening the time customers must wait for line extensions. s The Staff recognizes that there may be some legitimacy to the Company's arguments and that this problem may result O from an unclear definition of what was contemplated by the Commission in its use of the term " construction-related materials and supplies". The prior Bangor Hydro-Electric rate case affords no illumination, and although the issue of construction-related materials and supplies was raised, it appears to have not been extensively tigitigated at that time. Nevertheless, for the purposes of negotiation the Commission Staff would not stipulate to a result inconsistent with the Commission's prior ruling. It thus r suggested that the Company bring the facts of the actual ! impact of this rate base treatment to the attention of the Commission through the procedure of an advisory ruling. e
- 5. Caoital Recuirements of PURPA. In response to a Staff Data Request, rne Company proviceo cescriptions of its plans for compliance with PURPA requirements and the schedule for implementing such plans. From this the Staff determined that all capital items associated with these requirements would be required sufficiently in the future to not warrant inclusion of the costs therefor in rate base. The parties agreed.
- 6. Wyman Unit #4. The parties have agreed that amounts i associatec witn investm2nts made in electric plant for !
O correction of a noise problem with Wyman Unit 14 shall receive the same rate base treatment as the Commission determines proper for Central Maine Power Company in Docket No. 80-25.
- - ,. s...):. , in
~:2 >
;,e-O~- Because the Staff underst4cds that this issue has bcen reviewed in the Central Maine case, it seems reasonable to avoid duplicate litigation of this issue. This is especially so inasmuch as Central Maine Power is the lead participant in that unit, and it would be CMP's witnesses who most likely would be needed to testify on that issue. To avoid their having to testify in two separate proceedings or to avoid the complications arising from consolidation of the Bangor Hfdro proceeding with Central Maine for purposes of that issue, :ne Staff feels that erriciency would best be served by applying to the instant case the Commission's ruling on that matter in the Central Maine case.
- 7. Land Held for Future Use. In its 1979 annual report to the Feceral Energy Regulatory Commission, the Company indicated that it has no land held for future use. Upon inquiry the Staff ascertained that the Company does have land held for future use, but that it is reflected on the FERC report under non-utility, 'property. ,
Although by listing it under the category of non-utility property, this land held for future use would receive no rate base treatment, the Commission Staff included this provision in the Stipulation for purposes of clarifying () the parties' understanding with regard to this fact. t
- 8. Cancelled NEPCO Units. The Company's investment in the cancellec NEPCO nuclear units is excluded from rate base.
The Staff has agreed, however, to allos as an expense the amortization of the unrecovered balance of this investment. Discussion this item appears of the in Staff's rationale Paragraph for infra. II.B.7. the entire treatment of
- 9. Underrecovery froa 1980 Fuel Clause. The implementation of the Januarye1980 ruel clause resultec in an underrecovery of about $4,000,000 which is being amortized over a substantial period of time. The Staff has agreed to rate base , treatment of the unamortized outstanding balance of this amount,3 a treatment which allows.the Company to recover the carrying costs associated with amounts unrecovered as of September 1, 1980.
l Although the Staff does not question the fact that the i i Company is ' entitled to inclusion of such amounts in rate base, l l , O) (_ 3) The period of amortization war chosen on the same basis cs that described in footnote 1 infra.
., . .. th lg I I
() this case illustrates the difficulty presented by our inability' to treat working capital for fuel within the context of a fuel adjustment proceeding under 35 M.R.S.A. 5131. Although the rates set in a general rate adjustment proceeding may provide for carrying costs for fuel set under a fuel clause established therein, the life of those ratcs most likely will ex'ceed the life of the fuel clause. The resulting underrecovery or overrecovery of working capital perpetuated by the endurance of the rates could be avoided if amounts for working capital were to be included as part of the calculations under the fuel clause. _The Staff would urze the Commission to seek an amand ene n F__ 33 M.R.S.A. 5131 to enr e t th is p r abia
- 10. Working Capital.
- a. Comoutation in General. The Staff took the' position enac in accicion to any other specific changes made with respect to working capital, three days must be added to the lead day figuresjon the Company's Exhibit 0-2-2 for all items except purchased power (lines 1 and 9) and 0 & M labor (line 2). Tae Company's lead / lag study computes the revenue lag from the time the utility's service is rendered to the time the Company receives payment for that service; it computes expense lead days, however, from the time the s' Company receives the service for which it is paying to the time not when the Company's payments are received by the vendor, but when its payments are mailed.
For purposes of consistency, c'bree days should be added to all working capital expenses paid by mail in order to more accurately reflect the dates of receipt of payment and to bring days. the lead day calculations more in line with that of lag Because purchased power expenses are paid by wire and labor expenses are paid by hand delivery- three days need not be added to lead day calculations of these items. The parties agreed to accept the Staff's position.
- b. Purchased Power. The Stipulation provides for the exclusion of 5200,000 tros the computation of working capital for purchased power. This amount represents decommissioning costs for Maine Yankee. Assuming that the Company is billed for these costs in accordance with the most recent communications which the Company has received, it appears that payment of the costs will not commence until substantially after these rates are to go into effect. For this reason the Staff's position was that there is no need for working capital. The parties accept the Staff's position.
() The Staff also argued that amounts billed to the Company by Maine Yankee for lobbying expenses should be excluded from the test year figures. The parties agreed to this adjustment.
7,
$ i)
- v. .
b ( c. 0 & M Non-Labor. The Company agreed to the removal of working capital allowance for uncollectible revenues. The Staff argued the position that because this is not a cash expense, there is no need for working ca, ital. The Staff, upon reviewing the Company's responses to data requests, ascertained that expenses for tree trimming i would not be incurred for several months until after the rates were to go into effect. Because of the timing of this expense, sufficient amounts would be collected beforehand. The Staff thus took the position that there would be no need for working capital for this item. The parties accepted this position. Subsequent to the filing of its prefiled testimony, the Company corrected an error in its lead day calculations for pension expenses to reflect a June 15 tax return filing date. This correction results in a lower working capital requirement, and.the parties agreed to the adjustment.
- d. PURPA and NECPA Excenses. The Company originally
' filed for working capital allowance for expenses associated with several phases of its PURPA and NECPA programs. Because of the timing of the various aspects of these programs, the O Staff argued that working capital should be allowed for only Phase IA of the PURPA program but for ao phases beyond that nor for any portion of the NECPA program. The parties agreed te .e Staff s position. Although in its original filing the C "ay had consolidated all program expenses for its calculation of working capital, it became apparent from the l data request responses'that the expenses had both labor and non-labor components. The Company agreed to separate the
- Ph'ase IA expenses into those two categories in order to apply the appropriate lead day figures and thus more accurately reflect ~the working capital needs for these expenditures.
Each of these adjustments lower the working capital requirement for this item. f l e. Fuel Cos.ts. The parties have agreed to determine a working capital allowance for fuel expenditures on the basis of fuel costs determined under a revised fuel clause to be I established prior to the conclusion of the revenue portion of this proceeding. Again it is important to note that the working capital allowance which the Company will collect through these rates will most likely outlive the fuel clause l upon which it is based. Whether resulting in an i underrecovery or overrecovery of working capital, this i problem could be avoided by lezislative amendmenr ro the l l () orovisions of the fuel clause statute to allow the Commission to incluae working caoital in the comoutation of fuel costs re_ covered thereunder.
~
. e ,
,D
- f. Sales Tax. As initially filed, the lead days for this item were not measured from the midpoint of the time the services were rendered. The Staff's position was that the lead days should be measured frcm the midpoint of the billing period which would correspond to the time service was rendered. The parties agreed with the Staff and corrected the calculation to make it consistent with the method of computation used for all other working capital items. This adjustment lowered the working capital requirement.
- g. Federal Income Taxes. Although the Company's original filing included in its working capital calculations the amounts attributable to deferred federal-income taxes, the Company later corrected the figure by deleting those amounts. The Staff's research showed that the correction proposed by the Company was appropriate.
- h. Procerty Taxes. The Company's original filing measured leaa days ror property taxes on the basis of an April 1 to March 31 period, the midpoint being October 1. It is the position of the Commission Staff that although_ taxes may be assessed on April 1, the towns are on a calghdVr fiscal year and the taxes thus collected finance services
' rendered during the period of January 1 to December 31. The
\
. midpoint of this period is July 1. The parties agreed to accept the Staff's position.
B. OPERATING EXPENSE ITEMS j !
- 1. P.U.C. Assessment. The Company's original filing did not contain an expense item for the P.U.C. assessment. Although i billed in the test year, it was not paid in the test year and was I thus inadvertently omitted by the Company. The amount assessed for 1979 was for only one-half year. The parties thus agreed to l
include as an expense a full year's assessment for purposes of l these rates. i 2. Deoreciation.. The Company's original filing included pro forma adjustments to test year depreciation to account for anticipated general increases in this category of expense. The Commission Staff took the position that growth in this expense and in certain other expenses discussed herein would more appropriately be reflected in an attrition analysis. By eliminating any pro forma adjustment to this item and performing such an analysis, a consideration of growth in revenues could be accounted for as well and provida a balanced assessment of increased costs. 3. O' PURPA. As with depreciation, the Staf f took the position tnat future PURPA expenses could best be incorporated into the overall calculation of growth in expenses as reviewed
.. . O V:4 ,
6
- O through an attrition analysis. The Company agreed to the removal of its original pro forma adjustment for this item, and the Staff's attrition analysis includes a S150 expenses in its calculation of expense grow,000 amount of PURPA th.
- 4. Test Year Maintenance. In its original filing, the Company proposeo an upwarc adjustment of $40,000 to reflect an intensified trimming program. The Staff's analysis of the Company's response to Staff Data Requests revealed that in che test year the Company experienced excessive maintenance expenses as a result of its previously inadequate tree trimming program.
The Staff argued that this improvement in tree trimming should obviate the need for so high a maintenance expense. The Company agreed to a downward adjustment of $10,000 to both transmission and distribution maintenance categories. 5.
~
Wyman Unit #4. The Staff took the position that the Commission cetermination in the Central Maine Power case on the issue of test year maintenance expenses associatec with start up problems (salt water' intrusion) should govern the er atment of this issue in the instant proceeding. The Staff's reasons for applying the decision in that case to this one are the same as those set forth in the discussion of the muffler issue in Paragraph II.A.6. above. O' 6. Purchased Power. As the prefiled testimony reflects, the Staft originally eliminated the Company's pro forma upward adjustment for increased purchased power and accounted for the growth in this expense through its attrition. analysis. I Subsequent to the prefiling of that testimony, the Staff learned that by virtue of certain contractual provisions with Boston Edison , the Company is committed to the purchase of an additional 10 megawatts from MYSTIC 7 in November of 1980. In light of this identifiable increase in purchased power, the Staff felt that a. pro forma adjustment to purchased power would be more l appropriate analysis. than treatment of this increase through an attrition 1 It was thus agreed that a revision of the attrition analysis and income statement would be made accordingly. I
- 7. New England Power Company Nuclear Units. The Company, l
' through a joint ownersnip agreement with New England Power Company, invested in a proposed nuclear generating facility in i Charlestown, Rhode Island. Inability to obtain the site subsequently necessitated the cancellation of the project. Through discovery procedures and cross-examination of the Company's witness, Thomas Greenquist, the Staff reviewed the Company's analysis of its decision to participate in this project, which appears in the record as Staff Exhibit 2.11. Based upon that review the Staff has concluded that the Company's l O decision to invest in the project was not imprudent considering I
v F) r O the circumstances existing at the time the decision was made. This situation raises the question of the extent to which investors or ratepayers should bear the burden of a cancelled or abandoned project. Whether the. investors should receive a return of their investments and whether they should receive a return on eneir investments in such cases must be decided. ~~ The approach to this problem varies widely, Bonbright, Principals of Public Utility Rates, New York (1961), pp. 213 - 214, ano cepenoing on ene tacts this Commission could elect to do either of the following: 1) disallow racemaking treatment of the entire investment, thereb placing the entire burden on the investors and not allowing even a return of the investment, or;
- 2) provide both rate base treatment of the investment and.
recovery of the loss as an expense, thus placing the entire burden on the ratepayers, and allowing investors to receive both a return of and on their investment, or; 3) allocate the burden of the lost investment between both the racepayer and the investor. The Commission Staff took the position that under the facts of this case the burden should be shared. In prior cases, the Commission has held that the investors and ratepayers should O' share the gains made on the sale of utility property. Casco Bay Lines v. Public Utilities Commission,, 390 A.2d 483 (19/a), it may likewise ce argueo enat losses should be shared, assuming the investment had been prudently made. j ; The manner and extent to which these losses should be shared is a matter of Commission discretion. Case law reflects a wide range of treatment. See discussion in San Diego Gas & Electric Co., 31 PUR 4th 435 (June 5, 1979). For example, in cnat case tne Commission disallowed rate base treatment of the investment, while allowing as an expense the amortization of the loss exclusive of AFUDC; in doing do, that Cor1'ssion allowed only a returnofofcapital. cost the investment made in labor and materials and not the In contrast, other Commissions, while spreading the burden of the loss'between the investor and ratepayer, have allowed the amortized loss as an expense, as well as carrying costs therefor. Re: Gasco, Inc., 27 PUR 4th 615 (December 21, 1978). - The Staff argued that the Company's investment in the NEPC0 units should be excluded from rate base, thereby not allowing a return to investors on their capital for property which is not used and useful in utility service. We have also concluded, however, that the loss of the investment, including funds O attributable to AFUDC, should be recovered as an expense amortized over a period of five years, thereby allowing the investors only a recovery of their investment. In light of what seems to be the prudency of the the Company's decision at the
-d I.2 n ,,
(s (,,) time, the Staf f believes this to be a reasonable allocation 'of the burden of the loss between the investors and ratepayers.
- 8. Post 1970 Replacement Property. Consistent with Commission policy, tne Company nas agreed to flow through the benefits of accelerated depreciation on post 1970 replacement property. It appears that the figure representing this item, which had not been calculated at the time of the hearing on the Stipulation Agreement, will be S11,120.
C. OPERATING INCOME L. Revenue Loss. IMC Chemicals, Inc., was an active party to all negotiations resulting in the Stipulation Agreement and was able to confirm the Comp,any's figures for the loss of revenue due to the closing of IMC's chlorate plant. This revenue loss was taken into account in the measurement of KWH sales for purposes of the Staff's attrition analysis. D. ATTRITION In its original filing the Company attempted to pro form
/) \_-
certain expenses. The Staff argued that such adjustments (applied to fuel, depreciation and PURPA expenses) were not , sufficiently identifiable in their magnitude to be treated as pro forma adjust =ents, and that such adjustments would result in double counting if. considered in conjunction with an setrition analysis which the Staff would perform. The Company-agreed to the removal of these adjustments. The Staff then performed aa attrition analysis. The basis of this analysis appears in the prefiled testimony of Staff witness Nancy J. MacDonald, and was revised for the reasons set forth in the body of the Stipulation. As discussed under purchased power expense above, this item was removed from the attrition analysis and S150,000 of PURPA expenses were specifically included in the calculation. The only other revisions since the prefiling of the Staf f's case was a change in the revenue growth rate. This cher a was made to more accurately reflect estimated growth in salea. The initial calculation of the expected growth rate in reveaues utilired inconsistent data. Growth rates were developed for the 1979 - 1981 period. Actual sales data was used for 1979 and compared with forecast total energy data for 1980 and 1981. Since sales data does not contain losses and Company use, the base (i.e., 1979 data) was understated, thereby producing a
. s-[~) higher forecast growth rate for the 1979 - 1980 period. The data j was 1
l l l
;Q
- -:.S
.. .. w
\
()
)
also corrected to normalize for the sale of IMC's chlorate operations. It is important to point out that the annual growth rate in revenues used in this revised attrition analysis is higher than the Company's actual experience of sales growth thus far this year. In fact, the Staff in its analysis has focused on the Compan/ s load forecast and present experience as opposed to historical trend in growth. This approach is consistent with that being utilized in other proceedings pending before this Commission. The Staff recognizes that a change in the Company's rate design may affect the ratio between sales and revenues (presently 65%). In the absence of an . analysis of likely changes in the rate design, we did not make any such adjustments. This ' approach is not unreasonable in light of the Stipulation of the parties regarding rate design during the pendency of Phase II of this proceeding (Docket No. 80-108) and the fact that resolution of Docket No. 80-108 may not occur until some time in early 1981. Even if the rate design portion of this case were resolved on a timely basis and all rates were flattened to produce a one-to-one correspondence between growth in sales and growth in revenues, a rate of growth in sales somewhat higher than the 2.48% utilized {/} m would have to be realized during the " attrition year" to produce the revenues used in the analysis. Given recent experience and the likelihood of some " elasticity" resulting from the new rate design, this appears to be highly unliyely. f E. RATE OF RETURN l The Staff's rationale for the rate of retuin agreed upon in this case is fully set forth in the prefiled testimony of Staff witness John Peters. It should be noted th.it Mr. Peters has utilized " dividends over period hence" as :he numerator in the
" yield" component of the discounted cash flow formula. Mr.
Peters describes the form of the D.C.F. model he has chosen to use on page 9, equatio'n 1. Since the D.C.F. model essentially states that the ma;2at price of any stock is equal to the present
, value of the expected future returns of the stock, he has used
! the expected dividenu jield, i.e. in the first period, plus the growth in dividends per share in determining the cost of equity to the Company. l III. EMPLOYEE DISCOUNTS i
^\ The Staff argued and the Company agreed to phase out its i (A-) program of employee discounts. It is understood that the purpose of eliminating such discounts it to promote conservation of I
l l
- , , - - , , , _ . - y -..-
, , . , - - - , , . . . , - p.. e ,,,_-,.w. - - . . - . . , , , . , ,,,.
*a p ..
. 4 g energy consistent with the policies enunciated by the federal O)
( government under the provisions of the Public Utilities Regulatory Act. 16 USC 5 2611. Respectfully suomitted,
/.
V .U Ja e..S.<Brac1.ey Esqu ~ re/ 4-p David H. Moskovitz, Esquire Staff Attorneys Public Utilities Commission , i
- In Consultation With:
John Peters, Director of Finance Nancy MacDonald, Financial Analyst Merle MacDonald, Finance Division [ David Deprey, Finance Division John Leavitt, Chief Engineer - Electric Norman Leonard, Electric Division 1 O l l l
> (U) CANAL ELECTRIC COMPANY UNITS NO.1 AND NO. 2 cEABROOK, NUCLEAR POWER STATION i SEABROOK, NEW HAMPSHIRE A
\ !
!nformation furnished pursuant to 630.33 of Commission's Rules and Regulations with respect to the particular Applicant named above as part of Final Safety Analysis Report and Operating License Application for the above Units July 1981
\v)
- 1. Organization and Control (a) Name of Applicant
\ . ,
Canal Electric Company (Canad (b) Address of Applicant 675 Massachusetts Avenue Cambridge, Massachusetts 02139 i l (c) Description of Business of Applicant Canal, a wholly-owned subsidiary of Commonwealth Energy System, is a wholesale electric generating company located in Sandwich, Massachusetts. Canal's generating station consists of two oil-fired steam electric generating units: Canal Unit No.1 with a rated capacity of 568 MW, wholly-owned by Canal; , and Canal Unit No. 2, with a rated capacity of 584 MW, is
' jointly owned by Canal and Montaup Electric Company.
Canal generates and sells electricity at wholesale to other utilities under substantially identical life-of-the-unit power. contracts. The capacity and energy of Unit No.1 is purchased by Boston Edison Company, Montaup Electric Company, New England Power Company, Commonwealth Electric Company, and Cambridge Electric Light Company. The Company's entir'e P one-half share of the net capability of Unit No. 2 is under ( obligation to Commonwealth Electric and Cambridge Electric, distribution subsidiaries of Commonwealth Energy System. a Canal is a member of the New England Power Pool (NEPOOL), whose central dispatching facility (NEPEX) coordinates the ) operating of' essentially all of the generation and transmission facilities in New England. Carial is also a member of the Northeast Power Coordinating Council (NPCC). j Additional details of Canal's operations are contained in its An' sal Report on From 10-K to the Securities and Exchange
~
Commission included as an exhibit to this application. Canal
- proposes to purchase Commonwealth Electric's share (3.52317%)
- of the Seabrook Station No.1 and No. 2 Units.
(d) Corporate Organizauon i Canal is .a business corporation organized under the laws of l Massachusetts on March 17, 1902 and as of April 30, 1981, had 1 domestic shareholder owning its 1,523,200 common shares. 1 i ' !O 4 0
,w- -.ww--me--,.ww.,-.--v-vov-- w,w,*.--,---w--~
(e) Corporate Officers and Directors p Officers V Chairman of Board and Presic'ent G. E. Arlderson P.O. Box 190, Cambridge, MA Financial Vice President E. G. Cheney P.O. Box 190, Cambridge, MA Executive Vice President - Electric Operations J. V. Donovan P.O. Box 190, Cambridge, MA Vice President - Administration A. S. Griffiths P.O. Box 190, Cambridge, MA Vice President - Customer Services R. F. MacDonald P.O. Box 190, Cambridge, MA Vice President - Energy Supply W. R. Smith P.O. Box 190, Cambridge, MA Vice President - Facilities Development R. G. Velte P.D. Box 190, Cambridge, MA Vice President - - Human Resources R. E. Healey P.O. Box 190, Cambridge, MA Vice President - Rates J. J. Tasillo P.O. Box 190, Cambridge, MA Treasurer R. S. Parker P.O. Box 190, Cambridge, MA Comptroller J. A. Whalen P.O. Box 190, Cambridge, MA Clerk M. P. Sullivan P.O. Box 190, Cambridge, MA Directors Charles T. Abbott P.O. Box 190, Cambridge, MA Gerald E. Anderson P.O. Box 190, Cambridge, MA Earl G. Cheney P.O. Box 190, Cambridge, MA s Leland R. Crowell P.O. Box 190, Cambride MA Jeremiah V. Donovan P.O. Box 190, Cambridge, MA "J William R. Smith P.O. Box 190, Cambridge, MA
- Richard G. Velte P.O. Box 190, Cambridge, MA Burdette A. Johnson P.O. Box 190, Cambridge, MA All of the directors and principal officers of Canal are citizens of the United States of America. Canal in not owned, controlled or dominated by an alien, foreign corporation or foreign government.
j ll. Financial Qualifications Under the Joint Ownership Agreement, Canal is responsible for its Ownership Share of the operation and maintenance cost of the Units whicn, when the pending transactions described herein have been i consummated prior to commercial operation, will be 3.52317% of those l 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, Canal's share of these costs should amount to approximately
$5,285,000 and $5,285,000 for the first five years of operations of Units 1 and 2, respectively; and approximately $1,480,000 to $3,030,000 for the decommissioning of the two Units. in addition, Canal's share of fuel expenses during the period would be $18 074 000.
As evidence of its financial qualifications to meet those costs, Canal v submits herewith: .. 3-2
- -. - _ _ . ~ _ - ,, _ _ . _ _ _ _ _ _ - ._ _ . . _ -_. - - . , . . . . . , . . . . - ~ - , - _ . . - - - - - - , -
(i) 1980 Annual Report to Stockholders (Parent company) (Exhibit A-1). (ii) 1980 Annual Report on Form 10-K (Exhibit A-2). (iii) 19J1 Quarterly report on Form 10-Q (Exhibit A-3). (iv) Prospectus, dated Septemb'er 9,1976 relating to $35,000,000 Fir 3t and General Mortgage Bonds, Series B 8.85% due 2006 (Exhibit A-4), lil. Regulatory Agencies and Publications i (a) Regulatorv_ Agencies l
- The following regulatory agencies have jurisdiction over the rates and services of Canal Electric Company
Federal Energy Regulatory Commission Washington, D.C. 20426 (b) The following publications are used by Canal for official notification and/or are otherwise appropriate for notices regarding these Units: Barnstable Patriot 4 P.O. Box 1208 Hyannis, MA 02601 Barnstable Village Advertiser P.O. Box 429 (p / Osterville, MA 02655 Bourne Courier P.O. Box 334 Buzzards Bay, MA 02532 Cape Cod Chronic!e 641 Main Street l Chatham, MA 02633 j Cape Cod independent t 3204 Cranberry Highway Buzzards Bay, MA 02532 Cape Cod Journal P.O. Box 627 Hyannis, M'A 02601 Cape Cod News P.O. Box 426 Orleans, MA 02653 ,
, Cape Cod Oracle P.O. Box 426 Orleans, MA 02653 U
1 t . _. .
.- _- .. .~ . . -.- - .- - - . ..- - . - . .-- ---
/ Cape Cod Times 319 Main Street Hyannis, MA 02601 Cape Codder P.O. Box 39 Orleans, M/ 02653 Dartmouth Ci.ronicle ' 450 State Road Dartmouth, MA 02747 Duxbury Clipper P.O. Box 1656 Duxbury, MA 02332 Edgartown Vineyard Gazette P.O. Box 66 Edgartown, MA 02539 Falmouth Enterprise P.O. Box 647 Falmouth, MA 02541 Falmouth Pennysaver P.O. Box 548 Falmouth, MA 02541 Focus on Plymouth-Market Basket Messenger 71 Evergreen Street Kingston, MA 02364 Kingston Independent Box 13 Kingston, MA 02364 ' Kingston Voice 72 Main Street Kingston, MA 02364 Marion Sippican Sentinel P.O. Box 666 Marion, MA 02738 Marshfield Mariner P.O. Box 682 Marshfield, MA 02050 Mattapoisett Presto Press 15 Mechanic Street Mattapoisett, MA 02739 Middleboro Gazette 3S Wareham Street d Middlebore , MA 02346
1 New Bedford Portuguese Times P.O. Box N-113 New Bedford, MA 02746 New Bedford Standard Times 555 Pleasant Street New Bedford, MA 02742 Old Colony Memorial P.O. Box 959 Plymouth, MA 02360 Patriot Ledger i 13 Temple Street Quincy, MA 02169 Provincetown Advocate 100 Bradford Street , Provincetown, MA 02657 ! Sandwich Village B oadsider P.O. Box 695 i Sandwich, MA 02563 l Scituate Mariner i P.O. Box 202 i Scituate, MA 02060 O Scituate Mirrce 100 Front Street Scituate, MA 02066 Silver Lake News P.O. Box 458 Pembroke, MA 02359 This Week on Martha's Vineyard Stata Road Wes* Tisbury, MA 02575
\ ,reham Courier d5 Main Street Wareham, MA 02571 West Tisbury Grapevine
! State fload West Tisbury, MA 02575 Yarmouth Sun P.O. Box 1002 South Yarmouth, MA 02664 Yarmouthport Register
! Lock Box C
- Yarmouthport, MA 02675
. _ _. ..__ .._...___. _ ___.._ __.,.__._._. _._ ____ _ _ _ _..-~,_ . _ _ _ _ . - _ _ _ . _ ._
Boston Globe Boston, MA 02107 Boston Herald American 300 Harrison Avenue Boston, MA 02106 Press Gallery Room 456 - State House Boston, MA 02133 Time Magazine 277 Dartmouth Street Boston, MA 02116 Wall Street Journal 35 Congress Street Boston, MA 02109 Associated Press 184 High Street Boston, MA 02110 UPI 20 Ashburton Place Boston, MA 02108 Newsweek 1918 Prudential Tower Boston, MA 02199 O
. __}}