ML20009F282
| ML20009F282 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 02/28/1981 |
| From: | CENTRAL MAINE POWER CO. |
| To: | |
| Shared Package | |
| ML20009F275 | List: |
| References | |
| NUDOCS 8107300242 | |
| Download: ML20009F282 (150) | |
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I Central Maine Power Company I[,. Annual Report 1980 Table of Contents President's Letter 2 Financial Review 4 Balance Sheet 18 Statement of Earnings 20 Statement of Capitalization 21 Statement of Changes in Common Stock investment 22 Notes 24 Statistical Review 34 Management Analysis 36 Highlights of 1980 1980 1979 % change m
) Revenues $335.3 million
$291.2 mi!! ion
$271.8 million
$227.1 million
+ 23.4
+ 28.2 Expenses Interest Charges S 23.2 million S 19.5 million + 19.0 Netincome S 26.4 million S 29.6 million - 10.8 Earnings per Share $ 1.67 $ 2.10 - 20.5 Dividends Paid perShare (rarrent annual rz.:e is S1.72) $ 1.66 $ 1.55 + 7.1 BookValue perCommonShare S 16.89 $ 17.73 - 4.7 Rett?r siEquity 9.2% 12.0 % - 23.3 Tota: Assets $795.0 million $694.8 million + 14.4 Customers 380.285 375.299 + 1.3 l Territorial Kilowatt-HourSales (mi:. lions) 6.039 5.952 + 1.5 Common Stock Earnmgs per s' tre Dividends paid per share S2 Em 52 O
7C 77 76 '79'80 76 77 78 79'80
President's Letter
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February 28,1981 The nationalscene On Jrnuary 20. this country inaugurated a new President tn iead us through the early years of the 1980's-a Presi-Toourshareholders: dent with sharply differing views from his recent As we look back on 1980, about the best we can say is predecessors on the role of government, the free enter-that it was a rough year and a busy one. We rode the roller prise system and regulation. We must wait until the coaster of high interest rates, risir, fuel costs, continued Reagan program is unveiled, but early indications suggest inflationary pressures and a depressed economy. That that the new administration will be more responsive to combination was a tough one to beat in 1980 and will con- the needs of business and more understanding of the im-tinue to challenge your management team in 1981. Portant role the energy producing industries play in the economic strength of our country. Earningsdrop We applaud and support the President's statement. "1 Earnings per share of common stock for 1980 were $1.67, cannot support an energy policy based on a sharing of scar-the lowest point ir five years, and dowr' fmm 02.10 earned city." President Reagan's support for increased coal and in 1979. inflation, high interest rates and depressed nuclear energy production and his determination to pro-energy sales account for this poor performanre, but these mote energy conservation and energy production by rely-factors WW aggravated t,y "too-little-too-late" rate relief ing on the marketplace are refreshing and exciting signs from thu hoe Public Utilities Comrms.on (PUC). In that perhaps we can get back to the business of producing FebTry your Company petitioned foi mueased rates clean, competitively priced, reliable electricity for our tota N 535 million, asking for $11 million uf that n tem- custorr.ers. p r.iry rdief to help slow the erosion of earning" any endt tre beginning of theyear. Vote of confidence The Comrmssion dismissed our filing for remporary in a September 23 statewide referendum. Maine voters, relief, assuring us, however, that they would speed up by a 3 to 2 margin cast their ballots in favor of continued g their review period and grant us an early decision. By law operation of the state's or.ly nuclear plant. Maine Yankee. the PUC has a limit of nine months in which to act on rate While we are heartened by this vote of confidence, we do requests. Unfortunately, early relief was not to come and not view it as a mandate to build additional nuclear an eleventh hour PUC decision-exactly nine months from facilities in Maine. Earlier in the year at the Company's an-our filing date-granted less than one half of the Com- nual meeting. CMP shareholders soundly defeated three pany's ordinal request. nuclear related proposals made by individual shareholdcr5 As a result of the Commission's decision, the Compoy wh3 are active in the anti-nuckor movement. Recent has no abernative but to file for additional revenues in surveys indicate that Maine people are extremely in-1981 in order to stop the continued erosion of shareholder terested in nuclear power and want to know more about eamings. it. We intend to accelerate our public education program with the goal of building even greater confidence in the Seek more respnsive regulation nuclear program. Failure of the Maine Commission to recognize the financial Sears Island-coal gasification? needs of the Company is a matter of great concern to your management. We must work doubly hard to gain the con. The Company still awaits a decision by the PUC on its ap-fidence of the Commission which we are convinced is a plication to build a S68.000 KW coal-fueled plant at Sears prerequisite to more responsive state regulation. Our 1981 Island. As reported in last year's annual report the Com-objectives include several steps towards reaching this goal mission tumed down our original application in 1979. but including supr. ort for regulatory reform legislation which. greed to reopen hearings on a revised proposal in which in port, would separate the advocacy and judicial roles c e the Company agreed to reduce its ownership and delay the the Commission. We are also seeking to initiate a more in, project completion date by two years. formal and open dialogue with the Commission outside the Meanwhile, the Company is very excited about the pro-adversary environment of formal proceedings. This has spects for constructing a coa! gasification plant at Sears 2 tieen difficult in recent years due to political pressures and Island in place of the conventional coal-fueled plant cur-administrat:ye constraints placed on both the Commission rently planned. The Company was successful in obtainira a g and the Company under cxisting state law. $3.6 million grant from the Department of Energy to W
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, - National attention focused on Maine last fall when voters defeated an anti-VM/ Y. I 1:1]
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s,, study the feasibility of building the first commercial sized health of the Company depends on our ability to maintain coal gasification combined cycle power plant in the United a supportive investor base, adequately reward existing States. Aithough ccmpeting with dozens of other com- shareholders and attract new equity capital, all of which panies across the country. CMP was able to forga a coali- make it extremely important that our dividend policy in-tion of state and regional bipartisan support from the clude prompt recognition of the value of investor funds. state's governor, state and federal legislators, regulators and yes, even leading environmentalists to help a strong Managing the 1980's CMP-led project team win DOE recognition over its com- Despite a poor earnings performance in 1980, we face the petitors. future with a combination of optimism and concern-
.A optimism that we can meet the challenges that lie ahead New strategies for new times but concern that we may be deprived of the tools that we in today's changing energy environment, management's need to meet those challenges. State economists project planning philosophy is to anticipate and respond to the that Maine, thanks to its diversified economy and growth heightened risk we face as a regulated industiy, potential, should experience a stronger recovery from the vulnerable to steadily rising fuel costs, tight and expensive depressed economy of 1980 than many of its sister states.
money markets and changing consumer demands. We That recovery and growth will require a strong energy must set realistic corporate goals, manage the demand base. We must strive to gain the support of responsible side of the energy equation as well as the supply side and regulatory agencies, and we must redouble our efforts to reevaluate our construction program in light of current overcome special-interest interventionism which would financial pressures. In response to those pressures, we in- deter us from that essentialgoal, stituted a COday hiring freeze on January 1.1981, to be We must forge an aggressive program to help shape replaced with a stronger policy of carefully controlle 1 hir- state and federal legislation, seek more responsive regula-ing designed to meet essential needs. In addition, we are tion and raise customer awareness of the issues. In this implementing major spending cuts in all areas of operation age of special interest groups." our industry represents and will defer expenditures on several previously planned the interests of the whole public-not only today's but generating and transmission projects. tomorrow's. In truth, we are a general interest group. We must build on this strength and continue our leadership Dividend increase announced role in Maine's energy decision making. if the general in-Although 1980 was a bad earnings year, we are confident terest and not the special interest is to shape our energy that better days !ie ahead. As evidence of that confidence. future. Your continuing espport, both as an investor and the Board of Directors voted a two cent increase in the as a citizen concerned with a healthy energy environment, common stock dividend for the fourth quarter bringing is vital. the annual dividend rate to $1.72 per share. This increase, Sincerely. 3 the fifth in five years, is consistent with CMP's long_ O standing g 4'/& M growthobjective of to providing moderateThe butfinancial steady of dividends our shareholders. .
/4X-resident and Chief Executive Officer l
Financial R::vi:w e Revenues Total operating revenues rose to $335.3 million in 1980. up $63.5 l Increase, million or 23.4 percent from 1979. The higher revenues, in a year of l sales lag lagging sales growth, reflected primarily increased revenues relating I to the Company's cost of fuel to make electricity. Since money collected from customers through the fuel-used-for-generation charge is a 100 percent nonprofit pass-through, increased revenues from fuel do not affect net earnings. Increased revenues also reflected a rate increase granted October 31 and made effective November 13. Kilowatt-hour sales were 1.5 percent over the previous year, reflecting conservation efforts as well as customer response to rising costs. Milder weather and thereby lower wintertime demands early in 1980 and the impact of a sluggish economy also depressed sales. Residential kilowatt-hour sales declined 0.7 percent and commercial sales declined 2.8 percent. while industrial sales increased 7.3 percent. Where each CMPdollarcame from: Where each CMP dollarwent: Residential Fuel mings-Common 41C 49C Stock General S* # ' Taxes SIC Depreciation 6C Lighting and Operations ' > Interest and Eledric Utilitles Preferred Dividends 11C Earnings dip "Too-little-too-late" rate relief in the fall of 1980 aggravated already declining earnings resulting in the lowest earnings per share level in five years. Overall earnings applicable to common stock totalled ) $20.6 million, $4.4 million less than 1979. Earnings per common share were $1.67 compared to $2.10 in 1979. Factors affecting the lower earnings were higher expenses-including increased purchased power capacity costs, higher wage levels and soaring interest costs. In addition, the awrage number of common shares outstanding increased by approximately 458,000. Rates increased On October 31 the Maine Public Utilities Commission approved
$16.2 million revised retail electric rates designed to produce an additional l
$16,185.000 on an annual basis. The Company was greatly disappointed with the decision but is encouraged by several positive 4 aspects.
The Commission did allow, for example, a rate of return on h,
common equity of 13.75 percent, up from the 12.5 percent allowed in their 1979 rate decision. i I O We are also encouraged that the recent Commission decision did provide a $2.3 million attrition allowance to help offset the erosive effect on eamings resulting from regulatory lag during a period of high inflation. Although the attrition allowance ordered was less than half that requested by the Company, this does represent the second rate decision which has reflected Commission acknowledgement of the need for some attrition consideration. The Commission also allowed the Company to recover, over a five-year period, more than $3 million in costs associated with a planr.ed nuclear power planc which was later cancelled. The Company, however, has appealed to the Maine Supreme Judicial Court portions of the Commission rate order, in particula'r its decision not to allow the Company to recover $827.000 of capital costs incurred in connection with the abandoned nuclear pmject.
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CMP's home service advisors help communicate energy. 5 saving ideas such as insulated " Roman shades" which can help customers save from 10% to 40% on their home heating costs. i
$64 million During 1980 the Company raised $18.8 million through the sale of in new capital 1.6 million shares of common stock and $24.7 million through the raised sale of 11.75% Series Preferred Stock. In addition $16.5 million was received in 1980 as the final payment on a 1979 bond sale arrangement. Proceeds were applied to help meet construction requirements.
More than 241.000 shares of common stock were also sold through the Company's Dividend Reinvestment and Common Stock Purchase Plan. This plan, which was instituted in 1978, has provided capital funds totalling over $7.2 million through the sale of more than 536.000 shares since inception. The plan provides both common and preferred shareholders with an opportunity to purchase additional new issue shares of common stock directly from the
']' PtY in Associated Cornpanies Company without brokerage commissions by having their cash (in rnillions of dollars) I dividends automatically reinvested and by making optional cash !
investments. Additionally, approximately 36.000 common shares were issued seco during 1980 through the Employee Stock Ownership Plan (ESOP). A federal tax incentive. ESOP provides another valuable source of new 500 capital as well as economic participation in the Company by virtually all empbyees. 400 Capital needs Capital requirements during 1980 totalled $99.5 mil lion. Of this total top $99.5 million approximately $68.5 million was required for generating station 300 additions. $29.4 million for transmission, distribution and other general plant facilities and $1.6 million to meet sinking fund 200 requirements, in October the Company purchased frem United Illuminating Co. of Connecticut an additional 2.5 percent interest in the Seabrook nuclear plant for $30.8 million. An agreement with 100 Public Service Company of New Hampshire will increase CMP's ownership in the New Hampshire plant by another one percent to a g total of six percent. 76 77 78 79 so During 1981 the Compar.y anticipates total construction requirements of approximately $107 million including allowance for funds used during construuion of $18 million. To meet a portion of these requirements and to retire existing short-term debt, the fp','ra ng Revenues Company plans to issue additional debt durng the second and fourth (in rnillions of dollars) quarters of 1981 to raise approximately $90 million and will issue approximately two million shares of common stock before year end. The exact timing and nature of theso financings will, of course, s300 depend on market conditions during the year. 200 100 - o 6 7e 77 78 79 '80 0
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,3d More than five million barre!s of costly fuel oil were burned :.1 1980 to help 3erve our custorners' growing needs. Reduced oil dependence is a prirnary CMP objective 7 for the 1980's.
Setting strong Management has adopted long-range goals to strengthen the financial Company's financial base, improve the retum on shareholders' g objectives investment and provide the financing flexibility necessary to raise W capital under adverse economic and money market conoinons. Very briefly, we seek to improve the quality of CentrW Maine Power securities by:
- working toward upgrading the rating on General and Refunding Bonds to a strong "A,
- improving the quality of eamings on our common stock to help ehminate the gap between current market value and book value, an ' by
- improving the rating on our preferred stock to a strong "A.
As always, your Company is working to upgrade the quality of its earnings in order to maintain reasonable dividend growth and improve the allowed and earned return on common equity. This can be accomplished most effectively through a program aimed at increasing regulatory responsiveness in rate proceedings to include:
- allowed rates of return equal to cost of capital
- more substantial attrition allowances to help offset the effects of inflation e a current cash return on its investment in construction projects
- adoption of a forward looking test year, year end rate base and more timely rate decisions.
New investor in December the Board of Directors approved an accelerated investor O relations program relations program designed not only to enhance the Company's unvelled visib.aty-and viability-within the investment community but also to strengthen the management / shareholder partnership. The new effort was " kicked off" with an extensive shareholder survey in late 1980. Programs will include increased personal interaction by management with investors, brokers and analysts, improved opportunities for shareholder participation in the issues affecting the Company and a more attractive in-house shareholder stock purchase plan. Common and Preferred Shareholder Distribution Asof December 31,1980 Shareholders Number of Shares Maine 18.682 3.988.276 Other New England States 12.369 3.372280 Atlantic 11.055 4.823.457 Central 7.783 1,761.722 Western 4.085 930.586 8 Foreign 116 18.688 S4.090 14.895.015
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I 1 1 l 9 ll1 Energy growth Looking ahead. the Company currently projects that sales will Continues increase between two and three percent annually over the next 10 , years. substantially below the nearly five percent average of the last f five years. Peak load is expected to grow at about tne same rate. As ) an extremely capital intensive industry, we are very comfortab'e with this slower. more controlled rate of growth and its attendant demand on our power delivery system. It is important to remember j that while this sales growth is projected to be less than half the ; histoncal rate. Centrai Maine Power customers will still mm ire nearly oneshird more energy than they are currently using before the ere1 of this decade. A balanced of the total six billion kilowatt-hours sold in 1980.51 percent came , generation mix from oil-fueled plants. 30 percent came from nuclear plants 15 l percent came from hydroelectric plants and the remainder came from other sources. Unfavoraole water supply conditions reduced the l hydroelectnc contnbution dunng 1980, increasing the Company's I dependence on oil-fueied generation. The nuclear portion was also lower due to extended refuehng and maintenance outages. Although the Company is committed to an oli backout policy. it does not anticipate that its mix of nuclear. hydro and oil-fueled generation will vary significantly until a major coal-fueled facility is completed on Sears Island. Several projects. however. are unaer way to fortify the
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Energy education is for ail ages - and an important CMP goal.
l n) Q existing mix and assure a reliable power supply for the 1980's. We are anxious to forge ahead with these projects to reduce oil dependence but must recognize that their timely completion is very dependent on the receipt of adequate rate relief in the near term. Hydro upgraded Reducing dependence on foreign oil by upgrading existing hydro 4 facilities and constructing neN ones, where economical, is a major Kilowatt HoursSold goal of CMP. During 1980 CMP progressed plans to add more than (TerritorialSa!es in Billions) 300 million U!owatt-hours a year and up to 77,000 kilowatts of capacity of new hydroelectric generation to its system before the 6 othe end of this decade, promising savings in oil of approximately 500,000 barrels a year. Aside from its own hydroelectric generation, the Company service purchased more than 49.5 million kilowatt-hours during 1980 from (inoustriai) 17 small hydro units owned by independent power producers. CMP has purchased surplus energy from independent producers for many years, long before federal legislation evolved requiring such ceneral suvice i pur#hases. 3 (Commercia!) Mason coal CM? is fw .a.g its efforts to reduce dependence on foreign oil in 2 conversion pd under way other are. Yso. Based on preliminary studies, management is proceeding with plans to convert to coal three units at its oil-fueled
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cost of about SSO million. 76 77 '78 79 '80 Future potential Historically, Central Maine and other New England utilities have Fuelsources for Canadian relied upon Canadian power to fulfill short-term capacity and energy of Power Produced power seen needs. The Company is considering a purchase of 100.000 KW of contact power from New Brunswick Electric Power Commission's 100 % her Point Lepreau nuclear plant between late 1981 and 1989. a During 1980 the New England Power Pool, of which CMP is a 73 Oil member, and Hydro-Quebec, the utility serving the province of , Quebec, studied the potentialjoint benefits of a Quebec-New so England transmission tie to take advar.tage of potential Canadian hydro power surpluses available through 1987. The study concluded Numear that a transmission tie cannot be completed before the excess hydro " 25 energy is absorbed by Hydro-Quebec itself in 1987. However, other [';; potential benefits of a direct interconnection includir.g improved reliability for both regions, economy transactions, and energy 0 [<4 Q}.Qyoro 76 77 78 79 '80 banking indicate that a tie might be justified. Central Maine's primary benefit from such a transmission tie would be derived from a share of economy transactions that would result from oil tiisplacement for the New England region. 11 v
Cogeneration Cogeneration, the recycling of waste heat to produce steam or potential explored electricity, has been widely used in Maine's paper induse for many years, and CMP has historica!Iy purchased excess power fro 1 cogenerators when less eyensive than its own oil-fueled generation. Although additional industrial cogeneration may not significantly impact future power supply, the Company intends to pursue all > economically viable pmjects including cogenerated electricity from the Scott Paper Company's S.D. Warren papermaking facility in Westbrook. Maine.
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Turning to wood is one way Maine people have tried to 12 avo;d high oil prices. Through cogeneration purchases from . in:!ustrial customers. Such as this wood-burning lumber and power producer. CMP helps hold down power costs to its customers.
Energy Energy management, whether utilizing timemf-day rates, electric management storage heat or voluntary customer demand reduction programs. to control peak such as the Companv's Kilowatt SavingTime promotion, is designed to encourage off-pea'< use of elect
- city and ultimately hold down the need for new power facilities in the future. Energy management is not an alternative energy source nor does it significantly reduce energy consumption. It does, however, shift consumption to a different period of time hopefully reducing costly peak demand. The Company currently has several industrial and approximately 300 residential customers on time-of-day rates which encourage off-peak use by charging a higher rate for on-peak use and lower rate for off-peak use. Customer response to T-O-D. both in terms of acceptability and abihty to shift significant load to off-peak hours. is still being evaluated. Meanwhile, the Company is embarking on an ambitious program to encourage the use of electric storage heat, which uses off-peak electricity, to displace a portion of its winter peak kiad.
Revenues / Kilowatt-HourSales Revenues Kilowatt +1ourSales (S Millions) (Millions) More(Less) More(Less) 1980 Tnaq1979 1980 Than 1979 O Resniential $1372 CommercialandInduetrial 1722 S28.7 48.2 2336 3.570 (17) 100 Average Annual Eicctric Utilities 3.2 .8 83 4 Residential Use in KWH l
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, otal Operating 6000 Revenues $3353 $63.5 4000 KWH Sales toIndustrial Customers 1980 1979 Pulp and Paper 1218351.402 1.104.956.607 MetalTrades 236.419375 208.771.044 o 70 76 77 78 79 so Chemicals 144.009311 150.679371 Textiles 135.844.294 138.826.078 Food Processing 110.790.761 108.865.843 Lumberand Woodworking 110.700.103 109.725.875 Boots and Shoes 89.145.494 74.193.484 Shipbuilding 44.458.190 40.967.010 13
R: search and During 1980 runagement committed more than $1 million towards development local and nai.ional research a fforts. In addition to ongoing CMP Continues studies in the area vf solar, wind and thermal energy storage technologies, the Company was selected in 1980 as the utility model for a U.S. Department of Energy feribility study of producing solid generating fuel pellets from wood waste and peat. Recognizing CMP leadership in the area of low-head hydroelectric development, DOE also designated the Company's Shawmut Station expansion as a national demonstration project, awarding CMP $850.000 to fund an information exchange program on design, :onstruction and operation. t J.
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E 7 Management Changes l s'. Clifford
;cceeding Dr.udd wasF. elected Charles Chairmen Phillips who of the reached board Boardage retirement on June 19. _-
O. of 70. Mr. Udd is also Chairman of the Board and former president 5_ of W.C. bdd & Sons (general insurance). Rockland, and has served on 4 CMP's board since 1966. Also a member of several other corporation , boards. Mr. bdd is a 1934 economics graduate of the University of 7 Maine and has served as financial counsel to many businesses in c - Maine. Dr. Phillips, an economic consultar
- and president emeritus of Bates College, joined CMP's board in 1953 and became chairman in _
1966. Donald F. Kelly was elected Assistant Vice President and Manager g of Power Supp'y in addition to his continuing role as Assistant to the President. - Joseph R. Moran was named Manager of Northern Division and -? Willi A. Hartung became Manager of Informati"n Systems. _
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15 - Environmental workers maintain continuous studies of __ land, air and water to assure clean, safe operation of the ' Maine Yank?e nuclear station at Wiscasset. , m
Board of Direct:rs . Offic;rs Priscilla A. Clark,58. Portland. Maine E. Clifford Ladd,68 Vice President and Treasurer, Chairman of the Board Casco Bay College Elwin W.Thurlow. 57
'Galen L. Cole. 55. Bangor. Maine Presiderit and Chief Executive Officer President Charles E. Monty. 53 Coles Express (Truc <ing)
Senior Vice president. E. James Dufour,46. Skowhegan, Maine Engineering and Production Vice President and Treasurer Robert F. Scott. 51 William Philbrick Co. - Senior Vice President. (Generalinsurance and Real Estate) l Customer Services George H. Ellis,61, Boston Massachusetts Thomas C. Webb,46 President and Chief Executive Officer Home Savings Bank Senior Vice President. Finance
' Leon A. Gorman,46.Yarmouth, Maine g 3 g President V re President, L.L. Be n, Inc.
Legislative and Public Affairs
- E. Clifford Ladd,68. Rockland. Maine j Chairman of the Board of the Company Director. W.C. Ladd & Sons (General Insurance) Adm nistrative Services Roland L. Marcotte,62, Lewiston, Maine John B. Randazza,52 Cantin Chevrolet [oecia Projects Charles E Monty 53, Augusta Maine Ralph L. Bean. 58 Senior Vice President Assistant Vice President Carlton D. Reed, Jr.,50. Woolwich Maine Donald F. Kelly,49 Pr2rtner Assistant Vice President Reed & Reed (Construction)
John J. Russell. 53. Portland, Maine Robert S. Howe. 41 Comptroller Senior Vice President and Treasurer Hannaford Bros. Co. Richard A.Crabtree 34 Robert F. Scott. 51, Augusta. Maine e swer Senior Vice Pre',ident
. Seward B. Brewster,53 Halsey Smith,59. Lewiston, Maine cmayaM M President William M. Finn. 44
)
Northeast Bankshare Association Assistant Secretary and Assistant Clerk
'Elwin W. Thui 0w. 57 Augu ita. Maine David E. Marsh. 33 President and Chief Executive Officer Assistant Treasurer James H. Titcomb. 63. Sanford, Maine Division Managers Partner Titcomb. Fenderson & Knight, Attorneys John H. Kennedy,57 Southern Division. Portland
- Members of the Executive Committee Patrick S. Lydon. 38 Central Division. Augusta 16 Joseph R. Moran,39 Northern Division. Waterville Ibra L. Ripley. 59 Western Division. Lewiston
l O Central Maine Power Company Annua! Report 1980 Financial Statements and Statistical O aeview O
CentralMainePow rCompany Balance Sheet (Dollarsin Thousands) ! 9l! Assets Cw:mber31, , 1980 1979 Electric Property, at Original Cost (Notes 8,10 and 14) $689.521 SC61,491 l Less: Accumulated Depreciation (Note 1) 198.249 179,995 l 491,272 481.496 Construction Work in Progress (Note 3) Jointlyowned Projects 113,466 63.340 Company Pmjects 21.058 7,548 134.S24 70,888 625,796 552,384 Investments in Associated Companies, at Equity (Note 9) 38,370 36.741 ( l Net Electric Property and Investments in Associated Companies 664.166 589.125 Current Assets Cash (Note 6) 1,862 1,528 Accounts Rectivable, Less Allowances for Uncollectible Accounts of $575 in 1980 and $371 in 1979 Service-Billed 31,346 23.299
-Unbilled (Note 1) 4',701 34.459 Other 13.509 6.067 inventories,at Average Cost Fue10il 19,155 14,984 Materials and Supplies 10.819 9,805 Prepayi nents and Other Current Assets 3.929 3,783 TotalCurrent Assets 122.321 93,925 Deferred Charges and Other Assets (Note 3) 8.554 11,787
$795.041 $G94.837 18 The acornpanying notes are an integral part of these financial statements.
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CentralMaine Pow:r Company Bal:nC Sheet (Dollarsin Thousands) 7
% )
Stockholders
- Investment and Liabilities December 31, 1980 1979 Capitalization (See Separate Statement)
Common StockInvestment $235,711 $214,022 Preferred Stock 35.571 35,571 Redeemable Preferred Stock (Note 11) 58,305 33,690 Long-Term Debt (Note 10) 273.219 254,699 Total Capitalization 602,806 537,982 ['; Current Liabilities
'd Interim Financing (See Separate Statement) 72.131 60,592 Other Cur ent Liabilities-Sinking Fund Requirements 394 553 Accounts Payable 42,824 23.220 Accruedinterest 6,519 5,506 Accrued Income Taxes 1,766 7,834 Other 3,651 2,830 F5,154 39,943 TotalCurrent Liabilities 127,285 100,535 Comtaitments and Contingencies (Notes 3,4 and 8)
Reserves and Deferred Credits Accumulated Deferred Income Taxes (Note 2) 32,708 27,913 Unamortized investment Tax Credits (Note 2) 30,644 26.349 Other '598
, 2.058 Total Reservesand Deferred Credits 64,950 56,320
$~,95.041 $694.837 I9 p) i The accompanying notes are an integral part of these fina! cal state."ents.
{ CentralMaine PowerCompany I Statem:ntof Earnings (Do!!ars in Thousands Except Per Share Amounts) l 9l Year Ended December 31, 1980 1979 1978 Electric Operating Revenues (Notes 1 and 4) $335.265 $271,764 $208.176 Operating Expenses FuelUsed forCompany Generation 65,860 29.691 19.470 Purchased Power (Note 8) Energy 100,507 71.961 43.369 Other 30.759 28.054 28,594 Other Operation 39.934 36,572 32,736 Maintenance 13.984 14.121 11.363 Depreciation (Note 1) 21.362 20.160 15,962 Taxes Federaland State Income (Note 2) 9.078 16 882 13.229 LocalPropertyand Other 9.741 9.688 9.194 291.225 227.129 173.917 Equity in Earnings of Associated Companies (Note 9) 3.291 3.595 3.376 Operatingincome 47.331 48,230 37,635 OtherIncome(Expense) Allowance forOther Funds Used During Con 2ruction(Note 1) 1,771 723 6.250 Other, Net 571 218 (300) Income BeforeInterest Charges 49.673 49.171 43.585 l Interest Charges I Long-Term Debt (Note 10) 23.657 19,823 17.514 Other 8.733 5.289 2.147 Allowance for Borrowed Funds l Used During Construction (Note 1) (9.144) (5.5d4) (5.687) 23.246 19.528 13.974 r l Netincome 26,427 29.643 29.6 1 Dividendson Preferred Stock 5.780 4.599 4.642 1 Earnings Applicable to Common Stock $ 20.647 $ 25.044 $ 2J.969 Weighted Average Number of Shares of Common Stock Outsta.iding 12.357,075 11,899,435 11.378.432 Earnings Per Share of Common Stock $ 1.67 $ 2.10 $ 2.19 20 Dividends PerShare of Common Stock $ 1.66 $ 1.55 $ 1.46 The accompanying notes are an integral part of these finanaal statements. O
CentralMaine P0werCompany Statement of Capitalization and intrim Fin::ncing (Dollarsin Thousands) December 31. O (j 1980 1979 Amount % Amount % Capitalization (Note 5) CommonStockinvestment Common Stock. Par Value $t ?erShare-Authanzal -20.000.0005aares Outstanding-13SS2.402 Sharen 1980 and 12.074234 Shares in 1979 $ 69.762 S 60371 Other Paidin Capital 90.022 77A45 Retained Earnings (Note 12) 75SZ7 76206 235.711 34.9 % 214.022 35P% Cumulathe Preferred Stock: Par Value $25 PerShare-Authonzed-2.000,000 Shares Outstanding-None - ParValue $100PerShare-Noncallable. Voting 6%-Authonzedandoutstanding-5.713 Shares 571 571 Dividend Senes. Callable-Authorized-1300.000 Shares Current Current Rate OutstandingShares Reemption Price 350% 220.000 $101DO 22.000 22.000 4.60 30.000 101.00 3.000 3.000 4.75 50.000 101.00 5.000 5.000 525 50.000 102.00 5.000 5.000 PreferredStock 35.571 53 35571 5.9 8.40 250.000 108.40 25.000 25.000
$1125 86S00 in 1980 90.750 in 1979 108.44 8.690 9.075 11.75 % 250.000 111.75 25.000 -
58.690 34.075 385 385 p tmss: Current sinking fund requirement of $ 1125 Senes 58305 8.6 33.690 SE . (,I IM1eemable Preferred Stock (Note 1 1) long-Term Debt: Seres Interest Rate Matunty rirst and General Mortgage Bonds: T }5/8% November 1.1981 SS33 5S33 U 35/8 March 1,1983 8580 8.630 V }3/8 April 1.1985 10378 10513 W 4-7/8 May 1.1987 15B16 15.966 X 51/4 November 1.1990 5330 5389 Y 7-1/2 May 1,1999 28.096 28.392 Z 930 August 1.1995 32.978 33215 AA 7.70 July 1.1997 23.822 24.000 BB 1045 August 15.1904 20.000 20.000 General and Refunding Mortgage Bonds: A 9'S/8 May 1. 2006 3S000 35.000 3 95/8 Cctober 1.2003 25.000 25.000 C ICL1/2 (rtaber 15.1999 40.00_0 23500 250S33 235.618 Unamortized prem;ums 87 100 251.020 235.718 Other: IraseOttigaton 1150 % 2021 (in insta".ments) 7B91 7B99 Instanment Notes-PollutionControl Facilit ies 6-3/4 20022003 11250 11250 RevolvingCredit Agreement Prime Apnl 15,1982 9.000 - 28.141 19.149 j less: Sinknig fund requirements ano current matuntie< 5942 __ 168 > i 273219 405 254.699 42.6 TotalCapitalization 602.806 893 537S82 89 3 Interim Fktancing. Amounts to be Refinanced (Note 6) 21 4.000 150
.) Notes Payade to Danks 62.198 60442 CommerdalPaper Current Matuntesoflong-Term Debt 5.933 -
72.131 10.7 60.592 10.1 Total Capitat'zation and Interim Finandng $674.937 100.0 % $598.574 100.0 % The aanmpanying rn+a re an integral part of tNse financial statements. l
CentralMaine PowerCompany Statement of Changes in Common Stock Investment For the Three Years Ended December 31,1980 (Do!!arsin Thousands) Other Amount at Paid-in Retained Shares ParValue Capital Eamings Total Balance-December 31,1977 10.077.071 $50.385 $56.605 S60,964 $167.954 Add (Deduct) Reclassification of Equity Hydro Reserve 807 807 Netincome 29.611 29.611 Cash dividends-Common Stock (17.100) (17.100) Preferred Stock (4.642) (4.642) Sa e of Common Stock 1.728.773 8.64a 18.310 26.954 Capitalstock expense 16 16 bas.nce-December 31.1978 11.805.844 59.029 74.931 39.640 203.600 Add (Deduct) Netincome 29.643 29.643 Cash dividends-Common Stock (18.478) (18.478) F eferred Str'ck (4.599) (4.599) Sale of Common Stock 268.390 1.342 2.397 3.739 Capitalstock expense 117 117 Balance-December 31.1979 12.074.234 60.371 77.445 76.206 214.022 Add (Deduct) Netincome 26.427 26.427 Cash dividends-Common Stock (20.926) (20.926) Preferred Stock (5.780) (5.780) Sale of Common Stock 1.878.168 9.391 12.981 22.372 Capitalstock expense _ jg (404) Balance-Decemoer31.1980 13.952.402 $69.762 $90.022_ $75.927 $235.711 The acornpanying notes are an integral part of these finanaal staternents. Price Range and Dividends of Voting Stock 1980 1979 Market Price Market Price High Low Dividends High Low Dividends Common Stock Traded N.Y.S.E. l 1st Quarter $13% $10% $ .41 $16 $14% $ .38 1 2nd Quarter 14 % 11% .41 15% 13% .38 3rd Quarter 14% 12% .41 15 13% .38 4th Quarter 13% 11 .43 14% 62 % .41 6% Preferred Traded O.T.C. 1st Quarter * *
$1.50
$1.50 2nd Quarter *
- 1.50 *
- 1.50 22 3rd Quarter *
- 1.50 *
- 1.50 4th Quarter * *
- 50 1.50
*There have been no quotations since June 1974.
l ! CentralMaine PowerCompany Stat:m:nt of Sources of Funds for Construction e (Dollarsin Thousands) f
\ Year Ende ' December 31, 1980 1979 1978 Funds Provided InternalSources From operations Netincome S 26.427 $ 29.643 $ 29.611 Depreciation 21.362 20.160 15.962 Deferred income taxes and investment tax credit, net 11.375 8.495 12.892 Allowance for other funds used during construction (1.771) (723) (6.250) 57.393 57.S?S 52.215 Less:
Sinking fund requirements of long-term debtand $11.25 Preferred Stock 1.578 1.046 917 Dividends declared 26.706 23.077 21.742 Other. net (1.53G) (430) (687) 26.746 23.693 21.972 (Increase) decrease in working capital, exclusive ofinterim financing and sinking fund requirements Cash and receivables (23.065) (9.869) (21.953) O d Other current assets Othercurrentliabilities (5.331) 1S.370 (10.916) 4.275 1.065 S.341 (13.026) (16.510) (15.547) InternalSources. Net 17.621 17.372 14.696 rnalSources a .. mon Stock 22.372 3.739 26.954 Preferred Stock 25.000 - - Long-term debt 16.500 33.500 16.000 Revolving credit agreement 9.000 - - Increasein short-term borrowings 5.606 19.201 10.318 Long-term debt refunded - (14.528) (4.293) Changesin advancesandinvestments 58 61 57 External Sources. Net 78.536 41.973 49.036 S 96.157 S 59.345 S 63.732 Funds Used for Construction Jointly-owned projects S S3.473 $ 25.112 S 36.100 Company projects 44.455 34.956 33.882 Allowance for other funds used during construction (1.771) (723) (6.250) S 96.157 $ 59.345 S 63.732 The acornpanying notes are an integral part of these finanaal statements. 23 q LJ
CentralMaine PowerCompany Notes to Financial Statements 9
- 1. Regulation: The Company's rates, operations. accounting and certain other practices are subject to Summary of the regulatory authonty of the Public Utilities Commission of the State of Maine (PUC) and the Significant Federal Energy Regulatory Commission (FERC). Approxirrately 99% of the Company's revenues Accounting Policies from kilowatt-hour sales are derived from billing ratec subject to approval by the PUC.
Depreciation: Depreciation of electnc property is provided using composite rates and the straight-line method. The effective composite rates were 331%. 3.30% and 333% for the three years 1980,1979 and 1978.respectively. At the time depreciable properties are disposed of, the onginal cost, plus cost of removal less salvage, of such property is charged to accumulated depreciation. Electric Operating Revenues: Electnc operating revenues include amounts billed to customers. estimated unbil led sales and unb:!!ed fuel costs at the end of each reporting penod. The Company's approved tanffs include a rate component permrtting the cunynt recovery of the cost of fuel used in Company generating faci!rties and the energy component of purchased power. Effective December 11.1980. the Company is also permitted to recover through billings under this component the actual cost of short-term borrowings used to finance unbilled energy costs. Allowance for Funds Used During Construction (AFC): The Company includes as an element of the cost of construction of electric property an allowance for funds (!ncluding common equrty funds) employed during penods of construction. The debt component of AFC is reflected as a reduction of interest expense while the balance, or equity component. is recorded as Other income. While the equity component of AFC recorded does not result from a current expendrture of funds nor provide f unds currently, when the constructed property is placed in service, the Company is per-mrtted under applicable rate-making practices to recover these amounts in revenue over the useful life of the property. Further. the unrecovered cost of electric property. includ ng AFC is an element of rate base on which the Company is permitted to earn a return. The amount of AFC recorded through December 31.1980 was determined by multiplying the average month!y dollar balance of construction work in progress (CWlP) by a rate reflecting both the current month's average short-term borrowing rate and, to the extent the amount invested in CWIP exceeds outstandog short-term borrowings, the weighted cost of other caprtal at the begin-ning of the year. The average AFC rate produced by the Company's monthly computations was 12.44%.11.22%. and 9.27% for the years ended December 31.1980.1979 and 1978. respective!y. On October 31,1980 the PUC. in its decision reWing retail rates, requ: red a prospective change in M the computation of the AFC rate. It ordered that the AFC rate should be determined using the overall weighted cost of caprtal including short-term borrowing balances. During periods of high short-term borrowing levels and rates. this method provides a lower AFC rate than the poor methodology.
- 2. The components of Federal and state income taxes reflected in the Statement of Eamings are as
,- ~ IncomeTaxes follows:
()" Year Ended December 31 1980 1979 1978 (Dollarsin Thousands) Feoeral: Current $(2.696) $ 6.596 $ (661) Deferred 6.765 4.857 3.712 Investment tax credit. net 4.295 3.640 8.826 8.364 15.093 11.877 State: Current 399 1.791 1.369 Deferred 315 (2) (17) 714 1.789 1.352 Total Federaland stateincome taxes $ 9.078 $16.882 513229 The rateaaking practices currently followed by the PUC permit the Company to recover Federal and state income taxes payable currently and to recover deferred taxes only when the tax law. in ef-fect. requires such treatment or when PUC approval is granted on specific timing differences. To use accelerated depreciation, the current tax law requires the Company to defer Federal income taxes arising from the use of accelerated tax depreciation of expan:;;on property added subsequent to 1969. The income tax effects of other timing d:fferences are flowed through for rate rnaking and accounting purposes. The Company expects that these unrecorded costs will be recovered in the future when taxes deferreo become payable. The following table recoriciles the statutory Federal income tax rate to a rate determined by dividing the total Federal income tax expense by income before that expenw. 1980 1979 1978 Amount % Amount % Amount % ('^' (Dollarsin Thousands) Statutory Federalincome tax rate $16.004 46.0 % $20.579 46.0 % $19.914 48.0 % Permt lent reductionsin tax expense resulting from statutory exclusions from taxable income Dividend recerved deduction related toeamings of assocated companies (1287) (3.7) (1.405) (3.1) (1.377) (3.3) Allowance forotherfunds used during construction (814) (23) (333) (.8) (3.000) (7.2) Other (956) (2.8) (861) (1.9) ( (563) _1.4) 12.947 372 17.980 40.2 14.974 36.1 I Effectof timingdifferences forwhich deferred taxes are not recorded (flow thmugh) l Deduction of removalcosts (851) (2.5) (743) (1.7) (578) (1.4) Allowance for borrowed funds I used during construction (4207) (12.1) (2569) (5.7) (2.730) (6.6) Deprecation of replacement property added subsequent to 1969 (425) (12) (410) (.9) (708) (1.7) Depreciation d:fferences flowed through in prioryears 1.395 4.0 1.139 2.5 936 2.2 Other (495) (1.4) (304) (.7) (17) Calculated rate $ 8.364 2g % $15.093 332 % $11.877 2g % Investment tax credits utilized to reduce Federal income taxes currently payable are deferred and amortized over the lives of the assets giving rise to the credits. At December 31.1980, the Com. 25 (3 (j pany had available approximately $4.028.000 of additional investment tax credits which may be used to reduce future Federal income taxes which would otherwise be payable.
- 3. Construction Program: The Company's load forecasts and plaris for the constructon of additonal 9
C0mmitmentS generation and purchase of power are under continuing review and revsion. Estimated con'itruc-and Contingencies ton expenditures relating to thejointlyowned unrts shown below are based upon information fur-nished by the utility responsible for the constructon of the unrt. fhese estimated expenditures are j cont:nuously under review in light of increased costs due to deferrals, delays and other factors. The Company's current forecasted constructim expenditures amount to $88.600.000 for 1981 and
$409.400.000 for 1982 thmugh 1985 exclusive of AFC but including estimates for nuclear fuel costs where appleab!e. These expencitures include $247.800.000 for major generating facilities as shown below. S59.800.ON) for other generation facihties $39.300.000 for transmission.
$ 124.300.000 for dstnbution and $26.800.000 for other capital pmjects.
T he Company's Share of Generaton Fachties Expendrtures (includ:ng i.stimated AFC) Estimated Expenditures Net Through (excluding AFC) Unit-Estimated Percent Capabil.ty December 31 Total in Service Date Ownership MW 1980 1981-1985 Project (Dollars in Thousands) Boston Edson Company Pilgnm No. 2-late 1980's* 2.85 % 33 $ 12.714 S 21.800 $ 45.100 Pubhc Service Co.of NH Seabrook Nos.1 & 2-1983 and 1985 *
- 139 66.841 95.900 150.400 Northeast Util: ties Millstone No. 3-1986 2.50 29 24.161 28.600 49.100 Central Maine Power Co.
Brunswick Topsham Hydro-1982 100.00 12 13.353 11.400 23.000 Shawmut Hydro-Expand Capaaty-1982 100.00 3 195 5.600 5.800 i Sears Island Coal-1989 341 10.453 36.700 475.100 Mason Coal Converson-1983 100.00 573 47.800 48.400
$128.290 $247.800 The cost estimates > 1 completon dates for thejointlyowned plants reflect the latest informaton made available by the iead partic: pant in each project.
- Boston Edson Company has said that no f'trm dates can be eh hed for commencement of construction or commercial operation of Pugnm No. 2 and ihat because of uncertainty sur-rounding the licensing process these estimates of cost financing and scheduhng may no longer be realistic.
*
- A redacton in the overall level of constructon and a ten-week ironworkers'stnke, both in 1980.
have affected the completon dates of the units to an extent that PSNH has said will not be known until it completes its next review of the project schedule in March 1981. As of December 31.1980. the Company had a 5.04178% interest in the Seabrook units. An adjust-ment of the ownership interests in the units over a penod of approximately 13 months com-mencing January 31.1981 will ultimatefy result in a 6.04178% ownership interest for the Com-pany. The estimated expendrtures and estimated net capabihty for the project reflect the pro-posed increased ownersh:p percentage.
'
- As of December 31.1980, the Company had an 80.8227% interest in the Sears Island Coal unit.
26 which it is planning to reduce through partial sales to approximately 60%. The estimated ex-penditures and estimated net capability for the project reflect the lower ownershy percentage.
i s i Seabrook: The construction of the two nuclear gerierating units at Seabrook. New Hampshire, in which the Company is participating as part owner. has been plagued by lengthy delays in obtaining approvals and permits resVting in greatly increased costs for the project. One court appeal from Federal regulatory approvals is pending and further appeals are possible. Public Service Company of New Hampshire ("PSNH~). the lead participant in the Seabrook plant, has experienced difficulties in financing its 50% interest in the plant. Consequently it negotiated an ad-justment whereby its ownership interest in the plant would Je reduced by 15% and the ownership ' interests of other utilities would be increased commensurately. Commencing January 31,1981 cer-tain of these utilities, including the Company, began making payments which over a period of time - wSI reduce PSNH's ownership interest from 50% to about 44%. A further reduction to approx-imately 35% will commence when three remaining utilities obtain necessary regulatory approvals and financing now expected to occur in the first part of 1981. Due to delays in commencing the pro-posed reduction of its interest. in March 19d0 PSNH reduced the level of construction at the Seabrook plant. In January,1981 PSNH sought emergency rate relief from the New Hampshire Public Utilrties Commission (~NHPUC") in order to obtain sufficient revenues to satisfy interest coverage tests under its mortgage bond indenture. PSNH has taken the position that reduction of its ownership interest in the Seabrook plant by not significantly less than a 15% interest, tcgether with adequate rates and avalla ility of extemal f.nancing. are essential to enable PSNH to finance its share of the plant and avoic'st spension of construction or other measures which might adversely affect the complethn and cost of the two units. The Company cannot predict what effectfinancing problems or further administrative or court decisions may have on completion of the project, the cost of the project, or on the Company. Montague Nuclear Unir.: On December 31,1980 the lead owner of the two nuclear generating unrts - planned for construction at Montague. Massachusetts, announced the cancellation of tfy project, in which the Company owned a 3% interest. Recovery by the Company of its investmerc of approx-imately $1.700.000 (including AFC of $691.000) which is included in deferred charges, net of in-O come taxes. is dependent upon regulatory approval if any amounts are determined not to be recoverable they would be charged, net of related income taxes, against earnings in the period such determinationis made. Sears Island Coal-Fired Plant: On December 31,1979 the PUC denied the Company's application for a certificate of public convenience and necessity for a proposed coal-fired generating plant on Sears Island in Searsport on the basis that the Company's need for baseload power in the late *.05C s did notjustify construction of a 568 MW facility. Hearings are in progress on the Company's modifdd application based on a smaller ownership interest, a later commercial operation date, and other known changesin circumstances. Nuclear Fuel Assignment: In June 1980, the Company assigned tr.c nuclear fuel enrichment contract
- for its abandoned Sears Island nuclear project to hve utilities, including Maine Yankee. The assign-ment allowed the Company to recover approximately $35 million of $4.0 milicn in prepayments to l
the US. government. Recovery of the remaining amount is dependent upon regulatory approval (See Note 4 below for discussion of the PUC's disallowance $5 mHlion of reated AFC.) i
- 4. On February 1.1980. the Company filed with the PUC an application for a $35,000.000 increase in Rate-making annual revenues. On October 31.1980 the PUC authorized the Company to increase annual gross Matters revenues by approximately $16200.000 (including an attrition adjustment of $2.300.000). Such rates are based upon an allowed overall return of 10.78% including a retum of 13.75% on common equity. The new rates were implemented for kilowatt-hour sales on and after November 13.1980.
The Company's prior rate decision in October 1978 had allowed an overall return of 9.48% ircumi a return of 1250% on common equity. The PUC's order allows the Company to recover over a five-year period, through rates to be charged to its customers. approximately $3.154.000 of expendrtures for a proposed nuclear plant, the plans for which were cancelled by the Company. The PUC disallowed recovery of AFC of $827.000 re-corded on such expendtures and a related uranium enrichment contract. The Company has ap-pealed this disallowance and certain other portions of the order to the Maine Supreme Judicial 27 Court. lf finally determined not to be recoverable, the costs would be charged against eamings in the per%n which such determination is made.
.~- _
- 5. The Company so'd through private placement $25 million of rts Ceneral and Re?unding Mortgage Recent Financing Bonds. Series B 9-5/8% Due 2003. The sale of $15 million of the Bonds was completed in October 1978 and the balance of S 10 million in January 1979.
The Company sold through private placement S40 million of its Ceneral and Refunding Mortgage Bonds. Series C 10-1/2% Due 1999. The sale cf $23.5 million of the Bonds was completed in Oc-h W tober 1979 and the balance of S 163 million in January 1980. In April 1980 the Company entered into a two-year revolving credit and term loan agreement wrth several banks in the amount of $40.0 million wrth interest at the prime rate. At the end of the revolving cred:t term, the Ccmpny has the option to convert the amount then outstanding into a three-year term loan payable in six equal semi-annual instaliments with inte'est at 102% of the prime rate dunng the first and second years and at 104% of the prime rate during the third year. The Company may repay amounts from time to time outstanding under the agreement without penalty. The loan is secured by a pledge of the Company's 38% common stock interest in Maine Yankee Atomic Power Company. At December 31,1980 the amount of outstanding revolving credrt sans was $9.0 million. On July 31,1980 the Company sold through a public offenng 250.000 shares of Preferred Stock 11.75% Senes ($100 par va!ue). The proceeds of $24.725.000 were used to reduce short-term bor-rowings incurTed pnmarily in connection wrth the Company's construction program. On November 26.1980 the Company sold 1.600.000 additional shares of its Common Stock. The proceeds of S18.832.000 were used to reduce revolving credrt loans incurred primarily in connection wth the Company's construction program.
- 6. The Company uses short-term borrowings under hnes of cred:t with commercial banks and com-Interirn Financing mercal paper to initially provide finanang for construction and other corporate purposes. The Com-pany ntends ultimately to repay these borrowings with the proceeds from sales of long term debt or equty secunties. Certain information related to borrowings is as follows:
1980 1979 1978 (Dollarsin Thousands) Tctal!!nes of bank credrt $67.950 $66.450 $52.700 Ur.used lines of bank cred:t at year end 63.950 66.300 52.700 BoTowings outstanding at year end Notes payable to banks 4.000 150 - Commercial paper 62.198 60.442 41.391 Total 66.198 60.592 41.391 Weighted average interest rate on borrowings outstanding at year end Banks 19.00 % 16.78 % - Commercial paper 19.14 % 14.20 % 10.71 % Average Ja ly net outstanding borrowings Banks S 801 S 15 $ 169 Commercial paper 57.358 44.915 25.168 58.159 _44_930 25.337 Weighted daily average annual interest rate Banks 19.10% 12.75 % 8.59 % Commercal paper 13.747 11.68 % 8.35 % Highest level of borrowings outstanding at any time during the year $77.728 $62.645 $41.391 Existing lines of credit at December 31.1980 totalled $67.950.000 with $15.500.000 requiring from 1 % to 10% of tne line in compensating balances. Annual fees of either % to % of 1% of the line or 5% to 8% of the pnme rawimes the line are required on $44.000.000. One commitment of
$5.000.000 ca!!s for a cm..,u.un of compensating cash balances and an annual fee. Other com-mrtments amounting to $3.450.000 require compensating cash balances only on outstanding loan balances.
The Company's Articles of Incorporation limrt Unsecured Borrowings that may be outstanding to 20% of Capitalization, as defined ($119.536.000 as of December 31.1980). Unsecured Borrowings, as defined. amounted to $77.448.000asof Decerr* . 31.1980. 28
- 7. The Company has two no, contributory defined benefit pension plans which cover substantially all Pension Plans of its employees. The Company's policy is to fund pension costs accrued on an annual basis. Annual pension expense. including amortization of prior service costs over 30 years, amounal to
$2.562.000. S 2.420.000 and $2.273.000 for years 1980 through 1978. respectively.
I
January 1. 1980 1979 (',/ Actuarial present va!ue of accumulated benefits: Vested $30.361.000 $28.415.000 Nonvested 1.757.000 1.055.000
$_32.118.000 $29A70.000 Net assets available for benefits $36563.000 $32.808.000 The weighted average assumed rate of return used for both penods in determining the actuarial l prr.,ent value of accumulated plan benefits was 625%.
- 8. Power Agreements: The Company owns directly or indirectly a portion of the generating capacity Capacity and energy production of certain generating plants operated by associated utility companies and is Arrangemisrlts obligated to pay its proportionate share of the generating costs, including depreciation and a return oninvested capital.
Perttnent data related to these power agreements are as follows: Ma:ne Vermont Connecticut Yar.kee Yankee Yankee Yankee Atomic Contract Expiration Date 2002 2002 1998 1991 Plant Capacrty(MW) 830 528 580 176 Company's Share of a Capacity (MW) 311 19 35 17 - (Dollarsin Thousands) Esnmated A'inualCosts-(1980 Co' ts)* Deprecauun $ 3.116 $ 310 $ 314 $ 242 Interest and Pre-ferred Div w nds 4.752 344 415 236 ( ) Other Costs 23.680 2.162 3.695 2.628
$31.548
$2.816 $4.424 $3.106 Company's Share of Debt and Preferred Stock-December 31.1980 $62.277 $4.056 $5.670 $2.043 December 31.1979 $60.112 $4.398 $ S.243 $ 2.328 in add: tion, the Company has an entrtlement percentage of the capacty and energy obtained through the 345 KV inter <onnection of Maine Electnc Power Company. Inc. (MEPCo.) The connec-tion provided up to 400 megawatts of base-load power from a Canadian electnc system, of which the Company's share was 41.1 megawatts from 1976 to 1980. Beginning January 1,1981 and until November 1985 the connection will provide 133 megawatts of base-load power of which the Com-pany's share is 11.4 megawatts. The Company's share was reduced to 7.8 megaw3tts on January 1, 1981, and will be reduced to 4.2 megawatts in November 1981, because of a transfer of entitle-ment to another utility. All of MEPCo.'s costs. including depreciation and a return on invested caprta!. not met by transmission revenues, are pad by the p irticipating utilities.
- These costs are included in purchased power on the Statement of Earnings.
W.F. Wynun Unit No. 4: The 600 megawatt oil-fired Wyman No. 4. operated by th? Company, segan commercial operation on December 1.1978. The Company's nearly 60% ownership of the unit added about 360 megawatts to its generating capability. The Company's share of operating costs of this unit is included in the appropriate expense categones on the S'.atement of Eamings. The Company's piant in service and related accumulated depreciatiun attributab:e to the Unrt are as follows: December 31, 1980 1979 (Dollarsin Thousands) Plant in Service $113300 29 i (qj Accumulated Depreciation $ 7.072
$112.300
$ 3.492
- 9. The Company's advances to and ownenship interests in the common stock of joint corporate Associated generating companies and other associated companies, accounted for using the equity method. are Companies ac.follows: l
..ivestment at Percent December 31.
Omership i 1980 1979 (Dollarsin Thousands) Joint corporate nuclear generating companies: Maine Yankee Atomic Power Compan; 38.0 % $25.388 $25.396 Vermont Yankee Nuclear Power Corporation 4.0 2.317 2.323 Connecticut Yankee Atomic Power Company 6.0 3.371 3.042 Yankee Atomic Electric Company 9.5 1,948 1.962 33.024 32,728 Other assoc ated companies: Maine Electric Power Company. Inc. 78.1 916 974 CentralSecunties Corporation 100.0 1.149 1.070 Cumberland Secunties Corporation 100.0 3.042 1.783 The Union Water-Power Company 100.0 239 186
$38.370 $36.741 Condensed financialinformation of Maine Yankee Atomic Power Company and Maine Electric Power Cornpany. Inc.. is as follows:
Maine Yankee MEPCo. 1980 1979 1978 1980 1979 1978 (Dollarsin Thousands) Earnt Operati..f cvenues $ 84.245 $ 68.867 S 70.373 S111.604 $98.122 $59.860 Eamingsapplicable to Cemrnon Stock S 6.574 5 6.650 $ 6.702 S 146 S 155 $ 164 Compny s equity share af net earnings S 2.498 $ 2.527 S 2.547 $ 114 $ 121 $ 128 I hvest.9ent-Total assets $297.064 $287.105 $265.955 $ 31.100 $22.804 S20.812 Less: Preferred Stock 11.980 13.070 13.696 - - - Long-term debt 134.823 .39.373 128.818 9.900 10.560 11 Z'O Otherliabilities and def, cred credrts 83.450 67.830 56.634 20.028 10.997 8.267 Net assets $_ 66.811 S 66.832 S 66,807 $ 1.172 $ 1.247 $ 1.325 Company's equity ir net assets $ 25.388 $ 25.3% S 25.386 S 916 S 974 $ 1.035
- 10. General Provision: Under the terms of the indenture secunng the First and General Mortgage lontterift Debt Bonds substantially all of the Company's electric utility property is subject to a first mortgage lien.
Bonds issued under the General and Refunding Mortgage Indenture are subject to the pror lien of the First and General Mortgage indenture until the First Mortgage Bonds have been retired. All or any part of each outstar.d:ng series o' First and General Mortgage Bonds and General and Refund:ng Mortgage Bonds may be redeemed by the Company at any time at established redemp-ton pntes plus accrued interest to the date of redemption, except that the Series A Bonds are sub-ject to certain refunding limitations until May 1,1986, the Series B Bonds until October 1.1988 and the Series C Bonds until October 15.1989. Sinking Fund Requirements and Maturing Debt: The annual sinking fund requirements for First and General Mortgage Bonds (1 % of maximum principal amount of senes outstanding) may be met by payment in cash or repurchased bonds or, up to one-half of their amounts, by the certification of ad-d:tional property. The Series A General and Refunding Mortgage Bonds have no sinking fund. The Senes B General and Refund:ng Mortgage Bonds have a five percent mandatory cash sinking fund commencng in 1984. and a aon<umulative optional five percent cash sinking fund, limrted to one-30 third of the aggregate princip.at amount of Series B Bonds issued also commencing in 1984. The i Series C General and Refunding Mortgage Bonds have a six and onequarter percent mandatory cash s:nking fund commencing in 1984. and a non<umulative optional cash sinking fund not to exceed J l
i l the amount of the mandatory cash sinking fund and limrted to thirtyone and onequarter percent of the aggregate principal amount of Senes C Bonds issued, also commencing in 1984. Il The Company intends to meet one-half ($680.000) of the 1981 sinking fund requirements by the certification of addrtional property. Sinking fund requirements and maturing debt issues (exclusive of $ 1.152.000 purchased in advance) for the five years ending December 31.1985 are as follows: Year Sinking Fund Maturing Debt Total (Dollarsin Thousands) 1981 $ 689 $ 5.933 $ 6.622 1982 970 - 970 1983 1.256 8.452 9.708 1984 5.023 20.000 25.023 1535 4.905 10.020 14.925
- 11. Sinking fund pi nvisicns of the $1125,8.40% and 11.75% Senes Preferred Stock require the Com-Reuemable pany to redeem aii shares at par plus an amount equal to dividends accrued to the redemption date Preferred Stocks on the basis of 3.850 shares annua!!y for the $11.25 Series.13.750 shares annually beginning in 1982 for the 8.40% Series and 10.000 shares annua'ly beginning in 1986 for the 11.75% Series.
The Company also has the non<umulative right to redeem up to 13.750 additional shares of the 8.40% Series annually beginning in 1982 and up to 10.000 shares of the 11.75% Series annually beginning in 1986 at the same price. The annual sinking fund requirements are as follows: 1981-
$385.000.1982 through 1985-$1.760.000.
- 12. Under terms of the indentures securing the Company's Mortgage Bonds and the Company's Articles Retained Earnings of Incorporation no dividend may be paid on the common stock of the Company if such dividend would reduce retained eamings below $29.604.000. At December 31,1980 $46.323.000 of re-taincd eamings was not so restncted.
- 13. Unaudited quarterly financial data pertaining to the resu!ts of operations for 1980 and 1979 is I
rna ited Quarterly shown below: Financial a@n Quarter Ended March 31 June 30 Sept. 30 Dec.31 (Dollars in Thousands Except Per Share Amounts) 19_80 Electric Operating Revenues S101.165 $68.292 S71.995 $93.813 Operatingincome 12.905 9.942 10.114 14.370 Net .. ome 7.807 3 951 5.184 9.485 Earnings Per Common Share .55 .23 .29 .58 197_9 Electnc Operating Revenues S 76.001 $63.536 $64.437 $67.790 OperatingIn ae 14.007 10.676 10.729 12.818 Net incorry 9.472 5.957 6.027 8.187 Earnings Per Common Share .70 .41 .41 .5') The major fluctuations between quarters in any given year generally are caused by the seasonal nature of the Company's business. His rically, larger sales of electncity have occurred during the winter months.
- 14. The followmg supplementary information is supplied in accordance with the requirements of the Supplementary Statement of Financial Accounting Standards No. 33 for the purpose of providing certain informa-int 0rmation to tion about the effect of changing prices. It should be viewed as an estimate of the approximate ef-disclose the effects fect of inflation. rather than as a precise measure.
' of changing prices (unaudited) Constant do!!ar amounts represent histoncal 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 31 amounts reflect the changes in specific prices of plant from the date the plant was acquired to the present, and drffer from constant dollar amounts to the extent that specific prices have increased n
more or bss rapdly than the general rate of inflat:on. The current cost of electre generating and l transmission plant is estimated based on eng:neering stud:es of the current cost (per megawatt) of replac:ng the present mix of hydro, oil-fired, and gas turbine generating plants and the current cost ; of replacing existing transmission facilities. The current cost of remaining plant is determined primanly by indexing surviving plant by the Handy-Whitman Index of Public Utility Construction Costs. Since the utility plant is not expected to be replaced precisely in kind. current cost does not represent the replacement cost of the Company's productive capaaty. Fuel inventones and the cost of fossil fuel used in generation have not been restated from their ;- historical cost in nominal dollars. Regulation limits the recovery of fuel through the operation of the fuel adjustment clause to actual costs. For this reason fuel inventories are effectively monetary assets. Depreciation is determined by app!ying the Company's composite depreciation rate for 1980 to the indexed depreciable plant amounts. Since only histoncal costs are deductible for income tax purposes, the income tax expense in the histoncal cost financal statements is not adjusted. Under the raternaking practices prescnbed by the regulatory commissions to which the Company is subject, only the depreciation of historical cost of utthty property is included Li the cost of service used to establish the Company's rates. Therefore, the cost of plant stated in terms of constant dollars or current cost that exceeds the histoncal cost of plant is not presently recoverable in rates, and is reflected as a reduction to net recoverable costs. While the ratemaking pecess gives no recognition to the current cost of replacing property plant. and equ:pment. based on past practices the Company believes it will be allowed to eam on and recover the increased cost of its net invest-ment when replacement of facilities actua!!y occurs. To property reflect the economics of rate regulation in the Statement of income from Operations Adjusted for Changing Prices. the reduction of util:ty plant 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 habitties experience a ga:n. The gain from the decline in purchasing power of net amounts owed is pnmanly attnbutable to the substantial amount of debt which has been used ; to finance property. plant, and equipment. Since the depreciation on utihty plant is hm:ted to t amounts based on historical costs, the Company does not have the opportunity to realize a holding gain on debt and is hmited to recovery only of the embedded cost of debt capital. Staterr.ent of income f rom 0perations Adjusted f or Changing Prices For the Year Ended December 31.1980 (Dollars in Thousands) Constant Dollar Current Cost Conventioral Average 1980 Average 1980 Dollars Dollars H:stonc Cort ~ Operating Revenues $335.265 $335.265 $ 335.265 Operationand Ma:ntename (;ncluding Purchased Power) 251.044 251.044 251.044 Depreciaton 21.362 45.900 56200 Taxes 18.819 18.819 18.819 interest Charges 23.246 23246 23246 Other. Net (5.633) (5.633) (5.633) Income from Operations (excluding reducticn ta net recoverable amount) $ 26.427 $ 1.889* $ (8.411) Increasein speafic pnces (current cost)of plant held dunng the year * * $ 75.200 Reduction to net recoverable amount $ (48.600) (11.400) Effect of increase in general pnce level (102.100) Net (38.300) Cain from decline in purchasing power of net amountsowed 46.800 46.800
$ (1.800) $ 8.500
- Including the reduction to net recoverable cost. the loss f rom conJnuing operations on a constant f 32 *
- At December 31.1980. current cost of property, plant and equipment, net of accumulated depreciation, was $893.900, while historical cost or net cost recoverable through depreciation was $491.300.
( I
Five Year Comparison of Selected Supplementry Firtncial Data Adjusted to Average 1980 Dollars for Effects of Changing Prices (Dollars in Thousands Except Per Share Amounts) ,
/' Year Endea December 31.
,I 1980 1979 1978 1977 i976 Orierating Revenues Histoncal $351265 $271.764 $208.176 $188.309 $155.005 Adjus' ed forinflation $335.265 $308.516 $262.937 $256.059 $224.371 HsumcalCost Information Adjusted for Generalinflation income o.'m operations excit 3."<J reduction to net recatreble amount Histor. cal $ 26.427 $ 29.643 Adjudled for generalinflation S 1.889 $ 10.200 Income (lo."" nperations per Q common si.ea Jter preferred dividend requirements)
Histoncal $ 1.67 $ 2.10 Adjusted for generalinflation $ (.31) $ .42 Current CostInformation [ loss from operations excluding reduction to net recoverable amount S (8.411) $ (1200) Loss from operations per common share (after preferred dividend requirements) $ (1.15) $ (.54) Excessofincreasein general pricelevelover increase in specific pnces.after reduc-tion to net recoverable amount S 38.300 $ 46.000 GeneralInforma ion Gain from deunein purchasing
! ! powerof net amounts owed $ 46.800 $ 51.200 Net assetsatyear end at recoverable amount Hstancal $235.711 $214.322 Adjusted for general inflation $225.100 $229.800 Cash dividends pershare Hstorical $ 1.66 $ 1.55 $ 1.46 $ 1,41 $ 1.355 Adjusted for generalinflation S 1.66 $ ' .76 $ 1.84 $ 1.92 $ 1.96 Market pnce pei share atyear end Hstorical $12.25 $13 30 $14.875 $1&375 $1650 Adjusted for generalinflation $ 11.70 $13 96 $18.09 $21.72 $23.36 Average consumer pnceindex 246.8 21; 4 195.4 181.5 170.5 Report of Totne Board of Directors CENTRALMAINE POWER CCMPANY:
Ind: pendent Public We have examined tne baiance sneet and statement of caprtarization and intenm financin9 of CENTRAL MAINE POWER COMPANY (a Maine corporation) as of December 31.1980 and 1979, and Accountants the statements of earn'ngs, changes in common stock investment and sources of funds for con-struction for the three , ears ended December 31.1980. Our examinations were made in accordance with generally accepted aud: ting standards and, accordingly, included such tests of +he accounting records and such other aud: ting procedures as we considered necessary in the circumstances. In our opinion. the accompanying financial statements present fairly the financial posrtion of CENTRAL MAINE POWER COMPA.4Y as of December 31,1980 and 1979, and the results of its operations and its sources of funds for construction for the three years ended December 31.1980, in conformity wrth generally accept:d accounting pnnciples applied on a consistent basis. ARTHUR ANDERSEN & CO. 33 Boston Massachusetts. February 6.1981.
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l CentralMaine PowerCompany 1980 1979 N-Statistical Review Total Revenues (Dollars in Thousands) Resdental $137229 43.1 % S108350 452 % 172.178 54.1 124.033 51.7 Commeraalandindustnal Electnc Util ties 3212 1.0 2390 1.0 Ughting 5.604 1.8 5.059 2.1
$318313 100.0 % $240.032 100.0 %
TotalTerntonal Revenues TotalOperating Revenues $335265 S271.764 Kiowatt-hour Sakes (Tinusands) Resdental 2335368 38.7 % 2352.503 395 % I A75.416 24.4 1517264 25.5 Commeraal industnal 2.094.900 34.7 1 952.664 32.8 Electnc Util; ties 83.102 1.4 78.836 13 49.735 .8 50.507 .9 Ughting 6.038521 100.0 % _5.951.7_80_ 100.0 % TotalTemtonalSWs Annual Percent 9 Change-Temtonal Sales 15% 18% ElectricCustr ners(Average) Resdental 340 351 335A74 Commercut andIndustnal 39.538 39.430 4 5 Elecmc Utihties Ughting 392 390 TotalTemtonal Customers 380 285 375 299 Annual Percentage Change-Total Customers 13% 13 % ResidentialSales Averages Annual Kilowatttours Used 6.862 7.012 Revenue per Kilowatthour 5.88C 4.61 C Annual Jill S 403 $ 324 529C 4.05C Revenue Per Retail Klowatt hour Netincome(Thousands) S 26.427 $ 29.643 Capitalizatbn(Thousands) Shortterm Debt S 66.198 9.8% $ 60.592 10.1 % long-ter.n Debt 279.152 41.4 254.699 42.6 93.876 13.9 69261 115 4 Preferred Stock Common Shareholders' Equrty 235.711 34.9 214.022 35.8 Total $674.93_7 ,100 0 % $598574 100.0 % Common Stock Data Eamings Applicable to Common Stock (Thousands) $ 20.647 $ 25.044 Earn:ngs Per Average Share of Common Stock $ 1.67 S 2.10 Divdends Pad Pc" Share S 1.66 S 155 Payout Ratn 99 % 74 % Pnce/Earrungs Ratn 7X 6X Shares 0utstanding-Average 12357.075 11.899.435 Numberof Common Shareholders 50.015 48S15
% Earnedon AverageCommonEquity 92% 12.0 %
Book Value Per Share $16.89 $17.73 Market Pnce High $14% $16 Low 10% 12 % At Year End '2% 13 Generation Mix (% of KWH Generated) Hydro 15 % 20 % Fossiland Other 55 47 Nuclear 30 33 1 tal 100 % 100 % MsceRaneous Average Annual Interest Rate on Bonds 838% 8.23 % Average Annual Divdend Rate on Preferred Stock 7.91 % 6.55 % tet 0,% Ca, atxhty at Tirne of Peak-MW 1,523 1526 System Peak ve..#-MW 1.193 1207 Reserve Marg:n at Timeof Peak 28 % 26 % 63 % 61 % System Lead Factor Total Average FuelCost/KWH 252C 156C Fuel Costs as a % of Operating Revenues 49 % 37 % Number of Employees-Year End 2.008 2.000 Net Utility Plant (Thousands) 5625.796 $552.384 34 $694.837 Total Assets (Thousands) $795.041 Construction Expend:tures (Tht usands) S 97S28 $ 60.068 Interna!!y Generated Fundsasa 9. of ConstructionRequ;rements(inclue ATC) 21 % 32 % Effectiveincome Tax Rate 25.6 % 363 %
*Totalof Commeroalandindust n.
CentralMaine P0wer Company 1978 1977 1976 1970
$ 88.815 46.6 % $ 83.500 46.4 % $ 71.557 47.9 % S33.080 46 2 %
/ 95.651 50.1 90246 50.1 72,529 485 35353 49.4 V 1.7EC 4.543 S
2.4 1.775 4.398 1.0 25 1362 3.971 S 2.7 875 2265 12 32 S197.762 100.0 % S180.009 100.0 % $149.419 100.0 % $71573 100.0 % S M .176 $188309 $155.005 $74.026 2319.602 39.7 % 2213.823 39.7 % 2.t 43.942 41.1 % 1280220 i.49 1.465.070 25.1 1.428.187 25.6 1383290 26.6 2222.764* 61 5
- 1.932.070 33.0 1.805.954 32.4 1 5 58.731 29.9 76.768 13 75.180 14 79.149 15 76569 2.1 50573 S 49.358 S 48322 S 35.740 1.0 5.841.083 100.0 % 5572502 100.0 % 5213.434 100.0 % 3.615293 100 0 %
4S% 6.9% 8.4% 7.0% 330.655 323.562 316.487 266.440 39285 38.914 38358 33361 4 4 4 6 390 392 387 335 l 1 370334 362.872 '.255236 300,142 2.1% 2.1% 32% 23 % 7.015 6.842 6.774 4.805 3.83C 3.78C 334C 258C ) 5 269 S 258 2?S ,124 J ( 328c 324c 288c 2.00C
$ 29.611 S 21.001 S 16S40 $ 12574
[ S 41391 75% $ 31.073 63 % $ 15.400 3.6% S 1.100 .4% 236391 42S 225228 45.6 228576 53.3 152.461 522
-s 69.646 12.7 70.031 14.1 45.416 10.7 35571 122 36.9 167.951 34.0 139387 32.4 102.619 35 2
( ) 203.600
' ' $551.028
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100.0 % S494286 100 0 % $428.779 170% S291.754 100_0 %
$ 24.969 $ 18275 S 14310 S 11.132 t S 2.19 $ 1.87 $ 1.75 S 1.63 ! S 1.46 S 1.41 S135W $ 1.17 67 % 75 % 77 % 72 %
7X 9X 9X 12X . 11378.432 9.748304 8.163.930 1825.636 > 49.621 45.615 41.497 36.970 Q% 11.9 % 10.9 % 11.0 %
$1725 $16.67 S16.44 S15.03 S16% S17% $16% S19 14% 15% 14 14%
14% 16% 16% 19 22 % 25 % 27 % 35 % c 39 36 26 57 39 39 47 8
- 100 % 100 % 100 % 100 %
7.69% 745% 7 38 % 5.72% 6.58 % 6.60 % 5 66 % 4.05 % 1290 1348 1268 853 1.173 1.124 1.089 759 10 % 2P 16 % 12 % 62 % FA 60 % 61 % 0.98C Ou]C 0.63C 020C 30 % 29 % 23 % 11 % 1971 1.962 1.948 1.859
, $513.170 $459.695 $397.905 S259.883 35
[ ; $634.041 $559.487 S483.425 $313.592 (_ / S 69.982 S 84.713 $ 65333 $ 22.024 31 % 27 % 37 % 58 % 30 9 % 32.9 % 34 9 % 41.6 %
CentralMaine PowerCompany Manag:m:nt Analysis of Operating Results and Financial Condition I t I preferred and common stock. These sources of funds were , operating ResultS further reduced by an increase of $13.0 miliion in working l ( Electnc Operating Revenues rose almost $64 million each year centtal requirements (exclusive of short term borrowing 2 and ! in 1979 and 1980. Most of each increase. however. resulted the current prtion of long term debt) resulting primanly f from higher fuel costs which reflected escalating oil prices as from the delay in recovenng higher fuel costs under the Com-l v, ell as greater dependence on oil fueled generaton to meet pany's former fuel adjustment clause. The resulting net funds j l growing customer demands. Add:tional od-fueled generation available f rom intemal sources were $ 17.6 million. Funds Used l was also required to rep: ace nuclear generated electncity dur- for Construction amounted to $96.1 million (net of $1.8 i ing extended refuehng and maintenance shutdowns and a million of allowance for equity funds used dunng construc-Nuclear Regulatory Commission ordered shutdown at Ma:ne tion). The Comnany funded $78.5 million. or the remaining Yankee during the penods. Since money collected from amount of these requirements, from extemal sources, in-customers through the fuel-used forqeneraton charge is a ciuding $63.9 million from the sales of long term debt and 100 percent nonprofit pass through. increased revenues from equity secunties. $9.0 milhon from revolvi.1g credit loans and fuel do not affect net earnings. $5.6 milhon from short-term borrowings. Revenues from base rates reflect increased general service The Company, as well as the electnc utility industry in (commercial and industna!) kilowatt hour sales cf 2.1% in general. has been plagued by common problems in iacent
- 1979 and Z.9% in 1980. Also reflected are a 1.4% ircease in years including those of obtaining timely and adequate rate
! residential sales in 1979 and a 0.7% do rease in 1980. General rehef, increased costs and delays in construction projects i serWe sa:es were 58% and 59% of t a Company's total ter- attnbutable to increased regulatory requirer ants and ! ntonal k:iowatt41our sales for 1979 and 1980 respectively. environmental considerations and the finanang of iarge con-and residential sales were 40% and 39% of those sa:es. Due in struction programs during a pened of high inflation and large part to conservation efforts by its customers, the unsettled capital rnarkets. Other factors adversely affecting growth rate in the Company's kilowatt hour sales for the the Company include uncertaint es caused by political involve-years 1979 and 1980 were less than the histoncal growth I ment in utihty regulation and the availabihty and higher cost rate. The Company believes that conservaton efforts will con- cf fuel for generaton. t:nue to affect kilowatt hour sales tut that a colder than nor-Eamings per share of common stock in 1980 fell approx-mai 1980L1981 winter and a proposed expanson by a major tmateiy 20% to $ 1 67 a share, considerably below the 13.75% industnal customer will affect the growth rate for 1981. A rate of retum allowed by the PUC in rts 1980 rate decision.
$6.6 milhon sale of power to another utikty dunng 1979 as Although earnings are expected to rebound somewhat in well as the full year effect of a $15.5 milhon rate decisior' 1981 as a result of a November 1980 rate decision. a colder granted in 1978 anc the six-week effect of a $16.2 milhon than normal 198081 winter and a planned expansion by a decison in late 1980 also impacted revenues. As a resutt, base major indmstnal customer, it ts anticipated that il e Comoany revenues increased $24 m:lhon in 1979 while 1980 base wdl continue to earn below its allowed retum on common revenues were slightly less than the previous year.
equity. As a result, the Company intends to file f ar additional Higher operation, mainte*ance and depreciation expenses rate re!!ef dunng the year. ref'ect the impact of WF. Wyman Un:t No. 4, which com' Due to current retail ratemaking practices vihich include a menced commercial operation in December 1978, and also focus on historical cost dunng a perod of severe inflation, a reflect increases in wages and costs of matenals and supphes. nrohibition of cash retum on construction work in progress. Interest charges reflect greater borrowing to finance higher and flow through of tax deferrals that otherwise would pro-working capital requirements, pnmanly for fuel costs. ac- l vide cash flow, the Company is faced with a s abstantial invest-counts receivable and construction requirements. Long term ment in projects requiring a long constru; tion period with debt and interim financing grew dunng 1979 and 1980 and large amounts of non< ash eamings. Unless rate regulators related interest rates, while fluctuating dunng certain adopt practices more responsive to todays economic environ-penods. rose sign:ficantly on average- ment and permit the Company to earn a current cash return The larger a lowance for funds used dunng construction in on its investment in construction .jects. the Company wili 1980 resutts from the Company's growing investment in proj. be required to rely more heavily on uncertain and unsettled ects under construction, pnnapally its share of joint!yowned capital markets to finance its construction program. The Com-nuclear generating projects, and increased cost of funds used pany intends to actively seek such a current cash return > dunng constructon the rates for v hich averaged 9.27% in through programs aimed at increasing regulatory respon-1978.11.22% n 1979 and 1244% in 1980. siveness in rate proceedings, by upgrading its own formal par- , All of t' ' factors discussed above resulted la minimal ticipation in Commission proceedings and by initiating more growth in net income in 1979 and a reduction in 1980. D anng informal dialogue between the Commisson and t he Company. the two years, the Company issued $25 r .: hon of prehrred Construction expendrtures for 1981, exclusive of allowance stock and over two milhon shares of common stock to pr vide for funds used during construction, wt!I be approximately finanong for constructon and working cap:tal needs and $88.6 milhon and for 1982-1985 are estimated to be $409.4 N ma:ntain a balanced capitai structure. As a result, the amount million. The Company n.ust also raise additional funds to meet of eamings apphcable to common shares roso slightly in 1979 preferred stock and mortgage bond sinking fund require-and dechned in 1980. Farnings per share of common stock ments and debt maturrties. The Company will also seek to dechned in both penods. reduce its higher than normal level of short term borrowings in order to avoid high interest costs and provide the Company 36 with add:tional flexibihty as to the secunng ot additional extern I funds dunng times o r unsettled capital markets. FinancialCondition Financing plans for 1981 include sa'es of $90 million of long-Dunng 1980. funds from operations (pnnapally net income, term debt and 2 million shares of common stock. The re-depreciation and deferred taxes) amounted to approximately matnder of planned expenditures. plus working caprtal re-
$57.4 milhon. Of these funds. $26.8 milhon were used prrhari- quirements. will be financed by intemal sources and short-ly to provide for sinking fund reqfements and dividends on term borrowings.
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Central Maine Power Company Edison Drive. Augusta. Maine 04336 m-n~, mmmvm-ww . ,- , . ,m w BULK RATE - g , U.S. POSTdGE ' (
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[ - PERMIT NO. 37 k: '< Q , ' ;g( f' P 1 ,.- CMP Common Stock is Listed for Trading [* _ , on the New York Stock Exchange (ticket symbol CTP). The f_; stock is abbreviated CeMPw in daily newspaper listings of , New York Stock Exchange Transactions. {l ,-
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if Company's office in Augusta. Maine, or at Manufacturers Hanover Trust Company 4 . New York Plaza. New York N.Y. . D Registrars of Stock ' Depositors Trust Company. Augusta. Maine. Manufacturers Har.over 1 rust e Company. New York, N.Y. , Annual Meeting , Third Thursday each May Form 10 K Available ,: Copies of CMP's Form 10-K. f Securtties and Exchange Commission ?, Annual Report, are available free of e charge. Requests and other inquiries f-should be directed to: Shareholder Services Department. Central Maine Power Company. Edison Drive. Augusta. Maine 04336 (207-623-3521). qms{,,,4( l j . Too many Annual Reports? . You may receive extra CMP Annual Reports due to multiple stock accounts -- in your household. To stop AN. unwanted capies please write to Shareholder _ ..g r [ Services Dept. and enclose - fl[jj g mailing labels from the '(' 3 extra reports.
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(Exhibit C - 1) i D l 1 ANNUAL REPORT OF CENTRAL MAINE POWER COMPANY ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1980 AND l l 1980 ANNUAL REPORT O
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O SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended Commission file number December 31, 1980 1-5139 CENTRAT., MAINE PCWER COMPANY (Exact name of registrant as specified in its charter) Maine 01-0042740 ' (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Edison Drive, Augusta, Maine 04336 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (207) 623-3521 * . . - -. Securities registered pursuant to Section 12(b) of the Act: Common Stock New York Stock Exchange ~ ~~ l (Title of each class) (Name of each exchange on l which registered) i
. Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock (Title of Class) 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 duri~ng the ! preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. , Yes X No {
4 State the aggregate market value of the voting stock held by non-affiliates of the registrant: 5169,197,515 based upon the last reported sale price on the New York 50cck Exchange on March 19, 1981 for the Company's Common Stock, $5 Par Value. l Indicate the numEer of shares outstanding of each of the issuer's classes of Common Stock, as of the closc of the period covered by this report. Shares Cutstanding Class as of December 31, 1980 Common Stock 13,952,402 DCCUMENTS INCORPORATED BY REFERENCE The following documents, or indicated portions thereof, have been incorporated herein by reference: (1) Specifically identified information on pages 17 through 36, inclusive, of the registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1980 is incorporated by reference as Part II hereof. (2) Specifi: ally identified information under the
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caption " Election of Directors" in the registrant's definitive proxy matorial for its annual meeting of stockholders to be held on May 21, 2.981 is incorporated by reference as Part IiI hereof. O Central Maine Power Company Form 10-K - 1080 Central Maine Power Comoany PART I Item 1. Business. General The Company, a Maine corpora :2.0 organized in 1905, is an electric utility engaged in the generation, purchase, transmission, distribution and sale of electric energy in the southern and central part of Maine. It has its principal executive offices at Edison Drive, Augusta, Maine 04336, and its telephone number is (207) 623-3521. The Company is the largest electric utility in Maine, serving about 380,000 customers in a 10,600 square-mile area in southern and central Maine. No other electric utility operates in competition with the Company in the territory which it serves. This area, in which most of the State's industry is located, includes the industrial centers of Portland, South Portland, Westbrook, Lewiston, Auburn, Rumford, Brunswick, Sath, Biddeford, Saco, Sanford, Gardiner, Augusta, Waterville; Fairfield, Skowhsgan, Belfast and Rockland. The population of the service area is about 800,000, approximately 70 percent of the total population of the State. The more important industries served are pulp 1 and paper products, cotton and wool textiles, metal trades, chemicals, plastics, electronic components, food processing, lumber and woodworking, footwear and shipbuilding.
. Problema Affecting the Industry The electric utility industry in general is, and for several years has been, experiencing common problems, including those of obtaining timely and adequate rate increases, increased costs and delays in construction projects attributable to regulatory requirements and environmental considerations, financing large construction programs during a period of high inflation and unsettled capital markets, uncertainties caused by increasing political involvement in utility regulation, availability and high cost of fuel for generation, effects of energy conservation, and general economic conditions. These problems are being experienced in varying degrees by different companies in different regions.
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l 1 Central Maine Power Co=pany Form 10-K - 1980 Central Maine Power Comoany Events at the Three Mile Island Nuclear Unit No. 2 in Pennsylvania ("TMI") in March, 1979 have prompted a rigorous reexamination of safety related equipment and operating procedures in all nuclear facilities. The Ccmpany has interests in four operating nuclear generating plants (representing approximately 26% of the Company's current generating capacity) and ir. three other nuclear generating plants which are either planned or under construction in New England. See Item 2, "Prcperties - Existing Facilities and Planned Facilities". The Company has been informed by Maine Yankee Atomic Power Cc=pany (" Maine Yankee") and the owner-operators of the other nuclear plants in which it has interests that those companies have made the near-term modifice.tions required by the Nuclear Regulatory Commission ("NRC") in response to studies of the TMI incident. Maine Yankee and the other owner-operators are still in the process of evaluating the impact of certain long-term modifications llh suggested by the NRC. While the ultimate effect of these and various other reexaminations, studies and legislative' j;oposals arising out of the TMI incident cannot be specifically predicted, they could interfere with or prevent
- licensing of and cause delays in construction and costly modifications of both the operating and planned nuclear
(' plants in which the Company has an interest. For a further discussion of certain of these problems as they have affected the Company, see the remaining material under Item 2, " Properties" anc Item 3, " Legal Proceedings - Regulation and Rates". Employee Relations l Operating and maintenance employees in each of the Company's four operating divisions, and office and clerical employees in two divisions, are represented by a local union
; affilisted with the International Brotherhood of Electrical ! Workers (AFL-CIO). At December 31, 1980, the Company had 2,008 employees. . The current union contracts extend from May 1, 1980 to May 1, 1982 and thereafter from year to year unless either party shall give at least 60 days' notice prior to an l
anniversary date. The contracts provide for wage increases which, with adjustments and fringe benefits and increases to g j non-union employees, will result in increased payroll costs l l
Central Maine Power Company Form 10-K - 1980 Central Maine Power Comoany of approximately $4,000,000 during each of the first and second contract years. Environmental Expenditures The Company estimates that its capital expenditures for environmental purposes for the five years 1976 through 1980 totalled approximately $20,520,000. Capital expenditures for such purposes for 1981 and 1982 are presently expected to total approximately $3,200,000 and
$18,900,000, respectively. Such expenditures are based upon the assumption that no substantial additional expenditures will be required in 1981 and 1982 in order to comply with the Water Pollution Control Act Amendments of 1972 or the Clean Air Act Amendments of 1977. See Item 3, " Legal Proceedings - Environmental Matters".
Executive Officers The following are the present executive officers of the (]) Company with all positions and offices held. There are no family relationships between any of them nor are there any arrangements pursuant to which any were selected as officers. __ Name Age Office and Year First Elected Elwin W. Thurlow 57 President, Chief Executive Officer and Director - 1972
. Charles E. Monty 54 Senior Vice President, Engineerng and Production, and Director - 1971 Robert F. Scott 51 Senior Vice President, Customer Services, and Director - 1974 Thomas C. Webb 46 Senior Vice President Finance - 1977 Norman J. Temple 59 Vice President, Legi slative and Public Affairs - 1967 Matthew Hunter 46 Vice President, Administrative Services - 1978 O
Central Maine Power Company Form 10-K - 1980 lll Central Maine Power Comoany JoPn S. Randassa
- 52 Vice President, Special Projects - 1979 Robert S. Howe 41 Comptroller - 1975 Richard A. Crabtree 34 Treasurer - 1978 Seward S. Brewster 53 Secretary and Clerk - 1968 Each of the executive officers has for the past five years been an officer or employee of Central Maine Power Company, except for Mr. Webb. Mr. Webb was elected to the positions of Vice President, Financial, and Treasurer in 1977 after having been Treasurer (from 1974) and Assistant Treasurer (1972-1974) of Wisconsin Power and Light Company.
The executive officers are elected at the Board of Directors meeting following the Annual Meeting of Stockholders and hold office until their successors are elected or qualified. Item 2. Properties, j Existing Facilities The electric properties of the Company form a single integrated system which is connected at 345 kv and 115 kv vith the lines of Public Service Company of New Hampshire at the southerly end and at 115 kv with Bangor Hydro-Electric l Company at the northerly end of the Company's system. The l Company's system is also connected with the system of The New Brunswick Electric Power Commission, Canada, and with Bangor Hydro-Electric Company thr'ough the 345 kv inter-connection constructed by Maine Electric Power Company, Inc. ("ME?Co."), a 78% owned subsidiary of -he Company. As of December 31, 1980, the Company had about 2,246 circuit-miles of overhead transmission lines, 15,645 pole-miles of overhead distribution lines and 390 circuit-miles of und arground and submarine cable. The maxi +2m one-hour firm system net peak load experienced by the Company was approximately 1,212,000 kw on January 12, 1981. As of that date the Company's net capability was 1,489,610 kw, including 13,790 kw of purchases. At the time of the 1980-1981 peak, the New England Power Pool had 21,372,000 kw of installed capacity to meet the New England Power Pool peak I load of 15,518,000 kw. See "NEPCCL" under this caption below. 9 l
Cen ral Maine Pcwer Company Form 10-K - 1980 Central Maine Power Comoany The Company operates 22 hydro-electric generating stations, of which 'l are owned and one is leased, with an estimated not capability of 300,200 kw, and owns all or part of, and operates, two oil-fired steam-electric generating stations with an estimated net capability of 747,160 kw (consisting of 593,590 kw at Wyman Station exclusive of 251,400 kw attributable to the 40.85% ownership interests of other utilities in Wyman Unit No. 4, and 153,570 kw at Mason Station). These oil-fired stations are located on tidewater, permitting waterborne delivery of fuel. The Company also kas four internal combustion generating facilities wi.h an estimated net capability of 47,150 kw. The Company owns varying portions of four operating nuclear plants located in New England. It owns a 38% interest in Maine Yankee Atomic Power Company (" Maine Yankee") and is entitled to the same percentage of the power produced by Maine Yankee's generating plant at Wiseasset, Maine. In addition, the Company owns a 9.5% interest in Yankee Atomic Electric Company, a 6% interest in Connecticut Yankee Atomic Power Company, and a 4% interest in Vermont Yankee Nuclear Power Corporation. I The Company is entitled to the same respective , l percentage of the power produced in each generating . company's plant. As of December 31, 1980, the Company's share of the capacity of the four plants amc2nted to the following: Maine Yankee . . 310,850 kw Connecticut Yankee . . 34,800 kw , . Yankee Atomic. . 16,700 kw Vermon: Yankee . . . . 18,960 kw See Item 1, " Business - Problems Affecting the Industry" for a discussion of the possible inpact of the TMI incident on the above operating nuclear plants. The Company is obligated to pay its proportionate share of the operating expenses, including depreciation and a return on invested capital, of Maine Yankee and each of the other generating companias referred to above for periods of 30 years expiring at various dates from 1991 through 2002. 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 capability to burn coal or alternate fuels. An " existing" oil-1. red powerplant =ay be required
Central Maine Power Company Form 10-K - 1980 ggg Central Maine Power Com=any by the Department of " Energy (" DOE") 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 l, substantial reduction in rated capacity. The Company l believes that all of the oil-fired units at its two existing i plants qualify as " existing" powerplants. In view of the i lack of exparience to date under the Powerplant and Industrial Fuel Use Act, no assurances can be given as to the ultimate status and treatment of the Company's existing oil-fired units under such Act. 1 l Based upon preliminary studies, the Company currently l intends to convert Units Nos. 3, 4 and 5 at Mason Station ! (aggregating 108,870 kw) from oil-fired to coal-fired units. Such conversion is expected to cost approximately l S50,000,000 (excluding AFC) based upon a completion date in l 1984. The conversion is subject to obtr.ning various ! regulatory and environmental permits. l MIPCo. owns and operates a 345 kv transmission interconnection, completed in 1971, extending from the Company's substation at Wiscasset to the Canadian bordar where it connects with a line of The New Brunswick Electric Power Commission (the " Commission") under a 25-year interconnection agreement. Under a subsequent agreement, the Commission provided up to 400,000 kw of base load power over the interconnection, of which the Company's share was 41,100 kw. Pursuant to a revision of that agreement, the power provided by the Commission has been reduced to 133,000 kw from 1981 to the termination of the agreement in 1985. The Company's share s 7,800 kw which the Company plans to reduce to 4,200 kw from November, 1981 until termination of the agreement, through assignment to another utility. l As par?. of its power planning, the Company periodically l enters ints agreements of varying durations with other utilities for the purchase of unit power. The Company is currently negotiating with the Commission for the purchase of 100,000 kw of unit power from the Commission's nuclear plant under construction at Point Lepreau for an undetermined period commencing in 1982. No assurance can be given that the purchase will be consummated. O l l l
Central Maine Power Ccmpany
, Form 10-K ,1980 J Central Maine Power Comeany l
i NEPCOL The Company is a member of the New England Power Pool ("NEPCOL"), which is open to all investor-owned, municipal and cooperative utilities in New England, under an agreement in effect since 1971 which provides for coordinated planning of future facilities and operation of approximately 98% of existing generating capacity in New England and of related transmission facilities. The NEPOOL Agreement imposes obligations concerning generating capacity reserve and the use of major transmission lines, and provides for central dispatch of the region's facilities. The Company expects to be able to satisfy its reserve obligations under the NEPOOL Agreement through the 1980's from its own generating capacity and from available sources of purchased power. Construction Program The Company is engaged in a continuous construction fs program to accommodate existing and estimated future loads 5 on its electric system. During the five-year period ended December 31, 1980, the Company's construction expenditures amounted to $339,784,000 (including investment in jointly-owned projects), not including allowance for funds used during construction ("AFC") of $41,330,000. Plant retirements during the period amounted to $21,746,000. The. Company's construction program for the period 1981 through 1985, shown below, is e-_.:ently estimated at approximately S498,000,007 (not inclading AFC estimated at $141,300,000, but including estimates for nuclear fuel costs of ~
. $17,100,000 where applicable). The Company estimates that construction expenditures for each of the years 1981 through 1985 will be approximately $88,600,000, $127,200,000, S85,500,000, $89,400,000, and $107,300,000, respectively.
O
-9
l Central Maine ower Company Form 10-K - 1980 ggg Central Maine Power Comcany Total Tyre ef Facilities 1981 1982-85 1981-85 (Millions of Dollars) Generation Central Maine Power Company Projects Brunswick-Topsham (Hydro) $10.5 S .9 S 11.4 Sears Island (Coal) 1.2 35.5 36.7 Mason Station (Conversion to Cocl) 4.8 43.0 47.8 Pro;ects Sponsored by others Seabrook Nos. 1&2 (Nucl3ar) 33.9 62.0 95.9 Millstone No. 3 (Nuclear) 5.0 23.6 28.6 Pilgrim No. 2 (Nuclear) .8 21.0 21.8 Transmission 2.4 36.9 39.3 Distribution 19.9 104.4 124.3 Other Capital Projects (including small hydro projects) 10.1 82.1 92.2 ,
$88.6 S409.4 $498.0 l
l l The above estimated expenditures for major jointly-owned j generating facilities are based upon the latest information l furnished by the sponsoring utility. See discussion below for certain information regarding regulatory and other factors which may affect the ownership, construction, nature, timing, estimated cost and operation of planned facilities. Based upon the Company's estimate of the average annual ecmpound Crowth rate in the Company's peak capacity requirements for the years 1981 through 1990 of approximately 2.1% and anticipated growth rates throughout i New England, the Company believes that its generating capacity, including and assuming timely additions to generation to be provided by certain of the jointly-owned projects described below, coupled with power purchased from other utilities with excess capacity, will be sufficient to meet such requirements and its reserve requirements under the New England Power Pool Agreement through the 1980's.
Central Maine Power Company O Form 10-K - 1980 _ Central Maine Power Comeany Financing Considerations In 1980 internal sources of funds provided approximately 20% of the Company's total construction requirements with the remainder provided by external sources. The company estimates that approximately 32% of the Company's total construction requirements will be financuc by internal sources in 1981. The Company currently plans to raise approximately $90,000, LOO from the sale of long-term debt and also plans to issue 2,000,000 shares of common stock in 1981. However, the nature and timing of future financing will be determined in light of future market conditions, earnings and other relevant factors. The continuation of the Company's 1981-1985 construction program at planned levels depends upon the company's ability to finance a substantial portion of the program from external sources. In April, 1980 the Company entered into a two-year revolving credit and term loan agreement with several banks () in the amount of $40,000,000 with interest at the prime rate. At December 31, 1980 the amount outstanding under this agreement was $9,000,000. At the end of the revolving credit term in April, 1982, the Company has the option to convert the amount then outstanding into a three-year term loan payable in six equal semiannual installments, with interest at 1C2% of the prime rate during the first and second years and at 104% of the prdme rate during the third year. The Company may prepay amou...s from time to time outstanding under the agreement without penalty. The loan is secured by a pledge of the Company's 38% common stock
. interest in Maine Yankee Atomic Power Coreany.
I In addition to funds required to finance its construc , ion program during the period 1981-1985, fands aggregating $64,573,000 must be provided for preferred secck and mortgage bond sinking fund requirements and debt maturities. See Notes 10 and 11 of Notes to Financial Statements of the Company and Statement of CIapitalitation and Interim Financing of the Company. Planned Facilities. The Company plans to construct a 568 MW coal-fired plant at Sears Island, which plant is proposed to be jointly owned with other electric utilities. In December, 1979 the PUC issued its order denying the issuance of a certificate of public convenience and necessity based on findings that the Company's projected need for baseload power in 1987 did not justify construction
Central Maine Power Company Form 10-K - 1980 lll Central Maine Power Comeanv of a 568 MW facility"of which the Company's proposed sha.3 was 459 MW or approximately 80%. The Company petitioned on January 18, 1980 for a rehearing before the PUC and such petit! n was granted. In its petition for rehearing the Compai.y deferred the estimated date of commercial operation of the proposed plant from 1987 to 1989 and stated its intention to reduce its ownership share of the plant from approximately 80% to between 55% and 60%. Hearings on the Company's revised proposal have been in progress since the summer of 1980. The Company presently estimates that the cosc of the Company's share of the Sears Island plant (based upon a 60% ownership interest and a commercial operation date in 1989) will be approximately S475,100,000, excluding AFC of approximately $165,400,000. As of December 31, 1980 the Company's share of Sears Island expenditures (not including AFC and based upon the current 80% ownership interest) was approximately S6,975,000. Statements of the Company. See Note 3 of Notes to Financial g In addition to the Sears Island plant, the Company is participating or expects to participate as a part owner with other New England utilities in several other major electric generating plants now planned or under construction. Such participation would be on a tenancy-in-common basis. The Company's actual expenditures through December 31, 1980 and estimated expenditures for jointly-owned generating facilities listed below (not including AFC which will be substantial but including nuclear fuel costs wherever - - - applicable) are set forth in the following table (see also Note 3 of Notes to Financial Statements of the Company): O O O . O EeSD811r'13haf. Iotal Estimated I'kposh11 tu re s Estimated Date of ihrayagte Conststec-iseergy Coeeercial Capacity Capacity ownership December 31, t ioes
!!ni t hufse 9eefdtleni11 _itMil_ _iftfl_ laterstt 1200 EutLtl21 (Dollars in thosisands)
Suabsouk Nus. I $$8,633 $ 150.seoo and 2(3) Muclear 1983-1985 2,300 139 ( 6. 0:al) rijgria No. 2 Nuclear (4) 1,150 33 (2.8$1) 8,999 (4) 1,850 29 (2.$01) 18,$95 49,100 Hillstone No. 3 Nuclear 1986 1989 $68 341 (S) 6,97$ 41$,100 Soars Island ($) Coal (l) line completion dates of these units have been deferred from time to time and additional deferrals may occur daee to licesusing delasys, economic and political conditlosis and other f actors. Deferrels have the effect of significantly
- increas6ng the cost of a annit.
(2) Estimated construction expenditures relating to the Jointly owned annits sloown above are based impon information fase.ilshed by the utility r'esponsible for the construction of such seatit. The company has been advised by each of the sponsorleig ue llities glist cosistreection boedgets are cositinaiously asader review Ise light of increased costs dise to duferrals, delays and other factors, the estimated expenditaires, completion dates and complottose of all the above miselts may also les af fected by the variosis factors referred to below and ellwr events asul cosiditions which cannot h snow be predicted. 3 as (3) As of December 31, 1980, the Compassy had a 5.041781 Interest in seabrook. An adjustment or the owsierstilp interests es p
' in the units over a period of approximately 13 months commencing Janssary 31, 1981 will ultimately result in a P 6.041781 ownessisip interest l'or the Company. See "Seabsook" sinder this caption teolow for a discussion of Elio e,n possible deferral of the Seabrook units and of possible lacratased costs. 3 r
(4) Isoston 6dison Company, the utility responsible for construction of Pilgrim 180. 2, has anssounced that daea to the e leo resguired for tise constrisction of the unit and cosapletlose of Ilcosesing and regnalatory proceedasegs and the 3 4 gecatly incroacing construction costs no fire dato can be establistied for ties commosiceaient of co.istruction or s:omme r c i a l ope ra t i on o f tioe ten i t . As a result, estimates of constrasction expenditesses asui schedseling are sio losege r ,o scalistic. Sucle nett a lty has also stated that when a more definitive schedaele is set for the grantleig of a g cusestreectigst paralt, it will be able to develop revised cost estimates. At that time ansch set t a lty lias stated that g- p it is its leitesition to review the feasibility of the project and to decide whether to casical or continue e gs constructiosi of the project. let the meantime procaarement commiteesets for sleo projuct are bedrig deferred. et of Ga O I P (S) liso Compasey's projected ownership share of this astelt has recently been chegged from approwleately 801 to j O approximately 601. Ihe amount showse above with respect to empenditures tierciagli December 31, 1980 aso based aspose a h 3,, tursent ownership interest of 801 while the amount with respect to total estimated constructiosa costs asstenes a 601 g y p. ownership. n up Due to the ti ene required for the construction o f generating faci li ti es and the cosapi c t i on 4
?*
M *u of li censing and regulatory proceedings relating thereto, subs tan ti al inves tenen ts in the above units wi ll be required prior to the comipletion o f licensing and regulatory O proceedings. There is no assurance that all necessary approvald, permaits or licenses g ,"
'O will be obtained, or i f obtained, will not be snodi rl ed or revoked or that the units will be come pl e t ed . o"O H
*ti m
U
Ccntrcl Maino Povor Company Form 10-K - 199C - Central Maine Power Com any Seabrook. The n(cessary approvals and permits for the construction of the Seabrook units have been obtained and have been upheld by the courts on appeal by a number of cppesition groups. Construction is currently in progress, although at a reduced level from that originally scheduled for 1980-1981 (see below). One appeal is still pending and a further limited evidentiary hearing on the seismic issue has been ordered by the NRC. Further proceedings before the NRC relating to the licensing of the units will be required for operation, and other proceedings and appeals are possible. The Company is unable to predict the out cme of such proceedings or what effect current or further administrative or court proceedings may have on the cost or c =pletion of the project or on the Company. Public Service Company of Nsw Hampshire ("?SNH") has exper:enced difficulties in financing its 50% share of the Seabrook units. Consequently, PSNH has obtained commitments for the sale of about a 15% share to several New England utilities, including 1% to be sold to the Company. Commencing January 31, 1981 certain of these utilities, including the Company, began making payments which over a llh per:Od of time will reduce PSNH's ownership interest from SC% to about 44%. A further reduction to about 37% will ecmmence when Massachusett.:. Municipal Wholesale Electric Company receives its initial financing and to about 35% when two remaining utilities obtain necessary regulatory approvals and financing. There can be no assurance that such approvals will be granted and financings obtained. In January, 1981, PSNH sought emergency rate relief from the NHPUC in order to obtain sufficient revenues to ensure that the earnings coverage test applicable to the issue of bonds under its mortgage bond indenture would be satisfied in connection with a substantial bond issue planned for the fourth quarter of 1981. In February, 1981 the NEPUC summarily denied PSNH's request for emergency rate relief stating that an emergency had not been demonstrated, PSNH is unable to predict the effect of this denial on its plans for financing its interest in the Seabrook project during 1981. In March, 198C. PSMH anncunced that due to the unsettled state of the capital markets and the high cost of external funds and the delay in obtaining approvals for the reduction in :ts interest in the Seabrook project it was substantially reducing the eveJail level of construction of the Seabrook pro;ect in order Oc lessen PSNH's external financing O 14 -
Central Maine Pows: Company O Form 10-K - 1980 i
, Central Maine Power Coqoany requirements. PSNH has stated that such reduction and a ten-week ironworkere' strike in the summer of 1980 have affected the completion dates. The extent to which such dates have been affected will not be known until PSNH completes its next review of the project schedule in late March or early April, 1981. However, the figures for estimsted construction expenditures and costs of the Seabrook plant set forth above give effect to the reduced level of construction (assumed for this purpose to continue through March, 1981) which PSNH has stated would postpone the scheduled completion dates of the units to 1984 and 1986. respectively, and would increase the estimated cost of the units. It is anticipated that the reduction will continue until the reductions of PSNH's interest in the plant to 35% have commenced, assuming that the capital markets are reasonably stable at that time and that adequate rate relief is granted to PSNH.
() Various orders of the NHPUC have required delays of work or deferral of costs on Unit No. 2 of the Seabrook plant until commencement of the reduction of PSNH's ownership interest in the Seabrook plant. Montaqu_e. On December 31, 1980 the lead owner of the two nuclear generating units planned for construction at Montague, Massachusetts announced the cancellation of the i project, in which the Company owned a 3% interest. Recovery
- by the Company of its investment of approximately $1,700,000 (including AFC of $691,000) which is included in deferred l charges, not of income taxes, is dependent upon regulatory i . approval. If any amounts are determined not to be recoverable they would be charged, net of related inecme j taxes, against earnings in the period such determination is made.
l l e 1 I _ _ _ , . . _ , _ . , _ _ _ . _ _ . . _ - _ - _ . _ _ , _ . _ . - - _ , _ _ , . . _ . . . . . . . , _ _ = . _ _ _ _ _ _ _ . _ _ _ . _ _ , - . . . . . . _ - . -
Central Ma:ne Power Company Form 10-K - 198C 1 h! 1 Central Maine Pewer Cemeany Fuel Supply l l The Company's kilowatt-hour production by energy source for each of the last two years and as estimated for 1981 is shown below: 1 Actual Estimated Source 1979 1980 1981 Nuclear (principally fcom Maine Yankee) 33% 30% 32% Hydro 19 15 18 011 16 23 29 Purchased (principally from cil-fired sources) 32 32 21 100% 100% 100% O The 1981 estimated kilowatt-hour output from oil and purchased power may vary depending upon the relative costs of Company-generated power versus power purchased through NE? COL. Oil. The Company's steam and internal combustion
. electric generating units are oil-fired. The Company has a l' contract which expires on June 1, 1982 for the supply of l essentially all of the Company's oil requirements at world l market prices. Under the contract, the Company retains the l right to purchase 25% of its quarterly requirements in the r l cpen market. ,
The average cost per barrel of fuel oil purchased by the , Company during the past five cale.ndar years was $10.38, e 512.17, 512.05, S15.95 and $25.32, respectively. Most of ' i the fuel oil burned by the Company and the other me=ber ;- utilities of NEPCOL is imported. The availability and cost of oil to the Company, both under any contract and in the ! cpen market, could continue to be adversely affected by policies and events in oil-producing nations, other factors affecting world supplies and domestic governmental action. It is impossible to predict the impact on the Company's operations of possible action by the President or Congress , with respect to import fees, duties or quotas on cil, or ggg 9 d C
Central Maine Power Company Form 10-K - 1980 Central Maine Power Comeany restrictions on the use of oil for generating electricity. The Company's electric sales are subject to fuel adjustment clauses which enable the Company to pass on to customers its fuel costs and the fuel component of purchased power. Nuclear. As described above, the Company has interests in a number of nuclear generating units. The cycle of production and utilitation of nuclear fuel for such units consists of (1) the mining and millir.g of uranium ore, (2) the conversion of the resulting concentrate to uranium hexaflouride, (3) the enrichmect o' the uranium hexaflouride, (4) the fabrication of fuel assemblies, (5) the utilitation of the nuclear fuel and (6) the dispositten of spent fuel. The Company has been advised by Maine Yankee that it has contracted for the purchase of all of its uranium concentrate requirements through 1986. Maine Yankee has a conversion contract through 1983 and is presently I Os negotiating for. conversion services expected to meet ! requirements through 1995. It has a contract with DOE for i enrichment services through 2002 and its fabrication requirements are covered through 1993. As is the case throughout the nuclear industry, Maine Yankee has no contractual arrangements for the final disposition of spent fuel. In September, 1979, Maine Yankee filed with the NRC a proposed change to its operating license relating to increasing its existing spent fuel storage capacity by
. providing more compact fuel rod storage and in September, 1980 Maine Yankee filed an amendment to its application.
The NRC has published notices of the proposed issuance of a license amendment implementing the change and providing an opportunity for interested persons to petition for leave to intervene and request a hearing. A timely petition and request was filed by a Maine group and the Attorney General of Maine filed a notice of his intent to participate in any hearing. The NRC has established an Atomic Safety and Licensing Board to preside over the proceeding. The Company anticipates that adjudicatory hearings will commence in the latter half of 1981. The Company cannot predict the scope of the proceeding, its duration or its outcome. The present capacity of the spent fuel pool at the () Company's plant will be filled in 1987 and after 1984 would not accommodate a full core removal. The modification of
1 1 l Central Maine Power Company Form 10 *K - 1980 i l Central Maine ?cwer Comeanv this capacity proposdd by the Company differs from designs heretofore implemented at other nuclear facilities but is essentially the same basic concept of more compact storage in the existing spent fuel pool. If the proposed modification is not approved, the Company will have to 1 develop alternative plans which would involve further approval by the NRC. i The Company has been advised by the companies operating or planning nuclear gen rating stations in which the Company has or expects to have an interest that they have contracted for certain segments of the nuclear fuel production cycle through various dates. Contracts for other segments of the i fuel cycle will be required in the future, but their availability, prices and terms cannot now be. predicted. Coal Although the Company currently does not have a enntrhet for coal supply, it has started to explore possible lll arrangements for a supply at the Mason Station units currently proposed for conversion to coal-fired operation in 1984 and at the Sears Island unit presently scheduled for commercial operation in 1989. Item 3. Lecal Proceedines. Regulation The Company is subject to the regulatory authority of the Maine Public Utilities Commission ("?UC") as to retail rates, accounting, service standards, territory served, the issuance of securities and various other matters. The , Company is also subject as to some phases of its business, including licensing of its hydro-electric stations, accounts, rates relating to wholesale sales (which constitute less than 1% of operating revenues) and to interstate transmission and sales of energy and certain other matters, to the jurisdiction of the Federal Energy Regulatory Commission ("FERC") under Parts I, II and III of the Federal Power Act. Other activities of the Cor any from time ta time are subject to the jurisdiction of various other state and federal regulatory agencies. The nuclear generating facility of Maine Yankee and the other nuclear facilities in which the Company has an g interest are subject to extensive regulation by the NRC. 18 -
Central Maine ?cwer Company Form 10-K - 1980 Central Maine ?cwer Comoany The NRC is empowered to authorize the siting, construction and operation of nuclear reactors after consideration of public health, safety, environmental and anti-trust matters. Under its continuirq jurisdiction, the NRC may, after appropriate proceedings, require modification of units for which construction permits or operating licenses 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 reduced. See Item 1 " Problems Affecting the Industry" for a discussion of the impact of the TMI incident on Maine Yankee and the other nuclear facilities in which the Company has an interest. The Environmental Protection Agency (" EPA") administers programs established under the Federal Water Pollution Control Act and the Clean Air Act which affect all of the Company's thermal generating facilities, as well as the nuclear facilities in which it has an interest. The former Act establishes a national objective of complete elimination (]) . of discharges of pollutants into the nation's water and creates a rigorous permit program designed to achieve these effluent limitations. The latter Act empowers the EPA to establish clean air standards which are implemented and enforced by state agencies. EPA has broad authority in administering these programs, including the ability to require installation of pollution control and mitigatica devices. The Company is also subject to regulation with regard to environmental matters and land use by various state and local authorities. The Price-Andersen Act is a federal statute providing, among other things, that the maximum liability for damages resulting from a nuclear incident would be S560 million, to be provided by private insurance and governmental sources. As required by the NRC regulations, prior to operation of a nuclear reactor, the licensee of the reactor is required to insure against this exposure by purchasing the maximum available private insurance (presently $160 million), the remainder to be covered by retrospective premium insurance i and by an indemnity agreement with the NRC. Owners of operating nuclear facilities may be assessed a retrospective premium of up to SS million for each reactor owned in the event of any one nuclear incident occurring at any reactor in the United States, with a maximum assessment of S10 million per year per reactor owned. As a part owner of C1 Maine Yankee and other operating New England nuclear
Central Maine Power Company I Form 10-K - 1930 ll) Central mine Power Comcany facilities, the Compt , would be obligated to pay its proportionate share of any such assessments, which presently amounts to a maximum of $2,875,000 per incident. Under the Federal Power Act, the Company's hydro- l electric projects (including storage reservoirs) on navigable waters of the United States are required to be licensed by the FERC. Twenty projects, some of which include more than one generating unit, have been licensed to date. The licenses so far granted to the Company's projects do not in any instance expire before 1987; most expire in 1993; and two expire after the year 2000. The United States has the right upon or after expiration of a license to take over and thereafter maintain and operate a project upon pay =ent 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 specified rates of return. If the United States does not exercise its statutory right, the a FERC is authorited to issue a new license to the original W 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. A petition calling for the enactment of a bill cscating
, a Maine Energy Commission was signed by more than the l required number of voters and has been presented to the Maine legislature. Under Maine law, the legislature must enact the proposed legislation at its 1981 session or refer it to a vote of the electorate to be held in November, 1981.
i The Maine Energy Commission would be a new state agency replacing the PUC and the office of Energy Resources and l would have three commissioners elected for terms of four l years. The bill would also revise the rate making and ! capital construction approval procedures for utilities by c requiring that all applications for rate increases and ', authoritations for new capital construction be consistent with an annual state energy budget. The bill also l establishes an Energy Development Fund consisting of funds raised from general obligation bonds, revenue bonds issued
; by the Maine Energy Commission and other sources to be used for financing pro *ects within the guidelines to be set forth in the state energy budget. The Company is currently unable l
to predict the result of the electorate vote or what effect the bill would have on the Company, if adopted. O i 20 -
i 1 l Central Maine Power Company Form 10-K - 1980 Central Maine Power Comoany Rates on February 1, 1980, the Company filed with the PUC an application for a $35,000,000 increase in annual revenues, which was subsequently increased to $36,859,000. On October 31, 1980, the PUC authorized the Company to file retail rates designed ';.o increase annual gross revenues by approximately $16,185,000 (including an attrition adjustment of $2,300,000). Such rates are based upon an allowed overall return of 10.78%, including a return of 13.75% on common equity. The new rates were implemented for kilowatt-hour sales on and after November 13, 1980. The Company's prior rate decision in October, 1978 had allowed an overall return of 9.48% including a return of 12.50% on common equity. The Cc=pany intends *o file an application for additional rate relief in 1981. f-s The PUC's order allows the Company to recover over a five-year period, through rates to be charged to its customers, approximately $3,154,000 of expenditures for a proposed nuclesr plant. The PUC disallowed ;ecovery of AFC of S827,000 recorded on such expenditures and related uranium enrichment contracts. The Company has appealed this disallowance and certain other portions of the order to *he Maine Supreme Judicial Court. If finally determined not to be recoverable, the costs would be charged net of related income taxes against earnings in the period in which such determination is made. Fuel Cost Adjustment Charges Regulations adopted by the PUC pursuant to a Maine statute effective in 1978, and implemented with respect to the Company effective April 1, 1980, allow the Company to recover currently the cost of fuel consumed in the Company's generating stat ons and the fuel component of purchased power by the application of a single uniform rate in the monthly bills to the Company's retail customers The single uniform rate it based upon the Company's proje- ed cost of fuel and the fuel component of purchased pow ( ca 11-month forward-looking period (eight months .he case of the transitional peried) and must be approved me PUC after public notice and hearings. The Compar ; y at intervals of not less than 90 days request ch."fes in the () unifor= rate to reflect actual experienet. *urir.g any period
Contral Maine Power Company Form 10-K - 1980 Central Maine ? ver C: meany as well as new forecssts. In addition, the Company's fuel adjustment charge provides for recovery over a twelve-month ., period of unbilled fuel costs at the time that the new regulation became effective. Over- or under-collections resulting from differences between estimated and actual fuel costs for a period as well as an amount for the actual cost of short-term borrowings used to finance the unbilled balances are included in the computation of the fuel amounts
, to be recovered during the succeeding fuel adjustment period.
Under the federal Public Utility Regulatory Policies Act of 1978, the Company's fuel adjustment charge may be subject
; to periodic review by the PUC to ensure that the charge provides incentives for efficient use of fuel and for l maximum economies in operations and purchases that affe:t utility rates.
Environmental Matters The application of federal, state and local standards to g protect the environment, including but not limited to those W hereinafter described, involves or may involve review, certification or issuance of permits by various federal, state and local authorities. Such standards, particularly in regard to emissions into the air and water, thermal mixing zones and water temperature variations, may halt, limit or prevent operations, or prevent or substantially j increase the cost of construction and operation of installations and may require substantial investments in new equipment at existing installations. They may also require substantial investments above the figures stated under
" Operations - Properties and Power Supply - Planned Facilities" for proposed new projects.
Water Quality Control. As of late 1979 the Company held all discharge permits required under the Federal Water Pollution Control Act Amendments of 1972 (the "Act") for its existing plants. Some of these permits have since expired by their terms, and the Company has made timely applications f for renewal while continuing to operate under the terms and
! conditions of the expired permits. Although. as is the case 4
throughout the industry, applications have not yet been acted upon, the Company has no reason to believe that the licenses will not be renewed upon essentially the same terms and conditions. The Company has also received all permits ,
- _ quired under the Rivers and Harbors Act of 1999 for its hl l
f Central Maino Power Company Form 10-K - 1980 Central Maine Power comoany existing plants. In general, these water quality control permits as well as s:iting permits issued by the Maine Department of Environmental Protection ("LEP") require the subject plant to m1et prescribed environmental quality standards in its ongoing operations and impose monitoring requirements on the Company intended to insure compliance with the standards. With respect to effluent discharges, including heat, from existing plants, the Act, as amended in December, 1977, i requires the application of the "best practicable control technology currently available" by July 1, 1977 and the "best available technology economically achievable" by July 1, 1984. In addition, the Act kiso requires that cooling water intake structures must reflect the "best technology available for minimizing adverse environmental
, impact". Regulations promulgated under the Act, unless waived, require non-exempt generating units to use closed-cycle cooling systems such as cooling towers by July 1, 1981. Certain of these regulations have been remanded for further deliberation by the EPA, and further administrative O hearings and court proceedings are expected. In addition, the December, 1977 amendments to the Act call for the promulgation of additional pollution control technology l requirements relating to matters such as toxic pollutants l and waste management practices. The Company believes that
- it is in compliance with the July 1, 1977 guidelines l referred to above. Although the Company is presently unable to determine with certainty whether changes in cooling water I intake structures or the installation of closed-cycle
. cooling systems will be required, it does not believe that the guidelines will materially affect the operations of its generating units. However, if changes were required, the Company's expenditures could be substantial.
Air Cuality Control. Pursuant to the federal Clean Air Act of 1970, the DE? has issued preliminary and secondary ambient air quality standards with respect to certain air pollutants including particulates, sulphur oxides and , nitrogen oxides. One of the effects of these regulations is to restrict the sulphur content of the fuel oil which the Company is permitted to burn. Under regulations adopted by the DEP, the sulphur content of fuel oil burned in the Company's generating plants may not exceed 2.5%. All oil burned at Wyman Unit No. 4 is required to have a sulphur content of not in excess of 0.7% and the other three units l at Wyman Station are required to have a sulphur content of i
Contral Maine Power Company Form lO-K - 1980 Central Maine Power Comeany , not in excess of 1.5% while Wyman Unit No. 4 is in operation. The Company believes that it will be able to arrange for supply of suffic?.ent oil with the required sulphur contents, subject to unforeseen events and the factors influencing the availability of oil discussed under " Operations - Fuel Supply". The operation of the Company's present fuel adjustment charge permits it to pass on the additional cost of such fuel to its customers. See " Fuel Cost Adjustment Charges". The Clean Air Act Amendments of 1977, among other things, require the Administrator of EPA to promulgate revised New Source Performance Standards. The amendments also provide that state implementation plans contain emission limitations and such other measures as may be necessary, as determined under regulations to be prcmulgated by the EPA, to prevent "significant deterioration" of air quality, prescribe new classifications of non-degradation areas and pemnit a redesignation of areas under certain conditions. In addition, the amendments limit maximum allowable increases in concentrations of sulphur oxides and particulates in the various areas and require the promulgation of regulations with respect to certain other pollutants. The effect of the amendments on the existing regulations or on the Company cannot presently be determined. Other. On Fecruary 13, 1979, the Maine Board of Environmental Protection ("3EP") held a public hearing to investigate the causes of excessive noise emanating from Wyman Unit No. 4 during operation. To minimise the effect l en the surrounding area, the SEP ordered that the unit be operated only on weekdays between the hours of 6 A.M. and 11 P.M., except in the case of emergencies. This , restriction required the Company to buy additional replacement power from time to time from NEPCOL. The Company has cempleted the installation of new sound-attenuating mufflers and Wyman Unit No. 4 is currently in I full commercial operation. The SEP initiated a suit against the Company seeking payment of a civil penalty for alleged violation of the siting permit for Wyman Unit No. 4. Item 4. Security ownership of Certain Beneficial owners I
)
and Manacement. i 1 (a) Security ovnershie of certain beneficial owners: As of December 31, 1980, there was no person who was known l
Central Maine Power Company Form 10-K - 1980 0 Central Maine Power Comoany to registrant to be the beneficial owner of more than five percent of any class of registrant's voting securities. (b) Security ownershio of manacement: The following is a tabulation of the equity securities of the registrant beneficially owned by its directors, and its directors and officers as a group, as of March 1, 1981: Amount and Nature of Title Name of Beneficial Percent of Class Beneficial Owner Ownershio of Class Common Stock, SS Par Value Priscilla A. Clark 651 .005% Galen L. Cole 1,100 .008 E. James Dufour 445 .003 George H. Ellis 133 .001 Leon A. Gorman 669 .005 E. Clifford Ladd 1,250 .009 O Roland L. Marcotte Charles E. Monty
'100 595
.001
.004 Carlton D. Reed; Jr. 732 .005 John J. Russell 500 .004 Robert F. Scott 827 .006 Halsey Smith 100 .001 Elwin W. Thurlow 2,422 .017 James H. Titcomb 400 .003 All Directors and
. Officers as a group 15,551 111%
(c) Chances in control: Not applicable. _ PART II Item 5. Market for Registrant's Common Stock and Related Securitv Holder Matters. See the information under the heading " Price Range and Dividends of Voting Stock", " Statistical Review" and Note 12 of " Notes to Financial Statements" on pages 22, J4 and 31 of the registrant's 1980 Annual Report to Stockholders, which is hereby incorporated herein by reference; said Annual Report to Stockholders is filed as an exhibit hereto. O l l
1 l Central Maine Power Company ' For= 10-K - 1980 Central Maine Power Com=any O As of December 37, 1980 there were 50,015 holders of the Company's Common Stock. Item 6. Selected Financial Data. See the information under the heading " Statistical Review" on pagos 34 and 35 of the registrant's 1980 Annual Report to Stockholders, which is hereby incorporated herein by reference: said Annual Report to Stockholders is filed as an exhibit hereto. Item 7. Management's Discussion and Analysis of Financial Conditions and Results of O=erations. See the information under the heading " Management Analysis of Operating Results and Financial Condition" on page 36 of the registrant's 1980 Annual Report to Stockholders, which is hereby incorporated herein by reference; said Annual Report to Stockholders is filed as an exhibit hereto. . Item 8. Financial Statements and Sueolementarv Data. See the information under the heading " Financial Statements" on pages 17 through 33 of the registrant's 1980 Annual Report to Stockholders, which is hereby incorporated herein by reference; said Annual Report to Stockholders is filed as an exhibit hereto. PART III Item 9. Directors and Executive Officers of the Registrant. See the information under the heading " Election of Directors" of the registrant's definitive proxy material for its annual meeting of stockholders to be held on May 21, 1981, which is hereby incorporated herein by reference. Item 10. Management Remuneration and Transactions. l See the information under the heading " Election of Directors" of the registrant's definitive proxy material for 1 its annual meeting of stockholders to be held on May 21, 1981, which is hereby incorporated herein by reference.
Central Maine Power Company Form 10-K - 1980 <~ U Central Maine Power Comeany PART IV Item 11. Exhibits, Financial Statements, Schedules and Recorts on Form 8-K. (a) 1. and 2. - The response to this portion of Item 11 is submitted as a separate section of this report. See pages F-1 et. seq.
- 3. Listing of Exhibits.
Incorporated Filed Documents herewith SEC at Exhibit Docket Page A. Articles of incorocration and bylaws Incorporated herein by reference: A-1 Article of Incorporation, as amended 2.2 2-68184 A-2 Bylaws, as amended 2.3 2-68184 B. Instruments defining the rights of security holders Incorporated herein by reference: B-1 First and General Mortgage between 7.1 2-7589
. the Company and Old Colony -
Trust Company, as trustee, as amended by Supplemental Indentures to and including September 15, 1942. B-2 Supplemental Indenture dated 7.10 2-9257 as of November 1, 1951, relating to the Series T Bonds. B-3 Supplemental Indenture dated 4.15 2-10051 as of March 1, 1953, relating to the Series U Bonds. O
Contral Maine Power C0mpany I Form 10-K - 1980 Central Maine Power Company lll Incorporated Filed Documents herewith SEC at Exhibit Docket Page B-4 Supplemental Indenture dated 4.15 2-11908 as of April 1, 1955, relating to the Series V Bonds. ; l B-5 Supplemental Indenture dated 4.16 2-17196 - as of May 1, 1957, relating ) to the Series W Bonds. l B-6 Supplemental Indenture dated 4.17 2-1719G l as of November 1, 1960, I relating to the Series X Bonds. B-7 Supplemental Indenture dated 2.17 2-32333 as of May 1, 1969, relating to the Series Y Bonds. j B-8 Supplemental Indenture dated 2.18 2-37987 l as of August 1, 1970, relating to the Series Z Sonds. B-9 Supplemental Indenture dated 2.19 244611 as of July 1, 1972, relating to the Series AA Bonds. B-10 Supplemental Indenture dated 2.18 2-54240 as of August 15, 1975, relating to the Series BB Bonds. 1 l B-11 Supplemental Indenture to the 2.17 2-58251 First and General Mortgage dated as of April 15, 1976, relating to the closing of such Mortgage. l O
Central Maine Power Compan Form 10-K - 1980 0 Cencral Maine Power Comcany Incorporated Filed Documents herewith SEC at Exhibit Docket Page 3-12 General and Refunding Mortgage 2.18 2-58251 between the Coraany and The First National Bank of Boston, as Trustee, dated as of April 15, 1976, relating to the Series A Sonds. 3-13 First Supplemental Indenture 2.19 2-60706 as of March 15, 1977 to General and Refunding Mortgage. 3-14 Supplemental Indenture to the A Annual General and Refunding Mortgage Report Indenture dated as of 1-6554 O October 1, 1978 relating to the Series 3 Sonds. for 1978 3-15 Supplemental Indenture to the A Report on General and ifunding Mortgage Form 10-Q Indenture dated as of 1-5139 for October 18, 1979 relating September to the Series C Bonds. 30, 1979 C. Material Contracts
. Filed herewith:
C-1 Amendment to Exhibit C-53 dated December 11, 1980. Incorporated herein by reference: C-2 Agreement dated April 1, 1968 4.27 2-30554 between the Company and Northeast Utilities Service Company relating to services in connection with the New England Power Pool and NE?EX. O
Central Mcine Power Company Form 10-K - 1980 Central Maine Power comoany ggg Incorporated Filed Documents herewith SEC at Exhibit Docket Pace C-3 Form of New England Power 4.8 2-55385 Agreement dated as of September 1, 1971 as amended to November 1, 1975.
'C-4 Agreement setting out 5.10 5-50198 Supplemental NE?OOL Understandings as of April 2, 1973.
C-5 Sponsor Agreement among the 4.27 2-32333 Company and the other sponsors of Vermont Yankee Nuclear Power Corporation, dtted as of August 1, 1968. C-6 ?ower Contract between the 4.28 2-32333 llh Company and Vermont Yankee Nuclear Power Corporation, dated as of February 1, 1968. C-7 Amendment to Exhibit C-6 13-21 2-46612 dated as of June 1, 1972. C-8 Capital Funds Agreement 4.29 2-32333 between the Company and Vermont Yankee Nuclear ?cwer Co rporation, dated as of February 1, 1968. C-9 Amendment to Exhibit C-8 3-3 70-4611 dated as of March 12, 1968. C-10 Stockholder Agreement among 4.30 2-32333 the Company and the other stockholders of Maine Yankee Atomic Power Company, dated as of May 20, 1968. l l
Central Mains Power Company Form 10-K - 1990 () Central Maine Power Cemeany Incorporated Filed Documents herewith SEC at Exhibit Decket Page C-11 Power Contract between the 4.31 2-32333 Company and Maine Yankee Atomic Power Company, dated as of May 20, 1968. ' C-12 Capital Funds Agreement 4.32 2-32333 between the Company and Maine Yankee Atomic Power Company, dated as of May 20, 1968. C-13 Agreement dated October 13, 5.3(d) 2-45990 1972 for Joint Ownership, Construction and Operation of Pilgrim Unit No. 2 among Boston Edison Company and other utilities including the O Company. C-14 Amendments to Exhibit C+13 5.14 2-51999 dated September 20, 1973 and September 15, 1974. C-15 Amendment to Exhibit C-13 13-45 2-54449 dated December 1, 1974. C-16 Amendment to Exhibit C-13 13-52A 2-53819
. dated February 15, 1975. - - - -
C-17 Amendment to Exhibit C-13 13.523 2-53819 dated April 30, 1975. C-18 Amendment to Exhibit C-13 13-45(a) 2-54449 dated as of June 30, 1975. C-19 Amendment to Exhibit C-13 5.9(f) 2-55748 dated as of November 30, 1975. O B
Ccntral Maino Powar Com;any Form 10-K - 1980 Central Maine Power comoany ggg Incorporated Filed Documents herewith SEC at Exhibit Docket Pace C-20 Addendum dated as of October 1, 5.41 2-52177 1974 to Exhibit C-13 by which Green Mountain Power Corporation became a party thereto. C-21 Addendum dated as of January 17, 5.45 2-55450 1975 to Exhibit C-13 by which the Surlington Electric Department became a party thereto. C-22 Addendum dated as of October 1, 10.1 Annual 1976 by which MMWEC Report became a party thereto. 1-2301-2 for 1976 C-23 Agreement for Sharing Costs 5-3(e) 2-45990 Associated with Pilgrim Unit No. 2 Transmission dated October 13, 1972 among Boston Edison Company and other utiJ.les including the Com.any. C-24 Adaendum dated as of October 1, 5.41 2-52177 1974 to Exhibit C-23 by which Green Mountain Power Corporation became a party thereto. C-25 Addendum dated as of January 17, 5.46 2-55458 1975 to Exhibit C-23 by which Burlington Electric Department became a party thereco. O Central Maine Power Comp;.ny Form 10-K - 1980 () Central Maine Power Comeany Incorporated Filed Documents herewith SEC at Exhibit Docket Page C-26 Agreement dated as of May 1, 13-57 2-48966 1973 for Joint ownership, Construction and Operation of New Hampshire Nuclear Units among Public Service Company of New Hampshire and other utilities including the Company. C-27 Amendments to Irhibit C-26 5.15 2-51999 dated May 24, 1974, June 21, 1974 and September 25, 1974. C-28 Amendments to Exhibit C-26 5.1-12 2-53674 dated.as of October 25, 1974 () and January 31, 1975. C-29 Sixth Amendment to 5.4.3 2-64294 Exhibit C-26 dated as of April 18, 1979. C-30 Seventh Amendment to 5.4.4 2-64294 Exhibit C-26 dated as of April 18, 1979. C-31 Eighth Amendment to 5.4.5 2-64815
. Exhibit C-26 dated as of April 25, 1979.
C-32 Ninth Amendment to 5.4.6 2-64815 Exhibit C-26 dated as of June 8, 1979.
- C-33 Tenth Amendment to 5.4.2 2-66334 Exhibit C-26 dated as of October 10, 1979.
C-34 Eleventh Amendment to 5.4.8 2-66492 ~ Exhibit C-26 dated as of December 15, 1979. O
Central Maine ?cwer C:mpany Form 10-K - 1980 Central Maine Power Comeany Incorporated Filed Documents herewith SEC at Exhibit Docket Page C-35 Twelfth Amendment to 5.4.9 2-68168 Exhibit C-26 dated as of June 16, 1980. I C-36 Thirteenth Amendment to 10.6.10 2-70579 Exhibit C-26 dated as of December 31, 1980. C-37 Transmission Support Agreement 13-58 2-48965 dated as of May 1, 1973 among Public Service Company of New Hampshire and other utilities including the Company with respect to New Hampshire Nuclear Units. h C-38 Agreements relating to purchase and transmission power from New Brunswick Electric Power Commission, as follows: C-39 Participation Agreement, dated 4.23.1 2-35073 June 20, 1969 between Maine Electric Power Company, Inc. registrant and other utilities. C-40 Power Purchase and Transmission 4.23.2 2-35073 Agreement between Maine Electric Power Company, Inc., registrant and other utilities, dated August 1, 1969. C-41 Agreement amending Exhibit C-40 4.41 2-37987 dated June 24, 1970. C-42 Agreement supplementing 5.7.4 2-51545 Exhibit C-40 dated December 1, 1971. O 34 -
f Central Maine Power Company Form 10-K - 1980 () Central Maine Power Company Incorporated Filed Documents herewith SEC at Exhibit Docket Page C-43 Assignment Agreement dated 5.7.5 2-51545 March 20, 1972, between Maine Electric Power Company, Inc., and The New Srunswick Electric Power Commission. C-44 Capital Funds Agreement dated 4.19.1 2-24123 as of September 1, 1964 between Connecticut Yankee Atomic Power Company, the registrant and others. C-45 Powar Contract dated as of 4.19.2 2-24123 July 1, 1964 between Connecticut Yankee Atomic O Power Company, the registrant and others. C-46 Stockholder Agreement dated as 4.19.3 2-24123 of July 1, 1964 among the Stockholders of Connecticut Yankee Atomic Power Company, including the registrant. , C-47 Connecticut Yankee Transmission 4.19.4 2-24123 Agreement dated as of October i . 1, 1964 among Stockholders of l Connecticut Yankee Atomic Power Company, including the I registrant. C-48 Agreements with Yankee Atomic Electric Company (Yankee), l dated June 30, 1959, as follows: i l Stockholder Agreement. 4.17.1 2-15553 Power contract. 4.17.2 2-15553 l- Research Agreement. 4.17.3 2-15553 0 1
Central Maine Power Company l Form 10-K - 1980 Central Ntaine Power Comoany 0 Incorporated Filed Documents herewith SEC at Exhibit Docket Page C-49 Transmission Agreement with 4.18 2-15553 Cambridge Electric Light Company and other sponcoring stockholders of Yankee. C-50 Agreement for Joint Ownership, 5.16 2-52900 Construction and Operation of William F. Wyman Unit No. 4 between Central Maine Power Company, and other utilities dated November 1, 1974. C-51 Amendment to Exhibit C-50 5.48 2-55458 dated as of June 30, 1975. C-52 Amendment to Exhibit C-50 5.19 2-58251 dated as of August 16, 1976. C-53 Unit Participation Agreement 13-43.1 2-44377 relating to purchase and transmission of power from New Brunswick Electric Power Commission dated November 15, 1971. C-54 Preliminary Ag reement dated 13-65 2-44377 as of July 5, 974 among The Connecticut Light and Power Company and other utilities including the registrant, with respect to two nuclear generating units to be constructed in Montague, Massachusetts. C-55 Amendment to Exhibit C-54 13-58(a) 2-54449 dated June 30, 1975. 9 Central Maine Power Company Form 10-K - 1980 Central Maine Power Comcany - Incorporated Filed Documents herewith SEC at Exhibit Docket Page C-36 Transriission Agreement dated 13-57 2-54449 November 1, 1974 among Central Maine Power Company, and other utilities including the Company with respect to William F. Wyman Unit No. 4. C-57 Sha:ing Agreement--1979 2.43 2-50142 Connecticut Nuclear Unit dated September 1, 1973 to which the Company is a party. l C-58 Amendment to Exhibit C-57 5.16 251999 l dated as of August 1, 1974. () C-59 Agreement dated as of February 25, 1977 among the 5.24 2-58251 registrant, the Connecticut Light and Power Company; the Eartford Electric t.ight Company and Western Massachusetts Electric Company relating to Millstone Unit No. 3. C-60 Trust Indenture dated as of 5.27 2-60786 .
. June 1, 1977 between the Town of Yarmouth and Casco Bank &
Trust Company, as trustee, relating to the Town of Yarmouth's 6 3/4% Pollution Control Revenue Bonds (Central Maine Power Company, 1977 Series A).
. C-61 Installment Sale Agreement 5.28 2-60786 dated as of June 1, 1977 between the Town of Yarmouth and the Company.
O
Central Meino Powor Company Form 10-K - 1980 s Central Maine Power Comoany 9 Incorporated Filed Documents herewith SEC at Exhibit Docket Pace C-62 Joint Ownership Agreement dated 5.29 2-60786 as of December 22, 1977 among the Company, Massachusetts Municipal Wholesale Electric Company and Green Mountain Power Corporation relating to Sears Island Coal Unit. C-63 Transmission Support Agreement 5.30 2-60786 dated as of December 22, 1977 among the Company, Massachusetts Municipal Wholesale Electric Company and Green Mountain Power Corporation rela':ing to Sears Island Coal Unit. C-64 Agreement to Transfer Ownership 5.31 2-60786 i Share dated as of April 30, ! 1979 between The United Illuminating Company and , Central Maine Power Company. I C-65 Amendment to Exhibit C-51 5.31 2-68184 dated as of December 31, 1 1978. l C-66 Uranium Concentrates Sales Agreement 5.33 2-68184 dated as of November 6, 1978 , between International ) Minerals & Chemical Corporation and Maine Yankee Atomic Power Company, as amended. ; 1 C-67 Revolving Credit and Term Loan 5.34 2-68184 Agreement dated as of April 29, 1980. O Central Maine Power Company Form 10-K - 1980 () Central Mair.e Power Comeany Incorporated Filed Documents herewith SEC at Exhibit Docket Page C-68 Labor Agreements dated as of 5.35 2-68184 May 1, 1980 between the Company and Local No. 1837 of the International Brotherhood of Electric Workers. C-69 Agreements for the assignment of 5.36 2-68184 a portion of the Company's rights to receive uranium enriching services from the Department of Energy. a) Assignment to Gulf States Utilities Company dated ar. of June 20, 1980. O b) Assigt. ment to Maine Yankee Atomic Power Company dated as of June 24, 1980. c) Assignment to Texas Utilities Generating Company dated as of June 18, 1980. d) Assignment to The Tokyo l, Electric Power Company, Inc. t dated as of June 13, 1980. e) Assignment to The Japan Atomic Power Company dated as of June 24, 1980. C-70 Settlement Agreement between the 5.37 2-68184 Company and its wholesale electric customers, effective March 1, 1980. D. Statement re Computation of cer share earnings Not Applicable
Central Mnino Power Company , Form 10-K - 1980 l Central Maine Power Comeany lll Inco rporated Filed Documents herewith SEC at Exhibit Docket Pace E. Statements re comeutation of ratios Not Applicable F. Annual Recort to Security Holders Filed herewith: F-1 1980 Annual Report to Stockholders G. Letter rs change in accourting erincieles Not Applicable E. Previously unfiled documents ggg Not Applicable I. Subsidiaries of the registrant Filed herewith: I-1 List of subsidiaries of registrant. (b) A report on Form 8-K was filed on November 4, 1980. The items reported on in said Form 8-K were under Item 5 of said Form and related to a rate decision issued by the Maine Public Utilities Commission on October 31,~1980 cnd recent developments with respect to the Seabrook project. 30 -
O SIGNATURES 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 be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Augusta, and State of Mafhe on the 19th day of March,1981. , CENTRAL MAINE POWER COMPANY Thomas C. Webb By THOMAS C. WEBB, Senior Vice President, Finance Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date President of the Company and Chief Executive Officer; Elwin W. Thurlow Director March 19, 1981 ELVIN W. THURLOW (Principal Executive Officer) Senior Vice President, Thomas C. Webb Finance March 19,1981 TMOMAS C. WEBB (Principal Financial and Accounting Officer) Senior Vice President, Engineering and Charles E. Monty Production; Director March 19, 1981 CHARLES E. MONTY l Chairman of the Board E. Clifford Ladd of Directors March 19, 1981 E. CLIFFORD LADD Senior Vice President, Customer Services; < Robert F. Scott Director March 19,1981 ROBERT F. SCOTT Priscilla A. Clark Director March 19, 1981 PRISCILLA A. CLARK Galen L. Cole Director March 19, 1981 GALEN L. COLE E. James Dufour Director March 19, 1981 E. JAMES DUFOUR
O Gsorte H. Ellis Director March 19. 1981 GECRGE H. ELLIS Lton A.Gorman Director March 19, 1981 LEON A. GORMAN Roland L. Marcotte Director March 19, 1981 ROLAND L. MARCGTTE Crrlton D. Reed, Jr. Director March 19, 1981 CARLTON D. REED, JR. John J. Russell Director March 19, 1981 JOHN J. RUSSELL Hr.lsev Smith Director March 19, 1981 RALSEY SMITH Jrmes H. Titcomb Director March 19, 1981 JAMES H. TITCOMS O ANNI;AL REPORT ON FORM 10-K T mT_.M.
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1 l FCRM 10-K - ITEM ll(a)(1) and (2 ) CENTRAL MAINE PC'GR COMPANY O LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES I. The following financial statements of Central Maine ?cwer Company, included in the annual report of the registrant to its shareholders for the year ended Decenter 31, 1980, are incorporated by referenca in Ite= 8. A_nnual Recort Report of independent public accountants Page 33 Salance Sheet as of December 31, 1980 and 1979 Pages 18, 19 Statement 'of Earnings for the three years ended Dece=ber 31, 1980 Page 20 i Statement of capitalization and interi= financing as of Dece=ber 31, 1980 and 1979 Page 21 Statement of changes in Cc==on Stock investment for the three years ended Dece=ber 31, 1980 Page 22 l State =ent of sources of funds for construction for the three years ended Dece=ber 31, 1980 Page 23 Notes to financial statements Pages 24-33 i II. The following report and consent relating to the financial statements of Central Maine Power Cc=pany are filed herewith and included in Ite= ll(a)(1): Pare i Report of independent public accountants as to l financial statement schedules F- 4 Consent of independent public accountants F- 5 III. The following financial statements of significant subsidiaries of the registrant are filed herewith and included in Ite= ll(a)(1): MAINE ELECTRIC POWER COMPANY, INC. Report of Independent Public Accountants F6 State =ent of Income for the three years ended Dece=ber 31, 1980 F-7 Salance Sheet at Dece=ber 31, 1980 and 1979 F8 1 , Statement of Changes in Co==cn Stock Investment for the three years ended December 31, 1980 F9
C Statement of Changes in Financial Position for the three years ended Dece=ber 31, ',80 F lO Notes to Financial Statements , F ll MAINE YANKEE ATOMIC ?OWER COMPANY Report of Independent Public Accountants F-15 Statement of Income for the three years ended December 31, 1980 F-16 Balance Sheet at December 31,1980 and 1979 F-17 Statement of Capitalization at December 31, 1980 and 1979 F-19 Statement of Changes in Cc= mon Stock Investment for the three years ended Dece=ber 31, 1980 F-20 Statement of Sources of Funds for Acquisition of Nuclear Fuel and Construction of Electric Property for the three years ended December 31, T 1980 F-21 (O Notes to Financial Statements F 22 IV. The following financial statement schedules of Central Maine
?cwer Co=pany and its significant subsidiaries are filed herewith and included in Item ll(a)(2):
Schedule III - Investments in, Equity in Earnings of, and Dividends from Associated Co=panies F 37 Schedule V - Property, Plant and Equipment F 40 Schedule VI - Reserves for Depreciation of Property, Plant and Equipment F 43 Schedule VIII - Reserves Exclusive of Reserves for Depreciation F- 4 6 SIGN!?ICANT SU3SIDIARIES MAINE ELECTRIC POWER COMPANY, INC. Schedule V - Electric Property for the threr years {,, s) ended December 31, 1980 F 49 F-2 1 _ _ _.- _ . - J
Schedule VI Accumulated Provisions fer Oepreciation g of Electri Property for the three years ended W December 31, 1960 F-50 MAINE YANKEE ATOMIC PO' DER COMPANY Schedule V - Electric Property and Nuclear Fuel F-51 Schedule VI - Accumulated Provision for Depreciation and A=crtization of Elactric Plant and Nuclear Fuel F-54 Schedule IX - Short-Ters Borrowings F-55 All other schedules are c=10:ed as the required information is inapplicable or the infernation is presented in the financial state-
- ants or related notes.
O O @ l l I 1 1 1 1 1
- -a 1
4
Central Maine Power Company Form 10-K - 1980 l Central Maine Power Company REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES TO CENTRAL MAINE POWER CCMPANY: In connection with our examinations of the financial I statements included in Central Maine Power Company's annual report to stockholders and incorporated by reference in this Form 10-K, we have also examined the supporting schedules listed in the accompanying index. In our opinion, these schedules present fairly, when read in conjunction with the related financial statements, the financial data required to be set forth therein, in conformity with generally accepted accounting i principles applied on a consistent basis. F ARTHUR ANDERSEN & CO. O Boston, Massachusetts, February 6, 1981. - O r.=
Central Maine Power Company Form 10-K - 1980 h Central Maine Power Company CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby coasent to the incorpora-tion of our reports appearing in the annual report on Form 10-K for the year ended December 31, 1980, of Central Maine Power Company in its Registration Statement on Form S-16 (File No. 2-66624). ARTHUR ANDERSEN & CO. Boston, Massachusetts, March 23, 1981. O O F-3
central Maine Power Company l Form 10-K-1980 To the Board of Directors of Maine Electric Power Company, Inc. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have examined the balance sheet of Maine Electric Power Company, Inc. (a Meine corporation) 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. Our examinations were made in accordance with generally accepted audit-ing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. O 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 schedules present fairly the informa-i - i tion required to be set forth therein, all in conformity with generally accepted accounting principles applied on a consistent basis. ARTHUR ANDERSEN & CO. Boston, Massachusetts,
'Februrry 6, 1981.
38A2 O F-6
Central Maine Power Company zor= 10-K-1980 Maine Electric Power Cocroany, Inc. 0 STATEMENT OF INCOME For the Three Years Ended December 31, 1980 (Dolhrs in Thousands Except per Share Amounts) Year Ended Decuber 31, 1980 1979 1978 l l'I2CTRIC OPERATING REVENTJES $111,604 $98,122 $59,860 OPERATING EXPENSES Purchased Power (Note 1) 108,756 95,368 57,181 Operation 303 106 182 l Maintenance (Note 1) 136 153 44 ! Depreciation (Note 1) 735 735 736 ! Taxes l Federal and State Income (Note 2) 152 162 197 Local Property and Other "16 217 229 Total Operating Expenses 110,298 96,841 58,569 OPERATING INCohE 1,306 1,281 1,291 g OTHER INCOME AND DEDUCTIONS, NET 110 112 74 INCOME BEFORE INTEREST CHARGES 1,416 1,393 1.365 INTEREST CHARGES ! Long-Term Debt (Not' 3) 993 1,056 1,127 Other 277 182 74 Total Interest Charges 1,270 1,238 1,201 NET INCOME $ 146 $ 155 $ 164 Weighted Average Number of Shares of Conunon Stock Outstanding 12,161 12,923 13,677 EARNINGS PER SHAPI 0F COMMON STOCK $ 12.00 $ 12.00 $ 12.00
~
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK 12.00 S 12.00
$ $ 12.00 The accompanying notes are an integral part of these financial statements.
38A3 O l z-7
Central Maine Power Cc=pany For= 10-K-1930 Maine Electric Power comoany, Inc. BALANCE SHEET (Dollars in Thousands) ASSETS a December 31, 1980 1979 ELECTRIC PROPERTY, at Original Cost (Notes 1 and 3) (Sch. V) $18,588 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 approxi: nates 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 $22,804 STOCKHOLDERS' INVESTMENT AND LIABILITIES Common Stock Investment Common Stock, $100 Par Value, Authorized 20,000 Shares, Outstanding 11,733 in 1980 and 12,467 in 1979 $ 1,173 $ 1,247 Retained Earnings - -
Total Common Stock Investment 1,173 1,247 Series A 9k". 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 11,807 CURRENT LIABILITIES Current Sinking Fund Requirements (Note 3) 584 660 ! Notes Payable - Banks (Note 3) 1,5 15 - l Accounts Payable l Associated Companies 36 90 J Other 10 468
- Dividends Payable 35 37 Accrued Purchased Power '
15,350 7,547 l Accrued Interest and Taxes 427 466 i Other 74 - Total Current Liabilities 18,031 9,268 DEFERRED CREDITS Accumulated Deferred Income Taxes (Note 2) 1,818 1,696 Unamortized Investment Tax Credits (Note 2) 9 10 Unamortized Gain on Reacquired Debt (Note 1) 169 23 O Total Deferred Credits 1,996
$31.100 1,729
$22.d04 The accompanying notes are an integral part of thuse financial statements.
l F-3
- _ _ _ _ _ _ - _ . _ . . . . ..._.. ____..._ . - _. - , _ --___ _ __ _ _ . . _ _ . _.. - - . - _ . . _ _ _ ~
Central Maine ?cwer C;=pany Form 10-K-1930 O Maine Electric Power Coepany. Inc. STATEMENT OF CHANGES IN COMMON STCCK IMTSTMENT For the Three Years Ended December 31, 1980 (Dollars in Thuusands) Amount at Par Retained Shares Value Ea rnings Total Balance December 31, 1977 13,984 S1,398 S $1,398 Add (Deduct) Vet Inccme 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 (781) (78) ___ (78) Balance December 31, 1979 12,467 1,247 1,247 Add (Deduct) Net Income 146 146 Dividends Declared (146) (146) Redemption of Stock (734) (74) (74) Balance December si, 1980 11,733 $1,173 $ $1,173 The accompanying notes are an integral part of these financial statements. . e 38A5 ., O
- -r
Central Maine Power Cc=pany Form 10-K-1980 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 $ 164 Depreciation 735 735 736 Deferred Income Taxes 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 Redemption of Common Stock 74 78 73 () Other Increase in Working Capital, (157) 799 (23) 870 (5) 892 exclusive of sinking fund ! requirements $ 203 $ 160 $ 194 l Increase in Working Capital, i exclusive of sinking fund requirements-Cash, Receivables and Temporary Investments S 9,040 $2,730 $ (421) Other Current Assets 2 7 4 Notes Payable (1,515) - - Other Current Liabilities (7,324) (2,577) 611
$ 203 $ 160 $ 194 The accompanying notes are an integral part of these financial statements.
38A6 O F-10 l l I
.-. . -, ..._...._....._. _ _ .. _..._..~. ..._ _..._ .._ _ _.__.._ _ ___..._._...__..__.._._._ __ .______ _____ _ _
Central Maine Pcwer Oc=pany For= 10-K-19c0 l Maine Electric Power Company, Inc.
)
NOTES TO FINANCIAL STATEMENTS
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES The Comoany: 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 Ccanission (New l Brunswick) under a 25-year Interconnection Agreement. Under a Par- : ticipation Agreement which terminates in 1996, all costs of the Com- l pany (including a return on invested capital), to the extent not met by transmission revenues, are paid by the participating utilities l (Participants), which include most of the larger companies in New England and a group of publicly-owned systems. Under a Power Pur- I chase Ag eement, New Brunswick provided to the Participants over the interco:.aection up to 400,000 kilowatts of base load power in 1980. Under an Amendment Agreement, effective January 1,1981, New 3 runs-wick will provide 133,000 kilowatts through October 31, 1985. The following is a list of those companies that purchase power from 1 the Company and their respective entitlements: hl Percent of Entitlement ! Particicant 1980 (400MW) 1981 (133MW) Banger Hydro-Electric Company 2.395% 1.9962% Soston Edison Ccmpany 16.250 13.5429 i 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 1 Fitchburg Gas and Electric Company .770 2.3158 Maine Public Service Company .844 6.2977 - Marblehead Municipal Light Department .170 .1413 l Middleborough Municipal Light Department .769 1.1098 Middleton Municipal Light Department .056 .2820 Montaup Electric Company 5.792 4.6714 New England Power Company 22.500 13.3158 Newport Electric Corporation 2.260 1.8828 Peabody Municipal Light Department .546 .4549 Public Serrice Ccapany of New Hampshire 26.250 20.8354 Shrewsbury Municipal Light Department .275 .8271 Union River Co-op .005 .0045 Vermont Electric Power Company, Inc. 7.509 16.5135 Wakefield Municipal Light Department .268 .8060 West Boylston Municipal Lighting Department .083 .2496 Total 100.000% 100.0000% l F-il
Central Maine Power C0=papy Form 10-K-19c0 0 Maine Electric. Power Compaav. Inc. NOTES TO FINANCIAL STATEMENTS
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued) The Comeanv: (continued) The following Maine electric utilities own all of the Company's Common Stock: Ownership Soonsor 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 100.03 Regulation: The Ccapany is subject to the regulatory authority of O the Federal Energy Regulatory Commission and the Public Utilities Commission of the State of Maine as to operations, accounting and other matters. Depreciation and Mainter.ance: Depreciation is provided using the composite and straight-line methods at rates designed to fully depreciate all properties over the period ending July 1, 1996. [ l 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 Losses: Gains and losses on bonds reacquired to satisfy sinking fund requirements are deferred and amortized over the remaining original term of the Series A Bonds.
- 2. INCCME TAX EXPENSE The components of Federal and State income taxes reflected in the statement of income are as follows:
38A8 1 O F-12 i l
._ _ _ _ _ _ . _ . . - . - -. . ~ . ----------- - . - - - - -
i Central Maine ?cwer Ccr.pany For: IC-K-1930 9
. Maine Electric Power Comoanv, Inc.
I NOTES TO FINANCIAI. STATE.MENTS
- 2. INCOME TAX EXPENSE (continued) i i
Year Ended December 31, - 1980 IS/9 1978 Federal: (Dollars in Thousands) Current $ 30 $ 21 Deferred $ 10 105 121 162 Investment Tax Credit, Net (1) - (1) 134 142 171 State: - Current 1 1 1 Deferred 17 19 25 IS 20 26 Total Income Taxes $152 $I62 $197 The Company provides deferred Federal and state inceme taxes for the tax effects of timing differences between pre-tax accounting income lh and income subject to tax. The deferred provision represents prin-cipally the tax effects arising from the use of accelerated deprec-istion for income tax purposes which currently exceeds the amounts provided in the income statements. Investment tax credits are de-ferred and amortired over the lives of the related properties. The table below reconciles a provision calculated by multiplying income before Federal taxes by the statutory Federal income tax rate to the provision for Federal income taxes: 1980 1979 1978 Amount } Amount i Amount } (Dollars in Thousands) Federal income tax provis-ion at statutory rate $129 46.0% $137 46.0% $161 48.0% Difference in tax expense: Depreciation and amor-
- tization for accounting purposes not allowed for tax purposes 22 8.0 22 7.6 22 6.7 Surtax exemption (19) (6.8) (19) (6.4)
Other (13) (3.9) 2 .7 2 .6 1 .3 Federal income tax provision
$134 47.9% $142 47.3% $171 51.1%
38A9 O
- _~
Cen ral Maine Power Company Form lO-K-1930 O Maine Electric Power Companv, Inc. NOTES TO FINANCIAL STATEMENTS
- 3. FIRST MORTGAGE BONDS Under the terms of the -indenture securing the First 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. COMPENT,ATING 3ALANCES 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 compensating balance require-ment for $2,500,000 is 10% of the line or 20% of outstanding borrow-ings, whichever is greater. With respect to $1,500,000 the compen-sating balance requirement is 2% of the line plus 13% of outstanding O borrowings. With respect to S3,000,000 there is no compensating balance requirement but there is an annual fee of 5/3 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 infor: nation related to these lines is as follows:
~
1980 1979 1978 (Dollars in Thousands) Total lines of credit at end of periode $10,400 $8,400 $8,400 Borrowings outstanding at end of the periods 1,5 15 - - Average daily outstanding borrowings for the twelve months ended 1,574 1,179 765 Average annual interest rate for the twelve months ended ' 16.18% 13.65% 9.02% Highest level of borrowing at any time during the twelve months periods $10,250 $8,150 $5,300
,38A10 O
F-12
Central Maine Pcwer Company Form 13-K-1933 O RIPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Maine Yankee Atomic Power Company: We have examined the balance sheet and statement of capitalization of Maine Yankee Atomic Power Company (a Maine corporation) as of Decem-ber 31, 1980 and 1979, and the related statements of income, changes in common stock investment and sources of funds for acquisition of nuclear fuel and construction of electric property for the three years ended December 31, 1980, and the supporting schedules as listed on the accom-panying index. Our examinations were made in accordance with generally accepced auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we consid-ered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of Maine Yankee Atemic Power Company as of December 31, 1980 and 1979, and the results of its operations and its sources of funds for acquisition of nuclear fuel and construction of l electric property for the three years ended December 31, 1980, and the - supporting schedules present fairly the information required to be set forth therein, all in conformity with generally accepted accounting principles applied on a consistant basis. ARTHUR ANDERSZN & CO. Boston, Massachusetts, February 6, 1981. - l 0 l l 7-15
Central Maine Power Cc=pany Form 10-K-1060 0 Mai e ra *ee Ate 1c Po er Co can. STATEMENT OF INCOME (Dollars in Thousands Except Per Share Amounts) Year Ended December 31, 1 1980 1979 1978 l 1 ELECTRIC OPERATING REVENUES $84,245 $68,867 $70,373 1 OPERATING EXPENSES Fuel (Notes 1 and 10) 24,024 15,319 17,411 Operation 18,370 14,193 10,684 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 Expenses 66,211 51,949 53,561 OPERATING INCOME 18,034 16,918 16,812 OTHER INCOME (EXPENSES) Allowance for Other Funds Used: O During Construction (Note 1) For Nuclear Fuel (Note 1) 253 1,118 76 1,547 50 1,341 Other (145) (113) (6) INCOME 3EFORE INTEREST CHARGES 19,260 18,428 18,197 INTEREST CHARGES Long-Tera Debt (Notes 4 and 5) 14,171 13,307 11,534 Other 1,480 205 49 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 APPLICABLE TO CCMMON STOCK $ 6,574 5 6,650 $ 6,702 SHARES OF COMMON STCCX OUTSTANDING 500,000 500,000 500,000 EARNINGS PER SHARE OF COMMON STOCI $13.15 $13.30 $13.40 O DIV!DENES DECLARED PER SHARI 0F COMMCN STOCK S13.19 S13.25 $13.40 The ace: panying notes are an integral part of these financial statements.
- ?-16 1
Central Maine Power C0=pany Form 10-K-1930 Maine Yankee Atomic Power Comoacy l l BALANCE SEET ! (Dollars in Thousands) j l ASSETS l l
,., December 31, 1980 1979 EEFCTRIC PROPERTY, at Original Cost (Notes 4 and
- 10) (Sch. V) $246,921 $240,061 Less: Accumulated Depreciation and l Amortization (Note 1) (Sch. VI) 61,803 54,105 185,118 185,956 l l Construction '4ork in Progress 9,124 8,951 Net Electric Property 194,242 194,907 l
NUCLEAR FLT.L at Original Cost (Notes 1 and 10) (Sch. V) l Nuclear Fuel in Reactor 74,346 52,564 Nuclear Fuel-Spent 51,814 42,557 Nuclear Fuel-Stock 4,895 131,055 35,679 130,S00 g
' Less: Accumulated Amortization (Note 1)
(Sch. VI) Original Cost 91,023 76,443 Permanent Disposal, Net 24,845 15,401 15,187 38,956 Nuclear Fuel in Process 70.240 40,394 ( Net Nuclear Fuel 85,427 79,350 Net Electric Property and Nuclear Fuel 279,669 274.257 l CURRENT ASSETS l Cash (Note 3) 62 139 Accounts Receivable 9,544 6,474 Materials and Supplies, at Average Cost 3,746 3,503 l Prepayments 1,042 949 , l ' l iotal Current Assets 14.394 11,065
- DEFERRED CHARGES AND OTER ASSETS 3.001 1.783 S297,064 5287,105
~he accompanying notes are an integral part of these financial statenents.
1 1 l
* '~ ---
Central Maine Power Cc=cany g Form 10-L 1930
~
Maine Yankee Atomic Power Comoany BALANCE SHEET (Dollars in Thousands) STOCKHOLDERS' INVESTMENT AND LIABILITIES December 31, 1980 1979 CAPITALIZATION (See Separate Statement) Counca Stock Investment S 67,052 $ 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 MYA FUEL COMPANY (Note 5) 33,225 33,450 CURRENT LIABILITIES Notes Payable to Banks (Note 3) (Sch. IX) 16,000 3,925 O Current Sinking Fund Requirements (Note 4) Accounts Payable 1,084 2,600 1,822 3,412 Bank Checks Outstanding 671 - Dividends Payable 2,000 1,919 Accrued Interest and Taxes 2,877 2,739 ___ Other Current Liabilities 53 47 Total Current Liabilities 25,285 13,864 COMMITMENTS AND CONTINGENCIES (Note 8) DEFERRED CREDITS Accumulated Deferred Income Taxes (Note 2) 47,004 45,224 Unamortized Investment Tax Credits (Note 2) 8,166 7,346 _ Unamorti:ed Gains on Reacquired Debt (Note 1) 2,754 1,371 Total Deferred Credits 57,924 53,941
$297,064 $237,105 The accompanying notes are an integral part of these financial statements.
O ' F-13
Central Maine Power Cc=pany & Form 10-K-1900 W Maine Yankee Atomic Power Comnany STATEMENT OF CAPITALI2ATION (Dollars in Thousands) December 31. 1980 1979 COM".ON STOCK INVESTMENT Common Stock, $100 Par Value, Authorized and outstanding 500,000 Shares S 50,000 S 50,000 Other Paid-in Capital 16,805 16,805 Capital Stock Expense (255) (281) Gain on Cancellation of Preferred Stock 316 110 Premiums on Preferred Stock ISO 196 Retained Earnings 6 27 67,052 66.857 R N "A3LE 2 REFERRED STOCK - 7.48% Series,
$100 Par 'jalue, Authorized 170,000 Shares, Outstanding 119,805 at December 31, 1980 and 130,700 at December 31, 1979 (Note 19) 11,980 13,070 LONG-TERM DEST (Note 17)
First and General Mortgage Bonds Series A - 9.10 % due May 1, 2002 55,050 58,161 Series B - 8 1/2% due May 1, 2002 37,034 38,911 Series C - 7 5/8% due May 1, 2002 ' 10,752 10,842 Less: Current Sinking Fund Requirements (1,084) (1,822) Unamortized Debt Discount, Net of Premium (154) (169) 101,598 105,923 Total Capitalization $180,630 $185,850 The accompanying notes are an integral part of these financial statements. O F-u
Central Maine Power Cc:tpany Forr. 10-K-iHO Maine Yankee Atomic Power Comoany STATEMENT OF CHANGES IN COMMON STOCX INVE.iTMENT For the Three Years Ended December 31, 1980 (Dollars in Thousands) Amount at Retained Shares Par Value Other, Net Earnings, Total 3alance December 31, 1977 500,000 $50,000 $16,769 $ -
$66,769 Add (Deduct)
Net Income - - - 7,727 7,727 Cash Dividenc, Declared on - Ccanon Stock - - - (6,700) (6,700) Preferred Stock - - - (1,025) (1,025) Capital Stock Expense - - 13 - 13 Balance December 31, 1978 500,000 50,000 16,782 2 66,784 Add (Deduct) Net Income - - - 7,651 7,651 Cash Dividends Declared on - Comunen Stock - - - (6,625) (6,625) Preferred Stock - - - (1,001) (1,001) Redemption of Preferred Stock - - 35 - 35 Capital Stock Expensd - 13 - 13 Balance December 31, 1979 5N ,000 50,000 16,830 27 66,857 Add (Deduct) Net Income - - - 7,508 7,508' Cash Dividends Declared on - Common Stock - - - (6,595) (6,595) Preferred Stock - - - (934) (934) Redemption of Preferred Stock - - 206 - 206 Capital Stock Expense - - 10 - 10 Balance December 31, 1980 500,000 $50,000 S17:046 3 6 $67,052 The accotr.panying notes are an integral part of these financial statements. O F-20
l Central Maine Power C =pany For= 10-K-1030 0 1 Maine Yankee Atomic Power Comoany STATEMENT OF SOURCES OF MJNDS FOR ACQUISITION OF NUCLEAR FUEL AND CONSTRUCTION OF ELECTRIC PROPERTY ! l (Dollars in Thousands) l Year Ended December 31, ' 1980 1979 1978 B NDS PROVIDED Internal Sources From Operations Net Income $ 7,508 s 7,651 $ 7,727 Amortization of Nuclear Fuel 24,024 15,319 17,411 Depreciation and Amorti:ation 8,319 8,279 8,173 ' l Deferred Income Tax and Investment l Tax Credits, Net 2,600 6,918 7,583 Allowance for Other it ds Used for Nuclear Fuel and During Sastruction (1,371) (1,623) (1,391) 41,080 36,5*4 39,503 Less: Sinking Fund Requirements: ! Iong-Term Debt 5,078 4,850 5,555 i Preferred Stock 1,090 626 - Dividends on Preferred Stock 934 1,001 1,025 Dividends on Common Stock 6,595 6,625 6,700 i t Other, Net (567) 505 46 W 27,950 22.937 26,177 (Increase) Decrease in Working Capital, Exclusive of Notes Payable to Banks and Sinking Fund Requirements Cash and Receivables (2,993) 425 (616) Other Current As:ets (336) (466) (66) Other Current Liabilities 84 (533) (7,776) (3,245) (5 74,) (8.458) Net Available from Internal Sources 24,705 22,2o3 17.719 External Sources Ine: ease (Decrease) in Notes Payable: IfYA Fuel Company (225) 15,800 8,75 0 Banks 12,075 3,925 - Net Available from External Sources 11,350 19.725 3,750
$36,555 S42,088 $26,469 FUNDS USED FOR ACQUISITION OF NUCLEAR FUEL AND CONSTRUCTION OF ELECTRIC PROPERTY Acquisition of Nuclear Fuel $30,101 $35,244 $25,732 Allowance for Other Funds Used for Nuclear Fuel (1,118) (1,547) (1,341)
Construe ion of Electric Property 7,825 8,467 2,123 Allevance for Other Funds Used l During Construction (253) (76) (50) h S36,555 $42.088 526.069 l '"he accompanying notes are an integral part of these financial statements. \ v ,,
Central Maine ?cwer Company For: 10-K '930 0 . Maine Yankee Atemic Power Cemeany NCTES % FZNANC:AL STATD'EN%
- 1.
SUMMARY
OF SIGNIFICANT ACCCUNT*.NG PCL*CIES ne Comeanv: me Company owns and operates a pressuricac-water nuclear-powered electric generating plant with a current net capacity of approximately 830 megawatts. me plant ccamenced ccamercial operation on January 1, 1973 Me following New England electric utiliths own all of the Company's common stock: Cwnership Secesor/Particicant Interest Central Maine Power Company 385 New England Pcwer Company 20 2e Connecticut Light and Power Company Banger Hydro-nectric Ccapany 7 Maine Public 3ervice Company 5 Public Service Company of New Hampshire 5 Cambridge nectric Light Ccapany 4 Montaup nectric Ccmpany 4 he Hartford nectric Light Ccepany 4 Western Massachusetts n ectric Ccmpany 3 Central Vermont Public Service Corporation 2 1005 yer a period of thirty years, commencing on Janua.7 1, 1973, in accordance with the ?cwer Contracts and, subject to certain limitaticas, each participant shall receive its entitlement percentage of plant output and is obligated to pay its entitlement percentage cf the Ccapany's total ccats, including a return on invested capital regardless of the level of operation of the plant. Ferulation: 2e Company is subject to the regulatory authority of the Federal Energy Regulatory Commission (FE3C), the Nuclear Regulatory Ccamission (NFC) and the Public Utilities Commission of the State of Maine (?UC) as to accounting, operations and other =atters. Cecreciation: Oepreciation is previded using a ec=;csite remaining life sethed designed to fully depreciate electric plant over the period ending May 1, 2002. "nder the O F-22
Central Maine ?cwer Co=cany l
. Ftr:n 10-K-1980 g
Maine Yankee Atemic ?ower Cemeany ! NO"ES TO FDANCIAL STATDiENTS t l 1. Si29(ARY OF SIGNIFICANT ACCCUNTING PCLICIES (centinued) Deereciation: (continued) l caposite method, at the '.ime depreciable property is l retired, the original cost, plus cost of removal, less l salvage, of such property is charged to accumulated i depraa4ation. 1 Decommissioning: me NRC currently recognizes three deccamissioning methods - complete dismantling and reecval, in-place encapsulatien or "entoebment" and mothballing - or a combination of these methods. [(USAEC Regulatory Guide
- 1.86, Termination of ceerating Licenses for Nuclear Peactor (1974).] Altncugh the Company presently does not provide for nuclear plant decommissiening costs, it is considering immediate dissantling as the most desirable and probably the only accer table method of deccamissioning its nuclear reactor. Based on a study performed by Stone and Webster i
Ehgineering Corporation and Nuclear Ehergy Services,
*accrporated, the estimated cost of decommissioning utilizing this methodology is 357,600,000 in 1980 dollars.
Accordingly, the Company proposes to bill out through May 1, 2002, under the terms and conditions of its Power Contract and pending FERC approval, an amount equal to the current estimate of the cost of deccamissioning. The l Company fully recognizes the relative uncertainty of the j future cost of decommissioning, the changing technology of decommissioning or new requirements of the law and, therefare, recognizes the need to constantly senitor and adjust, if necessary, the amcunt of collectica. De ferred carres: 3e Company has adopted the policy of ceterring and amortining over a five year period the ecsts of unusual and irregularly recur-ing studies and inspecticas. mis is in response to recent events and orders requiring the Ccapany to undertake significant analyses of specified operating design ;rocedures and equipment. Amertization of Nuclear ?uel: Se ecst of nuclear fuel in the reactor, plus the estimated ecs: of dispcsal of that nuclear fuel, is asceti:ed to Fuel Expense based on the F-23
l Central Maine Power Company O For= 10-K-1980 Maine Yankee Atomic Power Cemeany NOTES TO FINANCIAL STATINEN"5
- 1. StHMARY OF SIGNIFICANT ACCOUNTING PCLICIES (continued)
Amortization of Nuclear Fuel: (continued) ratio of energy produced during the period to the estimated total core capability with a corresponding credit to i Accumulated Amortization. ' Imring 1978 and 1979 the Company provided for pomanent storage of nuclear fuel in reactor using an estimated cost of permanent storage which was based on a study my the NRC. Specifically the disposal estimate provided was at a rate of SiOO/ kilogram of uranium (KGU) originally contained in the assemblies in 1977 dollars escalated at 85 per year to i l the time of discharge from the reactor. 3eginning in March 1980 the Company's cost estimate for O aers eat di o to $130/KGU 1 or *==1t r rue 1 1= so ===r w 1==re 4 originally contained in the useablies, expressed in 1978 dollars, escalated at 85 per year to the - time of permanent disposal (currently estimated to be 1988). 21s estimate of the cost of permanent disposal (3130/KGU) is based on a report issued by the Department of Energy. This report estimated the cost of pe manent storage to be 3117/KGU originally contained in the assemblies (in 1978 dollars). mis estimate did not include the cost of transportation to the disposal center, which has been estimated by the Company to be 313/KGU. Me disposal cost for Nuclear Fuel in Reactor is being rece rered from participants, based on generation, over the period that the fuel is consumed. Brough 1988 the Company is also adjusting the disposal reserve collected for Spent
?uel to reflect the current disposal cost estimats. Sis adjustment which amounts to approximately 340,000,000 is ,
being recovered based on estimated electric kilowatt hour l generation from March 1980 throt:gh 1988. l 2e estimate of cost of disposal of nuclear fuel is subject l to a number of uncertainties including P,he timing of available storage capacity, the extent of future inflation, regulatory require =ents and the cost of future services, O all of which may require periodic revisions in future nuclear fuel amortization rates. Mcwever, the Company believes that its estimate is reasonabis. F-24
Central Maine ?cwer Cot;1ny Form 10-K-1980 0 Maine Yankee Ateele Pewer Cee any NOTES TO FINANCIAL STATD4ENT3
- 1. SQ4 MARY OF SIGNIFICANT ACCCUNTIN PCLICIES (contine.ed)
Allowance fer Funds Used During Construction- (AFC) and Allowance fer Fbnds Used fer- Nuclear Fuel (AFN): 3e ~ Company records the not cost of bcrrowed funds and a reasonable return on other funds used to finance construction and nuclear fusi acquisition programs. 2e amount of the allowance recorded is determined by
=ultiplying the average monthly dell r balance of Construction Werk in Progress (CWIP) and Nuclear Fuel in F1ocess (NTIP) by rates related to the cost of the capital used to finance the respective additions. me following table centains the weighted average rates used for the seat recent these annual perieds:
AFC ATN A on CWIP on NFIP W 1980 7.265 8 905 1979 7.40 7.68 1978 7.60 7.00 thamertized Cain or- Loss on Reacquired Debt: Gains and losses on bonds reacquired to satisfy sinking fund requirements of First Mortgage Bonds have been deferred and are being amortized to inecae over the remaining original terms of the applicable series as prescribed by the T form System of Accounts of the FERC.
- 2. INCCHE TAX EXPEEE Ihe ecmponents of Federal and state incese taxes reflected in the state =ents of income are as follows:
O F-25
A + .-e i Central Maine .00wer Cc=pany For:n 10-K-1930 Maine Yankee Atemic Power Comcanv NrITS TO FINANCIAL STATD.ENTS
- 2. INCCHE TAX EXPF.63E (continued)
Year Ended Oeceeber ?l. 1980 1979 1978 (Oo11ars in mousands) Federal Current 3 3,242 3 602 3 625 Deferred (2,545) 5,264 4,845 Investment Tax Credits, Net 5,368 812 1,986 6,169 6,578 L.356 State Current 1,463 384 495 Deferred _g) 832 752 1,lu0 1,186 1.237
- Total Fe( eral and State income taxes 3 L1010 37,864 38.703 he Ccepany provides deferred taxes for the tax effects of l
timing differences, primarily accelerated depreciation and certain expenditures related to nuclear fuel, between pre-tax accounting inccme and taxable income. Prior to 1975 the Company did not provide fully for the tax effects of timing differenceu and began in 1976 to provide additional deferred taxes to recognize the tax effects of these prior timing differences through 1980. Investment tax credits are deferred and ascetized over the life of the assets giving rise to such credits. At December 31, 1979 the Company had available a carryever of unused investment tax credits of approxi=ately 35,800,000 to be applied to reduce Federal income taxes. The Ccapany 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 income tax returns for years 1973 through 1977, the Internal Revenue Service examining agent disallowed the current deduction of these ecsts. "he Internal Revenue Services position as ( sustained at the Appelate level which resulted in the Company fully utili:1cs the 35,800,000 of investment tax credit available as of Oece=cer 31, 1979 and paying F-25 i (
l Central Maine ?cwer Company a t For= 10-K '930 . W Maine Yankee Atemic r 'vt e Cemeany NOTES TO FINANCIAL STATD!ENTS r l t
- 2. INCCHE TA% EXPENSE (continued) additional Federal and State inceme tax assessments cumulative through 1979 of 32,729,530 exclusive of interest. Rese assessments had no effect on total inecce tax ex;6nse because the Ccmpany had pectided inceme taxes for the effects of all timing differences.
me folicwing table reconciles the statutory inceme tax l rate to the rate determined by dividing the total Federal incese tax expense by inecme before that expense. Dollars in 2cusands
, 1980 1979 1978
) Amount Amcunt l i i Amount i Statutory Federsi inceme tax rate (increase) Reductions in 36,290 46.0 36,591 36.0 37,288 48.0 h taxes resulting frcm: Ceferred taxes not provided on certain timing differences 418 31 all 29 429 2.8 Amorti:ation of in-vestment tax credits (890) (6.5) (678) (4.7) (573) (3 8) Other 347 25 2.3 1 312 2.1 Calculated rate 36.165
- ===== 35.15 36.678 36.65 37,356 uo.15 i
i - 3 NOTES PAYABLE TO SANKS 1 l l De Company had bank lines of credit totaling 329,000,000 as of December 31, 1980, of which $29,000,000 requires an l annual fee of 1/2 to 5/8 of 1% of the line. Sere are no ecmpensating balance requirements for thesJ lines. Se remaining 31,000,000 dollar line requires a ecmpensating balance of 10% of the line or 20% of relating borrowings, unichever is greater. me Cc=pany had lires of credit at ecember 31, 1979 totaling $13,000,000. With respect to 313,000,0C0 cf the line, there was a required annual fee of 5/3 of 1%. Sere are no ecmpensating balance requirements fer these lines. 1 O l i
.;_o?.
J Central Maine ?cwer Co=pany Fer= 10-K-1930 O Maine Yankee Atemic Pewerr Cemeany NOTES TO FINANCIAL STATmENTS 3 NOTES FATABLE % BANKS (continued) 2e compensating balance requirement for the remaining 31,000,000 dollar line was 10% of the line or 20% of outstanding borrowings, whichever was greater.
- 4. FIRST MCRTUAGE SCNDS 2e annual sinking fund requirements of the First Mortgage Bonds currently outstanding amount to 34,775,000 for each of the years 1981 through 1985. Sends repurchased ascunted to 33,739,000 at December 31, 1980 and 33,436,000 at December 31, 1979 Under the ter=s of the Indenture securing the First Mortgsge Bonds, substantially all electric plant of the Company is subject to a first mortgage lien.
O 5. MTA FUEL CCMPANT Cn August 26, 1976, the Company entered into a Loan Agreement covering the issuance of up to 335,000,000 principal amount of promissory notes to MTA Fuel Company, a subsidiary of BSC Soldings, Inc. SSC is owned by a t partnership composed of partners of Goldman, Sachs & Co. Cerb 4.n information related to this loan arrangement is as follows for the years ended Neember 31:
- - ~~
1980 1979 (Dollars in mousands) Fromissory notes outstanding 333,225 333,450 Average daily outstanding borrowings 332,901 328,252 Highest level of borrowings $33,500 $34,250 Annual interest rate at end
- of periods 20 585 14.185 Effective average annual interest rate 15 425 13 335 U
F-2Q
'0 l
Central Maine Power Corpany Forr. 10-K-1930 g. Maine Yankee Atemic Pcwer Comeany NOTES TO FINANCIAL STATDfENTS 5 MTA FUEL CCMPANY (continued) me Loan Agreement provides that, in the absence of an Event of Default (as defined) or occurrence of a Terminating Event (as defined) the arrangement will extend to May 1, 2002, unless te:-ninated by either party upon proper notice. De Company inust provide 90 days vritten notice while MYA Fuel Company must give at least three years written notice. In order for the arrangement to extend beycnd August 26, 1981, the PUC must extend its. present approval of the arrangement.
- 6. RELE.W.ASLE PREFERRED STCCK me Company may redeem, in whole or in part, any of the 7.48% Series Preferred Stock upon not less than thirty or more than fifty days' notice at $107.11 per share on or before December 31, 1982, and at ancunts decreasing to 3100.00 thereafter; in each case plus, accrued dividends.
De Company must redeem and cancel 6,000 shares annually, at par, and at the election of the Company an additional 6,000 shares may be redeemed and cancelled, at par, en each redemption date. me optional provision is not cumulative. Preferred Stock repurchased and not cancelled a:nounted to 12,195 shares at December 31, 1980, 7,300 shares at December 31,1979 and 7,040 shares at December 31, 1978.
- 7. PENSION PLANS me Company has two acacentributory pension plans which cover substantially all full-ti=e empicyees. 3e Cem;any's policy is to fund pension ecsts accrued on an annual basis, including ascunts sufficient to amortime unfunded prior service ecsts over 30 years.me plans expenses approxi=ated
$183,000 for 1980, 3182,000 for 1979 and 3130,000 for 1973.
O 7-29
Central Maine Power C0= pan /' Form 10-K-1030 0 1 Maine _Ypnkee Atemic Power Cemeat.v NOTIS TO FINANCIAL STATD4ENTS
- 7. PENS!CN PLANS (continued)
Januarv 1 1980 1979 Actuarial present value of accumulated plan benefits: Vested 3173,000 3124,000 Nonvested 166,000, 118,000 3339.000 3242,000 Net assets available for benefits 3913,000 3656.000 O Se assumed weighted average rate of return used in determining the actuarial present value of accumulated plan benefits was 6.255.
- 8. CCMMISENTS AND CONTINGENCIES i
Nuclear Fuel: 2e Company anticipates nuclear fuel expenditures of $30,079,000 for 1981 (exclusive of AFN) and l 3113,362,000 for the period 1982 through 1985 (exclusive of AFN). De Company has contracted for the purchase of all of its uranium concentrate requirements through 1986. De Company has conversion contracts through 1983 and is presently negotiating for conversion services which are expected to meet requirements through 1995. Uranium enrichment services are covered through 2002 under a centract with the epart=ent uf Energy. Nuclear fuel fabrication service requirements are covered through 1983 and a contract is presently being negotiated which is expected to meet services through 1988. me 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 NBC a preposed change in its operating license relating to increasing its existing spent fuel storsge capacity by ;roviding more compact fuel O F-30
~ ~ ~
Central Maine Power Cc=pany Form 10-K-1960 g Maine Yankee Atemic Power Cemeany N0*ES TO FINANCIAL STA DfENTS
- 8. COMMINENTS AND CONTINGENCIES (continued) storage. An intervenor has requested a hearing and the Company cannot predict the scope of that proceeding, its duration or its outeeme. If the proposed change is not approved, the Company will have to develop alternative plans which would involve further approvt.1 by the NRC.
Construction: 2e Company anticipates construction expenditures to amount to 315.400,000 for 1981 including 34,200,000 towards the installation of a steam turbine driven feedpump and 33,200,000 for ecmputer equipment. Price-Anderson: he Price-Ander:en Act requires each reactor licensee to carry 3160 million of pri=ary public liability insurance, supple =ented by a mandatory industry-wide program of self insurance. Under the program, in the event of a nuclear incident at any operatirg reactor in the United States, eaun licensee could be assessed up to 35 million with a limit of two assessments per reactor owned per calendar year in the event of more than ene incident.
*hree Mile Island: The events during the spring of 1979 at the Three Mile Island Nuclear Unit No. 2 in Pennsylvania
( "NI") caused widespread concern about the safety of nuclear generating plants and prompted a rigorous reexaminatica of safety-related equipment and operating procedures in all nuclear facilities by their owners and the NRC. me commission forued by President Carter to investigate the causes of the NI incident issued its report in 1979, recommending a number of changes in NRC organi:ation and practices, licensing of nuclear plants, plant operating practices, operator M ining and other safety-related matters and in 1980, a NBC-cc= mis;.icned report containing si' liar recommendations was releasad. As a result, the NPC has promulgated numerous requirements, including both near-term modifications and longer-ter s design changes. 2e Company has made the modifications required to date by the NRC, but cannot ;redict what further modifications will be required, their cest, or their effect on the operstion of the Maine Tankee plant. O F-31
Central Maine Power Company gorm 10-K-1980 Maine Yankee Atemie Power Ocmeany NOTES TO FINANCIAL STATD4ENTS 9 UNAUDITED QUARTERLY FINANCIAL DATA i Unaudited quarterly financial data pertaining to the results of operations are shown below.
, 1980 Quarter hded _
March 31 June 30 September 30 December ?1 (Dollars in Pacusands, Except Per Share Amcun:s; Electric Cperating Revenues $16,911 324,065 319,678 Cpersting Income 321,591 4,297 4,718 4,546 4,473 Net Income 1,921 1,837 1,836 Earnings Per Share 1,914 of Common Stock 3 35 3 22 3 21 3 37 O 1979 Quarter ?nded March 31 June 30 September 30 December ?1 (Dollars in Thousands, Except Per Share Amounts) Electric Cperating Revenues $16,592 315.324 317,686 319,265 operating Income 4.334 4,234 4,145 4,205 Net Incone 1,933 1,930 1,876 Earnings Per Share 1,012 of Cocunon Stock 3 35 3 35 3 26 3 34 e O g-32
Central Maine Power Coc:pany Form 10-K-1980 Maine Yankee Atomic Power Company hl' NOTES TO FINANCIAI, STATEfENTS
- 10. SUPPI.EfENTARY INFORMATION TO DISCI,0SE THE EFFECTS OF CHANGING PRICES (UNAUDITED)
The following supplementary information is supplied in accordance with the requirements of the Statement of Financial Accounting Stan- i dards No. 33 f.: 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. l Constaat 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 constant 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 g study of the current cost (per kilowatt) of replacing the present w generating plant. This study was updated in 1980 resulting in an increased cost (per kilowatt) from $871 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 market 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 j
was developed by applying the depreciation rate to the current cost l value adjusted by the ratio of average historical cost to year-end l historical cost. t i 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 rata-making practices prescribed by the regulatory com-missions to which the Company is subject, only the depreciation 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 9 7-u
Central Maine Power Cc=pany Form 10-K-19eo Maine Yankee Atemic power Ceareany NOTES TO FINANCIAL STATDE.NTS
- 10. SUPPLEMENTARY INTORMATION TO DISCLOSE C EFFECTS OF CHANGING PRICES (UNAUDITED) (continued) 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. 'ihile i 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 will 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-sent of Income from Operations Adjusted 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 mocetary liabilities experience a gain. The O gain from the decline in purchasing 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 utility plant and amortization of nuclear fuel is limited to amounts based on historical costs, the Company does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital. O 7-y
Central Maine Power C0=pany For= 10-K-1360 Maine Yankee Atemic Power comoany h NOTES TO FINANCIAL STATE.T TS
- 10. SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (UNAUDITED) (continued)
S ta tement of Income and Operations Adjusted for Changing Prices for the Year Ended December 31,1980 (Dollars in Thousands) i Constant Current 0 Dollar Dollar Conventional Average Average Historical 1980 1980 Cost Dollars Dollars Operating Revenues $84,245 $84,245 3 34,245 Operation & Maintenance 22,762 22,762 22,762 l Fuel Expense 24,024 28,351 33,117 Depreciation & Amortization 8,319 15,951 41,419 Taxes 11,106 11,106 11,106 & W l Interest Charges 11,752 11,752 11,752 Other, Net (1,226) (1,226) (1,226) Income (Loss) from Operations (excluding reduction to net recoverable amount) $ 7,508 $ (4,'451) $(34,685) l Increase in specific prices (current cost) of plant and Nuclear Fuel held dur-ing the year * $ 84,345 Reduction to set recov-erable amount $(20,757) (24,229) Effect of increase in general price level (51,139) Net 9.477 Gain from decline in pur-chasing power of net l amounts owed
$ 24,791 $24,791
$ 4,034 $34,268 l
O t 7-35
i Central Maine Power Company Form 10-K-1980 O Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS l
- 10. SUPPLEMENTARY INFORMATION TO DISCLOSE THE Errr. CTS OF CHANGING PRICES (UNAUDITED) (continued)
*At December 31, 1980 current cost of Plant and Nuclear Fuel, net of accumulated depreciation and amortization was $1,031,135 while his-torical costs or net cost recoverable through rates was $279,669. 4 Five Year Comparison of Selected Supplementary Financial Data Adjust-ed fer Effects of Changing Prices (Dollars in Thousands, Average 1980 Dollars) I l
Tears Ended Oeemmber 31. 1940 1979 1978 1977 1976 Operattag levesaes 3 84,2e5 sfTiso sarTI5 ss9 7 2 385,200 Iistorie:1 Cost Information Adjusted for General Inflattos Loss free operations O , escluding reduction to set recoverable aseant 3(4,451) 3 (670) Less free operations per commes share (after preferred divideed requiressat) $(10.77) $ (3.61) Carrest Cast Information Lass free operations
- escluding reducties to ast recoverable ameuat $(34,645) $(26,755)
! Issa free operations l Per commes share (after preferred divideed requirement) $(71.26) $ (55.79) tacess ot' increase in senersi price level over increase is specific prices after reduction to set re-coveratie amount $9.477 $ (2,104) General Information Jet assets at yese end at recoverable amount $64,042 3 71.77t Gaia frees decline in purchasing power of set amounts owed $24,791 3 28,J02 Casa sivsdends per comen saare 313.19 315.04 316.32 $13.22 $19.a0 Average Consumer Petes !ades 244.3 217.4 195.4 131.5 170.5 O
~
F-36
Cent ral Itaine rewe_r C_eeremy _ lavestment s is. Egetty in Earmlage of, sad DivideaJa Deceived free Asaeciated Campesies for the fear Ended December 31, 1980 (Dollars la ThousamJe) i Cel. I Dieidead Neee4ved Col. A Col. B Col. C Col. O Col. E Dus 6mg t he Pe r iod Name of Isamer Betance at_Beginalog of Period AdJillene Dedettions Balance as End of Feriod het Artomated fes and Destripties Number Pertest of Equity 04vidende Number Percent of by t he Iq.el t y el lavestment of Sharea OweesablL Amount 1.a Essailege Other Regg vj Other of y ses Oweesabig, t _ _ Me,4.J , SubaiJaaries Not Comaelidated Teatee Atomic Electric Ceepany: Coe . Sie k 14.573 9.51 8 1,457 8 8 8 8 14.573 9.51 8 1.457 Equit y la easnings 505 164 178 491 1942 164 178 I,944 Nome Commestitut Tsakee Ateele Power Company: Common Stesh 21,000 6.0 2,500 24,000 6.0 2,500 Capital Coat ibetles 180 180 Capital Centraleution Agesement - Sabesdinated 8.oana 300 300 k.aulty in essaings j62 197 164 791
,3,042 197 304 165 3,}71 N.ne Vereunt Yankee Netseer Power Carperstles:
,,3 t'ame a Stea k 16,003 4.0 9.600 16,001 4.0 8,600 g Ret us a Iher ing Cose t s uc t isen 507 507 w Equity in caratage 228 228 219 210
'~
-a fla6me Yankee Atomic f .er Ceepany:
13fi ~ 2}i 239 2,317 Nome C on St oc k 190,000 38.0 19,000 190,000 38.0 69,000 Return During Comattaction 6.346 6,346 Equity la carnings le 498 2 2 bN! 2,b!! b b,506 N 254 )8! ""'" ffeine Llettric rower Ceapany, Inc.6 C-- - Sto k 9,743 78.2 974 58 9,869 18.1 916 Equity in easmings 184 lie O
~ )( 9 ~lli ~ill ~58 (Note) llE Name h c te:Is.J Sci. Itie. C.rporatie. re C Se ei k 180 100.0 Il lle 100.0 II
,y y Open Ascomet 1,777 1.257 3,034 o p.,
Equity la easmings 5) 2 , _54 (8) 2 h,N [ 1 N(3) Name [ Cential Sesusitsee Cosperation: og yg g
.ca As- us. 763 44 807 Equaty in earningo 3A6 35 _ 348 g y 1,070 M 44 1,149 Weae O (L I O 1he Unsee Water-rower Cuepany: m C C - St oc k 2,470 100.0 258 2.470 100.0 258 g(( %
Eq*e6ty is earninge _ (72) 53 _ (19) pq co _ I$$ d! __ _ _ . . _
-. J y N..ae o g 814 741 8 M *5 8.58 838,370 4,
_s__ 8 M _98 l l ._'* !_ O Mate: NcJeept ion of Come.a Stoc h an rash at 1.ook s eat . O O O
C O 3 i Cc_attet Maine Pewer Coagg levestmente is, Equity in Earatese of, and 04vidende Bereived free Aeoectated Companies for the fear Emded December 38, 1979 (Dollare la Themseeds)
]
i _... Col. [ _ , , .
! Dividend pesetved Col. A Col. 3 Cel. C Col. D Col. E - During elic resia.8 N. E of' issuer ialhce et BeMing of PerioJ Additiene Deductions islance at Em3 ef Perded~ Not Artemated Der and pestrig. tion Number Percent of Equity Dividende Ilumber Percent of by the Equity e r jeyts! est. .f Sh m s ou- r.68, A u.t i g_E_,5.l ast m__ht r *rif8's! mbes *Learts r=*teh.le_
o A===.=1 _ _ar! bad . _ Subsidiastes Not Comaelidated
) Vanker Atomic Electric Company l Commun Stock 14,573 9.51 $ I,457 $ $ $ $ 14,573 9.51 8 l 457 E.guity in earaisse Sto 199 ~
204 ~ 505 1,967 199 ~I54 I,94,i None 1 Co.uier t i t ut Yankee Atomic Power Ceepany: Commeon Steth 28,000 6.0 2,100 28,000 6.0 2,800 Cas. ital Centribution lee ISO Equity in earmlage 516 415 169 762 Vesmont Yankee Nuclear Power Corporations F93 ~l l 5 159 3,0]4 None Commeon Stask 16,001 6.0 I,600 16,001 6.0 1,600 Return During Comet ruction 507 507 N Equity in earnings 225 217 241 228 1,535 ~}il 248 2,328 Ilone i g Maine Yankee Atomic Peuer Company: i Common Stock 190,009 38.0 19,000 190,000 30.0 19,000 Resura lauring Comatsucties 6,306 6.346 Equity la earmissa 2,527 2,517 ~ le
),Sil fg f,52)
_ 25!394 None flaine Liestric Power Cearany, Inc.. Commann St ea k 10,351 78.5 1,035 68 9,743 78.2 974 i Equity la cannings 128 128 1,035 128 128 ~5l (Note) 7)4 home Cumberland Securities CarPoration: 3 Common Stock lie 100.0 II Ile 100.0 Il at Open Arteunt 3,887 40 3,777 '1 Equity la earninge 22) _ l) ,_,_(j) [ h 4
~~,8 3
{65 Il 55 1,783 None ej
! Central Securitire Corporat8ae Z Common St oc k 10 100.0 a le 100.0 I y'd QLA U%
Opra Astuunt 393 37c 76) gg gg o 3 Equity la carmlage 274 32 306 gl. I m 44s 32 370 8.070
~ ~
Nome 84 C W The Union W.ler-Power Company: 100.0 oe g [ fomenom Sleck 2,470 100.0 258 2.470 2%S ete C Ogen Acteunto e-4 P m Equity in earnings j l19) 47 _ {72) None __ l)? _!! _ ___ _ .!*6 o o O INal2! _ -. I}a%!.). IME I}a 2}2 $l91. $Na.I'I y Notes itedemption of Commum Stock in taab at back rest. 3 4 l t i
C;ntral Maina Power Compcny Form 10-K - 1980 Schedule III Page 3 of 3
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F-39
1 l O O O l 4 1 Centsel Heine rower C_empen,y I j F9erERTV PLANT AtIO EQUll'ttENT
! For the frer Ended peremier 31,19s4 (IbIless in 1beusende)
Befence other Cbemees Seleare et Scalaalma Additiene Ettletaente Miscellencese et EmA Classtlication - of Perled et Cost er Sole (A) M ustmente of Ferled ' i Electric Department i Intangible Prog.esty $ 2a5 s 9 $ $ 285 Generating riant - Stree 177,446 1,485 (28) 146 175,e% Groesating Flemt - Ny4re 64,984 368 (8) (29) 69,233 ] { e,g Generetlas Plant - Internet 1 C==buellee 4,246 (528) 3,725
. 5:
O l Traneeleeleia 134,478 $,725 (dt) 839,754 o Distributies 245,386 11,759 (2,J62) 9 262.192 $ l II Other FrerestF sad E ulpment 9 '30.546 4.457 (162) 34,881 *. os e o e Electric Plant Aragelettien eo in U + A.ljustment gPyg 190 190 g eeo ts ! thifinished Constructies (a) 70,884 6 ),6 36 134,524 gg[* 6-4 *o j Total Electric Department 732,379 95,463 (3,123) 826 824.045 0
- 8 y
<2 e o l Miscellemeous Freyerties (C) 989 _4 ,_ { # ) 3 918 u y 't i o o
! Total Propesty, Flent and O Etair = rat s!!!,29s st),9 se,9}p slag sen,961 d g
A Notes (A) Incleedes f.end Retisemente of $7. (8) Refer to Nate 3 et is tes to Flamarlet Statrecate for discussion of statue of several projects. ' (C) Inclu4c4 la Deferred Charace esed Other Assete e.a Selease Ebeet.
f*Elsel M ag Peyet { mpany F30FLNTT, FtANT Amu tapellitENT for the Year teJed Detember 3B, 1979 (Dallese la Themes Je) Deleece (Jaber Cheesee Selence et Begimetas A444ttees . Retisemente IIIst ell ence=a et Eed Closelfacettee of Perted at Cent es sele (A) , AJj es t acat e, of rest,e4 Electsic Deressment Inteegible Freresty $ 745 $ $ $ $ 245 Genesetles Fleet - Steos 172,235 8.379 (2,832) (336) 877,446 Generating Fleet - Wydse 64,786 370 (155) (II) 64,934
',' l Genesettaa Tleet - Internal 4; Ca.abeetles 4.245 1 4,246 6-* n Trees.*setoe 129.775 5,832 (429) 13&,47s g rt Dietstbuttee 228,259 20,e38 (2,905) I 245.346 j
y o a y> t), y weber Fesperty and Egelyment 26,704 3,984 (74) (2) 30.546
- bg Electste Fleet Argeleittee m *T. H ta AJ j ust s eet 190 190 $? N e4 C: W Uefielebed Comensucties (a) 3 ,865 22,72{ 70,ssa o7, j H. s:
Tet el ' Elec t ric Departeemt 678,574 64,554 (6,315) (354) 732,379 w 'I ,$ litetelleseems Psepesttee (c) 857 68 ,_j 6 ) 989 O Yetal Psepesty Fleet and j kguiracet $6M ,4]I $68,622 g(6,43 ) $(34) $73},ps .; Notees (4) Incledes Lead Retisenests of $l8. (t) Refer to Note 3 of Ilotes to fleesclel Statemente les diermeelma of the statue of sevesel eejer psejeste. (C) Bacleded la Defessed Charges and other Assete em Beleeve $ beet. O O O
j j l Cestsel W eme Power M any Peorthir, FIAIIT AND E4till1tDNT For the leer Eeded December 34, 3978 (Dellare le Thoussede) Beloece cober Cheeses Delence , et sessu set Addats e actssemente niecellaec e et End 1 Cle!!!811st82n r!_!e<8ed - .st Co.t _ er 8.;s (a) ,pj g eeste_ es r_ ns .d l Electric Depastecas Intensible Feepesty $ 285 $ $ $ $ 285 Generating Fleet - Stees 67,686 104,563 (14) 872,235 1
,y Generet tes Fleet - Ilydse 60,395 377 (38) (la) 68,786 8 *: Generstles Fleet - lateseal N Combussten 4,244 3 4.245 m
de Tresseleeles 888.365 38,480 (270) 829,775 o rs
*t 1 Dietsibutive 238,287 89,446 (2,468) (6) 228,259 og as Other Psopesty and Egulpeemt 23,890 5.985 (3,497) 26.788 *o un
> n k ea tr e r Electsic Fleet Acqu8eltlee aeo o a
Adjeetment 197 (I) 190 4[* gb,N tielleinbed Cemetructise (8) j25,j5g Q6,991) _48,165 0 # 8 y
=3 e se Total Electric Depastseet 6tl.007 75,985 (4,287) (35) 678.574 W g '8 o o asocolanees.e er.restsee (C) _g,115 _(99 q!) 05 y o
Total Property, Plant med g Egulyment $6}3,142 $Ja.08% $(4,748) $(88) $639,43l . .: Notes: (A) Incledes Lead settremente of $37. (8) Bedes to ble 3 of Ilotes to fleencial Statemente for discuselos of the steaue of sevesel mejos psejette. (C) secteded la Defersed Chesses med Other Assete se Belease Sheet.
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Central Maine ?:wer,COnpany Fo::: 10-K-1950 Schedule V O Maine Electric Power Ceccanv, Inc. ELICTRIC PROPERTY (Dollars in Thousands) Balance at December 31, i Classification 1980 1979 1978 Intangible plant Organization $ 4 $ 4 $ 4 Franchises and consents 4 4 4 Miscellaneous intangible ytant 25 25 25 Total intangible plant 33 33 33 l Transmission plant Land and land rights 914 914 914 Structures and improvements 180 180 180 , d tion equipment 3,040 3,040 3,040 1 Towers ;cd 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
~
i Genersi plant l Land and land rights 4 4 4 Structures and improvements 9 9 9 Tools, shop and garage equipment 14 14 14 Communication equipment 187 216 216 Total general plant 216 243 243 Total electric property $18,588 $18,617 $18,617 1 38A11 O F 29 l l l
Central Maine Power Company For= 10-K-1930 Schedule VI O Maine Electric Power Company 3 Accumulated Provision for Depreciation and Amortization of Electric Property For the Years Ended December 31, 1980, 1979 and 1978 (Dollars in Thousands) Additions Balance at Charged Balance Beginning to Profit Retire- Other at End of Period and Less* ments Changes of Period 1978 Electric property $5,011 $736 $- $
$5,747 1979 Electric property $5,747 $735 $- $ -
$6,482 1980 Electric property $6,482 $735 $29 $19 $7,207
*See Note 1 of " Notes to Financial Statements" for the Company's depreciation polig.
8 38A12 y_50
Central Maine ?cuer Cc=pany Form 10-K-1930 Schedule 7 g i i Maine Yankee Atemic Power Company ELECTRIC PROPERTY AND NUCI. EAR IUEL For The Year Ended December 31, 1980 (Dollars in Thousands) Balance at Balance Beginning Additions Retirements Transfers and at End Electric Procerty Organization $ 7 $ -
$ 7 Miscellaneous Intangible Plant 601 - - -
601 Land and land rights 520 - - - 522 Structures and improvements 57,527 356 9 - 57.874 Reactor plant equipment 101,468 1,714 - - 103,182 Turbogenerator units 56,997 3,812 505 - 60,304
.secessory electric .
equipment 14,498 2 - - 14,500 Miscellaneous power plant equip. 5,128 380 278 - 5,230 Substation equip. 3,239 1,388 - - 4,627 Miscellaneous electric property 74 - - - 74 Unfinished construction 8,951 173 - - 9,124 Total Electric Property $249,012 $ 7,825 $75 $ - $256,045 Nuclear Fuel Nuclear fuel in re ctor S 52,564 S
$- S 21,782 3 74,346 Nuclear fuel in process 40,394 30,084 -
(238) 70,240 Nuclear fuel - spent 42,557 - - 9,257 51,814 Nuclear fuel - stock 35,679 17 - (30,801) 4,895
$171,194 $30,101 S- S
$201,295 0
.=- 51
. - - . .- - ~ . . - . - .
Central Maine Power Company Form 10-K-1930 Schedule V Maine Yankee Atomic Power Company ELECTRIC PROPERTY AND NUCLEAR FUEL For The Year Ended December 31, 1979 (Dollars in Thousands) halance at Balance Beginning Additions Retirements Transfers and at End
" ~
of Period at Cost or Sales Othe- Charges of reriod ' Electric Property organization $ 7 $ -
$ 7 Miscellaneous Intangible Plant -
601 - - 601 Land and land rights 522 - - - 522 Structures and improvements 56,025 1,505 3 - 57,527 Reactor plant equipment 101,189 280 1 - 101,468 Turbogenerator
~T 57,605 (J
\
units Accessory electric 608 - 56,997 equipment 14,498 - - - 14,498 Miscellaneous power plant equip. 4,725 405 2 - 5,128 Substation equip. 3,239 - - - 3,239 Miscellaneous electric property 74 - - - 74 Unfinished construction 3,275 5,676 - - 8,951 Total Electric Property $241,159 $ 8,467 $614 $ - $249,012 \ . . . . _ __ Nuclear Fuel Nuclear fuel in reactor S 52,564 $ -
$ 52,564 Nuclear fuel in process 35,905 35,167 - (30,678) 40,394 i
Nuclear fuel - spent 42,557 - - - 42,557 Nuclear fuel - stock 4,924 77 - 30.678 35,679 ( $135,950 $35,244 $_ _-
$171.194 O
F-52
Central Maine Power Cc=pany Form 10-K-1930 h Cchedule V (continued) j l l Maine Yankee Atomic Power Comoany ELECTRIC PROPERTT AND NUCLEAR FUEL For The Year Ended December 31, 1978 (Dollars in Thousands) Balance at Balance Beginning Additions Retirements Transfers and at End of Pericd at Cost or Sales other Charges of Period Elsetric Pronerty Organization S 7 $
$ 7 Land and land rights 522 - - -
522 Structures and improvements 55,861 166 2 - 56,025 Reactor plant equipment 101,084 126 21 - 101,189 Tc.rbogenerator units 56,658 947 - - 57,605 lll Accessery electric equipment 14,477 21 - - 14,498 Miscellaneous power plant equip. 4,607 130 12 - 4,725 Substation equip. 3,239 - - - 3,239 Miscellaneous electric property 74 - - 74 Unfinished construction 2,537 738 - - 3,275 Total Electric Property $239,0is $ 2,128 $ 35 $ - $241,159 Nuclear Fuel Nuclear fuel in reactor S 33,812 $ - S- $ 12,752 S 52,564 Nuclear fuel in process 33,140 25,665 - (22,900) 35,905 Nuclear fuel - spent 33,202 - - 3,355 42,557 Nuclear fuel - stock 4.064 ,67 - 793 4,924 S110.218 $25. 732 S- S -
$_135. 950 F-53
Central Maine Power Cc=pany Fo r::1 10-K-1980
! 0 Schedule VI Maine Yankee Atomic Power comoany ACC12fULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF ELECTRIC PLANT AND NUCLEAR FCEL For The Years Ended December 31, (Dollars in Thousands)
Additions I. lance at Charged Balance Beginning to Costs Other at End 1978 of Period , and Expenses Retirements Changes of Period Electric Property $38,313 $ 8,173 $ $ (3_) $46,448 Nuclear Fuel $59,114 $17,411 $- $
- $76,525 l
lO 1979 Electric Property $46,44A $ 8,279 $6_14 $ (8) $54,105 t Nuclear Fuel $76,525 $15,319 $1 $ ,
$91,844 l- _ _
i 1980 Electric Property $54,105 $ 8,319 $792 $171 $ 61,803 Nuclear T . _
$91,844 $24,024 $1 $- $115,868 See Note 1 oi " Notes to Financial Statements" for the Company's depreciation and amortization policies.
O F-su I.. .... . . --,....--_ ....-,-- - -.._-_- - . . ...-. - .-
Haine Yankee Atomic Power Company Schedule IX Short-Term Horrowings (Dollars in 1housands) Column A Column B Column C Column D Column E Column F Category of Balance at Wolghte(( Haximum Amount Average Amt. Weighted Daily Short-Tern End of Average Outstanding Outstanding Average Dorrowings Year Interest During the Year During the Year Interest Rate Rate During the Year Year Ended Documber 31. 1980 Banks (1) 416,000 22.515 $20.155 $6.992 17.905 .in UI Year Ended Deceinbur 31, 1979 Hanks (1)
- 3.925 15.255 4 9.300 $1.1888 15.8:05 o
e Year Ended ~3 December 31. 1978 Hanks (1) - -
$ 3.900 $ 97 7 795 0
.u fa o
en es :.: o il su (1) Sou Note 3 to Notes to Financial Statements I .2 3 O. um
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13 9 O O
f O ANNUAL REFORT CN FORM 10-K ITEM 11(a)(3) AND ITEM 11(c) EXHI3ITS FILED HEREWITH AS LISTED CN PAGES 29 THROUGH 41 OF THIS FORM 10-K , CENTRAL MAINE FOWER COMPANY Filed herewith _ Filed herewith: at Page C-1 A=end=ent to Unit Participation Agreement with the New Brunswick Electric Power Commission dated December 11, 1980 F-1 1980 Annual Report to Stockholders I-1 List of subsidiaries of O registrant l l f O
3 E:Gi!BI"' C-1 O A=endment to Unit ;?articipation Agreecent Between The New Brunswick Electric Power Cermission and Maine Electric Power Ccceanv, Inc. A=endment dated December //,1980, to the Unit Participation Agreement, dated November 15, 1971 (the
" Agreement") between The New Brunswick Electric Pcwer Cc= mission (the "Cecnission") and Maine Electric Pcwer Ccmpany, Inc. (the "Ccupany").
%LN the Cc-4 =sion desires to continue to sell h and the Cecpany desires to centinue to purchase a portion of the capacity and energy of the generating units described in the Agreement.
%LN the Cc *ssion and the Ccmpany desire, a=cng other things, to reduce the ters of the Agreement and l
co reduce the entitle =ents p cvided in the Agreement; and { hdEREAS the Cem#ssion and the Company have 1 i deter =ined that it is desirable to amend the Agreement as
' 1 herei=after set forth. I
)
NCW, THEREFORE, in censideration of the premises and of the =utual covenants herein set forth, it is =utually agreed, unless the National Energy 3 card of Canada fails to app :"e this Agraecent, as follows: h Section 1. The feu::h paragraph of Section 1 of the Agree =ent is hersby deleted and the following paragraphs
O are hereby inserted in p ace thereof which shall read in their entirety:
"The parties =utually agree that the Cc-fsaion may at i':s discretion withdraw f cm service any c: all of the units for the purpose of converting such units to burn coal.
The Termination Date of this Agreement shall be October 31, 1985, or such earlier date as the Commission shall remove the last of the units f cm cec =lercial operation for the pv pose of converting such unit to burn coal, which-ever is earlier. The Ccemission shall give written notice to the Ccmpany six (6) months prior to any such earlie: Termination Date." Section 2. Clause (c) of sectica 3 of the Agree- _ ment is hereby amended by deleting theref:cm " October 31, -- 1985", and by inserting in place thereof " December 31, 1980". Section 3. Clause (d) of section 3 of the Agree-ment is hereby amended by deleting theref cm "For the final twelve months" and by inserting in place thereof "F cm January 1, 1981 thrcush the balance"; and by deleting theref:cm "200" and by inserting in place therecf "133". Section 4 Section 3 of the Agraecent is hereby amended by the additica of a new clause (e), i= mediately following clause (d), which shall : ead in its entirety
"(e) Notwithstanding the p cvisiens of clauses O (a), (b), (c) and (d) of this section 3, the units in which T
the Cc=pany is participating shall not include any unit which has been recoved f:cm ec==ercial operation for the purpose of converting such unit to burn coal". Section 5. Clause (c) of section 10 of the Agree-ment is hereby amended by adding the following sentence at the end of such clause (c) which shall read in its entirety "Such fuel charges are to be based on the un-compensated cost of fuel, less any Canadian gover== ental compensation which =ay, from ti=e to ti=e, be payable with respect to such fuel used to generate the energy purchased by the Cecpany within its entitle =ent, p cvided, however, that should any Canadian regulation, legislation or other act of the Canadian gever==ent reduce the level or such Canadian govern = ental ec=pensation below $4 (Canadian) per g barrel during the ti=e when the program provided fcc by the F=ergency Petroleu= Allocatica Act of 1973, as amended, or any similar or successor program, rc=ains in effect, then the Ccmpany may terminate this Agreement upcn giving six (6) months notice in writing to the Cc= mission, such notice to be given within thirty (30) days of the Coc:=ission's having notified the Ccmpany of anticipated or actual Canadian governmental action causing such level to drop below $4 (Canadian), and, provided further, that the Cc=missicn shall not be liable for da= ages to the Ccepany in the event of such termination by the cc=pany". Section 6. Clause (d) of sectica 10 of the Agree- =ene is hereby a= ended by deleting therefica che last two g sentences and by inserting in place thereof a new sentence . which shall read in its entirety, "The transmission use charge shall be at the rate of $57,250.00 per month - until December 31, 1980 and shall be at the rate of $19,083.33 per month from January 1,1981 to the Termination Date of the Agreement". Section 7. Clause (f) of section 10 of the Agree-ment is hereby amended by deleting therefrom "For the period from the Starting Date of the second of the units to be placed in ecmmercial operation until October 31, 1985", and by inserting in place thereof "From January 1,1981 to the Termination Date of the Agreement" by deleting theref cm "section 3(b)" and by inserting in place thereof "section O 3(d)"; and by adding the follcwing sentence at the end of such clause (f) which sentence shall read in its entirety, "Should one of the first two units be taken out of service for the purpose of ccnverting such usit to burn coal, the charges under clause (a) shall be calculated ce the basis of the capital costs of such first two units at the time such unit is taken out of service, or shall be calculated en such other basis as the parties :nay matually agree". , Section 8. Clause (g) of seccion 10 of the Agraecent is hereby deleced in its entirety. Section 9. Clause (h) of section 10 of the Agreement is hereby a= ended by redesignating such clause l as clause "(g)"; and subclause (ii) of such clause (h) is l
.c_
l - . . - - _ - . - _ _ _ _ _ _ - _ - - . _ _ __ - _ _ __ - - - _.
T T hereby a= ended to read in its entirety "(11) " Plant" shall be the facilities in which the Gross Capital Invest =ent g has been =ade, but should one of the first two units be taken out of service for the purpose of converting such unit to burn coal, the Gross Capital Invest =ent shall be 1 the capital costs of such first two units at the ui=e such unit is taken out of service or shall be calculated on such ochen basis as the parties =ay nutually agree". Section 10. Clause (c) of section 13 of the Agree =ent is hereby amended by deleting theref cc "In the event that the. third unit is placed in coc=ercial operation prior to Dece=ber 1,1979"; by capitalizing the letter "f" in the word "for" 4 ediate'ly folicwing such deleted language; and by deleting theref:cc "all three units" and by inserting in place thereof "those units in which the Cc=pany is par-ticipating pursuant to section 3(d)". IN WITNESS tiEE3. EOF the parties have caused this A=end=ent to the Unit Participation Agreement to be executed in duplicate by thei: respective officers thereunto duly l l authorized, and their corporate seals affixed, as of the first date herein above written. l TE NEW 3RUNSWICK ELECTRIC PCWER COMMISSION hl. i el S.! h> lgfnaw AT WWA "- '~ W:: ness - r WNA, u es/ W ec:ecary MAINE ELICTRIC PC'wER COMPANY,
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. -_em. r__1 LIST OF SUBSIDIARIES OF CENTRAL MAINE POWER COMPANY
~
Jurisdiction of Percent Name Incercoration Ownership Maine Yankee Atomic Power Cc=pany Maine 38% Maine Electric Power Company Maine 78% Central Securities Corporation Maine 100% Cu=cerland Secarities Corporatien Maine 100% The Union Water-?cwer Cc=pany Maine 100% l
\
(Exhibit C - 2) SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1924 For Qtiarter Ended March 31, 1981 Commission file number 1-5139 CENTRAL MAINE POWER COMPANY (Exact name of registrant as specified in its charter) Incorporated in Maine 01-0042740 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Edison Drive, Augusta, Maine 04336 (Address of principal executive offices) (Zip Code) - f%
? ? 'J Registrant's telephone number including area code 207-623-3521 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to the filing requirements for at least the past 90 days. Yes No Indicate the number of shares onstanding of each of the issuer's classes of Common Sto d as of *ae close of the latest practicable date. Shares Outstanding Class as of April 30, 1981 Common Stock 14,032,609 Q ,I
PART I - FINANCIAL INFORMATION Iten 1. Financial Statemtnts Central Maine Power Company O Q STATEMENT OF EARNINGS (Unaudited) (Dollars in Thousands Except Per Share Amounts) For the Three Months Ended March 31, 1981 1980 ELECTRIC OPERATING REVENUES $95,575 $101,165 OPERATING EXPENSES Fuel Used for Company Generation 30,052 23,732 Purchased Power Fuel 16,350 33,267 _
- Other 6,279 8,249 Other Operation 11,177 9,745 Maintenance 3,890 2,801 Depreciation 5,605 5,223 Taxes Federal and State Incerte (Note 2) 4,722 3,570 Local Property ac4 Other 2,641 2,412 80,716 88,999 EQUITY IN EARNINGS OF ASSOCIATED COMPANIES 840 739 O
OPERATING INCOME 15,699 12,905 OTHER INCOME (EXPENSE) Allowance for Other Funds Used During Construction 2,078 310 Other, Net 64 68 INCOME BEFORE INTEREST CHARGES 17,841 13,283 INTEREST CHARGES Long-Term Debt 5,716 5,681 Other 3,988 1,970 Allowance for Borroud Funds Used During Constructiori (1,698) (2,175) 8,006 5,476 NET INCOME 9,835 7,807 Dividends on Preferred Stock 1,865 1,141 EARNINGS APPLICABLE TO COMMON STOCK $ 7,970 $ 6,666 WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 13,964,799 12,084,453 EARNINGS PER SHARE OF COMMON STOCK $ .57 $ .55 DIVIDENDS PER SHARE OF COMMON STOCK $ .43 $ .41 The accompanying notes are an integral part of these financial statements. I-I
Central Maine Power Comnany BALANCE SHEET (Dollars in Thousands) I March 31, December 31, 1981 1980 (Unaudited) ASSETS ELECTRIC PROPERTY, at Origina! "ost $694,779 $689,521 Less: Accumulated Depreciation 203,461 198,249 491,318 491,272 , Construction Work in Progress ! Jointly-Owned Projects 123,037 113,466 , Company Projects 23,784 21,058 146,821 134,524
- 638,139 625,796-INVESTMENTS IN ASSOCIATED COMPANIES, at Equity 39,753 '38,370 Net Electric Property and-Investments in Associated O Companies 677,892' 664,166 CURRENT ASSETS Cash 2,704 1,862 Accounts Receivable, Less Allowances for Uncollectible Accounts of $575 in 1981 and in 1980 Service - Billed 34,695 31,346
- Unbilled 32,174 41,701 i Other 10,903 13,509 l Inventories, at Average Cost t Fuel Oil 24,735 19,155 Materials and Supplies 11,173 10,819 Prepayments and Other Current Assets 2,282 3,929 Total Current Assets 118,666 122,321 DEFERRED CHARGES AND OTHER ASSETS 8,228 8,554
$804,786 $795,041 The accompanying notes are an integral part of these financial stiatements.
O I-2 l
O Central Maine Power Company BAIANCE SHEET (Dollars in Thousands) March 31, December 31, 1981 1980 (Unaudited) STOCKHOLDERS' INVESTMENT AND LIABILITIES CAPITALIZATION Common Stock Investment $237,878 , $235,711 l Preferred Stock 35,571 35,571 Redeemable Preferred Stock 58,305 58,305 Long-Term Debt 264,008 273,219 Total Capitalization 595,762 602,806 CURRENT LIABILITIES
, Interim Financing 95,182 72,131 Other Current Liabilities -
Sinking Fund Requirements 423 394 Accounts Payable 20,639 42,824 Dividends Payable - 6,007 - s Accrued Interest 7,756 6,519 Accrued Income Taxes 2,137 1,76'6 Other 4,794 3,651 l 41,756 55,154 l Total Current. Liabilities 136,938 127,285 COMMITMENTS AND CONTINGENCIES (Note 4) RESERVES AND DEFERRED CREDITS Accumulated Deferred Income Taxes 33,910 32,708 Unamortized Investment Tax Credits 33,661 30,644 7 Other . 4,515 l',598 i Total Reserves and Deferred Credits 72,086 64,950
$804,786 $795,041 The accompanying notes are an integral part of these financial statements.
O U I-3 l___-.__._______.__.-_.__
Central Maine Power Company STATEMENT OF SOURCES OF FUNDS FOR CONSTRUCTION
) (Unaudited)
(Dollars in Thousands) For the Three Months Ended March 31, 1981 1980 FUNDS PROVIDED Internal Sources From operations Net income $ 9,835 $ 7,807 Depreciation 5,605 5,223 Deferred income. taxes and investment tax credit, net 4,141 3,069 Allowance for other funds . used during construction (2,078) (310) 17,503 15,789 Less: Sinking fund requirements of long-term debt and preferred stock 179 599 Dividends declared 7,872 6,097 Other, net (2,152) (597) 5,899 6,099 (Increase) decrease in working capital, exclusive of interim A (j financing and sinking fund requirements "ish and receivables 7,942 (31,530) Other current assets (4,287) 455 Otner current liabilities (13,427) 16,327 (9,772) (14,748) Internal Sources, Net 1,832 (5,058) External Sources Common Stock 214 189 Long-term debt 16,500 Revolving Credit Agreement (9,000) - Increase in short-term borrowings 23,051 4,320 External Sources, Net 14,265 21,009
$16,097 $.15,951 FUNDS USED FOR CONSTRUCTION Jointly-owned projects $ 9,423 $ 5,611 Other construction and plant additions 8,752 10,650 Allowance for other funds used during construction (2,078) (310)
$16,097 $ 15,951 The accompanying notes are an integral part of these financial statements, b
I-4
Central Maine Power Company Notes to Financial Statements
- 1. Summary of Significant Accounting Policies Certain information in footnote disclosures normally included in financial statements. prepared in accordance with generally accepted accounting princip.es have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. However, the disclosures herein, when read with the annual report for 1980 filed on Form 10-K, are adequate to make the information presented not misleading.
The Company's significant accounting policies are containe! in Note 1 to the financial statements in the Company's Form 10-K for 1980. For interim accounting periods the policies are the same. However, the Company considers each interim period as an integral part of the entire year and allocates certain revenues and expenses to the interim period on the basis of estimates of such revenues and expenses on an annual basis.
- 2. Income Taxes The components of Federal and state income taxes reflected in the Statement of Earnings are as follows:
For the Three Months Ended March 31, 1981 1980 (Dollars in Thousands) Federal: Current $ 50 $ 138 Deferred 1,135 1,197 Investment tax credit, net 3,017 1,873 4,202 3,208 State: Current 531 363 i Deferred (11) (1) 520 362 Total Federal and state income taxes $4,722 $3,570 l O l I-5
Central Maine Power Company Notes to Financial Statements
- 2. Income Taxes (continued)
The following table reconciles the statutory Federal income tax rate to a rate determined by dividing the total Federal income tax expense by income before that expense. For the Three Months Ended
. March 31, 1981 March 31, 1980 Amount %
Amount %
~
(Dollars in Thousands)
- Statutory Federal income tax rate $ 6,457 46.0 % $ 5,067 46.0 %
Permanent reductions in tax expense resulting from stat-utory exclusions from tax-able income (1,437) (10.2) (680) (6.2) Effect of timing differences for which deferred taxes are not recorded (flow-through) (818) (5.9) (1,179) (10.7) Calculat.ed rate $4,202 29.9 % $ 3,208 29.1 %
- 3. Financings On April 15, 1981 the Company publicly solicited to sell $45 mil-lion of its General and Refunding Mortgage Bonds, Series D 16 1/8%
Due 1991. The sale of $36.5 million was completed April 23, 1981 and the balance of $8.5 million was contracted by certain institu-tions under Delayed Delivery Contracts with delivery anticipated on or before October 15, 1981. Proceeds from the sale of these bonds will be used to reduce short-term debt and bank borrowings incur-red in connection with the Company's construction program.
- 4. Contingencies There have been no significant changes in the commitments and con-tingencies reported in the Company's 10-K report for the year ended December 31, 1980 except as discussed in "Part II, Item 5 -
Other Information". I-6
1 Central Maine Power Company I l Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ; Operating Results Electric Oper._ ting Revenues decreased $5.6 million during the first quarter of 1981. The primary reason for the decrease was a $10.6 mil-lion reduction in fuel revenues resulting from the fact that the Maine Yankee nuclear facility was down for refueling from January 11, 1980 to March 15, 1980 and that it operated at record levels in the first quart-er of 1981. The next refueling is scheduled during the second quarter of 1981. Since money collected from customers through the fuel used for generation charge is a 100 percent non-profit pass-through, increas-ed or decreased revenues from fuel do not effect net earnings. Operat-ing Revenues also include a 2.5% increase in KWH sales and three months effect of a $16.2 million rate increase implemented in November 1980. Lower purchased power capacity costs result from a decrease in the Com-pany's share of base load power received from a Canadian electric system (41.1 megawatts to 7.8 megawatts effective January 1, 1981). Other operation included higher wages and costs of material and supplies while maintenance expenditures increased at the Company's steam gene-O rating plants. , Interest charges reflect greater borrowings to finance higher invest-ments in plant under construction and working capital - requirements, primarily for fuel costs. Larger allowance for funds used during con-struction . (AFC) results from the Company's growing investment in pro-jects under construction, principally its share of jointly-owned nuclear generating plants. The current period also includes the effects of the issuance of 250 thousand shares of Preferred Stock 11.75% Series in July 1980 and 1.6 million shares of common stock in November 1980. Financial Condition During the first quarter of 1981, funds from operations (principally net income, depreciation and deferred taxes net of AFC) amounted to approximately $17.5 million. Of these funds, $7.9 million were used to provide for dividends on preferred and common stocks. These sources of funds were further reduced by an increase in working capital require-ments of $9.8 million dollars (exclusive of short-term borrowings and the current portion of long-term debt). The net funds available from internal sources were $1.8 million. Funds Used for Construction amount-ed to $16.1 million (net of $2.1 million of allowance for equity funds used during construction). The Company funded $14.3 million or the 4 remaining amount of these requirements from increased short-term borrow-ings. (See footnote 3 of the notes to financial statements for infor-mation relative to a long-term debt financing in April.) I-7
l l Central Maine Power Company Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (contd) . Annual earnings levels are expected to increase somewhat in 1981 over 1980 as a result of the November 1980 rate increase, a colder than normal 1980-81 winter and a planned expansion by a major industrial ! customer, but it is anticipated that the Company will earn below its allowed return on equity. As a result of this and continuing inflat-ionary pressures, the Company intends to file for additional rate relief during this year. I i I l l l I-8
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O Central Maine Power Company PART II - OTHER INFORMATION Item 5. Other Information Construction Program The utility responsible for the construction of the Seabrook project, Public Service Company of New Hampshire ("PSNH"), has recently released revisions to its estimated construction budget and scheduled comple-tion dates, which increased the Company's share of the total estimated construction costs of the Seabrook units by approximately $16,000,000 (excluding AFC) and deferred the completion dates of the units from 1983-1985 to 1984-1986. The Company's estimated construction costs have been further increased by its recent decision to increase the size of its Brunswick-Topsham hydroelectric project. The Company estimates that this will raise the total capital expenditures for the 1981-1985 period by $5,100,000 (excluding AFC). Seabrook On April 2, 1981, PSNH filed with tne New Hampshire Public Utilities Commission ("NHPUC") a request for permanent rates designed to increase annual revenues by approximately $34,900,000 together with a request for temporary rates at the increased level to be effective at the earliest possible date. On May 1,1981, the NHPUC grante:i PSNH tempor- i ary rates (to be collected subject to refund) designed to in: ea::a annual revenues by approximately $17,400,000, effecti.e immediately. PSNH has estimated that the additional revenues provided by the tempor-ary rates will enable it to issue somewhat less than the $50,000,000 of mortgage bonds planned for the fourth quarter of 1981 unless the NHPUC grants increases permanent r.i te s , and has stated that it considers its ability to issue mortgage bonds in adequate amounts ar.d in a timely fashion to be an essential part of its financing program. Purchase of Sourthern Maine Properties of PSNH On March 30, 1981, the Company entered into a preliminary agreement, subject to the receipt of regulatory approvals, for the purchase by the Company of certain electric distribution and supporting transmission facilities of PSNH located in Kittery and other southern Maine towns for an anticipated purchase price of approximately $3,000,000. II-1
Central _ Maine Power Company 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. However, the results for the interim period are not necessarily indicative of results for the entire year. The required information for unconsolidated subsidiaries, Maine Yankee Atomic Power Company and Maine Electric Power Company, Inc., is attached hereto in accordance with Instruction D. Signature Pursuant to the requirements of the Securities Erchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authori. zed. CENTRAL MA.NE POWER COMPANY (Registrant) O V Date May 13, 1981 /S/ Robert S. Howe Robert S. Howe, Comptroller
/S/ Thomas C. Webb Thomas C. Webb, Senior Vice President, Finance
)
( ~
- PROSPECTUS
$45,000,000 0- Central Maine Power Company General and Refunding Mortgage Bonds Series D 16%% Due 1991 Intercst on the Series D Bonds is payable on November 1,1981 and semi. annually thereafter on each 3 fay 1 and November 1. The Series D Bonds are redeemable at any time at the option of the Company at the prices set forth under " Description of Bonds-Series D Bonds" herein, except that prior to May 1,1986, the Series D Bonds are not refundable at an Sterest cost less than 161/89 per annum. The Series D Bonds are to be issued under and secured by a General and Refunding Mort-gage Indenture which is subject to the prior lien of the Company's First and General Mortgage.
So long as the Series D Bonds are outstanding, the Company may not issue further First and General Mortgage Bonds. See " Description of Bonds". THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCI%NGE CO3DUSSION NOR HAS THE CO3DIISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRDilNAL OFFENSE. L'nderwriting Price to Discounts and Proceeds to Public(1) Commissions (2) Company (3) Per Bond 100.00 9 .75 9 99.25 9 Total H5,000,000 $337,506 M4,662,500 (1) Plus accrued interest, if any, from the date of issue. (2) The Company has agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933. (3) Before deduction of expenses payable by the Company, estimated at $120,000. The Series D Bonds are offered by the several Underwriters when, as and if issued by the Com-pany and accepted by the Underwriters and subject to their right to reject orders in whole or in part. The Series D Bonds are also being offered to certain institutions by the Company through the [ several Underwri'ers pursuant to Delayed Delivery Contracts. See " Delayed Delivery Arrange-ments" It is expected that delivery of the Series D Bonds purchased from the several Underwriters will be made at the office of Kidder, Peabody & Co. Incorporated,10 Hanover Square, New York, New York 10005, on or about April 23,1981 and that delivery of the Series D Bonds purchased from the Company pursuant to Delayed Delivery Contracts will be made on or before Octokr 15,1981. Kidder, Peabody & Co. Lehman Brothers Kuhn Loeb Incorporated . Incorporated The date of this Prospectus is April 15,1981.
[ IN CONNECFION WITH TIIIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WIIICII STABILIZE OR MAINTAIN TIIE MARKET PRICES OF TIIE COMPANY'S F,0NDS, INCLUDING TIIE BONDS OFFERED IIEREBY, AT LEVELS ABOVE TIIOSE WHICll MIGIIT OTIIERWISE PREVAIL IN TIIE OPEN MARKET. SUCil I STAllILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFORMATION Central Maine Power Company (the " Company") is subject to the informational requirements of the Securities Exchange Act of 1934 (the " Exchange Act") and in accordance therewith files reports and other information with the Securities and Exchange Commission (the " Commission"). Informa. tion for the year 1979 and prior years concerning directors and officers of the Company, remuneration and any material interests of such persons in transactions with the Company, is disclosed in proxy statements distributed to shareholders of the Company and filed with the Commission. Such reports, proxy statements and other information can be inspected and copied at the office of the Commission at Room 6101 at 1100 L Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices at Room 1228, Everett McKinley Dirksen Building, 219 South
Dearborn Street,
Chicago, Ill. 60004; Room 1100, Federal Building, 26 Federal Plaza, New York, N.Y.10007; and Suite 1710, Tishman Building,10960 Wilshire Boulevard, Los Angeles, Calif. 90024; and copies of such material can be obtained from the Public Reference Section of the Commission,500 North Capitol Street, Washington, D.C. 20549, at prescribed rates. Certain securities of the Company are listed on the New York Stock Exchange, where reports, pmxy statements and other information concerning the Company can also
, be inspected.
INCORPORATION OF CERTAIN DOCUMENFS BY REFERENCE The following documents heretofore filed with the Commission are hereby incorporated in this Prospectus by reference:
- 1. The Company's Annual Report on Form 10.K for the year ended December 31,1980.
i
- 2. The Company's definitive proxy statement dated April 19,1980 in connection with its Annual Meeting of Stockholders held on May 15,1980.
All documents filed by the Company with the Commission pursuant to Section 13,14 or 15(d) of l the Exchange Act after the date of this Prospectus and prior to the termination of this offering of l the Series D Bonds shall be deemed to be incorporated in this Prospectus by reference and to be a part hereof from the date of filing of such documents. [ The Company hereby undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, on the written request of any such persms, a copy of any i or all of the documents referred to above which have be(n or may be incorporated in this l Prospectus by reference, other than exhibits to such documents. Written requests for such copies should be directed to William M. Finn, Assistant Secretary, Central Maine Power Com-pany, Edison Drive, Augusta, Maine 04336. 2
THE ISSUE IN BRIEF The following is a summary of certain pertinent facts, and is qualified in its entirety by de-tailed information and financial statements appearing elsewhere in this Prospectus and in the ['/ documents and information incorporated by reference in this Prospectus. TIIE OFFERING 3 Securities Offered $45,000,000 General and Refunding Afortgage Bonds, Series D 16%7c Due 1991 Interest Payment Dates 3 fay I and November 1 (commencing Novem-ber 1,1981) Redemption Restriction Series D Bonds are not refundable for five yean at an interest cost of less than 16%7c Use of Proceeds To reduce short-term debt and bank borrow-ings incurred in connection with the Com-pany's construction program THE COMPANY Business and Service Area Largest electric utility in Alaine serving ap-proximately 380,000 customers in southern and central portions of 3Iaine. Population of service area estimated at 800,000 (ap-proximately 70c/c of the state's population) 1980 Energy Sources Nuclear 309c; Hydro 159c' ; Oil 235'c; Pur-chased (principally from oil-fired sources) 329'c Estimated 1981-1985 Construction Expenditures $523.4 million (see "Use of Proceeds and Con-struction Program") i FINANCIAL INFORMATION l (dollars in thousands) 12 Months Ended February 28, December 31, December 31, 1981 1980 1979 Income Summary: (unaudited) Electric Operating Revenues $335,674 $335,265 $271,764 Operati g Income 49,40S 47,331 48,230 Net Income 27,865 26,427 29,643 Ratio of Earnings to Fixed Charges- Actual 2.08 2.07 2.79 Pro Forma
- 1.79
' Assumes the issuance of the Series D Bonds and the use of the proceeds therefrom and from presently anticipated financing during 1981 to reduce short-term debt and bank borrowings.
February 28,1981 (unaudited) Capitalization Summary: Ac'u'l ** *di"d
- i I Long-Term Debt $264,126 44.17c $309,126 48.07c l Preferred Stock . . . .. ..... 35,571 6.0 35,571 5.5 Sinking Fund Preferred Stock 58,305 9.7 58,305 9.1 Common Stock Investment 240,758 40.2 240,758 37.4 Total $598,760 100.07c $643,760 100.07c Short-Term Debt $ 92.321 $ 47,779" Long-Term Debt Currently 3faturing $ 5,971 $ 5.971 l
- Adjusted for the issuance of the Series D Bonds.
" Assumes net proceeds from the issuance of the Series D Bonds of $44,542,500.
3 1
THE COMPANY The Company, a 31aine corporation organized in 1905,is an electric utility engaged in the genera. tion, purchase, transmission, distribution and sale of electric energy in the southern and central part [ l5 of 3faine. It has its principal executive offices at Edison Drive, Augusta,3faine 04336, and its tele-phone number is (207) 623-3521. ENERGY SOURCES AND PROPERTIES The Company is a member of the New England Power Pool ("NEPOOL"), and the Company's ehetric properties are interconnected with the systems of other NEPOOL members. .<EPOOL pro-vides for coordinated planning of future f acilities and operation of 989 of existing gemrating capacity in New England and of related transmission facilities. The Company's system is also connected with the system of The New Brunswick Electric Power Commission, Canada (the " Commission"). The Company is currently negotiating for the purchase of 100 3nV of power frorr the Commissioa's Point Lepreau nuclear plant, commencing with operation of the plant now scheduled for tne spring of 1932, although no contractual commitments for such purchase have been reached. The maximum one-hour firm system net peak load experienced by the Company was approximately 1,212 31W on January 12, 1981. As of that date the Company's net capability was 1,490 3RV, including 14 31W of purchases. At the time of the Company's 1980-81 peak, NEPOOL had 21,372 31W of installed capacity to meet its peak load of 15,518 31W. As a NEPOOL mcmber, the Company is , nquired to maintain its share of an excess capacity reserve of 199. The Company currently has a capacity reserve of 239 The Company's 1980 energy sources were: Nuclear 309, Hydro 159, Oil 239 and Purchased 329. The Company's 1981 estimated energy sources are: Nuclear 329, Hydro 189. Oil 299 and Purchased 219. Purchased power comes principally from oil-fired sources. The mix of the Company's energy sources for a particular year will generally vary from that
, available from the Company's electric generating properties. The principal reasons for such varit-tions are the central dispatch by NEPOOL of the region's most economical generating facilities, the
- temporary shutdown of generating facilities for refueling, maintenance or modification and fluctua-tions in the amount of water run-off for hydro generation. The following table lists the Company's electric generating properties: Company's Share of Capacity (MW) I) ate of Percentage (Company's Ownership Energy First Commercial of Interest Unit Source Operation Capacity Indicated in Parentheels) Alaine Yankee Nuclear 1973 310.9 ( 38.0 % ) Connecticut Yankee Nuclear 1968 y" 9N, 34.8 ( 6.09) Vermont Yankee Nuclear 1972 19.0 ( 4.09c) Yankee Atomic Nuclear 1961 16.7 ( 9.59) 22 Hydro Stations Hydto 1901 -56 20.3 9 300.2 (100.0 9 ) Wyman Station Oil 1957 -78 593.6 ( ) 3fason Station Oil" 1941 - 55 53.8 9 153.6 (100.0 9 ) Internal Combustion Oil 1940-70 47.2 (100.0 9 ) 100.09'c 1,476.0
'Three of the four Wyman units (229.5 3IW) are 100% owned by the Company; the Company owns 59.15% of the fourth unit (364.131W).
[i "The Company currently intends to convert three of the five 31ason units (108.9 31W) to coal. fired unita by some time in 1984. 4
During 1980, the Company's average fuel cost per kilowatt-hour was $.043725 for oil-fired power from Company-owned plants and $.006248 for nuclear power. [i, RATES On February 1,19S0, the Company filed with the Maine Public Utilities Commission (the "PUC") an application for a $35,000,000 increase in annual revenues, subsequently adjusted to $36,859,000. On October 31,1980, the PUC authorized the Company to file retail rates designed to increase annual gross revenues by approximately $16,185,000 (including an attrition adjustment of $2,300,000). Such rates are based upon an allowed overall return of 10.789, including a return of 13.759 on common equity. The new rates were implemented for kilowatt-hour sales on and after November 13, 1980. The Company's prior rate decision in October,1978 had allowed an overall return of 9.489, ine!uding a return of 12.50% on common equity. The Company intends to file an application for additional rate relief in 1981. Regulations adopted by the PCC pursuant to a 1978 Maine statute allow the Company to recover currently the cast of fuel consumed in the Company's generating stations and the fuel component of purchased power by the application of a single uniform rate in the monthly bills to the Company's retail customers. The single uniform rate is based upon the Company's projected cost of fuel and the fuel component of purchased power for a 12-month forward-looking period and must be approved by the PUC after public notice and hearings. At intervals of not less than 90 days the Company may request changes in the uniform rate to refleet actual experiences as well as new projections of costs.
- Over- or rnder-collections as well as an amount for the actual cost of short-term borrowings used to finance the unbilled balances are included in the computation of the fuel amounts to be recovered during the succeeding fuel adjustment period.
USE OF PROCEEDS AND CONSTRUCTION PROGRAM The proceeds from the sale of the Series D Bonds will be applied to the payment of a portion of outstanding short-term borrowings and bank borrowings under a revolving credit and term loan agreement, which together amounted to approximately $84,800,000 on April 14, 1981 and are ex-peeted to approximate $93,000,000 on April 23,1981, the date the Series D Bonds (other than those to be delivered pursuant to Delayed Delivery Contracts) are expected to be issued. See " Delayed Delivery Arrangements" These borrowings were incurred primarily in connection with the Company's continuing construction program. During the five-year period ended December 31, 1980, the Company's construction expenditures amounted to $339,784,000 (including investment in jointly-owned projects), not including allowanec for funds used during construction ("AFC") of $41,330,000. Plant retirements during the period amounted to $21,746,000. The Company's construction program for the period 1981 through 1985, [,
' shown below, is currently estimated at approximately $523,400,000 (not including AFC estimated at
$147,500,000, but i'ncluding estimates for nuclear fuel costs of $22,100,000 where applicable). The Company estimates that construction expenditures for each of the years 1981 through 1985 will be approximately $86,800,000, $140,500,000, $95,500,000, $89,300,000 and $111,300,000, respectively.
5
Total Type of Facilities 1981 1982-83 1981 85 (Millions of Dollars) Generation g Central Maine Power Company Projects Brunswick-Topsham (Hydro) $10.5 $ 6.0 $ 16.5 1.2 35.5 36.7 Sears Island (Coal) 4.8 43.0 47.8 Mason Station (Conversion to Coal) Projects Sponsored by Others 32.1 84.1 116.2 Seabrook Nos.1 & 2 (Nuclear) 5.0 23.6 28.6 Millstone No. 3 (Nuclear) Pilgrim No. 2 (Nuclear) .8 21.0 21.8 2.4 36.9 39.3 Transmission 19.9 104.4 124.3 Distribution
- Other Capital Projects (including small hydro projects) 10.1 82.1 92.2
$86.8 $436.6 $523.4 The above estimated expenditures for major jointly-owned generating facilities are based upon the latest information furnished by the sponsoring utility.
Based r o 'he Company's estimate of the average annual compound growth rate in the Com- - pany's peak mapacity requirements for the years 1981 through 1990 of approximately 2.19 and antici-pated growth rates throughout New England, the Company believes that its generating capacity, including and assuming timely additions to generation to be provided by certain of the jointly-owned projects described below, coupled with power purchased from other utilities with excess capacity, will be sufficient to meet such requirements and the Company's reserve obligations to the New England I Power Pool through the 1980's. In 1980 internal sources of funds provided approximately 20% of the Company's total construe-tion requirements with the remainder provided by external sources. The Company estimates that approximately 329 of the Company's total construction requirements will be financed by internal sources in 1981. In addition to the sale of the Series D Bonds, the Company currently plans further sales of approximately $45,000,000 of long-term debt and 2,000,000 shares of common stock in 1981. However, the nature and timing of future financing will be determined in light of future market con-ditions, earnings and other nlevant factors. The continuation of the Company's 1981-85 construction program at planned levels depends upon the Company's obtaining timely and adequate rate relief and its ability to finance a substantial portion of the program from external sources. In addition [ to funds required to finance its construction program, funds aggregating $64,673,000 must be pro-vided for sinking fund requirements and debt maturities during the peried 1981-1985. The Company's actual expenditures through December 31,1980 and estimated expenditures for jointly-owned generating facilities (excluding AFC which will be substantial but including nuclear fuel costs wherever applicable) are set forth in the following table: 6
Company's Share Estimated Capadty (MW) Espenditures Total [O Date of Percentage Through Estimated Energy Commercial Capacity of Total December Construction Unit Source Operation (1) (MW) Cap @ 31,1980(1) Costs (t) (thousands) (thousands) Seabrook Nos. I and 2(2) Nuclear 1984-1986 2,300 139 (6.N9) $58,633 $166,000 Pilgrim No. 2 Nuclear (3) 1,150 33 (2.85 9 ) 8,999 (3) 31illstone No. 3 Nuclear 1986 1,150 29 (2.50 % ) 18,595 49,100 Seam Island (4) Coal 1989 568 341 (60.0 % )(4) 6,975 475,100 (1) The completion da'es of these unitr. have been deferred from time to time and additional deferrals may occur. Deferrals significantly increase the cost of a unit. Estimated construction expenditures are based upon information furnished by the utility re pon-sil,le for the construction of the unit and are continuously under review in light of deferrals, delays, and other factors. llue to the time required for the construction of generating facilities and the completion of li-censing and regulatory proceedings relating themto, substantial investments in the above units will be required prior to the completion of licensing and regulatory proceedings. 'lhere is no assurance that all necessary approvals, permits or licenses will be obtained, or if obtained, will not be modified or revoked or that the units will be completed.
. (2) As of December 31,1950, the Company had a 5.M1789 intenst in Seabrook. An adjustment of the ownership interests in the units commencing January 31, 1981 will ultimately result in a 6.04178 9 ovmenhip interest for the Company. Although the necessary approvals and permits for construction , he Seabrook units have been obtained and upheld on appeal by a nuinber of oppo.
sition groups, such opposition has resulted in significant construction delays. One appeal from federal regulatory approvals is pending and a further limited evidentiary hearing on the seismic issue has been ordemi by the Nuclear Regulatory Commission; licensing proceedings will be nee-essary before operation; and further appeals and proceedings are possible. Construction is cur-rently in progress, although at a reduced level from that originally scheduled for 1981. The utility msponsible for construction of Seabrook, Pablic Service Company of New Hampshire ("PSNH"), has recently relen. sed revisions to its estimated construction budget and scheduled completion dates to give eCect to the reduced level of construction and other factors. Such revisions, which are reflected in the table shown above, increased the Company's shan of the total estimated construction costs of the Seabrook units by approximately $16,000,000 (excluding AFC) and deferred the completion dates of the units from 1983-1985 to 1984-1986. PSNH, experiencing difficulties in financing its 50% share of the units, is currently selling a 69 interest in the units to certain New England utilities (including the 1% interest being sold to the Company as described ab..ei and intends to sell a further 9% interest pending receipt [,' of certain regulatory approvals and financing by certain other cilities. One of such other utili-ties, 3fassachusetts Municipal Who!csale Electric Company ("hDIWEC"), has obtained regula-tory approval and has informed F3NH that it expects to complete its initial financing prior to June 30,1981 at which time the adjustment period for ADIWEC's purchase of an additional 6% interest will commence. PSNH has stated that it plans to resume full construction when 3fMWEC's initial financing has been completed. On April 2,1981, PSNH filed a request for tem-7
e porary rate relief to be effective at the earliest possible date. PSNH has stated that in obtain sufficient revenues to ensure that the earnings coverage test applicable to the issuan , bonds under its mortgage bond inth rore woubt be satisfied in connection with a planned ; iss
}
anee of bonds in the fourth quarter of 1981, it will be necessary for a substantial portion rates requested to become effective during the sceand quarter. PSNH has furtherE sta adequate and timely temporary rates are not granted or if PSNil's interest in the S project is not reduced to 359, PSNH may be unable to obtain the external financing n to finance its ownership interest in the Seabrook project. d (3) Boston Edison Company, the utility responsible for construction of Pilgrim No. 2, has annou that due to the time required for the construction of the unit and completion of licensing regulatory proceedings and the greatly increasing construction costs As no firm date can a result, lished for the commencement of construction or cominercial operation of the anit. estimates of construction expenditures, financing and scheduling are no longer realistic. Bos Edison Company has also stated that when a more definitive schedule is set for the g construction permit, it will be able to develop revised cost estimates aad review the fe the project and decide whether to cancel or continue construction of the project. At present curement commitments for the pr9 ject are being deferred. Com-(4) On December 31,1979 the 3faine Public Utilities Commission (the "PUC") denied the pany's application for a certificate of public convenience and necessity for the S fired plant on the basis that the Company's need for baseload power in 1987 did n Hearings construction of a 568 31W fa<ility in which the Company would have an 809 interest. before the PUC are in progress on the Company's modified application which includes a tion in the Company's proposed ownership interest to between 559 and 609 and a 19S9
- for commercial operation. The Company will continue to review the proposed schedule The amounts shown above with plant in light of its capacity requirements and other factors.
respect to expenditures through December 31,1980 are based upon the Company's prese ship interest of approximately 809, while total estimated construction costs assum ownership intetsst. The foregoing introduction to the Company contains only a summary of certain pertinen vnd is qualiflad !" its entirety by detailed information and financial statements appear rrents and information incorporated by reference in this Prospectus. General DESCHIPTION OF HONDS The Series D Bonds, which will mature 3 fay 1,1991, are to be issued under a Smle denture to be dated as of April 15,1981 (th_ " Supplemental Indenture") to the General and Refund-ing 3fortgage Indenture dated as of April 15, 1976 as amended and supplemen 3fortgage") between the Company and The First National Bank of Boston, Truste for the i .suance of an unlimited amount of bonds under the circums National Bank of Boston is the lead partidpant under a secured two-year revolving cr [ loan agreement of $40,000,000 with the Company and from time to time makes loans to the Company. The Company currently has outstanding an aggregate of $10 eipal amount of Series A, B and C Bonds under the General 5fortgage. At December 31, 1980 the Company had outstanding an aggregate of $150,933,000 d principal d se-amount af First and General 3fortgage Bonds (the "First 3! >rtgage Bonds") issued un er an cured by its First and General 3fortgage dated as of June 1,1921 between the Com 8
i Street Bank and Trust Company, as successor Trustee, as supplemented and amended (the "First 3fortgage"). The lien of the First 3fortgage is prior to the lien of the General 3fortgage. So long as the Series D Bonds or any other Bonds issued under the General 3fortgage are outstanding, the Com- [; pany may not issue fu-ther First 3fortgage Bonds. The Company has covenanted in the General 3 fort-gage to obtain the release and discharge of the First 3fortgage as soon as practicable after it sati,,fies all of its obligations thereunder including the payment of all outstanding First 3fortga,te Bonds. Because certain provisions of the First 3fortgage restricted the issue of additional First 3fortgage Bonds in a manner which did not permit financing the Company's capital requirements and because such restrictions could not be changed without the unanimous consent of the holders of all First 3fortgage Bonds, the Company created the General 3fortgage as its primary long-term debt financing instrument. A copy of the General 3fertgage and all supplemental irientures thereto are filed as Exhibits to the Registration Statement, which Exhibits are incorporated herein by aference. The following statements mlating to the Series D Bonds and the General 3fortgage are subject to and are qualified by the detailed provisions of the General Afortgage and the Supplemental Indentum, particularly the parts themof specifically referred to. Terms under this heading which are printed in Initial Capital o letters are defined in the General 3fortgage, as amended, and are given such defined meanings when used under this heading. Copies of the First 3fortgage and of the supplemental indentures and the directors' resolutions determining the provisions of the outstanding First 3fortgage Bonds are filed as Exhibits to the Registration Stattment, which Exhibits an incorporated herein by reference. The following statements with respect to the First 3Iortgage are subject to and are qualified by the de-tailed provisions of the First 3Iortgage, particularly the parts thereof specifically referred to. Terms , under this heading which are printed in Italics are defined in the First 3fortgage and are given such defined meanir.gs when used under this heading. Series D Bonds Intenst on the Series D Bonds will be paid from their date of issue and will N payable semi-annually on each 3 fay 1 and November 1, commencing November 1,1981, to holders 4 record on the preceding April 15 and October 15, mspectively. Principal will be payable at the principal corporate 7 trust office of The First National Bank of Boston, Boston, 3fassachusetts, and at the principal cor-porate trust offlee of 3f anufacturers Hanover Trust Con v ny, New York, New York. The Series D Bonds will be issued only in the form of fully registered bonds without coupons, in denominations of
$1,000 and multiples thereof. No charge will be made for any transfer or exchange of Series D Bonds other than for any tax or other governmental charge required to be paid by the Company.
The Series D Bonds will be redeemable at the option of the Company at any time prior to maturity, as a whole or in part, upon at least thirty days' notice, at the applicable Redemption Price, expressed in percentages of the principal amount, spetified below, in each case with accruel and unpaid interest to the date fixed for redemption. During During 12 Months' 12 % nth ' Period Ended Redernption Period Ended Hedernption April 30 Price April 30 Price [j 1982 1983 1984 116.13 9 114.11 112.10 110.08 1987 1988 1989 1990 106.95 9 104Al 102.02 100.00 1985 1986 108.07 1991 100.00 9
[ The Supplemental Indenture provides that no bonds of Series D may be redeemed at the option of the Company prior to 3 fay 1,1986, directly or indirectly, from the proceeds of or in anticipajion of any refunding oreration involving the incurring of debt which has an interest cost to the Company, computed in accordance with genera!!y accepted financial practice, of less than 16Fs9e per annum. The Series D Bonds will also be redeemable from time to time by operation of various provisions of the General 3fortgage at par plus accrued and unpaid interest to the date fixed for redemption. Security The Series D Bonds will be secured by the General 31ortgage equally and ratably with other bonds heretofore and hereafter issued under the General 3fortence. In the opinion of William 31. Finn, Esquire counsel for the Company, the lien of the General 3fortgage constitutes a legal lien on rub-stantially all the properties and franchises of the Company, whether owned at th* time of the execu. tion and delivery of the General Ertgage, or acquired thereafter, except that L nstitutes an equi-table lien on real property acquired after the weording of the Supplemental Inden um. The lien of the General Lrtgage is subject only to the prior lien of the First Ertgage, to the Trustee's prior lien for compensation and indemnification (Section 16.10) and to other Permitted Liens (Section 1.01(ii)). No additional First Wrtgage Bonds may be issued while the Series D Bonds or any other bonds issued under the General Ertgage are outstanding. Upon the payment in full of all outstanding First Ertgage Bonds (the latest maturity of which is 3!ay 1,1999) either upon maturity or earlier redemption, the General brigage will become a first lien upon the properties subject thereto, sub-ject however to Permitted Liens and the prior liens wfermd to above other than that of the First Ertgage. There are excepted from the lien of the General 5fortgage, among other things: (1) cash and securities not deposited with the Trustee, (2) contracts and receivables not assigned to the Trustee, (3) electricity, appliances, stock in trade, materials, fuel (including nuclear cores and materials) and supplies, timber, gas, oil, minerals and other products of land, (4) automotive and construction equipment, (5) leasehold interests, permits, licenses and similar rights which may not legally be transferred and (6) property not used for producing or furnishing electricity, gas, water or steam. Securities representing the Company's 387c interest in Line Yankee Atomic Power Company, which have not been deposited with the Trustee, have been phxiged by the Company to secure its borrow-ings under a two-year revolving credit and term loan agnement of $40,000,000. l'nder the Atomic Energy Act of 1954, neither the Trustee nor any other transferee of the mort-eaged properties may operate a nuclear generating station without authorization from the Nuclear Regulatory Commission. The Trustee and any other transferee may require similar authorization as to nuclear generating and other properties from state utilities commissions af those states in which the [ Company owns properties. Renescal and Replacement Fund The maintenance covenant contained in the First 5fortgage and described below will remain in effect until the First Ertgage is discharged, and upon such discharge the renewal and replacement fund provisions of the General Lrtgage will become effective. 10
l l l l - The First 3fortgage provides that the Company will, so long as any First 3fortgage Bonds are outstandNg,in each calendar year (a) expend for maintenance and repairs of the mortgaged property. I or (h) deposit in cash with the Trustee on account of maintenance, repairs, renewals and replacements. or (c) allocate to the same purpmes an amount of additional property, the aggregate of which shall not be less than 157c of the grms operating revenues from the mortgaged property, provided that this himme percentage may be redetermined by arbitration at intervals of not less than three years (but may not be reduced below 15% of gross op(rating revenues from the mortgaged property so long as any First 3fortgage Bonds are outstanding). If in any year the total of (a), (b) and (c) above exceeds the requirementa for that year, the excess may either be credited upon the requirements for the sub-sequent year or any excess of additional property allocated shall be available for use under the provi-sions of the First 3fortgage (Section 48 of the First 3fortgage). The General 3fortgage provides (Section 9.01) that during each calendar year following the calendar year in which the Fint 3fortgage is discharged, the Company will, as a renewal and re-placement fund, (a) deposit with the Trustee a sum of money, and/or (b) allocate Available Bonds which have theretofore been paid at maturity, redeemed or acquired by the Company (other than pursuant to a sinking, purchase, arr.ortization, improvement or other fund, or the renewal and replace-ment fund, or with eminent domain, release, insurance or certain other moneys deposited with the Trustee or in connection with a refunding of other bonds), and/or (c) allocate an Amount of Available Additional Property, for each calendar year in an amount equal to Ec of the arithmetical average of the Company's gross plant investment in depreciable utility property on the books of the Company on January 1 and Deaember 31 of the preceding calendar year. The General 3fortgage also provides for a pro rata deposit or allocation for any portion of a calendar year preceding any use or allocation of a Net Amount of Available Additional Property under the General 3fortgage of this renewal and replacement fund or, before the Fint 3fortgage is discharged, of the maintenance fund under the First 3fortgage. Restrictions on the Payment of Dividends on Common Stock The Company will covenant in the Supplemental Indenture (Section 1.03) that so long as any Series D Bonds are outstanding it will not pay or declare any dividends on its Common Stock (other than dividends payable in Conunon Stock) or make any distribution on, or purchase or otherwise acquire for value, any shares of its Common Stock (such actions being hereinafter referred to as
" dividends on its Common Stock") in an amount which, together with all other dividends on its Com-mon Stock declared within the period from January 1,1981 to and including the date of such dividend declaration exceeds the sum of $48,000,000, plus, or minus if a deficit, the Net Income Available for Dividends on Common Stock for the period from January 1,1981 to a date not more than 45 days prior to the date of such dividend declaration.
Issue of Additional Hands Additional bonds may be issued under the General 3fortgage, without limit of amount, upon [ compliance with the stated conditions of issue, as follows: (i) to the extent of 60fc of a Net Amount of Available Additional Property, (ii) to refund Available First and General 3fortgage Bonds, Avail-able Bonds or Available Underlying Bonds and (iii) against the deposit with the Trustee of an amount of cash equal to the aggregate principal amount of bonds to be issued (Article V). Afoney deposited pursuant to (iii) above may be withdrawn to the extent of 60% of a Net Amount of Avail-11 l
( able Additional Property or to refund Available First and General 3fortgage Bonds, Available Bonds or Available Underlying Bonds (Article V). The Series D Bonds will be issued against $75,000,000 Net Amount of Available Additional Property. Following the issuance of the Series D Bonds, the Net Amount of Available Additional Property remaining available for the issuance of bonds or other [I action under the General 3fortgage will be approximately $64,000,000. No bonds may be issued under the General 3fortgage (except in connection with the refunding of First Afortgage Bonds, bonds issued under the General 3fortgage or Underlying Bonds which, in any h such case mature within two years before or after the date of issue of the bonds to be so issued or which bear interest at a rate higher than the rate of interest to be borne by the bonds to be so is med) unless, for a period of 12 consecutive calendar months during the period of 15 calendar months next preceding the application for authentication of the bonds to be so issued, the Net Earnings of the Company (not more than 15c/c of which may be derived from securities, sources not part of the property mortgaged under the General 31ortgage and mortgaged property leased to others which is not used for utility pur-poses) before income taxes shall have been at least equal to twice the interest for one year upon all bonds outstanding under the General 3fortgage at the date of such authentication (excluding any bonds for the retirement of which provision has been made), the bonds to be so issued and all other indebtedness for money borrowed then secured by a lien equal or superior to the lien of the General 3fortgage (excluding any such indebtedness the evidence of which is held in any sinking fund or otherwise by the Trustee or by the trustee or mortgagee under any instrument constituting a lien equal to or superior to the lien of the General 3fortgage, and any such indebtedness for the payment or the redemption of which the necessary moneys shall have been deposited with the trustee or mortgagee under the mortgage securing the same). (Sections 1.01(ee) and 5.01(f).) The coverages (based on bonds outstanding at the end of such periods) computed under the General 3fortgage for the years 1976 through 1980 would have been 2.84, 3.37, 3.85, 3.70 and 3.23, respectively. Release and Substitution of Property The Gereral 3Iortgage (Article X) provides that subject to various limitations property may be released from the lien thereof on a sale or other disposition upon the deposit with the Trustee of , cash, obligations or Additional Property equal to the Current Fair Value of the property released. - - Release moneys held by the Trustee may be withdrawn by the Company for or on account of a Net Amount of Available Additional Property or in connection with the payment, redemption or other discharge of Available Bonds, Available First and General 3fortgage Bonds or Available Under-lying Bonds. Modification of Mortgage The General 3fortgage (Section 17.02) permits the provisions thereof, and the rights and obli. gations of the Company and the bondholders, to be modified with the consent of holders of at least 66%fc in principal amourt of the bonds then outstanding which would se materially adversely affected; provided, however, that (i) the rights of the holders of one or more series of bonds may not [ be affected differently from other series unless consented to in writing by at least 66%7c in principal amount of the bonds of each series so affected, (ii) no modification of the time or terms of payment of principal, premium or interest on any bonds may be made without the consent of the holder of each affected bond, (iii) no liens prior to or on a parity with the lien of the General 3fortgage (other 12 l
than Permitted Liens) on the mortgaged property may be permitted nor may the percentage of [ consents required for modification of the General 3fortgage be reduced, without the consent of the holders of all outstanding bonds and (iv) the Trustee's rights and obligations may not be changed T. without its consent. Certain other modifications of the General 3fortgage may be made without the consent of the holders of outstanding bonds. (Section 17.01.) Defaults The General 3Iortgage (Section 11.01) provida that the following events constitute " events of default" thereunder: failum to pay the principal of or premium on any bond when due; failure for 10 days to pay interest on any bond when due; failure to pay any sinF , fund payment when due; an event of default beyond any period of grace under the First 31ortgage; the continua-tion for 30 days after notice to the Company of c default in the performance of any other General 3fortgage covenant; and certain events of bankruptcy, insolvency or reorgar.ization. The Company is required (Section 6.15) to deliver to the Trustee an annual Officers' Certificate as to whether or not any defaults exi t under the General 5fortgage. The General 3fortgage (Section 11.04) provides that the holders of a majority in principal amount of the bonds outstanding may direct the time, method and place of conducting any pro-ceeding for the enforcement of remedies contained in the General 3for+ gage. The Trustee is not required to advance or risk its own funds or otherwise incur personal financhl liability in the per-formance of any of its duties or the exercise of any of its rights, upon default or otherwise, if there is rea.sonable ground for believing that the repayment thereof is not reasonably assured to it by the
*curity afforded to it under the terms of the General 31ortgage (Section 16.03), nor is the Trustee required to exercise any of its trusts or powers at the direction of the bimdholders unless such bond-holders have offered to the Trustee reasonable security or indemnity. (Section 16.05(5).)
Certain Depned Terms Additional Property (Section 1.01(c)) means any property acquired or constructed by the Com-pany after 3 fay 31,1970, used or planned to be used in the production or furnishing or both of electricity, gas, water or steam in any form and for any purpose and properly chargeable to the Ccmpany's plant or plant addition accounts. Additional Property m include construction work in progress and interests of the Company in pmperty owned jointly or in common with other parties, improvements to public ways paid for by the Company although title thereto may not be in the Com-pany, and movable physical property of the Company situated on land leased by the Company; but does not include leasehold interests, real estate not owned in fee simple or rights in real estate unless owned in perpetuity, property excluded from the General 3fortgage or property subject to a lien (other than a Permitted Lien) prior to or on a parity with the lien of the Genwal 31ortgage. Amount of Additional Property (Section 1.01(e)) means the Cost or Current Fair Value, which. [ ever is less, of Additional Property evidenced to the Trustee, less in the case of Additional Property which was subject to an Underlying 3fortgage 166%7c of the principal amount of the Underlying Ilonds outstanding at the time of acquisition of such Additional Property. Amount of Available Additional Property (Section 1.01(e)) means the Amount of 9ditional Property remaining after deducting the Amount of Additional Property (i) constructed or acquired 13
G with certain proceeds of insurance paid to the Company, (ii) constructed or acquired with the net pnieceds treeived from certain dispositions of property, (iii) allocated to satisfy the Renewal and Replacement Fund or (iv) alh>cated or used as a basis of credit under the First 3!ortgage or any [7 Underlying 31ortga,e; and also after deducting any Excess of Retirements and the Net Amount of Available Additional Property theretofore used or alhvated under the General llortgage. Net Amount of Available Additional Property (Section 1.01(dd)) means the Amount of Avail. able Additional Property, less, after the discharge of the First 5fortgage, the amount of any Excess 8 of Retirements (being the excess of retirements over the requirements of the renewal and replacemen fund). Prior to the discharge of the First 3fortgage, retin ments are deducted in computing the Amount of Available Additional Property. Underlying Bonds (Section 1.01(qq)) means obligations secured by an Underlying 3fortgage (Section 1.01(rr)), which term includes any mortgage other than the First 3fortgage and a purC ase money mortgage existing on Additional Property at the time of its acquisition by the Company which is a Prior Lien, but only if the Cost or Fair Value, whichever is less, of such property is at least equal to 166%9 of the principal aniount of the obligations secured by such Underlyine 3fortgage, aH other Prior Liens on such property except for Permitted Liens have been discharged and the lien of such Lnderlying Mortgage does not constitute a lien on any other property of the Company. The Com-wr> ha.s covenanted not to become liable for any Underlying Honds if the principal amount of all Underlying Bonds outstanding would thereupon exceed 25W of the sum of the principal amount of all outstanding First 3fortgage Bonds, hon is issued under the General 3fortgage, and Underlying Bomis (Section 6.05(a)). ' LEGAL OPINIONS The validity of the Series D Bonds will be passed upon for the Company by Alessrs. Hopes & tiray, Boston, 5fassachusetts and by William M. Finn, Esquire, counsel for the Company, and for the Underwriters by 3Iessrs. Choate, Hall & Stewart, Boston, 3f assachusetts. Certain matters in-volving Connecticu and New Hampshire law will be passed upon for the Company by 3fessrs. Day Herry & Howard, MIartford, Connecticut and by 3fessrs. Sulloway Hollis & Soden, Concord, New llampshire, respectively. 3fessrs. Hopes & Gray and 3fessrs. Choate, Hall & Stewart may rely upon the opinions of William 3L Finn, Esquire as to all legal conclusions affected by the laws of 3faine (including the organization and existence of the Company, its title to its properties and the lien of the General Mortgage), and the opinions of 3fessrs. Day, lierry & Howard and 3fessrs. Sulloway Hollis & Soden as to all legal conclusions affected by the laws of Connecticut and New Hampshire, twpectively. EXPERTS The statements made under" Description of Bonds-Security"have been reviewed by William M. Finn, Esquire, counsel for the Company, and are inclu< led herein in reliance upon his authority as an expert. [ The financial statements of the Company and of its affiliates,3faine Yankee Atomic Power Com-pany and Maine Electric Power Company, Inc, which are incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31,1980 have been examined by Arthur Andersen & Co., independent public accountants, as indicated in their reports with respect thereto, and am included herein in reliance upon the authority of said firm as experts in accounting and auditing il giving said reports 14
UNDERWRITING The names of the several Underwriters and the respective amounts of Series D Bonde - hich they have severally agreed to purchase from the Company, subject to reduction as describal under "De- [O: layed Delivery Arrangements" and subject to the terms and conditions specified in the Underwriting Agreement filed as an exhibit to the Registration Statement, are as follows: Principal Principal Name Amount Name Amount Kidder, Peabody & Co. Incorporated $6,500,000 Alex. Brown & Sons 775,000 Lehman Brothers Kuhn Loeb Incorporated 6,500,000 A. G. Edwards & Sons, Inc. 775,000 Bache Halsey Stuart Shields Incorporated 1,200,000 Moneley, Hallgarten, Estabrook & The First Boston Corporation 1,200,000 Weeden Inc. 775,000 Bear, Stearns & Co. 1,200,000 Thomson McIbanon Suurities Inc. 775,000 Blyth Eastman Paine Webbe; ~ncorporated 1,200,000 Tucker, Anthony & R. L. Day, Inc. 775,000 Dillon, Read & Co. Inc. 1,200,000 American Beeurities Corporation 425,000 Donaldson, Lufkin & Jenrette Securities J. C. Bradford & Co. 425,000 Corporation 1,200,000 Fahnestock & Co. 425.000 Drexel Burnham Lambert incorporated 1.200,000 Janney Montgomery Scott Inc. 425,000 Goldman, Bachs & Co. 1,200,000 Josephtha' & Co. Incorporated 425,000 E. F. Hutton & Company Inc. 1,200,000 Mcdonald & Company 425,000 Lazard Freres & Co. 1,200,000 Wm. E. Pollock & Co., Inc, 425,000 Merrill Lynch, Pierce, Fenner & Prescott, Ball & Turben 425,000 8mith Incorporated 1,200,000 The Robinson-Humphrey Company, Inc. 425,000 L. F. Rothschild, Unterberg, Towbin 1,200,000 Burgens & Leith Incorporated 275,000 Salomon Brothers 1,200,000 Elkins & Co. 275,000 Mhearson IAeb Rhoades Inc. 1,200,000 First Albany Corporation 275,000 Nmith Barney, Harris Upham & Co. Freehling & Co. 275,000 Incorporated 1,200,000 Warburg Paribas Baker Incorporated 1,200,000 Herzfeld & Stan 275,2 Wertheim & Co., Inc. 1,200,000 Laidlaw Adams & Peck Inc. 275,000 Dean Witter Reynolds Inc. 1,200,000 Barton J. Vincent, Chealey & Co. 275.000 Adrest, Inc. 775,000 Total E 5. m .000 The Underwriting Agreement provides that e several Underwriters are required to take and pay for all of the Series D Bonds offered hereby if any are taken, other than Series D Bonds agreed to be sold by the Company pursuant to Delayed Delivery Contracts described below. The obligations of the Underwritem are subject to certain conditions precedent. The Company has been advised by Kidder, Peabody & Co. Incorporated and Lehman Brothers Kuhn Loeb Incorporated, as Representatives of the several Underwriters, that the Underwriters propose to offer the Series D Bonds to the public initially at the offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession of not more than .409 [;' of the principal amount, and that the Underwriters and such dealers may reallow a discount of not more than .259 of the principal amount to other dealers. The public offering price and the con. eessions and discounts to dealem may be changed by the Representatives. 15
L)EIAYED DELIVERY ARRANGEMENTS The Company has authorized the Underwriters to solicit offers by certain institutions to purchase [ Series D Bonds from the Company at the public offering price set forth on the cover page of this !, Prospectus pursuant to Delayed Delivery Contracts providing for payment and delivery on or before October 15, 1981. Each such Delayed Delivery Contract (or the aggregate amount under Delayed Delivery Contracts with related purchasers) must be for a minimum of $500,000 principal amount of Series D Bonds, each purchaser must be approved by the Company and the yrgwgate principal amount of Series D Bonds covered by such Delayed Delivery Contracts will not exceed $9,000,000. Institutions with whom Delayed Delivery Contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable ins tions and such other institutions as may be approved by the Company. The Underwriters will mecive from the Company, at the time of delivery to the Underwriters of the Series D Bonds to be purchas by them, a commission of .75fc of the aggngate principal amount of the Series D Bonds co to be sold pursuant to such Contracts. Delayed Delivery Contracts will not be eubject to any condi-tions, except that (i) the purchase by an institution of the Series D Bonds covered by its Delaye Delivery Contract shall not, at the time of delivery thereof, be prohibited under the laws of any ju isdiction to which such institution is subject, (ii) the sale of the deries D Bonds to be purchami by Underwriters shall have been ecusummated, (iii) all regulatory approvals required in con with the issuance and sale of the Series D Bonds covend by Delayed Delivery Contracts shall remain in full force and effect at the time of delivery of such Series D Bonds, and (iv) the legal opinions described in such Delayed Delivery Contracts as to the validity of such Series D Bonds shall have been lelivered. The Underwriters will not have any responsibility in respeat of the validity or per-formance of Delayed Delivery Contracts. The principal amount of Series D Bonds to be purchased by each Underwriter will be propor-tionately reduced by the amount of Series D Bonds contracted to be sold pursuant to Delayed D Contracts, except to the extent that any such Delayed Delivery Contract has been directed and cated to a particular Underwriter by a purchaser under a Delayed Delivery Contract. The Under , writers may pay a commission to dealers equal to the concession to dealers set forth above in resp of Series D Bonds for which Delayed Delivery Contracts directed and allocated to them are arra through the Representatives of the Underwriters. 16
[ No dealer, salesman or other person has been authorized to give any information or to make any representaSon not contained in this Prospectus in connection with the offer made by this Prospectus and,if given or made, such informatian or representation must not be relied upon as hav*ng been authorized by
$%QQQ QQQ b
b the Company or by the Underwriters. This Prospectus does not const!tute an offee *,y the Company or any Underwriter to sell, or a entral Maine solicitation of an offer to buy, any of these eccurities in any jurisdiction to any person to whom it is unlawful fer the Company or such PO"Wer COmpa1U Underwriter to make such offer or solicitation in such jurisdiction. The delivery of this Prospectus does not imply that the informa- General and Refunding tion herein is correct as of any time subse-Mortgage Bonds l quent to its date. Series D 16%% Due 1991 TABLE OF CONTENTS PAGE Available Information 2 PROSPECTUS Incorporation of Certain Documents by Reference 2 I The Issue in Brief 3 The Company 4 Kidder, Peabody & Co. 4 I"* 'Porstd Energy Sources and Properties Hates 5 Lehman Brothers Kuhn Loeb Use of Proceeds and Construction Pro-gram 5 IN 'd Description of Bonds 8 Legal Opinions 14 Experts 14 April 15,1981 s [i Underwriting Delayed Delivery Arrangements 15 16
, sr .
(Exhibit C - 4)
' CDMMISSIONERS CHAIRMAN Dinnes A. Campn
'Ph H. Geldw t.i coin smia STATE OF MAINE PUBLIC UTILITIES C05LMISSION 242 State Street State House Station 18 Augusta, Maine 04333 (207) 289-3831 October 31, 1980 Gerald M. Amero, Esq. Michael Feldman, Esq.
Henry R. MacNicholas, Esq. Severin M. Beliveau, Esq. Paul A. Fritzsche, Esq. Roger A. Putnam, Esq. Rigdon H. Boykin, Esq. James Good, Esq. Frank E. Southard, Jr., Esq. Seward B. Brewster, Esq. Mark L. Haley, Esq. Richard E. Whiting, Esq. Robert A. Burgess, Esq. Choryl Harrington, Esq. Horace S. Libby, Esq. Cushing W. Pagon, Esq. Jane S. Bradley, Esq. Stephen A. Johnson, Esq. David H. Moskovitz, Esq. Wayne R. Crandall, Esq. Stephen T. Hayes, Esq. Virginia E. Davis, Esq. Donald W. Hopkins Richard Thayer l Ms. Ann DeWitt Cabanne Howard, Esq. Richard Williams Margaret Wells Dobbins l Barbara Lounsbury, Esq. Re: CENTRAL MAINE POWER COMPANY, Proposed Increase in l Rates, Locket Nos. 80-25 and 80-66 l TO THE COUNSEL: Please find enclosed an attested copy of the Commiss u s Order on the above-captioned matter rendered today. Very truly yours, Y $# jorie Marcotte Walo ssistant Secretary MMW/ajh Enclosure O
i1
- TABLE OF CONTENTS PAGE 6
FAIR RATE OF RETURN........................................
- 1. Cost of Debt...................................... 6 Table I: Recommendations Regarding Cost of Short-Term Debt and Revolving Credit and Term Loan Agreement.................................... 6
- 2. Co s t o f P r e f e r r e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
- 3. Cost of Equity................................... 8
- 4. Fair Rate of Return....................... ...... 15 Table II: Fair Rate of Return................ 16 16 TEST YEAR.................................................
16 RATE BASE.................................................
- 1. Property Held for Future Use..................... 17
-s
- 2. Conversion Allowance for Thermal .
....... 21 Energy Storage.............................
- 3. Wyman Unit Numb e r Fo u r . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5
- 4. Exclusion of 1/2 the AFUDC Accrued 30 During the Tast Year CWIP........................
- 5. Working Capital...................................;v
- 6. Rate Base........................................ 32 Table III: Rate Base.......................... 32 TEST YEAR INCOME AND EXPENSES............................. 33 .
- 1. Sears Island Nuclear Plant Costs................. 33
- a. Precertification Costs...................... 34
- b. Uranium Enrichment Co n t r a c t . . . . . . . . . . . . . . . . . 3 9
- 2. Decommissioning.................................. 41
- 3. Nuclear Outage Insurance......................... 42
- 4. Cost of the Stone and Webster Study Co nce rning Main e Yankee . . . . . . . . . . . . . . . . . . . . . . . . . . 44
- 5. Storm Damage..................................... 45
- 6. Edinon Electric Institute Brochure............... 47 l
J
PAGE
- 7. Allowance for Funds Used During Construction. . . . . 49
- 8. Pro Fo rma In t e re s t Exp en s e . . . . . . . . . . . . . . . . . . . . . . . 5 5
- 9. Non-Recurring Test Year Purchase From Public Service of New Hampshire.................. 56
- 10. Non-Recurring Maintenance Expense of Wyman Unic Number Four................................. 56
- 11. Pole Attachments................................. 57
- 12. Residential Conservation Service Expense. . . . . . . . . 5 7
- 13. Remand Rates..................................... 60
- 14. Boise Cascade.................................... 60
- 15. Injuries and Damages............................. 61
- 16. Employee Discount................................ 61 Table IV: Comparative 1979 KWH Usage of CMP Employees and Residential Customers.... 64 ATTRITION................................................. 67 Table V: Analysis of Attrition............... 69 TOTAL REVENUE DEFICIENCY.................................. 70 Table VI: Determination of 1979 Revenue Recuirements Test Year Ended December 31, 1979.......................................... 70 REVENUE INCREASE ALLOCATION............................... 71 BASE RATE FUEL C0STS...................................... 72 CU S TOM ER C HARG E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3 11
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,+ % , n,.. , , , ,. ,--,%.-
e STATE OF MAINE October 31, 1980 PUBLIC UTILITIES COMMISSION ORDER CENTP.AL MAINE POWER COMPANY Docket No. 80-25 Re: Proposed Increase in Rates CENTRAL MAINE POWER COMPANY Docket No. 60-66 Re: Investigation into Cost of Service of Customer Classes and Rate Design GELDER, Chairman; SMITH and CARRIGAN, Commiss ioners PHASE I. REVENUE REQUIREMENT APPEARANCES in Phase I of this proceeding are as follows: Gerald M. Amero, Esquire, Portland, Maine, Seward B. Brewster, Esquire, Augusta, Maine, James Good, Esquire, O Portland, Maine for Central Maine Power Company ; Wayne R. Crandall, Esquire, Rockl,and, Maine for Martin Marietta Corporation; Virginia E. Davis, Esquire, Augusta, Maine for the Natural Resources Council of Maine; Ms. Ann DeWitt, Oakland, Maine, Pro Se; Margaret Wells Dobbins, Esquire, New York, New York, Stephen T. Hayes, Esquire, Augusta, Maine for St. Regis Paper Company; Paul A. Fritzsche, Esquire, Lewiston, Maine, Harvey Jalgo, 1 squire, Boston, Massachusetts for the Maine Committee for Utility Reform and Bruce Reeves; Mark L. Haley, Esquire, Bath, Maine for Bath Iron Works Corporation; Mr. Donald W. Hopkins, Brunswick, Maine for Pejepscot Paper Division of the Hearst Corporation; Cabanne Howard, Esquire, Assistant Attorney General for the Office of Energy Resources; Stephen A. Johnson, Esquire for the Public Utilities Commission Staff; Peter L. Murray, Esquire, Portland, Maine for Emil Garrett; Roger A. Putnam, Esquire, Portland, Maine for Scott Paper Company ; and Frank E. Southard, Jr., Esquire, Augusta, Maine for Keyes Fibre Company.
Docket No. 80-25 Docxec No. co-co Pursuant to 35 M.R.S.A. 564, Central Maine Power Company, hereinafter sometimes referred to as CMP, Central Maine or the Company, on February 1, 1980, filed revised schedules of rates and charges
- with the Public Utilities Commission, l
w A complete list of the proposed rate changes includes revisions in the following rates: Rate A Sheets 1 and 2 Twenty-first Revision Rate AL Sheets 1 and 2 Fifth Revision Sheet 3 Fourth Revision Sheet 4 Cancelled (the subject matter is included in Sheets 1, 2 and 3) Rate A-TD Sheets 1 and 2 Third Revision Rate E Sheets 1 and 2 First Revision h Race GSS Sheets 1 and 2 Third Revision Rate GST Sheets 1 and 2 Third Revision Rate GST-TD Sheets 1 and 2 Third Revision Rate M-3 Sheet 1 Ninth Revision Rate N Sheet 1 Thirteenth Revision Rate SL Sheets 1, 2 and 3 Fifth Revision Sheets 4 and 5 Cancelled (the subject I matter is included in Sheets 1, 2 and 3) The new rates filed are: l Rate A-LM Sheets 1 and 2 Original Rate A-TDR Sheets 1 and 2 Original Rate GS Sheets 1 and 2 Original Rate GSP Sheets 1 and 2 Original Rate GS-TD Sheets 1 and 2 Original Rate GSP-TD Sheets 1 and 2 Original O
~
3- Docket No. 80-25 Docket No. ou-oo ( '} hereinafter sometimes referred to as the PUC or the Commission. The rates and charges, as filed, were to be effective on March 2, 1980 and would have increased Central Maine's annual revenues by 535,000,000. Subsequently, the requested increase in annual revenue was amended to 336,900,000. Acting pursuant to the authority of 35 M.R.S.A. 569, the Commission suspended the effective date of the schedules. By order dated February 27, 1980, the schedules were suspended for three conths from March 2, 1980, and by order dated May 29, 1980 the schedules were suspended for an additional five months f rom June 2,1980. A prehearing conference was held as ordered on March 25, 1980 at the offices of the Commission in Augusta. Petitions to intervene had been filed orior to that date and were considered at the conference. By order dated April 2, 1980, the (' Existing rates to be cancelled are: Rate GS-1
~
Sheets 1 and 2 Fifth Revision Rate GS-2 Sheets 1 and 2 Fifth Revision Rate GS-3 Sheets 1 and 2 Fourth Revision i Race GS3-TD Sheets 1, 2 and 3 Second Revision Changes are proposed in the following Rules and Regulations: Section 3 Sheet 3 Fourth Revision Sheet 3-A First Revision (Subsection 3.9 and 3.10 deleted) Section 4 Sheet 4 Ninth Revision Sheet 4-A Sixth Revision Section 5 Sheet 5-A First Revision Section 6 Sheet 6-A First Revision Section 15 Sheet 15 Seventh Revision Section 17 Sheet 17-A Fourth Revision Section 18 Sheet 18-D First Revision O
Docket No. 80-25 Doc <ec 30, cu-oo Ccamission allowed the petitions of Associated Industries of Maine," Sath Iron Works, Ann DeWitt, Keyes Fibre Company, Maine Committee for Utility Rate Reform and Bruce Reeves, Maine Of fice of Energy Resources, Martin Marietta Corporation, Natural Resources Council of Maine, Pejepscot Paper Division of the Hearst Corpora tion, St. Regis Paper Company, and Scott Paper Company. The April 2, 1980 Order dealt with another issue considered at the prehearing conference which is relevant here. An investigation to 35 M.R.S.A. 1296 was initiated into Central Maine 'pursuantof s cost service by customer class and raca design. The $296 investigation was assigned Docket No. 83-66 and was consolidated with the 564 filing. The consolidated proceeding was bifurcated for purposes of hearing, with revenue requirement issues being heard as Phase I. Issues dealing with cost of service by customer class and rate design will be heard as Phase II. Extensive discovery through data requests was conducted and hearings on revenue requirement issues commenced May 19, 1980. Hearings continued on May 20-22, June 23-27, July 7, and August 4, 1980, a total of 12 days. Testimony from the public was received o,n June 27th and August 4th. Briefs were filed by the parties on or before August 1, 1980 and reply briefs were filed on or before August 18, 1980. While certain actions have been taken with respect to the Phase II portion of this proceeding, this order is dispositive of only revenue requirement issues. Active participants in Phase I were Central Maine, Bath Iron Works, sometimes hereinafter referred to as Bath or BIW, the Maine Committee for Utility Rate Reform and Bruce Reeves, sometimes hereinafter referred to as the Maine Committee, and the Public Utilities Commission Staff, sometimes hereinafter referred to as the Staff. Some other intervenors were present at most of the hearings, but their participation was relatively limited and they have taken no position on issues concerning Central Maine's revenue requirement. Central Maine presented four witnesses : Mr. Robert F. Scott, Senior Vice-President, Customer Services and Rates Mr. Thomas C. Webb, Senio: Vice-? esident, Finance: Mr. Robert S. Howe, Comptroller; and Mr. Douglas Stevenson, Assistant to the Comptroller. These witnesses are all officers o f the Company. . n The Associated Industries of Maine subsequently withdrew i:om the case.
u 5- Docket No. 80-25 5?5 Docrer No. ou-oo D The Staff oresented three witnesses: Mr. David A. Kosh, President of Kosh, Louiselle, Lurito & Ascociates, Inc., an Arlington, Virginia consulting firm specializing in public utility economics; Mr. Bruce M. Louiselle, Vice-President of the same firm; and Mr. Richard E. Darling, Supervisor of Conservation Programs for the Maine Office of Eaergy Resources. Sath Iron Works presented two witnesses: Dr. Michael J. [ Ileo, President of Technical Associate:, Incorporated, an economic research and consulting firm of Washington, D.C. and Richmond, Virginia and Mr. David Parcell, Vice-President of the same firm. The Maine Committee called two witnesses who testified: Mr. Charles E. Monty, Senior Vice-President, Engineering and Production, Central Maine Power Company; and Mr. Samuel D. Soule, Plant Superintendent of Central Maine's William F. Wyman Station at Cousins Island. During the proceeding, Emil Garrett das permitted to intervene on two issues concerning the costs associated with
the Sears Island nuclear f acility. He called as a witness,
(-)/ Mr. Webb, . Central Maine's Senior Vice-President, Finance. In determining a utility's revenue requirement, the Commission must determine the fair rate of return which the utility is entitled a reasonable opportunity to earn. Then, the Commission must determine whether the utility is earning its fair rate of return and, if not, the amount of revenue which will afford the utility a reasonable opportunity to do so. This second step under trad~itional rate case analysis requires selection of a test year and the eval"ation of rate base, revenue and expenses as adjusted during the test year. The test year analysis reveals the return earned. The return earned is seiohed against the return required (the fair rate of return multiplied by the test year rate base) and the difference between the return earned and the return required l shows the return adjustment that is required. Since rates are set prospectively for at least a year ahead, i t. is necessary to normalize expenditures and revenues in a tes: year to reflect a level of expenditures and revenues that can be reasonably expected to occur during the first year rates are in effect. This process includes incorporating known changes that have occurred since the test year. Also, this gy Cocaission in recent years has orovided an attrition allowance to take into account expected--but not actually known--future q_) enanges in revenues and expenditures to help assure that the allowed or required rate of return will be maintained for the Company for at least the first full year that the new rates are in effect.
4 6- Dceket No. 80-25 Docket No. o0-oo These topics are addressed in this Order as they currently apply to Central Maine Power Company. FAIR RATE OF RETURN
" Capital cost when competently computed is essentially and practically the equivalent of fair race of return." Central Maine Power Cocoany v. Public Utilities Commission, lao Me. 21 ] , 30i (11o0). Inererore, in cetermining tae fair rate of return, it is necessary for the Commission to determine the cost of debt, the cost of preferred stock, the cost of common equity, and the capital structure.
Three cost of capital witnesses were presented by the parties. Thomas C. Webb, Senior Vice-President, Finance, for Central Maine, testified on behalf of the Company. David A. Kosh, President of Kosh, Louiselle, Lurito and Associates, Inc., presented testimony on behalf of the Staff. David Parcell, censulting economist and Vice-President of Technical Associates, Inc., testified for Bath Iron Works.
- 1. Cost of Debt - gg % gggg Qgg ,
Mr. Webb recommended a cost of debt of 9.87%, Mr. Pa rcell recommended a cost of debt which the Commission comoutes to be approximately 8.94%, and Mr. Kosh recommended a cos't of debt of
- 9. 3 3~ . There are two major differences in these recommendations--the cost of short-term debt and the cost of the revolving credit and term loan agreement. The witnesses' recommendations on these issues are reflected in Table I below.
TABLE I RECOMMENDATIONS REGARDING COST OF SHORT-TERM DE3T AND REVOLVING CREDIT AND IERM LOAN AGREEMENT Cost of Revolving Crecit ano Term Loan Cost of Short-Term Azreemenc Recommencations Deot Recommencations Mr. Webb 15% 14.0% Mr. Parcell 13% 8.0% Mr. Kosh 13% 11.0% gg
0 Docket No. 80-25 _s\ Docket No. cO-oo [G The cost rate of the revolving credit and term loan agreement deoends on the prime rate. The rate covers the prime rate and cer'ain t fees, the latter causing an increase above
" prime" of about 50 basis points. Mr. Kosh and Mr. Parcell recommended a 13% rate which the Commission accepts as just and reasonable. ainst the The Commission checked this 1980 orime rate actual experience, which was official conclusion a!y noted by an'0: der dated August 20, 1980.
The crime interest rate at the beginning of 1980 was 15%-15.57.. Between late February and early Acril the prime rate rose to 20%. Then " prise" declined to l'3% by mid-June. It continued to decline to 10.75% - 11% by late July. By August 20, 1980, the end of the period officially noted, the 6 prime rate again started to increase. In light of this less than stable actual experience the Commission believes a cost rate of 13% for the revolving credit and tern loan agreement is just and reasonable for the coming year. The short-term debt is reasonably expected to be in the form of commercial paper with bank lines of credit to back it up. We have checked the recommendations of the witnesses (~N against the actual 1980 experience which was officially noted.
\_) Commercial pacer races in 1980 acoear to have fluctuated in a cattern similar to the prime ratbetween e a high of 18.3% and a low of 8%. At the end of the oeriod of official notice, the commercial paper rate was 9.75% - 10%. In light of the actual experience we believe the 8% recommendation is slightly :ow, that the 14.0% is slightly high, and that the 11.0% is jt se and reasona.ble for the future. We so find.
Because we have used the rates that Mr. Kosh recommendeu on both of the issues affecting the cost of debt, we find Mr. Kosh's recommendation of 9.33% for the cost of debt to be just and reasonable.
- 2. Cost of Preferred - %M Aq @wg kggg Mr. Webb testified chas the cost of preferred stock was 8.82%, Mr. Parcell testified that the cost of preferred stock was 8.27% and Mr. Kosh testified that the cost of preferred stock was 8. 52%. The difference between these costs relates largely to the estimates by the witnesses of the cost of Central Maine's July 24, 1980 preferred stock issue. Central Maine submitted a late filed exhibit that shows that this issue had an effective cost rate of 11.95%, with a dividend requirement o f 11. 7 5%. Using these costs, Central Maine's
(( w) Exhibit
11, late filed, shows a comoosite cost of preferred scock of 8.35%. The Commission finds the 8.35% cost rate to be just and reasonable.
o Docket No. 80-25 Doc .< e t No. ou-oo
- 3. Co s t of Equity In setting the cost of equity for ratemaking purposes, the Coccission is bound by the now f amiliar principles enunciated in Bluefield Water Works and I=orovement Comoany v. Public Service commission or West Virginia, 2o2 U.S. o/y (iy23) and Feceral Power Commission v. Hoce Natural Gas Co. , 320 U.S. 591 (1944) cnat "tne return to ene equity owner snould be commensurate with returns on investments in other enterprises having corresponding risks. That return, moreover, should be sufficient to assure confidence in the. financial integrity of the enter so as to naintain its credit and to attract capital." prise, Id. at 603. The cost of equity is the amount of the material reward needed to induce an investor to supply a given a=ount of equity capital. The required return is thus set by the investor. The Commission merely measures what, in its estimation, is that required return. Based upon the application of these principles, the Commission finds- tha t the cost of equity is 13. 75%.
Mr. Webb used a number of methods to measure the cost of equity to arrive at his recommended cost of 15%. Mr. Webb first used a' discounted cash flow ("DCF") analysis to arrive at a " bare bones" cost of equity of 14. 25%. The DCF method ! recognizes that the objective of an equity investor is to obtain current and future income in the form of current l dividends and growth in future dividends and/or market price. Using estimates of the investor's expectations of income, the DCF method computes a capitalization rate that indicates the investor's required return. From this return, the just and reasonable earnings requirement of the Company is determined. The capitalization rate is determined by adding the erticated I dividend yield to the estimated growth rate in divid?nds per I share. Like all other methods used in computing the cost of equity, some degree of judgment is required to deter =ine the
- l. figures to be used in the equation. In fact, all three witnesses employed a DCF analysis to reach substantially different results. In evaluating the DCF analysis employed, therefore, it is necessary to evaluate the judgments made and the basis for those judgments.
In determining dividend yield, Mr. Webb testified that, since the near-term future is projected to encompass many of the economy's current problems, he believes that the recent past provides a realistic basis for projection. Mr. Webb used tne period 1977-79 to develoo an average CMP dividend yield of 9.5%. Giving some weight to' the 1979 yield of 10. 7 5% and the current vield of ove: 12%, Mr. Webb developec a range from 9.5% g to 10.25%.
'()
Docket No. 80-25 Doexer No. ou-oo In deriving a growth rate, Mr. Webb again used the period
, 1977-79 and recommended a growth rate of 4.5%. The rate was derived by analyzing CMP's growth in annual dividends pe-share, CMP's growth in the annualized dividend rate, and the industry's average o chose to use a 9.75f.rowth in dividends per share. Mr. Webb dividend yield and a growth rate of 4.5%
to compute his 14.25% capitalization race. The primary difference between the DCF analyses performed by the three cost of capital witnesses is the growth rate. Dividend yield figures varied less significantly among the witnesses, although we are persuaded that Mr. Kosh has , presented the most reliabla yield estimate. In fact, the dividend yield figure used by Mr. Kosh and approved in this decree is slightly higher than that used by Mr. Webb. Our analysis of Mr. Webb's methodology will focus solely on the growth rate used. We find that, because of his sole reliance on dividend growth figures, Mr. Webb's analysis of future growth is fatally flawed. Upon cross-examination, Mr. Webb, as a matter of mathematics, agreed with the following principles:
- l. If the payout ratio and the rate earned on book equity are unchanged over time, then book value per share, earnings per share, and market price will grow at the same race;
- 2. Growth in dividends per share originates with growth in earnings per share; and i 3. The growth in earnings per share is equal to the l growth in the rate earned on equity times the growth in book j value.
Over the 1977-79 period, CMP's growth in book value per i share was 2.26%, while its growth in earnings per share was
- 6. 6 2% . The difference in growth rates must result, therefore,
.o
10 - Docket No. 80-25 Docxer No. ou-oo from the growth in the return earned on equity.* During the 1974-76 period, CMP's average earnings for equity were approximately 9.97. and the dividend growth was 1.97.. During the 1977-79 period, however, the average return earned was 12.47., representing a 257. growth in the rate of earnings. The growth in divicends, as computed by Mr. Kosh, was 4. 6%. Since a relatively high payout ratio was maintained,** the growth in dividends over the more recent oeriod resulted from the increase in the rate earned on book value. It is irrational to assume that the race earned on book value will continue to increase in the future. Mr. Webb testified that CMP had . .:geted a 757. ' ratio (257. retention ratio). In order to maintain a 4.57.payoutgrowth rate with a 257. retention ratio, the required return on equity would have to be 187. ( 4. 57. e 257. = 187.) . This return is far in excess of the amount Mr. Webb actually recommended in this case. Such inconsistency agair. demonstrates the absurdity of extrapolating from the recent trend in the rate earned on book. We find that Mr. Webb's use of the dividend growth rate results in an overstate =ent of anticipated growth and must be rejected. Inaddition[Mr.Webbusedamarket-to-bookanalysisto test his DCF result and to mark up the result to achieve a market-to-book ratio of 1.2. Mr. Webb stated that a -h market-to-book ratio of 1.2 was required to compensate for the costs of issuing new equity and to provide a reasonable provision for market pressure. Using a dividend yield range of
- 9. 57. to 10. 257., a book value of 517. 54 and a gayout ratio of 757., Mr. Webb found a range of 15. 227. to 16. 4,. to be the required return on book equity to yield a 1. 2 market-to-book ratio. Assuming a constant market-to-book ratio, however, any x
T In its exceptions to the Examiner's Report, CMP argues that this state =ent is erroneous since it " completely ignores" the dilution which has occurred in the past when the Company has issued stock below book. This argument, however, does not rebut the statement made in the text. While dilution certainly is one factor which must be taken into account when computing growth in book value, the growth in book value, including dilution, when multiplied by the growth of the rate earned on equity will yield the growth in earnings per share. Thus the difference between the growth in book value and growth in earnings depends solely on the growth in the rate earned on equity. That dirition exists does not affect the validity of the equ. ion. we The ps, "t ratio averaged approximately 727. for this period.
r~ Docket No. 80-25 (_)3 Doexer No. co-co change in the payout ratio would have an increasing or decreasing effect on the required return. Mr. Webb testified that an increase in the payout ratio should increase the investors' perceotion of risk. Using Mr. Webb's market-to-book ratio analysis, however, demonstrates just the opposite result. Thus an increase in the pa, tout ratio would require a decreased return, while conversely, a decrease in the yields an increased rate of return. Because Mr. Webb' spayout analysis contradicts his own prediction of investor response, we reject Mr. Webb's market-to-book approach. Mr. Webb also used a comparable earnings approach to arrive at a cost of equity of 15-16.5%. Mr. Webb comoared the earnings of the Standard and Poor's 400 Indust'ials r with the earnings of electric utilities and CMP. Over the 1965-78 period studied, the industrials earned 12.7% on equity. They earned 13.9% over the 1974-78 period and 14.35% over the 1977-78 period. Even assuming the comparability of the S & P 400 with Central Maine, an assumotion wnich has not been supported on this record, the typical firm in the S & P 400 Industrials had a 1.25 market-to-book ratio during the most recent period, 1977-79. Since Mr. Webb stated that a O market-to-book ratio of only 1.2 was required for CMP, it is clear that the required rate of return under Mr. Webb's comoarable earnings approach would be less than 14.35%. We do not' find that this approach supports'Mr. Webb's recommendations. Finally, Mr. Webb used a " risk premium" approach, demonstrating a range of returns f rom 14.75% to 16%. To acnieve this result, Mr. Webb added 575 to 625 basis points--the risk premium--to the long-term U.S. Treasury Bond-rate of 9% to 9. 75%--deemed to be the appropriate "riskless rate." Mr. Webb derived his risk premium in part from a survey of institutional investors by Paine Webber Mitchell Hutchins. In the survey, investors were asked what return on equity would be attractive relative to AA long-term utility bond yields of 9 1/2%. To this spread, Mr. Webb added another saread to account for the dirference in the risk perceived by the investor between companies whose bonds are rated AA and Baa.* Mr. Webb, however, was unable to state what market-to-book ratio the investors surveyed believed would be produced by their desired return. Without such information, it is impossible to determine the validity of the spread to x CMP's most recent bond issue is rated 3aa. [)
achieve pocket No. a0-25 I!h Doczet No. cu-55 Moreover,the 1.2 market-to-book ratio targeted by M spread was applied between to the r Baa bonds and theMr. Webb's risk pre
. Nebb uted based on a.
appropriate Baa race.iskiess race, however, cost of equity. The premium is not sufficien not to the recommendations. tly reliable to support Mr.The Commiss pproach Webb's Mr. In recommending a cost analysis,Parcell relied upon a comparableof equity of 12% to 13.2 his DCF analysis earnings ap roach, a DCF andrate capitalization ran thethatrange capitalof assets 9-10% an,d pricing CAPM") . ae growthIn mod in the rate i Mr.ges are similar toresults those isdeveloped therefore 11-13%.the by Mr. The range of Kosh These of Moody's 24 UtilitiesParcell's analysis deper.ded rge pa . in la studies to determine com.Mr. Kosh however,rt upon an analysis Moody's 24,that developing his DCF analysis. parable com,panies to Moody's 24 are in fact comnarablein and of itself does n adopts the approach taken by Mr companies imply that the The Commission demonstrable Moody's 24 correlation lends supportWe believe, however on this. Kosh e of thebecaus. lack of record that Mr. between CMP and the to Mr. Kosh's recom,mendations'Pa rcells analysis the premise thatThe CAPM methodology y Mr. described b or "systemat ic", risk inherentthe cost of equity is measur d bParcell i less market e y the market, security. risk that exists, in the stock. current Systematic risk is quantified bthe more valuable is theT interest provided by the market rate on over risk-free investments ; 2)y determining : 1) the a period performance to the market. of stock of the utility b iof time; and The last the 3)the return coefficient. factor is known as the " beta"e ng studied in com The beta coefficient provide the systematic risk premiumpremium of a The systematic risk premium is th ofarable companies to a particular company. to determine the fair rate ofreturn. en addedMr. to the risk-free rate computed relaces to the Moody 's 24 ities.Pa rcell's relies on dac analysis sufficiently demonstrated to relat and has not The therefore beenbeta thus rejects Mr. Pa e to CMP. methodolog,y to this case. rcell's application of the CAPMThe Cce Mr. recommen however, ded range of 12% does not Mr. to 13%.?arcell's ysis yielded a comparable e derive the appropriate market-to bPa rcell's analysis,
- ook ratio
13 - Docket No. 80-25 Docset No. du-co J for CMP or show what the market-to-book ratios were for his j cocoarable coacanies. It is, therefore, difficult to test the j I reebamended result. The Commission finds that this analysis does not orovide a sufficienttv 9ttania nast2 -" - -- n
; Ie setermine the cost of equitv.
Mr. Kosh used a DCF analysis to comoute his recommended cost of equity of 13. 757.. The Company has criticized Mr. Kosh's recommendation on the ground that over the past seven years this Com=ission has adopted Mr. Kosh's recommendations, while the Company's stock over that period has sold consistently below book. The Company urges that this latter fact is attributable to Mr. Kosh's overly low recommendations of the cost of equity in the cast and that therefore Mr. Kosh's testimony in this case should be taken with "a grain of salt." While it is true that the consistent selling of stock below book is a matter of concern and will, in the long run, work to the detriment of the Company and its ratepayers, the fact that the Company's stock has sold below book in the past does not in and of itself indict Mr. Kosh's methodology. The Company, in short, has made no demonstration on the record that the allowed rates of return in the past have been a ccatributing factor to the Company's sale of stbck below - book and ascribes more weight to our past decisions chan is appropriate. Management may exercise its discretion with respect to the Company's financial affairs in a variety of ways that can affect the otice of its stock. Thus, the mere fact that the price is undesirably low does not establish that the allowed return was insufficient. For the Company's contention to be persuasive, it must be suoported by an evidentiary demonstration that management had no meaningful opportunity to improve the market-to-book ratio. Even then, it would also be necessary to show that an increase in the allowed return would have remedied the situation. There are, therefore, many factors which may contribute to the Company's sale of stock
- below book. Past Commission decisions cannot be deemed at M N fault.
j Mr. Kosh developed a 9.927. dividend yield for CMP and a 9.3". yield for his selected eight comparable companies. Analyzing growth in book value rather than growth in dividends per share, Mr. Kosh computed a growth rate of 2.757. for CMP and a growth rate of 3.137. for the comparable cocoanies. These figures yield a capitalization rate of 12.'57. 'for CMP and 12. 527. for the comparable companies. Mr. Kosh determined that the range for the bare bones cost of equity was 12. 5% to 12. 7 57.. 3 (V
Docket No. 80-25 Docket No. ou-55 g In arriving at those figures, Mr. Kosh relied on the 36-month period ending April 30, 1980 as the period most reflective of investor expectations. This period basically coincides with that used by Mr. Webb and is, the Commission believes, the appropriate period to be used. The major disagreement between Mr. Webb and Mr. Kosh concerns the appropriate growth rate. As noted previously, the growth race derived by Mr. Webb from growth in dividends per share is overstated. Mr. Kosh testified that, in the short-run, dividends may vary for a variety of reasons.* Long-term growth in dividends, however, derives f:om earnings and earnings are derived from book value. Over the long-run, therefore, growth in book value provides the appropriate measurement for growth in dividends. An analysis of growth in book value factors out those elements of dividend and earnings growth which depend on increases in the rate earned on equity. Those ele =ents must be eliminated from consideration, because those increases cannot be expected to continue indefinitely. For these reasons, the Commission adopti Mr. Kosh's analysis. In :ecommending a cost of equity of 13. 7 5%, Mr. Kosh determined that that was the return required in order to achieve a market-to-book ratio of 1.19 given the capitalization . rates he computed. Because the Company is planning to issue a w substantial amount of equity, Mr. Kosh has testified that the
.: ate allowed should be sufficient to protect the Company from downward price fluctuations and to allow it to cover financing costs and pressure. Mr. Kosh has computed financing costs anc oressure to be no more than 7. 5" and we approve that ' figure.**
a Mr. Kosh stated: Experienced growth in per share dividends may reflect abe :ations which cannot be exoected to continue. For exa=ple, management may allow 'the dividend rate to remain the same for a period of years until earnings reach a level where an increase in the dividend is likely to ' stick' ; or management may increase the payout, i.e., increase dividends move rapidly than earnings; or, if in need of cash, it may maintain a constant [ dividend] in the face of rising per share earnings. Thus, it is important that the analyst supplement his analysis of past dividend growth by developing additional indicators of future dividend growth. (P.U.C. Staff Exhibit 3 at 29) . In computing this figure, Mr. Kosh used a cost rate of 3.95% and a cressure rate of 3.55%. Both of these figures are found to'be reasonable.
15 - Docket No. 80-25 fg Docket No. 00-00 U. excessive. Mr. Parcell apparently believes the 7.5% figure to be Based on studies he performed, Mr. Parcell recommended that an adjustment of up to 2% be used to reflect any possible downward effect due to a new stock issuance. The Commission believes that this figure is understated. Mr. Parcell examined common stock sales for Moody's 24 Utilities over the past five years. He analyzed changes in market price of e'ch Company relative to the Dow Jones Utility Stock Index for si months prior to each stock issuance and determined that there was no significant decline for a utility issuing stock in relation to utility stocks in general. The Commission finds that an analysis of the reactions of the Moody's 24 Electrics is insufficiently related to CMP to be orobative of the effect on CMP's stock of a stock issuance. Soreover, Mr. Parcell's 2% figure results in part from the application of his derived cost rate only to the new shares to be issued. The Commission rejects this approach since we find that for a rate on equity to be fair, the rate must produce a market price for all stock which allows the sale of new stock at a reasonable level. In addition to market Mr. Kosh recommended a 9% pressure and adjustment financingagainst to protect costs, short-term market declines in CMP's common stock. That figure
'- was computed by comparing the high price in any given month with the low price'two months later. The Comm r aion recognizes that adjusting the bcra bones cost of equity by the 9%
fluctuation figure and the 7.5% market ~ pressure and financing cost figure represents a highly conservative approach. These adjustments are nevertheless approved because of the Company's plans for substantial additional financing in the near future and CMP's recent tendency to issue stock below book. Therefore, a cost of equity of 13.75% is found to be just and reasonable. 4 Fair Race of Return Having found the cost of debt to be 9.33%, the cost of preferred stock to be 8.35%, the cost of common equity to be 13.75% and there being virtually no disagreement as to the capitalization ratios, the Commission finds the f air rate of return to be 10.78% as set forth in Tabla II, i
Docket No. 80-25 Docket No. ou-co TABLE II FAIR RATE OF RETURN Capital Tyoe of Caoital Structure Cost Debt 50.8% ~ 9.33% 4.74% Preferred 13. 57. 8.35% 1. 137. Coccon Equity ' 35.77. 13.757. 4. 917. Cost of Capital 10./o7. TEST YEAR By agreement of all parties, the test year for this proceeding is 1979. RATE BASE "The, rate base consists of the investment made by various capital owners of Central Maine in utility olant that is used llh or' required to be used in rendering utility' service. The suppliers of capital are legally entitled to a reasonable opportunity to earn a fair return on their investment. Thus, the race base multiplied by the fair rate of return equals the fai: [or required] return in dollars." Re: Central Maine Power comoany 26 PUR 4th 388, 398 (Me. Pub. Util. Comm'n. 19/d). In u. tis case issues arise as to whether certain plant held for future use, the thermal energy storage project costs, and certain Wyman Unit No. 4 costs should be included in rate base. A discussion of these issues follows. The Commission has also included construction work in progress (CWIP) in rate base. However, since the issues concerning an allowance for funds used during construction ( AFUDC) are closely related to CWIP and since AFUDC is an income issue, most of the discussion of the CWIP/AFUDC issues is in the test year income and expense section of this Order. In this section the Commission discusses only the question of deducting 1/2 of the test year accrued AFUDC from rate base. In the rate base section the Commission also addresses the working capital issues concerning contractor recentions and vendor-financed fuel.
e f 3-Docket No. 80-25 () Docket No. o0-0o Other issues which concern rate base treatment are the Sears Island project costs and the Nuclear Enrichment Contract costs. Since the Commission disallows rate base treatment of these costs, but would allow some amortization of them, the discussion of these issues appears in a subsequent section of this decree.
- 1. Prooerty Held For Future Use Central Maine has included in race base 53,381 449* of property held for future use as well as 51.573,793bof land in Richmond included in the " Investment in aoint Coroorate Projects" account. In Re: Central Maine Power Co'. , 26 PUR 4th 388, 399-401 (Me. Pub. Util. Comm'n. 1978), this Commission put the Company on notice that in the future the Company must bear the burden of justifying the inclusion in rate base of property held for future use 'by demonstrating that a sufficiently definite plan exists for the use of such procerty." The Commission adopted the " definite plan" standard because "we cannot burden ratepayers for an indefinite period with paying a return on Company assets which confer no immediate benefit on and provide no guarantee of future banefit to Central Maine's O- ratepayers."
The Company has asked the Commission to depart from this standard and to allow all property held for future use in rate base when the acquisition was'made in good faith and in the exercise of reasonable and prudent business judgment in anticipation of future needs. Alternatively, the Company contends.that, even under the " definite plan" standard, it has met its burden of proof with regard to all properties except Stockton Springs. At the other end of the spectrum, the Maine Committee argues that, as a policy matter, all property held for future use should be excluded since it is not used and useful. The Maine Committee alternatively contends that the Company has not met its burden of proof under the " definite olan" standard with regard to any of the property proposed to be included. BIW concurs in this conclusion. The Staff has argued that the Company has f ailed in its burden of proof only with regard to a number of specific items. x This figure includes 60% of the purchase price of land at 0 Sears Island. That amount is 5706.057. 1mem====E
18 - Docket No. 30-25 l Docxec so. ou-ce The Co= mission reaffirms its adoption of the definite plan standard. The reasons stated in the prior Central Maine Power Co. decree supporting the reliance on the scancarc remain as via' ole today as when first enunciated. In considering whether the Company has met its burden of proof in demonstrating the existence of definite plans, the Commission finds that the burden has not been met on a number of parcels. All part es appear to agree that under the definite plan standard, the parcels of land at Stockton Springs should be excluded. The Company agreed that the use of those parcels was "quite hypothetical" and was unable to give any idea when the oroperty would be placed in service or when construction might begin. The Staff has also argued that the Richmond parcels be excluded. Mr. Howe, who sponsored the Company's proposal to include in rate base certain items of property held tor future use, testified that the Richmond site was intended to be used as an alternative site to Sears Island or as a generating site i~n 1994 The Company, however, is still actively pursuing its plans to build a coal plant on Sears Island. Moreover, Mr. Howe was unaware of the type or capacity of any generating facility to be built at Richmond in the event the site was not used as an alternative to Sears Island. Mr. Howe was further unable to testify that if a new generating facility was required in 1994 'that the Richcond site would definitely be llh used. The Commission finds that the Company has not demonstrated the existence of defihige plans with respect to either Stockton Springs or Richmond. At the hearings, the Staff cross-examined Mr. Howe concerning the Company's plans for two transmission lines--a line from Guilford to Greenville and a line from Portland's Sewall Street Substation to Cace Station. Both lines were given an in-service date of 1985. The exhibit itemi ing the parcels proposed to be included in rate base in the property neld for future use and investment in joint corporate projects accounts was introduced not by the Company but by the Staff. Mr. Howe was unable to describe the purpose of the proposed lines, how the in-service dates were determined, what was the anticipated size of the lines, and when the projects were developed or whether any necessary permits had been sought. Because of these inadequacies in the tasti=ony concerning the x The amount attributable to Stockton Springs is $496,2653 / W That attributable to Richmond is 51 57' 793./'A c ae amounts used in this section reflect 13-month average figures supplied to the C = mission by order of the Examiners in the Examiner's Report. The figures, sucolied by the Cocoany under cover letter dated October 20, 1980, a're hereby' admitted into the record as a late-filed exhibit.
Docket No. 80-25 (} existence of a definite plan, the Staff argues that these lines Docker No. co-oc should be excluded. The Commission agrees. We also note, . however, that Mr. Howe stated that he would be unable to , testify specifically in regard to any of the items listed as
" Transmission Line Property" in P.U.C. Staf f Exhibit 1, 3 MPUC-8 and 9. We can only conclude that the same infirmities noted above with regard to the Guilford line and the Sewall Street Substation line apply to all the transmission line property which the Company has requested be included in rate base.
As noted earlier, Central Maine was put squarely on notice that it had the burden of proof in this area and that the Commission would expect evidence of the existence of definite plans. The Company's only attempt to deal with this issue was Mr. Howe's pre-filed statement that the Com an y had " included parcels that we believe meet this standard.p' However, this means that the Company believes that there exists a definite plan for the Richmond property as well. 'In fact, the plans for i that property are no more definite than they were during the pendency of the last rate case when that property was also excluded. The Commission finds that it can place little reliance on Mr. Howe's pre-filed statement since clearly.the
- s. Company 's " belief" that the requested items meet the definite plan standard differs from the Commission's conception of what meets that standard. Mr. Howe's demonstrated inacility to verify the existence of definite plans for the transmission line properties further casts in grave dou;c.the existence of definite plans.
A review of the exhibit submitted by the Staff reveals, however, that a number of transmission line properties have an in-service date of 1980. We find that for those properties, we can infer the existence of definite plans since presumably the properties will be, or already are, placed in service during this year. In addition, we find substantial evidence to include the Transmission Lines for the Sears Island project since a definite plan exists to build a coal-fired generating
- station at Sears Island. All other transmission line i propertief will be excluded. We therefore reduce rate base by a
- $542,641/to reflect the property eliminated above.
The Staff has also contended that the Commission should exclude property in Portland on Canco Road slated to be used for expansion of the existing Portland service building. On cross-examination, Mr. Howe conceded the possibility that the Company's plans to reduce costs through use of data entry
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Docket No. 80-25 Docket No. o0-co systems and inventory systems might preclude the need for O future exoansion of the building on Canco Road. Unlike the propertie's discussed previously where it is not even clear that any plan even exists for the use of the properties, here the Company apparently has at least decided what use to make of the Canco Road property. It is the definiteness of that use which is at issu2. Based on this record we cannot conclude that the property will definitely be used. The Cocoany has made no attempt to resolve this question. We exclude this property and reduce rate base by S # The last issue raised by the Staff concerns what should be included in rate base on account of the Company's proposal to build a coal-fired generating station on Sears Island. The Company had originally proposed to include in rate base 60% of its land lease payments, made under an option on the land. By lare-filed exhioit, the Company now proposes to include 60% of the total purchase price
- of the land since the Company exercised its option to purchase during the pendency of this proceeding. The Staff does not object to the inclusion of the lease pay =ent but contends that there is no definite plan to justify inclusion of the cost of the purchased land. The definiteness of the Company's plan to use the land at Sears lll Island does not vary, howeyer, depending on whether the Company owns the land outright or makes payments under an ootion. The Company has sought reconsideration of this Commission's original rejection of the croposal to build Sears Island and hearings are now underway.' Regardless of the outcome of that proceeding, it is clear at this point that a definite plan exists.
The Staff has made a number of arguments with regard to Sears Island attempting to cast doubt on the prudence of acquiring the Sears Island pro final decision on the Company'perty priortotobuild s proposal the rendering the plant. of a We share the Staff's concerns. However, based upon the record ) before us, we cannot conclude that those concerns are sufficient to allow us to find that the Company's actions were imprudent or unreasonable Accordingly, the Commission allows l the inclusion of 60% of the purchase price for the Sears Island par:el in rate base. Having reviewed the record on property held for future use, we find that definite plans exist for the items not l x The Company has requested inclusion of only 60% to reflect its anticipated ownership of the generating facility once, and if, it is built.
U ( 21 - Docket No. 80-25 Docket No. co-oo
}
specifically mentioned in the body of our discussion.
- 2. Conversion Allowances For Thermal Energy Storage CMP has proposed a test year expense adjustment of 5375,000 to cover program (p'TES") .roposed Undercosts the Company's of the Company's proposal, thermal energy electric space storage heating customers would be encourazed to convert from existing resistance heating to storage heating. The program is an attempt at load management, designed to shift a customer's usage from on-peak to off-peak. In order to encourage conversions, the Company oroposes to spend 575,000 in advertising and to give 51,500 to each customer who decides to convert. The Company has estimated there will be about 200 conversions in the first year the program is offered. The program is not designed to benefit customers who install TES initially. -
Both BIN and the Maine Committee have argued that this expense be disallowed encirely. The Maine Committee argues first that the allowance would constitute unjust discrimination Os proh'ibited by 35 M.R.S.A. 1102; second, that it is a proscribed rebate under 35 M.R.S.A. 5103; and finally that it is a promotional allowance within the terms of 65-407 CMR 83. l(E) . BIW concurs with these arguments. The allowance is alleged to be discriminatory in that it is made only to those converting to TES: no allowance is made to those converting to oil, solar, wood or any other method of home heating which could also have the effect of lessening on-peak consumotion. The Commission finds that 35 M.R.S.A. 5102 was not designed to prevent the type of allowance contemplated here. "'When a utility has established rate classifications available to all customers for a like and contemporaneous service it has fulfilled its obligations under the statutes.'" Gifford v. Central Maine Power Co., 217 A.2d 200, 202 (Me. 196o) cuocing In te city Ice o Fuei co., 260 App. Div. 537, 23 N.Y.S. zo dio, det (194u). Here, cne-conversion allowance is available to all residential space heating customers and is uniformly applicable to all those choosing to convert. U
--, . ,, - . , , - - - , . , , , - . - , ,, , , , , . , - - - - -. , , , - , - , , - .,, - - . - , - - - - a, - - - - - - - - . , - - - - - - , - , - .
Docket No. 80-25 Docker No. 60-66 Nor does the allowance constitute a rebate proscribed by 35 M.R.S.A. 5103, so long as the Company has filed a rate therefor which is approved by the Commission. Section 103 proscribes only rebates, discounts, or d.iscriminations whereby service is provided free or at a rate lass.than a rate named in a schedule in force. We do find, however, that the conversion allowance and its concomitant advertising constitute a promotional allowance and promotional advertising. Under 65-407 CMR 83.l(D) promotional advertising is defined as, any advertising conducted for the purpose of encouraging any person to select or use the service or increase usage of the service of a public utility, to select, purchase, install, or use any appliance or equipment designed to use such utility's service, or to use any other particular service of the utili:y. Promotional allowances are similarly defined under 51(E) as, any reduction in rates or char credit granted by a public utifes or any rebate ority to a customer for llh the purpose of encouraging any person to select or use the service or increase urage of the service of a utility, to select, purchase, install, or use any appliance or equipment designed to use such utility's service, or to use any other particular service of such utility. In general, the Commission has enunciated a policy that the costs oc promotional advertising and promotional allowances shall not be borne by the ratepayers. See 6 5-407 CMR 8 3. 5 (C) . However, the Commission may aitow an adjust =ent to rates under that subsection "on the basis of the policy expressed in this rule and the justness and reasonableness of the expenditure, contributions, expenses, or costs in the particular case." TES is designed to be used as a load management tool, promoting a shirt to off-peak usage. If successful, the O
() Docket No. 80-25 Docxec No. ou-co program should benefit all customers by deferring construction projects with the resultant savings accruing to the Company and customers over a number of years. Thus, while TES is decidedly a promotional program, it can theoretically be justified for inclusion in rates because of the benefit it will confer to all customers. Were we to find that rates should be allowed to cover the costs of the TES program, we would endorse the approach suggested by the Staff--namely, to capitalize the amounts for the allowance and amorti:e them over a ten-year period.* , The record purportedly showing the benefits of the TES program is, unfortunately, so sketchy and clouded in doubt as to force the Commission to conclude that an adjustment allowing the requested amount in rates cannot be justified at this time. The Company's presentation of this issue and its ap, parent. decision not even to attempt to support the validity or the program,** even after serious questions had been raised by the intervenors, poses grave questions regardino the sincerity of the Company's approach to load management. The Commission's subsequent findings in regard to the proposed. () 7 program reflect only the-inadequate presentation of the program ay the Company. The Commission's actions, therefore, are not to be, construed as a general indictment of load management techniques. , Dr. Ileo testified on behalf of BIW that the TES program could result in an overall increase in total energy usage. While it may well be that on-peak usage will decline, CMP has made no attempt to demonstrate the relative costs and benefits of a total increase in enervy usage vis-a-vis a decline in on-peak usage. Nor is it clear how much of a decline in on-peak usage can be anticipated. The Thermal Energy Storage Technical Validation Final Recort, whien apparently rorms tne l l n A ten-year period, rather than the average life of a generating facility, was suggested because of the uncertainties surrounding the program. we For instance, the Company chose not even to address this issue in either its main or reply brief. l-s
24 - Docket No. 80-25 Docket No. du-co basis for the Company's TES program, states that in designing a TES heating system for a specific installation "it is usually necessary to use s.ome electric resistance heaters for small rooms and other areas where the cost of the minimum size s,orage heater would not be justified." It appears, therefore, that under the conversion program customers will continue to have resistance heating available with a potential for on-peak use. The anticipated scope of that on-peak use, if any, is presently unquantified, however.* Moreover, the alleged advantage of the TES program would appear to result equally from conversions to forms of heating other than off-peak electric. No attempt has been made to demonstrate why a conversion allowance is appropriate in the event of conversion to TES while not appropriate for conversions to other forms of heating. The Company also has not demonstrated any rational relationship between the $1,500 amount of the allowance and the degree of inducement necessary to attract customers to use the program. CMP has made no attempt to show that any lesser sum would or would not be sufficient to attract customers to the program. With these unanswered questions the Commission cannot approve an adjustment in rates at this time. Because this program does offer some potential fo: load management, however, the Company is encouraged to present further evidence on the efficacy of this program during Phase II of this proceeding. The Commission will reconsider its decision on this issue should the Company pursue this option. Should the Company be able to justify the TES program, the Commission will make an adjustment to allow so much in rates as is just and reasonable at the time the Company's new rate structure is implemented. Properl techniques will, in the Commission'y supported load managements opinion, greatly benefit both the Com ratepayers by delaying and perhaps even avoiding the necessity for future additional generating capacity. The development of such techniques is an extremely important aspect of providing electrical service and is to be encouraged. As noted previously, however, we cannot approve a program without a sufficient record to support it. x In addition, the Reoort points out the extreme importance of proper sizing or toe TES units, since undersized units may require supplemental on-peak energy. The Reoort itself admits, however, that sizing requires further stucy.
1 4 i 25 - Docket No. 80-25 Docker No. ou-co
- 3. Wyman Unit Number Four In early December of 1978, the Company's Wyman Unic Number Four, an oil-fired generating plant, came on line for the first i time. The plant was raced at slightly over 600 MW by NEPEX on February 1, 1979. By January 1, 1979, the plant had been rated at 471 MW and CMP was deemed to have satisfied its NEPOOL capability responsibility. Previously, the Company had-been assessed for deficiencies in meeting its responsibilities for the =onths of November and December.
Al=ost i==ediately following its start-up in December, the plant was required to be taken out of service. From December 17-21, the Company took the plant off line-to conduct i=plosion studies. These studies were characterized as a " fine tuning"
- of the system. The plant was down again on December 22 to allow the Company to =odify the hangers for the high peessured
- turbine steam chest. By early January, the plant was running again.
During the morning of January 15, 1979, the plant hit 600 MW for the first time. Later that day, however, a condenser leak began to introduce salt wate into the feedwater
- system and the plant was shut down shortly after 9:00 a.m. on January- 16, 1979. The plant was down until April 3 because of i damage caused by the salt water intrusion. Sometime in early April the output level of the plant was required to :+ reduced to 450 MW due to the bysassing of the high oressure heaters to allow for recubing of the heaters to eliminate a number of leaks which had been discovered. Finally, down time of i
approximately two =onths between September and November of 1979 occurred to replace the stack muffler since the muffler originally installed exceeded the design decibel level. Throughout these outages NEPEX allowed the Company to retain its rated 600 MW capability. In addition to certain initial operational problems at the - plant, there have been changes in the anticipated use of the plant by the Company. The. plant was originally intended to be used as an intermediate base load unit. In fact, for purposes of the last rate case, Re: Central Maine Power Co., 26 ?UR 4th ' 388 (Me. Pub. Ut il . Comm ' n. 19/o), ene company nac projected a 60% load factor, which is consistent with use of the unit for 1 intermediate base load.* The Company has stated that this u (- For purposes of computing operation and =aintenance expense for that unit, the Co= mis ion in fact used a 50% load factor based on its finding that new plants tend to have a lower than average load factor.
-n,-. - - - - - - , , . ,,,,,_g. - . - - - , . . , - ~ . . , _--y-,-n-,,,,,..
- .- ..-,.-, , , ,-,_.,.,,,,._-,,,_,,--,-,,,n-.,,,m,+,
26 - Docket No. 80-23 Docker No. co-oo change in dispatch occurred because Wyman Four must use costly low-sulphur fuel and because the plant can be used as a cycling plant. The Company denies that the operational dif ficulties relating to the condenser leak have had any impact on the change in the dispatch scenario. Based upon the events outlined above, the Maine Committee has made two arguments with regard to the treatment of Wyman Four. The first argument relates to treatment of the defective scifler. The Maine Committee argues that the muffler be exc'.uded antirely from rate base in order to_ provide the maximum incentive for the Company to seek recovery of its costs f:cm the manu:acturer, Burns & Roe. Alternatively, the Maine Committee con: ends that since the muffler is no longer used and useful, it should be excluded from rate base but the costs should be acottized over the useful life of the plant. The Staff concurs with this second contention. The Maine Committee's second argument relates to treatment of Wyman Four because of the change in dispatch. The Maine Committee has argued that an investigation be begun to inquire more fully into the change in dispatch and the events relating to the condenser leak to determine whether management has acted prudently and to consider the potential long-term effects of the leak, including whether the damage from the leak has or lll will affect the use of the plant. Pending investigation, the Maine Co=mittee contends that one-half of~Wyman Four should be excluded from race base with or without an accompanying amortization. In regard to the muffler, Central Maine points out that it has incluced something less than 307, of the cost of the muffler in rate base and that that fact in and of itself provides sufficient incentive for the Company to pursue possible sources of recovery. In regard to the proposed exclusion of one-half of Wyman Four from rate base, the Company argues that the plant will be used and useful during the period that rates will be in effect and that it was in the best interests of the ratepayers to bring the plant on line and operate it rather chan to incur costs for replacement power.
~
- -wmh YiiFTeTe'Tfire7niut c Fler; :the--Commis ston' Erdd s m'mniuif'le t~I Frib~I'ongds'Is dd'and use f ul and mus t ~ be e:ccidded' f rom fate base. '^ #a e.fnre,::educa.-ra te-base @
l l 1 l l l l l
Docket No. 80-25 '(\_/"] UocKet No. cu-oo ar - *^9$ to :aflect this adjustment. While the malfunction of the muffler is not attributable to any imprudence on the part of the Company, we do not find that it is reasonable to allow the Company to recover the cost of the muffler through an allowance for an amortization at this time, however. The record reveals that the Company has taken some steps to secure a settlement with the =uffler's manufacturer, Burns and Roe. Since recovery of some or all of the costs may be possible, a balancing of the interests of the ratepayers and shareholders dictates that any allowance for an amortization at this point
, , in cine is premature. ~% nam h, owe.v hshou-ld-keep -the y -Wssion informed <ahchthe= Company's7: ogress-itrsecning sect-lem'ent - during -f utu-re--rate cases.
In regard to r other issues raised by the Maine Committee, we finc Nat it is not appropriate to exclude one-half of Wyman Four from rate base cnd we conclude that further investigation of the dispatch change and of the events surrounding the condenser leak of January 15, 1979, is not warranted at this ti=e. We will continee to watch the ' operation of Wyman Four in future rate cases, however, and will s be prepared to make such adjustments as appear necessary. For - 7 purposes of the presont case, usmusemesis sio nnc on~6tudes.v h ache V Wnytac;ed. unrea sonably- by, discontinuing. .its . taking .of.. grab samples shortly af tar .the. plant. reached 600 MW for the.first crit and we exclude f rom.. rate base 5116,491, which represents - the l?-month avera;;e of_.the- capitalcosts incurred to rebuild ' three high pressure feedwater heaters which were damaged as a result of stress corrosion cracking the heater tubes. Based uoon our review of the record in this case the Co= mission ' finds that the following events surrounding the condensee leak occurred. At app:oximately 2:00 p.=. on Janua:y 15, 1979, the Wyman Four unit went to full lead capacity for the first time since the plant's initial start up. From the date the unit started operation, the Company, along with representatives of the manufacturers of the various pieces of equipment, had been engaged in monitoring aspects of a iW 7 6t'po@s"n:ehW2;w;vLrshe.defac-c ae azui,Wc-is ele atett sa r e p lac.eme n t , cost,.odwAS 32,;42&g hi c h-a 1 s o teJf vnts't'hh dost of the new"mu m e t. For undisclosed reas however, the Company has only included 5542,468 of the n muffler in rate base. Since the new muffler is ()
~s used sad useful, the Company is entitled to earn a return
~
on the full value of the new muffler. Our adjustment, therefore, leaves in rate base the full cost of the new muffler.
1 l
.i l
l
. og
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. Docket No. 30-25 Dockee No. 80-6o the operation of the olant. Included as a method of monitoring, the Company had employees taking "Crab grab sampling samples" is ona l a continuous 24-hour basis every two hours. ,ff water samples i process by which individual employees draw o from various points in the wate side of the steam cycle in Because of the order to test the conductivity including of the water.
the high pressure l sensitivity of the equipment, to chlo?ide intrusions, conductivity levels ! feedwater heaters, are automatically monitored on a continuous basis. There are I alarm systems, =oreover, which are designed to notify the operators in the control room when the automatic monitoring The grab equipment records undue levels of conductivity. sampling was used as a check on the automatic monitoring systems. At 8:00 ,.m. on January 15, 1979, grab sampling every two Before the termination was ordered, the hours was terminated. plant supervisor, Mr. Samuel Soule, testified that he had satisfied himself that the alarm and =enitoring systems were working properly. It is not clear from the record, however, the taking of the exactly when the alar =s were checked prior r1 a.m., e condencer 8:00 p.m. grab sample. At approximately 8:3 leak began introducing salt water into the fe.iwater Early in the morning of January 16,At1979,
'- outputsystem.
of the 7:00 a.m. grab samples g plant began to reduce gradually.it appeared eb;_ the conductivity were taken. After analysis, levels were abnormally high and the plant was taken off line. The Cocpany's testimony is that the alarm system failed, although it allegedly worked prior to 8:00 p.m. on January 15. While a Company employee noticed abnormally high readings on a strip chart at some time between 1:00 and 2:00 a.m. on i l January 16 and notified the night suoervisor, the supervisor l apparently ignored the warnings and kept the plant on line. l Mr. Soule testified that under the of investigation same the circumstances conductivity he would I have conducted an i= mediately. The Company has not demonstrated whether any of the manufacturer's representatives remaining at the plant and monitoring operations at the condensate polisher
- became aware of the high conductivity levels and, if they did, whether l any Company employee was notified.
1 1 l w . The condensate polishers remove rd.nute amounts or impurities from the water returning from the condenser and "put the water in the best possible coadition prior to l going into the boiler," according to Mr. Money. Personnel l ' running the condensate polishers under the direction of & representatives of Burns & Roe shculd also have been T checking the quality of the water. It seems inconceivable l l that they would not have noticed problems with water l guality and that they would have failed to notify Company aersonnel if they had. l l
29 - Docket No. 80-25 (} The Co= mission finds it astounding that approximately a Docket No. 80-66 l 10-hour period, during which Wyman Four operated for the first time at full load capacity, passed before anyone at the plant noticed or became concerned about as Mr. the high conductivit Soule testified. y'If It is you especially astonishing since, are going to find problems with a condenser--and specifically
- hose tubes--you would find them near the top end of that load l as rho steam flows are the greatest," sad sirce the purity of the feedwater is " essential to the oleration of the plant Had grab sampling not been terminated, grab samples would
- tve been taken at 10:00 p.m., and every t wo hours thereaf ter, on January 15 which, after analysis, would presumably have shown l concerning levels of conductivity requiring, at the very leasr an investigation. Had this step been taken, considerable i damage to thc unit could well have been avoided.
While Mr.-Monty testified that, in his opinion, most of the damage to the equipment had been done by 1:00 a.m. when the Company employee notified his supervisor of high conductivity, it is not at all clear that some'of the damage couldn't have been alleviated by an immediate shut down even at 1:00 or 2:00 a.m. Presumably, the damage would have been far less, perhaps even negligible, had grab sampling revealed problems Os two or three hours prior to 1:00 a.=. Given the extreme importance of maintaining purity in the j feedwater system and given the probability that problems such as actually occurrad here would occur when the plant was operating for the first time at full load, we find the decision to terminate grab sampling im notwithstanding Mr. Soule's reliance on th^ " prudent, integrity" of the monitoring and alarm systems. The Commission also notes, as reviewed earlier in this section, that various shut downs had occurred throughout the month of December for " fine tuning" of the plant. The complete reliance on the monitoring and alarm systems of a plant which had only recently come on line and which had only just that day reached full load can only be deemed imprudent. The injury to the high pressure feedwater heaters was a direct result of the condenser leak. Accordingly, given the imprudence of the Company's operation of the plant during January 15 and 16, we disallow the capitalized amounts of the repairs from rate base. We find it unnecessary to make further adjustments at this time. While the plant experienced a great deal of down time O during its first year of operation, we do not consider that the plant was no longer used and useful. See Public Utility Commission v. Metrcoolitan Edison Co. 29 PUR 4tn 502, 506 (Pa. Pub. Util. Comm'n. 1979). We, therefore, do not find any justification for excluding any other portions of the plant from rate base.
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.1 Docket No. 80-25 i Docket No. 80-66 l Nor do we make any adjustment based on the dispatch change. While it is true that Wyman Four's original use was intended to be as an intermediate base load plant, we do not find on this record any concrete evidence that the Company's i actions in building the plant and having it go on line in l December, 1978 were imprudent. The Commission, however, will l continue to review the plant's operation during future rate l l
Cases. ;
- 4. Exclusion of 1/2 The AFUDC Accrued Durinz The Test Year ;
Ecom CWIP l I i In the Test Year Income and Expense portion of this Decree, infra, the Commission allows CWIP in rate base with the AFUDC l offset in income. One issue concerning CWIP/AFUDC should be l noted in connection with the discussion of race base. The Staff witness, Mr. Louiselle, recommended that the average amount of booked CWIP be adjusted to exclude one-half of the AFUDC accrued during the test year. Mr. Louiselle j recommended a comparable adjustment in the Company's last race , case, Re: Central Maine Power Comnanv, 26 PUR 4th 388, (Me. Puo. Util. Comm'n. 1978), whicn was accepted by the Commission. Because Central Maine compounds AFUDC on a semi-annual basis, this adjustment is necessary to eliminate double counting and to place AFUDC on the same annual basis as the rate of return. If this adjustment were not made, Central Maine would accrue AFUDC In thisatcase a rate in adjustment the excess of the is allowed supported fair rate of return. by Bath Iron Works and is neither supported nor opposed by l Central Maine. We accept the adjustment. l
- 5. Workinz Caoital
" Working capital represents the amount of funds which investors must provide to =eet day-to-day operations involving the delivery of [ utility] service. To the extent l
it is unnecessary for investors to supply those funds, there is no need for a working capital allowance in rate j base." Re: Continental Telechone Cocoanv of Maine, 18 PUR 4th 636, 643 (Me. Pub. Util. Comm'n. 1977). O
.- l I
Docket No. 80-25 Docket No. 30-oo Mr. Douglas Stevenson, Central Maine's Assistant to the Comptroller, developed a " lead-lag" study which demonstrated the amount of investor supplied capital required to cover the costs of day-to-day operations between the time the Company pays such costs and the time the Company receives revenues from those ooerations. The Commission Staff raised two issues with respect to Mr. Stevenson's " lead-lag" study. The Staff, based on the testimony of its witness, Mr. Louiselle, contends that contractor recentions--funds due contractors, but withheld from payment until certain inspections have been made--are not investor supplied capital ' and may be utilized to finance day-to-day operations. Thus, the Staff contends such funds should be deducted from the Company's working capital requirement. Central Maine, in its reply brief, has agreed with Mr. Louiselle and thus accepts the Staff's adjustment. The Commission agrees with the reasoning and result of this adjustment. This working capital reduction, amounts to S1,576,000. The Staff clso contends that Central Maine's working capital for fuel inventory expense is excessive. The Staff contends that Central Maine's " lead-lag" study considers fuel O to be financed by investors prior to the time the Company pays for it'but that at that time the fuel in fact is financed by the vendor rather than investors. The record evidence demonstretes that the fuel is paid for approximately ten days after delivery. Thus, Mr. Louiselle, assuming a sixty-day supply of fuel on hand in inventory, reduced average fuel oil by one-sixth, the ratio of the length of the payment lag to the length of the fuel inventory on hand. t Central Maine, in its reply brief, claims that Mr. Louiselle's adjustment is incorrect. Central Maine contends that this issue was accounted for in its lead-lag study when the revenue lag applicable to fuel expense was reduced from 45 days to 27.8 days to reflect payment lags. While Central Maine's contention may be correct, the Commission does not find record evidence from which Central Maine's explanation can be found as a fact. Perhaps this issue could have been more clearly resolved in a rebuttal presentation. Since the Company declined to make such a presentation, the Commission's option is to resolve the issue based on the burden of. proof. In rate making cases it is clear that that burden falls on the utility. 35 M.R.S.A. 569, 1307. The Commission therefore finds that this adjustment is appropriate because Central Maine has not demonstrated
\ otherwise. T'- 4 2 adiustment recui.res the 2-n"-- n! f"=1 senck inventorv included in working capital to be Sc, 720,000. _
f 32 - Docket No. 30-25 Docket No. 50-66
- 6. Rate Base Having determined these issues, the Commission finds Central Maine's test year rate base as adjusted to be
$554,028,000. Table III shows the full calculation.
TABLE III RATE BASE AVERACE FOR YEAR ENDED DECDiSER 31. 1979 ( $1. 000) LINE A. MOUNT
- 0. ITOt -S-(A) (5) <G,
- 1. .'la n : In Service 637.977
- 2. Less: Ac:Omulated Oepreciation 170
- 3. Less: '4yman Unic No. 4 Heaters 4 Less: '4y=an Unit No. 4 .Muf fler 542
- 5. Net ?lant In Service 466.545
- 6. Plant Held for Future Use 2.130
.c hp % 34,247
- 7. Investment in Joint Corpcrace Projec:s
- 3. Construction ' Jock in Progress 1/ . w 55.545 gf66 CAn1 Y 4s, 9W y&g..
- 9. '4orking capital Requirements -/ q) L psQf M 22.744 Less: Non-Investor Supplied Capital o) g .
- 10. Custorner Deposits 309 l
ll. Accumulated Oeferred Income Taxes 25.519 :
- 12. Reserve for Injuries and Damages 990 )
- 13. Cust:=er Advances 415 I I. . Tocal Non-Investor Supplied Capital (27.233)
- 15. Ra:e 3ase 554.023 l 1/I.cludes Nuclear Tuel in Process and Less 1/2 Test Year Amount of AFUCC. ,
l 9' l l
O Docket No. 80-25 (} TEST YEAR INCOME AND EXPENSES Docket No. 80-66 The Company proposed several adjustments and the Staff a few adjustments to test year income and expenses which appear to be acceptable to all parties. They are incorporated in this decree. This section, however, does not consider all non-controversial issues. The issues considered herein concern Sears Island Nuclear Plants costs, including Precertification Costs and the Uranium Enrichment Contract, Decommissioning, Nuclear Outage Insurance, Cost of the Stone and Webster Study Concerning Maine Yankee, Storm Damage, Edison Electric Institute Brochure, CWI?/AFJDC, Pro Forma Interest Expense, Non-recurring Test Year Furchase from Public Service of New Hampshire, Non-recurring Maintenance Expense of Wyman Unit No. 4, Pole Attachments, Residential Conservation Service Expenses, Recand Rates, Boise Cascade, Injuries and Damage, and the Employee Discount.
- 1. Sears Island Nuclear ?lant Costs On January 25, 1977, Central Maine announced that it was (s)
cancelling its plans to build a nuclear plant at Sears Island. The Company had announced its decision to build the planc.in early 1974 After mid-April of 1975, however, the Company suspended work on the project, except for operations characterized by the Company as being necessary to keep the project viable, because of the discovery of a geological fault. Between 1974 and 1977, CMP spent a total of 59,686,000 on precertification studies and $4,493,600* on prepayments ' made under a contract with ERDA for nuclear enrichment services. The Company is now asking that an adjustment be made to allow the Company to recover $3,497,000** of the precertification stuales and the future capital costs of the unrecoveref,balanceofprepaymentsmadeundertheERDA contract. x Both figures include amounts for AFUDC.
==
The remaining precertification costs have been allocated to the Company's Sears Island Coal Project. The figure allocated to the nuclear project includes $343,274 of AFUDC. uan () By letter dated October 7, 1980, the Company withdrew request to be allowed to recover the capital costs associated with the full amount of the prepayments. its
Docket No. 30-25 Docket No. 80-66
- a. Precertification Ccats In regard to its precertification costs, the Company originally requested a five-year amortization to allow recovery of the investment. In its brief, however, the Company requests a five-year amortization and inclusion of the unamortized balance in rate base, allowing its shareholders both a recovery of and on their investment. This latter approach was suggested by Staff witness Louiselle,* although the Staff in its brief has advocated simply a five-year amortization without rate base treatment. SIW has argued that the expenses could be totally disallowed because of CMP's alleged lack of good faith in pursuing the project or, alternatively, that the Commission either disallow 407. of the costs, since the Company was allegedly imprudent in failing to procure a commitment from proposed joint owners who would have owned 40% of the plant, or disallow all expenses incurred after March 31, 1975, the date on which the Company first became aware of the fault. This latter suggestion is the approach most strongly recommended by SIW and it includes an amortization period of 15 years with no rate base creatment.**
The Maine Committee has argued that the costs be disallowed entirely because the expenses were incurred for plant which &W never became used and useful. Alternatively, the Maine Committee suggests that the expenses be amortized over 30 years. Finally, Mr. Emil Garrett, who was allowed intervention status solely with regard _to this issue and the question of treatment of the uranium enrichment contract, contends that the expenses should be disallowed entirely on the grounds that the nuclear plant never beca=e used and useful and that the Company's actions with respect to the plant were imprudent. Mr. Louiselle suggested an amortization period of ten years.
- w BIW witness Ileo suggested amortizing the total costs over 30 years.
O
35 - Docket No. 80-25 () Docket No. 80-66 Based upon our review of the Company's actions as demonstrated by the record in this case, the Commission concludes that CMP's actions with regard to incurring expenses on the proposed nuclear plant were not imprudent. We further find that, as a matter or policy, the risks of the project must be balanced between the ratepayers and the shareholders. The Commission, therefore, finds that the costs will be amortized over five years, but that the unamortized portion will not be included in rate base. We alto exclude AFUDC from the costs to be amortized. Between early 1974, when the Company first announced its plans to construct the Sears Island nuclear generating station, and March 31, 1975, when the Company first became aware of the existence of the fault, CMP expended S2.425.744 in engineering costs, including $290,997 of AFUDC. Those costs, and others which have been allocated to the Sears Island coal projects, were incurred at a time when the Company perceived no impediment to its construction of the nuclear project. The costs are attributable to the preliminary studies and work necessary to obtain licensing and regulatory approval. We find nothing imprudent about the Company having incurred. preliminary O costs when there was no reason to anticipate any difficulties with proceeding with construction of the plant. In March of 1975, a magnetic survey of the site for the proposed plant revealed the possibility of the existence of an ancient tectonic fault within 2,000 feet of the proposed location of the reactor containment building. The following week the Company began digging trenches to confirm the existence of the fault. By mid-April, the Company decided to halt major work at the site. From April 18, 1975, until the final decision to cancel, the only work performed was that necessary to keep the project viable, such as continuous data gathering. On April 25, 1975, the Company informed the NRC by letter of the existence of the fault. The Company then entered into a series of discussions with the Staff of the NRC to determine whether the fault would be considered " capable" so as to preclude all possibility of construction at that site. The initial informal reaction from the NRC staff was that the fault would not pose a problem. There appear-to have been further communications with the NRC, however, including visits to the site by NRC geologists. In December of 1975, the NRC advised the Company to delay any request for a waiver of the regulations governing the definition of a capable fault. It
/~ appears, therefore, that the Company at that time had expressed
(_]/ concern over the viability of the Sears Island site. On July 12, 1976, the Company ultimately filed a petition with the NRC to change the regulations. -Apparently, the Ccapany had - been told to go ahead with its petition by the NRC, although the record does not establish the date when this occurred.
36 - Docket No. 80-25 Docket No. 60-66 On December 19, 1976, the Company received the first direct expression from the NRC staff that the Sears Island fault would g not be exempted from the NRC's regulation. In late January of 1977, the Company decided to abandon the project and made an announcement to that effect. Several months later, the NRC formally denied the Company's July 12, 1976 petition. Upon its decision to abandon plans for a nuclear plant at Sears Island, the Company originally allocated the precertification costs now sought to be recovered to an account for a nuclear project at Richmond. The Company no longer anticioates building a nuclear plant at Richmond and, in fact, the precertification costs now have no value since changing regulations and technological advances have rendered obsolete the architectural and engineering work done for Sears Island. The Commission finds that it is reasonable for CMP to attempt to recover the costs at this time. Given the existence of the fault and the changing political and regulatory environment relating to nuclear plants, any decision to proceed with the project would have required massive expenditures coupled with delays and uncertainties over the eventual resolution of the question whether the plant could be built. Under the circumstances, the Company's ultimate conclusion appears reasonable. Nor does there 'ppear a to have been unwarranted delays before the Company finally abandoned the plant. From the time the fault was discovered until the project's cancellation, the Company =aintained contact with the NRC staff, albeit informally, and kept abreast of the NRC's opinions concerning potential problems in obtaining approval of the site. In view of the NRC's initial reaction to the existence of the fault and its advice to CMP to hold off on l filing the petition for a change in the regulations, we cannot find that the Company's decision to abandon the plant was unduly delayed. Finally, we cannot conclude that the Company acted unreasonably in failing to obtain other owners for the plant. CMP had originally anticipated selling 40". of the plant's capacity but, by the date of cancellation of the project, no According potential owners had become contractually committed. to Mr. Webb's testimony, the Company engaged in " preliminary discussions" with potential owners, although it was never made clear when the attempts to find joint owners commenced. When the fault was discovered, the Company felt that it was unable to pursue joint owners since CMP was unable to provide a
" concrete proposal." Given the existence of the fault and the deteriorating prospects that the plant would be built, it appears unlikely -hat joint owners could have been t
Docket No. 80-25 () Docket No. 80-66 obtained even had CMP pursued its preliminary ownership discussions more actively. While the plant might have appeared more attractive prior to the discovery of the fault, we cannot conclude that CMP's failure to obtain joint owners during the year following announcement of the plant was unreasonable. We now turn to the policy question of how to creat the costs incurred. We find that when a project is abandoned and no imprudence has been demonstrated, it is equitable to allocate the costs of the project between the shareholders and the ratepayers. In our view, the most equitable method of allocation is to allow the shareholders a return of their investment but not allow any return on the investment. In Re Virzinia Electric and Power Co., 29 .JR 4th 65 (Va. St. Corp. Comm. 1979), the Virginia Commission considered how to treat losses incurred by VEPC0 as a result of the cancellation of two nuclear units. The Commission in that case concluded that VEPCO's management had acted reasonably in cancelling the plants and allowed VEPC0 to amortize i.ts losses over ten years. The Commission rejected the Company's request to include the unamortized balance in rate base. The Co==ission stated that, Traditional business practice, as well as economic theory, demands that the ratepayers not bear this entire investment burden. The fact that VEPCO is a regulated monopoly does not mean, and has never meant, that the racepayer rather than the investor must bear the investment risks. [The nuclear units] were never used and useful to the ratepayers and, after the cancellation of the project, there is no hope or promise that they will ever be used or useful. Under these circumstances equity demand's that VEPCO's investors must accept some of the risk of [the units] be [ sic] forfeiture of any claim to an expected return on the investment. M. at 81. This approach is consistent with the approach taken in other jurisdictions with regard to plant prematurely abandoned, see, e.z., Public Service Commission v. Northwest Natural Gas Co., 32 PUR 3c 355, 359 (Wash. Pub. Serv. Comm'n. 1966), and conforms to this Commission's own previously expressed concerns over the equitable distribution of gains and losses between ratepayers and investors. See Casco Bav Lines, Inc. v. Public Utilities Commission, 390 A.2d 483, 434-90 (Me. 1973). O
Docket No. 80-25 Docket No. 30-66 In Re San Diezo Gas and Electric Cocoany, 31 PUR 4th 435 (Cal. Pub. Util. Comm'n. 1979), the California Commission amortized non-site related costs" of an abandoned nuclear project without rate base treatment, stating: While we are cognizant of the carrying costs of money, on the one hand, for any project or cost not given rate base treatment, on the other hand, we are also concerned about the burden we are placing on the ratepayers to pay for an abandoned project. While the burden on the shareholders is substantial, the burden on the ratepayers is also substantial. We believe that adherence to our cast practice of allowing recovery of abandonment co'sts from racepayers while denying rate base treatment is an equitable solution to a difficult problem. Id. at 449. In addition, the Commission excluded AFUDC from the amount to be amortized on the grounds that, Allowance for funds during construction covers the investors' risk when a project is undertaken and carried through to completion. When a proposed project is terminated, and siting and site-related costs are included in plant held for future use and/or amortized, it is' proper to exclude the AFUDC allowance for investor risk because the project did not come to fruition. Id. at 447. When a plant becomes used and useful, the shareholder is ordinarily rewarded for his risk by being allowed both a return of AFUDC, through depreciation, and on AFUDC, when it is capitalized and included in rate base. The AFUDC amounts in the present case, however, represent the carrying costs borne by the invector of a project which will never becocc used and useful. While we recognize that the shareholders have, in the present case, been shouldering all carrying costs so f ar, a
= l Site-related costs were included as land held for future use, apparently because of the utility's financial l condition which included an al,rmingly high level of AFUDC and continuing interest c:c . age problems.
I 1
Docket No. 80-25 Docket No. 60-66
\'-
reasonable balancing of the burden of this abandoned project requires that the shareholders continue to do so. Our present decision adheres to our policy of not allowing recovery of AFUDC as a current cost and represents an equitable distribution of the risk that a project will not be completed. We finally find that a five-year amortization period is appropriate. The Company's actions cannot be deemed imprudent. We therefore concur with Staff witness Louiselle that an asset with no intrinsic value should, absent rate base treatment, be written off as quickly as possible. The i five-year period allows for a reasonably swift write-off l without an overly great i= pact on rates. Accordingly, we I decrease test year net operating income by S317,000 to reflect our aa,usu.e.~.
- b. Uranium Enrichment Contract Contral Maine has also requested working capital on S971,820 including approximately $500,000 of AFUDC, to allow its shareholders to earn a return on the unrecovered balance of I)
\#
precayments made to the United States Government under a uraniya enrichment services contract. During the course of these proceedings, the Company was able to sell the contract and is about to receive a net payment of 53,534,180." Prior to the sale, CMP had requested that the entire aucunt be amortized over five years. A review of the record reveals that the Company's actions in signing the contract were not imprudent. The contract was signed in June of 1974, shortly after the original announcement that CMP intended to proceed with its nuclear project. While the Company committed itself under the contract well before the preliminary work on the project had been completed and subjected itself to the risk--which ultimately materialized-- that the project would have to be abandoned, the Commission concludes that the Company acted reasonably at the time. u By letter dated October 7, 1980, tF, Company stipulated to this fact cnd this information is hereby deemec to be part (7 of this record. U
40 - Docket No. 30-25 Docket No. 80-66 At the time the contract was signed, CMP had committed itself to going forward with a nuclear project at a ci=e when many other utilities were announcing their plans for similar projects. As Mr. Webb testified: Schedules were extremely difficult at that time. Work loads for electric--for architect- engineers, for designers of reactors, for the enrichment process, the schedules were filling up, and the only way that we could place ourselves in the scheduling line to provide fuel for that planned reactor was to sign that enrichment contract at that time. There's one other further thing, and that is that--that the--ERDA was running out of capacity and they had informed us that they were about to shut off the acceptance of any enrichment contracts, and shortly after that announcement or shortly after they informed us of that, they published in the Federal Register that they are in fact discontinuing accepting enrichment contracts. The reason they were is
'cause they ran out of capacity. They couldn't accept any more. We were forced into signing that contract in order to have a viable project.
Given the Company's decision to proceed with a nuclear plant and the time at which that decision was made, CMP's signing the - contract was reasonable. The Company began its attempt to sell the contract shortly after its decision to abandon the project. Those attempts and, in fact, have now paid off. appear Having to have beenthat determined diligentthe Company's actions with regard to the contract were reasonable, we are confronted with the question of what, if any, rate treatment is to be accorded the unrecovered balance of costs incurred under the contract. As noted in the preceeding section on pre-certification costs, we have found that the appropriate method to treat the prudently incurred costs of an abandoned project is toHere, allow a the return of, but not on, the shareholders' investment. shareholders will be recovering the major portion of their l investment immediately and will, therefore, recover their costs much faster than they would under an amortization. A balancing l of interests between shareholders and ratepayers leads us to conclude that it is unnecessary to give further consideration l in this case to treatment of the balance remaining unrecovered at this point in time. Should any portion of the unrecovered balance remain when the Company next files for races, the l Company may request that an appropriate allowance be made. I Consistent with our treatment of AFUDC in regard to the pre-certification costs, we maka no adj"st-aar recovery of the approximatelv 5500,000 of Afr]C.~~_ ra $11ow for, lhI l j l l
, Central Maine ?ower Company Rate Order November 1980 Docket No. 80-25 ' f~)
V Docker No. 80-66
- 2. Decommissioninz Central Maine owns 38% of the stock in Maine Yankee Atomic Power Company which operates the nuclear fueled generating facility at Wiscasset, Maine. This facility commenced operation in 1972 and has an estimated useful life of thirty years. Maine Yankee, therefore, will complete its depreciable life in the year 2002. The owners of Maine Yankee are responsible for the safe disposition of the facility. Thus, Maine Yankee will begin billing the owners in 1981 for the cost of decommissioning which is estimated to be S57,511,000.
Central Maine's share of this cost is $1,009 749_. annually. Consequently, Central Maine has asked'ror re, venues in this proceeding to cover its share of these costs. Maine Ya1kee has advised Central Maine that it has selected prompt removal and dismantling as the method of decommissioning the Maine Yankee plant and further that it intends to attempt to establish a non-taxable trust to. hold the funds collected for decommissioning until they are needed for that purpose. The Commission favors the idea of segregating the funds for decommissioning. The funds collected ror such purpose should be segregated even if Maine Yankee is unsuccessful in O establishing a non-taxable trust. In light of the lengthy period until decommissioning occurs, the Commission anticipates there will be revisions in the cost estimates and Nonetheless, modifications or refinements of the modes of decommissioning. the Commission is of the opinion that collection of funds for decommissioning should commence as scheduled by Maine Yankee. Maine Yankee is a corporation with a single asset, a nuclear fueled generating facility which has already been 16 service eight years. During the past eight year period, Maine Yankee's owners have not been billed for decommissioning costs. Such costs it appears now will be incurred at the conclusion of the facility's operational life. Current ratepayers are receiving the energy generated by the facility and in the Commission's view it is appropriate that current i ratepayers contribute to the decommissioning fund. The ! Commission is aware that the Maine Committee and Bath Iron Works disagree. However, postponement of dealing with this issue merely shortens the time within which the fund must be l accumulated which may well result in future ratepayers paying relatively higher charges for this purpose. t l There appear to be two issues as to the amount of the l decommissioning adjustment which CMP seeks. First, the Staff contends the 557,511,000 share of Central Maine should be l
Docket No. 80-25 Docket No. 80-66 reduced by the amount of the 25% contingency which has been included in the study prepared by Nuclear Energy Service, Inc. llh The Staff contends that the contingency has not been quantified, that technological changes may reduce the cost, and that the decommissioning process after experience will be more efficient. Consequently, the Staff urges that an amount for i che contingency fund should not be allowed. We believe the Staff's position is well reasoned and we cannot say that it is flawed. However, because of the lack of experience with decommissioning, the nature of the goals of decommissioning, l l and the importance of adequate provision therefor, we believe a l contingency allowance is appropriate. At this point we are not
, prepared to find the request for a 25% contingency allowance l unreasonable. Moreover, this issue, along with other relevant l issues can be reviewed periodically and, if necessary, adjusted. The Commission therefore rejects the Staf f argument and does not eliminate the contingency allowance.
l CMP has computed its estimate for decommissioning expense in today's dollars which, if invested, would provide a margin l to cover inflation. As Mr. Louiselle pointed out, however, the I cost of capital and hence the return, is greater than the rate of inflation. Thus, in addition to protection against l inflation, the investor requires a return that reflects pure l interest as well. Mr. Louiselle testified that the funds would llh j most likely be invested in government securities. T.he r e f o re , I the return earned will reflect both inflation and pure interest. Pure interest is generally believed to be in the i area of 2.5% to 3%. Therefore, Mr. Louiselle calculated his i adjustment by computing the amount which, if invested at a 3%
- annual compound rate, would produce, in the year 2002, Central l Maine's share of the decommissioning costs. The Commission accepts this adjustment and reduces net operating income by S344,000, 7
- 3. Nuclear Outage Insurance Certain electric utilities have organired a mutual insurance company to provide aurance coverage against the extra expense incurred in obt. 11ng replacement power during prolonged outages of nuclear powered generating units caused by l
accident. The mutual insurance company, Nuclear Electric l Insurance Limited (NEIL) is a Bermuda Corporation. Central l Maine proposes to reduce test year net operating income by l 5481,000 to reflect the expense of annual premiums for i insurance against the extra expense incurred in obtaining replacement power during prolonged accidental outages of nuclear generating facilities. The Staff, 3ath Iron Works and the Maine Cocsittee contend this reduction should be
Docket No. 80-25 O Docxec No. 80-60 d is a l, lowed . 3ath Iron Works and the Maine Committee feel the benerits of the coverage offered are outweighed by the costs. The Staff suggests the same conclusion, but in a more carefully structured way. The Staff appears to agree that this ii,surance proposal appears costly when weighed against its benefits. Yet the Staff acknowledges there is lack or clarity with respect to the proposal and urges that a fully informed decision cannot be made without further amplification and clarification.
- The following terms are included in NEIL's proposal
The premium is based upon NEIL's perception of the average risk of all units potentially covered by the policy rather than a risk assigned to Connecticut Yankee, Maine Yankee, Rowe Yankee and Ver=one Yankee, the four units in which Central Maine has an ownership interest. This measure, as opposed to rating potintially covered units individually, of courst, prejudices participants owning safer units. There appears to be no coverage if a nuclear unit is shut down by order of a governmental agency, graduc1 nuclear contamination, contamination from a source external to the plant, ordinary wear and tear or a law requiring construction O' or repairs resulting from the shutdown. It is unclear whether there is coverage if contamination results from an Act of God. If there is such coverage, it is available only on payment of an additional premium. It is also unclear that there is coverage of accidents such as occurred at Three Mile Island. The only coverage which appears certain result's from outages occasioned by sudden internal release of nuclear contamination within the unit. There is no coverage during the first 26 weeks of a shutdown regardless of its cause. For the following year there is full benefit and the succeeding year one-half benefit. Thereafter, there is no benefit. The Staff witness, Mr. Lviiselle, noting that the unscheduled outage of Maine Yankee would cost 5384,000 each day and Central Maine's share of Maine Yankee would result in a maximum benefit payment of 5749,000 per week during the first year of benefit and 5375,000 per week during the second year of benefit, testified that the insurance proceeds would cover only 287. of Central Maine'c additional fuel cost during the first year of any outage and 147. during the second. Moreover, Mr. Louiselle testified that (^)T (_ given the level of premiums and the potential liability per unit, the maximum number of events that would be covered during the coverage period is 1.63, or 2.47. of the units for which coverage is available.
Docket No. 80-25 Docket No. 80-66, Central Maine's annual premium for its ownership interest in four nuclear generating facilities is 5824,319 and for the first year there is an additional 13% reserve premium of $107,161. Moreover, if losses exceed NEIL's accumulated funds, participants are liable ?;; a retrospective premium of up to five times its annual premium. Central Maine proposes to continue collecting each year the 13% first year reserve ptemium to meet any future liability it might incur for the retrospective premium. Though NEIL can cancel the policy at any time, such cancellation does not affect the insured's liability for the retrospective premium adjustment for losses while insured. For Cantral Maine the retroactive premium adjustment could amout. : to S4,100,000. Several questions were raised by Mr. Louiselle with respect to this policy such as whether Three Mile Island I and II would be covered, the circumstances under which the retroactive premium assessment can be invoked, and the basis for the financial limits of such an invocation. , The only case in which this issue has arisen previously was brought to the Commis; ion's attention by the Staff. A Maryland case, In the Matter of ehe Acolication of Baltimore Gas and Electric Cocoanv. for Revisions in its Electric, Gas and Steam Rates, order No. 64331 (Md. P.U.C. 1980) disallowed an adjustment to cover policy premiums because of a 1ack of information. While the Co= mission does not reject the idea of such insurance as a matter of principle, the way this particular policy is presented calls into serious questiot. whether the benefits the ratepayers receive justify the cosas. Based upon the presentations and information in this record the Commission cannot find that NEIL's proposal is clearly attractive enough to justify a finding that the cost of the 2nr premiums are a just and reasonable ratema!a:s expense. that -eason, the Commission disallowe "ha exoense. Test vear net ooerating income, there for= . ie anc reduced by $481,000 as ~ Lentral Maine seeks.
- 4. Cost of the Stone and Webster Studv Concerni:n Maine Yankee.
During the test year, the Maine Yankee ger.erating f acility was shut down as a consequence of a Nuclear Regulatory Commission order. Stone and Webster conducted an engineering study as a result of the shutdown. Maine Yankee billed Central Maine and Central Maine paid $423.721 for Central Maine's share of Stone and Webster work. central Tw4,a 4-cluded this c^e~ in its cost of service as purchasec cower expense. O 1
Docket No. 80-25 () Docket No. 80-66 It has been contended that this study is a non-recurrin cost and therefore should not be included in Central Maine'gs cost of service. Central Maine agrees that this particular Stone and Webster study is unique and non-recurring. However, Central Maine contends that there will be future studies because of the current scrutiny to which the nuclear industry is subject and that this Stone and Webster study is representative of them. The Staff witness, Mr. Louiselle, testified that if this Stone and Webster study is similar to others that will be undertaken and reflects the normal level of expense, then no adjustment would be warranted. Because Central Maine did not provide Mr. Louiselle with essential information regarding whether future studies would be required at Central Maine s expense and if so, whether the 1979 Stone and Webster study reflects a normal amount of expense, Mr. Louiselle proposed an adjustment increasing net operating income by $212,000 because of the non-recurring nature of the test year study. Central Maine contends the issue can be resolved by common sense which dictates "that the owner-operators of nuclear O plants will be making additional engineering studies in the aftermath of TMI (Three Mile Island]." The Staff contends that Central Maine has not sustained its burden of proof. See 35 M.R.S.A. 569, $307. The Commission agrees with the Staff. For racemaking purposes, the Commission believes the utility has the responsibility of demonstrating that such costs are normal. More specifically, the Commission believes the utility has the burden of demonstrating that future studies will be conducted and that they will be conducted at an annual cost that tbe utility proposes to include in its test year revenue requirement. Central Maine has done neither here, and for that reason tha commi==ima 2rrept: :he 2djuermaar fer-aasine -ar operating income by $212,000 which the Staff proposes.
- 5. Storm Damage Central Maine incurred storm damage expense in the amount of $1,450,422 during the 1979 test year. Included in this expense 4.e cne abnormally high costs of storms in January and September. Central Maine proposed an adjust =ent which would increase net operating income by $254,647 to normalize this '
(} - test year expense.
, , _ . , - , _ _ _ _ _ , . . _ . , ,._.s .. _ . . . _ _ , ,. . .._._ ,_ _. . -- . . _ .
'I Docket No. 80-25 Docket No. 80-66 Central Maine's adjustment is based upon a separate analysis of payroll and non-payroll storm damage expenses incurred during the years 1974-1978. The payroll costs of each year were separately " indexed", that is, each year's cost was increased by a ratio of total labor for 1979 to total labor for l the year in question. For example, the index value Central l Maine assigned to 1974 storm damage labor was 1.524 which means i that Central Maine increased 1974 labor by 52.4%. The method was used for computing payroll costs for other years. The method of indexing non-payroll costs was comparable to the
- method of indexing payroll cost. The result of this method is that average yearly indexed storm damage ex3ense for 1974 through 1978 was S817,069. The difference 'aetween this-five year average and 1979 storm damage expense is $633,353.
Central Maine contends this difference is extraordinary and should be amortized over five years. Thus, Central Maine would decrease test year storm damage expense by $506,682, and it
- would increase gross income by that amount. After the tax effect, this adjustment would increase net operating; income by
$254,647.
The Staff rejects Central Maine's adjustment for two i reasons. The Staff contends Central Maine's " indexing" method is flawed. The method reflects all changes incurred with respect to Central Maine's labor and not just the changes in Central Maine's wage rate. In other words, the 52.47. increase - in payroll expense for 1974 represents not only the increase in actual wages, but also the addition of new employees to the I i Company" payroll. The Commission agrees with the Staff that l proper indexing" of the payroll portion of historic storm damage expense should be confined to increased costs attributed only to changes in wage rates. Such " indexing" should not l include increased costs attributed to an increased number of employees. To include such cost results, in our judgment, in an erroneously high index rate and annual costs. Moreover, the Staff rejects Central Maine's adjustment because it claims the test year 1979 storm damage expense was abnormally high and that to include the abnormal expenses in l Central Maine s five year average does not reflect normalcy. l The Staff developed its adjustment by using a 1974 through . 1978 average of actual storm damage expense. The average expense for these five years was S629,745 or S820,677 lass than the 1979 actual experience. The Staff croposes to allo' cha - the Company to recover this excess over iiee years at o4,135] l each year. The result of this adjustment is an increas-test year net operating income of S 29,964--rounded up to c g l 90.677-/6i/3C = mM
Docket No. 80-25 O Docket No. 80-o6
$330,000. Ee conclude that the Staff adiustment is a ine* nad reasonable way to normalize storm damaze__excenses anc therefore
~
_ increase nec operating tr3come ey s330,000.
- 6. Edison Electric Institute Brochure The Edison Electric Institute, an association of electric companies, has prepared a brochure entitled "You and Your Electric Company" ror which Central Maine expended $792 for 3,000 copies during the test year. The Maine Committee contends, citing Chapter 83, Sections 1(c) and 5(c) of the Commission's Rules, that the brochure constitutes institutional advertising and consequently should be disallowed as an operating expense for purposes of racemaking.
The Commission has reviewed the brochure and would agree with the Maine Committee. The brochure is largely informational, but interesting as that information may be, the brochure leaves the Commission with the impression that the way g
< some of the information is presented constitutes institutional advertising and in some cases political activities, as that phrase is defined in Chapter 83, Section 1(B).
For example, the brochure states,
, " Electricity remains one of the best buys in most family budgets, according to the Bureau of Labor Statistics (BLS). Although the cost of electricity is rising, it remains a relatively small part of a family's expenses, ranking among the lowest expenses at 2% of the typ"ical budget, compared with food which ranks first at 17 ";
(emphasis ours) "...the price of electricity decreased steadily until 1969 when it reached 2.09 cents a KWH, an all-time low average for residential service. Then, however, rates started a gradual rise,.due largelv to the higher costs of buying fuel and materials, building new generating plants and borrowing money - the same inflationary pressures affecting the entire economy. Meetine rigid environmental regulations also increased the cost of doing business." (emphasis curs) One need not question the accuracy of these facts to recognize that they suggest that the utility industry should not be held accountable for increases in the price of power. (} bu
Docket No. 80-25 Docket No. 80-66 lh This is an effort to persuade the public that the responsibility for these increases lies elsewhere (as well a large part of it may) and thus improve the public's perception of the corporate en. city to which it must render these higher payments. As for political activity, as defined by Chapter 83, Section 1(B) , the brochure contains a discussion of various utility rate designs and design features. The only rates with respect to which a disadvantage is unstated are declining block rates and flat races. Taken as a whole, the discussion of various alternative races carries the clear suggestion that declining block rates are rationally based on costs, whereas various alternatives or modificatiors thereof are either unrepresentative of costs or will result in increased costs of service due to metering investments and the like. These arguments are not presented in a strident or exaggerated maaner, but they express a preference for one out of many policy choices available for the resolution of an issue that is being actively debated by the public and by its appointed and elected policymakers in various governmental bodies. Moreover, notwithstanding the current, sometimes heated, controversy concerning nuclear energy, the brochure casually lll notes: " Nuclear power is needed to reduce dependence on foreign oil, to serve the energy needs of an expanding population, to protect the environment and to preserve remaining natural resources of coal, oil and natural gas" and later that "the basic difference between nuclear power plants and fossil fuel plants is the fuel". 1 The Commission does not suggest that Central Maine should not expend money promoting its ideas or promoting the corporate image or goodwill of it or the utility industry. The Commission Rule, however, proscribes the inclusion of such expenses in the cost of service. Where the thrust of an expenditure by a monopoly is to impr'ove its public image or promote its views on public policy choices, the Company's ratepayers, who have no choice but to purchase their services i at a fixed price from this entity, should not be forced to bear those image-building and political advertising costs. cha JQat cost of the 300 brochures is S792 andThathusen-mission adiustment co nec coeraciae income is $398.
~ increases net operating income ~oy 5400. _
O
e Docket No. 80-25 g-) Docket No. 60-66 (_j
- 7. Allowance For Funds Used During Construction In Re: Central Maine Power comoany, 26 PUR 4th 388, (Me. P.U.C. 1978) the Commission defined construction work in progress (CWIP) and an allowance for funds used during construction (AFUDC). CWIP is the cost of utility operating property in the process of construction but not ready for service at the date of the test year balance sheet. AFUDC is the capital cost associated with CWIP during the time prior to the plant being placed in service, that is, prior to the ti=e it becomes revenue producing.
There are several issues which arise in connection with CWIP and AFUDC treatment in this case. Central Maine urges that 257. of certain construction projects, that is, CWIP, for a total of $9,114,227, be included in rate base with no accrual of AFUDC. The remainder of CWIP, CMP contends, should be included in rate base with AFUDC capitalized at a " net" race, that is, at the allowed fair rate of return less the income tax effect of the interest component () of the fair rate of return. The Staff, Bath Iron Works, and the Maine Committee contend that all CWIP should be included in rate base with AFUDC capital.ized at a " gross" rate, that is, at the allowed fair rate of return. Because adding CWIP to rate base, and thus increasing the return required, is offset by including AFUDC in the test year return earned, the result of the position of the Staff, Bach Iron Works and the Maine Committee is approximately the same as i excluding CWIP from race base. It does not require a rate increase. On the other hand, Central Maine's position, understandably, does increase the required company revenues. This increase results for two reasons. First, Central Maine i would include 59,114,227 of CWIP in rate base, thereby increasing the return required without AFUDC accrual. Thus, the increased return requirement would not be offset by a corresponding increase in the test year return earned. Second, Central Maine would increase rate base with the remainder of CWIP thereby increasing its required return, but it would offset the remainder of CWIP with an accrual of AFUDC at a
" net" AFUDC rate. Since the " net" rate is less than the Os- allowed fair rate of return, the proposal increases the return
_j requirement by an amount larger than the amount AFUDC increases the return earned. Central Maine's position, thus, increases the Company revenue requirement.
Docket No. 80-25 Docket No. 80-66 ll There are essentially.three points which the parties debate in addressing these positions--whether Central Maine's customers should pay at present the capital costs associated with a utility plant under construction which will not be operational until some future time, whether it is necessary for Central Maine to receive cash earnings now as opposed to AFUDC earnings in the future in order to maintain its financial integrity, and finally, whether it is more economical for customers to pay the capital costs at the present time rather than in the future when the plant is providing them with electric service. Central Maine contends that its " existing customers contribute to the need for new facilities and benefit through the construction of new facilities and should, therefore, pay a portion of the capital costs of on-going construction programs." While it is true that some existing customers make some contribution to the need for new facilities, in the opinion of the Commission it does not follow that existing customers should pay the capital costs for a plant while it is under construction. Decisions of this Commission have held that customers & W should pay the capital costs associated with CWIP when the facilities are used to provide them with service. For example, in Re: Central Maine Power Co., 26 PUR 4th 388 (Me. Pub. Util. Comm'n. 1978) the Commission held, "it is our view that the customers who should pay for the cost of generating facilities are those who are served by those facilities." Id. at 402 Both Dr. Ileo, who testified on behalf of Bach Iron Works, and Mr. Louiselle demonstrated the soundness of this holding. Dr. Ileo pointed out that customers' usage patterns may vary over time and those current customers whose usage declines over time would be called upon to pay more than their share of the revenue requirement increase resulting from allowing a return on CWIP. By contrast, other customers who have low usage now, but who will use more electricity in the future, will pay lower capital costs than their usage pattern would require. For example," Dr. Ileo observed, "the usage characteristics (KW and KWH) of a retired couple today are likely to be much different than their usage characteristics were 10 years ago when they" were working and some of their children were living at home. Finally, Dr. Ileo urged that the transfer of capital cost burden from future to present ratepayers is improper because CWIP is largely composed of projects with fairly long construction periods, and the mix of customers which will be served is apt to be considerably different from the mix that existed at the time the project was initiated. _
\
l I Docket No. 80-25 () Docket No. 80-66 Mr. Louiselle pointed out that all costs incurred in the construction cf a generating facility are paid by the utility when they are incurred. However, the utility industry and investors have singled out capital costs and seek to have only those costs included in utility racemaking revenue requirements prior to the time period when the facility is operational. In other words, all costs of labor and materials incurred in constructing a facility are returned to investors through depreciation expense over the useful life of the plant. But , for accounting convention, which creats capital costs on the I income statement as income, there is no reason to creat capital ; costs differently from any other costs. As Mr. Louiselle observed,"...(H]ad construction-related capital costs like all other construction costs been charged directly to construction where they belong and noc included in the income statement, this issue would never have arisen." Thus, the Commission does not believe today's customers necessarily should pay today for a portion of the on-going construction program just because they will benefit from the facilities when they are operational or because they may () contribute to the need for the new facilities. As Staff points out in its reply brief, such " capital costs are precisely the sort of costs that are supposed to be supplied by the Company's investors,'who are, after all, paid for that investment through a return on equity or interest on debt. If the Company wishes to charge present ratepayers with the cost of future p ojects why should it bother to seek investment capital at al Central Maine takes the position that the inclusion of
' $9,000,000 of CWIP in rato base with no AFUDC offset and the inclusion of the balance of CWIP in rate base with AFUDC capitalized at a " net" race is " absolutely essential to the financial integrity of the Company." The issue of financial integrity was discussed more exhaustively in this case than it has been in any case before the Maine Commission.
Mr. Louiselle presented a most thorough study of the financial implications of Central Maine's construction program over the period 1980-1990. The study considered Central Maine's construction program with and without the proposed coal fired generating facility to be located on Sears Island. It
' considered cap"italizing AFUDC at the " gross" rate, the " net" rate and at a zero" rate. Mr. Louiselle anal period 1980-1990 the percent of Central Maine'yzed for the s construction
~
program financed internally, interest coverages, indenture (~) coverages, earnings coverages before and after taxes, the Since
\/ percentage of equity earnings accounted for by AFUDC.
( Docket No. 80-25 ^ Docket No. 80-oo the " gross" AFUDC rate places a greater strain on Central O Maine, it was these results that Mr. Louiselle analyzed. For the period analyzed, he found the average ratio of internally generated funds to construction expenditures was 43.5%. .If the
- proposed Sears Island facility were excluded from the construction program, this ratio increases to 67.3% of the construction program being financed by internally generated l
funds. He also analyzed interest coverage and determined that even with Sears Island, the before tax earnings coverage is i above 2.5 for the period. Indenture coverages would fall below l the minimum 2 x required in 1985, 1986, and 1987, however. l Thus, if the Sears Island f acility were constructed, Central Maine would be unable to finance its entire construction If the " net" rate program if the gross AFUDC rate were used. were used or no AFUDC were used to offset CWIP, indenture coverages da not fall below the minimum required. The final ratio which Mr. Louiselle studied was the percentage of AFUDC earnings included in equity earnings. This percentage covered a range from 30.7% in 1980 to 75.2% in 1984. The ratio is lower generally over the 1985-1990 period. Without Sears Island these AFUDC ratios are reduced g significantly. Mr. Louiselle reviewed for comparative purposes 1977/1978 financial indicators such as times interest coverage before and after income taxes, AFUDC as a percentage of equity income, the percent of the construction program internally financed, and the rate earned on average equity of Moody's "A" and "AA" rated electric utilities. Mr. Louiselle concluded from his comp'arison that if Sears Island were constructed and a " net AFUDC rate used, Central Maine's coverage would be "close to the 'A' rated electric utilities." If Sears Island were not included in the construction program, the results p'roduced by a gross AFUDC rate are superior to those of "AA rated electric utilities. Mr. Louiselle therefore concluded that the recults of his study indicate that
" Central Maine can finance its construction program, including Sears Island, on reasonable terms were it required to capitalire AFUDC at a net rate. Were Sears Island not to be constructed and not replaced by another project, CMP could finance its program on reasonable terms were it required to capitalize AFUDC at a gross rate." While Mr. Louiselle used a " net" rate in his computation of his recommended revenue requirement, taking his testimony as a whole he must have assumed that the Sears Island plant or some other facility in its place were to be constructed. The Staff does not make this assumption. It takes the position that the " gross" AFUDC race ,
should be used because at this time it is unclear whether Sears Island (or some other project) will be undertaken. The Staff thus urges that "the Commission should not at present make a
Docket No. 80-25 O Docker No. cu-oo blind guess as to the future of the Sears Island Coal Plant and should therefore continue its present practice (of using the gross AFUDC rate] until that future is ascertained." The Commission agrees with the Staff on this point and thus finds, consistent also with the positions of Bach Iron Works and the Maine Committee, that Central Maine can maintain its financial integrity during the period these rates are in effect by using a " gross AFUDC race" offsetting the inclusion of CWIP - in rate base. Finally, there is the issue whether there are cost savings to the consumer by paying for a portion of the capital costs during the construction period rather than later over the useful life of the plant. There are three ways the CWIP/AFUDC issues may be handled. First, CWIP may be excluded from rate base, AFUDC caoitalized and not reflected in the cost of service for re'gulatory purposes ; second, CWIP may be included in rate base, AFUDC capitalized and included in income; or third, CWIP may be included in rate base with no capitalizing of AFUDC. The () Staff, Bath Iron Works and the Maine Committee favor the second of these approaches which has been historically accepted by this Commission. Central Maine favors the third approach. Mr. Louiselle provided the Commission with a demonstration which shows that the total dollar return of and on capital in the third alternative in absolute terms is less than that in
'the first and second alternatives. However, the present value of t.he return requirement at the beginning of the first year is identical under each of three alternatives. The present value of the return discounted at the cost of capital rate equals the amount of the initial investment. Thus, investors should be indifferent to which of the three methods is used.
Mr. Louiselle also demonstrated that it is in the consumars' interest to have construction-related capital costs capitalized at no disadvantage to the investor. While Mr. Louiselle's demonstrations assumed a single piece of plant, he observes 1 CWIP is nearly always growing and under conditions of a growing plaat the present values of the returns earned by investors are the same under the three methods, the present values of the revenues paid by consumers under the first and second alternatives are less than under the third. Mr. Louiselle's conclusions in this respect are supported by the testi=ony of Dr. Ileo. The Commission finds that caoital costs to consumers are
# less if AFUDC is capitalized.
j
Docket No. 80-25 Docket No. ou-6o g Originally Central Maine sought only to have 25% of average test year CWIP on Seabrook Units No. I and 2, Millstone Unit No. 3 and the Brunswick /Topsham Hydro Redevelopment included in l rate vase without CWIP. After Mr. Louiselle testified that if either the Sears Island coal-fired generating facility or scme ! other facility in lieu thereof was to be constructed, the
- financial integrity of Central Maine required the inclusion of l a " net" AFUDC rate, Central Maine modified its position. Thus, Central Maine contends that all CWIP which is not included in rate base without AFUDC should be included at the " net" AFUDC rate. As earlier observed, the effect of the " net" rate is to transfer some of the capital costs of the plant to today's ratepayers.
This issue has previously been before the Commission in Re: Central Maine Power Co. , 15 PUR 4th 455 (Me. Pub. Util. Comm'n. ly / 6) . In enac case the Commission declined to use the net AFUDC rate. It used the gross rate and on appeal the Maine Supreme Judicial Court held the matter was within the sound discretion of the Commission. Central Maine Power Co. vs. Maine Public Utilities Co= mission, 3oz, A.za 302, 321-22 (Me. Lv io) . The Commission will not use the " net" AFUDC rate in this h proceeding. The Commission believes, as Mr. Louiselle - testified, "as a matter of princi le the AFUDC rate should be equal to the f air rate of return.p' Use of a rate for AFUDC less than the fair rate of return has the effect of shifting the burden for this portion of CWIP from the future customers to the current customers and, as previously discussed, such a shift is not now essential to the Company's financial integrity. Central Maine contends it is inconsistent not to narge capital costs to present customers, but to give present customers the benefit of the interest deduction for income tax purposes on the interest component of the fair rate of return. Of this point, Mr. Louiselle testified, " Conceptually, tax deductions have value only if there is revenue against which they can be offset. Since it is current customers who' provide that revenue, it is current customers who give rise to the value of these incarest deductions; therefore, they should receive the benefit." The Commission accepts this reasoning and result as it did in Re: Central Maine Power Co., 26 PUR 4th 388 (Me. Pub. Util. Comm'n. 1976). Having considered the evidence and arguments, the ; Commission is of the opinion, for the above reasons, that CNIP l should be included in rate base and that the AFUDC should be ll l capitalized at the fair rate of return and included in income. l l
Docket No. 80-25 () Docket No. do-oo A final issue concerns the computation of the AFUDC rate. Central Maine uses the Federal Energy Regulatory Commission (FERC) formula which results in the inclusion of all shoct-ters debt in the AFUDC race. Since this Commission includes short-ters debt in the fair rate of return, the inclusion of all short-term debt in the AFUDC rate results in an excessive arount of costs being capitalized. To avoid these excessive capital costs, the Commission accepts Mr. Louiselle's suggestion which requires Central Maine to capitalize AFUDC using a formula which does not assign all short-term debt to CJIP. '.The formula , stated by Mr. Louiselle, using the nomenclature on p. 428 of the FERC Form 1 is:
- 1) Gross rate for borrowed funds :
s + d ~~ (5 v D+Fv c) 5m D+Fv c)
- 2) Rate for other funds:
F + C
- p c-1 (5 m Dv Fv c) (5 + D v Pv c) s S,D, P, C represent the amount of short-term debt, long-term debt, preferred secek and common stock respectively and s, d, p, e represent the cost rates of these securities.
The Commission adapts this formula.
- 8. Pro Forma Interest Expense In computing its adjusted net operating income, CMP made two adjustments relating to its interest expense. The first adjustment is a reduction of test year operating income to account for non-recurring interest expense incurred as a result of the Nuclear Regulatory Commission ordered sht_dowr. of the Maine Yankee Atomic Power Station. Because of the shutdown, the l Company w eDil6 ' to purchase replacement power. Interest i costs o - 5925,565" ere incurred because this Commission ordered u c.;;f. saine to amortize the fuel costs over a 17-month ceriod. When the non-recurring interest cost is eliminated, tax
~
.xpens increases, reducing test year operating income by
'60,396. The Compa 3; :::-- adjustment increased net l opese.ir; income by 0820,369 to ecount for the difference Mr. Howe testified on behalf of the Company that this figure was computed by using the weighted average short-term debt rates.
c . .- Docket No. 80-25 , Docket No. 00-00 between test year actual interest and pro forma interest expense. In computing this figure, the Company subtracted the 5925,565 figare from its computed test year interest. The net ! effect of thess adjustments is to exclude the shutdown interest costs from consideration. 1 Through the testimony of Mr. Louiselle, ~ the Staff points out that the same result can be reached without making an djustment for the shutdown interest expense. Pro forma ir.cerest expense is l calculated by multiplying the rate base by the weightad cost of l debt'. The difference between the pro forma scount and the test year amouse yields the figure used to adjusc net operating income. All non-recurring interest expenses are automatically excluded under this approach. We approve Mr. Louiselle's l aporoach and determino eSat net operating income shall be ( adjusted upwards b C5594,000.
- 9. Ncn-Recurring Test ear Purchase From Public Service of New Hamosnire l buring the test year, Central Maine purchased 9C MW f rom Public Service Company of New Hampshire.
The Contract will not continue through 1980, however, and Staff Witness Louiselle has recomendad @ n t" test vear riat-ge*-ino int M-e increa W l to remove the effect of the purchase. The Company does a o this adjustment. We agree that this purchase represents a non-recurring expense requiring a normalizing adjustment to the test year. Simi?1:ly, the Commission approves CMP's proposal to decrease its l test par net operating income by 13,606,372 to p " M he eL.ect l of a sale of inn MW to Public <a v2ce company since that sale l M a non-rec h event P y _ l
- 10. Non-Recurring Maintenance Excense of Wyman Unit Number Four l
Central Maine originally included in its test year cost of service $74,623 to recover maintenance expenses, not recoverable by insurance, incurred because a condenser leak at Wyman Unit 1 Number Four introduced impurities into the feedwater system of the plant. The Staff has recommended that this expense be 1 disallowed. The Company, in its reply brief, does not oppose the l l l Staff's adjustment. ', l Mr. Howe, upon cross-examination, admitted that the leak had been corrected and was not expected to recur. Because the exoense is non-recurring, we recommend increasing te t g) l ing income by 538,000 N 1
3
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Docket No. 80-25 _. rx i Docket No. co-oo U 11. Pole Attachments Central Maine originally proposed that additional pole rental charges, attributable to increased amounts of charges to CATV and telephone companies, be reflected in the Company s attrition allowance. The_se amounts are, in fact, known chances
.utd are more pro W reacea~ M w i m #5'Biit 10 test v ak revenues. toe uompany, in its reply brief, agrees with this Snp9ac n. ' @ e test year cet operating income by
,000. ~
s
- 12. Residential Conservation Service Excenses As a result of the enactment of the National Energy Conservation ?olicy Act ("NECPA"), Central Maine is required to establish a residential conservation service ("RCS") program, consistent w!th the Maine State Plan promulgated by the Maine Office of Energy Resources.* See 42 U.S.C. 558201, et seo.
Under RCS, the Company is required to provide an onsTee Class A 7 energy audit upon the request of a residential customer. In 0 addition to the audits, the Company must incur costs to provide for orogram announcement and publicity, to arrange for such services as assistance in finding qualified installers and suppliers of conservation measures and in obtaining financing, to administcc complaint conciliation, and to keep records anc administer the program. NECPA requires that all costs incurred for program announcement and publicity be treated as a current expense borne by all ratepayers. The remaining costs are to be treated by state regulatory agencies as a current operating expense, and/or charged to the individual customer seeking service, with the exception that individual customers cannot be charged more than $15 per audit unless the State has petitioned the Department of Energy for adootion of a "temocrarv program.""* See 42 U.S.C. 58219.' ' ' x That plan had been submitted to the Department of Energy for its approval during the pendency of the hearings on this matter. The record does not disclose whether the plan _ has yet been approved. ,(~N This 515 upper limit became effective June 30, 1980. See s_) P. L. 96-294, 94 Stat. 611.
C Docket No. 80-25 Doexec No. so-oo $lb w Central Maine has proposed a pro forma adjustment to the test year of $1,927,782 to cover the costs of the program. That figure includes $1,716,842 to cover the direct costs of the audit, assuming a cost per audit of $70 and a response rate o f 7%. The other costs are broken down as follows : Program Announcement $155,000 Training $4,000 - Financing and Installation Arrangements $17,940 Tclephone S9,000 Program Development $25,000 As part of its direct case, the Staff presented the testimony and recommendations of Richard E. Darling, Supervisor of Conservation Programs for the Maine Office of Energy Resources. Mr. Darling estimated that the program announcement costs would be S86,000 and that the program administration-costs would be 561,500. After analyzing a range of audit costs based on audits performed by various groups ranging from utilities to independent auditors, Mr. Darling concluded that the average cost of an audit was 595. The Commission adopts this figure as a reasonable estimate. Noting that the response g rate varies depending on the cost of the audit, Mr. Darling found that the response rate was approximately 1% where the charg% e to the customer was 560/ audit. The rate was between 1% and 3 where the charge to customers was $15/ audit. The Commission finds that a reasonable total program cost is $258,000. In arriving at this figure, we adopt the S86,000 figure for announcement costs and the $62,000 figure for administration costs as reasonable estimates. Mr. Darling stated that his program announcement figure included an allowance for a separate mailing rather than mailing out the announcement as a bill stuffer. While mailing the announcement as a bill stuffer might create some savings, the amount of savings, if any, is unquantified. In addition, it appears that the large amount of information required to be contained in the announcement precludes the use of a bill stuffer. We also find that each customer availing himself of the RCS audit should be charged $60 for the audit. Mr. Darling testified that the "resulting savings to the electric utilities of implementing energy conservation measures through the RCS ' Program are unlikely to equal the costs of the program." Since ~ less than 10% of space heating and 30% of water heating is supplied by electric utilities in Maine required to implement - RCS, the benefits to ratepayers which would accrue from {
Docket No. 80-25 Docket No. co-oo encouraging the type of conservation envisioned by RCS are not so great as to warrant spreading all the program's costs over all ratepayers. There is no guarantee, moreover, that an audit will necessarily lead to reduced electrical usage. In addition, allowing a utility to provide this service for free or at a substantially reduced cost, would allow a regulated utility The S60 to compete unfairly % of charge represents 65the $95 average charge perwith private unregulate audit. Weighing the benefits and costs of the program to all racepayers with the benefits and costs to the individual customers utilizing the service, the Commission believes that a 65% allocation is reasonable. Moreover, the record reveals that there will be no significant difference in the number of customers using the program regardless of whether the charge is set at $15 or 560. The Company and its ratepayers will therefore bear the remaining 35% of the audit costs. Moreover, the Cocmission finds that it is reasonable to use an average uniform charge rather than to set the charges individually based upon the actual cost of the audit. An average charge will prove easier to administer and will allow the customer to make a rational decision regarding whether he wants an audic since he will know the cost of the audit prior O.' to requesting one. While Mr. Darling recommended that a customer be charged 65% of the actual cost, with a $100 ceiling per audit, such a proposal would penalize the Company by never allowing it to be reimbursed fully in those instances when the audit costs exceeded S100. We find that an average charge will eliminate this problem. We recognize that the $60 charge is substantially higher than the 51) charge which has been set as an upper limit by Congress. Mr. Darling stated that in the event that this Commission concluded that a charge higher than $15 was reasonable, OER would petition the Deoartment of Energy for a
" temporary program" which, if approved, would exempt the Company f rom the 515 ceiling. While such a temporary program has not yet been approved, we feel that it is appropriate to set rates based on the S60 charge. CMP will not oegin to implement the program until 1981. Because the petition for the temporary program may well be acted upon within 90 days of its receipt, see 42 U.S.C. 58219, the Company will know whether the S60 charge is permissible well in advance of its implementation of the program. Should the temporary program be rejected, CMP is encouraged to file a comolaint against itself pursuant to 3 5 M.R.S . A. 5298 which could be acted upon in short order. The Company will then be allowed to file new tariffs to cover the increased costs of the program.
}
Docket No. 80-25 Docket No. co-oo Based upon the testimony of Mr. Darling, we finally conclude th'at a 17. response rate is reasonablic We calculate ~
'in a decrease the RCS program to test year net operating -income of S128,000 costs to be $258.00p# resulting/
3 1
- 13. Remand Rates As a result of the decision of the Maine Supreme Judicial Cou rt in Central Maine's appeal from the decision of the Commission in Docket No. 2332, the Commission authorized the Company on August 14, 1979 to file rates increasing annual revenue by S800,000 based on a 1977 test year. Since the increase was in effect for only a portion of the test year, an adjustment is required to reflect the amount of revenue which would have been received by the Company had the remand rates been in effect the entire test year.
Both the Staff and , Central Maine agree that such an adjustment would increase net operating income by S4?5 0n0. The Commission accepts this amount as just and reasonableT' The Staff, however, suggests the Commission initiate an investigation of this matter since the rates which were filed llh in response to the Commission Order may'have been excessive. Central Maine contends its filing was in f ull compliance with the Commission's Order on remand and that its witness, Mr. Anderson, will be prepared to explain the design of the remand rates in Phase II of this proceeding. While the Maine Committee did not argue extensively on this issue, it did recommend hearing Mr. Anderson's explanation of the remand rates before commencing an investigation. Before further consideration is given to an investigation, the Commission will hear Mr. Anderson s explanation.
- 14. Boise Cascade Central . Maine increased its test year revenue by S2,235,000 due to the expansion of the Boise Cascade Paper Mill in Rumford, Maine. This adjustment represents estimated increased sales for only ten months. The other two conths for which an adjustment should have been made are reflected in Central Maine's actrition analysis. The Commission believes that if test year results are to be adjusted, the adjustment should .
reflect the effect on the entire test year. As the Staff points out, "[a]llocating a known change, as CMP har done, & W-between test year revenues and attrition unnecessarily blurs the nature of the adjustment frustrating effective
61 - Docket No. 80-25 () Docxec no. ou-oo regulation." The Commission, therefore, increases revenues by S2,68? which has the effect recommended by the Staff of ine. asing net operating income by S1,348,000.
- 15. Injuries and Damages Central Maine has included in its test year cost of service S485,203 for injuries and damages which represents the actual amount incurred for such costs. The Staff contends the
$485,203 amount is abnormally high and in lieu thereof urges that the Commission use the five year, 1975-1979, average of the debits in the injury and damage reserve account. This five year average is S316,000. Central Maine contends that claims against the Company can be expected to increase in the future and therefore the actual 1979 cost should be used for racemaking purposes. Nonetheless, Central Maine is less than specific as to why it asserts future claims will be greater than those of the past. The Commission has reviewed the experience of the injury and damage account since 1968 and finds that the test year actual cost is abnormally high. 'e Commi ssion, however, does not agree with the Staff that t
(~ ' S316,000 five year average should be used. The S316,00 amount is substantially less than the experience in two of the last three years. While we note that there has been no uninterrupted upward trend of injury and damages, over the Havin years that annual costs have tended to be higher.the 1979 actualw experience is abnorma substiture therefor a three year, 1977-1979, average.3,Tha3, ' averar,e p - 4= s e uuo an n ul:es an acjustment [gefeasing net operating income by 54o,uvu.
$$d.W' V,Y)l f gb , ,
# / w /
- 16. Emoloyee Discount In Central Maine Power Co. v. Public Utilities Commission, 405 A.2c 123 (Me. 13/3) ("ene 19/9 central Maine cecision"),
the Law Court reversed this Commission's cisatiowance of expenses associated with CMP's employee discount. Concluding that a " regulatory commission owes a degree of deference to the judgment of management in the establish =ent of employee compensation packages," Id. at 178, the Court ultimately held: We need not, and do not, decide that the entire spectrum of matters relating to employee compensation is beyond the rx reach of the Commission's regulatory powers. We have (m,) clearly held to the contrary in the past. [ Citation omitted] We hold only that we cannot find, in this record, any substantial evidence justifying the Commission's interference with a reasonable managerial judgment. Id. at 179.
Jocket No. 80-25 , Docxet No. co-co In the present proceeding, the Staff argues that " substantial evidence" exists to support a determination that the employee discount is " unwarranted" within the terms of Central Maine Power Co. v. Public Utilities Commission, 153 Me. 220, 130 A.Zo /20 (19]i). The Starr thererore recommends that net operating income be increased by S138,000 to prevent the cost of the discount from being passed on to the Company's ratepayers. We agree with the Staff that the discount is an unwarranted expense. Rather than disallow the amount attributable to the employee discount, however, we find that the fairest way to proceed is to allow the expense for present purposes but to order the Company to develop a method for phasing out the program and to present it to the Commission for our approval during Phase II of the proceeding. Since our action in regard to this expense may be deemed to override the Company's exercise of " managerial discretion", we find it useful to discuss why the discount has been deemed an exercise of reasonable managerial discretion in the past and what justifies regulatory interference with that judgment now. We wholly adopt the sound and thoughtful reasoning of Staff counsel on this score. As pointed out by the Staff, the term "mana erial. discretion"representsastandardbywhichthefawfulnessof lh the Commission s actions are measured. All expenses, in fact, are incurred through the exercise of managerial judgment. That this is so, however, has never been held to immuntze expenses from regulatory review concerning their reasonableness. Once an expense, such as employee compensation, is deemed as a general matter to be a reasonable type of expense, however, the Commission does not have the power to exercise its own discretion to override a managerial judgment solely on the ground that the Commission's judgment differs from that of management. As the 1979 Central Maine decision makes clear, " substantial evidence," not a mere airference of opinion, must exist to support any Commission decision to override a managerial judgment. When substantial evidence exists to support the Commission's actions, the Commission may disallow an expense as being unreasonable in amount, c.f. Casco Bay Lines, Inc. v. Public Utilities Commission, 37U X.za 463, 494 (Me. 19 / o) , cr ir may aisallow types or expense in toto if they are not related to the provision of utility service or are otherwise unreasonable. See New England Teleohone Co. v. Public 9
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63 - Docket No. 80-25 Docker No. cd-oo Utilities Com=ission, 390 A.2d 8, 56 (Me. 1978).* It follows enat tne torm or an otherwise proper expense may also be found unreasonaole. Based upon the evidence discussed below, we conclude that the Company's employee discount is an unwarranted form of compensation since it unreasonably promotes the consumption of electricity. Central Maine offers a discount to all of its 2,000 employees. The discount operates only on base rates, excluding fuel, and is included as part of the union pa ka approximately 50" of the Company's employees.g* ge af discount The fecting was originally offered to promote the use of electricity, although Compan changed and it'ys Witness no longerScott conceded necessary that "[T]imes to promote have the use of electricity unnecessarily." The discount applies to usage at all times, including during the systes peak, even though the costs experienced during the system peak are the highest costs and growth of the peak is a major factor considered by the Company when it determines the necessity for building a new plant. Moreover, the costs to provide electricity to employees are no less than the costs to serve any other residential customer. In addition, the only way for an employee to take x That case does not talk in terms of management discretion oer se. Rather, the Court upheld the Commission's actions in dTsallowing charitable contributions as a " policy" decision made by Commission and supported by substantial evidence. The only difference between a " policy" decision by the Commission, and a Commission decision to override
" managerial judgment"--both of which must be supported by substantial evidence--appears to be one of where to draw the line. Thus, if a category of expense is found to be unreasonable, the Commission's decision relies on a
" policy" determination. If the form or amount of an otherwise proper expense is founc unreasonaole, then management discretion has been overridden. The Staff has aatly characterired this difference as being more apparent t aan real.
The union contract has recently been renegotiated and no attempt was made by the Company to negotiate the discount. Interestingly, a provision of oast labor contracts allowing l s CMP employees interest-free loans for the purchase of electrical appliances was negotiated out of the exist.ng contract.
Docket No. 8C -25 3 Docket No. co-oo advantage of this particular type of compensation is by using electricity. Were cash payments given as an alternative method of compensation, it is "quite possible," according to Company Witness Webb, that the Company s employees would choose to spend the additional income on something other than electricity. Given that the original purpose of the discount was promotional, in that lower prices presumably encouraged greater usage, we find no evidence that that promotional effect has changed, especially since the only way for an employee to benefit from this form of comoensation is to use electricity and since employees would probably not use alternative forms of compensation i., the form of electrical usage. It is true that Mr. Webb testified that he did not believe that the discount promoted electrical usage since the Company has " impressed upon" its employees the need for conservation. The fact nevertheless remains that employee usage is substantially greater than average residential use, as the following makes Table IV clear:* TABLE IV COMPARATIVE 1979 KWH USAGE OF t CMP EMPLOYEES AND RESIDENTIAL CUSTOMERS h l l r l CMP AVERAGE RESIDENTIAL EMPLOYEE 1979 USAGE 1979 USAGE General 603 KWH 450 KWH l Water Heating 857 KWH 734 KWH I Space Heating 1,464 KWH 1,123 KWH ) Space & Water Heating 1,744 KWH 1,445 KWH i l l x CMP ar been "gues in itstoreply validated" showbrief ense employees that CMP this comparison has not are properly l compared to the average residential user. We find no record evidence to suggest that the comparison is inappropriate. CMP, moreover, had amole notice that this issue would be raised, yet declined to present any rebuttal case.
Docket No. 80-25 O DoCKeC No. du-QQ It is clear that 1979 usa residential users by 25%,ge14%, by CMP 23%employees exceeds that The and 177. respectively. of actual usage by employees clearly shows the prenotional effect of the discount, notwithstanding admonitions to conserve. We further find that a method of compensation which promotes electric consumation is unwarranted. In November of 1978, Congress enacted the Public Utilities Regulatory Policies Act ("PURPA")*. The basis for the Act was the protection of the public health, safety, and welfare by requiring " increased conservation of electric energy, increased erficiency in the use of facilities and resources by electric utilities, and equitable retail rates for electric customers." 16 U.S.C. 52601. In order to meet those goals, state regulatory agencies are directed to consider certain standards, including the standard that class rates should reflect the cost of service to that class. It costs the same to serve an ordinary residential customer as it does to serve a CMP employee. The Company employee pays less, however. Te the extent that residential customers are charged their cost of serv,1ce, it is clear that the employee is not charged the full cost of rendering service to him. Moreover, to the extent that the discount encourages s use of the system peak and generates higher costs, the efficient use of the Company's resources is not encouraged. Finally, Mr. Webb agreed that the discount was not consistent with the objectives of PURPA. In addition to considering the goals of PURPA, the Commission has also expressed its disapproval of promotional practices on the part of electric utilities. The Commission promulgated 65-407 C.M.R. 83 on July 16, 1979. That rule declares that a utility shall not be allowe to recover in rates the costs of promotional practices, ex ept under certain l limited circumstances. Consistency with Chapter 83 requires that we take steps to protect ratepayers from bearing this type of expense. Having concluded that the discount has an unwarranted promotional effect on the use of alectricity, we turn now to consider whether the Company has shown that its practice is nevertheless reasonable. We find no persuasive evidence that it is. Mr. Webb testified that in his view the discount was a . W The Commission is required by the Maine Legislature to
" con;; der and adopt" the standards set forth in PURPA and, f~ 's >)
if it chooses not to adopt a standard, the Commission must explain " fully and adequately" why the standard was rejected. See 35 M.R.S.A. 194. l l
-- .s.- .
l
- 66.- Docket No. 80-25 l Uoc'Ker No. ou-oo ' = ore economical method of providing compensation than some alternative. It is, first of all, difficult to conceive what an appropriate alternative method of compensation would be, I since it would not be easy to translate a discount which benefits employees relative to their electrical usage into some other form. Assuming the alternative would be some fcrs of cash payment,* however, Mr. Webb stated that the discount was more economical because it was provided to the employee as a tax free benefit. In order to reimburse employees fully for the loss of the discount, according to Mr. Webb, the cast payment would have to be greater than the value of the discount in order to account for the tax effect. Mr. Webb, however, was aware of no studies which proved that the discount was more economical because of this tax effect. Moreover, since the discount is not tax-deductible by the Company as compensation and since the discount may well add to system costs by encouraging peak usage, any increase due to the tax effect on the ezployee of cash compensation may well be of fset by tax deductions by the Company and some reduction in peak usage. At best, the record is inconclusive on the relative economics of the discount.
Having concluded that the employee discount is an unwarranted form of compensation, we are confronted with the decision of how to make an appropriate adjustment. We are mindful that the discount is currently embodied in the terms of the existing union contract. While only 50% of the Company's employees are affected by the contract, and while the provision relating to the discount can apparently be negotiated at any time, we find that fairness requires some degree of flexibility to allow the Company to extricate itself f rom its commitments to its employees. Rather than disallow the amount of the discount at this time, we will allow it as an expense but we will order the Company to present us with a plan for phasing out the discount as expeditiously as possible. We will i consider the Company's proposals during Phase II of this l proceeding. n l It should be noted, however, that the Company has not I demonstrated that an alternative would necessarily have to l be found. l l t l L
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)
Docket No. 80-25 O Docker No. oO-co Having deternined each of these issues, the Commission finds the Company's test year adjusted net operaring income to be 352,665,400. Table VI on page 70 shows the summary as well as the test year revenue requirement determination. ATTRITION Central Maine, the Staff, Bath Iron Works and the Maine Committee appear to agree in important respects as to what attrition is. Mr. Louiselle defined attrition, as an erosion in the earning power of a revenue-producing investment, ...the net result of operating expense or plant investment, or both, increasing more rapidly than revenues. In effect, attrition results when there is an imbalance in the revenue, expense, rate bsse relationship. When attrition occ'urs, the realized rate of return falls below that level which rates are designed to produce. ( Central Maine, the Staff and Bath Iron Works agree that attrition exists and that compensation therefor should be allowed. There is discgreement between these parties as to how much compensation should be allowed. The Maine Committee would deny an attrition allowance because of the importance of revenue projections to an analysis and because the variety of revenue projections presented render an attrition allowance too speculative. The Commission disagrees with the Maine Committee. A regulated utility is required to be given a ! reasonable opportunity to earn a fair rate of return. If attrition exists, there should be compensation therefor. Otherwise, the utility does not obtain the reasonable opportunity to earn a fair return. In this case, the evidence presented shows attrition exists. The question then is the l degree to which it exists. l ! Mr. Howe's attrition study orojected the test year ratemaking components through 1980 and, as previously noted, it included some ad "known charges."justments more Dr. Ileo's properly recorded recommendations as test year concerning i attrition dealt largely with revising upward Mr. Howe 's 2. 4". E.g. portions of the Boise Cascade adjustment were included l() l
'in the attrition analysis.
T
)
[ _ Docket No. 80-25 Doexec No. ou-66 'jll rowth race in revanues. Dr. Ileo's revenue growth rate is g%. 3 The Staff contends that Dr. Ileo's 5% growth rate is based on two faulty assumptions--first, "that all base revenues are obtained from KWH charges" and second, "that there is a single KWH rate charged for all usage." The Commission agrees with the Staff on these points. The Staff presented a study similar to the attrition analyses it has presented in previous cases. The Staff witness, Mr. Louiselle, started with adjusted 1979 test year results of the racemaking components, developed growth races for each, and applied the growth rates to the test year results in order to adjust the results through September 30, 1981. Central Maine challenges the Staf f's 6% growth race in capacity component of purchase power and Bath Iron Works challenges the Staf f's 4% growth rate in base revenues. In our review of the Staff Study, we have reviewed these growth rates particularly. Being mindful that the cegree to which attrition exists is largely a matter of judgment, we find them to be reasonable. We therefore accept the Staff analysis of attrition as just and reasonable. The analysis modified to take into account the adjustments of this report shows Central Maine will exoerience attrition at the rate of .19% chrough September, 1980. This rate translates into revenue increase for purposes of this case of $2,334,000. Table V shows the detail support of these results. - d O
N .
)
69 - Docket No. 80-25 Docxet No. o0-oo TABLE V ANAt.YSIS OF ATTRITION DECDtB ER 31. 1979 - SEPTEMBER 30 1991 (51,000) TEST YEAR GROWTH RATE Aai.U A L.
'E AMOUNT RATE- COMPOUND AMOUNT ADJUST
- ITDI ADJUSTED Tot -S- -%- FACTOR TO 1/30/31 da W) W) d) (c) (vi OPERATING REVENUES
. Base Revenues _12f31/79 171,681 4.00 1.0712 184,905
.. Other Revenues 12/31/79 8,531 7.90 1.1429 9,750
- 3. Fuel Billed and Unbilled 12/31/79 99,257 1/ -- 140,057
.. TOTAL * -
279.469 333,712 OPERATING EXPENSES h O Wuel 12/31/79 27,906 1/ -- 83,706 D d Jechased Power
- Energy 12/31/79 71,961 1/ -- 57,161 7.
~
- Capacity '2/31/79 27,425 6.00 1.1077 30,379
- 1. D:preciation 12/31/79 20,791 5.75 1.1031 22,935
). Wages 05/01/80 26,305 8.00 1.1160 29,356
). Fringe Benefits 12/31/79 3.163 12.00 1.2208 3,861
'.. Payroll Taxes 12/31/79 1,799 11.90 1.2139 2,193
!. State and Municipal Taxes 12/31/79 9,747 5.75 1.1031 10,752
- 1. Other 0 & M Expense 12/31/79 19,262 10.00 1.1825 22,777
- i. Total Operating Expense BIT 208,359 263,120
- 3. State Income Tax 2,386 1/ (389) 1,997
- i. Federal Income Tax 18,686 1/ (2402) 16.234
- 7. Allowance for Funds Used During Construction 6,060 1/ -- 14,122 3,626 1/
Equity Earnings of Associates Companies -- 3,626 1.
- 1. Nst Operating Income 59,724 70.059 RATE BASE
- 3. Production and Transmission Plant 373,033 4.00 1.0712 399.593
~1. Distribution, General and Intangible Plant 264,944 8.00 1.1448 303,365
- 2. Accumulated Depreciation (170,774) 8.50 1.1542 (197,107)
- 3. Construction Work in Progress $5,545 1/ -- 129,441
*, Ceferred Income Taxes (25.519) 18.00 1.3393 (34,178)
- 5. Other Race Base Items 56,799 3.50 1.0622 60,332
- 6. TOTAL RATE BASE 554,028 661,446
- 7. Race of Return 10.78% 10.59%
3 .- Attrition .19'.
/fiivsd ,
(v\ .
Docket No. 80-25 DocKeC no. ou-oo (g TOTAL REVENUE DEFICIENCY Having determined a test year revenue deficiency of
$13,851,000, an attrition allowance of $2,334,000, that S194,000 of the deficiency is allocated to retail sales, the annual revenue increase to which the Company is entitled is
$16,185,000.
TABLE VI DETEMINA TION OF 1979 RE'!ENUE ?.EOUIREMENTS TEST YEAR ENDEO DEC"MBER 31, 1979 l ($1,000) LINE AMOUNT No. ITEM tA) t3) tGt I
- 1. Nec Oparating Incoce 48.214 ADJUSTMENTS TO NET OPERATING INCOME
- 2. 1979 Waae Increase *
(202) , 3. Unit Sale Adjustment - PSNH (3.606) l 4. Unic Purchase Adjustment - PSNH 61 1
- 5. NEPEX Capacity Adjustment
- 128
- 6. St. Regis Scrike Adjustment 133
- 7. Equicy Earnings 32
- 8. Maine Yankee Station Service Power (107)
- 9. Storm Damage 330
- 10. Unbilled Revenue (490)
- 11. Remand Rates 425
- 12. Boise Cascade Adjustment 1.348
- 13. Decommissioning Costs - Maine Yankee (344)
- 14. MPUC Assessment (30)
- 15. Edic n Elec. In - vce - 3rochures .4
- 16. Residencial Co... . . ion Service Program (128)
- 17. Amorcization of Sears Island Project Costs (317)
- 18. Wyman Extraordinary Maintenance Expense 38
- 19. Excraordinary Injuries and Damage Expense 48
- 20. Maine Yankee Stone and Webster Study 212
- 21. CATV Adjustment 266
- 22. AFUDC 6.060
- 23. Proforma Interest 594
- 24. TOTAL Adjustments *.431.4
- 25. Adjusted Net Operating Income 52.665.4
- 26. Required Net Operating Income (5554.028 x 10.78%) 59.724.2
- 27. Recuen Deficiency 7. M8. 3
- 28. Revenue Deficiency (57.058.8/.502578) 14.045.
- 29. Portion Allocated to Resale (194)
- 30. Test Year Retail Revenue Oeficiency 13.851 l 31. Attrition Allowance 2.334
- 32. Total Retail Revence Oeficiency 16.185.
)
- Docket No. 80-25 O -
71 - DockeC No. dV-06 REVENUE INCREASE ALLOCATION Gn April 2, 1980, the Commission issued its Order on Prehearing Conference establishing an investigation into CMP's race structure, pursuant to 35 M.R.S.A. 5296. The investigation was given Docket No. 80-66 and was consolidated with this proceeding. On May 9, 1980, that Order was amended by a subsequent Procedural Order stating that one of the purposes or the Section 296 investigation was to consider specific rate structure standards as set forth in the Public Utility Regulatory Policies Act of 1978 ("PURPA") . See 16 U.S.C. 92621(d). The Commission has received funos from the federal government for this purpose and for the first time has been able to and has engaged consultants to work solely on rate
. structure matters. In addition, a prehearing conference was held on this phase of the case on August 28, 1980. While hearings have not yet begun on rate structure issues, the Commission has every intention of processing rate structure issues as expeditiously as possible, keeping in mind, however, that it is in the best interest of the public, as well as the Company and all intervenors, that sufficient time be allowed to O insure tha considered,e the rate structure issues be properly presented and Intervenors Keyes Fibre Co. and Scott Paper Co. have filed a brief requesting the Commission to determine race structure issues before the expiration of the suspension period on the rate case. Unfortunately, insufficient time exists to allow the Commission to hold hearings and render a decision within the suspension period. Moreover, under Central Maine Power Co.
- v. Public Utilities Commission, 382 A. 2d 302, 323 (Me. iv i d) ,
tne commission's " primary" responsibility under 35 M.R.S.A. 5564 and 69 is to determine the justness and reasonableness of proposed rates and, if proposed rates have not been found just and reasonable, to order substituted races and to approve them and order the substituted rates into effect. In regard to race structure issues, the Court held: Of course, the Commission, should it have time, may see fit to deal in such principal decree also with the matter of the design among rates as they are to be embodied in schedules, either indicating the formal outl'.nes of such design or addressing it more in detail. Race design is, however, an optional rather than necessary facet or the
' principal' decree, as it functions to orevent ' proposed' rates from ever becoming effective by o'eration p of law. \s This being so, the Commission's primary responsibility is to deal on a hizh criority basis with that which 12 the necessary aspect of its principal decree. [E=phasis in originatj Id. at 324.
( - -- - - - .. 72 - Docket No. 80-25 s Docket No. o0-00 Because insufficient time exists within the suspension period to consider rate design issuec, r'.1e Commission must enter its Order on revenue levels alone. Since no evidence exists in the record to support changes l in the existing rate structure, the Commission orders that the revenue increases be allocated so as to preserve the status l quo. A similar allocation was upheld when the Commission was l unable to approve proposed rate structures presented in the i record of the last Central Maine race increase. See Central Maine Power Co. v. Public Utilities Commission, A. za (Me. July 2, 19c0) . St. Regis Paper Co. nas riled a motion that the increase be allocated across-the-board with a uniform ! percentage increase to the base rate for each customer class j exclusive of fuel. The Commission agrees that the increase l sbottld be made across-the-board to base rates not including l fuel.
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1I BASE RATE FUEL COSTS y , On October 10, 1980, CMP filed its 1974 test year computacion o( its base fuel cost, pursuant to 35 M.R.S.A. 5131. case. The filing is hereby incorporated in the record of 'this According to the Comoany's filing, the base rate is - ll computed to be 0.016769. All parties participating in this phase of the proceeding have stipulated that this amount is proper. Having reviewed the filing and the parties' stipulations, we accept the stipulations and conclude that the base fuel cost filed by the Company is just and reasonable. On October 16, 1980, the Company filed its proposed fuel i cost adjustment, pursuant to 35 M.R.S.A. 5131. That proceeding I has been given Docket Number 80-219 and hearings will be held l on that matter in the very near future. Should the Company file new rates pursuant to this Order prior to the issuance of l any final order in 80-219, the Company is ordered to file with its new rates an adjustment to its existing fuel adjustment clause which will insure that the Company will not collect revenues for its fuel costs greater than the amounts now being collected. l CUWOMER CHARGE The Maine Committex has requested this Commission to consider "whether the exclusion of any minimum distribution costs incurred by the utility from (its minimum) customer charge may be reasonably expected to advance the basic findings g
Docket No. 80-25 O Qocket No. ov-oo and purposes..." of the Electric Rate Reform Act during Phase I of this proceeding. See 35 M.R.S.A. 596. We intend to address fully the issues presented by Section 96 in the second phase of this proceeding. Pending a determination of these issues, the residential customer charge will remain at $5.70. j Accordingly, it is ORDERED I
- 1. That the proposed rate schedules filed by Central Maine Power Company on February 1, 1980 are unjust and unreasonable and the same are disallowed, raje:ted and shall not become effective.
- 2. That Central Maine Power Company is authorized to file a schedule of races, tolls and charges consistent with this -
opinion and designed to increase 1979 test year gross revenues by no more than $16,185,000.
- 3. That Central Maine Power Camoany shall use an AFUDC
.Ol rate and compute its allowance for funds used during construction consistent with the discussion on page 55 of this opinion.
- 4. That Central Maine Power Company shall submit to this Commission a plan to phase out the employee discount by no later than January 1,1981.
- 5. That Central Maine Power Company's. base fuel cost of 5.016769 is found to be just and reasonable.
- 6. That Central Maine Power Company recompute its fuel adjust =ent clause so that the amount of revenues recovered for fuel do not exceed the amount currently recovered for fuel and file its adjustment at the same time that new rates are filed as allowed by paragraph 2 above. Provided that the Company need not make such adjustment if a final order in Docket No. 80-219 has been issued prior to the time of Central Maine's filing pursuant to paragraph 2.
- 7. That Central Maine Power Company comply with any other order continued in the body of this opinion.
O
Docket No. 80-25 Doc xe r tio . ou-oo l
- 8. That the Secretary of the Cecnission mail attested copies of this Order to all parties of record.
Dated at Augusta, Maine, this 31st day of October, 1980. BY ORDER OF THE COMMISSION Marjorie M. Walo Marjorie M. Walo Assistant Secretary tt :
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fff// YW Marjor)4 3. Waco, Assisranc. Secretary . . COMMISSION VOTE: , Chairman Gelder votes in favor of the foregoing opinion with the exception of the section concerning tne Residential Service Program. , Commissioner Smith votes in favor of the foregoing opinion with the exception of the issues which he has addressed in his attached dissent. Co=missioner Carrigan votes in favor of the foregoing opinion with the exception of a portion of the section concerning plant held for future use, as expressed in her dissent. O
Docket No. 80-25. O, Docket No. 60-oo Review of this Order by the Commission may be requested under Section 6(N) of the Commission's Rules of Practice and Precedure (65-407 C.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. (:) - O
Commissioner Carrigan, dissenting on the issue of rate base creatment of the investment in Sears Island. I disagree with my colleagues on the issue of whether to include the Company's share or the purchase price of Sears Island in the rate base as property held for future use. The Company could, by paying about one-sixth of the amount it did, have extended its option on the land for another year, by which time it is probable that the Commission would have decided whether or not to grant it a certificate of public convenience and necessity to build a coal-fired electric generating plant on Sears Island. According to the standard established by the Commiss' ion, whatever investment the Company has in Sears Island itself is entitled to rate base treatment under the " definite plan" standard, provided, presumably, that the investment is otherwise reasonable. Should tha Commission again deny the Company a certificate to build the coal plant on Sears Island, it is likely that the land would cease to qualify for. rate base treatment, unless the Company convinced the Commission that it had another definite plan for the property. The problem here is not whether a definite plan exists, for it does; the problem is whether the amount of the investment is reasonable, unde: O~ the circumstances. In fact, the real issue is even more preciselv definable than that: it is whether the Cocoany acted reasonably in maximizing its present investment in this property now, when the future of the Sears Island project is uncertain and when the Company could, for an a=ount equal to 127. of the purchase price, have bought itself another year of time in which the doubt would in all likelihood be resolved. The ancillary question is whether the Company has any incentive. to take this alternate course in this or any similar situation, if it is allowed to earn a return on its investment now solely because of the definite plan standard, without regard to the reasonableness of the amount involved. These are difficult questions. The burden of proof is on i the Company to show that its decision was reasonable, and I believe that Central Maine has not met that burden. The only evidence presented on the issue was the testimony of Thomas i Webb and one late-filed exhibit (C.M.P. #10) showing the numbers involved and stating what the option terms were and [ what the-Comoany had decided to do. Mr. Webb testified that the Company made an economic analysis of the cost of a further ! option payment as opposed to the (purchase) at this time and we l - felt very strongly that the analysis leaned toward the purchase, but I just don' t have the numbers in front of me." (Transcript, p. J-5 5) The closest Mr. Webb came to describing l l
2-the Company's reasoning in making the decision to purchase was this: "What went behina that decision was that the option payment is based on the prime that exists at the ti=e. The prime rate was so high we felt that to apply another option payment which was based on the rate of the prime was - was f ar higher and costlier than purchasing the land itself." (Transcript, p . J-54) He indicated that even if the Sears Island coal plant were denied, the Company felt that the land would still have value either on the open market or as a future generating plant site. (Transcript, p . J- 5 6) The Company's " economic analysis" was never presented to the Commission for review. If the material in the late-filed exhibit constitutes that analysis, it is clearly inadequate. Even at a prime rate of 12%, an additional year's option payment would have amounted to only about 15% of the amount the Company chose to pay to purchase the property. It does not seem unreasonable to conclude that, were the plant approved, the cost of this additional year's option, though not credited by the seller against the purchase price, would be added to that price by the Company and included in the rate base by the Commission as a reasonable investment, given the circumstances. Thus, the Crapany would have been protected, had it chosen to buy another year in which to make a final decision. Should ,the plant be denied, regardless of the amount invested in the site, rate base treatment of the present g investnent will be terminated, absent a new " definite plan". It =ay be that the Company's analysis did, in f act, address all of these issues in reasonable detail. The Commission does not know. All we have before us are the conclusory statements of Mr, Webb and the bare figures in the exhibit. It is clear, however, that in the face of uncertainty, the Company has i cnosen a course of action that maximizes the cost to the ratepayers when it had an apparently reasonable alternative ! under which it would have been equally safe and the ratepayers l would have paid less. It has also maximized the exposure of the shareholders'in the event the investment is eventually removed from rate base. I do not believe that this is prudent, based on the evidence the Company has chosen to present. I agree with the argument presented by the Staff on this issue in
- its reply brief. I would treat the matter as if the Company l had exercised the option for another year and allow only that amount in the rate base at the pr2sent time.
O
Commissioner Ssich concurring in part; dissenting in part: The Cocunission is unanimous on many =ajo, issues in this case. Disagree =ents arise which are consistent with my dissents in the last Central F.aine rate case and in the Sears Island decision. In addition, generally I supporr several conclusions of our outside consultants hired at taxpayers' expense--where the majority has seen ft: to alter the recc==endations downward. WYME #4 There is no clear showing in the record of imprudence on the part of the Company for the unfortunate mechanical failure of the =uffler at Wyman #4 It always is easy to critici:e after the fact. An attitude that "this sight have happened if that had been done" is argumentative and speculative.
\ .
The expense should be amortized now rather than hold of f and prolong , settlement on a possibility of litigation by the Company in court. The Commission is unanimous in its conclusion that no investigation is warranted at this time.
SEARS ISLAND ISSUES I agree that the Company is entitled to recover precertification costs of Sears Island, incurred in good faith. The recocnendation of staff exper: Louise 11e is followed for an anortization period of ten years and inclusion of the unamorti:ed balance in rate base. Although agreeing that the risks should be balanced between ratepayers and shareholders, it is pointed out that already for six years shareholders have borne these axpenses alone. This is a case where staff and =ajority reject the advice of the Co= mission's exper: hired at taxpayers' expense. A basis for the Louiselle recocnendation is found in a 1980 decision of the Wisconsin Public Service Cocsission in the Wisconsin Power Cc=cany case.1 In addition, the remaining balance of $971,820 en the uranius contract costs should be'placed in the rate base to allow the Company to recover its future capital costs.
^
CE-3, Wis . P. S. C., February 14, 1980. Citad in CG 3rief, 9 pp. 47-48; Reply 3rief, p. 33.
C'4IP AND AFL"0C Resolution of the issues involving construction work in progress and allowa2ce for funds used during construction is baffling. The Commission's outsid1 consultant offered some specific advice. In addition, he testified around some issues by presenting alternatives as guides for Commission decision. One of the dilemmas submitted is whether construction plans should be considered with or without approval of the projected Sears Island plant. A decision one way or the other now would seem to =a a prejudgment of the second round of Sears Island hearings now in progress. In round one of the Sears Island hearings, the =ajority of the Commission (1979) admitted that the Company will require additional capacity in the ne::t decade, and approxi=ately 184 =egawatts by ,1990. , This need would be reduced through concentrated efforts at conservation and by possible use of alternative sources, although some appear to this Commissioner unduly expensive and unreliable at this stage. 3ut my decision proceeds en the assumption that =uch additional capacity (Sears Island or not) will be required by 1990. The time to prepare is now. A " wait-and-see" approach is rejected. i It is unfair to require present customers to pay handsomely for expensive power projects from which =any may not receive benefits. Here is a situation where balancing see=s appropriate, weighted in favor of present customers who have little responsibility for rapid de=and growth in the future. J In view of the above and the assu=ption that greater capacity
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is i inent, a compresise solution is subnitted between the two extre=es favored by the najority and by the Co=pany. Wereas Cantral Maine ?over advocated 25 per cent of certain construction projects ($9,144,227) in the race base which would increase the revenue deficiency by approx 1=ately $1,954,948, I would compromise by allowing half of that, 12 1/2 per cent of certain construction projects in the rate base, which would increase the revenue deficiency by S977,474. l l l 9 l l 1 i l I l l l l0 l l l l l l l
l l 4 J EMPLOYEE DISC 0CNTS i 1 Once again I dissent on the =atter of empicyee discounts. In the. previous 4 I case, the Supreme Judicial Court disallowed the decision of the =ajority for lack of evidence in the record. Undaun:ed, the Commission =arshalled its forces , for another go a: industrial management.1 The Company, likewise, guided by Court outlines, strengthened its defenses. The Maine Legislature = ore than a quarter of a century ago specifically authorized any public utility to make special rates for its employees, subject to the discretion of the Public Utilities Comnission.n - Employee discounts are commonplace in industry. There are tax and morale benefits. The initiative rests with utility management. Generally decisions such as :his are prerogatives of management, as long as they are reasonable and granted in good faith. Thus, the burden of proof to justify invasion of manage =ent privil'ege rests on the accuser. The Supreme Judicial Court ruled that a decision of management on p\u-employee discounts must be respected when the discount "...is arguably at least as economical as any alternative, and the benefi:'does not clearly appear :o be I Excerpts from my dissent on this issue in the recent Public Service Company of New Hampshire case (Docket No. F.C. 2548, July 31, 1980) are quoted:
"I dissented on this very issue of employees discount in the last Central Maine Power rate case. The Supreme Judicial Court of Maine sustained
{ the dissent. My two colleagues attempted unsuccessfully, through the Governor's Of fice, to secure legislation outlawlag employee discounts. . . nothing in the record here shows tha: the discounts are excessive, unreascnable, or unwarranted. It simply is that the majority disapproves l of :he entire concept.
"This :ime the Company is ordered to phase out employee discounts--a technique to achieve the result w1:hout abrogating a union contract. The obvious strategy is to achieve che preconceived result by ordering the Company to =ake no = ore such contrac:s wi:h the union. To =a this is an at:e:pt at agency dic:ation of =anage=ent prirogatives by imposing a linit on the Co:pany's right to contract, and on collective bargaining..." p. 42 s_- ,
'R. 3. 1954, Ch. 44, Sec. 40.
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' excessive, unwarranted, or incurred in bad faith. ' " It expressed "relue:ance
- o interfere w1:h the understandings reached between a utility and 1:s e=ployee".3 The Co==ission again atte= pts to co= bat :he policy on the ground : hat 1:
promotes consu=ption of electricity. Although originally pro =otional, electricity today is so expensive even with a =odest discount that it is ridiculous to argue tha: it encourages use. Staff tries to suppor: 1:s position by placing in the record statistics purporting to show : hat Co=pany e=ployees use = ore electricity than other residential cusco=ers. But this assertion ignores ele =entary cause and effec: relationships. Staff fails to show that the group of custo=ars co= pared with Co=pany e=ployees are si=ilar in such other respects as size,
. style of living, inco=e, age, and residences. There is nothing :o show that Company e=ployees are typical of the others co= pared, or that any increased
. usage is a result of discounts. This is based on en opinion of :he California Co==ission in the Pacific Gas & Electric case of 1979:
. "The usage of ?G&E e.:ployees is ce= pared to that of none=ployees without consideration of such variables as income, econe=ic circu= stances, housing size, fa=ily size, or style of living. It can safely be assu=ed that as a group of wage and salary earners, PG&E e=ployees have a higher average ince=e, bet:er average economic circu=stasces, and a better average style of living than none=ployees. From this it follows that consumption per e=ployee can be expected to exceed that of none=ployees. 'Je conclude fro = this record that the energy consu=ption of PG&E e=ployees on the average approxi= aces that of none=ployees. 'Je find no evidence in :his record that discounts discourage conservation."4 In view of =y =any reservations on PURPA, it is sub=10:ed here, in response
- o scaff argu=ent, that this federal law (fortunately I do believe) is not
- anda:ory fa any s: ate. The argu=ent : hat discounts are contrary to cost of service is identical :o the one tried unsuccessfully last ti=e.
bOS A 2d, 177-79, ci:ed in CMP 3rief of Exceptions, pp. 23-29. 4 26 ?.U.a. 201, 213, Cal. P.U.C. , ci:ed in C4? Reply 3rief, p. 45.
e PROPERTIES HELD FOR FUTURE USE My dissent in the last Central Maine race case on proper:7 held for b future use is reaffirmed here--wi:h :he same rationale. Instead of a Defini:e plan s:andard attempted by the majority, I indicated that the majority was
" groping for a standard". It still is. The record shows that all disputed lands are defini:ely tied into very specific and well-publicized proposals actively pursued by Central Maine for future generating and transmission facilicies.
An excerpt from :he 1978 dissent is presentad here: It should be remembered : hat, as the demand for electricity increases, and as size and technologies of new plants and proj ections become more complex, astute corporation management must plan ahead todi.y far beyond their 1950 standards. Acquisition of land for generating plants must be acquired someti=es now or never. The land cannot be taken under eminen: domain in Maine. (Citations omitted.) Consequently delay in acquisition of land :oday may mean purchase at an exorbi: ant cost later. Of ten there is insufficient land available today for special facilities. Corporations need an incentive to make the purchases whenever they can. Even if a reasonably plausible purchase subsequently turns out unsuitable for future use, a company should not be penalized O; unless it is clear that the acquisition was imprudent, visionary, or made in bad faith.1 The record shows clearly that the properties la question were acquired in good fai:h and in the exercise of reasonable and pruden: business judgment in an:1cipation of future needs. ,In the final analysis it is the Company and not the Commission responsible for providing adequate power supply. The case is strengthened this ti=e because the Company has established in-service dates for planned use. FINALE These co--lesions have been reviewed in perspective--each item in relation to the others, and to the sum total. They appeat to be r.asonable and just to all par:1es: ratepayers--present and prospective--; Co=pany--=anage=ent, enployees, and inves: ors--; and to the State in its quest and de=and for (} kJ adequate power supply. This, I do believe, approximates a decision in :he public interest, respecting both im=ediate and long-term considerations. 1--Re Central Maine Power Co., Supre=e Judicial Court, Maine, Augus: 6, 1979, I6 FUR 4th, p. 434. 9
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l MAINE PUBLIC SERVICE COMPANY l Units No. I and No. 2 l Seabrook Nuclear Power Station Seabrook, New Hampshire Information furnished pursuant to E 50.33 l of Comission's Rules and Regulations with i respect to the particular Applicant named l . above as part of Final Safety Analysis Report and Operating License Application for the above Units. July 1981 l l LO
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I. ORGANIZATION AND CONTROL () (a) Name of Applicant Maine Public Service Company (MPSCo.) (b) Address of Applicant 209 State Street Presque Isle, Maine 04769 (c) Description of Business of Applicant MPSCo. is engaged in the business of producing, generating, transmitting, delivering and furnishing electricity for lighting, heating, and other public purposes in the State of Maine as follows: Its service area comprises 3600 square miles in Aroostook County and the northern part of Penobscot County in Northern Maine. This area includes over 60 communities at retail and eight communities served by wholesale sales, with approximately 32,000 customers. (d) Corporate Organization MPSCo. is a corporation organized under the laws of the State I)
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of Maine. As of December 31. 1980, MPSCo. had 3,468 domestic shareholders owning 674,807 common shares and 14 foreign share-holders owning 3,500 common shares. (e) Corporate Officers and Directors l The names and residence addresses of MPSCo.'s directors and principal officers are as follows: OFFICERS Name/ Title Residence Ralph A. Brown, President 55 Barton Street and Chief Executive Officcr Presque Isle, Maine 04769 G. Melvin Hovey, Vice President RFD 1, Box 254 of Engineering & Operations Presque Isle, Maine 04769 Frank E. Livingston, Secretary, 52 Dupont Drive Treasurer and Clerk Presque Isle, Maine 04769 Paul R. Cariani 68 Pine Street Assistant Treasurer Presque Isle, Maine 04769 Clarence E. Cambridge [}
'%,- Assistant Secretary 78 Pine Street Presque Isle, Maine 04769 C. Hazen Stetson 92 Barton Street Chairman of the Board Presque Isle, Maine 04769 I
DIRECTORS () Ralph A. Brown Donald F. Collins 55 Barton Street, Presque Isle, Maine 04769 4 Dorcas Avenue, Caribou, Maine 04736 St. John Road, Fort Kent, Maine 04743 D. James Daigle Thomas S. Pinkham P. O. Box 168, Ashland, Maine 04732 Irwin F. Porter 131 Barton Street, Presque Isle, Maine 04769 Walter M. Reed, Jr. 38 Lower Main Street, Fort Fairfield, Maine 04742 C. Hazen Stetson 92 Barton Street, Presque Isle, Maine 04769 G. Melvin Hovey RFD 1, Box 254, Presque Isle, Maine 04769 All of the directors and principal officers of MPSCo. are citizens of the United States of America. MPSCo. is not owned, controlled or dominated by an alien, foreign corporation or foreign government. II. FINANCIAL QUALIFICATIONS Under the Joint Ownership Agreement, MPSCo. is responsible for its Ownership Share of the operation and maintenance cost of the Units which, when the pending transactions described herein have been consummated prior to commercial operation, will be 1.4605T 2, of those costs, and a similar percentage of the ultimate cost of decommissioning the Units. Based upon the estimates set fo th above under Part IV of the General Information, MPSCo.'s share of these costs should amount approximately to
$2,191,000 and $2,191,000 for the first five years of operations of Units 1 and 2, respectively; and approximately $613,000 to$1,256>,000 for 7- the decommissioning of the two Units. In addition, MPSCo.'s share of t
\-' fuel expenses during the period would be $7,493,000. As evidence of its financial qualifications to meet those costs, MPSCo. submits herewith: (1) 1980 Annual Report to Stockholders (Exhibit A). (ii) 1980 Annual Report on Form 10-K (Exhibit B). (iii) 1981 Quarterly Report on Form 10-Q (Exhibit C). (iv) Recent Rate Order dated June 1,1981 (Exhibit D). III. REGULATORY AGENCIES AND PUBLICATIONS (a) Regulatory Agencies The following regulatory agencies have jurisdiction over the rates and services of MPSCo: Federal Energy Regulatory Commis. m n 825 N. Capitol Street, N.E. Washington, D. C. 20426 /) (/ Maine Public Utilities Commission 242 State Street Augusta, Maine 04333
(b) Publications The following trade and news publications are used by MPSCo. for official notifications and/or are otherwise appropriate for notices regarding this unit: Bangor Daily News 491 Main Street Bangor, Maine 04401 O ' O
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