ML20009F283
| ML20009F283 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 03/16/1981 |
| From: | MAINE PUBLIC SERVICE CO. |
| To: | |
| Shared Package | |
| ML20009F275 | List: |
| References | |
| NUDOCS 8107300243 | |
| Download: ML20009F283 (200) | |
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' l / RALPH A. BROWN C. HAZEN STETSON 1
',- Ip President and Chairman of the Board i
'j Chief Executive Officer
, V ' i ' %k FRANK E. LIVINGSTON Y' 1, Y g ,{1 G. MELVIN HCP. EY Treasurer. Secretary tw Vice Presiact and Clerk T*\
7U Engineenng ano Operations CLARENCE E. CAMBRIDGE "M-DONALD A. LINCSAY Assistant Secretary R ALPH A. BROWN C. HAZEN STETSON Vice President-Subsidiary President and Chief Execuave Chairman of the Board. PAUt R. CARIANI Officer, Maine Pubhc Service Maine Putil:c Service Company. Company, Presque Isle. Maine Presque Isle, Maine Assistant Treasurer contents President's Letter 1 , @C Analysis of Financial Condition g7
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E' f and Review of Operations Financial Statements and Notes 2 6-15 .w h , Auditors' Opinion 16 DONALD F. COLLINS D JAMES DAIGLE Consolidated Financial Statistics 18-19 President, President. S. w. Coinns Co. David D. Daigie & Sons. Five-Year Summary of Caribou, Maine; Fort Kent Maine Chairman, Aroostook Trust Selected Financial Data 20 Company, Caribou, Maine Eleven-Year Operating Statistics inside 7
.['ll Back Cover
,pa ,- ANNUAL MEETING. Second Tuesday in May.
I d , PRINCIPAL OFFICE: 209 State Street.
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,-j q. Presque Isle. Maine 04769
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N' Transfer Agent' Manufacturers Hanover Trust
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g ! S.; a Company, New York C. Stock Registrar: Common Stock-Manufacturers Hanover Trust Company, New York G MELVIN HOVEY THOMAS S. PINKHAM Vice President- General Manager, Engineenng and Pinkham Lumber Co., - Operations, Maine Ashland. Maine Pubhc Service Company
, front cover: l
, Mooseleuk Mountain and Lake from Radio
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_ Tower at N Jrway Bluff.
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# f 'A IRWIN F. PORTER WALTER M. REED, JR.
President. President. Northern National Bank' Presque Isle, Maine Reed Fort Farms Fairfield, MaiInc 'ne -
presidenti letter (3 to our stockholders and G employees The year 1980 was a dif ficult year f or our indus- The nuclear referendum, attempting to shut try. Interest rates started at a prime rate of 15%%, down the Maine Yankee plant, was defeated Sep-dipped to a low of 11%% in July and finally jumped tember 23,1980 by a statewide margin of 3 to 2. to 21%% before the year end. The price of heavy in our own service area it was resoundingly de-oil used to generate electricity in our system feated 3 to 1. started the year at $23.45 per barrel, F.O.B. Sears-It is with deep regret that we report the death of port, fell to $17.90 per barrelin April and May and Philip D. Tingley, a director since 1960. The Com-ended up at $32.99. Meanwhile, the overall rate of inflation averaged 12.4% for 1980. any will miss his dedicated effort and sage ad-v ce. Vice President of Engineering and Opera-Total kilowatt-hour sales increased 17,825,000 tions G. Melvin Hovey has been elected by the (3.4%) to 539,482,000 but firm sales increased directors to fill this vacancy. You can see why 1980 was a year many of us
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ma nly fro se of exces energy to he Brunswick Electric Power Commission during would like to forget. Perhaps, ho sever, there is off-peak hours. In 1980, consolidated operating reason for optimism. Both political parties finally revenues reached $27,789,640, exceeding those seem to realize that the growth of government of the previous twelve-month period by and regulation must be cut back, deficit spending
$6,549,911. The increase was partly a result of stoppe,d, and , taxes reduced and restructured,so these additional secondary sales, but was mostly they will provi,de incentives for capital formation the result of higher fuel adjustment revenues to reindustrishze America.We can then build our which generated $6,474,100 of the increase. defenses strong once again. To this end you are very important people. It seems an opportune The Company's energy generating mix during time to make your views known to your Congres-1980 continued to be better than most in New sional representativec on criticalissues affecting England: 37.7% nuclear,22.3% hydro and 40.0% our business. I believe if these things are done, fossil. Hydro energy gc seration was less in 1980 inflation, high interest rates, and the value of the CN because of decreased ilows (95.4% of normal) dollar will take care of themselves, as will the
) compared with 1979 when they reached 120% of unemployment problem. I see a beginning with
' normal. the new administration. Let's help them succeed.
Consolidated earnings per share for 1980 were To each of you our valued stockholders, our
$2.86, down $0.94 from last year's comparable employees and our customers, we thank you for earnings of $3.80 (re-stated). The overall quality your patience and understanding. With your sup-of these earnings has likewise deteriorated badly port we too will succeed.
since non-cash sources (Allowance for Funds S.incerely, Used During Construction and Foreign Ex-change Translation) amounted to 109% of earn- , ings per share or $3.12. Due to this rapid decline in earnings since the #W beginning of 1980, the Company filed for rate Ralph A. Brown relief with the Maine Public Utilities Commission President on September 2,1980 in an amount now adjusted to $4,970.889 or an increase of approximately Presque Isle, Maine March 16,1981 18% over total 1980 Maine Public Service rev-enues. Between the commission staff and three intervening groups, the Company has been bom-barded by .*07 data requests containing 588 ques-tions, all or which have been answered in written form with 12 copies each. Hearings are scheduled to start March 16,1981. The Seabrook Nuclear Units 1 and 2 in which - the Company has a 1.46% (33.6 megawatts) joint 7. . interest are now 33% complete. About 88% of the , r basic engineering design is complete,96% of the equipment is on site or on orde and 90% of the ! _ ~ construction work is under cos..rac' The Com-pany has an investment in these two units of G $20,458,909, including AFUDC, at year-end 1980. 1
Analysis of Financial Condition and Review of Operations-1980 Brunswick Electric Power Commission. Nuclear Revenue and Energy Sales energy purchases from Maine Yankee Atomic Power Company (Maine Yankee) were 3,966 MWh Consolidated operating revenues continued to less than the 220,218 MWh of the previous year set new highs, with 1980 reaching $27,789,640- due to refuciing downtime of the unit in the first $6,549,911, or 30.8%, more than such revenues of three months of the year and to sorae r;,ainte-the year before. Unfortunately for the Company nance work performed during the fourth quarter and customers alike, nearly all of that increase of 1980. Purchases from Maine Electric Power arose f ro,m the pass-through of increased f uel ex- Company were up from 19,200 MWh in 1979 to penses via fue,I adjustment clauses. Only $88,615 24,122 MWh in 1980 because of a 5-MW increase of the huge rise in revenues ca,n be related to n capacity entitlement acquired from other New growth in energy sales, which is indicative of the England utilities beginning November 1,1980. enormous impact of fuel cost increases on the Company and its customers. Except for nuclear energy from Maine Yankee, all purchases were generated by fossil fuels. As a As in
. dicated above, gains in energy sales over result, the total cost of purchased power (includ-those of 1979 were limited, with residential sales ing capacity charges) rose a staggering $3,870,896 staying about the same, while commercial and from $8,881,077 in 1979 to $12,751,973 in 1980.
mdustrial small sales went up about 2.1%. Com- As long as the OPEC nations continue to end-mercial and industrial large sales g and combined street and area light ing ained 1.0%, lessly remained raise their prices, no respite from this trend can be seen until the Company's investment in on the same level as the year before. Sales for Seabrook Units 1 and 2 reaches fruition and the resale showed a large 15.5% pickup from units infuse additional nuclear-generated energy 105,77,5 MWh to 122,13/ MWh, though most of into the Company's system. the gain was represented by increased economy sales to The New Brunswick Electric Power Com- Operating expenses of the steam plants were mission, which increased from 13,398 MWh in $1,520,763 more than 1979, primarily due to an 1979 to 29,231 MWh in 1980. Sales to public au- increase of $1,482,972 in fuel expenses. This thorities were 36,942 MWh. down from 40,417 due increase was brought on by incrr ased steam primaril'/ to the loss of 2,384 MWh in sales to production as well as leapfroggin9 prices of Loring Air Force Base. On the whole, primary fossil fuels. Diesel operating costs wera $28,234 energy sales were up 0.9% in 1980 from over the prior year,59,884 of which is attributable 475,856 MWh to 480,245 MWh, while secondary to greater fuel expenses, though net diesel gen-sales gained 29.3% from 45,801 MWh to eration was 43 MWh less than in 1979. Production 59,237 MWh. Additionalinformation on revenues, maintenance costs were up $90,142 (30.4%) sales, etc., may be found in the eleven-year con . mainly due to periodic overhaul of the steam solidated operating statistics summary at the units at Caribou, though hydro maintenance was back of this report. up 25.3% and diesel maintenance was higher by the same percentage. Operating Expenses Expenses of operating and maintaining t,he transmission system were higher by 10.4%, in-Reflecting a speedup in the collection of fuel creasing from $882,288 in 1979 to $974,120 in costs through fuel adjustment revenues during 1980, reflecting the general inflation rate. Some 1980, deferred fuel expenses were a positive accounts were up more than others, principally maintenance of overhead lines. Similarly, distri- $929,114 compared with a negative $875,165 in bution operation and maintenance charges were 1979. (A positive deferred expense' signifies that up 10.5% with overhead lines maintenance being a like net amount hm been recovered through proportionately a little higher than the other dis-operating revenu as, a negative deferred fuel ex-pense denotes a sailure to collect that net amount tribution accounts. Customer account expenses of fuel costs during that accounting period.) expanded from $503,086 to $626,542 (up 24.5%) with the greatest increase being in uncollectible After an exceptionally favorable water year in accounts, which rose from $71,100 in 1979 to 1979 (120.0% of normal), hydro generation $161,716 in 1980. Expenses for customer services dropped to 95.4% of normalin 1980. Thus, a net and information increased from $134,513 to of 127,630 MWh were produced in the hydro $162.137 (20.5%) partially as a result of expand-plants in 1980 compared with the previous year's ing efforts toward energy conservation. Adminis-very high 162,107 MWh. Because less hydro gen- trative and general accounts reflect expenses eration was available, more energy had to be 15.7% greater than in 1979, up from $1,614,843 purchased from others or generated in the Com- to $1,867,754. In this group, regulatory commis-pany's fossil-fuel plants. Fossil-fuel-produced sion expenses grew by 179.5% from $53,313 to steam and diesel energy amounted to 47,049 MWh $149,006, principally hecause of costs associated in 1980 compared with 20,616 MWh in 1979. Pur- with a petition for rate relief filed with the Maine chases of energy in 1980 totaled 398,634 MWh Public Utilities Commission (PUC) of the State of against 378,917 MWh in 1979. Most of that in- Maine on September 2,1980. During 1980 several crease was in energy purchases from The New projects requiring the sarvices of outside consul-2
tants were undertaken, focusing on a ten-year at the subsidiary's Tinker Station. Approximately c , power supply study and a load research study $376,000 was paid for voltage conversions and L ) end causing an increase from $165,094 to substation improvements, and nearly $286,000 __- $210.348 (27.4%) in expenses of outside services was spent for meters, services, transformers and employed. It is anticipated that the data resulting other customer- related f acilities. Distribution line from the load research study will be required to extensions, rebuilds and highway relocations re-fulfill requirements of the Public Utilities Regula- quired about $776,000 while improver-ents to the tory Policies Act (PURPA), which will likely be transmission system used about $20,000. Street applied to the Company by the PUC, even though lighting, general equipment, and miscellaneous the Company's sales are presently lower than the items absorbed the remaining $216,000. threshold level set by PURPA. Though adminis- In 1981 cash expenditures for construction are trative and general expenses other than those estimated at approximately $9,600,000, the bulk noted above reflected increases and decreases of which will be needed for the Company's share from the prior year, the net increase in those other hat less than f the continuing construction of Seabrook Units he genera fa na 1 and 2, which is expected to be in the area of
$6,700,000, including nuclear fuel. Transmission Depreciation and amortization expenses were improvements will need about $196,000, and dis-
$67,953 higher in 1980 due to increases in de- tribution requirements approximately $924,000.
preciable property. Taxes other than income Reconstruction of the Caribou Dam is expected taxes charged again it income were up $85,983, to cost nearly $900,000, while the replacement of reflecting higher pioperty taxes, more social three penstocks at the subsidiary's Tinker Station security taxes, and a new state assessment to will take about $360,000 (U.S. dollars). The re-help pay the expenses of the PUC ($5,530). In- maining $520,000 is budgeted for numerous mis-cluding deferred taxes and investment tax credit cellaneous improvements and needed equip-adjustments, income taxes charged to operating ment. The Company's share of the cost of Sea-expenses dropprd from $1,192,064 in 1979 to brook Units 1 and 2 is presently estimatri at
$168,800 in 1380 as a result of lower taxable in- $57,000,000 including initial fuel and Allowance come. Income taxN currently payable were down for Funds Used During Construction. The Com-from $235,209 to $154.149. The annual provision pany's ownership interest of 1.46% represents for deferred taxes was reduced greatly from 33,600 kilowatts of new nuclear capacity.
$755,452 in the previous year to $8,626 in 1980, principally due to a reversal of deferred taxes re-
'3 lated to deferred fuel expenses. Investment tax Affiliated Companies
! credit adjustments charged to income in 1980 were only $18.317 compared with $213,695 in The Company owns 100% of the common stock 1979, resulting from a decrease in the ability to (except for directors' qualifying shares) of Maine absorb such credits against otherwise current and New Brunswick Electrical Power Company, taxes payable. Total investment tax credit for Limited, a Canadian corporation (referred to in 1980 was $544,126, $408,740 of which was carried this report as the subsidiary). The subsidiary back to 1977. That investment tax credit com- owns and operates the Tinker Station, which is pares with the previous year's $847,409, $590,022 locat of which was carried back to 1976. The carried-da, j,ed ust in the miles a few Province acrossof New Brunswick, Cana-the international back portion of ITC is charged to the balance border from the parent company's service area of sheet as a refund due from the Internal Revenue Aroostook County in Maine. Principally a hydro Service, rather than to the current income state- generating facility, the Tinker Station has five ment. hydro units with a total capac,ty i of 34,000 kilo-watts and a small diesel unit of 1,000 kilowatts. As condition of its charter, the subsidiary is re-Construction quired to first serve the small communities of Andover, Perth, and Carlingford in New Bruns-The Company and its subs.i diary spent wick, with the remainder of the available energy
$7,212.529 on additions, replacements, and im- being exported to the parent company's system provements to,their utility properties and equip- in Maine.
ment in 1980, including uncompleted construc-tion work in progress. Approximately $5,272,000 The parent company is the owner of 5% of the was paid for progress payments on the Com- common stock of the Maine Yankee Atomic Power pany's 1.46% interest in Seabrook Units 1 and 2, Company (Maine Yankee) and is entitled to pur-nuclear units being constructed by Public Ser- chase approximately 5% of the output from the vice Company of New Hampshire as lead partici- 855,000-kilowatt nuclear plant located at Wis-pant. Additional work on William F. Wyman Unit casset Maine. That nuclear energy entitlement
#4, a new jointly-owned, oil-fired unit being has proved of enormous benefit to the Company operated by Central Maine Power Company, re- and its customers. With the exception of hydro quired about $130,000 from the Company to energy which has no fuel cost at all, nuclear
, cover its share of those expenditures. A new, generation is the most economical of all available
; improved, two-way radio system required about sources. Without such nuclear capacity, fuel
$120,000, while $17,000 was needed for prelim- costs would be astronomically higher and con-inary work on the replacementof three penstocks sumers' bills would have to reflect that fact.
3
Maine Electric Power Company,Inc. (MEPCO) tablish forward-looking fuel adjustment regula-owns and operates a 180-mile,345-kilovolt trans-
- ons for all Maine el-tric utility companies.
mission hne connecting utilities in the New Eng- Tnese proceedings cuNnated in new rules re-land Power Pool with The New Brunswick Elec- quiring companies to estimate fuel costs, includ-tric Power Commission system in Canada ing purchased energy, and kilowatt-hour sales (NBEPC). MEPCO purchases Canadian power for a future period (normally twelve months). under contracts with NBEPC and sells it to vari- Effective September 1,1980 the Company imple-ous New England utilities. Owning 7.49% of the mented the new regulations for an initial nine-common stock of MEPCO, the parent companyis month period to coincide with the statutory entitled to purchase a small amount of MEPCO period for the pending rate proceeding. Coinci-capacity and related energy (3.4 megawatts). In dent with the inception of new rates resulting addition to that entitlement, the Company has from the rate case, an estimated future fuel ad-acquired another 5 MW assigned to it by two justment factor will be implemented. The regula-other New England utihties for the period Novem- tions allow petitions for changes in the fuel ad-ber 1,1980 to October 31, 1981, after which justment rate af ter ninety days if the estimates ! another 5 MW will be acquired, making total and actual data become too divergent. Though a f MEPCO capacity 13.4 megawatts af ter that date. divergence has occurred, it had not been decided ) The additw,al 10 MW of purchased capacity at the time of this writing whether or not a revision entitlements are contingent, in part, upon the l will be sought. It is interesting to note that the PUC allowing them in base rates, as part of the PUC has reviud its new regulations, provid-Company's pending rate request. The MEPCO ing for interest on under-collections or over- l transmission line is also the path by which Maine collections at a rate approximating the utility's ( Yankee and Wyman #4 energy is delivered into cost of money. This will take effect at the time of j the NBEPC system and then wheeled to the the next fuel adjustment change. parent company through its interconnections with NBEPC at the international border. Pursuant to an October 1979 order by the Fed-eral Energy Regulatory Commission, the parent company on January 14, 1980 refunded to its wholesale customers $632,614.51 (including interest of $175,871.11) of fuel adjustment sur-charge revenues which had been collected in Re9ulatorY Proceedin9S 1975 and 1976. At the time of the refund, the case Because of its rapidly declinin9 earnings par- was still on appeal with the United S'ates Court ticularly cash earnings, the Company fil'ed a of Appeals for the First District. On June 6,1980 petition for rate relief with the PUC on September ine court denied the Company's petition and the 2,1980. If new rates are granted as requested, the Company has ceased further action in the case. Company s base revenues would increase by The refund, including interest,(net of Federal and approximately $5,000,000. Management has al- State income Taxes) has been charged to Re-ways considered the Company to be too small t tained Earnings at the beginning of the period in 1980. Financial statements in this report have justify having a, separate ra,te department. How- been restated, as appropriate, to retroactively ever, the three intervenors in the rate case have managed, to bombard the Company with data re- recognize the effect of the adjustments in proper quests with more than 400 items, with dozens of years dating back to 1975. sub-parts, each of which must be responded to In respect to wholesale rates,it is expected that ( in a timely fashion to fulfill the requirements of the Company will file a new rate proceeding with the so-called " discovery" process. The Company the Federal Energy Regulatory Commission by may be forced to add several staff positions to mid-1981. handle such matters in the future. The cost of time and paper to meet these requirements has been frightening and eventually will have to be passed on to the ratepayers. Public hearings in the rate case arc scheduled to be held in March. Financial Condition According to Maine statute, the PUC must render a decision by June 2,1981. In 1980 the parent company issued an addi-During 1979 and 1980 the PUC conducted an tional $5,500,000 of bank notes to finance its con-investigation to determine what items could be tinuing construction program, making a total of included in the fuel adjustment charges for re- $8,100,000 of such notes outstanding at the end placement energy costs incurred as a result of a of the, year. 8,ecause cash earnings in 1980 have NuclearRegulatoryCommissionshutdownof the been insufficient to generate adequate interest Maine Yankee nuclear plant in the spring of 1979. coverages, only a minimum amount of unsecured it is with considerable relief that we are now able long-term debt (no secured debt) may be issued to report that the total replacement costs of at this writing. The generation of needed interest
$1,541,465 was finally recovered through fuel coverages is,contm, gent upori the PUC allowing a adjustment billings as of December 31,1980. substantiai increase in rates as a result of the Company s pending rate request. The Company The PUC has also condtztt d a hearing to es- plans to continue bank borrowing to meet on-4
goiag construction needs until such time as suf- the Maine voters in September 1980. We are facient interest coverages have been generated happy to report that this ill-advised bill was re-so that a reasonable amount of long-term debt jected by the people by a vote of 3 to 2. may be issued. It seems doubtful that such a level can be attained before the second quarter of Subject to control of the board of directors,the 1982. No major issue o common stock is pres- Company and its subsidiary continue to avail ently planned, though it is pomted out that minor themselves of advisory and other services of amounts of new common stock are regularly is-Stone & Webster Management Consultant, Inc. sued in accordance with provisions of the Com- The Company's common stock is listed and pany's Employees Stock Ownership Plan, a traded on the American Stock Exchange. Only TRASOP plan qualified under the Tax Reduction common stockholders are entitled to vote at the Act of 1975, as amended. During 1980,5,282 annual meeting, except in the case of default shares of common stock were issued and sold to (considered unlikely) under the provisions of the the ESOP trust, increasing common equity by Articles of Incorporation relating to the preferred
$90,540. stock or as may be required by applicable law.
There were 678,307 shares of common stock out-standing at December 31,1980. Shares were held by 3,482 stockholders in 48 states, the District of Columbia, the Virgin Islands, Canada, West Ger-Employees many and Mexico. It is interesting to note that female stockholders outnumber male,1,208 to The parent company had 168 full-time em- 1,075. Stock is held by 860 joint tenants, with the ployees at the end of 1980 while the subsidiary remaining 339 covered by miscellaneous cate-had 11 employees at its Tinker Station, identical gories. In the state of Maine, 592 holders held to the numbers employed at the end of the pre- 132,519 shares,353 with 89,978 she as residing vious year. Consolidated payroll costs for 1980 in the Company's service area of Aroostook amounted to $3,280,996, 9.3% more than the County. There were 129 holders of the 10,180 comparable figure of $3,000,919 for 1979. In ac- shares of 4.75% preferred stock,3 of the 29,100 cordance with the second year of the parent shares of 9%% preferred stock and 3 of the80,000 company's contract with the International shares of 9%% preferred stock. Brotherhood of Electrical Wo,rkers, union em-ployees base pay rates were increased 7%, ef- Dividend information and market Price fective October 1,1980. Also on that date, some relatin,g to the common stock are shown in the . data
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previously agreed-upon changes in fringe bene- following tabulation for the two most recent fits became effective. Commensurate increases calendar years: ~4 in non-union pav scales of the parent company and subsidiary were initiated beginning with the first pay period in December. General The parent company engages in the produc-tion, transmission and distribution of electric gfgf y,'w Pafd e Share energy, serving retail and wholesale customers in all of Aroostook County and a small portion of 1979 Penobscot County in northern Maine. The ser- First Quarter 19% - 17% $0.41 vice area is approximately 3,600 square miles Second Quarter 19 - 17% 0.46 with a relatively sparse population. Third Quarter 19% - 18% 0.46 Fourth Quarter 18% - 16% 0.46 For the past several years, we have mentioned in this space the Indian Land Claims Case, a suit 1980 brought by the federal government on behalf of First Quarter 17% - 14% 0.46 the Pasumaquoddy and Penobscot tribcs, seek- Second Quarter 18% - 14% 0.48 ing the return of 12.5 million acres of Maine land Third Quarter 17% - 15% 0.48 to the Indians. All legal barriers to the settlement Fourth Quarter 16% - 13% 0.48 of this case apparently have been overcome and Congress has appropriated the necessary funds to satisfy the claims, so that we feel it is now proper to consider the case closed. An initiated bill, An Act to Prohibit the Genera-tion of Electnc Power by Means of Nuclear Fis-O sion, which would have closed Maine Yankee, was not passed by the Legislature and went to 5
Maine Public Service Company ' aini sub iiliarv 3j )6 $ statements of consolidated income Year Ended December 31, Restated (Note 10) 1980 1979 1978 Operating Revenues . $27,789,640 $21,239,729 $19,868,765 Operating Expenses Operation: Power Purchased . 12,751,973 8,881,077 7,638,595 Other . . 8,013,782 4,170,629 3,850,652 Maintenance . . . .
... . 916,875 723,936 764,282 Depteciation (Note 1) . 1,770,604 1,702.651 1,494,171 Taxes:
Other Than income. 878,008 792,025 669,456 State income . . . ..... .... ... .... 21,832 45,010 171,961 U.S. and Canadian Federal Income (Note 5): Current ..... ..... ... ... 132,317 164,227 266,262 Deferred-Related to Deferred Fuel Expense . (462,162) 409,045 429,510 Other Deferred-Net . 458,419 334,210 284,467 investment Tax Credits 18,317 213,695 881,380 Total Operating Expenses. _24,499.965 17,436,505 16,450,736 Operating income 3,253,675 3,803,224 3,418.029 Other Income (Deductions) Equity in income of Joint Ventures (Notes 1 & 3), 339,635 344,123 347,403 Allowance for Equity Funds Used During Construction (Note 1). .. . ..... 652,191 241,459 312,264 Foreign Exchange (Loss) Gain (21,845) (44,210) 103,652 Other-Net . 16,012 26,685 (69,025) Total . 985,993 568,057 694,294 Income Before Interest Charges . 4,275,668 _ 4,371,281 4,112,323 Interest Charges Long-Term Debt, etc. ... .. .. ... 3,263,503 2,747,255 1,494,463 Less Allowance for Borrowed Funds Used During Construction (Note 1) (1,475,677) (1,178.890) (208,176)
- Total . 1,787,826 1,568,365 1,286.287 Net income . . . . . ......... 2,487,842 2,802,916 2,826.036 Dividends on Preferred Stock 556,509 262.134 179,428 Net income Available for Common Stock $ 1,931,333 3 2.540,782 $ 2,646,608 Earnings Per Share of Common Stock . $2.86 $3.80 $3.97 Average Shares Outstanding 675,723 668,576 c66,380 Soo Notes to Consolidated Financial Statements.
O 6
\l;u n e Puhh, % soe ( mn q,a n s , , iii.i*- li i: - ./ 7 s!i!!i'!!I e 't!! ~ < >l 1 >tI s t >lli/itI e '< / t'i'jit j ri e i! r ij ? it iil to , December 31, 1980 1979 1978 Retained Earnings. Balance at beginning of year: As prer ;usly r reported . S12,128,080 $ 10. 791 23 7 $ 9196.861
. 'r u o per aad adjustment (Note 10) (309.270) (283 028) i262.369)
As Restated 11,818.810 10 508 209 8 934.492 Net income for the year 2,487.842 2 802 916 2 826 0'36 Dividends: Pmterred Stock (556,509) 1262 134) ,79 428) Cr..nunon Stor:k f por share $192 m 1960.
$184 m 1979 and $16' m 1978) (1.297.388) ,1 230 181) < 1 0 7 2 891 )
Miscellaneous Charge (52,984) Retained Earnings, Balance at end of year 512,399,771 $11818 810 $10.508 209 see N< >tes to Consoirdated Fmanciat Statements
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Maine Public Service Company arul Sub ,idiarv ' consolidated December 31, GSSC/S Restated (Note 10) 1980 1979 Utility Plant (Notes 1 and 4) Electric Plant in Service. $55,979,721 $54,667,859 Less Accumulated Depreciation. 20,219,504 18,849,887 Net Electric Plant in Service. 35,760,217 35,817,972 Construction Work-in-Progress. 20,626,495 14,575,898 Total , 56,386,712 50,393,870 investments in Associated Companies (Notes 1 and 3) Maine Yankee Atomic Powe,' t'ompani 3,339,711 3,340,759 Maine Electric Power Company, Inc. 87,388 92,888 Total , , 3,427,099 3,433,647 Net Utility Plant and investment in Associated Companies 59,813,811 53,827,517 Current Assets l Cash . ... .. . .. .. 733,970 961,327 l Deposits for interest and dividends , 516,644 492,367 i Accounts Receivable: Customer (less allowance for uncollectible ccounts-1980,
$76.300; 1979, $63,487) 2,652,247 1,954,221 Other........ .... ... .... . .. ...... 402,000 266,151 Refundable Federal Income Taxes (Notes 1 and 10) . 597,907 1,034,947 Deferrei Fuel and Purchased Energy Costs (Note 1) 1,323 487 1
2,252,601 Materials, Fuel, and Supplies (at average cost,' . 1,810,348 , 1,340,497 Prepayments . . 43.0S2 90,218 Total . 8,079,655 8,392,329 Deferred Debits Unamortized Debt Expense (being amortized over terms of related I debt) . . 234,801 253,205 Miscellaneous (Note 4)... 485,316 406,798 Total . . 720,117 660,003
$68,613,583 $62,879,849 l
See Notes to Consolidated Financial Statements. 8
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# x (H1 allre Slll'el,3 December 31, liabilitics and capital " d z L',',*','g, 1980 1979 Capitalization Common Shareholders Equity (Note 8):
Common Stock' . . . . . .. $ 4,748,149 $ 4,711,175 Paid-in Capital . . . 1,773,557 1.697,256 Retained Earnings . . 12,399,771 11,819,810 Total . . 18,921,477 18,227,241 Redeemable Cumuletive Preferred Stock * Mte 9) . 5,964,000 6,069.000 Long-Term Debt * (less current maturities) 25,414,040 25,941,208 O Current Liabilities Long-Term Debt Due Within One Year: 3% Series Bond Due September 1,1980 . 710,000 Other . ......... ....... ... . . . . . 505,664 518,128 Notes Payable to Banks (Note 6) 8,100,000 2,600,000 Accounts Payable ..... ...... .... . . 2,601,050 1,659,082 Wholesale Surcharge Refund (Note 10) . .......... ..... ... -- 632.615 Deferred Income Taxes Related to Deferred Fuel Costs (Note 1) S58,193 1,120,355 Dividends tjeclared . . . 463,802 438,935 Customer Deposits . 18,611 18,141 Taxes Accrued . . . . 67,659 61.207 Interest Accrued. . 626,925 585,783 Total . . . . . . 13,041,904 8.344.246 Deferred Credits income Taxes (Note 1) ... . . . . 2,242,397 1,783,978 investment Tax Credits (Note 1) . . . . 2,911,499 2,474,105 Miscellaneous . 118,266 40,071 Total . 5,272,162 4,293,154
$68,613,583_ 562,879,849 h see schesures or capitarization sarx 9
l SlHles!!!' ills Of SullTCC Of , COllSOllNH(CN fuilNS f0T [Nulll l T HNNillOllS HilN TefNHCCilleillS Year Ended December 31, Restated (Note 10) 1980 1979 1978 Source of Funds Funds From Oper? ions: Net income ... ...... . . .. . ... $ 2,487,842 $ 2,802,916 . $ 2,826,036 Principal Non-Cash Charges (credits) to income: l Depreciation (Note 1) . . . . . 1,770,604 1,702,651 l 1,494,171 Deferred Income Taxes-Net.. 458,419 334,210 284,467 Deferred Investment Tax Credits .. .. .... . 437,394 I 740,342 1,050,960 Allowance For Equity Funds Used During Construction (Note 1) . . ..... .... ..... (652,191)l (241,459) (312.264) Foreign Exchange Loss (Gain) (Note 1). 21,845 44,210 (103,652) Other . . 109,085 (63,346) 95.795 Funds From Operations. 4,632,998 5,319,524 5,335,513 Less: Dividends on Preferred and Common Stock (1,853,897) (1,492,315) (1,252,319) Miscellaneous Charge to Retained Earnings . (52,984) -- -- Funds Retained in the Business 2,726,117 3.827,209 4,083,194 Funds From (For) Financing-Net: Notes Payable to Banks. . . . . . .... ... ..... ... 5,500,000 (6,800,000) 9,400,000 issuance of Redeemable Preferred Stock and Long-Term Debt . .... ... ...... ..... ..... ......
-- 12,000,000 l i Reduction of Long-Term Debt and Capital Stock-Net (1,263,202) (480.390)l (574.113) l Funds From Financing-Net 4,236,798 4,719,610 I 8,825,887 l
Net Funds Available 6,962,915 8.546.819 12,909,081 increase (Decrease) in Available Funds j Decrease (Increase) in Working Capital (see below) 232,796 (485.799): (1,572,732) Other-Net . 16,818 57,810 27,436 Funds Used For Plant Additions and Replacements S 7,212,529 $ 8.118,830 $11,363,785 Increase (Decrease) in Working Capital by Components (excluding long-term debt due within one year and notes payable to banks): Cash . ...... ........ . . $ (227,J57) $ 375,998 $ 128,432 Deposits for Interest and Dividends. . .. .... . 24,277 120,605 19,201 Accounts Receivable-Net and Refundable income Taxes 396,835 (244,951) 1,196,882 Deferred Fuel and Purchased Energy Costs . (929,114) 875,165 831.741 Materials, Fuel and Supplies . . 469,851 267,484 183,946 Prepayments . . . . .. (47,160) 29,002 (12,595) Accounts Payable ..... ...... .. . (941,968) (173,057) (273,024) Wholesale Surcharge Refund (Note 10) , .......... . 632,615 (52,215) (41,107) Deferred income Taxes Related to Deferred Fuel Costs. 462,162 (409,045) (429,510) Taxes Accrued . .... ... ....... ... (6,452) (31,888) 14,507 Interest Accrued and Other Current Liabilities-Net (66,479) (271,299) (45,741', increase (Decrease) in Working Capital.. $ (232,796) $ 485,799 $ 1,572,732 , See Nctes to Consolidated Financial Statements. 10
ggfg 7g - gffggggf ggf associated w.th equity wnds have been excluded from funds provided from operat ons in the state-ments of socrce of consolidated funds for plant i j S/Ule/N CN /S additions and replacements. Maintenance and repairs, including replacement of minor items of property, are charged to maintenance expenses
- 1. ACCOUNTING POLICIES, ETC. as incurred. The companies' properties, with minor exceptions. are subject to a first mortgage Regulations The Company is subject to the reg- lien.
ulatory authonty of the Maine Public Utilities Commission (PUC) and, in respect to wholesale Depreciation Depreciation is provided on com-rates, the Federal Energy Regulatory Commis- posite bases using the straight-line method for sion (FERC). (See Note 10) financial reporting purposes and the declining balance method for tax purposes. C 2nsolidation The accompanying consolidated financial statements include the accounts of the By order of the Maine Public Utilities Commis-Company and its wholly-owned Canadian subsi- sion, the Company records income tax reduc-diary, Maine and New Brunswick Electrical Power tions, which result from the use of liberalized Company, Limited. Intercompany items have depreciation, by the " normalization" method for been eliminated in consolidation. Non-U.S. all property additions. Related deferred income assets and liabilities are translated into U.S. taxes recorded in 1980,1979 and 1978 amoun'ed dollars at year-end exchange rates, except for to $415.543, $370.995 and $300,440 respectively.. property plant and equipment, which are trans- The Subsidiary records income tax reductions by lated at approximate rates prevailing when ac- the " flow-through" method for all differences quired. Income and expense items are translated between book and tax depreciation, at average exchange rates prevailing during the year, except for depreciation which is trans- Investment Tax Credit The Company defe,s lated at historical rates. Foreign currency trans- investment tax credits ($548,482, $847,409 and le. tion adjustments are rebcted in income cur- $1,178,500 in 1980,1979 & 1978, respectively) rently, and amortizes the credits over the estimated use-ful lives of the related utility plant. In all three Deferred Fuel and Purchased Energy Costs years the available investment tax credit ex-The portions of fuel and purchased energy ceeded the maximum allowable to offset the tax costs which are recoverable from customers liability. The excesses were carried back result-
) under the operation of fuel and purchased energy ing in $408,740, $590,022 and $276,792 of refund-
' adjustment clauses are deferred until the periods able federal income taxes for 1980,1979 and in which the related revenues are billed. 1973 respectively. Utility Plant Utility plant is stated at original Investments The Company records its invest-cost which, as to construction, includes all direct ments in the Common Stock of Maine Yankee labor and material, as well as related indirect Atomic Power Company (Maine Yankee) (5% construction costs including general engineer- ownership), a jointly owned nuclear electric ing, supervision and similar overhead items, and power company, and the Common Stock of allowances for costs of funds used during con- Mr.Me Electric Power Company (M EPCO) (7.49% struction (AFUDC) at 12.69% during i980, at o vnership), a jontly owned electric transmission 12.48% during 1979 and at 9.98% during 1978. company, ca the equity method. (See Note 3). In accordance with an order of the FERC, AFUDC applicable to borrowed and equity funds are The Common Stock of the Subsidiary is pledged shown separately in the accompanying state- as additional collateral for the first mortgage and ments of consolidated income and the AFUDC co"ateral trust bonds of the Company.
- 2. GEOGRAPHIC BUSINESS SEGMENTS The following table summarizes the companies' operations in the two countries in which they operate (000 omitted):
Company Subsidiary Adjustments and United States Canada Eliminations Consolidated For the Year Ended December 31,1980: Sales to Unaffiliated Customers $27,638 $ 152 $2T 790 Intercompany Revenues 81 775 $ (856) Total $27,719 $ 927 $ (856) $27,790 tuote 2 continues on page 12> 11
Operating Profit Before Income Tares $ 3,188 $ 262 $ 8 $ 3.458 Income Taxes 83 86 169 Operating income $ 3,105 $ 176 $ 8 $ 3.289 Identifiable Assets at December 31,1980 $63,679 $4,935 $68,614 For the Year Ended December 31,1979: Sales to Unaffiliated Customers $21,090 $ 150 - - - $21,243 Intercompany Revenues 81 900 $ (981) Total $21,171 $ 1,050 $ (981) $21,240 Operating Profit Before incorne Taxes S 4.536 $ 427 $ 6 $ 4,969 income Taxes (A) 1,008 158 -- 1,166 Operating income (A) $ 3,528 $ 269 $ 6 $ 3.803 Identifiable Assets at December 31, .979(A) $57,884 $T99k $62,880 For the Year Ended December 31,1978: Sales to Unaffiliated Customers $19,717 $ 162 $ 19,869 Intercompany Revenues 81 757 $ (838) Total $19,798 $ 909 $ (838) $39,869 Operating Profit Before income Taxes $ 5,176 $ 276 -- $ 5,452 Income Taxes (A) 1,956 78 2,034 Operating income (A) $ 5,220 $ 198 -- $ 3,418 Identifiable Assets at December 31,1978 (A) $49,783 $5,042 $54,825 The identifiable assets,by company, are those assets used in each company's operations, excluding l intercompai;y receivables and investments. l l (A) Restated, See Note 10. ,
- 3. INVESTMENTS IN JOINTLY-OWNuD COMPANIES Dividends received during 1980,1979 and 1978 from Maine Yankee were approximately $325,000,
$333,000 and $335,000, respectively, and from MEPCO approximately $11,000 in 1980, and $12,000 in both 1979 and 1978.
Condensed financialinformation for Maine Yankee and MEPCO is as follovvs: Maine Yankee MEPCO _ (Dollars in Thousands) 1980 1979 1978 1980 1979 1978 Earnings Operating revenues S 84.245 $ 68,867 $ 70.373 $111,604 $ 98.122 $ 59,860 Earnint;s applicable to Common Stoc t $ 6,574 $ 6.650 $ 6,702 $ 146 $ 155 $ 164 Compar.v's equity share of net earnings $ 329 $ 333 $ 335 $ 11 $ 12 $ 12 Investment Total assets $296,724 $287,105 $265,955 $ 31,100 $ 22,804 $ 20.812 Less: Preferred Stock 11,980 13,070 13,696 -- -~ -- Long-term debt 134,823 139,373 128,818 10,484 11,220 11,880 Other lia'ailities and deferred credits 82,869 67,805 56,657 19,443 10,337 7,607 Net assets $ 67,052 $ 66.857 $ 66.784 $ 1.173 $ 1,241 $ 1,325 Company's equity in net assets $ 3.353 $ 3,341 $ 3.339 $ 88 $ 93 $ 99 I 12 l
- 4. INVESTMENTS IN ber 31,1980 are as follows: 1) an open credit JOINTLY-OWNED arrangement up to $1,200,000 with interest at the s UTILITY PLANTS lender's prime rate. 2) a line of credit up tc
! $7,500,000 with interest at 108% of the lender's d
The Company is a participant in three jointly- prime rate, plus a commitment fee of 5% of the owned utility plants: W. F. Wyman Unit No. 4 prime rate, and a compensating balance averag-(Wyman) Seabrook Units No.1 & 2 (Seabrook), ing $100,000. Certain information relating to and the New England Power Company Units these arrangements is as follows: No.1 & 2 (NEPCO). 1980 1979 in December of 1979, New England Power Com-pany cancelled the construction of Units No. Total n 1 & 2. Accordingly, approximately $207,000 of Y r end $8,700,000 $ 4,200 000 construction work-in-progress related to those Maximum amount of units was transferred to deferred debits, pending borrowings outstand-final disposition by NEPCO and the state regula- Ing at any month-end 8,100,000 12,600,000 ry uthomy. Borrow,ngs i outstand-ng at year end 8,100,000 2,600,000 The Company's proportunate share of the direct Unused lines of credit expenses of Wyman are included in the corre-sponding operating expenses in the income Average outstanding statement borrowings for the year 6,350,000 8,320,000 Each participant must provide its own financing. Average interest rate The Company's share in each of the two jointly. for the year 17.22 % 13.63 % owned plants at December 31,1980 is as follows: Effec ve interest rate Wyman Seabrook Electric Plant in Service $6,973,599 Accumulated 7, PENSION PLAN Depreciation 423,324 Construction The Company and its Subsidiary have insured Work-in-Progress $20,458,909 non-contributory pension plans (terminable at j Total S6,550,275 S20 458,009 any time) for the benefit of all union and non-union employees, based on age and period of Cornpany,s Ownership employment conditions. Pension expense, which Percentage includes amortization of prior service costs over 3.3455% 1.4606% a period of twenty years, was $255,083 in 1980,
$286,594 in 1979 and $249,372 in 1978. The com-
- 5. FEDERAL INCOME TAXES panies' policy is to fund pension cost accrued.
Certain information relating to these plans at December 31,1979, the date of the most recent The consolidate 1 orovisions for federat income taxes differ from an aunts computed by applying actuarial valuation follows: the statutory rate as follows-Restated Actuarial present value of (Note 10) vested accumulated plan 1980 1979 1975 benefits $1,970,294 Statutory Rate 46.0% 46.0% 48.0% N asset available Tax Benefits of Lower ft b ta e to The assumed rate of return used in determining the actuarial present value of vested accumulated Dividends Received (5.2) (3.5) (3.0) Foreign Tax Credit plan benefits was G%. The present value of non-(1.5) vested accumulated plan benefits was not avail-Allowance for Funds Used During Construction able from the actuary. (38.4) (17.1) (5.4) Other 3.2 3.0 1.6 Effective Rate 5.6 % 28.4 % 39.7%
- 8. COMMON SHAREHOLDERS' EQUITY 6,
Under the most restrictive provisions of the NOTES PAYABLE TO BANKS AND Company's long-term debt indentures, retained SHORT-TERM CREDIT ARRANGEMENTS earnings available for the payment of cash divi-dends on Common Stock were $7,366,801 at O The Company has had various credit arrange-ments with two banks. Those in effect at Decem-December 31,1980. (continued on pace 74> 13
Paid-in capital increased by approximately stated to reflect the refund and related interest
$76.000, S83.000 and $34.000 in 1980.1979 and thereon.
1978 respectively, representing the excess of the . proceeds received over the par value of common The effect of restating 1979 and 1978 results of j stock issued to the employees' stock ownership operations that were reported in the 1979 and plan (5282,6987, and 1304 shares in 1980,1979 1978 annual reports to share owners. to reflect and 1978 respectively) (see Note 12), and the the above court decision, is as follows: excess of par value over reacquisition cost of Ps red Stock (see Note 9). 1979 1978 Increase (Decrease) in:
- 9. REDEEMABLE CUMULATIVE al Income Taws $2592) M 2 W 8)
Intaest Garges 52.215 C,W PHEFERRED STOCK Net income (26,242) (20,659) The Preferred Stock is redmmable, with certain Earnings Per Share ( .04) (.03) restrictions, at the optiu of the Company, or in the case of voluntary hquidation at $51.00 per The restatement reduced retained earnings at share for the 4.75% Senes, 551.65 for the 9 e January 1,1978 by $262,369 (the balance relating Series, and 554.81 for the 9 *% Series (all plus to years pnor to 1978) which is riet of applicable income taxes of $276,924. accumulated dividends). No shares were re-deemed under this option during 1980,1979 or 78 11 CONSTRUCTION PROGRAM The 9%% Series has a sinking fund require-ment whereby the Company must redeem 5,333 See Construction Section on page three. shares at $50 per share and accrued dividends on October 1 of each year commencing in the 12. EMPLOYEES' STOCK OWNERSHIP PLAN year 1985. In additiol, the Company has a non-cumulative option to redeem up to an additional The Company has an employee stock ownership 5.333 shares at the same price and date as the plan that provides ehgible employees with the sinking fund shares. opportunity of becoming stockholders of the Company and, at the same time, achieves cer-Purchase funds for the 4.75'o and 9Yo Series tain tax benefits for the Company. All employees provide that the Company will annually offer with one or more years of service are ehgible to purchase on July 1, at prices not to exceed to participate in the plan; each year the Com-
$50 per share and accrued dividends,3% of the maximum number of shares issued prior to May p ny contributes .o t the plan shares of common stock (or an equivalent amount of cash to be 15 of such year, less any shares theretofore pur-chased and surrendered by the Company to the used tp purchase common stock) with a value, s defined, equal to 1 o of the Company s quah-transfer agent as a purchased fund credit for tied investments in property for that year. The such year. Any shares so purchased and sur- contribution to the plan amounted to $49,862 in rendered are retired. There were 1200 shares of 80, $77.036 in M79 and $107,140 in 1978.
4.75% Series purchased under this offer in 1980 Am unts contobuted are accumulated in indi-1979 and 1973, and 900 shares of the 9W Series purchased in 1980-vidual member accounts and are available for distribution upon termination of employment The Preferred Stockholders are entitled to spe- f ter an appropnate waiting period required by cial voting rights in respect to certain corporate federal statute. Amounts in individual member action and are entitled to elect a majonty of the accMs am M WsW at au kes. Board of Directors in the event of a def ault in the m~ . payment of four quarterly dividends on the Pre- < 1 ferred Stock. I L 1
- 10. RATE PROCEEDINGS ,
in 1975, a regulatory authority permitted the Company to use a fuel cost adjustment clause, subject to a hearing and possible refund (under which revenues were collected in part of 1975 and 1976). The Company was subsequently or- i' dered to refund the revenues collected, which < was appealed to various authorities. In 1980 the ; courts again denied an appeal, and a refund with - applicable interest was made. The financial state- - 4 +~ ments for all applicable periods have been re- Wancta Blake Library at University of Maine at Fort Kent. 14
- 13. QUARTERLY INFORMATION (unaudited)
Presented below are financial data showing results for each c,uarter in the three years ended , December 31,1980. (Dollars in Thousands Except Per Share Amounts) 1980 By Quarter 1st 2nd 3rd 4th Operating Revenues $6,725 $8,286 $5,781 $6,998 Operating Expenses (5.871) (7,479) (5,112) (6,038) Operating income 854 807 669 960 Interest Charges (441) (591) (474) (282) Other income-Net 253 186 304 243 l Net income $ 666 $ 402 $ 499 $ 921 Earnings Per Common Share: $ .78 $ .39
$ .53 $ 1.16 1979 By Quarter (b) i 1st 2nd 3rd 4th Operating Revenues $5,900 $5,137 $4,274 $5,929 Operating Expenses (4,738) (4,213) (3,548) (4,938)
Operating income 1,162 924 726 991 Interest Charges (478) (460) (488) (142) Other Income-Net 157 155 147 108 Net Income $ 841 $ 61} $ 385 $ 957 Earnings Per Common Share: $ 1.19 $ .5 $ .51 $ 1.24 l 1978 By Ouarter (b) 1st 2nd 3rd 4th Operating Revenues $4,826 $4,808 $4,208 $6,026 Operating Expenses (3,865) (3,948) (3,683) (4,954) Operating income 961 860 525 1,072 Interest Charges (305) (33G) (319) (326) Other Income-Net 162 161 210 162 Net lncome $ 818 $ 685 $ 416 $ 908 Earnings Per Common Share: $ 1.16 $ .96 $ .56 $ 1.29 (b) Restated, see Note 10. h - 4 as W
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disallowance by a federal regulatory authority of (1Ild[lOl'S' 0r)[72/071I certa,ni revenues the Company collected in 1976 and 1975 under the provisions of a revised whole-sale fuel cost adjustment clause. As discussed in MAINE PUBLIC SERVICE COMPANY: Note 10, the disallowance was upheld in 1980. Accordingly, the financial statements have been i We have examil,ed the consolidated balance restated to reflect the refund and related interest sheets of Maine Public Service Company and its thereon, in the applicable years. Accordingly, our subsidiary, Maine and New Brunswick Electrical present opinion on the 1979 and 1978 financial Power Company, Limited, and the related sched- statements, as expressed herein,is different from ules of capitalization data, as of December 31, that expressed in our previous report. 1980 and 1979, and the related staternents of consolidated income and retained earnings, and in our opinion, the financial statements and of source of consolidated funds for plant addi- schedules referred to above present fairly the tions and replacements for each of the three financial position of the Companies at December years in the period ended December 31,1980. 31,1980 and 1979 and the results of their opera-Our examinations were made in accordance with tions and their source of funds for plant additions generally accepted auditing standards and, ac- and replacements for each of the three years in cordingly, included such tests of the accounting the period ended December 31,1980, in con-records and such other auditing procedures as formity with generally accepted accounting we considered necessary in the circumstances. principles applied on a consistent basis. In our report dated February 29,1980, our opinion on the 1979 and 1978 financial staternents was DELOITTE HASKINS & SELLS qualified as being subject to the effect of the Boston, February 25,1981 w . g
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hh 3 , ll ,c . cy [ .s Q 3 3 wl), % Y- - l_. N ,f ( . [; l y-W [ Y JN Dr. Carlton W. Loder with students analyzing water sarnple _, a. Student conducting test in Industnai diectronics Program at in lab at the University of Maine at Presque Isle Northern Maine Vocational Technical Institute 16 i
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) and Subsidian f x schedules of capitalization data December 31,
[onf.f-tCTU! dobll 1980 1979 Maine Public Service Company: First Mortgage and Collateral Trust Bonds: 3% Series due 1980-intere.it Payable, March 1 and Sept.1 .. $ --
$ 720,000 3.35% Series due 1985-Interest Payable, February 1 and August 1 1,520,000 1,540,000 5%% Series due 1990-Interest Payable, March 1 and Sept.1 1,600,000 1,620,000 4h% Series due 1995--Interest Payable January 1 and July 1. 2,125,000 2,150,000 7%% Series due 1998-Interest Payable, May 1 and November 1, 3,560,000 3,600,000 7.95% Series due 2003-Interest Payable, March 1 and Sept.1 2,350,000 2,375,000 10%% Series due 1995-interest Payable, March 1 and Sept.1 3,640,000 3,760,000 10%% Series due 2004-Interest Payable, April 1 and Oct.1 8,000,000 8,000,000 Debentu es:
5%, due 1987-Interest Payable May 1 and November 1 702,000 756,000 9'n%, due 1995-interest Payable, May 1 and November 1 1,134,000 1,188,000 Maine & New Brunswick Electrical Power Company, Limited:
X First Mortgage Bonds-5%% Series due 1989-Interest Payable,
) June 1 and December 1, 1,298,704 1,460,336 Total Outstanding . . . . . . . . . . . 25,919,704 27,169,336 Less-Amount due Within One Year . 505,664 1,228,128 Long-Term Debt. , $25,414,040 $25,941,208 Current Maturities of Long-Term Debt for the Succeeding Five Years Are:
1981 - 5505,664 1982-$ 505,664 1983-$505,664 1984-$505,664 1985-$2,325,664 capital stock: Common Stock, $7 Par Value-Authorized, 1,000,000 Shares; lssued and Outstanding, 678,307 Shares in 1980 and 673,025 Shares in 1979 $ 4,748,149 $ 4,711,175 Redeemable Cumulative Preferred Stock, $50 Par Value-Authorized, 270,000 Shares (issuable in series): 4.75% Series-Originally issued 40,000 Shares; Outstanding, 10.180 Shares in 1980 and 11,380 Shares in 1979, . $ 509,000 $ 569,000 9'hS Series-Originally issued 30,000 Shares; Outstanding, 29.100 Shares in 1980 and 30,000 Shares in 1979. . . . . . . . 1,455,000 1,500,000 9%% Series-Originally issued and Outstanding,80,000 Shares 4,000,000 4,000,000 Total . $ 5,964,000 $ 6.069,000 17
i i .blaille l#tik)liC berViCC Company atul Sul:3itliary CONSO((da (Restated) (Restated)
. 1980 1979 1978 Capitalization (year end)
Long-term debt. 51.02 % 52.50% 50.639 Preferred Stock .. . . 11.74 % 11.73 % 5.489. Common Stock Equity . 37.24 % 35.77 % 43.899-Times interest Earned-Before Income Taxes . . 1.83 2.48 4.27 Af ter income Taxes . . . . . . . . . . . . . . . . . . ... . . 1.76 2.02 2.89 Times Interest and Preferred Dividends Earned-Af ter Income Taxes . . . . . ........ .... 1.51 1.84 2.58 Ettbedded Cost of Long-Term Debt (year end) . 8.27 % 8.10% 7.169, Embedded Cost of Preferred Stock (year end) 9.42% 9.38% 8.519 Common Shares Outstanding (year end) .. .... 678.307 673,025 667,038 Earnings Per Share of Common Stock (average shares) $ 2.86 $ 3.80 $ 3.97 Dividends Per Share of Common Stock-Declared Basis . . $ 1.92 $ 1.84 $ 1.61 Paid Basis . . . . . . . . . . . . . ....... $ 1.90 $ 1.79 $ 1.58 Common Stock Dividend Payout Ratio . . . . . .... 67.13 % 48.42% 40.55% Book Value Fer Share of Common Stock (year end) . $27.90 $27.50 $25.57 Market Price Per Share of Common Stock High . . $ 18% $ 19% $" Low . . $ 13% $ 16Ve $ Close.... ........ .. . .. $ 15% $ 16% $ 1, a 4 Price Earnings Ratio (year en4 .. .... 5.38 4.41 4.41 Number of Common Shareholders (year end) . 3,482 3.522 3.577 l 1980 SOURCE OF REVENUE 1980 DISTRIBUTION OF REVENUE Millions of Dollars (Total 57L8) and percent of tof at Millions of Dollars (Total 57ts) and percent of total g, FL'f L AND g 3g PURC H ASE O POWWE R th0ulf el AL s ni n t h T 4 A#h A L84'8 ' ' '
$4 2%
S10Ch ee0L DC R $ ge g 3347 A8eD
" A44.Ofeege Da vtDE NDS w.gyg aeED DewsCthD5 F% 4% 6%
te AmeD P W 5 i El OYmER
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13 % 18
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)tncial statistics tstit;d) (Restated) (Restated) 1977 1976 1975 1974 1973 1972 1971 1970 53.59 % 56.39 % 57.94 % 56.08 % 57.73 % 55.64 % 56.25 % 56.89 %
5.77 % 6.07% 6.29 % S.76 % 7.00 % 7.56% 7.84 % 7.95% 40.64 % 37.54 % 35.77 % 37.16 % 35.27 % 36.80% 35.91 % 35.16 % 3.92 3.01 2.80 3.53 3.14 2.70 2.61 2.72 2.67 I 2.10 2.01 2.35 2.21 1.99 2.01 2.10 2.39 1.87 1.76 2.02 1.90 1.70 1.70 1.87 7.15 % 7.12 % 7.10% 5.88% 5.88 % 5.57 % 5.57 % 5.57 % 8.41% 8.32 % 8.24 % 8.16 % 8.09% 8.01 % 7.94 % 7.88% 665,734 665,734 665,734 665,734 665,734 665,734 665,734 665,734
$ 3.54 $ 2.25 S 1.79 $ 2.41 $ 1.87 $ 1.40 $ 1.34 $ 1.74 S 1.46 S 1.34 $ 1.31 $ 1.28 $ 1.26 $ 1.20 $ 1.19 $ 1.16 5 1.43 $ 1.32 $ 1.30 $ 1.28 $ 1.24 S 1.20 5 1.18 $ 1.16 41.24 % 59.56 % 73.18 % 53.01 % 67.51 % 85.49 % 88.86% 66.79 %
S23.16 $20.91 S19.74 $19.54 $18.37 $17.76 $17.51 $17.33
' 0 's S 16% $ 14% $ 15% $ 16% $ 17% $ 19 $ 18 558 $ 13% $ 9% $ 8% S 13 $ 15% $ 16% $ 15 8% $ 15% $ 13% S 9 S 14 S 16 S 16% $ 17%
5.12 7.06 7.47 3.73 7.49 11.43 12.50 10.06 3,616 3,683 3,753 3,807 3.835 3,821 3,801 3,832 ant 4UAL RES OENTIAL cot 4SUMPTIOtJ
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~five-year Suininary of selected financial data &
(Restcted) (Restated) (Restated) (Restated) 1980 1979 1978 1977 1976 Operating Revenues , $27,789,640 $21,239,729 $19,868,765 $17,998,660 $ 17,002,445 Net inco me . . . . . . . . . . . . . . . . $ 2,487,842 $ 2,802,916 $ 2,826,036 $ 2,536,496 $ 1,685.431 Dividends on Preferred Stock 536,509 262,134 179,428 182,257 185,128 Net income Available for Common Stock. $ 1,931,333 $ 2,540,782 $ 2,646,608 $ 2,354,239 $ 1,500,303 Earnings Per Share of Common Stock $2.86 $3.80 _ $3.97 $3.54 $2.25 Dividends Per Share of Common Stock: Declared Basis $1.92 $1.84 $1.61 $1.46 $1.34 Paid Basis . $1.90 $1.79 $1.58 $1.43 $1.32 Total Assets. $68,613,583 $62,879,849 $54,825,8_53 $42,403,039 $41,851,129 Long-Term Debt Outstanding $25,919,704 $27,169,336 ' 19,670,4 ,, r 2 $20,331,496 $20,907,021 Less amount due within one year. 505,664 1,228,128 516,544 528,864 422,592 Long-Term Debt. $25,414,040 $25,941,208 $19,153,928 $19,802,632 $20,484,429 O Redeemable Cumulative Preferred Stock . $ 5,964,000 $_6,069,000 $ 2,129,000 $ 2,189,000 $ 2,249,000 3 7.- . '. Af,, , y (' T- l; .,- f 3 . .- *s ,.f..
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. 5 SECURITIES AND EXCllANCE COMMISSION e g Un:hington, D. C. 20549 FORM 10-K I ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 0F Tile SECURITIES EXCllANGE ACT OF 1934 For the fiscal year ended December 31, 1980 Commission file number 1-3429 Maine Public Service Company (Exact name of registrant as specified in its charter)
~
Maine 01-011-3635 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Indentification No.) 209 State Street, Presque Isle, Maine __ 04769 (Address of principal executive of fices) (Zip Code) Registrant's telephone number, including area code 207-768-5811 Securities registered pu.suant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $7.00 par salue American Stock Exchange
- "ecurities registered pursuant to Section 12(g) of the Act:
?
/ None (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 during the pre-ceding 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 . Aggregate market value of the voting stoch held by nonaffiliates at March 13, 1981:
$9,500,834.
The number of shares outstanding of each of the issuer's classes of com.non stock, as of March 13, 1981. Common Stock, $7.00 par value - 678,631 shares DOCITMENTS INCORPORATED BY REFERENCE
- 1. The Company's 1980 Annual Report to Stockholders is incorporated by reference inte Parts II and IV.
-1. The Company's definitive proxy statement, to be filed pursuant to Regulation 14A no
) later than 12C days af ter December 31, 1980, which is the end of the fiscal year covered by this report, is incorporated by reference into Parts I and III.
(Page 1 of 84 pages)
i? 16 t:n
y ',
PART I Item I. Business General The Company was originally incorporated as the Gould Electric Company in April,1917 by a special act of the Maine legislature. Its name was changed to Maine Public Service Company in August, 1929. Untti 1947, when its capital stock was sold to the public, it was a subsidiary of Consolidated Electric & Gas Company. Maine and New Brunswick Electrical Power Company, Limited, the Company's wholly-owned Canadian subsidiary was incorporated in 1903 under the laws of the Province of New Brunswick, Canada. The properties of the Company and Subsidiary are operated as a single integrated system. The Company engages in the production, transmission, and I distribution of electric energy to retail and wholesale customers in all of Aroostook County and a small portion of Penobscot County in northern Maine. Geographically, the service territory is approximately 120 miles long and 30 miles wide, with a population of approximately 93,000. The service area of the Company includes one of the most hmpor tan t potato growing and processing sections in the United States. In addition, the area produces wood products, principally pulp wood for paper manufacturing. Sources of Power 1980 Kilowatt-ilours Generated or Purchased (Thousa nd s) Net Generation: Steam 46,849 Ilyd ro 127,630 Diesel 200 Purchases: Nuclear Generated 216,252 Fossil Fuel Generated 182,382 In the 10-K for 1979 disclosure was made of the Maine Public Utilities Commission investigation to determine what items cou2d be included in fuel adjustment charges as a result of an NRC ordered shut-down of Maine Yankee in March, 1979. As of December 31, 1980 substantially all of the excess fuel costs, totaling $1,541,465 for the Company, have been recovered through fuel adjustment billings. O
i g* Finanefal Information about Foreign and Domestic Operations Financial Inf( vmat ;on Relating
/ i To Foreign and Domestic Operations
(_, ' (In Thousands) 1980 1979 1978 Revenues from Unaffiliated Customers: Company-United States $27,638 $21,090 $19,717 Subsid iary-Canada 152 150 152 Intercompany Revenues: Company-United States 81 81 81 Subsidiary-Canada 775 900 757 Operating Income: Company-United States 3,105 3,528 3,200 Subsidiary-Canada 176 269 198 Identifiable Assets: Company-United States 63,679 57,884 49,783 Sub,idiary-Canada 4,935 4,996 5,042 The identifiable assets, by company, are those assets used in each company's operations, excluding intercompany receivables and investments.
; Sources of Revenues In 1980 total consolidated operating revenues were $27,789,640 of which 36.47. came from residential customers, 23.17. from small commercial and in? ntrial customers, 18.67. from eighteen large commercial and industrial customers, 6.07. from public authorities, 13.47. from sales for resale to six wholesale customers and 2.5% from street and area lighting and miscellanecus other operating revenues.
In 1980 the largest single wholesale customet accounted for approximately 77. of total operating revenues. Construction and Financing The Company and its Subsidiary spent $7,212,529 on additions, replacements, and improvements of their utility properties and equipment in 1980, including uncompleted construction work in progress. Approximately
$5,272,000 was paid for progress payments on the Company's 1.46% interest in Seabrook Units 1 and 2, nuclear units being constructed by Public Service Company of New llampshire as lead participant. Additional work on William F.
Wyman Unit #4, a jointly-owned, oil-fired unit being operated by Central Maine Power Company, required about $130,000 from the Company to cover its share of those expenditures. A new, improved, two-way radio system required about $120,000, while $17,000 was needed for preliminary work on the replace-ment of three penstocks at the Subsidiary's Tinker Station. Approximately
'~'
$376,000 was paid for voltage conversions and substation improvements, and L-
~ <
o g , nearly $286,000 was spent for meters, services, tr .isformers and other customer-related facilities. Distribution line excensions, rebuilds and highway relocations required about $776,000, while improvements to the transmission system used about $20,000. Street lighting, general equipment, and miscellaneous items absorbed the remaining $216,000. 1980 construction requirements were financed through short-term bank borrowings and internally generated cash. In 1981 cash expenditures for construction are estimated at apprey' mately $9,600,000, the bulk of which will be needed for the Company's share of the continuing construction of Seabrook Units 1 and 2, which is expected to be in the area of $6,700,000, including nuclear fuel. Transmission improvements will need about $196,000 and distribution requirements approxi-mately $924,000. Reconstruction of the Caribou Dam is expected to cost nearly $900,000, while the replacement of three penstocks at the Subsidiary's Tinker Station will take about $360,000 (U.S. dollars). The remaining
$520,000 is budgeted for numberous miscellaneous improvements and needed equipment. The Company's share of the cost of Seabrook Units 1 and 2 is presently estimated at $57,000,000 including initial fuel and Allowance for Funds Used During Construction. The Company's ownership in teres t of 1.467, represents 33,600 kilowatts of new nuclear capacity.
In 1981 the Company expects to finance its construction program through bank borrowings and internally generated cash. Regulation The Company is subject to the regulatory authority of the Maine Public Utilities Commission as to retail rates, accounting, service standards, territory served, the issuance of securities and various other matters. With respect to wholesale rates, the Company is subject to the jurisdiction of the Federal Energy Regulatory Commission. The Company maintains its accounts in accordance with the accounting requirements of the Federal Energy Regulatory Commission which, generally, conform with the accounting requirement of tne Maine Public Utilities Commission. At this time the Company is not subject to the Public Utilities Regulatory Policies Act of 1978 because it has not gone across the threshold of 500,000,000 kilowatt hours excluding wholesale sales. However, the Maine Legislature has by statute instructed the Fuine Public Utilities Commission that they may consider PURPA standards in rate proceedings before that Commission. Rates Because of its rapidly declining earnings, particularly cash eatnings, the Company filed a petition for rate relief with the Maine Public Utilities Commission on September 2, 1980. If new rates are granted as requested the Company's base revenues would increase by ipproximately
$5,000,000. Hearings were held during the week of March 16, 1981. Three intervenors in the case have generated over 400 data requests to which the Company has responded in a timely fashion. The statutory time period during which the Commission must render a decision closes on June 2, 1981.
The PUC has also conducted a proceeding to establish forward-looking fuel adjustment regulations for all Maine electric utility
4' companies. These proceedings culminated in new rules requiring companies to estimate fuel costs, including purchased energy, and kilowatt-hour sales for a future period (normally for twelve months) . Effective l i September 1, 1980 the Company impicmented the new regulations for an (j initial nine-month period to coincide with the statutory period for the pending rate proceeding (See above). Coincident with the inception of new rates resulting from the rate case a new estimated future fuel-adjustment factor will be implemented. The regulations allow petitions for changes in the fuel adjustment rate af ter ninety days if the estimates and actual data become too divergent. Though a divergence has occurred, it has not been decided at the time of this writing whether or not a revision should be sought. The PUC has recently added to its new regulations to provide for interest on under-collections or over-collections at a rate approximating the utility's cost of money - to be recognized at the time of the next fuel adjustment change. Franchises 'd competition Except for consumers served at retail by the Company's wholesale customers the Company has practically exclusive franchise to provide electric energy in the Company's service area. Employees On December 31, 1980, the Company had 168 full-time employees, of whom 62 were covered by provisions of a two-year contract with a local of the International Brotherhood of Electrical Workers, which is due to expire on September 30, 1981. I l
's _,/ Subsidiaries The Company owns 1007. of the Common Stock af Maine and New Brunswick Electrical Power Company, Limited, a Canadian corporation. The accompanying consolidated financial statements include the Subsidiary Company.
The Ccmpany owns 57, of the Common Stock of Maine Yankee Atomic Power Company (Maine Yankee) a nuclear generating company at Wiscasset, Maine. By virtue of its stock ownership the Company is entitled to purchase approximately $7. of the output of the Maine Yankee plant. The Company also owns 7.497. of Maine Electric Power Company, Inc. (MEPCO) which owns a 345-kilovolt transmission line about 180 miles long, purchasing power from Canada for resale to New England utilities. The Company purchases a small amount of that power. The Company records its investments in the two joint-venture companies (Maine Yankee and MEPCO) on the equity method of accounting. Item 2. Properties The Company owns and operates electric generating facilities consisting of: oil-fired steam units with a total capability of 23,000 kilowatts, diesel generation totaling 12,300 kilowatts, and hydro-electric f'~ facilit ies of 2,300 kilowatts. The Company's wholly-owned Canadian () Subsidiary owns and operates a hydro-electric plant of 2';,000 kilowatts 4 I
'g .
and a small diesel unit with 1,000 kilowatts capacity. The genercting facilities of the Company and Subsidiary meet the respective current environmental regulations of State, Federal, Provincial and Dominion governments. As of December 31, 1980 the Company and Subsidiary had approximately 417 pole miles of transmission lines and the Company owned approximately 1,496 m as of distribution lines. The Company is a part-owner of a 600,000 - kilowatt unit built by Central Maine Power Company at its Wyman Station in Yarmouth, Maine. The Compamy's share of that unit is 3. 34557., or approximately 20,000 kilowatts. The unit was placed in commercial operation on December 1, 1978. The Company is also a part-owner (approxLmately 1.467.) ir. the construction of Seabrook Units 1 and 2, a nucicar generating plant being built by Public Service Company of New llampshire. The Company's share of that plant will be about 34,000 kilowatts in total. Substantially all of the properties owned by the Company are subject to the lien of the Indenture of Mortgage and Deed of Trust, securing the Company's first mortgage and collateral trust bon Item 3. Legal Proceedings (a) Indian Land Claims In its Form 10-Q commencing for the quarter ended September 30, 1977, acting on advice of its Ceneral Counsel, the Company discussed and disclosed the so-called " Indian Land Claims Cases" pending in the United States District Court for the District of Maine, Northern Division. (Civil Actions Nos. 1966-ND and 1069-ND). The Company's last report on the status of these cases was in its 10-Q for the quarter ended September 30, 1980, to which reference should be made. The Indian Land Claims, so-called, have been settled. The State of Maine has passed appropriate legislation. (Chapter 732 of the Public Laws of Maine, 1979.) On October 10, 1980, then President Carter signed the Maine Indian Land Claims Sett lement Act. It is our further understanding that Congress made the appropriation of $81,500,000 which was authorized in the Maine Indian Land Claims Settlement Act. The case mentioned above 1.as not as yet b,en dismissed with prejudice by the Plaintiffs. Counsel fo. both sides recently asked for an additional thirty days to submit this documentation. Thus the foregoing ase is still on the Court's docket as indicated. Counsel continues to advise that as of this writing the Company is not a party to the above litigation, it has not been a party to the above litigation, nor has any of the property of the Company become the direct subject of the litigation. 9 J
. p'~ (b) Fbine Yankee Shutdown Replacement Power Costs, March-1979 Shutdown
- '"4 Reference is made to the 10-Q for the period ending September 30, 1980. The continuing aspect of the Order in Maine PUC Docket U#3360 is that the Company must, every sixty days, describe in detail all actions taken by the Company with respect to seeking recovery from Stone & Webster Engineering Corporation for damages resulting from the March 15, 1979 shutdown of the Maine Yankee Atomic Power Station. The Company continues to file the reports; there is no action pending against Stone & Webster.
(c) Proposed Rate Increase, Maine PUC Docket No. 80-180 On September 2,1980, the Company filed with the Maine Public Utilities Commission (the Commission) Proposed Revised Rates. The original filing requested approximately $4,675,000 in additional revenue and results in an approximate increase of 201 in annual electric operating revenues from Maine jurisdictional customers. The pieceeding has been docketed by the Commission as indicated above. Consistent with applicable law, the Commission has issued its Second Suspension Order which expires on June 1, 1981, unless otherwise ordered, suspending the effective date of the Proposed Rate Schedules. The Company h: prefiled its direct case and updated its direct case in many instances t cover the year ending December 31, 1980. Inter-venors have been granted intervenor status and data requests and responses have been flowing. Hearings commenced at Presque Isic on March 16, 1981. f' ) The time within which the Commission must dispose of the filing is June 2, (_,f 1981. (d) Seabrook Units 1 and 2 In December of 1978, the Company acquired 1.46056% interest in Seabrook Units 1 and 2 located in Seabrook, New Hampshire, a nuclear plant being built by Public Service Company of New Hampshire (PS of NH) . Re ferenc e should be made to our last discussion of problems with regard to these two units set forth in our Form 10-Q for the period ending September 20, 1980. In our Form 10-Q for the period ending September 30, 1980 we noted that the comaencement of the reduction in PS of NH interest in the Seabrook Plant was awaiting only the approval of the Massachusetts Department of Public Utilities, the timing of which could not bc predicted, and the completion of the initial financing of Massachusetts Municipal Wholesale Electric Companies (MMWEC) increased interest. On February 6, 1981 the Massachusetts Department of Public Utilities in DPU #20248 acted upon FNWEC's Petition and approved the issuance of bonds in a total principal amount not to exceed $335,000,000 so that tenna: could finance and acquire an additional 6.0009131 (or appt >ximately 138 Megawatts) ownership interest in Seabrook Units 1 and
- 2. This authorization, when added to previous authorizations to MMWCC of the Purchase of 5.591497. (or approximately 128.6 Megawatts) will make MMWEC's total ownership interest 11.593403% or approximately 266.6
,r' , Megawatts in the Seabrook Units. An appeal may be taken. The total
,f commitments made by other utilities to PS of NH to reduce its osmership interest in the Seabrook Units (including FDNEC) are as follows:
'g .
hangor liydro-Electric Company 1.80142% Central Maine Power Company 1.00000 Town of Iludson, Massachusetts Light and 0 Power Department 0.01957 Massachusetts Municipal Wholesale Electric Company (MMWEC) 6.00091 Montaup Electric Company 1.00000 New Bedford Gas and Edison Light Company 2.17390 Taunton Municipal Lighting Plant Commissioa (Taunton) 0.33445 Fitchburg Gas and Electric Light Company 0.26087 New limnpshire Electric Cooperative, Inc. (Nil Coop) 2.17391 Total 14.76503% As of this writing, only Taunton and New limnpshire Electric Cooperative, Inc. have not received their required approvals. These final approvals are expected to be forthcoming. If all of the interests indicated above are finally approved, PS of Nll interest in the Seabrook Units will be reduced from 507. to 35.234971. PS of Nll stated in its most recent prospectus dated February 4, 1981, that while it is possible that future developments could lead to cancellation of Seabrook Units 1 and 2, PS of Nll considers such a possibility unlikely, not only because the necessary construction permits and approvals have been received and the construction is proceeding, but also because of the projected need for the Plant's power in PS of Nit's service area and in New England generally and the further need to reduce dependency on imported oil. Any delay in the construction of Seabrook units 1 and 2 may adversely affect the completion and the cost of the two units under cons t ruc tion. Delay or deferral would reduce the immediate cash needs of PS of Nil and other participants, including the Company, but would result in a deferral in the completion date of one or both units, and could result in substantially greater construction costs. Item 4. Security Ownership of Certain Beneficial Owners and Management Information for this item is set forth on pages 2 and 3 of the proxy statement of the registrant relating to its 1981 Annual Meeting of Stockholders, which is incorporated herein by reference. 9 PART II Item 5. Market for Registrants Common Stock and Related Security lloider j Matters Inforuation for- this itca: is cet forth on page 7 of the Company's 1980 Annual Report to Stockholders, which is incorporated herein by reference. Item 6. Selected Financial Data A fim-year summary of selected financial data is included on page 20 of the Company's 1980 Annual Report to Stockholders, which is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue'and Energy Sales 1980 Comparml With 1979
~ Consolidated operating revenues continued to Consolidated energy sales actually were lower set new highs, with 1980 reaching $27.789.640, than in the previous year, dechning 2 3% from
$6,549.911. or 30.8%. more than such revenues of 534.089 megawatt-hours (thousands of kilowatt-the year before. Unfortunately for the Company hours) in 1978 to 521.657 MWh in 1979. Of the and customers alike, nearly all of that increase major classifications, only the large commercial arose from the pass-through of increased fuelex- and industrial group recorded a gain in sales in penses via fuel adjustment clauses. Only $88.615 1979.110.452 MW5 compared to 106,757 MWh m of the huge rise in revenues can be related to 1978, for a 3 59o .mprovement. Residential use growth in energy sales, which is indicative of the was down 2.421 megawatt-hours, or 1.5%. while enormous impact of fuel cost increases on the small commercial and industrial sales were of f by
( ; Company and its customers, 5.947 MWh, or 5.4%. Primarily because Lormg Air
\./ Force Base took 3.412 MWWss sa'es to pubhc As indicated above, cains in energy sales over authorities as a group dechned by 3.676 MWh. or those of 1979 were hmited, with residential sales 8.7% Sales to other electric uhhties were also staying about the same, while commercial and down, principally because there was less energy industrial small sales went up about 2.1%. Com- (3,482 MWh) available f or sale to The New Bruns-mercial and indi:strial large sales gained 1.09o, wick Electric Power Commission (NBEPC) on an and combined s.reet end area hghting remained economy-flow basis. The 635 MWh decline m on the same level as the year before. Sales for sales to resale customers other than NBEPC ren.:. showed a large 15.5% pickup from piesumably reflects conservation among cor su5.77:, MWh to 122137 MWh. though most of sumers in their own service areas.
the gain was represented by increased economy O rating Expenses sales to The New Brunswick Electric Power Con" If80ComparedWih1979 t mission, which increased from 13.398 Mt/h in - 1979 :o 29,231 MWh in 1930. Sales to public au- Reflecting a speedup in tne collection of fuel i tnorities were 36.942 Muh. down f rom 40,417 due costs through fuel adjustment revenues during 1980, deferred fuel expenses were a positive prirrarily to the loss of 2.384 MWh ,ni sales t $ 929.114 compared witn a negative 5875.165 in Loring Air Force Base. On the whole, primary 1979. (A positive deferreo expense signifies that energy sales were up 0.99o in 1980 f rom 475.856 MWh to 480.245 MWh. while secondary a hke net amount has been recovered througn o eratmg revenues; a negauve deferred fuel ex-sales gamed 29.39a f rom 45,801 MWh t pense cenotes a f ailure to collect that r.et amount 59.237 MWh. Additionalinf ormation on revenues' of fuel costs during that accounting period.) sales, etc. may be found in the eleven-year con-sohdated operating statistics summary at the Af ter an exceptionally favorable water year in back of this repor1. 1979 (120.0*o of normal) hydro generation 1979 Compared wit h 1978 dropped to 95.4c'o of normal in 1980. Thus, a net o f 127,630 MWh were produced in the hydro Consohdated operating revenues for 1979 were plants in 1980 compared with the previous year's
$ 1.370,964 more than those of the previous year very high 162.107 MWh. Because less hyoro gen-r (6 9%). however, only $42.031 of that mcrease eration was available, more energy had to be l
, can be attributed to factors other than the pass- purchased from others or generateo in the Com-through of increasing fuel costs via the fuel ad- pany's fossit-fuel plants Fossil-fuel-produced justment clauses. Thus, there was no real growth st. am and diesc' e".ergy arr ounted to 47.0"9 MWh in 1979. apparently a reflection of newly- in 1980 comparea witn 20.616 MWh in 1979. Pur-developed conservation attitudes among con- chases of energy in 1980 totaled 393.634 MV,h sumers of electric energy in the Company's against 378.917 MWn in 1979. Most of that in-service area l
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crease was ir(energy purchases from 'ihe New supply study and a load research study and caus-Brunswick ElecirTQPower Commission. Nuclear ing an increase from S165,094 to $210.34B (27.4%) energy purchas(O from Maine Yankee Atomic in expenses of outside services employed. It is Power Company (Mame Yankee) were 3,966 MWh anticipated that the data resulting from the load less than the 220,218 MWh of the previous year research study will be required to fulfill require-due to refueling downtime of the unit in the first ments of the Public Utilities Regulatory Policies three months of the year and to some mainte- Act (PURPA), which will hkely be applied to the nance work performed during the fourth quarter Company by the PUC, even though the Com-of 1980. Purchase:. from Maine Electric Power pany's sales are presently lower han the thresh-Campany were up from 19,200 MWh in 1979 to old level set oy PURPA. Though administrative 24.122 MWh in 1980 because of a 5-MW increase and general expenses other than those noted in capacity entmement acquired from other New above reflected increases and decreases from the England utilities beginning November 1,1980. prior year, the net increase in those other ac-counts was held to 8.0%, somewhat less than the Except for nuclear energy from Maine Yankee, genval Mation rate. all purchases were generated by fossil fuels. As a result, the total cost of purchased power (includ- Depreciation and amortization expenses were ing capacity charges) rose a staggenng $3,870,896 567,953 higher in 1980 due to increases in de-from 58,881,077 in 1979 to S12,751,973 in 1980. preciable property. Taxes other than income As long as the OPEC nations continue to end- taxes charged against income were up 585,983. lessly raise their prices, no respite from this trend reflect ng hQner property taxes, more social can be seen until the Company's investment in secunty tar es, and a new t'ite assessment to Seabrook Units 1 and 2 reaches fruition and the help pay the expenses of the i UC 1S5.530). In-units inf use additional nuclear-generated energy ciuding aeferred taxes and investment tax c' edit into the Company's syst( ' adjustments income taxes charged tu oper. ting expenses dropped from S1,192.064 in 19J9 to Operating expenses of the steam plants were W8,800 in WO as a resW of lows tag i W St.MO,763 more than 1979, pnmarity due to an come. Income taxes curenW payaWewee own incrt ase of $1.482,972 in fuel expenses. This from 5235.209 to S154,149. The annual proeision incre tse was broaght on by increased steam for deferred taxes was reduced greatly from production as weli as leapfrogging prices of 5755.452 in the previous year to S8.626 in 1980, fossil fuels. Diesel operating costs were 528.234 pancipally due to a reversal of ceferred taxes re-over the prior year,59,884 of which is attributable lated to deferred fuel expenses investment tax to greater fuel expenses, though net diesel gen- credit adjustments charged to income in 1980 e.ation was 43 MWh less than in .e79. Production were only $18.317 compared with S213 695 in maintenance costs were up 590,142 (30.4%) 1979, resulting from a decrease in the ability to mainiy due to periodic overhaul of the steam aosorb such cred;ts against otherwise current units at Caribou. though, hydro maintenance was taxes payacle. Total investment tax credit for up 25 3% and diesel maintenance was higher by 1980 was 5544,126. $408,740 of whicn was carned the same percentage. ack to 1977. Tnat investment tax credit com-Expenses of operatmg and maintaining the pares with the previous year's 5'47,409. 5590.022 transmcsion system were higher by 10.4%, in- of which was carried back to 1976. Tne carned-creasing from 5882,288 in 1979 to $974,120 in back portion of ITC is charged to the balance 1980, reflecting tne general inflation rate. Some sheet as a refund due from tne Internal Revenue accounts were up more than others, principally Service, ratner than to the current income state-maintenance of overhead lines. Similarly, distn- ment. bution operation and maintenance charges were up 10 SS with overhead hnes maintenance being 1979 Compared With 1978 proportionately a little higher than the other dis- In 1979 water levels were excellent for a good tribution accounts Customer accoum expenses portion of the year and as a result hydro genera-expanded from S503.086 to 5626.542 (up 24.5%) tion was 120.0% of normal. rebounding f rom the with the greatest increase being in uncollectible previous year's dismal 86 8% in light of the un-accounts, which rose from S71,100 in 1979 to expected shutdowns of the Maine Yankeenuclear
$161,716 in 1980 Expenses for customer services ,lant (discussed in the Regulatory Proct Sngs and intormation increased from S134.513 tc section later in this review) good water conditions
$162.137 (20.5%) partially as a result of expand- appeared at a very opportune time or fuel ex-ino efforts toward energy consersation. Adminis- penses would have been much higher than tney
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trative and general accounts reflect expenses were. Whereas only 116 894 megawatt-hours 15.7% greater than in 1979, up f rom St.614,843 were produced by the aydro plants in 1978, a to S t.867,754. In this group, regulatory commis- total of 162.107 MWh came from that source in sion expenses grew by 179.5% from 553.313 to 1979 Because of the greater hydro production S149.006, pnncepally because of costs associated only 3/8,917 MWh had to be purchased corn-with a petition for rate relief fileo with the Maine pared with 420.991 MWh in the year bef ore how-Uhlities Commission (PUC) of the State of Maine ever, regulatory shutdowns of Maine Yankee on September 2.1960 Dunno 1920 several proj- reduced the energy available from that most (cts recuinna the services of outs.ce consultants economical source to 220,218 MWh dunng the v.c re ur.c_rti,en. focusing on a tin-yur p: ,er year, compared with 263,137 MW n in 1978. To fill
e g out the Company's needs a considerable amount Construction of additional energy was purchased from The 1980 Summary New Brunswick Electric Power Comrnission. The Company and its subsidiary spent
, 139.411 megawatt-hours in 1979 agamst 112.502 $7,212,529 on additions, replacements, and im-( ) MWn last year. Less energy was required from provements to their utihty properties and equip- '%/ the Company's own oil-burnmg plants than in the ment in 1980, including uncompleted construc-preuous year, totahng 20,373 MWh from steam tion wcrk in progress. Approximately S5.272,000 and 243 MWh from d esel compared with 26 913 was paid for progress payments on the Com-MWn and 627 MWh for 1979 and 1978 respective- pany's 1.46% interest m Seabrook Units 1 and 2 ly. The necessity of replacing low-cost nuclear nuclear units being constructed by Public Ser-energy during the Maine Yankee shutdowns vice Company of New Hampshire as lead partica-boosted purchased power costs from 57,638,595 pant. Additional work on Wilham F. Wyman Unit m 1978 to $8.881,077 m 1979 Steam plant oper- #4, a new jointly-owned, oil-fired unit being ating expenses were down 6 0% from S1,217,905 operated by Central Maine Power Company, re-tc $1,145,023 as a result of usmg considerably quired abou! S130.000 from the Company to less fuel of fset somewhat by higher urut cost and cover its share of those expenditures. A new, generalinflation Dieselplant operating expenses mproved, two-way radio system required about rose slightly from 5129.939 to 5131,638 while 5120,000, while $17,000 was needed for prelim-operating expenses at the hydro stations ad-vanced 117% to S189.029 due pnmanly to infla- reolacement ol three censtock s inary gg work ;on the.s Tinker Station. Approximately tion The lag in bdhng fuel costs applysng the retail and wholesale fuel adjustment clauses '376 subs'000 tationwas paid for voltage improvements, and conversions and rmarly S286,000 caused a net deferment to future bilkng penods of 5875,165, which was credited to the mcome was spent for meters, services, traraformers and statement in 1979, compared with $831,741 de- din Distehon hne extensions, rebuilds and highway remcatons re-ferred in 1978 Production mamtenance ex-penses were down 9 6%, or $31.626, because the 4uired about 3776 000 while improvements to the year before included unusually high mainte. transmission system used about S20,000. Street nance charges for Unit #5 at the Tinker Plant i nd lighting, general equipment, and miscellaneous for dam repair at the Squa Pan reservoir. items absorbed the remaining S216,000.
Operation and mainten ince costs of the trans. In 1981 Cash expenditures for construction are mission system were 515tt899 (216%) ovr r the estimated at approximately S9,600,000, the bulk previous year's 5725.389. principally due to 'mc q. of which will be needed for the Company's share (m') er wheeling costs of energy through the .raI S. of the continuing construction of Seabrook Units v' mission systems of other companies l'or Dution 1 and 2, which as expected to be in the area of operation and mamtenance coste were up by $6,700.000. including nuclear fuel. Tra,smission 3 5%, while customer accounting i.osts rose 4.5% improvements will need about S196 C00, and dis-Customer services and infortrat on expenses tnbution recuirements approximately 5924,000. were 18 0% greater than the previous year, re. Reconstruc.,an of the Canbou Dam is expected flecting contmumg efforts to encourage energy to cost nearly S900.000, while the replacement of r onservation. Administrative and general ex- three penstocks at the subsidiary's Tmker Station penses rose 13 0% as a result of inflationary cres- will take about S360,000 (U S. dollars) The re-tures in most of the accounts in that class: fica- maining S520 000 is budgeted for numerous mis-tion. Cellan30us improvements and needed equip-ment. The Company's share of the cost of Sea-Because of much lower taable income, in- brook Units 1 and 2 is presently estimated at come taxes charged to operating expenses- 557,000.000 including initial fuel and Allowance mcludmg deferred taxes and investment tax for Funds Used Dunng Construction. The Com-credit adlustments. totaled S1,192.064 compared pany's ownersnip interest of 1.46% represents with $2.054.020 in 1978 Currently payable m- 33.600 kilowatts of nesy nuclear capacity. come taxes decreased from S458.671 m 1978 to
$235.209 m 1979 The provision for deferred in- 1979 Summary come taxes rose shghtly in 1979. $755,452 com- In 1979 the Company and its Subsidiary en pared to 5726.261 in 1978. whde investment tax pende.f 58,118.830 on additions, replacoments credit adjustmtits charged on the income state- and improvements to utdity property and equip-rnent dropped sharply from $881,380 to $213.695 ment, mcluding unfinished construction work in respectively. because of the imuted abihty tu prNia ss Of that iotal. approximately S5.713 0ho absorb such credits against otherwise current re resented progress payments on the Com-taxes payable In 1978 totalinvestment tax credits n/s share of Seahrook t inits t and 9 nuch3ar were 51.178,547, 5276.792 of which had to be units being built by Put c 9 S
- pany of carned tnck to 19 75. while 1979 produced invest- New Hampshire as b . sarticipant Nearly ment tax credits totakng 5847,409, $590.022 of '528.000 was used f or the Cornpany s ownersnip which was carned back to 1976. Current m.est- 3nare of additional work required on Wdham F ment tax credits are generated primanly by quah- Wyman Unit t,4, an oil-fired. in-service unit con-(3 lied progress expenditures on the construction of structed by Central Maine Power Company (v) Seabrook Uruts 1 and 2, as highhghted below Voltage con ,ersions and substation improve-b 0I l
ments cost about 524 000, while meters, services. going construction needs until such time as suf- l transfurmers and other customer-related facih- facient interest coverages have been generated I ties totaled approximately $259,000. Distribution so that a reasonable amount of long-term debt < Ime extensions. rebuilds, and relocations due to may be issued, it seems doubtf ul that such a tevel i Nghway construction came to nearly $675.000 can be attained before the second quarter of Major improvements to the transmission system 1982 No major issue of common stock is pres- ! required expenditures of about 5741,000. Street ently planned, though it is pointed out that minor lighting, general equipment, and miscellaneous amounts of new common stock are regularly is-bettertnents absorbed the remaining 5179,000- sued in accordance with provisions of the Com- I p Oy,s employees Stock . Ownership Plan, a i Near the end of the year New England Power TRASOP plan qualified under the Tax Reduction l Company. the lead participant in the proposed Act of 1975, as amended. Durinc 1980, 5,282
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construction of two nuclear units in RhodeIstand. shares of common Stock were issueo aad sold to ( announced that it was cancelkng the project be- the ESOP trust, increasing common equity by cause of its mabihty to acquere the site of the 590,540. proposed plant There is considerable uncertain. ty as to the ultimate disposition of the Company's 1979 pi""" "m" incurred costs m that project and the fmal amount On October 11, 1979, the Company assued thereof Consequently, as of December 31,1973 80.000 shares of 9% Preferred Stock. 550 par
$203.845 was transferred from Construched value. in a negotio.ud sale to two institutional Work in Progress to Other Deferred Debits and investors at 100% of par. Cash preceeds af ter the is included in that account on the balance sheet cost of issuance were $3,917.016 On the same in this report date, the Company also issued 58,000.000 prmci-pai amount of 10% First Mortgage and Couateral 1978 Summary Trust Bonds, due 2004, to four insurance com-lhe Company and its subsiuiarv expended pan es with net proceeds to the Company of $11.363.785 on additions, replacemeu, and im. 57,912,120, after financing costs. The net pro-provements to utshty property and equipment in coeds from the two financarigs were applied to 1978 Approximately 58.587,000 of that amount short-term bank notes which previously had been was required for the Company's share of the incurred to finance the Company's continuing construction cost of Seabrook Umts 1 and 2, a construction program. Af ter note repayment, nuclear plant being built by Pubhc Service Com. $700.000 of bank loans remained outstanding.
pany of New Hampshire. The William F. Wyman Unit # 4, an oil-fired steam unit constructed by 197 8_ _Pinanci_ng Central Mame Power Corapany, required ap. During tne year 1978 the Company issued proximately 51,376.000 for the Company s own- short-term bank notes totahng 59.400.000 to ership share of expenditures durmg the year. help imance its construction expenditures The Company's participation as a part owner in during the year. Present plans are to issue the construction of two nuclear units planned in $4.000.000 of new Preferred Stock and up to Rhode Island by New England Power Company $10 000.000 of First Mortgage and Cottaterat (NEP) required about $171.000. Approximately Trust Bonds. about mid-year 1979. 5574,000 was utihzed for distribution extensions. highway rebuilds, and relocation of facihties, while improvements to the transmission system used approximately $112,000. Expenditures or meters, services, transformers, and other cus-tomer-related f acihties were about $231,000. Voitage conversions and substation improve-merits absorbed about 559.000 while general equipment and numerous miscellaneous proi-ects took approximately $254.000 Financial Condition 1980 Summary in 1980 the parent company issued an addi-tional 55,500 000 of bank notes to finance its con-tenuing construction program, making a total of
$ 8,100,000 of such notes outstanding at the end of the year. Because cash earnings in 1980 have been insufficient to generate adequate interest coverages, only a minimum amount of unsecured long-term debt (no secured debt) may be issued at this writing, The generahon of needed interest coverages is contingent upon the PUC allow ng a substantial increase in rates as a result of the Ccmpany's pcnding rate request. Tne Company pians to continue bank borrowino to meet on-e Item 8. Financial Statements and Supplementary Data /- (a) The following financial statements and supplementary data are
(_,)) included in the Company's 1980 Annual Report to Stockholders on pages 5 through 17 and are incorporatad herein by reference: Statement of Consolidated Income for the years ended December 31, 1980, 1979, and 1978. Statement of Consolidated Retained Earnings for the years ended ! December 31, 1980, 1979, and 1978. Consolidated Balance Sheets as of December 31, 1980 and 1979. Statements of Source of Consolidated Funds for Plant Additions and Replacements for the years ended December 31, 1980, 1979, and 1978. Notes to Consolidated Financial Statements. Schedules of Capitalization Data as of December 31, 1980 and 1979. Auditors' Opinion. (b) Report of Independent Certified Public Accountants. PART III Item 9. Directors and Executive Of ficers of the Registrant Information with regard to the Directors of the registrant is set forth on pages 2 and 3 of the proxy statement of the registrant relating to its 1981 Annual Meeting of Stockholders, which is incorporated herein by reference. I i The executive officers of the registrant are cs follows:
\s_/
Office Continuously Age licid Since Name Ralph A. Brown President and Chief Executive Officer 62 5/14/68 G. Melvin llovey Vice President - Engineering and Operations 51 6/ 1/78 Frank E. Livingston Treasurer, Secretary and Clerk 62 5/ 9/67 C. Melvin llovey has been a full-time employee of the Company continuously since April 1,1957 in various engineering capacities until March 1,1973 when he was made a District Manager. On January 16, 1976 l he was appointed Assistant to the President and was elected Vice President - Engineering and Operations, effective June 1, 1978. On February 23, 1981 Mr. Ilovey was also elected a Director of the Company to fill an existing vacancy un the Board. Each executive office is a full-time position and has been the (~') principal occupation of each of ficer since first elected. All officecs () were elected to serve t.ntil the next annual election of of ficers and
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until their successors shall have been duly chosen and qualified. The next annual election of of ficers will be on May 12, 1981. There are nc family relationships between the executive officers. l Item 10. Management Remuneration and Transactions Information for this item is set forth in pages 4 and 5 of the proxy statement of the registrant relating to its 1981 Annual Meeting of Stockholders, which is incorporated by reference. PART IV Item 11. Exhibits, F'nancial Statement Schedules, and Report s of Form 8-K (a)l. Financial Statements Incorporated by reference into Part II of this report from pages 5 through 17 of the 1980 Annual Report to Stockholders: Statement of Consolidated Income for the years ended December 31, 1980, 1979, and 1978. Statement of Consolidated Retained Earnings for the years ended December 31, 1980, 1979, and 1978. Consolidated Balance Sheets as of December 31, 1978 and 1979. Statements of Source of Funds for Plar.. Additions and Replacements for the years ended December 31, 1902, 1979, and 1978. Notes te Consolidated Financial Statements. Schedules of Capitalization Data as of December 31, 1980 and 1979. Auditors' Opinion. Report of Independent Certified Public Accountants appears on page 17 of this report. (a)2. Financial Statement Schedules Included in Part IV of this report: Page Schedule III 18 Schedule V 19-20 Schedule VI 21 Schedule VIII 22 Schedule IX 23 Schedule X 24 Audited Financial Statements of Maine Yankee Atomic Power Company 25-72 Audited Financial Statements of Maine Electric Power Company, Inc. 73-84 Schedules other than those listed above are omitted for the reason that they are not required or are not appl.icable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. Individual financial statements of the Company are omitted because it is primarily an operating company and its wholly-owned subsidiary included a , p in the consolidated financial statements being filed does not have minority
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equity interests and/or indebtedness to any person other than the parent in amounts which together exceed 57. of the total consolidated assets at the k,s) date of the latest balance sheet filed excepting indebtedness incurred in the ordinary course of business which is not overdue and which matures within one year from the date of its creation, whether evidenced by securities or not. (a)3. Exhibits Certain of the following exhibits are filed herewith. Certain other of the following exhibits have heretofore been filed with the Commission and are incorporated herein by reference. (*irdicates filed herewith)
*3 (a) Articles of Incorporation with all amendments through 10/3/79.
*3 (b) By-laws of the Company, as amended October 3, 1979.
*4 (a) Indenture of Mortgage and Decd of Trust defining the rights of the holders of the Company's First Mortgage Bonds.
*4 (b) First Supplemental Indenture.
*4 (c) Second Supplemental Indenture.
*4 (d) Third Supplemental Indentare.
*4 (e) Fourth Supplemental Indenture.
4 (f) Fif th Supplemental Indenture. (Exhibit A to Form 8-K dated May 10, 1968.) 4 (g) Sixth Supplemental Indenture. (Exhibit A to Form 8-K dated April 10, 1973.) 4 (h) Seventh Supplemental Indenture. (Exhibit A to Form 8-K
/N dated November 7, 1975.)
( ,) *4 (i) Eighth Supple.nental Indenture. 4 (j) Ninth Supplemental Indenture. (Exhlbit B to Form 10-Q for the second quarter of 1978.)
*4 (k) Tenth Supplemental Indenture.
*4 (1) Indenture defining the rights of the holders of the Company's 57. debentures.
4 (m) Indenture defining the rights of the holders of the Company's 9 7/8% debentures. (Ethibit A to Form 8-K, dated June 10, 1970.)
*10 Joint Ownership Agreement with Public Service Company of New llampshire in respect to construction of two nuc1 car generating units designated as Seabrook Units 1 and 2, together with all related amendments to date.
11 Not applicable. 12 Not applicable.
*13 1980 Annual Report to Stockhalders.
19 Not applicable. 20 Not applicable. 22 Maine and New Brunswick Electric Power Company, Limited, a Canadian corporation. (b) No reports on Form 8-K were filed during the last quarter of the period cciered by this report. O O
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SIGNATURES Pursuant to the requirements of Sections 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, on the 27th day o f 'tarch , 1981. MAINE PUBLIC SERVICE COMPANY By: /s/ R. A. Brown (R. A. Brown, President) Pursuant to the requirements of the Securities Exchange Act of 195'4, this report has been signed below by the following persons in the capacities and on the date indicated. Signature Title Date President and Director
/s/ R. A. Brown (Principal Executive Of ficer) March 27. 1081 (R. A. Brown)
Treasurer (Principal Financial and Accounting
/s/ F. E. Livingston Of ficer) March 27. 1981 (F. E. Livingston)
.'s/ C. Hazen Stetson Chairman of the Board and Director March 27. 1981 lh (C. Hazen Stetson)
/s/ Donald F. Collins Director March 27, 1981 (Donald F. Colline)
/s/ D. James Daigle Director March 27, 1981 (D. James Daigle)
/s/ C. M. Ilovey Vice President and Director March 27, 1981 (G. Melvin Hovey)
/s/ Thomas S. Pinkham Director March 27. 1981 (Thomas S. Pinkham)
/s/ Irwin F. Porter Director March 27, ~981 (Irwin F. Porter)
/s/ Walter M. Reed, Jr. Director March 27, L.81 (Walter M. Reed, Jr.)
Deloitte HaskinsiSells o V 28 State Street Boston, Massachusetts 02109 (617)742 7660 Telex 940161 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Maine Public Service Company: We have examtned the consolidated balance sheets and the related schedules of capitalization data of Maine Public Service Company and its subsidiary, Maine and New Brunswick Electrical Power Company, Limited, as of December 31, 1980 and 1979, and the related statements of consolidated income and retained earnings, and of source of consolidated funds for plant additions and replacements for cach of the three years in the period ended December 31, 1980, and have issued our opinion thereon dated February 25, 1981; such consolidated financial statements and schedules and opinion are included in _s your 1980 Annual Report to Stockholders and are incorporated herein by reference. (s_s) Our examinations also comprehended the supplemental consoli-dated schedules of Maine Public Service Company and its subsidiary, Maine and New Brunswick Electrical Power Company, Limited, listed in Item 11. In our opinion, such supplemental consolidated schedules, when considered in relation to the basic financial statements, present fatrly in all material respects the information shown therein. Jk , AY DELOITTE HASKINS & SELLS February 25, 1981 v
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m ( MAINE PUBLIC S AND SUB INVESIMENTS IN, EQUITY IN EARN FROM AFFILIATES FOR THE YEARS ENDED DEC COLUMN A COLUMN B BAIANCE AT BEGINNING OF PERIOD NUMBER NAME OF AFFILIATE OF AND DESCRIPTION OF INVESTMENT SHARES A'A0UNT YEAR ENDED DECEMBER 31, 1980: Consolidated subsidiary - Maine and New Brunswick Electrical Power Company, Limited 10,000 $3,547,312 Joint venture companies: Maine Yankee Atomic Power Company 25,000 3,340,759 Maine Electric Power Company, Inc. 934 92,888 _ TOTAL $ 6_. 980_. 9 59 (Nr AR ENDED DECEMBER 31, 1979: Consolidated subsidiary - Maine and New Brunswick Electrical Power Company, Limited 10,000 $3,398,563 Joint venture companies: Maine Yankee Atomic Power Company 25,000 3,339,500 Maine Electric Power Company, Inc. 992 98,689 TOTAL $6.836.752 YEAR ENDED DECEMBER 31, 1978: Consolidated subsidiary - Maine and New Brunswick Electrical Power Company, Limited 10,000 $3,284,795 Joint venture companies: . Maine Yankee Atomic Power Company 25,000 3,339,393 Maine Electric Power Company, Inc. 1,048 104,288 TOTAL $6 728.476 (1) Investee's re 1
)
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$ 96,748 10,000 $3,644,060
- 328,702 $329,750 25,000 3,339,711 ^+
, * - 4 10,933 10,933 $5,500 (1) 879 87,388 --
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; 332,509 $331,250 25,000 3,340,759
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y: 11,614 11,615 $5,t00 (1) 934 92,888 i . gl , l., . .
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MAINE PUBLIC SER g AND SUBSI 4
'1-PROPERTY, PIANT, FOR THE YEARS ENDED DECD1 5 COLUMN A COLUMN B COLUMN C g
_g 4.= =iiE BAIANCE AT BEGINNING ADDITIONS __-__- CIASSIFICATION OF PERIOD AT COST _y_ YEAR ENDED DECEMBER 31, 1980 - Utility % Plant in service: Production $20,546,985
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C Transmission 10,452,985 z Distribution 20,171,129 _ General 2,812,793 .- Total Construction work in progress 53,983,892 14,575,898 $7,886,029 = g
'Io tal Intangibles:
68,559,790 7,886,029 j 3 ( Organization 30,535 _-- -- N- Miscellaneous 239,835 270,370 Total Property held for futrre use 245,961 = Utility plant acquisition adjustments 167,636 a -- Completed construction not classified - g TOTAL $h9,243 J.51 $LE8b.J122 YEAR ENDED DECEMBER 31, 1979 - Utility Plant in service:
"M --
Production $19,998,655 J" Transmission 9,673,312 _ Distribution 19,530,213 __ General 2,729,102 M. Total 51,931,282 Construction work in progress Total 8,827,534 60,758,816
$8,394,933, 8,394,933 Intangibles:
-=
Organization 30,535 4 Miscellaneous 239,835 y Total 270,370 z-Property held for future use 245,961 -____ Utility plant acquisition adjustments 184,412 Completed cor.struction not classified 26,847 g
'IDTAL $61,486,406 $8,394,933 --
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IICE COMPANY [IARY 4 sND EQUIPMENT 'M 3ER 31, 1980, 1479, AND 1978 - W COLUMN D COLUMN E COLUMN F g RECIASS IF1 CATION S AND ADJUSTMENTS d-TRAN S FER S FROM Q1 CONSTRUCTION BA IANCi WORE IN FOREIGN AT END RETIREMENTS PROGRESS EXCHANGE OTHER OF PERIOb J m N
.h" 5 144,341 5(46) $20,691,280 -E
$ 7,663 108,031 '(46,363 ) 10,506,490 -d 425,250 1,367,591 46,863 21,160,333 3 73,893 506,806 215,515 1,835,478 2,954,415 55,312,518
_j (46> - (1,835,478 46 20,626,495 'I 506,806 - - - 75,939,013 -5 a 30,535 239,835 _ 270,370 _M 245,961 E (16,764) 150,872 f
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$ 798 $ 549,468 ($340) $20,546,985 g 23,769 267,993 803,524 (82) 10,452,985 m 6 944,143 $(35,234) 20,171,129 89,167 172,436 422 2,812,793 _
381,727 2,469,571 - (35,234) 53,983,892 '--:. (2,442,724) (203,845) 14,575,898 381,727 (26,847) (239,079) ~68,559,790 3 30,535 239,835 ----- 270,370 M 245,961 J (16,776) 167,636 -2 (26,847)
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( MAINE PUBLIC S AND SUB PROPERTY, PIANT FOR THE YFARS ENDED DE COLUMN A C_0LUMN B COLUMN C BAIANCE AT BEGINNING ADDITIONS CIASSIFICATION OF PERIOD AT COST YEAR ENDED DECEMBER 31, 1978 - Utility Plant in service: Production $13,752,669 Transmission 9,490,623 Distribution 18,905,480 . General 2,586,601 Total 44,735,373 - Construction work in pregress 4,797,611 $11,709,841 Total 49,532,984 11,709,841 Intangibles:
/ Organization 30,535
~ Miscellaneous 200,835 Total 231,370 Property held for future use 245,961 Utility plant acquisition adjustments 201,176 Completed construction not classified 26,847 TOTAL $50.211.491 $11_.7 36. 688 W
SCHEDULE V Sheet 2
- RVICE COMPANY
- IDIARY AND EQUIPMENT lMBER 31, 1980, 1979 AND 1978 COLUMN D COLUMN E COLUMN F RECIASSIFICATIONS AND ADJUSTMENTS TRANSFERS FROM CONSTRUCTION BALANCE WORK IN FOREIGN AT END RETIREMENTS PROGRESS EXCllANGE OTHER OF PERIOD
$6,248,090 $(1,849) $ (255) $19,998,655
$ 35,722 217,739 1,310 (638) 9,673,312 286,287 912,057 88 (1,125) 19,530,213 122,250 262,959 1,792 2,729,102 444,259 7,640,845 1,341 (2,018) 51,931,282 (7,679,845) (73) 8,827,534 444,259 (39,000) 1,268 (2,018) 60,758,816 30,535 39,000 239,835 39,000 270,370 245,961 (16,764) 184,412 26,847
$444.259 $ -
$1.268 $ (18_.782) S61.486.406 t
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- MAINE PUBLIC SE! i-E AND SUBS ACCUMUIATED DEPRECIATIt m
OF PROPERTY, PIANT FOR THE YEARS ENDED DECEI COLUMN A COLUMN B COLUM L -m BAIANCE AT ADDIT E mt BEGINNING CFARGED ' 3 DESCRIPTION OF PERIOD AND EX ._ ,i _ - _ 3 h YEAR ENDED DECEMBER 31, 1980 - Utility plant (Note a) $18,849,887 $1,770, m J. - M E-YEAR ENDED DECEMBER 31, 1979 - Utility plant (Note a) $17,399,839 $1,702, 7
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I _ m_ _ - YEAR ENDED DECEMBER 31, 1978 - Utility plant = E (Note a) $16,233,568 $1,494, - JJ. $ _- u E NOTES: 5 (a) The accumulated depreciation on utility plant is not classif - g in Schedule V. p T (b) Depreciation of utility plant other than transportation equi - (c) Depreciation of transportation equipment charged to c1 caring .g E accounts on the basis of operating hours. __ g g w T E _ 2 J e R L g
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SCHEDULE VI ? ICE COMPANY )IARY ) AND AMORTIZATION !AND EQUIPMENT EER 31,'1980, 1979 AND 1978 i COLUMN D COLUMN E COLUMN F OTHER CHANGES - ADD BA1ANCE hNS REMOVAL COST, LESS AT END ) COSTS RETIREMENTS SALVAGE OF PERIOD )NSES p4 (b) g (c) $506.806 $21.309 $20.219.504 51 (b) $18_.849,887 (c) $ 381.7 27 $34.642
.71 (b) g (c) $444.259 $60.717 $17 _. 399_. 839 Led in the accounts according to classes of property shown pment.
accounts and thereafter distributed to various other
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( MAINE PUBLIC SE -- AND SUBS VALUATION AND QUALIFYING FOR THE YEARS ENDED DECEM COLUMN A COLUMN B C BALANCE AT C0 DESCRIPTION BEGINNING OF PERIOD E RESERVE DEDUCTED FROM ASSET TO WHICH IT APPLIES - Allowance for doubtful accounts - year ended December 31: 1980 $63.487 $ 1979 $7 0_. 852 $ 1978 $75.015 $ s
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SCIEDULE VIII VICE COMPANY DIARY CCOUNTS AND RESERVES ER 31,1980,1979 AND 1978 COLUMN C COLUMN D COLUMN _E ADDITIONS DEDUCTIONS RGED TO RECOVERIES OF ACCC~JNTS WRITIEN TS AND ACCOUNTS PREVIOUSLY OFF AS BAIANCE AT PENSES WRITIEN OFF UNCOLLECTIBLE END OF PERIOD 61.716 $34.145 $183.048 $7 6_. 300 71.100 $35.856 $114.321 $63.487 53.000 $20_. 365 $. 77_. 528 $70.852 t
SCHEDULE IX e MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY SIIORT TERM BORROWINGS COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F MAXIMUM AVERAGE WEIGitTED CATEGORY OF AMOUNT AMOUNT AVERAGE AGGREGATE BALANCE WEIGilTED OUTSTANDING OUTSTANDING INTEREST SliORT-TERM AT END OF AVERAGE DURING Tile DURING Tile RATE DURING YEAR BORROWINGS PERIOD INTEREST RATE PERIOD PERIOD THE PERIOD 1980 Bank $8,100,000 22.617. $ 8,100,000 $6,350,000 17 . 2?*' 1979 Bank $2,600,000 15.917. $12,600,000 $8,320,000 13.637. 1978 Bank $9,400,000 12.837. $ 9,400,000 $ 220,000 11.697. O O
- 2 3-
SCHEDULE X O MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1980, 1979 AND 1978 COLUMN A COLUMN B CHARGED TO COSTS AND EXPENSES YEAR ENDED DECEMBER 31 1980 1979 1978 Maintenance and Repairs $, 916,875 $ 723,936 $ 764,282 Depreciation and Amortization of intangible assets, preoperating costs and similar deferrals:
$1,721,420 $1,653,511 $1,447,021 Deprec ia t ion Amortization of intangible assets $__ 65,948 $ 65,916, S 63,914
$ 718,723 $ 649,723 $ 550,005 Taxes, other than payroll and income taxes
) i I SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K Annual Report under Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended Commission file number December 31, 1980 1-6554 MAINE YANKEE ATOMIC POWER COMPANY (Exact name of registrant as specified in its charter) Maine 01-0278125 (State or other jurisdiction of (I ?..S. Employer incorporation or organization) Identification No.) Edison Drive, Augusta, Mainc 04336 (Address of principal executive (Zip Code) offices) Registrant's telephone number including area code 207-623-3521 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange G Title of each class on which registered First Mortgage Bonds, Series A (Sinking Fund) 9.10% Due 2002 New York Stock Excaange First Mortgage Bonds, Series B (Sinking Fund) 8 1/2% Due 2002 New York Stock Exchange First Mortgage Bonds, Series C . (Sinking Fund) 7 5/8% Due 2002 New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Ib(d) of the Securities Exchange Commission Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesN/ No State the aggregate market value of the voting stock beld by non-affiliates of the registrant. $50,000,000 based on the par value of the Comon Stock. There is no market in this security. Indicate the number of shares outstanding of each of the regis-trant's classes of common stock, as of the latest practicable date. Shares Outstanding Class as of December 31, 1980 Common stock 500,000 g
Maine Yankee Atomic tower Company Foro 10-K-1980 PART I 0 ITEM 1 - BUSINESS (a) General. The Compat.y , incorporated under the laws of Maine on January 3,1966, owns and operates a pressurized water nuclear-powered electric generating plant at Wiscasset, Maine, with a current net capa-bility of approximately 830 megawatts electric (the " Plant"). The Com-pany sells its capacity and output to its eleven sponsoring utilities. The Company's principal office is located on Edison Drive, Augusta, Maine 04336, and its telephone number is (207) 623-3521. The Company is sponsored by eleven investor-owned New England utilities (the " Sponsors"), each of which committed itself under a Power Contract with the Company to purchase a specified percentage of the capacity and output of the Plant and pay therefor, beginning on January 1, 1973, a like percentage of amounts sufficient to pay its fuel costs, operating expenses (including a depreciation accrual at a rate sufficient to fully amortize the investment in the Plant over a period ending May 1, 2002), interest on its debt and a composite return of 9.8% on its capital stock equity. However, due to limitations imposed by the Federal Power Com-mission (now the Federal Energy Regulatory Commission ["FERC")) on the return on the Company's common equity, the actual composite return is somewhat less. Each sponsor has also agreed under a Capital Funds Agreement with the Company to provide a like percentage of the Com-pany's capital requirements not obtained from other sources, subject to obtaining necessary authorizations of regulatory bodies in each instance. All such obligations are subject to the continuing jurisdic-tion of various Federal and state regulatory bodies. (b) Problems Affecting the Industry and the Company. Events at the Three M.le Island Nuclear Unit No. 2 in Pennsylvania ("TMI") aused increased concern about the safety of nuclear generating plants. The Company cannot predict what effect the events at TMI, which have pre-cipitated renewed opposition to nuclear power, may ultimately have upon the continued operation of the Company's nuclear generating f acility. The TMI incident has prompted a rigorous reexamination of safety related equipment and operating procedures in all nuclear facilities and has caused the Nuclear Regulatory Commission (NRC) to promulgate numerous requirements in response to TMI, including both near-term modifications to upgrr.de certain safety systems and instrumentations and longer-term design changes, ranging from equipment changes to operational support. The Company's nuclear facility and all other nuclear facilities are being reexamined by the NRC to determine the scope of modifications necessary to comply with these new requirements. The Company has made the near-term modifications required by the NRC and is still in the process of evaluating the impact of the long-term improvements suggested O n I-1
Maine Yankee Atomic Power Company Form 10-K-1980 b v ITEM 1 - BUSINESS (continued). by the NRC staff. However, until the scope of those latter improvements, as they apply to particular reactors, has been defined by the NRC, the cost of any modifications and their effect, if any, on the operations of the Company cannot be quantified. While the ultimate effect of these reexaminations, studies and proposals cannot be specifically predicted, they could result in costly modifications of the Company's nuclear plant. (c) Regulation and Environmental Matters. The nuclear generating facil-ity of Maine Yankee is subject to extensive regulation by the NRC. The NRC is empowered to authorize the siting, construction and operation of nuclear reactors af ter consideration of public health, safety, environ-mental and antitrust matters. The United States Environmental Protection Agency (" EPA") admini.iters programs established under the Federal Water Pollution Control Act and the Clean Air Act which affect the Plant. 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 this objective. The latter Act empowers EPA to establish clean air standards which are implemented and enforced by state agen-cies. The EPA has broad authority in administering these programs, including the ability to require installation of pollution control and S mitigation devices. The Company is also subject to regulation with regard to environmental matters and land use by various state authori-ties. Under their continuing jurisdiction, the NRC and one or more of the EPA and the state authorities having jurisdiction over the Company's facili-ties may modify permits or licenses which have already been issued, or impose new conditions on such petmits or licenses, and may require additional capital expenditures or require that the level of the opera-
. tion of a unit be temporarily or permanently reduced. See " Problems Affecting the Industry and the Company". However, since the eleven Sponsors of the Company have agreed to provide the required capital not othe rwise available, to take the total output of the Plant, and to pay all costs including capital costs , statutory requirements with respect to environmental quality, although they could necessitate significant cash outlays, will not materially affect the earning power of the Company or cause material changes -in the registran.'s business or intended business.
(d) Nuclear Fuel. The w pany has contracted for the purchase of all of its uranium concentrate requirements through 1986. The Company has con-version contracts through 1983 and is presently negotiating for conver-sion services expected to meet requirements through 1995. ~lt has a contract with DOE for enrichment services through 2002, and its fabrica-tion requirements are covered through 1983, and it is negotiating for v) M\ I-2
.3. _ - _ . _ _ _ - _ - _ _ _ _ _ - _ _ - - _ - _ _ - - - _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ .
Main Yank a Atoxic Pow;r Comprny Form 10-K-1980 ITEM 1 - BUSINESS (continued) such services through 1988. As is the case throughout the nuclear in-dustry, the Company has no contractual arrangements for the final disposition of spent fuel. In September 1979, the Company 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 storage. On October 24, 1979, the NRC published notics of the proposed issuance of a license amendment impluenting 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 Sensible Maine Power, a non profit corpo ration , and the Attorney General of Maine filed a notice of his intent to participate in any hearing. Fue NRC has established an Atomic Safety and Licensing Board to preside over the proceeding. The Company anticipates that an adjudicatory hearing 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 re-moval. The modification of this capacity proposed by the Company differs f rom designs heretofore implemented at other nuclear facilities but is essentially the same basic concept of more compact storage in the existing spent fuei pool. If the proposed modification is not approved, the Company will have to develop alternative plans which would involve further approval by the NRC. Maine Yankee does not currently utilize a net salvage value for spent fuel in its nuclear fuel cost calculations. Maine Yankee's nuclear fuel in the reactor is amortized on the basia of original cost plus the estimated cost of disposition of that fuel. ( -) Employees. At December 31, 1980, the Company had 161 employees. _ITE..M 2 - PROPERTIES The Plant is located on tidewater on Bailey Point in Wiscasset, Maine, on a 740-acre site which is owned in fee by the Company and is adequate for the Plant and for the associated switchyard facilities (which are owned in part and operated by Central Maine Power Company). It is'a nuclear powereu electric generating plant, utilizing a pressurized sater reactor, fueled with slightly enriched uranium dioxide. The nuclear steam supply system and certain other equipment were designed and fabricated by Combustion Engineering, Inc. The turbine generator was supplied by Westinghouse Electric Corpo ration. Stone & Webster Engineering Co rpo ration , as engineer and constructor, designed and constructed the Plant. The nuclear design and construction of the u e I-3
Maina Yankee Ator.ic Power Compxny Form 10-r(-1980 O ITEM 2 - PROPERTIES (continued) Plant was supervised by the Nuclear Services Divi . ion of Yankee Atomic Electric Company, which supervised and is super . sing the design and construction of several nuclear generating plants in New Englano. Con-struction of the Plant, which began in 1967, was completed in 1972 except for certain discharge temperature control facilities designed to meet the requirements of the Maine Board of Environmental Protection, which were completed in 1975. ITEM 3 - LEGAL PROCEEDINGS The operation of existing nuclear units and the construction of nuclear units presently planned in the United States continue to be a subject of public controversy. Various groups have filed law suits and participat-ed in administrative proceedings claiming that the present state of nuclear technology presents risks to public health and safety and to the environment. In addition, certain of these groups have proposed restrictive legislation relating to nuclear power. Some of the claims made by such groups, if they should prevail, or the existence of the controversy itself, could cause substantial modifications to or extended shutdowns of plants presently in operation. See Item 1. " Problems Affecting the Iadustry and the Company". ( ) The Price-Anderson Act is a Federal statute providing, among other U things, that the waximum liability for damages resulting from a nuclear incident would be $560 million, to be provided by private insurance and governmental resources. 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 the recently implemented retrospective premium insurance and by an indemnity agreement with the NRC. Under amendments to that Act, owners of operating nuclear facilities may be assessed a retrospective premi-of up to $5 million for each reactor owned in the event of any one nuclear incident occurring at any reactor in the United States, with a maximum acsessment of $10 million per year per reactor owned. The Maine Yankee Plant was declared commercial December 28, 1972, with regular operation at approximately 570 megawatts electric (net) starting on January 1, 1973, in accordance with the Power Contract. Hearings on the Company's application for a forty-year license at full operation were completed in 1972 and the license for full operation at approxi-mately 790 megawatts electric (net) was granted by the Atomic Energy Commission ("AEC"), the predecessor of the NRC, on June 29, 1973. Dur-ing 1978 the NRC authorized an increase in the ou tput rating of the plant to approximately 850 megawatts electric (net). The Company's nuclear generating plant, which had been temporarily shut [v ,) down along with four other nuclear units pursuant to a March 13, 1979 I-4
Maina Yankee Ato2ic Pow:r Corpany Form 10-K-1980 ITEM 3 - LEGAL PROCEEDINGS (continued) 0 order of the NRC staff, was restored to power production on June 5, 1979 after the order was lifted on May 24. The order was based on the dis-covery by the NRC of an allegedly improper analysis technique in a com-puter code used by the architect-engineering firm which designed . the plant in predicting the stress loads which would be placed on some safety-related piping systemr of the plant in the event of a major earthquake. During the shutdown the Company performed reanalyses of the piping systems in accordance with the order, and the plant was returned to commercial operation without modification of the systems. The Company's plant was shut down on January 11, 1980 for a scheduled reloading of its nuclear fuel and was restored to power production on March 15, 1980. During the shutdown the Company also made certain modi-fications required by the NRC as a result of the TMI incident. See Item 1. " Problems Affecting the Industry and the Company". The Pcwer Contracts between Maine Yankee and its sponsors require the sponsors to continue to make monthly payments thereund-r through 2002 whether or not the plant is in operation except under cir.umstances not now applicable which would entitle the sponsors to cancel the Power Contracts. The Sponsors are also obligated under the Capital Funds Agreements with :!aine Yankee to pay their respective shares of the capi-tal requirements of Maine Yankee, not otherwise obtainable, which would include the cost of any modifications to the Plant that may be required pursuant to an NRC Order. O 3C I-5
. *" Maina Yankze Atomic Powar Ccmpray Form 10-K-1980 ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows the ownership of the Company's 500,000 shares of $100 par value Common Stock, all of which is issued and outstanding and all of which is held of record and beneficially. None is held by management. Amount Percentage Name and Class Owned of Class Central Maine Power Company 190,000 shares 38% Edison Drive Augusta, Maine 04336 . New England Power Company 100,000 20 20 Turnpike Road (Route 9) Westboro, Massachusetts 05181 The Connecticut Light and Power Company 40,000 8 PO Box 2010 Hartford, Connecticut 06101 Bangor Hydro-Electric Company 35,000 7 33 State Street Bangor, Maine 04401 r (y) Maine Public Service Company 25,000 5 209 State Street Presque Isle, Maine 04769 Public Service Company of New Hampshire 25,000 5 PO Box 330 Manchester, New Hampshire 03105 Cambridge Electric Light Company 20,000 4 675 Massachusetts Avenue Cambridge, Massachusetts 02139 Montaup Electric Company 20,000 4 PO Box 2333 Boston, Massachusetts 02107 The Hartford Electric Light Company 20,000 4 PO Box 2370 Hartford, Connecticut 06101 Western Massachusetts Electric Company 15,000 3 174 Brush Hill Avenue West Springfield, Massachusetts 01089 Central Vermont Public Service Corporation 10,000 2 77 Grove Street [Vl Rutland, Vermont 05701 500,000 shares 100%
.hk I-6
PART II Maine Yankee Atomic Power Company Form 10-K-1980 ITai 5- MARKET FOR THE REGISTRANT'F_ COMMON STOCK AND RELATED SECURITY HOLDEP M ATTERS. We Company's Common Stock, being owned by the Company's eleven utility sponsors, is not publicly traded. Transfer of the Common Stock is restricted by the Company 's bylaws. The Company has paid cash dividends on its Common Stock to its eleven utility sponsors in each year of operation, 1973 through 1980. ne following table shows cash dividends paid for years 1980 and 1979: 1980 1979 Shares Ou tstanding Per Share Per Share January 500,000 3 3 35 3 3 40 April 500,000 3 15 3 35 July 500,000 3 25 3 35 October 500,000 3 25 3 20
$13 00 $13.30 he payment of dividends in the Company's common stock is subject to the following restrictions:
(1) ne Company 's First Mortgage Indenture provides that it will not declare or pay any dividend on any class of its stock, except out of earned surplus, and will not declare or pay any such dividend or directly or indirectly make any payment on account of the purchase, redemption, acquisition or other retirement of any si. ares of its stock, unless, after giving effect to such declaration or payment, the Company's Equity shall be at least 35% of Plant Construction Financing, and the Company 's Common Equity shall be at least 30% of Plant Construction Financing. (2) Re Company 's Articles of Incorporation provide that so long as any shares of the Company's Cumulative Preferred Stock, 7.48% Series (Sinking Fund) are outstanding, the payment of dividends on the Common Stock (other than dividends in Co= mon Stock) and the making of distributions thereon is limited to 50% of Net Income Available for Dividends on Common Stock for the preceding twelve months if the Common Stock Equity (after such action) is less than 20% of Total Capitalization, and to 75% of such Net Income if such Common Stock Equity is 20% or more but less than 25% of Total Capitalization. SA II-1
i O O O - 1 . Maine Yankee Atomic Power Company Form 10-K-1980 Item 6 - Selected Financial Data , (Dollars in Thousands Except Per Share Amounts) 1 l ITEM '6 - SELECTED FINANCI AL DAT A. i 4 1980 1979 1978 1977 1976 Selected Income Statement Data:
$ 84,245 $ 68,867 $ 70,373 $ 65.659 3 58,860 Electric Operating Revenues Earnings Applicable to Common Stock 6,574 6,650 6,702 6,701 6,703 i
Earnings Per Share of Common Stock 13 15 13 30 13 40 13 40 13 41 1 j Dividends Declared Per Share of Common Stock 13 19 13 25 13 40 13 40 13 41 3 " r., w J w 4 Selected Ba'ance Sheet Data: 4
$297,064 $287,105 $265,955 $262,917 $260,930 E Total Assets tt a
Long-Term Debt: (1) Y I, First and General 111,168 115,627 120,596 mE Mortgage Bonds 101,598 105,923 Notes Payable to HYA 33,225 33,450 17,650 8,900 20,850 hI> Fuel Company Uo 11,980 13,070 13,696 13,696 15,000 {c h Redeemable Preferred Stock (1) e i n (1) See Notes 4 and 6 to Notes to Financial Statements, o 1 i
60 g g Maine Yankee Atomic Power Company Form 10-K-1980 ITEN 7 - M ANAGENENT'S DISCUSSION AND ANALYSIS OF FINANCI AL CONDITION AND RESULTS OF OPERATIONS. For a period of thirty years, commencing on January 1, 1973 in accordance with the Power Contracts and subject to certain limitations, each participant receives its entitlement percentage of plant output and is obligated to pay its entitlement percentage of the Company's total costs, including a return on invested capital, regardless of the level of operation of the plant. Operating Results me following is management's analysis of certain significant factors which have affected the Company's operating costs. Higher fuel expense for 1980 reflects (1) the impact of new fuel at higher rates being inserted into the reactor during the first quarter of 1980 (2) a change in In-Feactor fuel disposal a.ssumptions and (3) a spent fuel disposal adjustment. During 1979 lower fuel expense was experienced primarily as the result of the plant being ordered to shut down by the NRC from March 13 through May 24, 1979 and an outage during the month of September 1979 Operation and maintenance costs for 1980 reflect increased expenses associated with outside services employed to meet new and continuing NBC requirements and a first quarter shutdown to refuel the reactor and perform necsssary maintenance on equipment. De primary reason for increases in operation costs in 1979 were expenses associated with the shutdown ordered by the NRC. Be Company did not have a refueling in 1979 Lower levels of maintenance activity, performed at the plant during 1979, were experienced between those occurring in 1978 during a re fueling . Interest charges reflect greater borrowing to finance higher investments made for nuclear fuel and increasing construction requirements. Interim financing rose signficantly on average during 1980 and 1979 and related interest rates, while fluctuating during certain periods, also rose on average. We fluctuations in the amount of allowance for funds occur from the result of changes in level of investments in nuclear fuel 9 sv II-3
Maine Yankee Atomic Power Company Form 10-K-1980 m ITEN 7 - M AN AGEMENT'S DISCUSSION AND ANALYSIS OF FINANCI AL CONDITION AND RESULTS OF OPERATIONS. (continued) Operating Results (continued) in process and construction work in progress along with changes in the rates of funds used to finance these investments. During 1980 the incre se in levels of investment in construction work in progress was due primarily to construction projects that included the progress payments for a spare turbine rotor and steam driven feed-water pump system. Progressively higher levels of investment in nuclear fuel were made during the period to meet current and future refueling requirements. Along witt. these higher levels of investment, higher interest rates were incurred on corporate borrowing to finance these investments. Financial Condition During 1980, funds from operations (principally Amorti::ation of w Nuclear Fuel, Depreciation and Net Income) amounted to nearly
$41.1 million. Of these funds, $13 7 million was used to provide for sinking fund requirements and dividends on preferred and common stock. Rese sources of funds were further reduced by an increase of $3 2 .million in working capital requirements (exclusive of short-term borrowings and the current portion of long-term debt) resulting primarily from operating costs billed under the Company's power contract. The net funds available from internal sources were $24.7 million or approximately 68% of Funds Used for Acquisition of Nuclear Fuel and Construction of Electric Property which amounted to $36' 6 .
million (net of allowance for equity funds of $1.1 million used for nuclear fuel and $.3 million used during construction). Se Company funded $11.9 million, or the remaininc 32% of these requirements, from short-term borrowings. Se Company, as well as the nuclear electric industry in general, has been plagued by commou problems in recent years including those of (1) increasing operating costs attributable to greater regulatory requirements (2) financing of nuclear fuel and construction projects during a period of high inflation and unsettled borrowing market and (3) uncertainties i O
.9 f II-4
. . . o Maine Yankee Atomic Power Company Form 10-K-1980 0
ITEM 7 - M AN AGEMENT'S DISCUSSION AND AN ALYSIS OF FINANCI AL CONDITION AND RESULTS OF OPERATIONS. (continued) Financial Condition (continued) caused by political involvement in nuclear utility regulation. It is difficult at this time to predict the full impact that these factors will have in the future financial operation of the Company. The Company anticipates expenditures to be approximately $15.4 million for construction and $30.1 million for nuclear fuel (exclusive of AFN) for 1981. !.'uclear fuel expenditures are estimated to be $113 4 million (exclusive of AFN for the period 1982 through 1985 Fuel expenditures are planned to be financed by the MYA Fuel Company Loan Agreement (See note 5 to Notes to Financial Statements) while the remainder of planned expenditure s , plus working capital requirements, will be financed by internal sources, short-term borrowings, and to the extent necessary, other long-term financing. O O, sII-5
haina Yanken Ato:2ic Power Comptny Form 10-K-1980 9 O V ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Maine Yankee Atomic Power Company: We have examined the balance sheet and statement ei capitalization of Maine 14akee Atomic Power Company (a Maine corporation) as of Decem-ber 31, 1980 and 1979, and the reined 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 accepted auditing standards and, accordingly, included such teste 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 Atomic 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 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 la conformity with generally accepted accounting principles applied on a consistent basis. ARTHUR ANDERSEN & CO. l Boston, Massachusetts, g February 6, 1981. t i N.) 37 II-6 (
Mrina Ytaku Atomic P war Corpiny
- Fcrm 10-K-1980 ". ,
Maine Yankee Atomic Power Company STATEMENT OF INCOME (Dollars in Thousands Except Per Share Amounts) Year Ended December 31, 1980 1979 1978 ELECTRIC OPERATING REVENUES $84,245 $68,867 $70,373 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 Depceciation and etnortization (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: During Construction (Note 1) 253 76 50 For Nuclear Fuel (Note 1) 1,118 1,547 1,341 Other (145) (113) (6) INCOME BEFORE INTF' 2RGES 19,260 18,428 18,197 INTEREST CHARGES Long-Term 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 COMMON STOCK $ 6,574 $ 6,650 $ 6,702 SHARES OF COMMON STOCK OUTSTANDING 500,000 500,000 500,000 EARNINGS PER SHARE OF COMMON STOCK $13.15 $13.30 $13.40 DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $13.19 $13.25 $13.40 The accompanying notes are an integral part of these financial statements. II-7 N
Maina Yenkes Atecic P: war Compray
. '" Form 10-K-1980 y
Maine Yankee Atomic Power Company BALANCE SIEET (Dollars in Thousands) I ASSETS s December 31, ! 1980 1979 i ELECTRIC PROPERTY, at Original Cost (Notes 4 and
- 10) (Sch. V) $246,921 $240,061 Less
- Accumulated Depreciation and
~ Amortization (Note 1) (Sch. VI) 61,803 54,105 185,956 1E5,118 Ccnstruction Work in Progress 9,124 8,951 Net Electric Property 194,242 194,907
- NUCLEAR FUEL, at Original Cost (Notes 1 and 10) l (Sch. V)
Nuclear Fuel in Reactor 74,346 52,564 Nuclear Fuel-Spect 51,814 42,557 Nuclear Fuel-Stock 4,895 35,679 131,055 130,800 1
% Less: Accumulated Amortization (Note 1)
(Sch. VI) Original Cost 91,02. 76,443 ^ Permanent 0isposal, Net 24,845 15,401 i 15,187 38,956 Nuclear Fuel in Process 70,240 40,394 Net Nuclear Fuel 85,427 79,350 1 i Net Electric Property j and Nuclear Fuel 279,669 274,257 i CURRENT ASSETS 62 139 Cash (Note 3) , Accounts Receivable 9,544- 6,474 i Materials and Supplies, at Average Cost 3,746 3,503 Prepayments 1,042 949 Total Current Assets 14,304 11,065 DEFERRED CHARGES AND OTHER ASSETS 3,001 1,783
$297,064 $287,105 The accompanying notes are an integral part of these financial reatemeits.
O
.s ,
II-8
. _ . . . . - _ _ _ . . _ . . . . . . _ _ , . . . . _ _ _ _ . _ - , _ . , _ . - _ _ _ . . _ . _ ~ . - . - . -
Maine Yankee Atomic Power Company Form 10-E-1980 Maine Yankee Atomic Power Company BALANCE SHEET (Dollars in Thousands) STOC)010LDERS' INVESTMENT AND LIABILITIES December 31, 1980 1979 CAPITALIZATION (See Separate Statement) Common 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 Current Sinking Fund Requirements (Note 4) 1,084 1,822 Acceunts Payable 2,600 3,412 Bank Checks Outstanding 671 - Dividends Payable 2,000 1,919 Accrued Interest and Taxes 2,877 2,739 Other Curreat Liabilities 53 47 Total Current Liabilities 25,285 13,864 COMMITMENTS AND CONTINGENCIES (Note 8) DEFERRED CREDITS Accumulated Deferred Inccme Taxes (Note 2) 47,004 45,224 Unamortized Investment Tax Credits (Note 2) 8,166 7,346 Unamortized Gains on Reacquired Debt (Note 1) 2,754 1,371 Total Deferred Credits 57,924 53,941
$297,064 $287,105 The accompanying notes are an integral part of these financial statements.
O qe II-9
Maine Yankee Atomic Pouer Company Form 10-K-1986 Maine Yankee Atomic Power Company STATEMENT OF CAPITALIZATION (Dollars in Thousands) December 31, j ' 1980 1979 COMMON STOCK INVESTMENT ! Common Stock, $100 Par Value, Authorized and Outstanding 500,000 Shares $ 50,000 $ 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 180 196 Retained Earnings 6 27 67,052 66,857 REDEEMABLE PREFERRED STOCK - 7.48% Series,
$100 Par Value, Authorized 170,000 Shares, outstanding 119,805 at December 31, 1980 and 130,700 at December 31, 1979 (Note 14) 11,980 13,070 LONG-TERM DEBT (Note 17)
First and General Mortgage Bonds Series A - 9.10 % due May 1, 2002 55,050 58,161 Series B - 8 1/27,due May 1, 2002 37,034 38,911 Series C - 7 5/87,due May 1, 2002 10,752 10,842 i Less: Current Sinking Fund Requirements (1,084) (1,822) l Unamortized Debt Discount, Net of Premium (154) (169)
~101,598 105,923 1
Total Capitalization $180,630 $185,850 The accompanying notes are an integral part of these financial statements. i e II-10
Maine Yankee Atomic Power Comprny Form 10-K-1980 0 Maine Yankee Atomic Power Company STATEMENT OF CHANGES IN COMMON STOCK INVESTMENT For the Three Years Ended December 31, 1980 (Dollars in Thousands) Amount at Retained Shares Par Value Ocher, Net Earnings Total Balance December 31, 1917 500,000 $50,000 $16,769 $
- $66,769 Add (Deduct)
Net Income - - - 7,727 7,727 Cash Dividends Declared on - Common Stock - - - (6,700) (6,700) Preferred Stock - - - (1,025) (1,025) 13 - 13 Capital Stock Expense - Balance December 31, 1978 500,000 50,000 16,732 2 66,784 Add (Deduct) 7,651 Net Income - - - 7,651 Cash Dividends Declared on - Common Stock - - - (6,625) (6,625) Preferred Stock - - - (1,001) (1,001) Redemption of 35 - 35 Preferred Stock - - 13 - 13 Capital Stock Expense _ _ - - Balance December 31, 1979 500,000 50,000 16,830 27 66,857 Add (Deduct) 7,508 Net Income - - - 7,508 Cash Dividends Declared on - (6,595) Comcon Stock - - - (6,595) Preferred Stock - - - (934) (934) Redemption of 206 - 206 Preterred Stock - - 10 - 10 Capital Stock Expense - - Balance December 31, 1980 500,000 $50,000 $17,046 $ 6 $67,052 The accompanying notes are .in integral part of these financial statements. O a II-11
Maina Yankta Atomic Powar Compray Form 10-K-1980 Maine Yankee Atomic Power Company STATEMENT OF SOURCES OF FUNDS FOR ACQUISITION OF NUCLEAR FUEL AND CONSTRUCTION OF ELECTRIC PROPERTY (Dollars in Thousands) Year Ended December 31, 1980 1979 1978 FUNDS PROVIDED Internal Sources From Operations S 7,508 $ 7,651 $ 7,727 Net Income 24,024 15,319 17,411 Amortization of Nuclear Fuel 8,173 Depreciation and Amortization 8,319 8,279 Deferred Income Tax and Investment 7,583 Tax Credits, Net 2,600 6,918 Allowance for Other Funds Used for (1,623) (1,391) Nuclear Fuel and During Construction (1,371) 41,080 36,544 39,503 Less: Sinking Fund Requirements: 5,073 4,850 5,555 Long-Term Debt 1,090 626 - Preferred Stock 1,025 Dividends on Preferred Stock 934 1,001 6,595 6,625 6,700 Dividends on Common Stock 46 Other, Net ( _ 567) 505 27,950 22,937 2b,177 (Increase) Decrease in Working Capital, Exclusive of Notes Payable to Banks and Sinking Fund Requirements (2,993) 425 (616) Cash and Receivables Other Current Assets (336) (466) (66) 84 (533) (7,776) Other Current Liabilities (8,453) (3,245) ~ (574) Net Available from Internal Sources 24,705 22,3rl 17,719 External Sources Increase (Decrease) in Notes Payable: 8,750 MYA Fuel Company (225) 15,800 12,075 3,925 - Banks 11,850 19,725 8,750 Net Available from External Sources
$36,55_5 $42,088 $26,469 FUNDS USED FOR ACQUISITION OF NUCLEAR FUEL AND CONSTRUCTION OF ELECTRIC PROPERTY $25,732 Acquisition of Nuclear Fuel $30,101 $35,244 Allowance for Other Funds Used for (1,547) (1,341)
Nuclear Fuel (1,118) Construction of Electric Property 7,825 8,467 2,128 Allowance for Other Funds Used (50) During Construction (253) (76) I-v 526,469
$36,555 $42,088 TL; e:ompanying notes are an integral part of these financial statements.
II-12
Maint Yankee Atomic Power Company Form 10-K-1980 Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING P01.ICIES Company owns and operates a The Company: The pressurized-water nuclear-powered electric generating plar.t with a current net capacity of approximately 830 megawatts. The plant commenced commercial operation cn January 1, 1973 The following New England electric utilities own all of the Company's common stock: Ownership Sponsor / Participant Intereat Central Maine Power Company 38% New England Power Company 20 The Connecticut Light and Power Company 8 Bangor Hydro-Electric Company 7 Maine Piblic Service Company 5 Public Service Company of New Hampshire 5 Cambridge Electric Light Company 4 Montaup Electric Company 4 The Hartford Electric Light Company 4 Western Massachusetts Electric Company 3 Central Vermont Public Service Corporation 2 100% For a period of thirty years, commencing on January 1, 1973, in accordance with the Power Contracts and, subject to cer cain limitations, each participant shall . eceive its entitlement percentage of plant cutput and is obligated to pay its entitlement percentage of the company's total costs, including a return on invested capital regardless of the level of operation of the plant. Regulation: The Company is subject to the regulatory authority of the Federal Energy Begulatory Commission (FEBC), the Nuclear Regulatory Commission (NBC) and the Public Utilities Commissier. of the State of Maine (PUC) as to accounting, operations and other matters. Depreciat @ : Depreciation is provided using a composite remaining life method designed to fully depreciate electric plant over the period ending May 1, 2002. Under the II-13
Maine Yankee Atomic Power Company Form 10-K-1980 O Maine Yankee Atomic Power Comeany NOTES TO FINANCIAL STATEMENTS
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued) Depreciation: (continued) composite method, at the time depreciable property is retired, the original cost, plus cost of removal, less salvage, of such property is charged to accumulated depreciation. Decommissioning: De NRC currently recognizes three decommissioning methods - complete dismantling and removal, in-place encapsulation or " entombment" and mothballing - or a combination of these methods. ((USAEC Regulatory Guide 1.86, Termination of Operating Licenses for Nuclear Reactor _ (1974).] Although the Company _ presently does not provide for nuclear plant decommissioning costs, it is considering immediate dismantling as the most desirable and probably the only acceptable method of decommissioning its nuclear O, reactor. Based on n study performed by Stone and Webster Engineering Corporation and Nuclear Energy Services, Incorporated, the estimated cost of decommissioning utilizing this methodologf is $57,600,000 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 FEBC approval, an amount equal to the current estimate of the cost of decommissioning. The Company fully recognizes the relative uncertainty of the future cost of decommissioning, the changing technology of decommissioning or new requirements of the law and, therefore, recognizes the need to constantly monitor and adjust, if necessary, the amount of collection. De ferred Charges: The Company has adopted the policy of deferring and amortizing over a five year period the costs of unusual and irregularly . recurring studies and inspections. mis is in response to recent events and orders requiring the Company to undertake significant analyses of specified operating design procedures and equipment. Amortization of Nuclear Fuel: The cost of nuclear fuel in the reactor, plus the estimated . cost of disposal of that O v nuclear fuel, is amortized - to Fuel Expense based on the YS
'I2 i
Maine Yankee Atd mic Power Company Form lb d-1980 Maine Yankee Atemic Power Csepany 0 NOTES TO FINANCIAL STATDiENTS
- 1. StliMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Amortization of Nuclear Fbel: (continued) ratio of energy produced during the period to the estimated total core capability with a corresponding credit to Accumulated Amortization. During 1978 and 1979 the Company provided for permanent storage of nuclear fuel in reactor using 1.s astimated cost of permanent storage which was based on a study by the NRC. Specifically the disposal estimate provided was at a rate of $100/ kilogram of uranium (KGU) originally contained in the assemblies in 1977 dollars escalated at 8% per year to the time of discharge from the reactor. Beginning in March 1980 the Company's cost estimate for permanent disposal of Nuclear Fuel in Reactor was increased to $130/KGU originally contained in the assemblies, expressed in 1978 dollars, escalaced at 8% per year to the time of permanent disposal (currently estimated to be 1988). This estimate of the cost of permanent disposal ($130/KGU) is based on a rep 3rt issued by the Department of Energy. This report estimated the cost of perm.:nent storage to be $117/KGU originally contained in the assemblies (in 1978 dollars). This estimate did not include the cost of transportation to the disposal center, which has been estimated by the Company to be $13/KGU. The disposal cost for Nuclear Fuel in Reactor is being recovered from participants, based on generation, over the period that the fuel is consumed. Through 1988 the Company is also adjusting the disposal reserve collected for Spent Fuel to reflect the current disposal cost estimate. This adjustment which amounts to approximately $40,000,000 is being recovered based on estimated electric kilowatt hour generation from March 1980 through 1988. 1he estimate of cost of disposal of nuclear fuel is subject to a number of uncer 31nties including the timing of available storage capacity, the extent of future inflation, regulatory requirements and the cost of future services, all of wnich may require periodic revisions in future nuclear fuel amortization rates. However, the Company believes that its estimate is reaso;.able. b II-15
. - -- _ _ . = . - . _ _ -
Maine Yankee Atomic Power Company Form 10-r-1980 Maine Yankel Atomic Power Company NOTES TO FINANCIAL STATENENTS b 4
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued) Allowance for Funds Used During Construction (AFC) ag Allowance for Fbnds Used for Nuclear Fuel (AFN): ne Cordpany records the net cost of borrowed funds and a reasonable return on other funds used to finance construction and nuclear fuel acquisition programs. De amount of the allowance recorded is determined by multiplying the average monthly dollar balance of Construction Work in Progress (CWIP) and Nuclear Fuel in Process (NFIP) by rates related to the cost of the capital used to finance the respective additions. De following table contains the weighted average rates used for the most recent three annual periods: AFC AFN on CWIP cn NFIP 1980 7.26% 8.905 1979 7.:10 7.68 1978 7.60 7.00 Unamortized Gain or Loss on Reacquired Debt: Gains and losses on bonds reacquired to ratisfy sinking fund requirements of First Mortgage Bonds have been deferred and are being amortized to income over the remaining original terms of the applicable series as prescribed by the Uniform System of Accounts of the FERC.
- 2. INCOME TAX EXPENSE The components of Federal and state income taxes reflected in the statements of income are as follows:
~ O v. II-16
Maine Yankee Atomic Power Company Form 10-K-1980 Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATD!ENTS
- 2. INCCME TAX EXPENSE (continued)
Year Ended December 31, 1980 1979 1978 (Dollars in Thousands) Federal Current $ 3,242 $ 602 $ 625 Deterred (2,545) 5,264 4,845 Investment Tax Credits, Net 5,468 812 1,986 6,165 6,678 7,456 State Current 1,463 344 495 Deferred 3) 842 752 1,140 1,186 1,247 Total Federal and State income taxes $ 7,305 $7,864 $8,703 The Company provides deferred taxes for the tax effects of timing differences, primarily accelerated depreciation and certain expenditures related to nuclear fuel, between pre-tax accounting income and taxable income. Prior tc 1975 the Company did not provide fully for the tax effects cf timing differences and began in 1976 to provide additional deferred taxes to recognize the tax 3ffects of these prior timing differences through 1980. Inve:tment tax credits are deferred and amortized over the life of the assets giving rise to such crecits. At December 31, 1979 the Company had available a carryover of unused inves tment, tax credits of approximately $5,800,000 to be applied to reduce Federal income taxes. The Company had provided for, and deducted for tax purposes, certain costs associated with nuclear fuel reprocessing and permanent storage. In the recent examination of the Company's Federal income tax returns for years 1973 through 1977, the Internal Revenue Service examining agent disallowed the current deduction of these costs. The Internal Revenue Services position was sustained at the Appelate level which resulted in the Company fully utilizing the $5,800,000 of investment tax credit available as of Dece=ber 31, 1979 and paying II-17
2 Maine Yankee Atomic Power Company Form 10-K-1980 i b) !!aine Yankee Atemic Power Comeany NOT2S TO FINANCIAL STATEMENTS
- 2. INCOME TAX EXPENSE (continued) additional Federal and State income tax 7:;essments cumulative through 1979 of $2,728,530 exclus.*e of interest. These assessments had no effect on total income tax expense because the Company had provided income taxes for the effects of all timing differences.
The following table reconciles the statutory income tax rate to the rate determined by dividing the total Federal income tax e1 pense by income before that expense. Dollars in Thousands 1960 1979 1978 Acount i Amount % AmoenE % Statutory Federal income tax rate $6,290 46.0 $6,591 46.0 $7,288 48.0 (f- x,) (Increase) Beductions in taxes resulting from: Deferred taxes not provided on certain timing differences 418 31 411 29 429 2.8 Amortization of in-vestment tax credits (890) (6.5) (678) (4.7) (573) (3.8) Other 347 2.5 354 2.4 312 2.1 Calculated rate $6,165 45.1% $6,678 46.6% $7,456 49.1.% 3 NOTES PAYABLE TO BANKS The Company had bank lines of credit totaling $29,000,000 as of December 31, 1980, of which $28,000,000 requires an annual fee of 1/2 to 5/8 of 1% of the line. There are no compensating balance requirements for these lines. The remaining $1,000,000 dollar line requires a compensating balance of 10% of the line or 20% of relating borrowings, whichever is greater. The Company had lines of credit at December 31, 1979 totaling $14,000,000. With respect to $13,000,000 of the line, there was a required annual. fee of 5/8 of 1%. There are no ecmpensating balance recuirements for these lines. ('s G O II-IS
Maine Yankee Atomic Power Company Form 10-K-1980 Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 3 NOTES PAYABLE TO BANKS (continued) The compensating balance requirement for the remaining
$1,000,000 dollar line was 10% of the line or 20% of outstanding borrowings, whichever was greater.
- 4. FIRST MORTG AGE BONDS The annual sinking fund requirements of the First Mortgage
"~nds currently outstanding amount to $4,775,000 for each of the years 1981 through 1985. Bonds repurchased amounted to $3,739,000 at December 31, 1980 and $3,436,000 at December 31, 1979 Under the terms of the Indenture securing the First Mortgage Bonds, substantially all electric plant of the Company is subject to a first mortgage lien.
5 MYA FUEL CC!icANY On August 26, 1976, the Company entered into a Loan Agreement covering the issuance of up to $35,000,000 principal amount of promissory notes to MYA Fuel Company a subsidiary of BSC Holdings, Inc. ESC is owned by a partnership composed of partners of Goldman, Sachs & Co. Certain information related to this loan arrangement is as ' follows for the years ended December 31: 1980 1979 (Dollars in Thousands) Promissory notes outstanding $33,225 $33,450 Average daily outstanding borrowings $32,901 $28,252 Highest level of borrowings $33,500 $34,250 Annual interest rate at end of periods 20 58% 14.18% , Effective average annual interest rate 15.42% 13 33% O st 11-19
Maine Yankee Atomic Power Company Form 10-K-1980 0 Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 5 MYA FUEL COMPANY (continued) ne 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 terminated by either party upon proper notice. De Company must provide 90 days written notice while MYA Fuel Company must give at least thrae years written notice. In order for the arrangement to extend beyond August 26, 1981, the PUC must extend its present approval of the arrangement.
- 6. REDEEHABLE PREFERRLt STOCK Re 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 (g
f- before December 31, 1982, and at amounts decreasing to
$100.00 thereafter; in each case plus accrued dividends.
The 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, on each redemption date. The optional provision is not cumulative. Preferred Stock repurchased and not cancelled amounted to 12,195 shares at December 31, 1980, 7,300 shares at December 31,1979 and 7,040 shares at December 31, 1978. 7 PElGION PLANS Be Company has two noncontributory pension plans which cover substantially all full-time employees. We Company's l policy is to fund pension costs accrued on an annual basis, including amounts sufficient to amortize unfunded prior service costs over 30 years.me plans expenses approximated
$183,000 for 1980, 3182,000 for 1979 and $130,000 for 1978. -
O (J , 5\ II-20
Maine Yankee Atomic Power Company , Form 10-K-1980 Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATD4ENTS
- 7. PENSION PLANS (continued)
January 1 1980 1979 Actuarial present value of accumulated plan benefits: Vested $173,000 $124,000 Nonvested 166,000 118,000
$339,000 $242,000 Net assets available for benefits $913,000 $656,000 The assumed weighted average rate of return used in determining the actuarial present value of accumulated plan benefits was 6.25%.
- 8. COMMItiENTS AND CONTINGENCIES Nuclear Puel: The Company anticipates nuclear fuel expenditures of $30,079,000 for 1981 (exclusive of AFN) and
$113.362,000 for the period 1982 through 1985 (exclusive of AFN).
The Company has contracted for the purchase of all of its uranium concentrate require 9ents through 1986. The Company has conversion contracts thr-ough 1983 and is presently negotiating for conversion services which are expected to meet re qu.'.rements through 1995 Uranium enrichment services are covered through 2002 under a contract with the Department of 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. The company is expanding its on-site spent fuel storage facility to provide capacity to store such fuel through 1984 while maintaining a full core discharge capability. In addition. in September 1979 the Company filed with the NRC a proposed change in its operating license relating to increasing its existing spent fuel storage capacity by providing more compact fuel b II-21
a . .. Maine Yankee Atomic Power Company Form 10-K-1980 Maine Yankee Atomic Power Comcany NOTES TO FINANCIAL STATENENTS
- 8. CCHMI M ENTS AND CONTINGENCIES (continued) storage. An intervenor has requested a hearing and t!.e Company cannot predict the scope of that proceeding, its duration or its outcome. If the proposed change is not approved, the Company will have to develop alternative plans which would involve further approval by the NBC.
Construction: The Company anticipates construction expendi;ures to aciount to $15,400,000 for 1981 including , $4,200,000 towards the installation of a steam turbine driven feedpump and $3,200,000 for computer equipment. Price-Anderson: ne Price-Anderson Act requires each reactor licensee to carry $160 million of primary public liability insurance, supplemented by a mandatory industry-wide program of self insurance. Under the program, in the event of a nuclear incident at any 4 V operating reactor in the United States, each licensee could l be assessed up to $5 million with a limit of two assessments per reactor owned per calendar year in the event of more than one incident. W ree Mile Island: The events during the spring of 1979 at the Bree Mile Island Nuclear Unit No. 2 in Pennsyisania ( "MI ") caused widespread concern about the safety of nuclear generating plants and prompted a rigorous reexamination of safety-related eouipment and operating procedures in all nuclear facilities by their owners and the NRC. The commission formed by President Carter to investigate the causes of the NI incident issued its report in 1979, recommending a number of changes in t'RC organization and practices, licensing of nuclear plants, plant operating practices, operator training and other , safety-related matters and in 1980, a NBC-commissioned report containing similar recommendations was released. As a result, the NRC has promulgated numerous requirements, including botn near-term modifications and longer-term design changes. We Company has made the modifications required to date by the NRC, but cannot predict what further - modifications will be required, their cost, or m their effect on the operation of the Maine Yankee plant. 53 II-22
Maine Yankee Atomic Power Company Form 10-K-1980 Maine Yankee Atomic Power Cemeany NOTES TO .'INANCIAL STATEMENTS 9 UNAUDITED QUARTERLY FINAN IAL DATA Unaudited quarterly financial data pertaining to the results of operations are shown below. 1980 Cuarter Ended _ March 31 June 30 September 30 December 31 (Dollars in nousands, Except Per Share Amounts) Electric Operatin6 Revenues $18,911 324,065 319,678 321,591 Operating Inceme 4,297 4,718 4,546 4,473 Net Income 1,921 1,837 1,836 1,914 Earnings Per Share of Common Stock 3 35 3 22 L 21 3 37 1974 Ouarter Ended O March 31 June 30 September 30 Decemter 3! (Dollars in nousands, Except Per Share Amounts) Electric Cperating Revenues $16,592 315.324 317,686 319,265 Operating Inceme 4.334 4,234 4,145 4,205 Net Income 1,933 1,930 1,876 1,912 Earnings Per Share of Common Stock 3 35 3 35 3.26 3 34 9 sv II-23
Maine Yank 2 Atoric Powar Co pany Form 10-K-1980 Maine Yankee Atomic, Power Company NOTES TO FINANCIAL STATEMENTS O V
- 10. SUPPI.EMEYrARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (UNAUDITED) ,
The following supplementary information is supplied in accordance with the requirements of the Statement of Financial Accounting Stan-dards No. 33 for the purpose of providing certain information about the effect of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure. Constant dollar-amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consue.er 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 inflatich. The current cost of nuclear generating plant is estimated based on an engineering study of the current cost (per kilowatt) of replacing the present generating plant. This study was updated iu 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 anc :abrication. Nuclear fuel expense was developed by divid-ing the estimated current cost of the in-reacte- fuel by the expected generation of the core times the actual ge:n ration produced during the year 1980. Depreciation expense for the current cost of productive capacity was developed by applying the depreciation rate to the current cost val.ue adjusted by the ratio of average historical cost to year-end historical cost. Since only historical costs are deductible for income tax purposes, the income tax expense in the historical cost inancial statements is not adjusted. . Under the rate-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 Al I
%/
II-24
.. , 0 Maine Yankee Atomic Power Company Form 10-K-1980 Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS
- 10. SUPPI.EMENTARY INFORMATION TO DISCLOSE THE 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. While 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 reFulation in the State-ment 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 f rom the decline in purchasing power of net amounts owed as shown below. During a period of inflation, holders of moneta ry , assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gaiu. The gain from the decline in purchasing power of net amounts owed is primarily attributabie to the substantial am,unt of debt which has been used to finance property, plant, equipn. int and nuclear fuel. Since the depreciation on utility plant and am rtization of nuclear fuel is limited to amounts based on historics. costs, the Company does not have the opportunity to realize a holdi. g gain on debt and is limited to recovery only of the embedded cos, of debt capital. O 52 II-25
Maine Yankee Atomic Power Company Form 10-K-1980 Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS
- 10. SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CIIANGING PRICES (UNAUDITED) (continued)
Statement of Income and Operations Adjusted for Changing Prices for the Year Ended December 31, 1980 (Dollars in Thousands) Constant Current Dollar Dollar Conventional Average Average Historical 1980 1980 Cost Dollars Dollars Operatinr levenues $84,245 $84,245 $ 84,245 I Operation & Maintenance 22,762 22,762 22,762 Fuel Expense 24,024 28,351 33,117 Depreciation & Amortization 8,319 15,951 41,419 Taxes 11,106 11,106 11,106 Interest Charges 11,752 11,752 11,752 d Other, N2t (1,226) (1,226) (1,226) Income (Loss) from Operations (excluding reduction to net recoverable amount) $ 7,508 $(4,451) $(34,685) Increase in specific prices (current cost) of plant and Nuclear Fuel held dur-ing the year * $ 84,845 Reduction to net 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 amounts owed
$ 24,791 $24,791
$34,268 p $ 4,034 v
57 II-26
Maine Yankee Atomic Power Company Forn 10-K-1980 Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS
- 10. SUPPLEMF.NTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING P (UNAUDITED) (continued)
*At December 31, 1980 current cost of Plant and Nuclear Fuel, net of accumulated depreciation and amortization wc.) $1,031,135 while his-torical costs or net cost recoverable through rates was $279,669.
Five Year Comparison of Selected Supplementary Financial Data Adjust-ed for Effects of Chacging Prices (Dollars in Thousands, Average 1c90 Dollars) Years Enoed December 31, 1980 1979 l978 1977 1976 Operating Kevenues 3 S. 7 5 $78,180 $38,355 $89,262 $85,200 liistorical Cost Information - Adjusted for General Inf!ation Lasa from operations c.cluding reduction to net iecoverable amount $(4.451) $ (670) Loss free operations per common share (after preferred dividend requirement) $(10.77) $ (3.61) Current Cost Informatioc. Loss frou operations excluding reduction to net recoverable amount $(34,685) $(26,755) l Loss from operations per coanon share (after preferred div dend requirement) $(71.24) $ (55.79) Excess of increase in general price level over tocrease in specific prices after reduction to net re= coverable amount $9,477 $ (2,106) General Information Net assets at year end at recoverable amount $64,042 3 71,772 G4in from decline in purchasing power of net amounts owed $24,791 $ 28,002 Casa 4tvidends per common share $11.19 $15.04 $16.72 $15.23 $19.40 Average Consumer 246.8 217.4 195.4 181.5 170.5 Petce Index ) 1 9 l l II-27
Maina Yankee Atomic Powar Corpsny Form 10-K-1980 PART III ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT A. Directors The directors of the Company and their principal occupations and all positions and office's with the Company are as follows: Name, Age and Year First Elected Director Principal Occupation Elwin W. Thurlow, 57, 1973 President and Chief Executive i President and Director Officer, Central Maine Power Company Thomas C. Webb, 46, 1977 c
.enior Vice President, Finance Vice President and Director Central Maine Power Company Charles E. Monty, 54, 1971 Senior Vice President, Engineering ,.
Vice President and Director and Production, Central Maine l Power company 1 John B. Randazza, 52, 1975 Vice President, Central Maine Vice President and Director Power Company Joan T. Bok, 51, 1977 Vice Chairman, New England Electric l Director System William F. Burt, 55, 1978 Assistant to the President, NEGEA Director Service Corp. Ralph A. Brown, 63, 1968 President and Chief Executive Officer, Director Maine Public Service Company John F. G. Eichorn, Jr., 57, President, Eastern Utilities 1971, Director Associates William B Ellis, 40, 1976 President, Northeast Utilities Director l l Thomas A. Greenquist, 52, 1973 President, Bangor Hydro-Electric Director Company . James E. Griffin, 53, 1973 President and Chief Executive Director Officer, Central Vermoct Public Service Corporation Carroll R. Lee, 31, 1979 Assistant Vice President-Engineering Director Bangor Hydro-Electric Company I () Guy W. Nichols, 55, 1978 Director Chairman, President and Chief Executive Officer, New England Electric System b III-1
~ . . _ _ , _ . _ _ _ _ . _ _ _ , _ _ . _ . . _ . _ _ _ _ . . _ _ _ . . _ _ _ , _ . . - _..__ . . . _ _ .
Maine Yankee Atomic Power Company Form 10-K-1980 ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) A. Directors (continued) Robert F. Scott, 51, 1976 Senior Vice President, Customer Director Services, Central Maine Power Company Donald C. Switzer, 64, 1971 Vice Chairman, Northeast Utilities Director William C. Tallman, 60, 1966 Chairman and Chief Executive Officer, Public Director Service Company of New Hampshire Each of the Directors, other than Mr. Webb, has for the past five years been and is now an officer or employee of one of the Sponsors or an associate company thereof. Mr. Webb joined Central Maine Power Company as Vice President, Financial and Treasurer io 1977 after having served as Treasurer (from 1974) and Assistant Treasurer (1972-1974) of Wisconsin Power and Light Company. uch of the Sponsors is represented on the Company's Board of Direccors, but there is no formal understanding with respect to such representa-tion. The Directors are elected at the annual meeting of suck-holders and hold office until their successors are elected and qualified. B. Executive Officers The following are the executive officers of the Company with all positions and offices held: Name Age Office and Year First Elected Elwin W. Thurlow 57 President and Director - 1975 Charles E. Monty 54 Vice President and Director - 1971 John B. Randazza 52 Vice President and Director - 1975 Thomas C. Webb 46 Vice President and Director - 1977 Wendell P. Johnson 58 Vice President - 1972 Richard A. Crabtree 34 Treasurer - 1977 Robert S. Howe 41 Comptroller and Chief Accounting Officer - 1980 Seward B. Brewster 53 Secretary and Clerk - 1968 Each of the executive officers other than Mr. Webb, whose business experience is given under paragraph A above, has for the past five O
&c III-2
Maine Yankee Atomic Power Company Fom 10-K-1980 1 (~% ITEM 9 - DIRECT 0FS AND EXECITTIVE OFFICERS OF THE REGISTRANT (continued) B. Executive Officers (continued) years been and is now an officer or employee of one of the sponsors or an associate company thereof. The executive officers are elect-ed annually by the Board of Directors and hold office until their successors are elected and qualified. There are no family relationships between any director or executive officer nor any arrangements pursuant to which any were selected as officers or directcrs. C. Other Directorships The following directors of the registrant held other directorships as follows: i Director Other Directorships Held Joan T. Bok Vermont Yankee Atomic Power Company Connecticut Yankee Atomic Power Company a New England Merchants National Bank / New England Merchants Company, Inc. s Norton Company New England Electric System Massachusetts Electric Company New England Power Company The Narragansett Electric Company Ralph A. Brown Maine Public Service Company Maine Electric Power Company, Inc. Maine & New Brunswick Electric Power Co., Ltd. William F. Burt Vermont Yankee Atomic Power Company Yankee Atomic Power Company Connecticut Yankee Atomic Power Company Hopkinton LNG Corporation NEGEA Energy Products, Inc. NEGEA Energy Services, Inc. NEGEA Service Corporation John F. G. Eichorn, Jr. Eastern Utilities Associates (Trustee) . Moataup Electric Company EUA Service Corporation Blackstone Valley Electric Company Fall River Electric Light Company
- Brockton Edison Company Yankee Atomic Electric Company Connecticut Yankee Atomic Power Company
$ Vermont Yankee Atomic Power Company
[O Electric Council of New England b\ III-3
Maine Yankee Atomic Power Company Form 10-K-1980 ITEM 9 - DIRECTORS AND EXECITTIVE OFFICERS OF THE REGISTRANT (continued) C. Other Directorships (continued) William B. Ellis Northeast Utilities (Trustee) Connecticut Yankee Atomic Power Company Yankee Atomic Electric Company Vermont Yankee Atomic Power Company Connecticut Bank and Trust Corpora'. ion Thomas A. Greenquist Bangor Hydro-Electric Company James E. Griffin Central Vermont Public Service Corporation Connecticut Valley Electric Co., Inc. Vermont Electric Power Company Yankee Atomic Electric Company Connecticut Yankee Atomic Power Company Vermont Yankee Atomic Power Company Vermont National Bank Charles E. Monty Central Maine Power Company Maine Electric Power Company, Inc. Guy W. Nichols New England Electric System New England Power Company New England Power Service Company New England Energy, Inc. Massachusetts Electric Company Narragansett Electric Company Yankee Atomic Electric Company Connecticut YaLkee Atomic Power Company Vermont Yankee Atomic Power Company Breeder Reactor Corporation Electric Power Research Institute First National Bank of Boston l l First National Boston Corporation Nashua Corporation l State Mutual Life Assurance Company of America i Edison Electric Institute l John B. Randazza Vermont Yankee Atomic Power Company Connecticut Yankee Atomic Power Company Robert F. Scott Central Maine Power Campany Donald C. Switzer Northeast Utilities (Trustee) and a Director o.' its pinrcipal subsidiary companies Connecticut Yankee Atomic Power Company Vermont Yankee Atomic Power Company Yankee Atomic Electric Company William C. Tallman Public Service Company of New Hampshire Yankee Atomic Electric Company Amoskeag National Bank & Trust Company Amoskeag Industries, Inc. III-4 (c 2
Maine Yankee Atomic Power Company Form 10-K-1980 i ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) l C. Other Directorships (continued) Elvin W. Thurlow Cent 2.al Maine Power Company Yankee Atomic Electric Company Great Northern Nekoosa Depositors Corporation Maine Electric Power Company, Inc. Thomas C. Webb Maine Electric Power Company, Inc. ITEM 10 - MANAGEMENT REMUNERATION AND TRANSACTIONS The Company has paid no remuneration to its officers or directors, but, complying with regulatory requirements, has reimtursed Centr.s1 Maine Power Company for services rendered by its employees. During the constructf on period, no return was paid to Sponsors on the money paid by them for Common Stock, but a return (at the rate of 7% per annum through November 30. 1970 and at the rate of 10% per annum there-after) was charged to plant in a manner similar to that followed by utility companies in recording plant construction costs. The amounts so charged were recorded as paid-in capital. This practice terminated
] as of December 31, 1972, the last day of the last month of the con-struction period. These amounts are to be paid to the fponsors on the
) redemption of Common Stock. The. Company's First Mortgqe Indenture and the provisions of its Articles of Incorporation relating to its capital stock contain various limitations on redemption.
During 1980 and 1979, the Company paid $4,203,332 and $3,123,255 respectively, to Yankee Atomic Electric Company, an associate of sev-eral of the Sponsors, for services at cost of its engineering and nuclear services department. Prior to the execution vi the Capital Funds Agreements and Power Contracts, Central Maine Power Company, one of the Sponsors, advanced necessary construction funds to the Company ' at cost. Subsequent to that time, Central Maine has furnished the Company certain engineering, administrative and legal services, and furnished certain facilities, at cost and electric service at its filed rates. During 1980 and 1979, Central Maine was reimbursed in the amount of $3,052,066 and $3,090,256, respectively, for such services. It is expected that Yankee and Central Maine will continue to perform such services for the Company is the future, for which they will be > reimbursed by the Company. O O III-5
Maine Yankee Atomic Power Company Form 10-K-1980 PART IV 0 ITEM 11 - FINANCIAL STATEMENTS AND EXHIBITS FILED, AND REPORTS ON FORM 3-K (a) Financial statements and exhibits filed as a part of this report:
- 1. Financial Statements:
Report of Independent Public Accountants. Statement of Income for the three years ended December 31, 1980. Balance Sheet at December 31, 1980 and 1979. Statement of Capitalization at December 31, 1980 and 1979. Statement of Changes in Common Stock Investment for the three years ended December 31, 1980. Statement of Sources of Funds for Acquisition of Nuclear Fuel and Construction of Electric Property for the three years ended December 31, 1980. Notes to Financial Statements
- 2. Schedules:
V Electric Property and Nuclear Fuel. VI Accumulated Provision for Depreciation and Amortization of Electric Plant and Nuclear Fuel. IX Short-Term Borrowings All other schedules are omitted as the required information is i.3 applicable or the information is presented in the Financial Statements or related notes.
- 3. Listing of Exhibits:
Incorporated Filed Documents Herewith SEC at I (A) Articles of Incorporation and Bylaws Exhibit Docket Page Incorporated herein by reference: l A-1 Articles of Incorporation 3.1, 3.3 2-38547 l A-2 Amendment to Exhibit A-1 setting forth terms of Cumulative Preferred Stock 3.2 2-46226 l l A-3 Bylaws, as amended 3.2 2-38547 A-4 Amendment to Exhibit A-3 3.5 2-46226 (B) Instruments defining the rights of security holders Incorporated herein by reference: B-1 First Mortgage Indenture from the Company to Old Colony Trust Company, Trustee, dated as of November 1, 1970 3.2 1-6554 IV 1 U
.- - -- - = .- . - - .. - . - .
Maine Yankee Atomic Power Company Form 10-K-1980 [ ITEM 11 - FINANCIAL STATEMENTS AND EXHIBITS FILED, AND REPORTS ON FORM 8-K i Inco rporated Filed Documents Herewith SEC at (B) Instruments Defining the Rights Exhibit Docket Page of Security Holders 1 B-2 First Supplemental Indenture from the Company to the First National Bank of Boston, Trustee, dated as'of March 1, 1971 4 70-4976 B-3 Second Supplemental Indenture from the Ccmpany to the First National Bank of Boston, Trustee, dated as of December 1, 1972 4.3 2-46226 (C) Material Contracts Incorporated herein by reference: C-1 Composite copy of Power Contract between the Company and Sponrors (Included in '() dated as of May 20, 1968 C-2 Composite copy of Capital Funds prospectus in 2-46226) Agreement between the Company. and Sponsors, dated as of (Included in May 20, 1968 prospectus in 2-46226) C-3 Stockholders Agreement dated
- as of May 20, 1968 among the (Included in Sponsors prospectus in 2-46226)
; C-4 Loan Agreement between the i Company and MYA Fuel Company, dated as of August 26, 1976 B-1 70-5805 (D) Statements re computation of per share earnings Not applicable
] (E) Statements re computation of ratios t Not applicable (F) General report to security holders Not applicable (G) Letter re change in accounting principles Not' applicable ge[ IV-2
Maine Yankee Atomic Power Company Form 10-K-1980 ITEM 11 - FINANCIAL STATEMENTS AND FXIIBITS FILED, AND REPORTS ON FORM 8-K (H) Previously unfiled documents Not applicable (I) Subsidiaries of the registrant None (b) No reports on Forms 8-K were filed during the last quarter of 1980. l l l i e i l 9 a IV-3
Fces 10-K-1980 Schedule V O Maine Yankee Atomic Power Company ELECTRIC PROPERTY AND NUCIE/JL FUEL For The Year Ended December 31, 1980 (Dollars in Thousands) Balance at Balance Beginning Additions Retirements Transfers and at End or Period at Ccst o~ Sales Other Charges of Period Electric Property Organizatica $ 7 $ -
$ 7 i Miscellaneous
! Intangible Plant 601 - - - 601 Land and land rights 522 - - - 522 Structures and improvements 57,527 356 9 - 57,874 Reactor plant equipment 101,468 1,714 - - 103,182 Turbogenerator units 56,997 3,8.12 505 - 60,304 Accessory electric equipment 14,498 2 - - 14,500 Miscellaneous (, power plant equip. 5,128 380 278 - 5,230 4,627 Substation equip. 3,239 1,388 - - Miscellaneous electric property 74 - - - 74 s i Unfinished I construction 8.951 173 - - 9,124 i Total Electric i Property $249,012 $ 7,825 $792 $
- 1256,045 l
Nuclear Fuel ( Nuclear fuel in reactor $ 52,564 $
$- $ 21.782 $ 74,346 Nuclear fael in process 40,394 30,084 -
(238) 70,240 Nuclear fuel - spent 42,557 - - 9,257 51,814 Nuclear fuel - 4,895 stock 35,679 17 - (30,801) r
$171,194 $30,101 - $201,295 l
IV-4
Maina Yrnk23 Atoxic P:w2r Compray , , , Form 10-K-1980 Schedule V O Maine Yankee Atomic Power Company ELECTRIC PROPERTY AND NUCLEAR FUEL For The Year Ended December 31, 1979 (Dollars in Thousands) Balance at Baiance Beginning Additions Retirements Transfers sad at End of Period at Cost or Sales Other Charges of Period Electric Pror-rty Organization S 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 units 57,605 - 608 - 56,997 Accessory electric equipment 14,498 - - - 14,498 Miscellaneous power plant equip. 4,725 405 2 - 5,128 Substation equip. 3,239 - - - 3,239 Miscellaneots electric property 74 - - - 74 Unfinished 8,951 construction 3,275 5,676 - -
Total Electric Prop-rty $241,159 $ 8,467 $614 $
- $249,012 Nuclear Fuel Nuclear fuel in $ 52,564 reactor S 52,564 $
Nuclear fuel in 40,394 process 35,905 35,167 - (30,678) Nuclear fuel - 42,557 - - - 42,557 spent Nuclear fuel - 35,679 stock 4,924 77 - 30,678
$135,950 $35,244 $- $
- $171,194 9
69 IV-5
Maine Yankee Atomic Power Company Form 10-K-198C Schedule V (continued) Maine Yankee Atomic Power Company ELECTRIC PROPERTY AND NUCLEAR FUEL For The Year Ended December 31, 1978 (Dollars in Thousands) Balance at Balance Beginning Additions Retirements Transfers and at End -
~
of Period at Cost or Sales Other Charges of Period Electric Property 7 -
$ 7 Organization $ $
r Land and land 522 - - - 522 rights Structures and - 56,025 improvements 55,861 166 2 Reactor plant - 101,189 equipment 101,084 126 21 Turbogenerator 56,658 947 - - 57,605 units Accessory electric 14,477 21 - - 14,498 equipment Miscellaneous - 4,725 power plant equip. 4,607 130 12 3,239 - - - 3,239 Substation equip. Miscellaneous - - 74 electric property 74 - Unfinished - 3,275 construction 2,537 738 - Total Electric
$239,066 $ 2,128 $ 35 - $241,159 Property $
Nuclear Fuel Nuclear fuel in $ 52,564 i reactor S 39,812 $
$- $ 12,752
! Nuclear fuel in (22,900) 35,905 process 33,140 25,665 - Nuclear fuel -- 9,355 42,557 spent 33,202 - - Nuclear fuel - 4,924 4,064 67 - 793 stock () $110,218 $25,732 $- $
- 4135,950 IV-6
- _ - - . - - - . . - - - - . . , , ~ , - - . _ . - .
Maina Ycakaa Atomic Pow;r C prny Form 10-K-1980 . . . . Schedule VI O Haine Yankee Atomic Power Company ACCUMULATED PROVISION FOR DEPRECI1 TION AND AMORTIZATION OF ELECTRIC PLANT AND NUCLEAR FUEL For The Years Ended December 31, (Dollars in Thousands) Additions Balance at Charged Balance Beg)nning to Costs Other at End 1980 of Period and Erpenses Retirements Changes of Period Electric Property $54,105 $ 8,319 $792 $171 $ 61,803 Nuclear Fuel $91,844 $24,024 $- S- $115,868 1979
$46,448 $614 $ (8) $54,105 Electric Property $_82279 _
Nuclear Fuel $76,525 $15,319 $- $
- $91,844 1978 Electric Property $38,313 $ 8,173 $35 $ (3) $46,448 Nuclear Fuel $59,114 $17,411 $_ $
- $76,525 See Note 1 of " Notes to Financial Statements" for the Company's depreciation and I amortization policies.
1 i l I l I 1 C j IV-7 i
s Maine Yankee Atomic Power Cornpanv 1 Schedule IX Short-Term Borrowings (Dollers in 1housands) Columri A Column B Column C Colu.on D Column E Column F Category of Balance at Weighted Maximum Amount Werage Amt. Weighted Daily End of Average Outstanding Outstanding Average j Short-Term Borrowings Year Interest During the Year During the Year Interest Rate l During the Year Rate Year Ended $6,992 17 905 December 31, 1980 Banks (1) $16,000 22 515 $20,155 E M Year Ended 3 9,300 $1,148 15.405 1 V December 31, 1979 Banks (1) $ 3,925 15 25% Year Ended ' December 31, 1978 Banks-(1) - - $ 3,900 $ 97 7 795 x I, .
'.,o Financial Statements a (1) See Note 3 to Notes m
m a ' $k s ua. M3y l
*1 0
4 't V i
SIGMATURES 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 under-signed, thereunto duly authorized. MAINE YANKEE ATOMIC POWER COMPANY By Robert S. Howe, Chier Accouncing Officer (Principal Accounting Officer) March 27, 1981 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By By Elwin W. Thurlow, President John F. G. Eichorn, Jr. and Director (Principal Director Executive Officer) March 27, 1981 March 27, 1981 By _ By William B. Ellis , Director Ihomas C. Webb, Vice March 27, 1961 llh President and Director (Principal Financial Officer) By March 27, 1981 Thomas A. Greenquist, Director March 2 7 , 1981 By ' Charles E. Monty, Vice By President and Director James E. Grifrin, Director March 27, 1981 March 27 , 1981 By By i Jonn B. Randazza, Vice Carroll R. Lee, Director 1 President and Director March 2 7 , 1981 March 27, 1981 By By Guy W. Nichols , Director Joan I. Bok, Director March 27, 1981 l - l March 27, 1981 By By Robert F. Scott, Director Ralph A. Brown, Director March 27, 1981 March 27, 1981 By By Donald C. Switzer, Director William F. Burt , Director March 27, 1981 March 27, 1981 By _ William C. fallman, Director ' IV-9 March 27, 1981 Y l
MAINE ELECTRIC POWER C0?!PANY, INC. {() Index to' Financial-Statements and Sch'edules 4 Financial Statements: Report of Independent Public Accountants. Statement of Income for the three years ended December 31, 1980. Balance Sheet at December 31, 1980 and 1979. Statement of Changes in Common Stock Investment for the three years ended December 31, 1980. ] Statement of Changes in Financial Position for the three years
- ended December 31, 1980.
- Notes to Financial Statements 1 Schedules:
I V Electric Property for the three years ended December 31, 1980.
/~N VI Accumulated Provision for Depreciation of Electric 1 Property
. (s_) for the three years ended December 31, 1980. All other schedules are omitted as the required information is inapplic-able or the information is presented in t% financial statements or-related notes. e s T 1 I w)
- 73
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Maine Electric Power Company, Inc. We havc examined the balance sheet of Maine Electric Power Company, Inc. (a Maine 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 ana the changes in its financial position for the three years ended Decem-ber 31, 1980, and tha supporting schedules present fairly the informa-tion required to be set forth therein, all in conformity with generally accepted accounting principles applied on a consistent basis. l l ARTHUR ANP RSEN & CO. Boston, Massachusetts, February 6, 1981. 1 9 74
- - . _ . . ~ - ~ , . - - . . - - - - - .. .
s Main.' Electric Power Company, Inc.
^
STATEMENT OF INCOME For the Three Years Ended December 31, 1980 ,
- (Dollars in Thousands Except per- Share Amounts)
Year Ended December 31, 1980 1979 1978 ELECTRIC OPERATING REVENUES $111,604 $98,122 $59,860
- O?ERATING EXPENSES Purchased Power (Note 1) -108,756 95,368 57,181~
Operation 303 206 182 - Maintenance (Note 1) 136 153 44 4 Depreciation (Note 1) 735 735 736 Taxes Federal and State Income > 1 (Note 2) 152 162 197
- Local Property and Otner 216 217 229 Total Operating Expenses 110,298 96,841 58,569 OPERATING INCOME 1,306 1,281 1,291 OTHER INCOME AND DEDUCTIONS, NET 110' 112-- 74 INCOME BEFORE INTEREST CHARGES- 1,416 1,393 1,365 INTEREST CHARGES Long-Term Debt (Note 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 Common Stock Outstanding _12,161 12,923 13,677 EARNINGS PER SHARE OF COMMON STOCT $ 12.00 $ 12.00 $ 12.00 DIVIDENDS DECLARED PER SILGE OF COMMON STOCK $ 12.00 $ 12.00 $ 12.00 The accompanying notes are an integral part<of these financial statements.
O 7T 1
Mains Elcctric Power Co pany, Inc. ., , BALANCE SIIEET (Dollars in Thousands) ASSETS December 31, 1980 1979 ELECTRIC PROPERTY, at Original Cost (Notes 1 and 3) (Sch. V) $18,588 $18,617 Less: Accumulated Depreciation (Note 1) (Sch. VI) 7,207 6,482 11,381 12,135 CURRENT ASSETS Cash (Note 4) 828 129 Temporary Investments, at Cost which approximates market value - 275 Accounts Receivable Associated Companies 1,579 1,165 Other 17,054 8,852 Other Current Assets 156 154 Total Current Assets 19,617 10,575 DEFERRED CHARGES 102 94
$31,100 $22,804 STOCKHOLDERS' INVESTMENT AND LIABILITIES CAPITALIZATION 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 9L.% First Mortgage Bonds due in Annual Installments through August 1, 1996-Less Sinking Fund Requirements (Note 3) 9,900 10a p60 Total Capitalization 11,073 11,807 CURRENT LIABILITIES Current Sinking Fund Requirements (Note 3) 584 660 Notes Payable - Banks (Note 4) 1,515 - Accounts Payable Associated Companies 36 90 10 468 Other 35 37 Dividends Payable 15,350 7,547 Accrued Purchased Power 427 466 Accrued Interest and Taxes 74 - Other Total Current Liabilities 18,031 9,208 DEFERRED CREDITS 1,818 1,696 Accumulated Deferred Income Taxes (Note 2) 10 9 Unamortized Investment Tax Credits (Note 2) 23 Unamortized Gain on Reacquired Cebt (Note 1) 169 1,996 1,729 Total Deferred Credits $22,804 S31,100 The accompanying notes are an integral part of these financial statements. 7b
Maine Electric Power Company, Inc. STATEMENT OF CIIANGES IN COMMON STOCK INVESTMENT O- For the Three _ Years Ended December 31, 1980 (Dollars in Thousands) Amount at Par Retained . Shares Value E,a rnings Total Balance December 31, 1977 13,984 $1,398 $ $1,398 Add (Deduct) Net Income 164 164 Dividends Declared (164) (164) Redemption of Stock (736) (73) (73) Balance December 31, 1978 13,248 1,325 1,325 Add (Deduct) Net Income 155 155 Dividends-Declared (155) (155) Redemption of Stock (781) (78) (78) Balance December 31, 1979 12,467 1,247 1,247 Add (Deduct) Net Incoine 146 146 Dividends Declared-O\ Redemption of Stock (734) (74) (146) (146) (74) Balance December 31, 1980 11,733 $1,173 $ $1,173 The accompanying notes are an integral part of these financial statements. I I 4 4 e 77 J
Maine Electric Power Company, M c. STATEMENT OF CHANGES IN FINANCIAL POS7 TION 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 1,036 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 (157) (23) (5) 799 870 892 Increase in Working Capital, exclusive of sinking fund requirements $ 203 $ 160 $ 194 Increase in k iing C'apital, exclusive of sinking fund requirements-Cash, Receivables and Temporary Investments $ 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.
O 72 1
Maine Electric Power Company, Inc. NOTES TO FINANCIAL STATEMENTS
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES The Company: The Company owns and operates a 345,000 volt transmis-sion interconnection, completed in 1971, extending from Wiscasset, Maine to the Canadian border at Orient, Maine, where it connects with a line of The New Brunswick Electric Power Commission (New Brunswick) under a 25-year Interconnection Agreement. Under a Par-ticipation Agreement which terminates in 1996, all costs of the Com-pany (including a return on invested capital), to the extent not met by transmission revenues, are paid by the participating utilities (Participants), which include most of the larger companies in New England and a group of publicly-owned systems. Under a Power Pur-chase Agreement, New Brunswick provided to the Participants over the interconnection up to 400,000 kilowatts of base load power in 1980. Under an Amendment Agreement, effective Jan ury 1,1981, New Bruns-wick will provide 133,000 kilowatts through October 31, 1985. The following is a list of those companies that purchase power from the Company and their respective entitlements: Percent of Entitlement Participant 1980 (400MW) 1981 (133MW) v Bangor Hydro-Electric Company 2.395% 1.9962% Boston Edison Company 16.250 13.5429 Boylston Municipal Light Department .030 .0248 Central Maine Power Company 10.274 5.8443 Danvers Municipal Light Department .371 1.1158 Eastern Maine Electric Co-operative, Inc. 2.583 7.7684 Fitchburg Gas and Electric Company .770 2.3158 Maine P'tblic Service Company .844 6.2977 1 Marbles. ad Municipal Light Department .170 .1413 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 Service Company of New Hampthire 26.250 20.8354 Shrewsbury Municipal Light Departwat .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 p Tat <t 100.000% 100.u000*.
'd 97
Maine Electric Power Company, Inc. NOTES TO FINANCIAL STATEMENTS
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued) The Company: (continued) The following Maine electric utilities own all of the Company's Common Stock: Ownership Interest Sponsor Central Maine Power Company 78.15% 14.19 Bangor Hydro Electric Company 7.49 Maine Public Service Company Woodland Water and Electric Company .17 100.00% Total Regulation: The Company is subject to the regulatory .uttherity of the Federal Energy Regulatory Commission and the Public Utilities Commission of the State of Maine as to operations, accounting and other matters. Depreciation and Maintenance: Depreciation is provided using the composite and straight-line methods at rates designed to 1996. fully depreciate all properties over the period ending July 1, Under the composite depreciation method, at the time depreciable properties are retired, the original cost, plus cost oi removal, less salvage, of such property is charged to accumulated deprecia-tion. Gains and icsses on bonds reacquired Unamortized Gains and Losses: to satisfy sinking fund requirements are deferred and amortized over the remaining original term of the Series A Bonds.
- 2. INCOME TAX EXPENSE The components of Federal and State income taxes reflected in the statement of income are as follows:
O ro
Maine Electric Power Company, Inc. NOTES TO FINANCIAL STATEMEh"fS 4 ' 2. INCOME TAX EXPENSE (continued) 4 Year Ended December 31, 1980 1979 1978 i (Dollars in Thousands) Federal: , Current $ 30 $ 21 $ 10 Deferred 105 121 162 Investment Tax Credit, Net (1) - (1) 134 142 171 State: Current 1 1 1 Deferred 17 19 25 18 20 26 l- Total Income Taxes $152 $162 $197 i The Company provides deferred Federal and state income taxes for the tax effects of timing differences between pre-tax accounting income and income subject to tax. The deferred provision represents prin-cipally the tax effects arising from the use of accelerated deprec-l g iation for income tax purposes which currently exceeds the amounts provided in the statement of income. Investment tax credits are de-ferred and amortized 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 % Amount % i (Dollars in Thousands) s 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 l Surtax exemption (19) (6.8) (19) (6.4) (13) (3.9) Other 2 .7 2 .6 1 .3 I Federal income tax provision $134 47.9% $142 47.8% $171 51.1% l l i e
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Maine Electric Power Compa m 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. COMPENSATING BALANCES The Company had lines of credit at year-end 1980 totaling $10,400,000.
With respect to $1,400,000, the average compensating balance is 15% of outstanding borrowings. The average 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 borrowings. With respect to $3,000,000 there is no compensating balance requirement but there is an annual fee of 5/8 of 1% of the line with interest at 110% of prime. The remaining $2,000,000 has no compensating balance requirement but has an annual fee of 3/8 of 1% of the line on the unused portion. p N Certain informat, ion related to these lines is as follows: 1980 1979 1978 (Dollars in Thousands) Total lines of credit at end of periods $10,400 $8,400 $8,400 Borrowings outstanding at end of the periods 1,515 - - Average daily outstanding borrowings for the twelve months ended 1,574 1,179 765 Average annual interest rate for the twelve mcuths 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 O sz
. , , , Schedule V Maine Electric Power Company, Inc.
O ELECTRIC PROPERTY (Dollars in Thousands) l l 4 Balance at December 31, Classification 1980 1979 1978 Intangible plant Organization $ 4 $ 4 $ 4 Franchises and consents 4 4 4 Miscellaneous intangible plant 25 25 25 Total intangible plant 33 33 33 j , Transmission plant Lcad and land rights 914 914 914 Structures and improvements 180 180 180 Station equipment 3,040 3,040 3,040 Towers and fixtures 615 615 015 Poles and fixtures 9,029 9,029 9,029 Overhead conductors and devices 4,563 4,563 4,563 Total transmission plant 18,341 18,341 18,341 General plant
/-' 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 F ant l 214 243 243 Total electric property $18,588 $18,617 $18,617 1
U 83
Schedule VI ,, , Maine Electric Power Company, Inc. Accumulated Provision for Depreciation and Amortization of Electric Property For the Years Ended D.cember 31, 1989, 1979 and 1978 (Dollars in Thousands) Additions Balance at Charged Balance Beginning to Profit Retire- Other at End of Period and Loss
- ments Changes of Period 1978 Electric property $5,011 $736 $- $
$5,747 1979 Electric property $5,747 $735 $- $
$6,482 1980 Electric property $6,432 $735 $29 $19 $7,207 hSee Note 1 of " Notes to Financial Statements" for the Company's depreciation policy O
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EXilIBIT 13
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; CXCCUllUC OfflCCTS k RALPH A BROWN C. HAZEN STETSON <
- Presiderit and Chairman of the Board k I "
Chief Executive Officer k( "
- 2 *) a G MELVIN HOVEY FRANK E LIV.NGSTON
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- k. , Treasurer. Secretary
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Vice President and Clerk
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/ b W Engineenng and Operations )
/ CLARENCE E CAMBRIDGE DONALD A LINDSAY Assistant Secre:tary Vice President-Subsidiary HALPtt A BROWN C HAZEN STETSON i Pre snfent and Chsef E=n nieve Chairman of the Hoard- PAUL R CARIANI .
Othcer. Maine Pubin 5erme Maine Pubhc Sarwice Company. g l Cornpany. Presque Isle. Maine Presque is;e Maine ; h
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. u s Financial Statements and Notes 5-15 m % t [
i b\ b I s Auditor's Opinion 16 f, p DON ALD F COLLINS D JAMES DAIGLE h Consolidated Financial Statistics 18-19 u[ t Prrs.d, nt President. Vs w Couins cc David D naigie & Sons. I p,ve. Year Summary of f Lar.non Maine Fort Kent. Maine Selected Financial Data 20 Chairman Aroostock Trust ' Company Caribou. M une .
. Eleven-Year Operating Statistics incide !
gQ b r Back Cover s i r ANNUAL MEETING. Second Tuesdaf in May [,, .. * . 3 RINCIPAL OFFICE: 209 State Street, he s j Presque it.le. Maine 04769 ,] er a Transfer Agent Manuf acturers Hanover Trust ? Conipany. New York
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~. Stock Rt.gistrar. Common Stock - l l Mr.nufa,turers Hanover Trust Company, New York j G MELVIN HOVEY THOMAS S PINKHAM Vice President- General Manager.
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p(,/ IRWIN F PORTER WALTER M REED. JR j President President. % Northern National Barim. Presque Isle. Maine Rei d F arms. Inc . F ort f airteeld. Maine {_, _ . _ _ _
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president's feller p to our stock /wirlers anti NJ etaploYers The year 1980 was a difficult year for our indus- The nuclear referendum, attempting to shut try. Interest rates started at a prime rate of 15%% down the Maine Yankee plant, was defeated Sep-dipped to a low of 114% in July and finally jumped tember 23,1980 by a statewide margin of 3 to 2. to 21%% before the year end The pr,ce of heavy In our own service area it was resoundingly de-oil used to generate electncity in our system feated 3 to 1. started the year at $23.45 per barrel, F.O.B. Sears-port, fell to $17.90 per barrelin April and May and 11is with, deep regret that we report the death of ended up at $32.99. Meanwhile, the overall rate of Ph; lip D. Tingley, a director since 1960. The Com-mflation averaged 12.4% for 1980. p ny will miss his dedicated effort and sage ad-vice. Vice President of Engineenng and Opera-Total kilowatt-hour sales increased 17,825,000 tions G. Melvin Hovey has been elected by the (3.4%) to 539,482,000 but firm sales increased directors to fill this vacancy. only 1%. The increase in secondary sales car..e mainly from sales of excess energy to The New You can see why 1980 was a year many of us Brunswick Electnc Power Commission dunng would like to forget. Perhaps, hnwever, there is off-peak hours. In 1930, consohdated operating reason for optimism. Both political parties finally seem to realize that the growth of government revenues reached $27,789,640, exceeding those of the previous twelve-month period by and regulation must be cut back, deficit spending
$6,549,911. The increase was partly a result of stopped, and taxes reduced and restructured so these additional recondary sales, but was mostly they will provide incentives for capital formation it:e result of higher fuel adjustment revenues - to reindustrialize America We can then build our which generated $6,474,100 of the increase. defenses strong once again. To this end you are very important people. It seems an opportune The Conipany's energy generating mix dunr11 time to make your views known to your Congres-1980 continued to be better than most in New sional represent itives on critical issues affecting ,
England 37.7% nuclear,22.3% hydro and 40.0% our business. I believe if these tNngs are done, m fossil. Hydro energy generation was less in 1980 inflation, high interest rates, and the value of the because of decreased flows (95.4% of normal) dollar will take care of themselves, as will the (V ) compared with 1979 when they reached 120% of not mal. unemployment problem. I see a beginning with the new sdministration. Let's help them succeed. Consohdated earnings per share for 1980 were To each of you our valued stockholders, our
$2.86, down $0.94 from last year's comparab e employees and our customers, we thank you for earnings of $3.80 (re-etated). The overall quality yo".i patience and understanding With your sup-of these earnings has hkewise deteriorated badly port we too will succeed.
+ since non-cash sources (Allowance for Funds . Sincerely, Used During Constru . tion and Foreign Ex. change Translation) ariounted to 109% of earn-mgs per share or $3.1't Due to this rapid dechne in earnings since tne beginning of 1940, the Company filed for rate Ralph A. Brown relief wi'h the Maine Public Utihties Commission hesh ! on September 2,1980 in an amount riow adjusted t<' $4,970,889 or an increase of approximately Presque Isle, Maine March 16,1981 , 13% over total 19M Maine Public Service rev-I enues. Between the commission staff and three i intervenmg groups, tt.e Company has been bom-barded by 407 daia requests containing 588 ques-tions, all of which have been answered in wntten form with 12 copies each. Hearings are scheduled " to start March 16, 1981. .,. 1 A. , The'Seabiook Nuclear units 1 and 2 in which h ?< T the Company has a 1.46% (33.6 megawatts) joint 9r interest are now 33% complete. About 88% of the basic engineering design is complete,96% of the f r ggf-equipment is on site or on order and 90% of the 4 A construction work is under contract The Com-pany has an investment in these two un'ts of
' -Q (v.) $20,458,909, including AFUDC, at year-end 1980. .
7
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.dnalysis of Financial Condition and Results of Operations - 1980 Revenue and Energy Sales Brunswick Electric Power Commission. Nuclear energy purchases from Maine Yankee Atomic Conschdated operating revenues continued to Power Company (Maine Yankee) were 3,966 MWh set new highs, with 1980 rnaching $27,789,640 less thara the 220,218 MWh of the previous year $6.519,91 ', or 30.8% more than such revenues of "9 " "" '"
the year t afore. Unfortunately for the Company "amn s d me ym and cuMomers ahke, nearly all of that increase n nce wM WoM &n%ng to hsome maine MM quam arose f rom the pr.ss-through of increased fue! ex- f 1980. Purchases from Maine Electric Power penses via fuel adjustment clauses Only $88,615 Company were up from 19.200 MWh m 1979 to of the huge rise in revenues can be related to in 0 Mause of a WW inmase growth in energy sales, which is indicative of the in capacity entitlement acquired from other New enormous impact of fuel cost incr1ases on the n u s Nginmng hh L M Company and its customers Except for nuclear energy from Maine Yankee, As indicated above, gains in energy sales .aer all purchases were generated by fossil fuels. As a those of 1979 were limited, with residential sales result, the total cost of purchased power (includ-staying about the same, while commercial and ing capacity charges) rose a staggering $3,870,896 from $8,881,077 in 1979 to $12,751,973 m 1980. Industrial small sales went up about 2.1% Com- As long as the OPEC nations continue to end-mercial and industrial large sales gained 1.0%, lessly raise their prices, no respite ;'om this trend and combined street and aree hghting remained can be seen until the Company's irnestment in on the same level as the year before. Saies for Seabrook Umts 1 and 2 reaches fruition and the resale showed a large 15.5% pickup from units inf use additional nuclear-generated energy 105,775 MWh to 122,137 MWh, inough most of into the Company's system. the gain was represented by increased economy sales to The New Brunswick Electric Power Com- Operatmg expenses of the steam plants were mission, which increased from 13.398 MWh in $ 1,520,763 more taan 1979, prirnarily due to an 1979 to 29,231 MWh ir' 1980 Sales to public au- increase of $1,482,972 in fuel expenses. This thonties were 36.942 MWh, down from 40,417 due increase was brought on by increased steam pnrnanly to the loss of 2.384 MWh in sales to production as well as leapfrogging pnces of Loring Air Force Base. On the whole, primary fossil f uels. Diesel operating costs were $28,234 energy sales were up 0 9% in 1980 from over the prior year,59,884 of which is attributable 475,856 MWh to 480.245 MWh, while secondary to greater fuel expenses, though net diesel gen-sales gamed 29 3% f ron. 45,801 k Wh to eration was 43 MWh less than in 1979. Production 59,237 MWh. Additionalinformation on revenues, maintenance costs were up $90,142 (30.4%) sales, etc., may be f ound in the eleven-year con- mainly due to periodic overhaul of the steam solidated operating statistics summary at the un ts at Canbou, though hydro maintenance was back of this report. up 25 3% and diesel mamtenance was hgher by the same percentage. Operating Expenses Expenses of operating and maintaming the transmission system were higher by 10.4%, in-Reflecting a speedup in the collection of fuel creasing from $882,288 in 1979 to $974.120 in costs through fuel adjustment revenues dunng 80, n)fiecting the general inflation rate. Some 1980, deferred fuel expenses were a positive ccounts were up more than others, poncipally $929.114 compared with a negative $875,165 in m intenance of overhecd knes Similarly, dis'r - 1979. (A positive deferred expense signifies that bution operation and maintenance charges were a hke net amount has been recovered through up 10.5% with overnead lines mamtenance bemg opetodng revenues; a negative deferred fuel ex- propor.tionately a little higher than the other dis-inbution accounts. Customer account expenses pense denotes a f ailure to collect that net amount of fuel costs during that accounting period.) expanded from $503,086 to $626.542 (up 24.5%) with the greatest increase being in uncollectible Af ter an exceptionally favoiable water yea, m accounts, which rose from $71,100 in 1979 to 1979 (120 0 % of normal), hydro generation $161,716 in 1980. Expenses for customer services dropped to 95 4% of normalin 1980. Thus, a net and information increased from $134,513 to. of 127,630 MWh were produced in the hydro $162,137 (20.5%) partially as a result of expand-plants in 1980 compared with the previous year's ing ef forts toward energy conserva, son Adminis-very high 162.107 MWh Because less hydro gen- trative and general accounts reflect expenses eration was available, more energy had to be 15.700 greater than in 1979, up from $1,614,843 purchaced from others or generated in the Com- to $1,867,754 In this group, regulatory commis-pany's fossil-fuel plants Fossil-fuel-produced sion expenses grew by 179 Saa f rom $53,313 to steam and diesel energy amounted to 47,049 MWh $149.006, puncipall" because of costs associated in 1980 compared with 20.616 MWh in 1979 Pur- with a petition for rate rehef filed with the Maine chases of energy in 1980 totaled 398,634 MWh Pubhc Utilities Commission (PUC) of the State of agamst 378,917 MWh m 1979 Most of that in- Mame on September 2,1980. During 1980 several crease was in energy purchases from The New projects requinng the services of outside consul-2
e . ., tants were undertaken, focusing on a ten-year at the subsidiary's Tinker Station. Approximately power supply study and a load research study $376,000 was paid for voltage conversions and ( and causing an mcrease f rom $165,094 to
$210 348 (27.4%) in expenses of outside services substation improvements, and nearly $286,000 was spent for meters, services, transformers and
(% employed it is anticipated that the data resulting other customer-related f acilities. Distribution line from the load research study will be required to extens:ons, rebuilds and highway relocations re-fulfill requirements of the Public Utilities Regula- quired about $776,000 while improvements to the tory Pohcies Act (PURPA), which will hkely be transmission system used about $20,000. Street applied to the Company by the PUC, even though hghtmg, general equipment and miscellaneous the Company's sales are presently lower than the items absorbed the remaining $216,000-threshold level set by PURPA. Though adminis-trative and general expenses other'than those in 1981 cash expenditures for construction are noted above reflec'ed increases and decreases estimated at approximately $9,600,000, the bulk from the prior year. the net increasein those other of which wfil be needed for the Company's share accounts was held to 8.0%, somewhat less than of the contmumg construction of Seabrook Units the general iallation rate. 1 nd 2, which is expected to be in the area of
$6,700,000, including nuclear fuel. Transmiscion Depreciation and amortization expenses were improvements will need about $196,000, and dis-
$67,953 higher in 1980 due to increases in de- tribution requirements approximately $924,000.
preciable property. Taxes other than income Reconstruction of the Caribou Dam is expected taxes charged agaii at income were up $85.983, to cost nearly $900,000, while the replacement of reflecting higher property taxes, more social three penstocks at the subsidiary's Tinker Station security taxes, and a new state assessment to will take about $360,000 (U.S. dollaist The re-help pay the expenses of the PUC ($5,530). In- maimng $520,000 is budgeted for numerous mis-ciuding deferred taxes and investment tax credit cellaneous improvements and needed equip-adjustments, income taxes charged to operating ment. The Company's share of the cost of Sea-expenses dropped from $1,192,064 in 1979 to brook Units 1 and 2 is presently estimated at
$168,800 in 1980 as a result of lower taxable in- $57,000,000 including initial fuel ano Allowance come. Income taxes currently payable weredown for Funds Used During Construction. The Com-from $235.209 to $154.149. The annual provision pany's ownership interest of 1.46% represents for deferred taxes was reduced greatly from 33,600 kilowatts of new nuclear capacity.
$755,452 >
previous year to $8,626 in 1980, principaliy due to a reversal of deferred taxes re-lated to deferred fuel expenses. Investment tax Affiliated Companies O." credit adjustments charged to income in 1980 were only $18.317 comparw wi.h $213.695 in The Company owns 100% of the common stock , 1979, resulting from a decrease in the abihty to (except for directors' qualifying shares) of Maine absorb such credits against otherwise current and New Brunswick Electrical Power Company, taxes payable Total invest nent tax credit for Limited, a Canadian corporation (referred to in 1980 was S544,126, $408,740 0f which was carried this report as the subs' diary). The subsidiary back to 1977. That investment tax credit com. Owns and operates the Tinker Station, who is pares with the previous year's $847,409. $590.022 located in the Provmce of New Brunswick. Cana-of which was carried back to 1976. The carried. da, just a few miles across the international back portion of ITC is charged to the balance borde, from the parent company's servicc arca ol sheet as a refund due from the Internal Revenue Aroostook County in Maine. Principally a hydro Service, rather than tr the current income state _ generahng facihty, the Tmker Station has five ment. hydro units with a total capacity of 34,000 kilo-watts and a small diesel unit of 1 90 kilowatts. As condition of its charter, the subsidiary is re-Construction quired to first serve the small communibus of
. Andover, Perth, and Carlingford in New Wune The Company and its subsidiary spent wick, with the remainder of the available enery/
$7.212,529 on additions, replacement
- and im- bemg exported to the parent company's system provements to their utihty properties and equip- n Maine.
ment m 1980, including uncompleted construc-tion work in progress. Approximately $5,272,000 The parent company is the owner of 5% of the was paid for progress payments on the Com- common stock of the Mair.e Yankee Atomic Power, pany's 1.46% interest in Seabrook Units 1 and 2, Company (Maine Yankee) and is entitled to pur-nuclear units being constructed by Pubhc Ser- chase approximately 5% of the output from the vice Company at New Hampshire as lead parte - 855.000-kilowatt nuclear plant located at Wis-pant. Additional work on Wilham F. Wyman Una casset, Maine. That nuclear energy entitlement sr4, a new jointly-owned, ct fired unit being has proved of enormous benefit to the Company operated by Central Mame Pcwer Company, re- and its customers. With the exception of hydro quired about $130,000 from the Corapany to energy which has no fuel cost at all, nuclear cover its share of those expenditures. A new. generation is the most economical of all available improved, two-way radio system required about sourcas Without such nuclear capacity, fuel D)
$120,000, while $17,000 was needed for prelim- costs would be astronomically higher and con-saary work on the replacement of three penstocks sumers' bills wculd have to reflect that fact.
3
-.i - _ - _ - _ - _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _ - _ . _- _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ - . __ ._ n
e, o , Mauie Electoc Power Company,inc (MEPC tablish forward-looking fuel adjustment regula-owns and operates a 180-mile,345-kilovolt trar; tions for all Maine electric utility companies. mission line connecting utilities in the New En3 These proceedings culminated in new rules re-land Power Pool with The New Brunswick Elet quinng companies to estimate fuel costs,includ-tric Power Commission system in Canada ing purchased energy, and kilowatt-hour sales (NBEPC) MEPCO purchases Canadian power for a future penod (normally twelve months). under contracts with NBEPC and sells it to vari- Effective September 1,1980 the Cumpany imple-ous New England utikties Owning 7.49% of the nented the new regulations for an truttal nine-common stock of MEPCO. the parent companyis 1onth period to coincide with the statutory entitled to purchase a small amount of MEPCO enod for the pending rate proceeding Coinci-capacity and related energy (3.4 megawatts). In dont with the inception of new rates resulting addition to that entitlement, the Cr"npany has from the rate case, an estimated future fuel ad-acquired another 5 MW assigned to it by two justment factor will beimo!cmented The regula-other New Er.glan1 utilities for the period Novem- tions allow petitions for changes in the fuel ad-ber 1, 1980 to October 31, 1981, af ter which tustment rate after ninety days if the estimates another 5 MW will be acquired, making total and actual data bece ne too divargent. Though a MEPCO capacity 13 4 megawatts after that date. divergence has occurred,it had not been decided The additional 10 MW of purchased capacity at the t.m3 of this writing whether or not a revision entitlements are contingent, in part, upon the wil! 5e sought. It is interesting to note that the PUC allowing them in base ratas, as part of the PUC has revised its new regulations, provid-Company's pending rate request. The .viEPCO ing for interest on under-collec'rns or met transmission hne is also the path by which Maine collections at a rate approxim.% , .eubMys Yankee and Wyman #4 eneigy is dehvered into cost of money. This will take ei! . , ae time of the NBEPC system and then wheeled to the the next fuel adjustment change. parent company through its interconnections with NBEPC at the international border. Pursuant to an October 1979 oider by the Fed-eral Energy Regulatory Commissio., the pare _nt company on January 14, 1980 refunded to its wholesale customers $632,614.51 (including interest of $175,871.11) of fuel adiustment sur-Regulatory Proceedings charge revenues which had been collected in 1975 and 1976 At the time of the refund, the case Because of its rapidly dechnmg earnings, par- was still on appeal with the United States Court ticularly cash earnings, the Company filed a of Appeals for the First Distnct. On June 6,1980 petition for rate rehef with the PUC on September the court denied the Company's petition and the 2.1980 if new rates are granted as requested, the Company has ceased further action in the case. Company s base revenues would mcrease by T.ie refund. including nterest,(net of Federaland I approximately $5,000,000. Management has al- State income Taxes) has been charged to Re-ways considered the Company to be too small to tained Earnings at the beginning of the period in l 19n Financial statements m this report have I justify having a separate rate department How-ever, the three intervenors in the rate case have been restated, as appropriate, to retroactively managed to bombard the Company with data re- recognize the effect of the adjustments m proper quests with more than 400 items, with dozens of years datmg back to 197C sub-parts, each of which must be responded to In respect to wholer de sales. it s expected that in a timely fashion to fulfill the requirements of the Company will filc a new rate proceeding with the so-called " discovery" process The Compar s the Federal Energy Regulatory Commission by may be forced to add several staff positions to mid-1981. handle such matters in the future. The cost of time and paper to meet these requirements has been tr.gntening and evantually will have to be passed on to she ratepayers Pubhc hearings in Financial Condition the rate case are scheduled to be held in March. Accordmg to Mame statute, the PUC must render in 1980 the parent company issued an addi-a decision by June 2,1981 tional $5,500,000 of bank notes to financeits con-During 1979 and 1980 the PUC conducted an tinu.ng construction program, making a total of mvestigation to determine what items could be $3.100.000 of such notes outstanding at the end' mcluded in the fuel adjustment charges for re- of the year Because cash earninga in 1980 have placement energy costs incurred as a result of a been insufficient to generate adequate interest Nuclear Regulatory Commission shutdown of the coverages. only a minimum amount of unsecured Maine Yankee nuclear plant in the spnng oi1979 long-term debt (no secured debt) may be issued It is with considerable rehet that we are now able at this writing. The generation of needed interest to report that the total replacement costs of coverages is contingent upon the PUC allowing a
$ 1.541,465 was finally recovered through fuel sManh,y incmase in rams as a resd of me adjustment bilhngs as of December 31,1980. Company s pending a.e request. The Company plans to continue bank borrowing to meet on-The PJC has also conducted a heanng to es- < cont,noed on page 71 4
1 Maine Public Service Company w , - (Oj ain! Sub.,iiliary e x statements of consolidated income Year Ended December 31, I Restated (Note 10) 1980 1979 1978 Operating Revenues . . . . . ... .... .... .. $27,789,640 $21.239,729 $_19,868,765 Operating Expenses Operation: Power Purchased. . . ... .. ... 12,751,973 8,881,077 7,638,595 Other . . . . . .. . ... 8,013,782 4.170.629 3.620,652 Maintenance . . . .... . . .. ... .. . . .... 916,875 723.93o 764,282 Depreciation (Note 1) . .. . ...... .. . . .. .. 1,770,604 1,702.651 1.404,171 Taxes: Other Than income. .. .. ... .. . .. . 878,008 792,025 66%456 State income . . . . . . . ........ ....... . . . 21,832 45.010 1/'.961 U.S. and Canadian Federal .nceme (Note 5): Current ..... . ...... ... .... .. . 132,317 164,227 266,262 Deferred-Related to Deferred Fuel Expense . .. (462,162) 409,045 429,510 Other Deferred-Net . . . ... .. 458,419 334.210 284.467 investment Tax Credits ... . . ... . .. .. 18,317 213.695 , 881,380 Total Operating Expenses. .. . . .. 24,499,965 17,436,505 16.450,736 O Operating income . .. ... . 3,289,675 3,803,224 3.418,029 Other income (Deductions) Equity in income of Joint Ventures (Notes 1 & 3). . . 339,635 344,123 347,403 Allowance for Equity Funds Used During Construction (Note 1) . .. ....... . .. . . 652,191 241,459 312.264 Foreign Exchange (Loss) Gain . .. ... .. ... .. (21,845) (44,210) 103.652 Other-Net . . .. .. . . 16,012 26,685 (69.025) Total . . . .... .. . . . ... .. 985,993 568,057 694.294 income Before Interest Charges . ... . . . . .. ... . 4,275,668 4.371.281 4.112.323 Interest Charges Long-Term Debt, etc. . ... ............ .
. 3,263,503 2.747.255 1,494,463 Less Allowance for Borrowed Funds Used Dunng Con-truction (Note 1) ,. . . . (1,475,677) (1,178,890) (208.176)
Total . . . 1,787,826 1,568.365 1.286.287 Net income . . . . . .... ..... . . . .. 2,487,842 2.802.916 2.826.036 Dividends on Preferred Stock . . . 556,509 262.134 173.428 Net income Available for Common Stock .. . . . .. . . $ 1,931,333 ! 2.540,782 $ 2,646.608 Earnings Per Share of Common Stock ... ... . .. $2.86 $3 80 $3.97 Average Shares Outstanding .... .. . 6J5,723 668.576 666.380 5
,I
Maine Public Service Company asial Sulaitliary Sl(lleillCillS Of CollSUl5(l(lle($ rel(lille($ earitillj.(S December 31, 1980 1979 1978 Retained Earnings, Balance at beginning of year: As praviously reported . . .. , , $12,128,080 $10.791,237 $ 9.196,861 Prior period adjustment (Note 10) (309,270) (283,028) (262,369) As Restated 11,818,810 10,508,209 8,934,492 Net Income for the year. . 2,487,842 2,802,916 2,826.036 Dividends: Preferred Stock . .... .. .. (556,509) (262,134) (179,428) Common Stock (per share. $1.92 in 1980,
$1.84 in 1979 and $1.61 in 1978) . (1,297,388) (1,230,181) (1,072,891)
Miscellaneous Charge . . (52,984) _ Retained Earnings, Balance at end of year . $12,399,771 $ 11,818,810 $}0,508.209_
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1 reticw of 19H0 operations N going construction needs until such time as suf- the Maine voters in September.1980. We are t 1 facient interest coverages have been generated happy to report that this ill-advised bill was re- ] so that a reasonable amount of long-term debt jected by the people by a vote of 3 to 2. . may be issued It seems doubtfui that such a level can be attained before the second quarter of Sub'ect I to control of the board of directors, the 1982. No major issue of common stock is pres- Company and its subsidiary continue to avail ently planned, though it is pointed out that minor themselves of advisory and other services of amounts of new common stock are regularly is- Stone & Webster Management Consultant, Inc. sued in accordance with provisions of the Com- The Company's common stock is fisted and pany's Employees Stock Ownership Plan, a traded on the American Stock Exchange -Only i TRASOP plan quahtied under the Tax Reduction common stockholders are enti' led to vote at the Act of 1975, as amended During 1980, 5,282 annual meeting except in the ccse of default shares of common stock were issued and sold to (considered unlikely) under the pruisions of the 3 the ESOP trust, increasing common equity by Articles of incorporation relating to the preferred
$90,540.
stock or as may be required by applicable law. There were 678,307 shares of common stock out-standing at December 31,1980. Shares were held Employees by 3,482 stocknolder.; in 48 states, the District of Columbia, the Virgin Islands, Canada West Ger-The parent company had 168 full time ern- many and Mexico. It is interesting to note that ployees at the end of 1980 while the subsidiary female stockholders outnumber male,1,208 to had 11 employees at its Tinker Station, identical 1,075. Stock is held by 860 joint tenants, with the to the numbers employed at the end of the pre- remaining 339 covered by miscellaneous cate-vious year Consolidated payroll costs for 1980 gories. In the state of Maine. 592 holders held amounted to $3.280.996. 9.3% more than the 132,519 shares,353 with 89.978 shares residing comparable floure of $3,000.919 for 1979. In ac- in the Company's service area of Aroostook cordance with the second year of the parent County. There were 129 holders of the 10.180 company's contract with the International shares of 4.75% preferred stock,3 of the 29,100-Brotherhood of Electrical Workers, union em- shares of 9' % preferred mock and 3 of the 80,000 pMyees' base pay rates were increased 7%, ef, shares of 9%% preferred stock.
- fective October 1,1980. Also on that date, some Dividend information and market price da
- a
- () previously agreed-upon changes in fringe bene- relating to the common stock are shown in the
, fits became effechve. Commensurate increases following tabulation for the two most recent in non-union pay scales of the parent company calendar years: and subsidiary were initiated begmning with the first pay period in December. General The parent company engages in the produc-tion, transmission and distribution of electric M8'ket Price Dividends energy, serving retail and wholesale customers High Low Paid Per share in all of Aroostook County and a small portion of 1979 Penobscot County in northern Maine. The ser- First Quarter 19% - 17% $0.41 vice area is approximately 3,600 square miles Second Quarter 19 - 17% 0.46 with a relatively sparse population. Third Quarter 19h - 18% 0.46
" ~
!~ For the past several years, we have mentioned ! in this space the Indian Land Claims Case, a suit 1980 brought by the fedei11 government on behalf of First Quarter 17% - 14 % 0.46 the Passam tquoddy and Penobscot tribes. seek- Second Quarter 18% - 14 % 0.48 ,i ing the return of 12.5 million acres of Maineland Third Quarter 17% - 15% 0.48 ! to the Indians Alllegal barriers to the settlement Fourth Quarter 16 % - 13 % 0.48 i ~ of this case apparer'lly have been overcome and Congress has appropriated the necessary funds to satisfy the claims, so that we feel it is now pmper to consider the case closed. An initiated bili. An Act to Prohibit the Genera- , tion of Elecinc Power by Means of Nuclear Fis-sion, which would have closed Maine Yankee, r was not passed by the Legis'ature and went tc 7 a t
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1 Maine Public Service Company ain! Sulmiiliary consolidat December 31, Restated g33gf3 (Note 10; 1980 1979 Utility Plant (Notes 1 and 4) Electric Plant in Service. $55,979,721 $54.667,859 Less Accumulated Depreciation 20,219,504 18,849.887 Net Electric Plant in Service. 35,760,217 35,817,972 Construction Work-in-Progress. . 20,626,495 14,575.898 Total . . 56,386,712 50,393.870 investments in Associated Companies (Notes 1 and 3) Maine Yankee Atomic Power Company 3,339,711 3.340,759 f.1aine Electric Power Company, Inc. 87,388 92,888 Total . 3,427,099 3.433.647 Net Utility Plant and Investment in Associated Companies 59,813,811 _ 53,827,517 Current Assets Cash . . 733,970 961,327 Deposits for interest and dividends . 516,644 492,367 Accoun:s Receivable' Customer (less allowcnce for uncollectible accounts-1980,
$76.300.1979. $63.487) 2,652,247 1,954,221 Other. .... . . .. .... ...
402,000 266,151 Refundable Federal income Taxes (Notes 1 and 10) 597,907 1,034,947 Deferred Fuel and Purchased Energy Costs (Note 1) 1,323,487 2,252,601 Materials. Fuel, and Supplies (at average cost) 1,810,348 1,340,497 Prepayments 43,052 90,218 Total . 8,079,655 8.392,329 Deferred Debits Unamortized Debt Expense (being amortized over terms of related debt) . . 234,801 253.205 Miscellaneous (Note 4) 485,316 406.796 Total . 720,117 660,003
$ 68,613,583 $62,879.849 See Notes to Consolidated Financial Statements.
8
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'aHCC SilCetS December 31,
""' 'c d liabilities and Caoital I (Note 10) 1980 1979 Capitalization Common Shareholders Equity (Note 8);
Common Stock * , . . ... ... . . . . . . . . $ 4,748,149 $ 4,711,175 Paid.in Capital . .. .. . . . . . .. . . . . . . 1,773,557 - 1,697.256 Retained Earmngs . . .... ..... . .. . . . . . . . 12,399,771 11,818.810 Total . . .. ...... .. . . . . . . . 18,921,477 18.227.241 Redeemable Cumulative Preferred Stock" (Note 9) ... . . . . . 5,964,000 6.069.000 Long-Term Debt * (less current maturities) . .. . . . . 25,414,040 25.941.208 Current Liabilittes Long-Term Debt Due Within One Year: 30<o Senes Bond Due September 1.1980 710.000 O Other . . ... . ... .... . . . .. . . . . . 505,664 518.128 Notes Payable to Banks (Note 6) ... . . . . 8,100,000 2.600.000 Accounts Payable .. .. ...... ..... . . . . . . 2,601,050 1.659.082 olesale Surcharge Refund (Note 10) . .... . . . . . . . . . . . . . -- 632,615 seferred Inco 9e Taxes Related to Deferred Fuel Costs (Note 1) 658,193 1,120,355 eidends Declared . . .. .... .. .. . . . . . . . . 463,802 438,935 Lustomer Deposits . . . . .... . .. . . . . 18,611 18.141 Taxes Accrued . . .. . . . . . 67,659 61,207 Interest Accrued. .. ... . . . . . . . 626,925 585,783 Total . . . .... . . . 13,041,904. . . _ _ 8.344.246 Deferred Credits 2,242,397 1,783.978 income Taxes (Note 1) . . . . . . . inves;mant Tax Credits (Note 1) .. . . . . . . . 2,911,499 2,474,105 Miscellaneous .. . . .. . . . . 118,266 40.071-Total . . . .. .. . . . . . . . . 5,272,162 4.298.154
$68,613,583 $62.879.849 O
*See schedules of capitalizatoon data.
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statements of source of consolidatedfunds for plant additions and replacements
> },T Year Ended December 31, Restated (Note 10) 1980 1979 1978 Source of Funds Funds From Operations:
Net incorhe ... .... . .. . ... $ 2,487,842 $ 2,802,916 $ 2,826,036 Principal Non-Cash Charges (credits) to income: Depreciation (Note 1) . .... . . 1,770,604 1,702,651 1.494,171 Deferred Income Taxes-Net . 458,419 334,210 284,467 Deferred Investment Tax Credits . . . . ... 437,394 740,342 1,050,960 Allowaace For Equity Funds Used During Construction (Nc'e 1) . . . .... ..... ... (652,191) (241,459) (312,264) Foreign Exchange Loss (Gain) (Note 1). 21,845 44,210 (103,652) Other . 109,085 (63,346) 95.795 Funds From Operations. , 4,632,998 5,319,524 5,335,513 Less: Dividends on Preferred and Common Stock (1,853,897) (1,492,315) (1,252,319) Miscel!aneous Charge to Retained Earnings (52,984) -- -- Funds Retained in the Business . , 2,726,117 3,827.209 4,083,194 Funds From (For) Financing-Net: Notes Payable to Banks. . . ... ... ... 5,500,000 (6.800,000) 9,400,000 issuance of Redeemable Preferred Stock and Long-Term Debt . . ... .... ... ..... .. 12,000,000 -- Reduction of Long-Term Deot and Capital Stock-Net (1,263,202) (480.390) (574.113) Funds From Financis.g--Net 4,236,798 4,719,610 8.825,887 Net Funds Available 6,962,915 8,546,819 12,909,081 increase (Decrease)in Available Funds Decrease (Increase) in Working Capital (e e below) 232,796 (485,799) (1,572,732) Other-Net . 16,818 57,810 27,436 Funds Used For Plant Additions and Replacements $ 7,212.529 _ $_ 8.118 830 $_11J63,785 increase (Decrease) in Working Capital by Components (excluding long-term debt due within one year and notes payable to banks): Cash . .. ...
$ (227,357) $ 375.998 $ 128,432 Deposits for interest and Dividends. .. ...
24,277 120,605 19,201 Accounts Receivable-Net and Refundable income Taxes 396,835 (244,951) 1,196,882 Deferred Fuel and Purchased Energy Costs , (929,114) 875,165 831,741 Materials Fuel and Supplies 469,851 267,484 183,946 Prepayments (47,166) 29,002 (12,595) Accounts Payable ..... (941,968) (173,057) (273,024) Wholesale Surcharge Refund (Note 10) ... .... 632,615 (52,215) (41,107) Deferred income Taxes Related to Deferred Fuel Costs . 462,162 (409,045) (429.510) Taxes Accrued ... ... (6,452) (31,888) 14,507 Interest Accrued and Other Current Liabilities-Net (66,479) (271.299) (45,741) Increase (Decrease) in Working Capita: $ (232,796) $ 485,799 $ 1,572.732 See Notes to Consohdated Financial Statements. 10 J
s' ee associated with equity funds have been excluded IlOlCS lO COllSO((([UlC(/ J((TlGTlC[df f rom funds provided from operations in the state-ments of source of consolidated funds for plant 3f ggg77g ggg g3 (Q"j additions and replacements. Maintenance and repairs, including replacement of minor items of property, are charged to maintenance expensu
- 1. ACCOUNTING POLICIES, ETC. as incurred. The companies' properties, with l minor exceptions, are subject to a first mortgage Regulations The Company is subject to the reg- tien.
ulatory authority of the Maine Public Utilities Commission (PUC) and, in respect to wholesale Depreciation Depreciation is provided on com-rates, the Federal Energy Regulatory Commis- posite bases using the straight-line method for siori (FERC). (See Note 10) financial reporting purposes and the declining balance method for tax puyoses. Consolidation The accompanying consolidated l linancial statements include the accounts of the By order of the Maine Public Utilities Commis-Company and its wholly-owned Canadian subsi- sion, the Company records income tax reduc-diary, Maine and New Brunswick Electrical Power tions, which result from the use of liberalized Company, Limited. Intercompany items have depreciation, by the "normahzation" method for been eliminated in consolidation. Non-U.S. all property additions. Related deferred income assets and habihties are translated into U.S. taxes recorded in 1980,1979 and 1978 amounted dollars at year-end exchange rates, except for to $419,543 $370,995 and $300,440.espectively. property plant and equipment, which are trans- The Subsidiary records income tax reductions by lated at approximate rates prevailing when ac- the " flow-through" method for all differences quired. Income and expense items are translated between book and tax depreciation. at average exchange rates prevailing during the year, except for depreciation which is trans- Investment Tax Credit The Company defers lated at historical rates. Foreign currency trans- incestment tax credits ($548,482, $847,409 and lation adjustments are reflected in income cur- $1.178,500 in 1980,1979 & 1978, respectively) rently. and amortizes the credits over the estimated use-fut lives of the related utihty plant. In all three Deferred Fuel and Purchased Energy Costs years the available investment tax credit ex-The portions of fuel and purchased energy ceeded the maximum allowable to offset the tax costs which are recoverable from customers liability. The excesses were carried back result-(L 'p) under the operation of f uel and purchased energy ing in $408,740. $590,022 and $276,792 of refund-adjustment clauses are def erred until the periods able federal income taxes for 1980,1979 and in which the related revenues are billed. 1978 respectively. Utility Plant Util..y plant is stated at original Investments The Ccmpany records its invest-cost which, as to construction, includes all direct meats in the Common Stock of Maine Yankee labor and material, as well as related indirect Atomic Power Company (Maine Yankee) (5% construction costs including general engineer- ownership), a jointly owned nuclear electric ing, supervision and similar overhead items, and power company, and the Common Stock of allowances for costs of funds used during con- Maine Electric Power Company (MEPCO) (7.49% struction (AFUDC) at 12.69% during 1980, at ownership), a jointly owned electric transmission 12.48% during 1979 and at 9 98% during 1978. company, on the equity method. (See Note ). In accordance with an order of the FERC, AFUDC applicable to borrowed and equity funds are The Common Stock of the Subsidiary is pledged shown separately in the accompanying state- as additional collateral for the first mortgage and ments of consohdated income and the AFUDC collarteral trust bonds of the Company.
- 2. GEOGRAPHIC BUSINESS SEGMENTS The following table summarizes the compasm s* operations in the two countries in which they operate (000 omitted):
Company Subsidiary Adjustments and United States Canada Eliminations Consolidated For the Year Ended December 31,1980:
$27,638 $ 152 $27,790 Sales to Unaffiliated Customers Intercompany Revenues 81 775 $ (856)
Total $3,719 $ 927 $ (856) $27,790
%J INote 2 continued on page r2) 11
.. a .
Operating Profit Before income Taxes S 3,188 $ 262 $ 8 $ 3,458 income Taxes 83 86 169 Operating income $ 3,105 $ 176 $ 8 $ 3,289 Identifiable Assets at December 31,1980 $63,679 $4,935 $68,614 For the Year Ended December 31, 1979: Sales to Unaf filiated Customers $21.090 $ 150 -- $21,240 Intercompany Revenues 81 900 $ (981) Total $21,171 $ 1,050 $ (981) $21,240 Operating Profit Before income Taxes $ 4,536 $ 427 $ 6 $ 4,969 1,008 158 -- 1,166 income Taxes (A) Operating income (A) $ 3,528 $ 269 $ 6 $ 3,803 Identifiable Assets at December 31,1979(A) $57,884 $4,996 $62,880 For the Year Ended December .~ .978: $19,869 Sales to Unaffiliated Customers $19,717 $ 152 Intercompany Revenues 81 757 $ (838)
$19,798 $ 909 $ (838) $19,869 Total
$ 5,176 $ 276 -- $ 5,452 Operating Profit Before income Taxes 2,034 income Taxes (A) 1.956 78 Operating Income ( A) $ 3.220 $ 198 --
. $ 3.418 Identif table Assets at December 31,1978 ( A) $49,783 $5,042 $54,825 The identifiable assets,by company, are those assets used in each company's operations, exc!udmg intercompany receivables and investments.
(A) Restated, See Note 10.
- 3. INVESTMENTS IN JOINTLY-OWNED COMPANIES Davidends received during 1980,1979 and 1978 from Maine Yankee were approximatelv $325,000,
$333,000 and $335,000, respectively, and from MEPCO approximately $11,000 in 1980, and $12,000 in both 1979 and 1978.
Condensed financialinformation for Maine Yankee and MEPCO is as follows: Maine Yankee MEPCO 1980 1979 1978 1980 1979 1978 (Dollars in Thousands) Earnings Operating revenues $ 84.245 $ 68.867 $ 70,373 $111,604 $ 98,122 5 59,860 Earnings applicable to Common 164 Stock $ 6,574 $ 6,650 $ 6,702 $ 146 $ 155 $ Company's equity share of net earnings $ 329 $ 333 $ 335 $ 11 $ 12 $ 12 investment Total assets $296,724 5287,105 $265,955 $ 31.100 $ 22,804 > ?0,812 Less: Preferred Stock 11,980 13,070 13,696 -- - 134,823 139,373 128,818 10,484 11.220 11,880 Long-term debt Other liabilities and deferred 56,657 19,443 10,337 7,607 credits 82,869 67,805 Net assets $ 67,052 $ 66,857 $ 66,784 $ 1,173 $ 1,247 $ 1,325
$ 3,353 $ 3,341 $ 3,339 $ 88 $ 93 $ 99 Company's equity in net assets 12
s* e
- 4. INVESTMENTS IN ber 31,1980 are as follows: 1) an open credit JOINTLY-OWNED arrangement up to $1,200,000 with interest at the O UTILITY PLANTS lender's prime rate. 2) a line of credit up to
$7,500,000 with interest at 108% of the lender's
\
The Company is a participant in three gointly- prime rate, plus a commitment fee of 5% of the owned utility plants: W. F. Wyman Unit No. 4 pome rate, and a compensating balance averag-(Wyman), Seabrook Units No.1 & 2 (Seabrook), ing $100.000. Certain information relating to and the New England Power Company Units these arrangements is as follows: No.1 & 2 (NEPCO). 1980 1979 in December of 1979, New England Power Cor. - pany cancelled the construction of Units No. Total Lines of Credit at year end $8,700,000 $ 4,200,000 1 & 2. Accordingly, approximately $207,000 of construction work-in-progress related to those Maximum amount of units was transferred to deferred debits, pending borrowings outstand-ing at any month-end 8,100,000 12,600,000 final disposition by NEPCO and the state regula-tory authonty' Borrowings outstand-ing at year end 8,100,000 2 600,000 The Company's proportionate share of the direct Unused lines of credit expenses of Wyman are included ,n i the corre-Average outstanding sponding operating expenses in the income borrowings for the statement year 6,350,000 8.320,000 Each participant musi provide its own financing. Average interest rate for the year 17.22%, 13.63 % The Company's share in each of the two jointly- st rate El ct owned plants at December 31,1980 is as follows: aed 22.61 % 15.91 % Wyman Seabrook Electric Plant in Service $6,973,599 Accumulated 7. PENSION PLAN Depreciation 423,324 p Construction The Company and its Subsidiary have insured Work-in-Progress $20.458,909 non-contributory pension plans (terminable at (' any time) for the benefit of all union and non-Total [6.550,275 $20,458,909 union employees, based on age and period of employment conditions. Pension expense, which Company's Ownership neludes amortization of prior service costs over Percentage 3.3455 % 1.4606 % a period of twenty years, was $255,083 in 1980,
$286,594 in 1979 and $249,372 in 1978. The com-p nies' policy is to fund pension cost accrued.
- 5. FEDERAL INCOME TAXES Certain information relating to these plans at December 31,1979, the date of the most recent The consolidated provisions for federalincome actuarial valuation follows:
taxes dif fer f rom ar..ounts computed by applying the statutory rate as follows Actuarial present value of Restated vested accumulated plan (Note 1')) benefits $1,970,294 1980 1979 he78 46.0% 46.0% 48.0 % Net assets vailable Statutory Rate Tax Benefits of Lower
' The assumed rate of return used in determining tt ib tab e to the actuarial present value of vested accumulated Dividends Received (5.2) (3.5) (3.0) pl n benefits was 6%. The present value of non-Foreign Tax Credit (1.5) vested accumulated p'r " enefits was not avail-Allowable for Funds Used ble from the ar"uary.
Dunng Construction (38.4) (17.1) (5.4) Other 3.2 3.0 1.6 l Effective Rate 5.6 % 28.4 % 39.7 %
- 8. COMMON SHAREHOLDERS' EQUITY i'
Under the most restrictive provisions of the
- 6. NOTES PAYABLE TO BANKS AND Company's long-term debt indentures, retained O SHORT-TERM CREDIT ARRANGEMENTS Ihe Company has had various credit arrange-earnings available for the payment of cash divi-dends on Common Stock were $7,366,801 at December 31,1980.
(continued on page 141 ments with two banks. Those in effect at Decem-13
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Paid-m capital increased by approximately stated to reflect the refund and related interest
$76.000. $83.000 and $34.000 in 1980,1979 and thereon.
1978 respectively. representing the excess of the proceeds received over the par value of common The effect of restating 1979 and 1978 results of stock issued to the employees' stock ownership operations that were reported in the 1979 and plan (5282. 5987, and 1304 shares in 1980,1979 978 annual reports to share owners, to reflect and 1978 respectively) (see Note 12), and the the above court decision, is as follows: excess of par value ove. reacquisition cost of Preferred Stock (see Note 9). 1979 1978 increase (Decrease) in:
- 9. REDEEMABLE CUMULATIVE Federal income Taxes $(25.972) $(20,448)
PREFERRED STOCK Interest Charges 52,215 41,107 Net income (26.242) (20.659) The Preferred Stock is redeemable, with certain Earnings Per Share (.04) ( 03) restoctions. at the option of the Company, or in the case of voluntary liquidation at $51.00 per The restatement reduced retained earnings a: share for the 4 750o Senes. $51.65 for the 9 . January 1,1978 by $262,369 (the balance relating Senes, and $54 81 for the 9Mo Senes (all plus to years pnor to 1978) which is net of apphcable income taxes of $276,924. accumulated dividends). No shares were re-deemed under this option dunng 1980.1979 or 1978
- 11. CONSTRUCTION PROGRAM The 9'Ao Senes has a sinking fund require-ment whereby the Company must redeem 5.333 See Construction Section on page three shares at $50 per share and accrued dividends on October 1 of each year commencing in the year 1985 in addition, the Company has a non- 12. EMPLOYEES' STOCK OWNERSHIP PLAN cumulative option to redeem up to an additional 5.333 shares at the same price and date as the The Company has an employee stock ownership sinking fund shares plan that provides eligible employees with the opportunity of becoming stockholders of the Purchase funds for the 4.75% and 9'A Senes Company and at the sa'ne time, achieves cer-provide that the Company will annually offer tain tax benefits for the Company. All employees to purchase on July 1, at onces not to exceed wi one r m m ye rs of suce am ehgde
$50 per share and accrued dividends 300 of the to participate in the plan. each year the Com-pany contributes to the plan shares of common maximum number of shares issued prior to May s W np m unt d cash M N 15 of such year, less any shares theretofore pur- used to purchase common stock) with a value, chased and surrendered by the Company to the as defined, equal to 1 o of the Company s quali-transfer agent as a purchased fund credit for fled investments in property for that year. The such year. Any shares so purchased and sur-rendered are retired There were 1200 shares of contnMon b me dan amounM to MM2 m 4.75% Series purchased under this offer in 1980 '" "d 7 #
1979 and 1978, and 900 shares of the 9'ao Senes Am unts contobuted are accumu' lated in indi-purchased in 1980~ vidu I member accounts and are available for distobution upon termination of employment The Preferred Stockholders are entitled to spe- aNr an appropnate waiting penod required by cial voting oghts in respect to certain corporate ral statute. Amounts in individual member action and are entitled to elect a majonly of the a a ounM am No vesW at aH Umes i Board of Directors in the event of a default in the i . 2 l payment of four quarterly dividends on the Pre- i, k _ j, ~ ~% y.,y ; ferred Stock. ,
- 10. RATE PROCEFnte" ) 9,,
4 McWA<N l In 1975. a regulatory authority permitted the Company to use a fuel cost adjustment clause. aJ hO . dpM hkhh9 $ b (p$ y g {3 y 'Q Q3 l subject to a hearing and possible refund (under b .A j ,- P
' 9y which revenues were collected in part of 1975 7
and 1976) The Company was subseque .y or- Q [yMkp' f,jV C lg ~J3 dered to refund the revenues collected, which was appealed to vann is authorities. In 1980 the l i f ( 4l 9 3 6-courts again denied ar. appeal, and a refund with apphcable interest was made The financial state-
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ments for all applicable penods have been re- Waneta Blake Library at University of Maine at Fort Kent 14
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- 13. QUARTERLY INFORMATION (unaudited)
Presented below are financial data showing results for each quarter in the three years ended G December 31,1980; (Dollars in Thousands Except Per Share Amounts) 1980 By Quarter 1st 2nd 3rd 4th Operating Revenues $6,725 $8.286 $5,781 $6,998 0;,erating Expenses (5.871) (7.479) (5,112) (6,038 Operating income 854 807 669 960 Interest Charges (441) (591) (474) (282) Other income-Net 253 186 304 243 Net income $ 666 $ 402 $ 499 $_921 Earnings Per Common Share: $ .78 $ .39 $ .53 $ 1.16 1979 By Quarter (b) 1st 2nd 3rd 4th Operating Revenues $ 5,900 $5,137 $4.274 $5.929 Operating Fxpenses (4,738) (4.?13) (3,548) (4,938) Operating income 1,162 924 726 991 Interest Charges (478) (460) (488) (142) Other income-Net 157 155 147 108 Net income $ 841 5 619 $ 385 $ 957 Earnings Per Common 5.iare $ 1.19 $ .66 $ .51 $ 1.24 1978 By Quarter (b) 1st 2nd 3rd 4th Operating Revenues $4.826 $4,808 $4,208 $6,026 Operating Expenses (3.865) (3,948) (3,683) (4,954) Operating income 961 860 525 1,072 Interest Charges (305) (336) (319) (326) Other income-Nel 162 161 210 162 Net income $ 818 $ 685 $ 416 $ 908 Earnings Per Common Share $ 1.16 $_ _.96 $__ _. 56_ $_129 (b) Restated, see Note 10.
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- I certain revenues the Company collected in 1976 and 1975 u der the provisions of a revised whole-sale fuel cost adjustment clause. As discussed in MMNE PUBLIC SERVICE COMPANY-: Note 10, the disallowance was upheld in 1980.
Accordingly, the financial statements have been We have examined the consolidated balance restated to reflect the refund and related interest sheets of Maine Public Service Company and its thereon, in tt e applicable years. Accordingly, our subsidiary, Maine and New Brunswick %ctrical present opi iion on the 1979 and 1978 financial Power Company. Limited, and the related sched- statements, as expressed herein, is dif ferent from ules of capitalization data, as of December 31 that expressed in our previous report. 1980 and 1979 and the related statements of consolidated income and retained earnings, and in our opinion, the financial statements and of source of consolidated funds for plant addi- schedules referrec to above present fairly the tions and replacements for each of the three financial position o1 the Companies at December years in the period ended December 31,1980 31.1980 and 1979 and the results of their opera-Our examinations were made in accordance with tions and their source of funds for plant additions generally accepted auditing standards and, ac- and replacements for each of the three years in cordingly, included such tests of the accounting the pe tod ended December 31,1980. in con-records and such other auditing procedures as formi'.y with generally accepted accounting we considered necessary in the circumstances. prinuples applied on a consistent basis. In our report dated February 29.1980, our opinion on the 1979 and .978 iniancial statements was DELOITTE HASKINS & SELLS qualified as being subject to the effect of the Boston, February 25.1981 t . . : s p 5 k i on n Q %) t a ww wg m, fg$ 'hh 5?? $ N 'f 'A I
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Maine Public Service Company w - alltlSubditliary ] Q v schedules of capitalization data December 31, [ollg-lCT//l dCbl.* 1980 1979 i Maine Pt;blic Service Company: First Mortgage and Collateral Trust Bonds: 3% Series due 1980-Interest Payable. March 1 and Sept.1 $
$ 720.000 3.35% Series due 1985-interest Payable. February 1 and August 1 1,520,000 1,540.000 5%% - Series due 1990-Interest Payable. March 1 and Sept.1. 1,600,000 1.620,000 4h% Series due 1995-Interest Payable. January 1 and July 1. 2,125,000 2,150,000 7!s% Series due 1998-interest Payable, May 1 and November 1. 3,560,000 3.600.000 7.95% Senes due 2003-interest Payable, March 1 and Sept.1 . 2,350,000 2.375,000 10 % Series due 1995-Interest Payable, March 1 and Sept.1 . 3,640,000 3.760.000 10 %% Series due 2004-interest Payable, April 1 and Oct.1. .. .. 8,000,000 8,000.000 Debentures-5%. due 1987-interest Payable. May 1 and November 1 . 702,000 756.000 9'.%, due 1995-interest Payable, May 1 and November 1. .. 1.134,000 1,188.000 Maine & New Brunswick Electrical Power Company, Limited: ,
First Mortgage Bonds-Sh% Series due 1989-interest Payable, June 1 and December 1. . . 1,288,704 1.460.336
\- Total Outstandir.g ... .... . ... . . . .. 25,919,704 27,169,336 Less-Amount due Within One Year . 505,664 1.228.128 Long-Term Debt . . . . . $25,414,040 $25.941,208 Current Malurities of Long-Term Debt for the Succeeding Five Years Are:
1981-$505.664 1982-$ 505.664 1983-$505.664 1984-$505.664 1985-$2.325.664 capital stock: Common Stock $7 Par Value-Authorized. 1.000.000 Shares; issued and Outstanding. 678.307 Shares in 1980 and 673.025 Shares in 1979 $ 4,748,149 $ 4,711,175 Redeemable Cumulative Preferred Stock. $50 Par Value-Authorized. 270.000 Shares Ossuable in series) 4 75% Senes-Originally issued 40.000 Shares; Outstanding. 10.180 Shares in 1980 and 11.380 Shares in 1979. . . .. . $ 509,000 $ 569.000 9'.% Series-Onginally issued 30,000 Shares; Outstanding, 29.100 Shares in 1980 and 30.000 Shares in 1979. . ... . ... 1,455,000 1,500.000 9W Series-Onginally issued and Outstanding,80.000 Shares 4,000,000 4,000.000 (v Total . . . .. . . $ 5,964,000 $ 6,069,000 17 d
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Maine Public Service Company an.1 subsiiliary consolidateg (Restated) (Restated) 1980 1979 1978 Capitalization (year end) y Long-term debt. . . 51.02 % 52.50 % 50.63 % ! Preferred Stock . 11.74 % 11.73% 5.48% Common Stcck Equity . . 37.24 % 35.77% 43.89 % Times Interest Earned-Before Income Taxes . 1.83 2.48 4.27 After income Taxes.. ........
. . ... ... . 1.76 2.02 2.89 Times interest and Preferred Dividends Earned-Af ter income Taxes . . . . . . . . . 1.51 1.84 2.58 Embedded Cost of Long-Term Debt (year end) . 8.27 % 8 10 % 7.16 %
Embedded Cost of Preferred Stock (year end) . . . 9.42 % 9.38 % 851% Common Shares Outstanding (year end) . . 678.307 673.025 667.038 Earnings Per Share of Common Stock (average shares) $ 2.86 $ 3'.80 $ 3.97 Dividends Per Share of Common Stock-Declared Basis . . $ 1.92 $ 1.84 $ 1.61 Paid Basis . ... . ... .......
. $ 1.90 $ 1.79 i 1.58 Common Stock Dividend Payout Ratio ... ... 67.13 % 48.42 40.55%
Book Value !':r Share of Common Stock (year end) . $27.90 $27.50 $25.57 Market Pr ce Per Share of Common Stock High . .
$ 18ti, 4 19 % $ 20%
Low . $ 13% $ 135 $ 17' . Close ..... $ 15% $ 16% $ 17'. Price Earnings Ratio (year end) . .. . 5.38 4.41 4 41 Number of Common Shareholders (year end) . 3,482 3 5:'2 3.577 1980 SOURCE OF REVENUE 1980 DISTRIBUTION OF REVENUE Millions of Dollars (Total 127.81 and percent of total Miti ons of Dollars (Total 127 si and percent of total
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i 5 12 7.06 7.47 3.73 7.49 11.43 12.50 10.06 3.616 3.683 3,753 3.807 3.835 3,821 3,801 3,832 i ANNUAL RESIDENTIAL CONSUMPTION
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five-year summary of selectedfinancial data O (Restated) (Restated) (Restatad) (Restated) 1530 1979 1978 1977 1976 Operating Revenues $27,789,640 $21,239,729 $ 19,868,765 $17,998,660 $ 17,002,445 Net income . . . .
. ... $ 2,487,842 $ 2,802,916 $ 2,826,036 $ 2,536,496 $ 1,685,431 Dividends on Pret,rred Stock 556,509 262.134 179,428 182.257 185,128 Net income Available for Common Stock. $ 1,931,333 $ 2,540,782 $ 2,646,608 $ 2,354,239 $ 1,500,303 Earnings Per Share of Common Stock $2.86 $3.80 $3.97 $3.54 $2.25 Dividends Per Share of Common Stock:
Declared Basis $1.92 $1.84 $1.61 $1.46 $1.34 Paid Basis $1.90 $13 $1.58 $1.43 $1.32 Total Assets. $68,613,583 $62.879,849 $54,825,853 $42,403.039 $41,851,129 Long-Term Debt Outstanding $25,919,704 $27,169,336 $ 19,670,472 $ 20,331,496 $20.907.021 Less amount due within one year.. 505,664 1,228,128 516.544 528,864 422,592 Long-Term Debt. $25,414,040 $25,941,208 $19.153,928 $ 19.802,632 $20,484,429 Redeemable Cumulative Preferred O Stock. $ 5,964,000 $ 6,069,000 $ 2.129,000 $ 2.189,000 $ 2,249,000 V_v. 71 y E' ' ~.vrv v7;"iyy */ ;'yZ.['y J Q M Q. yV f ')jfff p Q%y ' -&f3'fNg#f[., R
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d o o -f AMaille Public berVice Company i 1980 More Average
- a or (Less) Annual i Than 1970 increase r Operating Revenues I Residential . . . . . . . . . .. . . . . $ 6,875,405 12.1 $10,113,502 $ 8,033,191 $ 7,531.515 i Commercial and Industrial-small.. . . 4.169,791 11.0 6,422,076 4,950,151 4,770,989 Commercial anci Industrial-large . . 4,112,778 17.3 5,156,489 3,578.710 3.220,676 Municipal Street Lighting . . . 196,073 9.0 339,557 293.577 282,505 Area Lig hting . . . . . . . . . . . . . . . 146,230 9.8 240,991 213.744 208,765 '
Other Municipal and Oth r Public Authorities . . . . 1,219,766 14.0 1,668,506 1,309,218 1.186.878 Other Electric Utilities . . . 2,844.090 15.5 3,722,945 2.722.707 2,535,654 , Other Operating Revenues . . . .. .. 55.823 6.1 125.574 138,431 131.783 Total Operating Revenues $ 19.619,976 13.0 $27.789.640 $21.239.729 $19,868,765 Number of Customers (average) Residential . . . . . . . . . . . . . .
,,v93 1.3 25,516 25,537 25,470 Commercial and industrial-small .. (36) (.1) 4.611 4,671 4.689 Commercial and Industrial-large 5 3.8 16 16 17 Municipal Street Lighting . . . . . . . - -
36 36 36 Area Lighting . .. .. . . . . . . . 427 2.9 1,733 1,751 1.753 Other Municipal and Other Public Authorities . . . . 3 36 10 8 8 Other Electric Utilities .. . . . . . 1 1.6 7 7 7 O (d Total Customers. Nel Generation, Purchases and Sales
. J,493 1.2 31,929 32,026 31.980 (thousands of kilowatt-hours)
Net Generation: Steam . . . . . . . . 32,503 12.6 46.849 20,373 26,911 Hydro. . . . . . . . . (16,850) (1.2) 127,630 162,107 116.894 Diesel . . . . . . . . . 672 - 200 243 627 Purchases: Nuclear Generated . . . . . . 216,252 - 216,252 220.218 263.137 Fossil Fuel Generated . . . . . (43,291) (2.1) 182,382 158,699 157,854 Total. . . . . . . . . . 189,286 4.1 573.313 561,640 565,425 Losses and Unaccounted for . . . . . . 3,141 1.0 32.447 38,706 30,040 Company Use . . . . . . . . (331) (2.1) 1,384 1,277 1.296 Electricity Sold . . . . . 186.476 4.3 539.482 521,657 534,089 Sales: Residential . . . . . . . . . . . . 49,393 3.9 156,403 156.399 158,82 Commercial and Industrial-small 37,844 4.4 107,275 105.055 111,002 Commercial and industrial-large 43,336 5.0 111.519 110,452 106,757 Municipal Street Lighting . . . 477 1.7 3,012 2,981 2,944 Area Lighting . . . . . . . . . . . 653 3.6 2.194 2,233 2,236 Other Municid and Other Public Aut'.wties . (4,825) (1.2) 36,942 38,762 42,438 Other Elect c Utilities .. . . . . . . . 59.598 6.9 122.137 105.775 109,892 Total Sales . . . . . . . . 186,476 4.3 539,482 521,657 534.089 Average Use and Revenue Per Residential Customer i Kilowatt-hours . . . . . . . . 1,358 2.5 6.130 6,124 6.236 V Revenue . . . . . . . . . . . . $251.95 10.6 $396.36 $314.57 $295.70 Revenue per Kilowa*
- hour . . . . . . 3.444 7.9 6.47C 5.14c 4.74C
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y se 4 G-operating statistics Q Restated Restated 1977 1976 1975 1974 1973 1972 1971 1970 $ 7.073.874 $ 6,617,492 5 6.498,277 $ 5,241,793 $ 4,306,306 $3,876,884 $3,586,685 $3.238,097 4.148,247 4.258,303 4,153,889 3,317,147 2.870,766 2,647,987 2.452,033 2,252,285 2,765,238 2,859.436 2,752,432 1,874,967 1,434,155 1,330,711 1,215,867 1,043,711 273,902 213.590 197,190 189,980 174,618 153,962 153,138 143,484 207,990 161,924 147.531 140,239 128,587 113,472 104,4;5 94,761 1.045.997 926.200 889,789 744,038 538,689 490,793 424,343 448,720 2.334,404 1,820.155, 1,855,254 1,415,135 1,191,488 1,169,430 1,005,892 878,855 149,008 145,342 149,690 145,385 103,841 91.086 c2,691 69,751 $ 17,998.660 $ 17,002.445 $ 16,644,052 $ 13.068,684 $ 10,748,450 $9.874,325 $9,025.124 $8,169,564 25.272 24,990 24,709 24,421 23,805 23,238 22,654 22,423 4,731 4,756 4,778 4,710 4,691 4,715 4,672 4,647 17 15 14 13 13 12 12 11 35 34 34 34 34 34 34 36 1,824 1,825 1,763 1,723 1,681 1,546 1,386 1,306 8 8 8 8 8 8 8 7 6 6 6 6 6 7 6 ~~ 6 31,893 31,634 31,312 30,915 30,238 29,560 28,772 28,436 6,193 14,791 50,748 3'>,385 33,263 55,617 84,437 14,346 167,874 173,421 105.726 14u,362 153,898 157,488 102,275 144,480 (175) (80) 78 (209) 875 10,741 6,854 (472) 252,829 52,978 -- -- -- -- -- -- 127.109 275,731 319,334 286,649 262.210 14,708 200,079 225,673 553.830 516,841 475,886 459,187 450,246 438,554 393,645 384,027 34,536 33,462 32,313 32,401 27,391 30,033 24,012 29,306 1,229 1,281 1,312 1.396 1,537 1,712 1,591 1,715 518.065 482,098 442,261 425,390 421,318 406,809 368,042 353,006 154.420 154,060 145,361 140,702 134,747 127,834 117.460 107,010 98.999 96,910 90,211 86,004 86,464 81,411 75,063 69,431 1( 0.122 96,499 87,712 79,504 78,414 80.284 74.057 68,183 2.952 2,889 2,804 2,706 2,744 2,707 2,775 2,535 2,269 2,305 2,182 2,085 1,992 1,835 1,647 1,541 42,493 41,157 34,752 35,617 39,754 35,820 29.121 41,767 116,810 88.278 79,239 78.472 77,203 76,918 67.919 62,539
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9 SECURITIES A'fD EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For Quarter Ended March 31, 1981 Commission file number 1-3429 MAINE PUBLIC SERVICE COMPANY (Exact name of registrant as specified in its charter) MAINE 01-011-3635 (State or other jurisdiction of (1.R.S. Imployer incorporation or organization) Identification No.) 209 State Street, Presque Isle, Maine 04769 (Address of principal executive of fices) (Zip Code) Registrant's telephone number, including area code 207-768-5811 Indicate by check mark whe*1er 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 r(quired to file such reports), and (2) has been subject to such filing requirements f ar the past 90 days. Yes X No (APPLICABLE ONLY 10 CORPOPATE ISSUERS:) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Common Stock, $7.00 par value - 678,631 shares 1
FORM 10-Q PART I. FINANCIAL INFORMATION A. Financial Statements D) (s, See attached exhibit - Maine Public Service Company and Subsidiary Condensed Consolidated Financial Statements, including an income statement for the quarter ended March 31, 1981 and for the corresponding period of the preceding year; a balance sheet as of March 31, 1981 and as of December 31, 1980, the end of the Company's preceding fiscal year; and a statement of source of consolidated funds for plant additions and replacements for the period January 1 (beginning of the fiscal year) through March 31, 1981 and for the corresponding period of the preceding year. The information furnished reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interts periods. B. Management's Analysis of Quarterly Income Statements A compart cr. of the quarter ended March 31, 1981 with the same period of the preceding yeat' shows that recoveries of fuel costs through revenues were up
$732,635, while other revenues were up $212,819, due to an increase in energy sales of 14,351,000 kilowatt-hours. Thus, overall operating revenues showed a net increase of $945,454. Operation and maintenance expenses for the first i quarter of 1981 were $570,522 above those of the corresponding period of 1980, principally due to fuel and purchased energy costs being $457,162 higher than the previous period. Deferred fuel cost accounting produced an expense of
$679,050 against a negative ($2,589,631) in the prior year's first quarter.
(A negative deferred fuel expense figure indicates that uncollected fuel s costs have been deferred to a future period during which those costs will be g collected. A positive deferred fuel expense indicates that previously
\~-] deferred fuel costs have been currently collected ,through the fuel adjusunent and are currently included in operating revenues.) Payroll chargea to operation and maintenance were $26,252 over the first quarter of 1980 while overall payroll costs increased about $43,598. Interest expense in the first quarter of 1981 shows an increase of $168,524 over that of the previous year's first quarter, reflecting an .ncrease of $303,313 in interest costs
> arising from bank loans offset by ,i18,999 of more credit to interest expense in 1980 for the interest portion of the Allowance for Funds Used During Construction and a decline in long-term debt and other interest of $15,790. Construction expenditures for the quarter ended March 31, 1981 were $1,222,305 (excluding Allowance for Funds Used During Construction) most of which was for the Company's 1.46% share of the construction costs of Seabrook Units 1 and 2, nuclear units under construction by Public Service Company of New llampshire. For the same quarter of 1980, $2,123,112 was expended on construction with about $1,600,000 of that amount also being spent on Seabrook Units 1 and 2. PART II. OT11ER INFORMATION Item 1. Legal Proceedings (a) Indian Land Claims In i t s Fo rm 10-Q aommencing for the quarter ended September 30, 1977, acting on advice of its General Counsel, the Company discussed and disclosed the so-called " Indian Land Claims Cases" pending in the
, if' '~}
e t'nited States District Court for the District of Maine, Northern Division. (Civil Actions Nos. 1966-KD and 1069-ND). The Company's last report on the status of these cases was in i ts 10-K for the year ended December 31, 1980, to which reference should be made. 2
FORM 10-Q ltem 1. Legal Proceedings (Continued) The Indian Land Claims, so-called, have been settled. The State of 3 ' Maine has passed appropriate legislation. (Chapter 732 of the Pablic Laws of Maine, 1979.) On October 10, 1980, then President Carter signed the Maine Indian Land Claims Settlement Act. The Act provided that it would extinguish all aboriginal land claims in Maine, but said extinguishment did not become effective, however, until Congress appropriated the money, provided for in the Law to compensate the Indians. Congress appropriated these funds ($81,500,000.00) on December 12, 1980. It should be noted that the two cases mentioned above have not been dismissed. The Federal Act extinguishing the Indian Land Claims in Maine provides, however, that none of the $81,500,000.00 appropriated by Congress to settle the cases may be spent until such time as the Passamaquoddy Tribe, the Penobscot Nation and the Houlton Band of Maliseet Indians execute certain releases required under the Act and also file stipulations as to the final judicial dismissal, with prejudice, of their claims. nus, the foregoing cases are still on the Court's Docket as indicated. However, Counsel is of the opinion that the so-called " Indian Land Claims" have now been extinguished. Counsel continues to advise that as of this writing the Company is not a party to the above litigation, it has not been a party to the above litigation, nor has any of the property of the Company become the direct subject of the lit' cation. Counsel further advises that from the Company's point-of-view this matter is closed. (b) Maine Yankee Shutdown Replacement Power Costs, March - 1979 shutdown Reference is made to the 10-K for the year ending December 31, 1980. ne continuing aspect of the Order in Maine PUC Docket U#3360 is that
- the Company must, every sixty days, describe in detail all actions taken by the Company with respect to seeking recovery from Stone &
Webster Engineering Corporation for damages resulting from the March 15, 1979 shutdown of the Maine Yankee Atomic Power Station. We Company continues to file the reports; there is no action pending against Stone
& Webster.
(c) Proposed Rate Increase, Maine PUC Docket No. 80-180 On September 2, 1980, the Company filed with the Maine Public Utilities Commission (the Commission) Proposed Revised Rates. The original filing requested approximately $4,675,000 in additional revenue and results in an approximate increase of 207. in annual electric operating revenues from Maine jurisdictional customers. The proceeding has been docketed by the Cocunission as indicated above. Consistent with applicable law, the Co=rnission has issued its Second Suspension Order which expires on June 1,1981, unless otherwise ordered, suspending the effec tive date of the Proposed Rat e Sci.adules, ne Company and the Intervenors have completed v.he presentation of the evidence in the rate proceeding. De parties ar e in the process of filing briefs and reply briefs on the issues that have been raised. The time m) within which the Commission must dispose of the filing is June 2,1981. 3
FORM 10-Q Item 1. Legal Proceedings (Continued) (d) Getty Uranium Contract Litigation p-~
' '- '; The Company became a Plaintiff in the following case: Wisconsin Electric Power Company (including Maine Public Service Company)
- v. Pancontinental Mining Ltd. et al (including Getty Oil Company),
Docket No. 81-C506, United States District Court, Northern District of Illinois, Eastern Division, by a Complaint filed January 30, 1981. This case arose out of another case entitled, Getty Oil Company
- v. Wisconsin E*.ectric Power Company et al (not including Maine Public Service Company), United States District Court, Central District of California, Civil Action No. 81-0334-G PM(Mx) . This Complaint was filed on January 21, 1981. The litigation arose out of a dispute in the price of uranium being supplied by Getty to the Seabrook project (and to another project in which Wisconsin Electric Power Company had an interest), said Agreement being dated March 23, 1976.
On January 21, 1981, Getty filed a Complaint, referred to above, against the Wisconsin and Seabrook utilities, alleging ~ breach of contract and conspiratorial anticompetitive practices. This action led to the filing of the case in the United States District Court for the Northern District of Illinoia, referred to above. Here the utilities sought the same type of relief that they sought in their counterclaim against Getty in the California f'] action, in summary that they, meaning the utilities, owed no duty
\ ,) to Getty under the Contract because of an alleged conspiracy of which Getty was a party. See Westinghouse Electric Corporation v.
Rio Algom, Ltd. et al (tacluding Getty Oil Company), filed in the United 3tates District Court for the Northern District of Illinois, Eastern Division, Docket No. 76-C-3830 (naw entitled In Re Uranium Antitrust Litigation, MDL 341). In this proceeding, Westinghouse alleged that the Defendants, including Getty, fixed and controlled prices sand supplies of uranium to purchasers, including Westinghouse, all in violation of the Antitrust Laws of the United States. I t em 5. Other Information (a) Scabrook Units 1 and 2 In December of 1978, the company acquired 1.46056% interest in Scabrook Units 1 and 2 located in Scabrook, New Hampshire, a nuclear plant being built by Public Service Company of New Hampshire (PS of NH). Reference should be made to our last discussion of problems with regard to these two units set forth in our Form 10-K for the year ending December 31, 1980. We can report further that the Public Utilities Commission of New Hampshire on April 13, 1981 in DF 81-52 authorized New Hampshire Electric Cooperative, Inc. (NH Coop) to borrow $75,750,000 through the Rural Electrificiation Administration. This will allow NH Coop to acquire a 2.173917. interest in Seabrook. We can further report
/ T that as of January 31, 1981, Central ?bine Power Company commenced
(_ / an adjustment of its own'ership interest so that its total interest in Scabrook will eventually be 6.0417%. 4
FORM 10-Q l Item 5. Other Informttion (Continurd) i 1 ~ If all the interests indicated in the 10-K Report for year ended i / December 31, 1980 are finally approved, PS of NH's interest in ( ,}/ the Scabrook Units will be reduced from 50% to 35.23497%. PS of NH stated in its prospectus dated February 4,1981, that while it is possible that future developments could lead to cancellation of Seabrook Units 1 and 2, PS of NH considers such a possibility unlikely, not only because the necessary construction permits and approvals have been received and the construction is proceeding, but also because of the projected need for the Plant's power in PS of NH's service area and in New England generally end the further need to reduce dependency on imported oil. PS of NH has recently released revisions to its estimated construction budget and scheduled co oletion dates to give ef fect to the reduced 1cvel of construction at d v her factors. Such revisions increase the Company's share of the total estimated construction costs of Seabrook Units by approximately $5,550,000 (excluding AFC) and deferred the completion dates of the Units from 1983/85 to 1984/86. On April 2,1981, PS of NH filed a request for temporary rate relief to be effective at the earliest possible date. PS of NH stated that in order to obtain sufficient revenues to insure that the earnings coverage test applicable to the issuance of bonds under its mortgage bond indenture would be satisfied in connection with a planned issuance of bonds in the fourth quarter of 1981, it will be necessary for a substantial portion of the rates requested to beccme effective during the second quarter. In response to the rate filing by PS of I [} NH the PUC of NH allowed a temporary rate increase of $17,435,268
's / to become effective on May 1,1981.
Any delay in the construction of Seabrook Units 1 and 2 may adversely
, affect the completion and the cost of the two units under construction.
Delay or deferral would reduce the immediate cash needs of PS of NH and other participants, including the Company, but would result in a deferral in the completion date of one or both units, and could result in substantially greater conseruction costs. Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K. In the opinion of management there was no occurrence or event which required the filing of a Form 8-K during the quarter ended March 31, 1981. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
!nINE Pl'BLIC SERVICE COMPANY (Registrant) r'"g Date May 12, 1981 /s/ R.A. Brown R. A. Brown, President
( Date thy 12. 1981 /s/ F. E. Livingston F. E Livingston, Treasurer 5 i
O March, 1981 MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY l O t CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) O , ? l
a ... M41NE PUBLIC SERVICE COMPANY AND SUBSIDIARY CCHPARATivr CONSot.IDtTfD BAtx;CE SHETT A557Ts Ma r c h 31 Decerner 31 COMPARATIVE CONsnLTD4TTD INCOME STATFMENTS 1981 1960 Utility Plant and Other Inve s t me nt s: Three Months.F3ded Utility Plant $18 785 555 $76 606 216 Less Accumulated Provision for Depreciation 20 568 769 20 219 504 March 31 56 386 712 1980 Net Utility Plant $8 146 786 1981 Inve s tme nt in Maine Yankee Atomic Pouer Plant 3 339 904 3 339 711 Investment in Maine Electric Pouer Co. 87 388 87 388 Operatine Revenues $7 670 770 $6 725 316 17 546 Nonutility Property and Other Investments 17 ,546 Operating Expenses: 4 978 935 Total 61 591 624 ..59 831 357 Operation 5 560 187 214 929 245 659 Ma intentnc e Deprsciatton and knorttaation 436 758 442 642 Current Assets: 733 970 240 885 222 571 Cash 596 868 Tsnes - Other Than income Accounts Receivable-Customers and Other-Bet 3 329 878 3 652 154
- State Income 49 902 (176 637) 1 810 148 79 102 157 881 Materials and Supplies 1 855 627
- Tederal Income 6 601 763 5 871 051 Deferred Fuel and Purchased Energy Erpense 644 437 1 323 487 T1tal MN 854 2M Other 58 510 95 894, Operating income 6 485 320 7 615 853 Total 702 573 Deferred Debits PIO 829 Opersting lacome and Deductions: Total litt_111_1ZJ litt.ls2_IR1 Alloutace for Equity Funds Used During Construction 241 379 154 661 Fsrsig2 Exchange Gain (Loss) (14 120) 14 604 86 580 86 617 LIABIL ITIES Equity in Earnings of Joint venture Compantes Other-pet 1 098 ____{3,010) Shareholders' Equity: $ 4 748 149 314 937 252 872 Common Stock $7 Par value, 678,631 Shares (678,307 in 1980) $ 4 750 417 Total 4 107 137 Paid-In Capital 1 776 352 1 773 557 Income before laterest Charges 1 383 944 12 710 208 12 199 771 Retained Earnings Total 19 236 977 18 921 477 12ttrist Charges:
Long-T;rm Debt 526 738 541 990 medeemable Preferred stock: 1 455 000 Preferred Stock 9-7/81, $50 Par value, 29.100 Shares 1 455 000 Allevance for Funds Used During construction (382 342) (263 143) 509 000 509 000 465 152 162 377 Preferred Stock 4.75%, $50 Par value,10.180 Shares Other Preferred stock 9-5/81, $50 Par value, 80,000 sheroe 4 000 000 4 000 000 Total 609 548 441 024 5 % 4 000 Total 5 964 000 Net Income 3 774 396 $ 666 113 Long-Tern Debt (less current maturities): 23 686 040 First Mortgage Sonds 23 646 480 I 728 000 I 728 000 Prsfttred Stoc'. Dividend Requirements 138 214 140 038 Deben ture s 25 414 040 s 636 182 9 526 075 Total 25 374 480 Salanca Available for Common Stock Earringi Per share of ra==an Stock (Eased on 678,631 and Current Liabilities: Portion of Long-Term Debt Due Within one Tsar 506 368 505 664 673,194 Average Shares Outstanding During 1981 and 1990 potes Payable 9 305 375 8 100 000 rstpictively 93.7c 78.lc 1 683 516 2 601 050 Accounts Payable 597 048 67 65d Tames Accrued 658 193 Deferred income Taxes Related to Deferred Fuel Expense 320 419 361 632 645 536 j Other L2 578 102 i Total 12 774 158 202 4t4 118 266 Deferred Credits 2 336 462 2 242 397 Accumulated Deferred income Tames 2 911 499 Accumulated Def erred Investment Tax Credits 2 899 052 s68 7s7 773 568 L49 751 Total F. E. Livingston, Treasurer j l l 1 l l I 1 l j
STATEMENT OF SOURCE OF CONSOLIDATED FUNDS FOR PLANT ADDITIONS AND REPL\ CEMENTS t q,) Three Months Ended March 31 1981 1983 Source of Funds t Funds From Operations: Net Income $ 774 396 $ 666 113 Charges (Credits) Not Affecting Working Capital: 442 642 Depreciation & Amortization 436 758 94 065 93 233 Deferred Income Taxes - Net 84 783 Deferred Investment Tax Credits (12 447) Allowance For Equity Funds Used During Construction (241 379) (154 661) (14 120) 14 604 Foreign Exchange Losses (Gains) 114 536 103 265 Other Funds From Operations 1 140 538 1 261 250
- 52 984 Less Adjustment to Retained Earnings 463 959 463 172 Less Dividends Declared 676 579 745 094 Funds Retained in the Business Funds From Financing - Net: - -
Issuance of Long-Term Debt 4 000 000 Increase (Decrease) in Notes Payable to Banks 1 205 375 5 063 2 831
) Issuance of Stock (21 392)
Reduction on Iong-Term Debt and Preferred Stock (38 856) Funds From Financing - Net 1 171 582 3 981 439 L 848 16L 4 726 533 Total Available Funds (Decrease) Increase in Available Funds 120 710 (1 454 023) Working Capital (see below) 12 675 (889 634) Other - Net Funds Used For Plant Additions and Replacements $1 981 546 32 382 876 Increase (Decrease) in Working Capital By Components (ex- ,
~
cluding long-teon debt due within one year and notes payable to banks) Cash $ (137 102) $ (359 645) Deposits for interest, dividends and bond proceeds held in escrow (51 656) Accounts Receivable - Net (322.276) (146 989) Deferred Fuel and Purchased Energy Costs (679 050) 2 589 631 45 27' 123 568 Materials, Fuel, and Supplies 1 562 335 Prepayments (37 384) Accounts Payable 917 534 (1 084 136) Deferred Income Taxes Related to Deferred Fuel Costs 337 774 (1 288 420) (929 389) (144 765) Taxes Accrued 283 904 254 100 Interest Accrued and Other Current Liabilities - Net S (120 710) st 454 02] (Decrease) Increase in Working C pital O
Exhibit D Docket No. 80-180 7g STATE OF MAINE g PUBLIC UTILITIES COMMISS'.ON June 1, 1981 DECISION AND ORDER . MAINE PUBLIC SERVICE COMPANY Re: Proposed Increase . in Rates GELDER, Chairman; SMITH and CARRIGAN, Commissioners I. PROCEDURAL HISTORY On September 2, 1980, the Maine Public Service Com (variously re# erred to herein as "MPS," " Maine Public"pany
~
and "the Company") filed with this Commission a new Schedule of Rates carrying an ef fective date of October 1, 1980. Also filed were a series of amendments to the Company's Rules and Regulations. According to the -Company's letter of transmittal, the new rates, which included a projected fuel cost adjustment were
- designed to produce a 20% increase in annual revenues, or'a The letter also stated M,at the do.11ar increase of $4,675,000.
Company was giving written notice of the proposed increase to all of its customers. ('O-- The new rates and rules are as follows: EXHIBIT A , I R' ATE SHEET REVISION Rate A Sheet No. 1 Eleventh Rate A-1 Sheet No. 1 - Second Rate C Sheet No. 1 Ninth Rate C . Sheet No. 2 Original - Rate D-2 -- Sixth Rate E Sheet No. 1 Eighth Rate E 3heet No. 3 Sixth Rate E Sheet No. 4 Second Rate F Sheet No. 1 - Ninth Rate H Sheet No. 1 Fourth Rate H Sheet No. 2 Second
. Rate.H Sheet No. 3- . Second Rate H Sheet No. 4 First Rate S Sheet No. 1 Seventh c Rate S Sheet No. 2 Screnth Rate T Sheet No. 1 Fifth
_____________.___A__._.______m_______.______._.m____
1 O v Docket No. 80-180 Oi EXHIBIT B RULES &' REGULATIONS SHEET REVISION R. & R. Sheet No. 3 Fourth R. & R. Sheet No. 4 Fou rth * , R & R. Sheet No. 4-A Original Sheet No. 8 Third R. & R. R. & R. Sheet No. 8-A . Original R. & R. Sheet No. 9 Third R. & R. Sheet No. 14 Fou r t h , R. & R. Sheet No. 15. Fourth l R. & R. Sheet No. 16 Fourth R. & R. Sheet No. 16-A Original ! R. & R. Sheet No. 19 Sixth R. & R. Sheet No. 19-A First . R. & R. Sheet No. 22 Seventh The Commission gave public notice of the increase in the September 11 and 12, 1980, editions of the Bangor Daily News, setting September 26, 1980, as the deadline for filing e- petitions to intervene. b Intervenor status was sought by the Acoostook County Committee for Utility Rate Reform (variously referred to herein as "the Committee" and "ACC"), by the Of fice of Consumer Services, under the auspices of the Attorney General of the State' of Maine (variously referred to herein as "the OCS" and-
"the Attorney General"), and by the General Servi.ces Administration and Loring Air Force Base on behalf of the Executive A herein as "gencies Loring" or of "the the United States Air Force") . (variously At a prehearing referred to conference held, af ter due notice, on December 16, 1980, all three petitioners were granted intervenor status by the Presiding Office' ,
Pursuant to 35 M.R.S.A. f69, the Commission twice suspended the effectiveness of the Company's new rates. The Commission's )- first Suspension Order was issued on. September 24, 1980, t suspending the rates for a period of three months from October 1,.1980. The Second Suspension Order was issued on December 29, 1980, suspending the votes for a period of five months from January 1, 1981. 1. a .
~ - .---, , , .. . , . . . . - . , , - , . . , , . . ~. , , . , . ,,__n. - ,_ , , . , . , , . . , - -
O Docket No. 80-180
\' At a prehearing conference held on February 23, 1981, the Examiner bifurcated the case, concluding that sufficient time -
did not exist prior to the expiration of the Commission's Second Suspension Order for the Commission to make an informed decision on the two basic issues of revenue requirement and rate design. In a Prehearing Order issued on March 2, 1981, , the Examiner specified that the Commission would decide the , revenue requirement issue during the suspension period. All parties were allowed to introduce testimony on permanent and temporary rate design questions during the hearings held on the' revenue phase of the case. The Order further specified that if-necessary, a second round of hearings would be held to take testimony on permanent rate design issues. -
, On March 10, 1981, the Staf f filed a " Motion for Partial Summary Judgment or, in the Alternative, to Bifurcate." The Motion explained that Loring Air Force Base was in the process of becoming a firm service customer of MPS, b.ut that the provisions of the Company's filed Rate H, the rate under which Loring would take, were unreasonable. The Staff asked that the Commission order Maine Public to insert certain modifications into the Company's Rate H, that such modifications were reasonable and in the public interest, and that such an Order would clear the way for Loring to become a firm service d) customer, augmenting the Company's revenues.
On March 13, 1981, the Company filed a new Rate H together with a Motion to allow the new rate to become effective on less than statuto.ry notice. On April 8, 1981, the Commission issued an Order granting the Company's petition. iThe Order noted that all parties had orally indicated supporb for the Motion at a hearing held on March 19, 1981, and that at that hearing, the Company set forth an interpretation of certain portions of the rate to which all parties had agreed. Early in the' proceeding, the Staff identified as'an issue the justness and reasonableness of including in the Company's fuel cost adjustment MPS's share of the incremented fuel expense of operating William F. Wyman Unit f 4 at the same time as Wyman Units #1, #2 and #3 are operating. The Company moved to sever this issue from the instant proceeding and asked that the Commission open a generic investigation to determine the proper treatment of these " fuel switching" costs. In an Order issued April 23, 1981, the Commission granted the Motion to Sever but declined to initiate a general investigation. O O , 8
(1) . Docket No. 80-180 gs The Company prefiled its direct case in early October. the Invoking the Commission's Alternate Hearing Procedure, Examiner ordered all parties to prefile their direct, rebuttal and surrebuttal testimony at time set forth.in the March 2, , 1981, Prehearing Order. . Heatings were held on March 16 through 19, 1981, in Presque ' Isle, Maine, for the purpose of af fording non-MPS parties the During opportunity to cross-examine the utility s witnesses. this portion of the case, the following individuals testified on behalf of the Company: G. Melvin Hovey, Vice President, MPS; Peter C. Lourida s , Manager, Power Supply and Planning, MPS; Frank E. Livingston, Secretary, Treasurer and Clerk, MPS;
- Pa u ? R. Cariani, Assistant Treasurer, MPS; Frederick C.
Bustard, As.cistant to the President, MPS; and Robert S.
' Jackson, Seafor Vice President ar' lirector, Stone &~ Webster Management Consultants, Inc. In .dition, two sessions were set aside during the Presque Isle hearings for the purpose of
- taking testimony from the geraral public. .
Hearings were resumed in Augusta, Maine, during the week of April 6, 1981, for the purpose of cross-examining those i non-Company witnesses who had prefiled their diuect testimony. . These included: David J. Deprey, Financial Analyst, Maine Public Utilities Commission, for che Commission Staf f ; Elliot [(r'" _') Toubman, Senior Fellow on Energy Law and Policy, Institute for
- the Study of Human Issues, for the ACC; John McCabe, Rate Consultant, McCabe Stevens, for Loring Air Force Base; and Alfred Maxwell, Maine Of fice of Energy Resources, for the OCS.
Additionally , the ACC prefiled 'the testimony of: Cha rles E. - , Hewett, Director, Program in Forest Resource Policy, Resource Policy Center, Da rtmouth College ; and Melvin M. Eisenstadt, President, Mel Eisenstadt & Associates, Inc. Inasmuch as no
. party indicated a desire to cross-examine these witnesses, they-did not appear in person at the hearings. Instead, by stipulation of the parties, their prefiled test' ony, together with affidavits from each swearing to the. truth of the facts asserted therein, were admitted into the record as though the witnesses had appeared and given the testimony under oath.
On April 23, 1981, the Commission held another day of hearing for the purpose of cross-examining the Company's rebuttal witnesses, whose testimony had been prefiled one week earlier. Present and testifying on this day were: Mr. Hovey, Mr. Louridas and Mr. Livingston of MPS; William R. Hopkins, Vice President, and Wah Sing Ng, Senior Consultant, Operations Division, both of Stone and Webster Management Consultants, Inc. and Charles W. Lockwood, Hydraulic Division Consultant, Stone and Webster Engineering Corporation. pg b
r O Docket No. 80-180 s Finally, on April 28, 1981, the Commission concluded its series of heatings with cross-examination of the surrebuttal testimony of Merle MacDonald, Utility Accountant, Commission Sta f f and Richard A. Rose . , Executive Vice Pres!. dent, Energy Systems Research Group, for the OCS. Elliot Toubman filed surrebuttal testimony on behalf of the ACC, but since no party ~ indicated a desire to cross-examine him, his surrebuttal testimony was received on the same basis as the direct - testimony of Messrs. Hewitt and Eisenstadt. , Main Briefs were filed by all parties on May 4, 1981. Reply Briefs were filed'on May 11, 1981. Pursuant to Commission Rule of Practice and Procedur'e 7(D), the Examiner
- filed his Report on May 19, 1981. Exceptions and Responses to the Report were filed on May 26, 1981. The Commission held public deliberations on this case on May 26, 27, and 28, 1981. .
II. FAIR RATE OF RETURN - In setting a level of revenues sufficient to provide a fair rate of return on investment, the Commission must determine a , capital structure for the utility; fIx a rate of return for each component of the capital structure, and then compute the 6-N overall rate of return by taking the weighted average of all of Q) the portions of the capital structure. The following section deals with each of these issues. l A. Capital Structure . All parties accept the Company's proposal regarding capital structure. This is the actual capital structure as of December 31, 1980 which appears _mlow. (MPS Exhibic 2; RSJ-Exhibit, Schedule 5, Revision) l ' Amount . Ratio TIRf07) l Long-term Debt $24,631 42.75% Short-term D.ebt 8,100 14.06 1 Preferred Stock 5,964 10.35 Common Equity . 18,921 32.84
$57,616 100.001
~
The Commission finds this capital structure to be reasonable and adopts it for, the purpose of determining the revenue requirement in this case. bV 1
i ~ O Docket No. 80-180 C3 s- B. Cost of Long-term Debt All parties have stipulated to the embe'dded cost of long-term debt of 8.38%. The Commission finds this cost rate for the year ending 1980 to be reasonable. - C. Cost of Preferred Stock _ No party has disputed Maine Public Service Company's proposed cost of preferred stock of 9.42%. The Commission finds this cost rate for the year ending 1980 to be reason,ble. D. . Cost of Short-term Debt The Staf f computed the cost of short-term debt by. rime interest rate for 1980, arriving at a averaging figure of the p%. (See Deprey, Appendix 9A) 15.18 The cost was then adjusted to reflect the additional cost above prime which the. This yielded ~the proposed short-term cost Company must pay (.See Deprey, Exhibit 9) rate of 16.86%. Mr. Deprey also testified that it would be reasonable for the Commission to average the prime rate for both 1979 and 1980. On this basis . the adjusted short-term debt cost for Maine Public Service would be 15.39%. The Company's witness, Mr. Jackson, recommend.s a short-term debt' cost of 17.21%. (See MPS Exhibit 2; Jackson, Schedule.5, Revision 1) This figure was computed by taking the average daily balance of short-term debt outstanding during the test year and dividing by the total interest paid on short-term debt during 1980.
- The ACC recommends using 14.18% which is an average of the actual short-term debt costs to Maine Public Service Company over the past three years, (See the Committee's Brief, Pages 1-3) This figure is produced from the.,following: (G-12) 1980 . 17.21%
1979 13.63% 1978 11.69% The Committee argues that the allowed rate for short-term debt which is to be an estimate of the future short-term rate, should not be skewed by an extraordinary year such as 1980. The Attorney General's Office recommends using an adjusted average of the prime rate for 1979 and 1980 for the cost of short-term debt for Maine Public Service Company. (See Attorney Geners1's Brief, Page 32) The cost rate
!. recommended is 15.36%. However, the average prime rate for 1979 should be 13.94% not 13.86% as noted in the Brief. This change results in an average cost of short-term debt of 15.40%.
.. -- . - _ . __ . . - _ = .- .. -- . - - _ _ . . - . .
s' Q , Docket No. 80-180 l [ The Air Force's witness, Mr. McCabe, recommends use of a 12% short-term debt rate. The following table was prepared by the Examiner to enable the Commission to review the volatility of prime 1 interest rates for 1979 and 1980. (See Deprey, Appendix 8 and 8A) . Prime Interest Rates ! (Source: The Weekly Bond Buyer). i
- Prime Rate -
i ' Year Month (Daily Average) 1979 January 11.74% February 11.5 j March 11.5 11.5 April - May 11.71 . June 11.61-l July 11.56 - August . 11.92 . September 12.86 -
. October 14.37 N- November 15.13 December 15.17_
g= 12.55% s = 1.47 S v g- x 100 i y= 11.71% 1980 January 15.03% - l l February 15.67 . March 18.32 April 19.77
- l. 16.36 May l
. June' 12.43
( July 11.00
*- August 11.13 September 12.28 l 13.79
- October .
November 16.03 December 20.32 g = 15.1Fs s= 3.18 v = 20.95% O .
.,---,m.
,_,_v--. ,,--n.,,.-f, ,.-,7,--w,--,,- ,,,,.,_ ,,w,,, ,,,,-,v.,,,3-,--,,,,--.-y. - , , - _ . , . _ _ . - _ _ _ , , . . . - ., ,
O . Docket No. 80-180 The average dai?.y prime figures for 1979 and 1980 are the same as those used by Mr. Deprey. The coefficient of l variation was computed for both of these periods in order to
- enable a comparison of variability.
The coefficient of variation measures the relative " dispersion of data from the means of different samples or-groups of data, and, as such, provides a'useful statistical i tool for comparing the variance of two dif ferent sets of data. j (Valentine and Kennis, Quantitative Techniques for Financial Analysis, pp. 78-81 (1980)) The Company's witness, Mr. Jackson, also used the coefficient of variation in his ' prefiled testimony. (See Jackson, Appendix C) . With respect to the prime rate, the coefficient of variation for 1979 was 11.71% as compared to 20.95% for 1980. Thus, there is higher variability in the prime rate for 1980. , However, consideration of the movement of the prime rate for 1981 is also an important factor when setting a cost -for short-term debt for this Company. As a result of recent ' increases and variation in the prime interest rate, the January 1980 - April 1981 period will be used to estimate the
- cost of short-term debt to MPS. '
l -- ( The Commission must establish a reasonable estimate ', for the cost of short-term debt for the expected life of the rates authorized by this Order. The major determining factor in computing the average short-term debt rate is the average prime rate. The Commission concludes, therefore, that averaging the prime rate over the longer test period of January 1980 to April 1981 will yield a more reliable result. Averaging the prime rate for'this period and adjusting this ' average, yields a figure of 17.9%. This number was adjusted to t reflect MPS's cost rate for short-term borrowing which exceeds l prime. The Commission finds that Maine Public Service Company's cost of short-term. debt is 17.9%._ (See Exhibits 1 and 2) E. Co st of Common Equity A utility's cost of debt and preferred stock is generally a matter of little controversy. The cost of these - forms of capital is calculated by taking the weighted average of the actual cost of the utility's senior securities, usually an embedded cost. , , l (11) . t
- r. ,---,.e-c- -*.,-w .. -,-.y . , _ . . . _ . , -
,.,w,--..r., .,--r -.----ry., , , . , , , . , + .- .,... _.-_y
. e' s Docket No. 80-180 ~l Determining the cost of commou equity, however, at several crucial stages:
requires the exercise of judgment What me'thodology should be employed?Of What the assumptions must be hard data available, made? Are the assumptions sound? what is relevant and how should it be analyzed? In pondering these matters, the Commission must bring its analysis within the framework of Bluefield Water Works and Improvemer t Company v. Public Service Commission of West Virginia, 262 U.S. 679 (1923) ; Federal Power Commission v. Hope Natural Gas Company, 320 U.S. 591 (1944); and New England Telephone and Telegraph Company v. Public Utilities Commission, 3f0 A.2d 8, pp. 34-35. (Me. 1978) As interpreted by the Law Court in the NET c,se, the decisions of the United States Supreme Court require that the utility's return "must be commensurate with returns on investments in other business enterprises having corresponding risks and uncertainties," and must be " sufficient
.to assure confidence in the financi a l integrity of the business enterprise so as to maintain its credit and enable it to attract capital." Id. at 35. Finally, we are directed by statute, 551, that~in determining just and reasonable rates, ,
the Commission must " provide such revenues to the utility as may be required to perform its public service and to attract necessary capital on just and reasonable terms." , b) Maine Public Service Company' introduced the testimony of Robert Ja'ckson 'on the topic of the Company's cost of common Mr. Jackson testified to a cost of common equity of uity. eq% 16 based upon a comparable earnings analysis, a discounted cash flow analysis, and a study of bond yield plus risk-premiums. (See MPS Exhibit 1; Jackson, Pages 3, 20) Mr. Jackson's comparable earnings study consisted of a group of forty-one electric companies traded on thetraded New York on this Stock Exchange and a group of nine utilities not Exchange. He concentrated on the smaller group because the companies are small and, in his Mr.view, more comparable to the Jackson measured the average Maine Public Service Company. return on common equity for the past five years at 12.0% to 13.3%, No specific cost of equity was quantified based upon ' this analysis. (See Jackson, Pages 6-11) In the past, this Commission has found fault with thein comparable earnings approach for aThe variety of reasons primary which, weakness of the
- our judgment, remain valid today.
compar,able earnings approach is that it ignores the, single most
f Docket No. 80-180 important factor in determining the cost of attracting equity capital, the market price of the, Company's stock. What the investor requires in the way of i return in order to induce him to buy a share. of stock is the cost of equity. It is clear , that this cost rate cannot logically be determined without some reference to the market price of the stock of the particular company involved. Yet the comparabic earnings method makes no such reference. Re: Central Maine Pc::ar Company, 8 PUR 4th 277, 285 (Me. 1975). The Commission will not rely ulon i this analysis. Mr. Jackson also performed a discounted cash flow analysis on the same two groups of companies. Emphasis again
~
was placed on the group of nine companies. Maine Jublic Service Company is not included in either group. . For the group of nine companies, Mr. Jackson computed a 9.82% yield based upon the average yield for 1979. , This yield was then adjusted by a range of 1.1 to 1.2 to reflect t issuance costs, market pressure, market fluctuation, and inflation. Ha 'then added.a growth rate of 4.39% to the i adjusted dividend yield. This growth ' rate was based upon a weighted average of growth in earnings per share, dividends per r share, and book value per. share for the same nine, companies for short:-term and for long-term periods. The! computations and results follow (See Jackson, Pages 12-16) : drouth' Component of DCF Pe r Sha re - 9 Comparison Companles . Long-term Growth Rates: 1969-1979 5.25% 3.03% 2.92%. 1970-1979 6.56 3.23 3.00 1971-1979 7.98 3.43 3.12 1972-1979 9.27 3.79 3.16 1973-1979 14.75 4.21. 3.19 Average 8.76 3.34 TQ3 Short-term Growth Rates: 3.19 1974-1979 4.53 5.00 1975-1979 3.46 5.50 3.16 1976-1979 . 4.19 5.40 3.50 l 1977-1979 4.62 5.55 ~4.17 l 4.03 1978-1979 (1. 2 6) 6.39 Average 3.11 3 57 3.61 Growth Rate 4.39% -
7-() _
~
Docket No. 80-180
'(m) The indicated cost of equity based on Mr. Jackson's DCF analysis is 15.19% to 16.17%.
The Staf f agrees with Mr. Jackson's calculations of the dividend yield component but questions the adjustment for issuance costs and other factors, as well as his 4.39% growth rate. The Sta f f recommends use of a growth rate between 3.11% and 3.61%, since "a realistic investor evaluating this The data ' would not expect future growth as high as 4.39%. diminished expectations are reflected in the dividend yield, as Mr. Jackson acknowledged. (E-88) Also, the Staff recommends no adjustment for' market fluctuation, a risk of which according to Mr. Jackson investors are aware, and which is, therefore, reflected in the market price of the stock. (E-94, 95) An adjustment to reflect the fact tha'. the market-to-book ratio '
"itself compares current dstiars af market value to historic dollars of book value," is also not recommended by the Staff. .
As Jackson explained, the impact of inflation would have already been reflected in the market price. (E-95, 96) The Staff recommends reducing the allowance for issuance costs to 2.5%, since Mr. Livingston testified that Maine Public Serv?ce does not plan to issue equity in the near future. The Staff supported Jackson's adjustment for market pressure, yielding a ra nge o f . 9% to 3% . Thus, the Staff recommends a 14% cost of ((f 3) equity based on the following: (See Staff Brief, Page 9) 9.82% (1.03% to 1.06%) + 3.61% = , (10.11% to 10.40%) + 3.61 = 13. 72% to 14. 01% The Committee also adv'ocates use of the DCF method, accepting the 9.82% dividend yield figure. The ACCofpoints nine out that growth in book value per share for the group % to 3.61%. companies during the 1975 to 1979 period was 3.15 The ACC adjusts these figures by 1.015 to reflect issuance costs. (See G-92, E-100, E-119) No adjustment was recommended for market pressure, on the ground that it can be either negative or positive on a random basis and cannot be reliably forecasted. (E-120; McCabe, Page 41) The ACC computations , result in a recommended cost of equity of 13.25% to 13.75%. The Attorney General's Office supports the findings of the Staff with regard to the cost of equity. The Air Force recommends use of a DCF analysis, rejecting comparable earnings and bond risk premium methods as poor substitutes for analysis of the market itself. Mr. McCabe, witness for the Air Force, accepted the 1979 Q) .
- (
- )
Docket No. 80-180 1
' average div'.dend yield of 9.82% for the nine comparison companies and the short-term, growth in book value of 3.61% and increased that sum by .55% to reflect issuance costs, based on the 3.7% cost of issuance from Mr. Jackson's study. (See McCabe, Schedule 4) Mr.- McCabe recommended a 14% cost of equity based on this analysis.
Mr. Jackson also performed a bond yield plus risk - premium analysis to support his recommendation.
~
We have considered the arguments of the parties and the testim 6ny of Mr. Jackson and Mr. McCabe, and believe that the DFC method is the appropriate one to use in this case . However, we feel a number of modifications are n,ecessary. l Althougi. we find the determination of the cost of equity based on an average of a group of companies to be useful - for comparison purposes, we prefer to rely upon a DCF computation for Maine Public Service Company itself. This calculation focuses upon and attempts to quantify. MPS's actual cost of equity as perceived by the investor in the market place. By, relying upon the group of nine companies, Mr. Jackson's analysis appears to take on some of the i charccteristics of a comparable earnings test rather than being. strictly a discounted cash flow test. It is not clear from the record that these companies are, in fact, comparable to MPS. i We have computed a DCF analysis for MPS based upon j
- data available in the 1980 Annual Report to Stockholders, l Pages!16, 17. In finding the DCF-determined cost of equity for MPS, the dividend yield for 1980 was computed as 11.09% and found to be reasonable. (See' Exhibit 3) Since we are setting rates for 1981-1982, it appears more appropriate to include 1980 data in the DCF computation.
An adjustment to reflect issuanc'e costs should be made and we accept as reasonable the 3.7% cost determined.by Mr. Jackson. However, our adjustment will be applied in a manner consistent with the Staff's recommendation. (See Staff ' Brief, Pages 8, 9) The 3.7% issuance cost will be applied only to a portion of common equity that the Company may reasonably be expected to sell during the period for which these rates ! will be in effect. The $12,000,000 recommended by the Staff appears reasonable since Mr. Livingston testified that Maine . Public Service Company has no p.lans to issue equity in the near future. The computation appears in the conc ~ usion of this i beClion.
,+m-,or 4 - , -- - - , - , . , -
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,--._._--.y.-,.--,.7-.p-.y
g)/
\_
Docket No. 80-180 i,-w)
\# We reject any adjustment for markct pressure finding no evidence on the record sufficiently substantiating that such a factor is significant for MPS. The market fluctuation and inflation adjustments are also rejected for the reasons presented by the Staff, as discussed previously. ,
Growth in dividends per share, book value per share, and earnings per share were computed for MPS for the period 1970 to 1980. (See Exhibit 3) This data shows that earnings per share have 'luctuated widely and that growth in dividends per share has increased d ramatically. We agree with Mr. Jackson that growth in dividends can only be~ supported over time by growth in earnings and/or book value. (E-87, 91) We do not feel that the more recent growth in dividends is sustainable. For example, growth in dividends for 1977 to 1980 was 10.02%, growth in book value was 6.52%, and growth in earnings per share was (6.61%). Because of the extreme variation in the growth of . earnings per share, over this short period, we do not believe that this data should be used to compute the growth component of the DCF formula. We conclude that the longer period of time of 1970 to 1980 should produce a more reliable growth
,. component, free of the derangements caused by temporary
( ) fluctuations in the economy. The growth rate of 5.11%, will be N/ used in the computation of the cost of equity for MPS. This growth rate compares well with 5.43% growth in book value for the same period.
! Taking the 11.09% dividend yield and adding the growth rate of 5.11% yields a cost. of equity of 16.20% for existing common equity. Using a 3.7% floatation cost and substituting the other variables into the following formula yields a cost of equity for newly issued equity:
= D1- +g Ke po (1_yy
= 11.09% + 5.11%
(1 .037
= 16.63%
Weighting chese costs by their respective portion of the total common equity for MPS, we find a cost of common equity of 16.37% which we will round 'to 16.5%: Weighted Weight Cost Cost Present Common Equity $18,921,000 61% 16.20% 9.88% Possible New Equity 12,000,000 39 16.63 6.49 l (/}
\_, 30,921,000 100-7. 16.37%
O Docket No. 80-180 i We find based on the ecord in this case, that Maine Public i Service company's c 1 of equity is 16.5%. F. Fair Rate of t.aturn , The & .ssion determines the overall fair rate of ' return for Maine Public Service Company to be 12.49% as calculated in Exhibit 4. i III. RATE BASE In setting rates', the Commission must "fix a reasonable value upon all the property of any public utility used or i required to be used in its service to the public within the State and a fair return thereon." 35 M.R.S.A. 552. In addition to the items traditionally included in an electric utility's rate base, MPS has asked that.25% of its investment in the as yet uncompleted Seabrook, New Hampshire, nuclear generating station be considered without offsetting AFUDC.- Traditionally, the Commission has included all of a utility's Construction Work in Progress ("CWIP") in'its rate base, but has made an allowance for funds used during construction ("AFUDC"). Central Maine Power Company, Docket No. 80-25,.80-66 I (October 31, 1980). At such time as the capital item is placed in service, the corresponding AFUDC that has accrued during the construction period and which has been considered, in effect, as non-cash earnings, is in~cluded as a port, ion of the cost of . the item. The Company now asks the Commission to depart from-this practice and to allow MPS to receive actuel cash earnings on 257. of its Seabrook investment. We are aisc asked to normalize the tax deduction on the interest component of the remaining 75% of the AFUDC. l The sum and substance of the Company's presentation is j that in financing its share of Seabrook, the Company has exhausted its ability to attract capital on any terms, that so-called normal regulatory revenues will not be sufficient, and that only by receiving the requested extraordinary relief can the Company continue to finance its position in Seabrook. l The Staff and the intervenors are in general agreement l with the Company's appraisal of its financing capacity; however, they disagree with the utility's assertion that its i investment is a prudent one.- The Staff takes the view that-in l the context of this rate case MPS has failed to meet its burden i of showing ~.he necessity of this investment, that the ! extraordinary relief requested should be denied, but that the Commission should undertake an investigation under 35 M.R.S. A. O . 9
(h - Docket No. 80-180 { 5296 to explore the question further. The Attorney General and 5 the ACC generally concur, but doubt the wisdom of beginning an investigation. Because of the unusual nature of. this case, we discuss the implications of the Seabrook problem separately in Part VI of, this Order. The remainder of this part will deal with the remaining rate base issues. .
,. A. Property Held for Future Use ,
The .Com'pany has included in its rate base the sum of~
$90,010 representing its investment.in'a transmission ,
right-of-way running between Houlton and Haynesville in the State of Maine. T right-of-way was obtained shortly after the Company bought into the Maine Yankee Atomic Power Company plant in Wiscasset, and.was then conceived as necessary in , order to create a means of bringing energy from Maine Yankee into MPS's territory. After the right-of-way was obtained, the Maine Electric Power Company (MEPCO) came into being.
~
MEPCO built and currently operates a transmission line by which power from Maine Yankee is traasmitted.into the New Brunswick Electric Power Commission's (NBEPCo) system at Orient, Maine. e The power is then wheeled north over NBEPCo's lines and back into the MPS system. Thus, 100% of the power'obtained by MPS s ( \ from Maine Yankee is delivered.by means of the Canadian interconnection. The non-MPS parties argue that, under the formula set forth' in Re : Central Maine Power Co._, 26 PUR 4th 388, T<1 . . (Me. PUC 197&), the Company has not met its burden of jroof to ' show that a sufficiently definite plan exists for the future use of this property, and that, accordingly, it would be unjust to compel ratepayers to pay a return on assets which " confer no immediate benefit-on and provide no guarantee of future benefit to them." Id. at 400-401. The Company concedes that the right-of-way has no. definite in-service date, and implies that, in fact, it may never be needed for the transmission of power. Instead, it argues that the property is presently conferring a benefit on the Company's ratepayers by providing the Company with a useful bargaining tool in its negotiations with NBEPCo over interconnection fees. In his rebuttal testim iy, Mr. Hovey insisted that the existence of the right-of-v had saved MPS ratepayers substantial sums by lowering the rconnection fee that would otherwise be imposed by New Brunst MPS Exhibit 5, Hovey Rebuttal at 13. He explair .nat without the standby transmission right-of-way, MPS woult aa in a weaker negotiating position with its Canadian ( 'ontet sart. (
- = - - - - _ - _ , , _
O Docket No. 80-180 Q(s Although the Company's position is not without some merit, we cannot conclude on this record that it has met its burden of showing the reasonableness of the expense. It is certainly logical to conclude that the existence of the standby transmission right-of-way would be a useful bargaining tool in
; this situation. Ilowever, on this record we cannot conclude .
that the benefits to be derived are outweighed by the added expense to the ratepayer stemming from the Company's ownership of the right-of-way. Accordingly, we reject the adjustment and . delete $90,010 from the Company s proposed rate base. B. Seabrook Educational Center _ The Company includes in rate base $28,653, reflecting its investment in the Seabrook Educational Center. The Commission disallowed expenses associated with this project in . Public Service Company of New llampshire, Re: Proposed Increase in Rates, Docket No. F.C. 2548 (July 31, 1980), holding that to < do so would violate chapter 83 of.the Commissioa's rules . governing corporate promotional expenses. Nothing in the record of this case suggests the necessity for a departure from this position, and we' decline to do so. Accordingly, we - disallow both the investment and test year expenses associated w with the Ce ter. , C. Inclusion of Canadian Subsidiary For the purposes of this rate case, Maine Public Service Company has included in rate . base 100% of the- , l i investment associated with its Canadian subsidiary, a' Canadian - corporation subject to the regulation of Canadian authorities. The chief asset of the subsidiary is a hydroe1~ectric facility, l 85% of whose power is exported to Maine for the.use of Maine Public Service Company's customers. The remaining 15% is I transmitted to Canadian distribution systems serving the , communities of Carlingford and Perth-Andover, New Brunswick. The Company . treats this situation by including all of the [ j subsidiary's plant in its rate base, together with 100% of the " , subsidiary's revenues.
. The Staff opposes the inclusion of 100% of the Canadian subsidiary's plant in MPS's rate Lase on two grounds:
first, that the subsidiary is not recovering its cost of capital with respect to-its Canadian sales; and second, that 35 M.R.S.A. 552 forbids the inclusion in rate base of any property not used or useful in serving Maine jurisdictional customers. The Company appears to concede both points, but argues that by selling a limited amount of hydroelectric power-
(J
~ -~ Docket No. 80-180 \/ to the Canadians a t bargain rates, the Company can preserve its excellent relationship with the NBEPCo. Increasing the rates on the subsidiary 's Cana'dian sales , the Company implies, might trigger an unfortunate reaction by the Canadian authorities, leading to a complete ban.on the export of the subsidiary's hydroelectric poter, to the severe detriment of MPS's ratepayers.
Although we folly appreciate the Company's position, we conclude that 552 interposes a clear legal barrier to the Company's proposed treatment of its Canadian investment. The Law Court has ruled, in unequivocal terms, that this Commission's rate setting must take into account only so much of the utility's plant as is used and useful in providing service to its Maine jurisdictional customers. Calais v. Calais Wa t er and Powe r Co._, 157 Me. 467, 4 2-474 (1961). There appears to be no dispute that a portion of the Canadian plant is devoted to the service oJ Canadian, and not. Maine, customers. In light of the Calais case, that portion cannot lawfully be included in a Moine jurisdictional rate base. The record supports an allocation of 85% of the Canadian subsidiary's plant to MPS's rate base. Accordingly,
.s we disallow 15% of this investment. The record also supports
') an allocation of 16.2% of the subsidiary's test year net
(~/ N- revenues to Canadian sales. (F-79-80) D. Acquisition Adjustment Between 1951 and 1963, Maine Public acquired five electric utilities in Aroostook County. The Commission approved each acquisition in the following cases: Fort Fairfield Light and Power Company, Docket No. U. 2075, May 10, 1951 Mars Hill Electric Company, . Docket No. U. 2148, September 7, 1954 Washburn Electric Company, Docket No. U. 2388, February 10, 1960 Monticello Electric Company, Docket No. U. 2469, June 26, 1961 Limestone Electric Company, Docket No. U. 2468, July 19, 1962 (_/
I O . Docket No. 80-180 i
- n. the first four of these cases, the Commission reviewed and approved of the acquisition. In the Limestone case, the
.ommission approved the acquisition, but determined that a portion of the acquisition cost --
the difference between the net book value of the acquired utility and the purchasa price paid by MPS -- was excessive. The excess was charged against the Company's shareholders. The acquisition cost of the other four utilities together with the non-excessive portion of the acquisition cost of the Limestone utility have been amortized by the Company for ratemaking purposes with the unamortized balance remaining in rate base. The net book value of the acquired utilities has been included in rate base. This treatment has' received Commission sanction in the Company's i past two rate cases. Mr. McCabe testified that the unamortized balance of the acquisition cost should not be included in rate base, but that the total cost should be amortized as an allowable expense. We believe that the Commission's specific approval of the purchase of these properties under 35 M.R.S.A. 5211 constitutes a judgment by the Commission that the purchases, as. ] consummated, were in the best interests of the ratepayers
; involved and that the acquiaition was reasonable and prudent i within the meaning of 35 M.R.S.A. 552. We accept the Company's adjustment.
~
E. Wyman Unit #4 Adjustment I In the recent Central Maine Power case, the Commission deducted from CMP's rate base the capital costs associated with a defective muffler on William F. Wyman Unit #4, a 600 MW oil-fired generating station located in Yarmouth, Maine. (Order at 26-27) With respect to the replacement muffler, the 3 i Commission found that "[s]ince the new muffler is used and useful, the Company is entitled to earn a return on the full value of the muffler." Order at 27. The Commission left in
- rate base the full cost of the new muffler. The Commission
' rem 9ved from rate base the capital costs associated with a damaged feed water heater, finding that imprudence on CMP's ! part had contributed to the malfunctioning of the plant. L The ACC asks that Maine Public's share of the
- replacement muffler and feed water heater should be removed from its rate base, advancing essentially the same arguments l made by the Maine Committee for Utility Rate Reform in the CMP
~
case. We concur that Maine Public's share of the defective muf fler (amounting to $2,776.37) and its. share of the feed' water heater (amounting to $425.82) should be deducted from i rate base. However, with respect to the cost of the replacement muffler, we adhere to the finding made in our CMP l O, s decision and reject the adjustment propos'ed by the ACC. I
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Docket No. 80-180 (' '
F. Calculation of AFUDC
. The Staff proposes aajustments to the Company's method of calculating AFUDC. The testimony of Staff Accountant Merle A. MacDonald provides the basis for this change. Maine Public Service currently computes its AFUDC cate using the FERC formula. This formula results in an excessive weighting of the cost of short-term debt which is already considered in the short-term debt component of the capital structure.
Mr. MacDonald recommends use of a formula developed by Mr. Bruce Louiselle which is simply the weighted cost of capital. (See MacDonald Surrebuttal; Staff Exhibit 17, Pages 3, 4) This adjustment was found to be reasonable by the Commission in Central Maine ?ower , Re : Proposed Increase in Rates, Docket No. 80-25. The Commission finds this adjustmenc to be reasonable for Maine Public Service Company. Also, Mr. MacDonald recommended that the Company compute its AFUDC rate by using an average monthly balance at the end of the month plus one-half of the current month's additions. The Company currently computes the AFUDC rate on the basis of a monthly ending balance. The Commission agrees with the Staff with regard to this adjustment. The $2,118,786 AFUDC amount reflected in the Adjusted Test Year column of the
/z s Pro Forma Income Statement includes these recommendations.
(b) MAINF PUBLIC SERVICE COMPANY AFUDC ADJUSTMENT
! l Seabrook at 12/31/80 $20,020,741 Less - 1980 Actual AFUDC 2,125,593 Amount for Rate Base $17,895,148 Allowed Rate of Return 12.49%
offset to Income $ 2,235,104 1980 Act~.31 AFUDC-Scabrook $ 2,125,593 Adjusted Test Year AFUDC __2,235,104 Adjustment $ 109,511 p U
1-O 1 G. Working Capital i " Working capital represents the amount of funds which' investors must provide to meet day-to-day operations involving the delivery of [ utility] service. To the extent it is j- unnecessary for investors to supply those funds, there is no , i need for a working capital allowance in rate base." Re: Continental Telephone Company of Maine, 18 PUR 4th 636, 643 (Me. Public Utilities Commission, 1977). . 4 Mr. Livingston, the Company's witness, developed a
" lead-lag" study which demonstrated the amount.of investor 4
supplied capital requ' red to cover the costs of day-to-day operations between the time the Comp'any pays such costs and the time the Company receives revenues from those operations. l Mr. Deprey, the Staff's witness, also developed a " lead-lag" study which differs from MPS's presentation in a number of
~
- aspects.
l The Staff and the Attorney General's Offi,ce propose i that the $100,000 compensating balance requirement for , short-term borrowing should be eliminated 1) because it is not formalized by a written contract and 2) because the CompanyLhas l
'gs failed to prove that maintenance of the compensating balance is l '( ) a andprerequisite to obtaining Rockland Water Company,less costly Docket No. financing (. See F.C. 2556 Me.Camden PUC, August 8, 1980). Mr. Livingston testified on-rebuttal that the-c Company's bank requires a compensating balance. However, there l
is nothing in the record to suggest that maintaining the balance gives the Company access to financing _at a cost less
- than could otherwise be.obtained. Finding that MPS'has failed ,
i to meet its burden of proof on this issue, we agree with-the ! Staff and the Attorney General's Office, and eliminate the
$100,000 compensating balance requirement for short-term borrowing from the working capital allowance.
f The Staff had three adjustments to the' test year . . purchased power expense component of working capital. First, - l the exclusion of Maine Yankee decommissioning costs has.been. updated to include that portion' consistent with the amount
~
I allowed in the recent Central Maine Power Company rate case, ! Docket No. 80-25. We find this adjustment reasonable. ! Mr. Deprey has included consideration of the MEPC0 capacity charge which begins November 1, 1981 as an-element of [ his attrition analysis. This is an out-of period. adjustment which we believe is more properly considered as part of an 1 attrition analysis since an offse,t for associated revenue growth is not made. t v l l
O Docket No. 80-180 V('^g The Staf f also recommends removal of fuel for ' generation in the amount of $1,900,123 from the purchased power expense of $15,656,549. The propr,iety of this adjustment, which we find reasonable, was acknowledged by Mr. Livingston on rebuttal. (Tr. J-144) The amount of purchased power expense component of working capital is therefore $13,864,484. The "other operation and maintenance" component of, working capital is simply the recommended adjusted test year other operating and maintenance expenses.
'The Staff has one major adjustment to th'e lead days . for real estate and personal property taxes. Mr. Ca r iani , the Company's witness, used October 1 as the midpoint of the service period, based on a taxable year of April 1 to April 1. .
He uses this period because he contacted the assessors' and they said that April 1 to April 1 was their taxable year. (Tr. at F-87) He also testified that he did not know the actual fiscal y'arse of the towns providing municipal services
' to the Company.
The Staf f recommends u'se of the actual fiscal years for the towns providing municipal services to the Company. ,
/;w Staff Exhibit No. 10 shows copies of all property tax bills f,(,) paid by the Company in 1980. Other than Easton _and Fort As a Fairfield the fiscal years are January 1 to December 31.
result, Mr. Deprey used July 1 as the midpoint for this category with the exception of Easton and Fort Fairfield. The number August 1 and October 1 were' app, lied, respectively. of lead days was computed to be 111.21 by the Staff. (See Deprey,. Exhibits 1 and 5) Working capital for local taxes is appropriately based on the time during which the Company actually received the municipal services for which it paid. Mr. Deprey is, therefore, correct when he bases his analysis upon a calendar year which is the year to which the towns apply these paymencs and the period during'which service is financed by these payments. Thus, consistent with other recent decisions such as Camden and Rockland Water Company _, Docket No. F.C. 2556, we accept 111.21 lead days for real estate taxes and personal property taxes to be just and reasonable. The Staff recalculated the number of lead days for the other expense items in order to reflect actual test year 1980 data. Mr. Cariani derived his lead days by using a mixture of 1979 and 1980 data which was available at the time ' the testimony was prepared. O
!s _-) ,
e
- C:1 1
Docket No. 80-180 < We find the Staff's lead day calculation for these other expense items reasonable as they provide a better match - of the working capital allowance. . ! The Attorney General's Office recommends that the cash accrued on interest on long-term debt and preferred stock. .
;. dividends be considered in the working capital allowance.
1 (See Attorney General's Brief, Pages 24-31) Payment of long-term debt interest occurs in arrears every six months. L (G-48, Page 15 of Exhibit GMll-1) Preferred stock dividends are-a paid in arrears on a quarterly basis. (G-48) Inasmuch as the 4 preferred stock issued by the Company is cumulative, it possesses many of the attributes of debt securities. Cash that is collected to pay these costs is available to the Company between time of collection and time of.pa ment. (See Deprey, G-25 and G-28) If this is not considered as an adjustment to
- working capital, ratepayers may be charged twice, once when the
! funds are provided through rates and again where a rate of return is collected on-those funds for costs paid in. arrears'.
- (See Depre , G-26 and G-28) ,
1 The proper date of service for computing lead days is .
.the mid-point between the time of collection and the time of j; w payment. (See Deprey, G-27) 1 j- -
The Company argues that these are investor supplied funds and should not be reflected in. working capital. The Attorney General's Office argues that the source of the funds is irrelevant and that what is important is.whether there is - cash available which can offset other costs o'r uses of funds ! and the associated carrying costs. After' reviewing these arguments in light of our policy announced in the above-noted . Continental Telephone case, we. find the adjustment-proposed by the Attorney General's Office to be reasonable. The working i capital allowance will be adjusted to deduct $258,345 representing interest on long-term debt and $6,590 for preferred stock dividends. (See Attorney. General's Brief, l Pages 30, 31) L Incorporating these revisions to the Company.'s working ! capital analysis, the proper working capital allowance is ! $1,694,807. (See Exhibit 5) 1 L
<m
~"; Docket No. 80-180 (G IV. TEST iEAR EXPENSES AND REVENUES A. Postage Expenses We accept the recommendation of all parties that MPS's test year be adjusted to account for an increase in postage costs. The adjustment amounts to $3,790, net after taxes.
B. Amortization of Investment in Abandoned Plants The record indicates that the Company invested
$196,470 in a nuclear generating station project sponsoredThe NEPCO chiefly by the New England Power Company ("NEPC0") .
project would have consisted of two units located in Rhode Island. The project was abandoned, however, when it became clear that NEPCO could not obtain title to the land upon which it desired to locate the plant. The $196,470 som reflect MPS's share of the engineering and preliminary planning costs as well as the cost of filing for preliminary approval. The Company initially proposed that the costs associated with this investment should be amortized over a three-year period. It now has adjusted that approach, and instead calls for a four-year amortization period. ( ,) The Staff supports a four-year amortization, but-argues that the amount to be amortized should be reduced by removing the accrued AFUDC. This approach was used by the Commission in determining the appropriate rate treatment of Central Maine Pow ( Company's investment in the abandoned Sears Island nuclear project. Central' Maine Power Company, Re: Proposed Increase in Rates, Docket No. 80-25 at 38-39 (Oct. 31, 1980). The ACC and OCS argues that NEPCO acted imprudently in paying engineering, planning, and preliminary approval costs without first securing clear title to the proposed site. The ACC asks that no recovery be allowed; the OCS that a five-year amortization be allowed. We do not believe that NEPCO's failure to obtain title to its proposed site constitutes imprudence per se, as the ACC and OCS appear to argue. The engineering, planning and construction of a major generating facility is a complicated and time-consuming process, as can be the obtaining of appropriate regulatory approvals. It might well have been imprudent for NEPCO to have bought title to the site before undertaking an engineering analysis to determine its feasability, or without first securing the necessary regulatory
<~'s .
i ! (% / l l l
s Docket No. 80-180 (V i sanctions. We do not believe that t .ecord discloses imprudence, and, accordingly, we conclude that the four-year amortization proposed by the Company and supported by the Staff constitutes.a just and reasonable apportionment of the costs of the project between ratepayers and shareholders. Furthermore, we see no reason to depart from our recently-announced policy, of excluding AFUDC from the balance to be amortized. Accordingly, we accept the Staff's proposed adjustment. C. Rate Case Expenses , The Company entered a late-filed exhibit showing an adjusted rate case expense of $188,804, composed of actual expenses, unbilled but known charges, and expenses which the Company estimates it will incur in connection with the rate design portion of this proceeding. Maine Public Service Company asks that the charges be amortized over a two-yea r period. The Staff accepts this adjustment. The Attorney General recommends a three-year amortization, noting that historically, MPS has sought general rate adjustments in four-yea r intervals. We believe that the two-year period proposed by the Staf f and the Company should be gN adopted. It is an unfortunate fact of life that over the past ( ,) several years, electric utilities in Maine have generally proposed and received rate increases in two-year intervals. In setting rates for an indefinite future, we must acknowledge that the economic environment which contributes to these relatively frequent rate adjustments is not likely to show marked improvement in the next few years. 'In short, a two-year amortization of rate case expenses appears just and reasonable. D. Maine Yankee Decommissioning Costs In the recent Central Maine Power case, we allowed Central Maine to recover in rates its estimated annual costs associated with the decommissioning of the Maine Yankee nuclear generating station. In doing so, the Commission noted that at such time as the Maine Yankee plant is taken out of service, the owners of the plant will be called upon to finance the decommissioning. In order to insure that these costs are met by ratepayers who are currently deriving the benefit of the plant, the Commission accepted the notion of including decommissioning expenses as a current expense, and adjusted Central Maine's rates accordingly. A
e Docket No. 80-180
, f]x $(
Maine Public Service Company is also a part owner of Maine Yankee and has likewise included in its rates an adjustment for decommissioning patterned af ter that proposed by Central Maine Power. The ACC urges disallowance of this adjustment on the ground that the Company has not been billed for such expenses and that, furthermore, the Federal Energy . Regulatory Commission ("FERG") has not ruled on the propriety of the billings. The Staff, OCS and Loring support the
- inclusion of decommissioning expenses, but argue that the Commission should adjust the expense figure to account for the compounding of the pure rate of interest. This approach was adopted by the Commission in the Central Maine Power case. ,
It is certainly true that the decommissioning expenses have not been incurred and, therefore, will not be known with certainty.until the actual decommissioning has concluded. On the'other hand, there would appear to be no disagreement that the plant will have to be decommissioned, that the owners of '
. the plant, including MPS, will be called upon to meet;these costs when due, that such costs are reasonably associated with '
the provision of service, that ratepayers taking service after Maine Yankee's usefulness has expired should not be called upon . to underwrite the expenses associated with the plant, and that
'~ to continue to delay the recovery of decommissioning' expenses l
i merely shifts the burden of meeting these costs from the
'" ratepayers who take service in the early years of the plant's life to those who take service in the later years. In that context, we find it juct and reasonable to estimate the costs and initiate recovery. . .
We see no reason to deviate fromtour postion, set forth in Central Maine, that the compounding of the pure rate of interest should be accounted for in computing the . allowance. In its Reply Brief, the Com issue that Maine Yankee Atomic Power Company'pany s Form raises 10-K, the filed with the Securities and Exchange Commission, discloses that Maine Yankee proposes to bill its customers, including MPS, an amount
" equal to the current estimate of decommissioning." (See MPS i
Exhibit 5, Livingston Exhibit L-9) Maine Public then argues that'such a bill would be rendered pursuant to a tariff amendment filed with the Federal Energy Regulatory Commission (FERC), and as such could not be rescinded, not even l questioned, by this Commission. .Narragansett Electric Comoany v. Burke, 381 A.2d 1358 (R.I. .' 9 7 7) cert. denied, 435 U.S. 972 (1978). o (G ) y en .-- + - ..-- . , . - - , . - , , - , ,- , , - + ,
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C:) j . Docket No. 80-180
]
We find that the Company 's a rgument is premised on the assumption that FERC will approve the rate as filed. Were we presented with a FERC tarif f as a fait accompli, the Narragansett case might be instructive. In the meantime, however, we will make the' adjustment based upon our'own _ conception of justness and reasonableness. E. Sales to N PCO and Loring AFB , For many years, the Company has had substantial non-firm power uales to the NBEPCo. The parties have reached an agreement, which we accept, that a four-year average of these sales should be included as an adjustment to the Company's test year revenues. The adjustment, ' net af ter taxes, ' amounts to $62,878. The record also indicates that Loring Air Force Base will shortly become a firm service customer of MPS. The parties recommend that $229,659 be added to the Company's test year revenues to account for this known change. 'We concur. F. Seabrook Educationa? Center j H'aving concluded that the Seabrook center should not
- properly be included in rate base, we are drawn to the
. conclusion that the test year expenses should also be
- disallowed as unreasonable for the same reason. ,
G. MEPC0 Purchase The circumstances surrounding this proposed adjustment
. sere outlined by Mr. Hovey in his prefiled direct testimony I
(MPS Exhibit 1) : The Maine Electric Power Company, Inc., had t agreements with The New Brunswick Electric Power Commission by which it received 400 megawatts of capacity and associated energy from three oil fired units located at Coleson Cove, New Brunswick,- Canada. The energy received by Mepco 1 from the Coleson Cove units was being' subsidized significantly by the Canadiar. Government. Mepco, on July 3, 1980, received nocification from The New Brunswick Electric Power Commission to the i
- effect that the Petroleum Compensation Board of Canada was going to reduce, and eventually phase out completely, the compensation applicable to l
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_ .. . - -. , , . . - _ - _ ~ .
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0 . .' - Docket No. 80-180 fuel used to generate Mepco's entitlemont under the terms of the Unit Participation Agreement. The Mepco participants considered this to be in violation of the basic pricing provisions of the Unit Participation Agreement dated November 15, - 1971, and in response to this notice, filed a . comp la in t for Declaratory Judgment with the United States District Court for the District of ! Maine. In an effort to resolve this matter out of Court, Mepco and the New Brunswick Electric Power Commission entered into negotiations, and as a result of these negotiations, an agreement was reached which reduced Mepco's entitlement in , the Coleson Cove units from 400 megawatts to-133 megawatts, effective January 1, 1981, and changed the contract expiration date from October, 1986, to October, 1985. Maine Public Service Company therefore had the option of. reducing its previously committed capacity entitlements to approximately one-third. An analysis of our power supply alternatives convinced us it was economical to maintain the original 13.4 MW entitlement. Since some Mepco participants did not want their full entitlement, the Company was' - I, able to maintain its full 3.4 megawatt
\ entitlement from Mepco. Maine Public Service Company had contracted on August 1, 1977, to purchase an additional 5 megawatts of Mepco capacity from Northeast' Utilities starting ,
t =J November 1, 1980, and another 5 megawatts starting November 1, 1981. Each of these 5 megawatt entitlements, under the amended Unit Participation Agreement, was reduced to 1.385 megawatts. Maine Public Service Company therefore has contracted with the Central-Maine .
- Power Company for an additional 3.615 megawatts -
starting January 1, 1981, and another 3.615
- megawatts starting November 1, 1981, expiring at l
the conclusion of the Mepco contract on October 31, 1985. These assignments from Cantral Maine Power were negotiated subject to the capacity costs being allowed in the Company's base rates in these rate proceedings. }
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Docket No. 80-180 t ) Af ter contracting for the entitlement, MPS determined that it would not need the capacity to meet increased load during the term of the contract, but that the purchase remained a sound one because, according to Maine Public's analysis of the cost of the MEPC0 energy and capacity, the MEPC0 energy would be "less expensive in total than the fuel cost from other sources." (D-57) This analysis was presorted by Mr. Louridas in his rebuttal testimony. On cross-examination, however, Mr. Louridas confirmed that his estimates for the per-barrel fuel costs of the MEPC0 purchase were understated for all of 1981, the only year for which Mr. Louridas performed an analysis. Furthermore, although the record shows that the Canadian Petroleum Compensation Board ended its oil subsidy in March of 1981, it is unclear whether and to what extent Mr. Louridas used the subsidized oil price for Coleson Cove in his analysis or whether he assumed a nonsubsidized price. With the record in this rather confused state, we are unable to determine whether the Company is correct in its analysis of the economics of its additional 10 MW participation in MEPCO. Given the Company's concession that this capacity is not needed to meet load, and given the lack of unambiguous support in the record for the Company's economic argument, we are constrained to conclude that MPS has not met its burden of showing the f- justne,ss and reasonableness of the charges for 10 MW of MEPC0 (3) capacity. We accordingly disallow the adjustment. H. Normalization of AFUDC Maine Public proposes, in, addition to eliminating the AFUDC ! offset on 25% of its CWIP, to normalize the interest component of the remaining AFUDC. (See MPS Exhibit 1, Livingston Prefiled) Mr. McCabe supported this position on philosophical grounds, (McCabe prefiled at 36), while the x In the event that we have misperceived the import of the record, or if it concludes that further information will clarify matters, MPS has the option of petitioning for reconsideration of this, or any other, aspect of our decision. ! V I
O Docket No. 80-180 Company frankly asks for this treatment in order to improve its cash earnings. The Commission continues to believe that its position on this issue, most recently articulated in Central Maine l Power Company , Re : Proposed Increase in Rates _, Docket No. 80-25, , at 44 (October 31, 1980), remains basically sound. Current - ratepayers who provide the revenue against which the interest tax , deduction is taken should enjoy the benefits of the deduction. As ' was true of the Company's CWIP argument and its flow-through argument we think it best for the purposes of this case to treat the Company's cash flow requirements in a later section of'this Decision. . I. Flow-through The Staf f and the ACC advocate that the Commission should continue to flow through to the ratepayers the benefits derived by j the Company from accelerated depreciation on all property subject to state income tax. They also argue that the Commission should
- flow through the tax benefits of accelerated depreciation with respect to all pre-1970 property as 'well as all post-1969 replacement property. ,The Company, while conceding that the Commission has the legal right to accept the ratemaking treatment proposed by the Staff, urges the Commission to change its long standing policy and allow the Company to improve its cash flow by g(/'g
_) normalizing. MPS also asserts, for the first time in its Reply Brief, that if the Commission adopts flow-through, - then the Company is entitled to have its accumulated deferred income taxes
- added to rate base. ,
In the first place, whcontinuetoadhere to our flow-through policy, and will deal with the Company's cash flow problem in a later section. Furthermore, we cannot, understand why the Company should be allowed to earn a return on taxes that neither the investors nor the ratepayers have paid. We accept the position taken by the Staff and the ACC.- J. Interest Synchronization In its Brief, the Staff computes the Company's revenue requirement using an adjustment which calculates the level of , annual interest payments which MPS will be making in the future. (Brief Exhibit 4, Page 13 of 16) As we explained in Re: Central Maine Power Company, 8 PUR 4th 277, 291 (Me. PUC 1975, Docket l No. F . C. 20 7 2) : The cost rate of deb't and debt ratio used to determine the fair rate of return produce [] a weighted debt component. That percentage times i s the rate base produced the appropriate amount of interest to use in computing income taxes. Only i in this way will tax expense be in balance with the other components of the revenue requirement.
1 i o - Docket No. 80-180 ( i Applying this very lamiliar adjustment, the Staff was able to determine the amount of federal income taxes which the Company will be called upon to pay given the 1cvel of earnings to be produced by the new rates. In its Reply Brief, the Company complains bitterly that the Staff never informed the Company that it would be proposing the same interest synchronization adjustment which the Comm.ission 1 has been making for many, many years. We reject the argument, apparently of fered by the Company, that it had no botice of this issue. Interest synchronization is a basic adjustment accepted by this Commission in many published decisions. The utility, and not the Staff, had the burden to show that for some reason the adjustment is. improper in this case. 3 4 The Company further argues that since its test year , federal income taxes were $68,312, the Staff's adjystment unrealistically " takes the taxes down to zero." The flaw in this. argume'nt is that the adjustment is made not to test year taxes, but to the taxes that the Company will be paying given the revenue requirement authorized by the new rates. Not to make the 4 . adjustment would be to deny to ratepayers the benefits flowing from the fact that interest payments are legitimate tax .
- deductions. We reject Maine Public's assertion,
- [ .
,4 i K. Regulatory Expense During the Company's 1980 test year, two unusual '
regulatory expense items occurred. One, amounting to $28,838, stemmed from the Company's involvement in the Maine Yankee shutdown case; the other, amounting to $29,794, from litigation
- before the Federal Energy Regulatory Commission over Maine Public's wholesale fuel surcharge. Mr. Livingston testified
( F-36-38) that the federal action had concluded, and that such a proceeding w:s not likely to reoccur. He also indicated that MPS did not antic ipat'e that its legal expenses associated with the Mainc Yankee case would continue at test year levels. The Staff recommends a two-year amortization of these i costs. The ACC characterizes them as unusual and non-recurring and argues that they should be disallowed for ratemaking purposes. We concur with the position advanced by the ACC. The utility has the burden of demonstrating that the costs incurred during its test year are reasonably likely to recur in future ! years. Nothing in this record suggests that these expenses are of a recurring nature. ( V(s - v ! I
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/"x Docket No. 80-180 tj The Company complains that it did not have sufficient f notice that the reasonableness of its regulatory expenses was an i
- issue in this case, and cites Intermountain Gas Company v. Idaho Public Utilities Commission, 97 Idaho 113, 540 P.2d 775 (1975) for ,
, the proposition that the mere cross-examination of a utility's witness on an issue does not constitute sufficient notice.to'one -
utility that the issue is being raised. There can be no question that " absent some prior notice [the uti'_ity] cannot be called upon to. account for every allocation made, property urchased or other action taken."' Central Maine Power Compar.y v. Public Utilities Commission, j 405 A.2d 153, 185 (Me. 1979)(emphasis supplied) . However, we hold that the specific and detailed cross-examination of MPS's treasurer, Frank E.-Livingston, conducted by counsel for the ACC with regard to these matters should have been sufficient.to place MPS on notice that the reasonableness of its test year regulatory expenses was in issue. The questionirs elicited the purpose for , the expenditures and the likelihood _ hat further expenditures for l the same purpose would have to be made in the future. Indeed, Mr. Livingston was asked if the-FERC proceeding was "non-recurring" (F-38) To anyone familiar with the basic. principles of utility ratemaking, it should have been clear that r3 the " recurring" nature of the Company's regulatory expenses was in
') Maine Public had ample opportunity to put in evidence on
( issue. the reasonableness of_this expense by means of redirect i examination of its witness or by filing rebuttal testimony. Thus, the opportunity to'" meet the issue" was available, a condition apparently different Jrom that prevailing in the Intermountain Case. t We accept the ACC adjustment. V. ATTRITION l-
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The Staff and the Company appear to agree in important respects as to what attrition is and.how it should be computed.
" Attrition results from changes in the relationship among revenues, expenses, and rate base." (See Deprey Prefiled Testimony, Page 11) i
- The Staff and'the Company both agree.that attrition exists and that there should be compensation therefor. There is i disagreement as to how much compensation should-be allowed.
The Air Force proposes that there be.no adjustment for attrition since past high inflation is not expected to
- continue. The Commission disagrees with the Air Force. The lO I
l
() . ig3 Docket No. 80-180 O Committee recommends that there be no attrition adjustment because of anticipated reforms in rate structure which could produce favorable results, thus eliminating the need for an attrition allowance. The Commission disagrees with the Comm i t t ee . The Attorney General's Office is opposed to The allowing any attrition adjustment as it is speculative. . Commission does not agree with the Attorney General's Office. A regulated utility should be allowed a reasonable opportunity to earn a fair rate of return. In this case, the evidence , presented shows that attrition exists. The remaining question - then is the amount of attrition that exists. The methodology used by the Staff and the Company was similar. Both witnesses started with the applicable adjusted .
, 1980 test year results, developed growth rates fo'r each, and applied the growth rates to the test year results in order to project the change in revenues, rate base, and expenses to May 31, 1982. ,
The Staf f accepts all of the Company's projected growth rates in revenues and expenses except the .32% growth for jurisdictional sales. This figure was derived by comparing base revenues for the test year with those projected in the
, 7~N Company's budget. (See Ca riaai, Exhibit C-2, Schedule 1)
Mr. Deprey, the Staff's witness, analyzed historical data in order to compute a 1.18% growth rate. (See Deprey, Page 14 and Appendix 13) After review of these growth rates, we find the Staff analysis and selection of a 1.18% growth rate to be just and reasonable. There is one remaining disagreement between the Staff and the Company's attrition' studies. This concerns the handling of a proposed adjustment to the test year to reflect increased ' MEPCO purchased power costs.- The Company praposes that the purchase power capacity item in the attrition allowance be adjusted by $300,000 to reflect
- twelve months of the unit pucchase which commen'ces November 1, 1981. The Sta f f proposes tha t this same component be increas'ed by $175,000 in order to reflect the expense for seven months which coincides with its twelve-month analysis, June 1,1981, .
through May 31, 1982. The attrition analysis would be distorted if this adjustment were included for the twelve-month j period as recommended by the Comp,any. Also, th'e specific ! impact of growth in revences for the remaining five months was i y.- -,,.. , , .--+- - , , - , - - . - , , . , ,v. - - , --. . - - - -.-r-,,- ,_......-c ---, .~~, -- - - - - -
(O v - ( Docket No. 80-180 V] not included. In addition, the Company would be collecting for
-this expense in advance of its occurrence on November 1, 1981.
The $175,000 would have been appropriate if this expense were found reasonable. Since this adjustment was not allowed at this time, the $175,000 adjustment will be removed from Mr. Deprey's attrition analysis. , Mr. Deprey's attritio' analysis is accepted by the Commission and only modified to reflect the rate base, test year, and cost of capital adjustments made elsewhere in this report. The resulting analysis produces an attrition allowance of 0% through May 31, 1982. See Exhibits 11-13 for support of these results. VI. TiiE SEABROOK SITUATION The Attorney General and the Aroostook Committee urge that Maine Public Service should sell all or at least part of its entitlement in Scabrook, and that the Commission should deny the Company's request for an inclusion of 25% of Seabrook CWIP in rate base with no AFUDC offset plus a normalization of the gS tax deduction on the interest component of the remaining CWIP. (~') The Staff takes the position that the Company has failed to meet its burden of proof as to the reasonableness of these requests, that, accordingly, the Commission should deny the extra relief but that the Commission should initiate and quickly conclude an investigation, pursuant to 35 M.R.S.A. 5296,finto the relative merits of having MPS sell all or a part of its Seabrook interest. Tne OCS and the ACC oppose any investigation. The Company insists that the record in this docket supports its decision to continue its Seabrook investment as being in the best interest of present and future ratepayers. The Company also argues that for va rious reasons the ratemaking treatment advocated by the other parties is unrealistic given the current situation and would, in effect, put Maine Public Service to the financial sword. We proceed to evaluate the , Company's fiscal integrity. A. Financial Overview of Maine Public Service No party in this docket has questioned the Company's assertion that its current financial picture is grim. The testimony of the Company's treasurer, Frank E. Livingsten, on a
O Docket No. 80-180
'C this point stands uncontradicted: MPS's participation in the Seabrook project has exhausted its capacity to issue senior securities of,any kind. Worse still, even if its rate request is granted in full, the Company's ability to meet the SS-8 million annual cash requirements of its construction program is uncertain.
As of November 30, 1980, the Company's common stock was selling at 53.4% of book value, precluding, for all ~ practical purposes, any new issuance of common stock. (MPS Exhibit #1, Livingston Supplemental at 1) Because of poor earnings during the test year, Maine Public is legally precluded from issuing bonds. As explained by Livingston, the Company's Indenture of Mortgage and Deed of Trust requires that prior to the issuance of new long-term debt, the Company.must be in a positico to certify that its actual pre-tax earnings over the twelve-month period prior to the issuance of its new debt were at least sufficient to cover two times the interest, on the Company's outstanding long-term debt, adjusted to account for the issuance of the new debt. (Id. at 3) Test year 1980 showed a 1. 9 coverage, legally precluding the Company
.from issuin~g bonds.' Preferred stock financing, which requires n even g eater coverage ratio, is also out of the question.
The prospects for short-term debt financing are no more encouraging. On December 31, 1980, the Company had outstanding $8,100,000 in short-term bank loans. Mr. Livingston indicated that the banks holding the Company's paper are balking at the notion of extending further credit-since the Company cannot give supportable assurances that the existing debt will be repaid from the proceeds of permanent financing. (Id.) Test year financial results also show storm signals to potential creditocs. Cash earnings per share stood at minus twenty-nine cents and AFUDC comprised 110% of earnings. Again, no party disputes this picture, and we find Mr. Livingston's testimony on this point to be entirely plausible. The Company's plans call for building up a level of earnings that will reach two and one-half times interest coverage, a level'which Mr. Livingston concludes will allow the Company to issue 12 million dollars of mortgage bonds at 15-1/2 percent by mid-1982 with a BBB rat ng by Standard and Poor. He believes that if the Company can demonstrate to the oanks a reasonable prospect for achieving these earnings, further short-term credit could be obtained sufficient to , a
O Docket No. 80-180 y) O the Company to meet its Seabrook construction payments. p(ermit Id. at 2) For the long term, until both Seabrook units are operational, Mr. Livingston flatly states that increasing amounts of CWIP will have to be included in the Company's rate base to preserve its ability to finance Seabrook. Loring's witness, John McCabe,~ agreed with Mr. Livingston that so-called normal regulatory revenues would not permit the Company to continue its construction program. After normalizing the income tax deduction on AFUDC'-- producing additional cash revenues of $524,827 for the Company -- Mr. McCabe advocated that the Company be allowed " extraordinary cash rate relief" amounting to $564,843, an amount he felt was sufficient to permit the Company to issue long-term debt with a 2.1 coverage ratio. Our review of the recor'd convinces us that the parties~ are correct in their assertion that the magnitude of the. Company's Seabrook construction program has reached the point where normal regulatory revenues -- the level of revenues to which the Company would be entitled af ter the Commission implements all of the adjustment it normally and appropriately makes -- will leave the Company unable to ' continue its PN
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participation in Seabrook. Accordingly, we must now decide (d ) what standards should govern in such situations. B. Standard of Review The Staff, the Attorney General and the ACC all . assert, in one form or another,'that all or part of Maine Public's investment in Seabrook represents an investment in unneeded capacity. From this, it follows that the expenses associated with the plant should not be borne ~by ratepayers, be ' it in the form of Q11P, extraordinary cash rate relief, normalization adjustments or in any other form. In establishing the standard of review which ought be used.to evaluate the reasonableness of the utility's construction policies, a general review of Title 35 proves I. useful., As a general-rule, electric utilities need not seek l approval from this Commission prior to the construction of l plant. It is true that the Commission must approve the encumbering of utility . property , 3 5 M.R.S. A. 5211, and l therefore has some measure of control over the utility's financing practices. However, in the normal course of events l 4 i ,O i l L l
.. s O
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g Docket No. 80-180 the utility. finances its construction on a short-term basis without Commission approval and then applies for authority to issue bonds at a time just prior to the issuance of the debt, the proceeds of which are used to retire the short-term debt. In short, the plant is all but built before the Commission enters the picture. , Without any requirement that utilities receive , Commission approval prior to constructing plant, few statutory checks on over-capitalization exist. One is found in 552. There, the Legislature has directed that the utility is entitled to a fair return only on property "used or required to be used in its service to the public within the State ... ." If in a rate proceeding a utility cannot meet its burden of showing that a particular item of plant fits 5 52's standard , then the Commission will not permit the utility to earn a return on the investment. In a sense, therefore, utilities are free to construct whatever plant they deem necessary to provide service, but face the risk that in a subsequent rate , proceeding, occurring after the plant has been built, an investment will be judged to be needless. - A second check on over-capitalization can be said to ; J exist within the Commission's inherent power to control the g-acts and practices of utilities. Thus, if in the context of an investigation undertaken pursuant to 55291 or 296, the - Commission were to determine that the utility's construction policies were resulting in over-capitalization or that a particular construction project represented a needless investment, 5292 would appear to afford the. Commission sufficient authority to order that different practices be adopted. As was true of the 552 check, however, there exists a . substantial likelihood under the 5291-296 scenario that the investment will be committed in substantial part before - Commission action is forthcoming. And, of course, this check can only function if a ten party complaint is filed under 5291,- i lor if the Commission, after summary investigation, elects to initiat'e a formal investigation under 5296. Thus, with one notable exception, an electric utility may proceed to construct plant -- unless, after notice and an opportunity to be heard, it is ordered to do otherwise -- with the proviso that if the construction is held to be unnecessary in a rate proceeding, no return may be earned on the
- investment. The exception concerns the construction of certain
( electric generating and transmission facilities within the . State of Maine. 35 M.R.S.A. 513-A. Under 513-A, an electric l utility propo' sing to construct a large generating facility must l l
O- . Docket No. 60-180-I ((m' first secure a certificate of public convenience and necessity from this Commission. The purpose of the precertification requirement, as explained in ou Sears Island decision, is to
" prevent the over allocation of resources to public' service and the inef ficiencies and costs that would result from such over 4
alloc'ation." Order at 5-6. The statute recognizes the massive capital investment required to construct such a facility and . furnishes the Commission with a vehicle to forestall a' needless ~ 4- investment before it is made. The Commission must, under 513-A, specifically find that the proposed plant meets a r. ni for capacity in the most economical and reas'onable matter. Id. at 6. Placing 513-A in the context of Title 35's general scheme, we see that with respect to most investments, the l' Legislature has decided that 55 52 and 294, discussed previdusly, provide sufficient checks against over-capitalization.- In 513-A, howe've r , it appears to recognize that given the potential magnitude of an investment in a generating facility, the Commission should be satisfied that the investme'nt is necessary before the utility actually commits the funds. This requirement, however, applies only to l projects being constructed within the State of Maine. It does-not apply to investments'in out-of-state facilities such as the Seabrook generating plant. Thus, an electric utility can (( ) commit itself to an investment-that will significant.ly increase its rate base without first submitting its p'lans to the Commission for review and approval.
! - This case illustrates the potential consequences of i such a legal anomaly. Maine Public Service estimates-that it i will invest some 57 million dollars in Seabrook, while its present rate base is roughly half of that figure. Issues are l now being raised, after the fact, about the nece'ssity or wisdom l of that investment. And yet the Company has already made i
substantial financial commitments to the project, commitments
- which it may not be able to alter or abandon without grave
- consequences to its credit standing, its future costs of borrowing, and, therefore, to its ratepayers. Such a situation
- places the Commission in a position wherein the scope of its power to remedy the problem is severely limited by the lack of previous analysis of the wisdom of the Company's p'lans and'by i the practical consequences to the Company and its ratepayers of any immediate and drastic action to reverse those plans before their wisdom can be fully assessed.
t l,
. _ , _ - . - , . . . . , . . .---._..-,,._.--,..a,,,,,,-,,_.-_._~.__ . , _ , _ _ - _ . . . _ . - . , _ _ , , ~ _ , . , _ . . . -
O Docket No. 80-180 q Nevertheless, the problem is before us, and we must consider what standard should apply where, as here, the wisdom of a utility's investment in anPractically out-of-statespeaking, generating the same facility is placed in issue. issues that must be explored in a 513-A proceeding are also relevant: has the utility met its burden of showing that its. irvestment will meet a need for power, and that purchasing the , proposed capacity is the most reasonable and econooical step.to take considering all available alternatives? This, of course, ' leads us to the question whether a 513-A-style proceeding should obtain within the confines of a rate case. We think not. Under 5564 and 69, the Commission has a total of nine
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months during which it may investigate.the reasonableness of the utility's proposed rate change. That is the maximum amount of time allowed the Commission to consider each of the many - complex issues that have commonly arisen in rate cases. Until recently, however, no limit was placed on the amount of time which the Commission could spend investigating the need for-constructing in this' State a large generating station' Only. , recently has such a limit been added, 1979 Me. Laws, ch. 265,- and that limit is, in the aggregate, eighteen months -- precisely double the amount of time allotted-the Commission to investigate and decide a rate case. In light of that fact, is [Os_f/) it reasonable to cast upon the utility the same burden which it
~~
would shoulder in a 513-A proceeding? We conclude that it is not. . The Commission's experience in the Sears Island case-shows that evaluating load forecasts and reviewing alternative sources of energy can and should be a painstaking and very , difficult process. From the time Central Maine filed its petition until the issuance of the final Order, the Sears < . Island case remained on the docket of this Commission for thirty-one months, roughly three~-and-one-half times as long as . the maximum statutory rate suspension period. The extremely I beccic schedule that obtained in this rate case is argument enough that a full blown 513-A proceeding simply cannot be conducted within the time fixed by law for a 569 investigation where all the usual revenue requirement issues must also be addressed. What, thca, should our standard be where, as here, a utility asks the Commission to change'its ratemaking policies in order to improve the utility's cash flow and so make, possible its continued participation in the construction of an out-of-state generating facility? We believe that the utility must show, first of all, that. normal regulatory revenues such O
(2) .
)
~39- Docket No. 80-180 i
j J as would result from our ordering impleme-ted the adjustments
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usually made in such cases, will preclud, further participation by the utility in the plant. Obviously, if no extraordinary cash requirements are shown, then none should be allowed for any reason. The Commission may be motivated by what it learns in the course of a rate proceeding to initiate anIf, investigation af ter such to determine the wisdom of such an investment. an investigation, the Commission finds that the utility's ' i construction policies will result in a needless financial firestorm, then appropriate action can be taken.
- If, as here, the extra cash rate relief is shown to be j necessary to keep alive the investment and the necessity of the investment is questioned, then the utility must show that the
~
capacity under construction will be'needed either to meet . future load or to displace less economical capacity already on the utility's system and so significantly minimize the long-run ' costs of electricity. Such a standard allows parties to inquire into the basic soundness of the utility's load forecasting. It also leaves room for the kind of economic . analysis performed in this -case on the Seabrook plant. With respect to conservation, cogeneration and load management, these factors will be considered in assessing the need for g' capacity in the future. The standard precl,udes an exhaustive analysis of all conceivable alternatives. We believe that this
'1.
standard adequately accommodates all parties to a rate proceeding, while recognizing the inherent impossibility of performing the exhaustive. analysis required by 35 M.R.S.A..
. 513-A. i If the utility meces its burden under this standard, then it would follow that the investment is required and that.
j the utility should be permitted an opportunity to achieve a- , level of earnings sufficient to support the investment by means of permanent rate relief. Again, _ the Commission will most likely conclude that although the utility has met its burden of proof under 569, further investigation under 3296 should be had to determine' in a more thorough manner the necessity of the investment. . If the utility fails to meet its burden of proof, then permanent relief should not be granted and the extra cash rate relief should be denied. 'The utility will be, practically speaking, compelled to divest itself of the investment with a consequent reduction of its need for cash earnings. (( % i f
%.)
1
.. s
()
-w / Docket No. 80-180 , There may be some instances in which the record indicates that even though the utility has failed to meet ~its burden of showing that the out-of-state facility is' required, some measure of relief beyond that generally. granted should be awarded to prevent a financial _ disaster injurious to the .
ratepayers and/or the utility. .The Commission's authority to authorize such relief as well as the statutory standard i governing the exercise of that authority is-found in. ' 35 M.R.S.A. 5311. With these standards in mind, we proceed to evaluate MPS's request for extra. cash rate relief beyond that which would normally and usually be allowed. . C. The Need For Power - The Company's Load Forecasting In June of 1977, MPS completed a load forecast which called for an annual compounded rate of growth of the Company's peak demand amounting to 5.7%. (Staff Exhibit 1) The forecast- , was premised ~upon an exponential extrapolation of historical . data, in conjunction with the MPS pla6ning department's evaluation of other factors. (D-14) From this forecast, the
- Company concludad that additional capacity would be' required in the future. Af ter considering a variety of alternative -
. capacity purchases, the Company, in 1978, committed to a
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1.46056% share of Seabrook units #1 and #2, ' enti.tling it to 16.8 MWs in each unit, or a total of 33.6 MWs. In 1979, the Company performed another load forecast again based chiefly on the extrapolation of historical growth data. Staff Exhibit 3. This forecast predicted a 3.7% growth rate, down significantly from the 5.7%. projection made in 1977. - The Company's most recent forecast prcjects a somewhat slower general growth rate of 2%, adjusted for the inclusion of two " spot loads -- Loring Air Force Base (1981) and Superior Mining (1985) . (Exhibit GMH-4) s explained by Mr. Hovey, the 2% figure could more
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accurately be described as a target, rather than a prediction. (D-31) He stated that the Compar.f doubted that it could finance sufficient new generating capacity to meet much more i than the 2% figure, and characterized that level as "the lowest
- i. end of a forecast we believe that is prudent." The Company's current load and capacity forecast under - i ts 27.-plus-spot-load view, are set forth in Exhibit GMH-4, which assumes the i availability of Seabrook Unit 1 in 1984 and Unit 2 in 1986:
l i
_ - - _ _ . - . . - ~ = . - - . _ _ - .. ~ O
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. (
- MAINE PUBLIC SERVICE COMPANY LDAD & CAPACITY FORECAST
- 27. PEAK IDAD GROWDi PilJS SPOT LOAD Total Required Capability Availablg Surplus Peak Spot (Deficiency)
Load load Peak load Reserve Respersibility Capacity
->N- -7.- -> N- ->H- - ->M-
->W- -bH-117.6 15 135.2 148.5 13.3 1981 110.1 7.5 119.8 15' 137.8 148.5 10.7 1982 112.3 7.5 122.0 15 140.3 - 151.9 11.6 i 1983 114.5 7.5 '
165.9 23.0 1984 116.8 7.5 124.3 15 142.9
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1985 119.1 15.0 134.1 16 155.6 155.3 (.3) 136.5 17 ' 159.7 172.1 12.4
- 986 121.5 15.0 133.G 18 164.0 172.1 8.1 1987 124.0 15.0 ,
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15.0 141.4- '13 168.3 172.1 3.8 1988 126.4' 1989 129.0 15.0 144.0
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20 172.8 172.1 (.7) 131.5 15.0 14 6.5 20 175.8 172.1 (3.7) 1990 ,
*Available Capacity consists of all existing and cmmitted generation, entitlements, l and purchases. See Exhibit G21-2.
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O . Docket No. 80-180
'l \ .
The reliability of the Company's load forecasting methodology is undercut by-several factors. The Company's consolidated system peak load has remained fairly constant: for the past four years, as the following char.t indicates: YEAR , PEAK (MW) 1976 104.3 (per GMH-5) 1977 98.7- " 1978 104.0 " -
-1979 101.8 1980 104.7 (D-10)
Had the Company employed the load forecasting method used prior to its 1977 forecast -- which consisted basically of extrapolating five years' of historical growth data -- in its most recent projection, a zero load growth.foreca'st would' emerge. , The Company's apparent continued reliabce on the-historical growth method'of load forecasting does not seem to be well placed. In the first place, the Company itself has had very little success using the method to compile accurate load forecasts. Over the years, projected annual load increases of O' 5.7% in 1977 and 3.7% in 1979 have simply not materialized. It would also seem that the historical growth
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extrapolation method is inherently suspect given the current economic climate. If all of 'the variables that ' contributed to a particular rate of growth over a particular period remain constant, then extrapolating a level'of growth.using available' However, load data might represent an acceptable approach. when significant new forces emerge to alter the old rules of 4 the marketplace, a different type.of forecast -- one that attempts to identify and account for the effect of these
. forces -- should be implemented.
There can be no doubt that the economic, legal and . regulatory environment for electric. The utilities Arab oil has changed embargo followed greatly in the past ten years. by a chronic oil price spiral, dislocations in-the capital markets attended'byEwildly fluctuating interest rates-and;the general onslaught of price inflation have had aPredictably,'and profound'effect upon electric utilities and their customers. e ( ,, i l l 1 l
O Docket No. 80-180 u'j rs understandably, utilities have sought and received steady increases in base rates and fuel charges. The consumer, finding himself faciag increasing electric rates and a shrinking disposable income. appears to have reacted by using less electricity and, perhaps, producing some for his or her own use. A straightforward application of the historical projection method could not hope to capture this crucial effect, particularly since in constant dollars electric rates had decreased for many years. In fairness to the Company,'it should he pointed out that Mr. Hovey and Mr. Louridas insisted that forecasting calls for the exercise of judgment, that they had not blindly made a i linear projection from the past, and that they had , .in fact , identified several new loads other than Superior Mining and Loring which they anticipate serving in the near future. (Hovey Rebuttal Testimony at 3) The Company also, complains that it "does not have the ' luxury' of ptedictin a zero load some of our intervenors have suggested."g(Brief at 49) growth as We believe that the consequences of an overstated load forecast to the utility, as well as its consumers, is comparable in severity to the consequences of an understated '
/~ load forecast. If the Company fails to have sufficient
{ 'N! capacity to meet load in the future, consumers can expect to pay higher rates as the Company buys whatever power is available on the regional grid. Generally speaking, this power, if available, will be the most expensive power in the , region, since the more economical power will have been dispatched to those utilities having the necessary - commitments. Under some circumstances, there may be no power available at any price, and brownouts or blackouts may precede the exodus of industrial and commercial customers disillusioned about the ready availability of reasonably priced electricity in the service territory.
.. Drastic as such a scenario may be, it is equally clear that neither MPS nor its consumers have the " luxury' of following an overstated load forecast and purchasing fabulously expensive capacity which fails to help minimize the cost of power. The testimony given by members of the public in this docket indicates that many consumers believe they are '
approaching the limit of their capacity to meet the charges now 1 imposed by MPS for electric service. A needless investment in expensive capacity translates into needless rate increases. . I Q
n V y Docket No. 80-180 g ,7 1 i
Even more sobering, as the price of electricity increases, stimulating conservation and cogeneration, the utility may find itself spreading mounting costs over shrinking energy sales, .
which, in turn, further stimulates conservation and cogeneration, further aggravating the problem of excess
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capacity. The economic r'e volution stimulated by the af termath of the 1973 energy crisis couple.d with the staggering increase'in generating capacity construction costs makes the load forecast a crucial tool in system planning. These same factors, and others of near equal significance, render the traditional' historic growth analysis method of load forecasting inherently unreliable. Finding Maine Public's projections to be based chiefly on this method, we are compelled to reject the forecast. The Spot Loads
- In addition to a 2% compounded general increase in .
load, the Company adjusted its forecast to account for two spot loads - Loring Air Force Base ard Superior Mining. The treatment in load forecasting of major known accretions to load expected to occur in the' future depends upon the type of load , ,73 forecast employed. With some methods, an adjustment can be t i proper. With others, the forecasc may be structured in such a
way that the inclusion of all or part of the load would serve to overstate growth. In short, a spot load adjustment should be made or not made depending upon the methodology underlying the particular forecast. Thus, our. rejection of the Company s-base line load forecast leaves us without occasion to determine whether stch adjustments were proper, or whether the general projected increase in load already contained an allowance for the spot loads. In any event, our review of the record leads us to question the process by which the loads were integrated into the MPS forecast.
Loring's witness, Mr. McCabe, indicated that Loring had substantial reserve capacity and that the use of that capacity to " peak shave" was currently under study by the appropriate authorities. (G-59) He indicated that Loring would have 4 MW of its own capacity and that these units could be used to shave 800 KW off of the peak. (G-59) He also indicated that in the rate structure phase of this proceeding, he would propose an interruptible rate for Loring. (G-60) Furthermore, the evidence in the record suggests that Loring's load at time of MPS system peak may be less than the 7.5 MW projected,by the Company. - I L
- -.. . . - . . - _ . . - - . . .. .=
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45- Docket No. 80-180 l The notion that Loring will be'able to take service on ' 1 an interruptible basis should be developed to the maximum extent possible by both MPS and Loring. In fact, 35 M.R.S.A. 592 contains an express legislative finding that improved rate 3 design has " great potential for reducing the cost of electric utility servic.e to consumers . . . and for _ minimizing the need
~
for expensive, new electrical generating and transmission capacity." If an ~nterruptible rate can be designed under. which Loring's load can be deleted during system peak hours ~, the Legislature's findings and the' policy stemming therefrom can be implemanted. We will expect MPS to propose such a rate in the course of the upcoming rate structure investigation which recognizes the avoided cost principles embodied in
~
Maine's Small Power Production Facilities Act and Chapter 36 of
! the Commission's Regulation's. ' These precepts may prove to be a 1
useful tool in the design of an interruptible rate. , l Our review of the. record suggests that the Company's
- other spot load adjustment also has uncertainties attached.. .
The Company predicts that in 1985, Superior Mining will begin
; exploitation of a massive copper deposit on Bald Mountain, a locale within the Company's service territory. Superior bas
- placed $50,000'in a trust account with the provision that Maine ,
t'~ Public may draw on i.t to defray preliminary, engineering costs. l i, (- associated with the construction of a transmission line into ! " the mining ~ site. Company officials again estimate a 7.5.MW- - 4 _ Superior load coincident with Maine Public's system. peak;: although Mr. Louridas conceded that a lower figure could be used. (C-34) . The' record shows'that a variety of factors could-l , intervene to undercut' the validity of - the Superior Mining adjustment. The project is dependent upon the' tax'and - environmental approach taken by the State of Maine, Superior's , ability to acquire the land on reasonable terms, (Exhibit GMH-8), and the soundness of the world's copper market. Also. 1 uaclear is whether Superior will be in a. position to cogenerate. Mr. Hovey indicated that Superior does not "know as yet whether it will be [cogenerating] or not," although it appeared to Mr. Hovey that cogeneration is not likely. (D-146) , l Again, we will expect that in connection with Phase II
- -of this proceeding, the Company will pursue all reasonable means to encourage Superior to cogenerate, peak' shave, or configure.its operation in such a way as to make an l
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em Docket No. 80-180 interruptible race possible. Unless some financial contribution from Superior to aid in the construction of Seabrook is obtained, Maine Public's current customers may be compelled to pay today for generating facilities required, in Mr. McCabe's words "to service a speculative new customer." (McCabe prefiled at 51-52) Reserve Requirement The Company's capacity planning calls for a gradual increase in its reserve requirement from the current 15% to 20% by 1990. Three reasons are advanced to justify the increase. First, the MPS system relics on the New Brunswick Electric Powe'r Commission as a source of backup generation. By contractual agreement with NBEPCo, Maine Public must retain a 15% reserve, although New Brunswick's reserve is 20%. The company takes the position that NBEPCo may, in the future,
. require FTS to match its 20% reserve. Second, the Company does not have complete confidence in its load forecast and believes a higher reserve should be implemented to guard against capacity shortages. Finally, the Company' believes that its increasing dependence on large nuclear plants -- Seabrook and Maine Yankee - requires a higher reserve.
- s
; ) Whether or not NBEPCo will require MPS to increase its \~ reserve to 20% is highly speculative. Given the high cost of generating facilities, MPS should bargvin very hard to avoid such an imposition, particularly where no clear need to improve reliability exists.
T.e Company's decision to expand its reserve capacity to offset for the possibility of understated load forecasting appears to us to confuse two separate principles. A utility s level of reserve capacity should be calculated in relation to the existing system reliability. A utility heavily dependent on a lim'ted number of large generating facilities should have a larguc reserve capacity than a system with a well-dispersed generation mix. The strength of the utility's interconnections must also be closely evaluated. If the utility's reserve capacity meets the requirements of systeu reliability, then the analysis is complete. Difficulties in load forecasting should be met by appropriate adjustments to the load forecast, not by adjusting the reserve requirement. We are also somewhat skeptical about the Company's assertion that its position in Seabrook will decrease system reliability. Seabrook consists of two separate unit's, MPS
.. s -
() . I !' . Docket No. 80-180
\0
's / having 16.8 FM entitlements in each. The per-unit Seabrook i entitlement is less than half of the Company's 40.9 FM i
entitlement in Maine Yankee. Even in the extremely unlikely
- event that both units of~Seabrook were to be forced out' -
l simultaneously, the chances that Maine Yankee would also be down during peak periods is slight. We cannot conclude that a i position in Seabrook I and Il would significantly lower Maine-Public's system reliability. . The Maxwell Forecast Alfred Maxwell, of the Maine Office of Energy Resources, presented a Technical Report entitled, Electricity
- Demand in the Maine Public Service Marketing Area: An Econometric Forecast. (See Attorney General's Exhibits 37 and
- 38) The Maxwell forecast employs the same methodology used by Dt. Thomas H. Tietenberg and Mr. Maxwell in the recent Sears Island case.* The econometric forecast begins with an
, analysis of historical' data in an attempt to establish the ,
existence of relat,ionships between electric energy consumption. and certain exogenous variables, such as population,
- employment, income and prices. The forecast then proceeds on the notion that
[ the combination of economic and demographic variables 3 used to form the statistical relationships in the !- forecasting equations have pronounced impacts on the j demand for energy and power; and .that since these variables can be projected with a relatively greater level of certainty future energy and power demand can be determined within a margin which can indicate the
- magnitude of financial investment necessary to meet
.that margin. .
4 Technical Report at 1. l The Commission, in the Sears Island decision, condoned as
" sound" the econometric forecast. Order at 11.
l 5 Central Maine Power Company, Re: Petition for Certificate of Public Convenience and Necessity to Erect a Permanently, Installed Power Generating _ Facility of More than 1,000 Kilowatts at Sears Island, Maine, Docket No. U. 3238 (Me. PUC, December 31, 1979). 1
, , ._ ~ _ _ _ . .__,,_ _ _ _ , - , _ _ , -. . _ , _ _ _ _ - ._ _ . _ _ _ _ _ . . _ _
O 3 Docket No. 80-180
- The Company makes three specific objections to Mr. Maxwell's forecast which We proceed to discuss. First, MPS asserts that Mr. Maxwell mistakenly included the Company's non-firm sales to NBEPCo in this forecast of the Company load.
Our review of the Technical Report shows that the Company's non-firm sales to NBEPCo was treated properly. Mr. Maxwell's ~ forecast of the Companys energy sales includes a reasonable estimate of the level of non-firm sales to NBEPCo. (See Technical Report, at Pages 39 and 40) With respect to the forecast of MPS's peak demand, however, the Technical Report clearly states at Page 40, that non-firm sales to NBEPCo were assumed to take place during off-do not contribute to the Company' speak periods system forecasted and, therefore, peak. We believe that this assumption is reasonable and thus, conclude that MPS's concern rggarding the treatment of non-firm sales to NBEPCo is misplaced MPS also asserts that Mr. Maxwell's pe k load ~ forecast excludes two important loads: Company uses and losses, and firm sales to two Canadian municipalities. The Attorney General in response asserts that its forecast does reflect these two loads. The resolution of this dispute requires an understanding of the forecasting methods used by Mr. Maxwell. I Mr. Maxwell obtained historical energy consumption and peak ($s) demand data from the Company. (See Attorney General's Exhibit 13) He then analyzed this data to derive a forecasting
. equation which reliably expressed the relationship between the '
Company's historical peak load and the major components of its actual energy sales'and the historical weather conditions. The final forecasting equation is shown on page 26 of the Technical Report. A review of this equation and the underlying data shows that Company uses and losses, and its sales for resale to Canadian municipalities are not . included as exogenous _ It should be noted that this conclusion is based upon the l belief that the historical peak loads analyzed by l Mr. Maxwell do not include non-firm sales to the NBEPCo. As discussed above, Mr. Maxwell's peak load forecast implicitly includes all loads which are reflected in the historical data. - O (l t
(') V Docket No. 80-180
'- variables. This might lead one to conclude that the resulting peak load forecast fails to reflect these two components of the
. Company's load. Such a conclusion, however, would be wrong.
The forecasting equation expresses the mathematical relationship between an independent variable, in this instance peak load, and several* exogenousv.ariables. Whether the list of exogenous variables includes every factor which might affect the independeot variable is not important, rather the inquiries
. are, 1) whether the exogenous variables selected by the forecaster bear some logical relationship to the independent variable, 2) whether the exogenous variables explain the historical variations in the independent variable to a ,
statistically significant extent, and 3) whether.the exogenous variables and the forecasting equation are statistically reliable. If these tests are met, as they are in this case, then the forecasted values of the independent v,ariable will be reasonable. To determine precisely what components of the ' Company's load are reflected in the forecasted peak depends not on the exogenous variables but rather upon the components that were included in the historical peak load data used to derive the equation. Our review of the data underlying Mr. Maxw' ell's
~
forecasting equation shows that the data represented the ((;)s' Company's consolidated system peaks. Mr. Hovey's testimony and the Company's established data, reports and procedures (See 1979 Report to Stockholders, MPS Exhibit 2, Exhibit GMH-2), show that Company uses and losses as well as its sales to the Towns of Perth-Andover and Carlingford, are included in the Company's conscJidated operating statistics.* Therefore, we find that the three errors asserted by the Company do ,not exist.
=
We note, however, that there is a discrepancy between the data reported in the Company's FERC Form One and the data contained in Attorney General Exhibit 13. O
O 50- Docket No. 80-180
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As acknowedged by Mr. Maxwell, the pure econometric load forecast must be modified to reflect the effects of structual changes which tend to change the relationships included in the model. The Commission recognized this as an inherent limitation of econometric load forecasting in the Sears Island case. Order at 24. Mr. Maxwell identified several such structural ch.. ages that were not fully captured in - the forecast. They include the improved climate for cogeneration, the effects of PURPA, the effects of enlightened load management, implementation of building and lighting standards, and improvements in rate structura. (H-20-23) Mr. Maxwell conceded that his forecast failed to capture the- . full effect of any of these changes, and that the net result was a forecast tending to over-predict load growth. (H-42) With this provision in mind, Mr. Maxwell characterized his - forecast as "somewhere between the middle and a maximum '
- projection." (H-15)
The record shows th'at Maine Public's load forecast similarly (C-40, changes. failed 100, to quantify 108, 109, the111, likely) 114 effects The uncontradicted of these testimony of the ACC's three expert witnesses tends to suggest . that the failure to assess the impact of these changes would throw the reliability of any load forecast into substantial
\ doubt. Melvin Eisenstadt's testimony tends to support the
'[!
'\- conclusion that potential conservation measures in conjunction with the use of certain' alternative renewable energy resources alone could result in a 14 MW savings. Mr. Eisenstadt and Mr. Hewitt discussed the strong possibility that cogeneration
~
amon MPS'g the Company's s system planning.consumers Changescould in the have a drasticand regulatory impact tax on climate now render investments in small scale power production facilities extremely attractive according to the testimony, i also uncontradicted, of Elliot Taubman. Mr. Taubman also ' reviewed a broad range of progressive rate structure measures and load management techniques that could be' implemented to i reduce peak load growth and energy usage. This testimony, in light of Mr. Maxwell's frank acknowledgment that his failure to-
; capture structual charges would tend to overstate projected l
load growth, lead us to the conclusion that Mr. Maxwell's
- forecast is in fact overstated. Given that finding, we. deem it-proper to evaluate the Company's Seabrook Economic Study assuming that the zero load growth assumption used in the study
. may come to pass.
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O Docket No. 80-180 ( D. Seabrook Economic Analysis i The Company, through Mr. Wah Sing Ng, presented an analysis of the economics of using Seabrook to displace The study energy
.which would have been generated by burning ~ oil. ,
purports to show that under a wide range of assumptions the construction and operation of Seabrook units 1 & 2 will result in savings approaching one billion dollars as compared to producing a similar amount of energy using oil-fired capacity. In other words, one of the assumptions made Ng prefiled at 10. for the purpose of the study was that MPS would not experience i load growth during Seabrook's lifetime. We have reviewed the Company's analysis of the economic benefits of retaining its ownership of 33.6 MW of the Seabrook units and, except as discussed below, find it to'be a reasonable approach to the issue. In our opinion, however, the
~
analysis is deficient in several areas. We proceed to discuss
~
these areas as well as portions of the analysis with which we agree. , Fuel Costs -
' / "s, The Company analyzed the sensitivity of its d oil
'( ) conclusions by usin which range from -7%g escalation to 15%. We believe rates that for nuclear the Company's~ fuel an assumptions in this regard reasonably bracket the expected range of escalation of these fuels.
Cost of Money MPS provided an analysis of the savings associated with its Seabrook investment using a weighted cost of capital ' of 11.53% and an alternative series of calculations assuming a l l 14.1% cost of capital. These costs were calculated as follows: Rate % Ratio Weighted . Debt 10.5 .55 5.775 l l Pro formed 11.0 .1 1.10 I Common 13.25 .35 4.638 _11.513 Rate % Ratio Weighted Debt 13.0 .55 7.15 - Pro formed 13.5 .1 1.35 Common 16.0 .35 5.6 l _14.1 we 1
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0 i Docket No. 80-180 In addition, in response to a Staff data request, the Company provided as a late-filed exhibit yet another series of calculations based upon a 15.5% weighted cost of money.* In its Brief, the Company insists that the 15.5% figure is unrealistic. - The record shows that the Company intended to issue approximately 12 million dollars of long-term bonds'during the next 12 months and that the interest rate is expected to be-about 15.5%. The record also indicates that thus far MPS has invested $20 million in the Seabrook plant and that from
$40 million to $90 million dollars of capital will have to be raised before the plant will be ready for service. (MPS Exhibit 1 and E-75) Interest rates have been at exceptionally high levels for many months and all indications are that t.hese rates will drop slowly in the future. Given the fact that a substantial po'rtion of MPS's investment in Seabrook will be made in the next few years we believe that the weighted cost of capital necessary to complete the Company's portion of the plant will be closer to 15.5% than the 11.1% assumed in the first portion of the Company's analysis.
Construction Costs _ [(- ) MPS's estimate of the total cost of its share of the Seabrook plant based upon data supplied to it by Public Service of New Hampshire is $57 million, of which $20 million has already been invested. The record indicates that Seabrook's construction costs have been estimated by architect-engineers using a so-called engineering approach.. This method of. estimating construction costs attempts to:.1) identify ~the costs of all major pieces of equipment, 2) quantify the amounts and costs of materials (wire, concrete, pipe, etc.) and,
- 3) estimate the amount of labor necessary to install equipment and materials. The sum total of all the costs of all of these
" nuts and bolts" plus the Company's capital costs is the estimated cost of the plant.
=
The Examiner hereby admits the late-filed exhibit. , s_; l e
- ,.- ,.- , . - . . . - . - . - - . ~,--
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l 1 Docket No. 80-180
,s
(
) Dr. Richard Rosen testifying on behalf of the Attorney General estimated that the total cost of Seabrook will be .
approximately 7.7 billion dollars and that MPS's share will be
$110 million or approximately four times Company's current rate base. Dr. Rosen reached his conclusion using a relatively new I and interesting approach. He analyzed the construction costs of all commercial nuclear power plants except a limited number of older plants that were constructed pursuant to relatively
. fixed-cost contracts. Regression analyses performed on this data were used to determine how the cost of nuclear power plants varied with time, size and several other factors. Using these historical relationships, Dr. Rosen estimated the cost of the Seabrook units.
Dr. Rosen testified that 'the estimates prepared by architect engineers using an engineering approach have uniformly underestimated the final cost of nuclear power plants. He explained that this' type of plant more than any other is subject to changing regulatory requirements and other factors which tend to increase the cost of the plant. In his view, traditional cost estimating techniques have simply proven to be unreliable for nuclear power plants.
~
.We believe that Dr. Rosen has presented a
/ F well-reasoned approach to estimating the cost of nuclear power K' plants. We also note that cost estimates prepared by the constructors of these plants have been revised upward on a regular basis. It is hard to believe this trend will stop today and that, henceforth, all estimates of the cost of Seabr6ok will be accurate. i The Company's economic analyses of Seabrook were made using three construction cost estimates; the Company's current
, estimate, a 50% increase in construction costs, and a 100%
increase in construction costs. In light of the discussion above, we believe that prudent planning requires MPS and the Commission to focus upon construction cost estimates which exceed the current estimate of $57 million and that increases in the range of 50% to 100% are not unreasonable. Economy Purchases The Com3any 's witness, Mr. Ng, calculated the extent to which the Seabrook units would be used to meet the Company's load under two assumptions - zero load growth plus the load attributable to Loring Air Force Base 'and zero load growth without Loring Air Force Base. Under these assumptions, the
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() . Docket No. 80-180 Company estimates that to meet its own load the Seabrook units' will operate at an. average annual capacity factor of 43.3% and 37.1%, rdspectively. The difference between the annual energy production at these capacity factors and the annual energy production at a 70% capacity factor was assumed to be excess nuclear energy which would be sold on an economy basis.*
~
The price which the purchasing utility usually pays h i i for these economy transactions is midway between the utility's production costs and the supplying utility'purc s as ng production cost. For example, if the Seabrook production costs were 10 mils per KWH and the purchasing utility's incremental production costs were 40 mils per KWH, the selling price of - economy sales would be 25 mils per KWH. . The rates for these types of sales, however, do not reflect the capital costs of the generating facility.. Thus, although the rate-which the supplying utility receives will more than recover the operating costs, it may be less than the ' total bus bar costs of the generating plant which' produced.the power. Usually, this is not a concern because generating stations are constructed to meet the demands of the. utility's customers and the customers can reasonably be expected ,co pay for the capacity-related costs. If'a necessary plant can be gPe ' I utilized to produce energy for sale at a price above its to the - production costs the revenue will reduce the However, where the generating plant is cost utility's ratepayer. l not required to meet the demands of the utility's customers, ratepayers do not benefit from economy sales made at a price
.below the full bus bar cost of the plant except to the extent that they may realize a reduction in the costs which chey would Fu-thermore, the economic benefit
~
otherwise be asked to pay. derived from economy sales way not overcome the economic penalty engendered by the investment in excess of that. required to meet load or displace oil-fired capacity. We are therefore confronted for the first time with
.the q'uestion of whether a utility's current ratepayers should be required to pay for the construction of a plant a .
i Thus, with no load growth, approximately 40% of the energy
- MPS expects the Seabrook units to produce will be sold on l
an economy basis. . ,- n-l
O pocket No. 80-180 {-
\' signific' ant portion of which will be used to p"roduce energy for sales to others. We believe the answer is "no . Where a utility is'asking current ratepayers ~to help finance the construction of new generating facilities for the purposes of displacing oil-fired capacity, the new facilities should be sized in relation to the needs of utilities' ratepayers.
Capacity Factor _ , MPS's analysis is based upon the Seabrook units achieving a 70% capacity factor. Dr. Rosen testified that, based upon his review of historical data, a 60% capacity factor is a more reasonable estimate of the long-term capacity factor for plants of this size. We see no ceason to base utility , planning on the assumption that a new or proposed generating
- facility will perform significantly better than similar plants have performed in the past. Accordingly, on the basis of the record compiled in this case, we find that a 60% capacity
. factor is a reasonable assumption in analyzing a utility's proposed construction of a large nuclear generating facility.
Consumer Cost of Capital
.f s The Company's ana' lysis compares the future cost of h energy from the Seabrook units including the Company's cost of
\- ) capital with the future cost of energy from existing oil-fired generating units. .
It concluded that since the total cost of - power from Seabrook is less than the production cost'of
- oil-fired units, that it would be in the ratepayers' interest to construct the nuclear power plant. This analysis omits one important element of cost to the ratepayer - his/her cost of capital. .
MPS is asking the Commission to_ require current ratepayers to pay a cost which, under our existing ratemaking policies, they would not have to pay until some future date. l These ratepayer-supplied dollars must be raised by ratepayers i from one source or another and can be done only at a cost to the ratepayer. For some ratepayers the added cost may be met by withdrawing the dollars from interest bearin savings accounts in which case the customer'g checking s cost or of capital will be approximately 5%. Other ratepayers may be forced to increase their borrowings on credit cards which carry an interest rate in excess of 18%. Irrespective of the exact source of capital it is clear that a determination of the v
O
~56- Docket No. 80-180 \7 savings to ratepayers which might result from the construction of the Seabrook units should take into consideration the consumers' cost of capital. .
Castle Hill Cost Comparison The Company also prepared an economic analysis of the development of a hydroelectric site known as Castle Hill and - compared this project to the Seabrook units. As discussed - earlier, we believe that the resolution of issues raised by the Company's investment in the Seabrook Nuclear Generating Station need not ~ include an in-depth review of alternatives to this continued construction. Nevertheless, since the analysis was presented, we will comment briefly on two aspects., First, the cost comparisons presented by the Company contrast a 33.6 MW , ownership in Seabrook with an 18 MW hydroelectric facility. Based on a comparison of the benefits of displacing oil by these two options, MPS concluded that the Seabrook alternative j was superior. We believe that a more reasonable analysis would
' compare the economics of these alternatives on a per-unit basis. The question should be: what magnitude of savings would result from the construction and operatiun of 1 FM of Seabrook as compared to 1 FM of Castle Hill. In addition, the analysis 1
should include a review of the comocrative risks of the projects and the sensitivity of th'e results to various fd
\-
sceaarios regarding future fuel prices and inflation rates. Second, we agree'with the Staff that the tax benefits recently granted by Congress to developers of hydroelectric-faciUities should be reflected in any comp'arison of these two ' alternatives. E. Conclusion - Having discussed the standards which the Commission will apply to the issues raised by this proceeding and the evidence presented by the. parties we are compelled to reach the following conclusions. , i 1. The Company's load forecast falls short of the type of analysis upon which investments of the magnitude of Seabrook can reasonably be based. l l' 2. Mr. Maxwell's load forecast is a reasonable starting point, but due to the inherent limitations of econometrics, probably overstates the Company's future load growth.
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~~ Docket No. 80-180
]
- 3. MPS has not shown that its ownership of 33.6 MW of capacity of the Seabrook units is not required to meet the Company's future load growth.
- 4. Some level of ownership of the Seabrook units, but probably not the full 33.6 PW, may be .,
justified based upon the savings which are likely to accrue to future ratepayers. Based upon these conclusions, the Commission will immediately initiate an investigation limited to the following issues.
- 1. What portion of the Company's investment in the Seabrook units is required to meet the ' demands that the consumers will place on the Company's system? ,
2 '. What portion of the Company's in' vestment in the Seabrook units is required to displace oil-fired
. generating capacity?
- 3. Are investments in alternative sources of power, superior to the Company's investment in the
. Seabrook units?
- 4. Can the Company divest itself of a portion of its inv.estment in Seabrook on a reasonable basis?
VII. EXTRAORDINARY CASH RATE RELIEF I ' The ACC and the Attorne , General urge a denial of any additional cash rate relief, taking the position that since Seabrook does not represent a wise investment, the Commission i should not allow revenues sufficient to support it. Loring would have us grant.some measure of extra relief, taking no position on the legitimacy of the Seabrook purchase. - The Staff would deny the relief and press ahead with an investigation-with the possibility of relief in the future. Maine Public argues that unless it is given sufficient revenues now to continue its Seabrook participation, it will be forced into bankruptcy, with a resulting permanent impairment of its credit
- worthiness.
Our calculations show that if no extra cash rate relief is granted, the Company will not be in a position to issue the secured debt which it must issue in 1982 in order to keep afloat its investment in Seabrook. It is certainly true that i
(
. Docket No. 80-180
- 7-( if the Company were to sell one-half of its interest in Seabrook, its cash requirements would be greatly diminished.
This, however, raises the questions (1) whether the Company could sell any part of Seabrook, (2) what price it might receive for its entitlement, (3) how long such a sale would take to consummate, (4) how soon after the sale would the Company receive the proceeds, (5) what portion of the proceeds would be available to MPS after all bondholders had been satisfied, and (6) what financing problems would the Compan'y encounter pending its receipt of the proceeds of a sale? In short, if the Commission's rate treatment in this case were such that MPS would be forced to sell all or part of Seabrook, what sequence of events might take place? In the period immediately following such a rate order, the Company might have severe difficulty obtaining credit,from its bankers. This would be so, since the Company s ability to fund out an acceptable portion of its existing short-term debt would depend on its ability to unload at least part of its Seabrook commitment and lower the level of its regular construction - payments. The record certainly discloses that the banks would not be acting with an excess of caution were they to conclude that the sell-down and pay-off' solution might not prove workable. I f'-) - Nothing in the record sugges'ts that a ready market for Seabrook entitlements exists. Mr. Hovey, on cross-examination, stated that although Maine Public's management had given no thought to the possibility of selling its share of Seabrook, "when there are other companies that have amounts of it for sale and are having trouble selling it, then it would seem as . though we could make a judgment that it would be fairly difficult for us to sell ours." (D-64) Attorney General 's Exhibit 34, a February 4, 1981, Stock Prospectus issued by Public Service Company of New Hampshire, Seabrook's lead owner, suggests that sales of Seabrook shares might prove difficult and time-consuming. PSNH's storied struggle to divest itself of a portion of Seabrook is discussed at pages 5 to 6 of the Prospectus. The discussion reveals that although PSNH began offering shares in 1979, it was not until January 31, 1981 that some of the utilities that had committed to buy were able to begin their participation in the plant. Three of the utilities seeking an interest -- Massachusetts Municipal Wholesale Electric Company ("MMWEC"), Taunton Municipal Lighting Plant Commission and the New Hampshire Electric Cooperative, Inc. -- had not received their required regulatory approvals at the
'. time the Prospectus was issued, some eighteen months after PSNH's initial offering. MMWEC's participation was conditioned
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i . l-()- Docket No. 80-180
.\
-both on its obtaining regulatory approval and sufficient
- financing. Given the general notoriety and controversy i surrounding Seabrook, the difficulty actually experienced by PSNH in selling shares, the fact that by the terms of the l
Seabrook Joint Ownership Agreement, ACC Exhibit 6, the market for Seabrook consists only 7f New England electri.c utilities, and the possible need for securing regulatory approval on the' part of the purchasing utility, we are driven to conclude that a sale of any significant portion of MPS's share would take-many months to consummate. We believe on the basis of the l record now before us that one year is a best-case time fr~ame for the period between offering and closing. , Without objection, official notice was taken of the-various cases in.wh'ich Commission approval of MPS~ mortgages were sought and granted pursuant to 35 M.R.S.A. 5211. The text of the mortgages makea plain the fact that the proceeds of any sale of f Maine ?ublic's Seabrook interest would not flou immediately into the Company's coffers. The Company's 1945 Indenture of ! Mortgage and Deed of Trust continues to govern the disposition of the proceeds of any sale of property subject to 'he lien of any MPS bond. Section 7.02 of the 1945 Indenture indicates that prior to releasing any bonded property from the operation of the lien, the Trustee representing the interests sf the debt
!'[,)-
holders must receive cash in an amount ec ual value of the property released. It woulc to the fair market therefore appear that -
, at the closing of the sale of Seabrook, the Trustee would issue ,
i his or her release only upon receipt of the cash derived from
. the sale.
! I i Under what circumstances could the Trustee make the cash available to MPS? The portions of Article 8 of the.
1945 Indenture relevant to our discussion provide that the cash can bg released if the Company certifies that new bondable additions have been added to the Company's plant or that bond i retirements or redemptions can be made. Logically'enough, it does not authorize the Trustee to release the property to pay down Maine Public's short-term debt, since that would cause a shrinking of the bondholders' security. It would thus seem that the Company would be forced to redeem or retire all of its long-term debt before it could pay down its high-interest, short-term obligations. Redemption of outstanding debt would seem to be the most likely co.urse to take, but onde again time constraints must be considered. Cash could be released for redemption only upon the presentation of a variety of certifications to the !O
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1 ( 4 t
, Docket No. 80-180 + s- Trustee. Also required would be an opinion of bond counsel sanctioning the release, an opinion that would take some time to prepare.
g Compl'etely aside from these factors, complications also , exist stemming from the Tenth Supplemental Indenture issued in conjunction with certain bonds by MPS on October 1,1979. - This instrument specifically pledges Seabrook as security for the
- long-term debt and also, in 52.02, forbids the redemption of the 1979 bonds until 1989, except under certain circumstances.
We are not p'repared to speculate how this provision might i affect the Company's ability to secure the proceeds of a Seabrook sale from the Trustee, except to conclude that it would render the preparation cf a reliable bond counsel's opinion somewhat difficult and time-consuming. Tr. the interval betwean the issuance of our rate decision ! in this case and.the consummation of a sale of all or a portion of'the Company's Seabrook entitlement, the ability of the
- Company to maintain its interest in Seabrook is c uestionable.
The Company's commercial lenders would understanc that Maine Public's financial viability would depend upon a hasty sale of its Seabrook intorest, stanching the flow of cash from MPS to g g, PSNH. They would also understand that the proceeds of the sale could only be used to retire bonds with relatively low interest ' t( rates by today's neandards, and not the high-interest paper- , taken by the commercial lenders. - In any event, it does not seem to be possible for the Company both to issue the long-term debt it must-issue in 1982 in order to reacquire its access to the short-term credit market and also to continue its payments to PSNH for one full ! year. Since we have found that it would take at least one year ! for the Company to locate a buyer, negotiate a sale'and close the deal, MPS might have to default on its Seabrook payments or on its credit obligations. Leaving entirely aside the guestion of the effect of either type of default on Maine Public s standing in the capital markets, we proceed to review the default provisions of the Seabrook Joint Ownership Agreement i ("JOA"), ACC Exhibit.6. . Under Article 25, paragraph 2, of the JOA as it presently l stands, after a participant has failed for five months to make i its payments when due, PSNH may declare that a default has occurred'and terminate the participant's interest in the plant. The termination has the effect of disenfranchising the defaulting utility from any interest in the power or capacity O
(:) . Docket No, 80-180 of Seabrook, and the defaulter's interest passes to PSNo. The defaulter must pay over all sums due under the JOA, or in other words almost one-half of a year's construction advaaces. In addition, it must pay as liquidated damages the lesser of (a) 25% of its net investment in ;he plant, or (b) 25% of the fair market value of the plant. After the defaulting u'tility, has made good on its arrears and paid over the liquidated damages, PSNil is than required to lesser of (a) 75% of the defaulting utility' pay over s net the investment, or (b) 75% of the fair market value of the defaulter's Interest. If these provisions were invoked today and a net investment approach were taken, MPS would lose on the order of 5 million dollars based on its December 31, 1980 investment. Furthermore, it is difficult for us to believa that the Company's bond holders would remain on the sidelines while a significant piece of their pledged security was being forfeited. Litiga' tion wo,uld be a likely course to pursue. The Examiner recommended that we grant Maine Public Service additional rate relief at this time to enable it to maintain its credit and to restore its ability to attract capital pending a Commission investigation of-the Company's power supply planning. The Examiner suggested that these rates be g
- temporary and remain in effect for no longer th'an one year.
After reviewing the exceptions filed b7 the parties, we conclude that such temporary rates are not clearly warranted on the basis of the record at this time. The hearings in this case have focu' sed on the Company's permanent rates, including rates.'to support its construction program,lassuming that that , program continued unchanged. The issue of temporary rates to sustain the Company's financial viability pending an investigation of the wisdom of that construction program has not been specifically addressed, except in the Examiner's . Report. As the Staff points out in its exceptions, a variety of factors should be considered before the Commission makes a decision on the need for, and the level and duration of, any such temporary rates. The Commission should consider the length of time required to complete the power supply investigation, the Company's actual need for cash during that time, other sources of funds available to the Com the effect of the Seabrook Joint Ownership Agreement'pany, s five-month grace period, and the likelihood and consequences of any default by the Company. In addition, particularl Order dif fers in some respects from the Examiner'y since this s Report, it is conceivable that the Company may conclude that its earnings under the new revenue requirement will permit it to continue () without additional relief.
i - - 2 s Docket No. 80-180 Thus, we conclude that temporary relief should not be granted at this time. Maine Public Service is, of course, free
, to petition the, Commission under 35 M.R.S.A. s311 for temporary i rate relief at any time, and if it d2cides to de so, we have enumerated the issues which we believe should be addressed 11 considering whether such relief should be awarde'd. ,
VIII. FUEL CONSIDERATIONS The Maine Fuel Charge Statute, 35 M.R.S.A. 5131, requires electric utilities such as MPS to include as part of its base rates a reasonable fuel cost. The base rate unit fuel cost, according to Section 131, "shall be based upon the < utility's reasonable cost of fuel during the test year used for th rcte adjustment." We hare included in Maine Public's base rates the retsonable test year fuel costs, consistent with Section 131(2).
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The Company's currently-effective fuel cost adj'ustment was put into effect by our Order entered on August 29, 1980 in Maine Public Service Company, Re: Implementation of Fuel Adjustment Regulations, Docket No. U.3388. That fuel rate was i authorized in accordance with the transition language of 1977 Me. Laws Ch. 689, 52, which empowered the Commission to establish a levelized fuel clause pending the electric
- utility's next general rate adjustment pursuant to Section 64.
or 296. Since this case constitutes the Company's first general rate adjustment since the enactment of the currently-effective Section 131, any new fuel cost adjustments-must be implemented in a manner consistent!with the terms of that Section and of Chapter 34 of the Commission's Rules and Regulations governing fuel adjustments. The Company's Feel Cost Adjustment Computation was filed
- with this Commission on May 22, 1980, some ter days prior to
- the expiration of the second suspension period for the general rate adjustment case. Since the fuel filing, given the existence of a general rate adjustment, must comply with the
~
provisions of Section 131, and Chapter 34, the filing must be separately docketed and noticed as intended by that statute and I rule. See Central Maine Power Company, Docket No. 80-25, Order l at 72 -(M.P.U.C. 1980). The current MPS fuel adjustment proceeding has been given Docket No. 81-103. We repeat the same instructions given in the latest CMP case with regard to fuel adjustments pending the outcome of Maine Public's May 22 O
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- Docket No. 80-180
[s)
\/ fuel filing:
Should the Company file new rates pursuant to this Order prior to the issuance of any fuel Order in [ Docket No. 8'.-103], the Company is ordered to file with its new rates an adjustment to its existing fuel ~ adjustment riause which will ensure that the Company will not co' lect revenues for its fuel costs greater than the 'auaunt now being collected. IX. INTERIM RATE DESIGN As noted in the first portion of this Decision and Order, the proceedings have been bifurcated in order to allow timely consideration of the revenue requirement issues in this docket. Phase II of this proceeding will focus upon the Company's proposed rate design. A Notice of Investigation in this matter will be issued shortly. During the period between the implementation of the new revenue requirement and the conclusion of our investigation of the Company's rate design, an interim rate design mest be implemented. The Company proposes to increase its customer service charge and alter its energy charge structure from three declining blocks to two. - The ACC, the Staf f and the Attorney General recommend that the customer service charge remain constant and that the declining [_/s') s- block energy charge be eliminated in favor of a " flat" rate. Although given the opportunity to do so, the Company did not present a cost of service study justifying an alteration of the c6stomer service charge. We are not able to consider, consistent with 35 M.R.S.A. 596, whether the costs of a minimum distribution system should be included in the customer charge. By the same token, we are not able to evaluate whether the ! Company's declining block proposal has cost justification. We l are also unable to determine whether the revenue requirement is correctly allocated among the customer classes. Under these circumstances, we believe the only fair method of implementing the rate increase is by increasing the revenue contribution of each customer class by the percentage increase allowed. With respect to the customer charge, we believe that the Commission is legally precluded from altering that charge absent the kind of investigation contemplated by Section 96. Consistent with our determination in the previous CMP case, we will keep the customer charge at its current level pending the conclusion of our investigation. We also conclude, based on the arguments made by the parties, that a flat energy charge should be instituted. C'i V
I . Docket No. 80-130
- {
i i X. CONCLUSION 1 Aci ord ingly , i,t is 4 4 0RDERED < - That the Schedule of Rates filed by the Maine Public 1. Service Company, filed with this Commission on September 2, 1980, and specified at the outset of this Decision and Order is r found to be unjust and unreasonable and shall not take ef fect; < That' the Maine Public Service Company's revenue 1
- 2. t j requirement for Maine jurisdictional sales is $27,467,592;
- 3. That the Maine Public Service Company shall file a new Schedule of Rates designed to generate the level of revenues hereby found to be just and reasonable, structured in a manner
- consistent with the body of this Order;_
q .
- 4. That the Commission shall, in the near future, t
initiate investigations of Maine Public Service Company's rate i design and of its power supply planning and future capacity ] requirements; .
- 5. That the Secretary of the Commission shall forward by ,
regular United States mail, postage prepaid, a copy of this Decision and Order to all persons on the attached service list. , t Dated at Augusta, . Maine, this 1st day of June, 1981. BY ORDER OF THE COMMISSION , t ..I ,
- Marjorie Marcotte Walo
. Marjorie Marcotte Walo Acting Secretary i
I
' 't . , .
i t eY: hh////fWWW Mar Nrie Mirc~otte Walo~ A'cting Secretary COMMISSIONERS VOTING FORf Gelder
~
Smith - Carrigan O COMMISSIONER CONCURRING IN PART AND DISSENTING IN PART: Smith
p~. LJ Docket No. 80-180 g[~1 i
'- / Review of this Order by the Commission may be requested under Section 6(N) of the Commission's Rules of Practice and Procedure (65-407 C.M.R.11) 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. . e
.e.--
x
+
O g--
\.. /
l O. _ !h- Commissioner Smith concbering in part, dissenting in part: f The Examiner's Report and decision of the majority involve issues this Commissioner addressed in the last Central Maine Power Company and New England Telephone Company rate cases, as well as the Sears Island decision--opinions in which this Commissioner filed minority reports, in whole or in part. This Commissioner adheres to his previous stands in these cases, and consequently dissents once more on responsibility for the mechanical defect in the Wyman Unit No. 4 muf fler, and , assumptions and methodology in energy forecasts, and reaffirms his positions on flow-through tax issues. j I disagree strongly with the decisions of the majority to j set cost of equity at 16.12 percent, and short-term debt at 17.9 percent. Both are considerably higher than amounts requested by Company witnesses, namely 16 percent and 17.21 percent. In fact, the Company brief of exceptions to the , Examiner's Report agreed to his recommendations, namely 15 percent and 16.75 percent. Despite the interesting-methodology used by the majority, the record does not support this generosity. The Company is not expected to appeal
; conclusions on these two issues' .
I must reject the decision of the majority on the so-called
,g h MEPCO purchase. When insufficient information is in the record - after a protracted hearing, as happens altogether too ,
frequently in recent years, the Commission probably must share responsibility for the shortcoming. The Hearings Examiner and staff participated in the hearings throughout, and I am well
. satisfied in the reasonableness of their recommendation here.
In my opinion, many of the conclusions on the Seabrook purchases are off base. It is largely the estimates of one set of experts against those of another. In the final analysis, outside experts, Commission staff, and Commissioners lack l
- experience in corporate management. Commissioners, jointly and individually, must exercise independent judgments as to the reasonableness of. alternatives presented by experts and self-styled experts. And, alas, Commission conclusions, majority and minor'ity, can aspire to little more than
- (hopefully) educated guesses. It simply reveals that this sector of public regulation, despite teams of testimony, is one man's estimate against that of another. Finally, credibility of learned witnesses depend upon Commission judgments as to objectivity, plausibility, and realism of the contradictory I
witnesses. O C
]
() - i f f Although the Company has the burden of proof, forecasts, wise or otherwise, are not legal matters to be proved or disproved. The task is for the Company to convince the Commission of the reasonableness of its prognostications--akin to substantive due process. Adverse witnesses, likewise, need to convince us of the reasonableness of their forecasts. Then the Commission selects the one considered to be the more reasonable, or perhaps manufacture a composite of its own.. i Lacking the expertise within the Commission, to appraise .or refute Company estimates, we must look to the recommendations of outside consultants and intervenors. All have responded j enthusiastically to the challenges. Yet we have numerous 4 alternatives covering a wide range, some of which are highly speculative and lack firm foundation. In my opinion, the
- Ccmpany forecasts by' experts on the scene, genera 1If appear to be logically superior to the others.
Likewice, I must reject the estimaten supported by the majority on the cost o.f nuclear power plants. Here again t.bere is a wide variance in the conclusions of the experts, and I reject a new (but interesting) approach as being more speculative than well reasbned. The same holds for growth (s ( forecasts. Although originally opposed to interim rates, the realistic view today, with so many electrical utilities in dire economic atraits, is that need for temporary rates sometimes is a fact
- of life. Our Hearing Examiner recommended additional relief in the amount of $1,800,000 to prevent injury to the utility company and its ratepayers. It is very ' unfortunate for theDenial public interest that this recommendation is. repudiated.
i entails several real business risks which may prove to be false
; economy for the company and its customers in the long run.
1 l
) tli Li6coln S. Smith Commissioner l
lO
_ . . _ - . - . - . . - . - _ _ - _ - - - - . . - ~ . - .. - _--- = . - - . .- . . . .._, ( - ! , EXHIBIT 1 l [y_($) - MAINE PUBLIC SERVICE COMPANY '
- COST OF S110RT-TERM DEBT' ,
The Weekly Bond Buyer)" ' (Source: , l Date Daily Average - l l 1979 May 11.71 June 11.61 I- July 11.56 August 11.92 Sep.tember . 12.86 l
- October '
14.37 -
. November . 15.13
, December i 15.17 1980 January 15.03 .' February 15.67 March 18.32 l . April 19.77 16.36
- May'
! ;- June 12.43
- I( July 11.00
August 11.13
- September 12.28
, October 13.79 -
16.03 l November December 20.32 , ; 1981 January 20.39 February 19.43 March - 18.29 , April 17.67 . 1980-1981 Y = 16.12 e e l -. I
- O e
ymw w 's--eo u 1r--e-=#--eePPee,--='-s- > < - - -
r O . i 7~ -- ED11 BIT 2 7 { l
- 4 i
! MAINE EUBLIC SERVICE GDIPANY -
! CDST OF SIDRT-TERF1 DEBT } Average Prime Rate for Fby 1979 to April 1981 16.121 Average borrowing rate:
'~
- Northern National Bark: 16.12%
Funufacturers Ibnover T ox "cepany: (16.127.)(1.08 + .05) 7 18.221 l 1 ( Weighted Average Short-Tem Debt Cost: . Weighted - Balance , Percent of , Cost Average -
. -. - .. .~ 2. ._.__ . .
sMm' TM~ ~ h h '
~
I ' Northern National ! r Bank $1,200,000 14.817.. 16.121 2.39% . Fbnufacturer's Ibnover - 1 Trust Co. 6,900,000 85.19 18.22 , 15.52 ! $8,100,000 100.001 17.917. - [ l ( . i i e e l
O MAINE PUBLIC SERVICE GMPANY
.005r OF CAPITAL Source: 1980 Annual Report to Stockholders pp. 16, 17, Derived" ~
DPS Book Value EPS - Price (Declared) (Yr. End) (Year) (Avg. Ili-lo) . 1969 1.16 16.77 1.66 18.25 - 1970 1.16 17.33 1.74 16.50 1971 1.19 17.51 1.34 17.63 1972 1.20 17.76 1.40 16.63 1973 1.26 18.37 1.87 14.94 1974 1.28 19.54 2.41 12.00 1975 1.31 ~ 19.74* 1.79* 11.69 ' 1976 1.34 20.91* 2.25* 14.69 1977 1.46 23.16* 3.54* -- 17.75 . 1978 1.61 25. 57* . - 3.97* 19.00 1979 1.84 27.50* 3.80* 18.19 1980 1.92 27.90 2.86 . 15.94
- Restated
'( Year-to-Year QTange 7. -
- Yieb % ,
O 6.36-
~~
3.34 4.82 69-70 69 70-71 2.59 1.04 (22.99) 70 7.03 71-72 ! .84 1.49 i 4.48 71 6.75 72-73 5.00 3.43 33.57 72 7.22 73-74 1.59 6.37. 28.88 73 8.43
'74-75 2.34' 1.02 (25.73) 74 10.67 75-76 2.29 5.93 25.70 75 11.21 .
76-77 8.96 10.76 57.33 76 9.12- ' 77-78 10.27 10.41 12.15 77 8.23 78-79 14.29 7.55 (4.28) 78 8.47 79-80 4.35 1.45 (24.74) 79 10.12 80 12.05 - Year to Final Year Growth Rate 69-80 4 . 6 57. 5.07% 9. 3 37. 70-80 5.11 '5.43 10.51 71-80 5.62 5.91 12.18 72-80 6.15 6.19 11.75 73-80 6.73 6.78 - 10.12 74-80 7.71 7.15 8.26 75-80 8.83 7.74 12.20 (' 76-80 9.97 7.46 5.66 77-80 10.02 6.52 (6.61) 78-80 8.81 4.46 (15.12) 79-80 4.35 1.45 (24.74) l u DPS/ Derived Price
O I . '" EXHIBIT 4 l[ .
. l Y>
MAINE PUBLIC SERVICE ODMPANY WEIGlHED AVERAGE (DST OF CAPITAL b, . Source: RJS-Exhibit, Schedule 5, Revisi6n 1 e i Amunt Weighted t (000's) Weight Cost Cost
~ -
$24,631 42.75% 8.38% 3.58% ~ .
! Iong-term Debt 8,100 - 14.06 17.90 2.52 i Short-teIm Debt- . J 5,964 10.35 9.42' .97 l . Preferred Stock , Commn Stock 18,921 32.84 16.50 5.42_ i $57,616 100.00L 12.49% i _,~' r e E
- f. . . . . , . , , . ,
i . '
! I .' ' .
i e - e O e i l
=
f ( 'wm e, r-r eeg*vm-ur**wa+eeewsw--*==*-*-**Tww'*-**e--**esem - w7 e--p . ***-*~--*w-we'-ge--en-va *-mewwwe ww - ww ew-e e ****-w wwe
A s' f) , ' O- ! ^
' EX11tBIT 5 MA!!E PUBLIC SU1V12 CGtPANY
' CA!LULATION OF WatKitC CAPITA!,
LIAD/ LAG tEUKD Other . tiec (imad) Cash i Working Capital. Daily Revenue Imad
- Tert Year Lag Days Days teR Days Required ;
Description as Miusted Itans Anount'. 40.50 0.78 $ 29,590 i
$13,846,484 $37,936- - 41.28 Purchased Power 5,206 41.28 14.94 26.34 137.126
- 1.900,123 33.73 222.753
; Fuel for Generation 2.410,575 6,604 41.28 7.55 o & tt tator 8,680 41,28 24.92 16.36 142.002 3,168,147
- Other Operation and Maintenance l' axes Other Than income Taxes: 421 1 - - . ---
Federal Pension Guaranty '451 41.28 11.44 29.84 13.458 ' Federal 'i,cial Security 164,795 (206) 7 41.28 70.70 (29.42) i Federal Unanploymei.: 2,625 .176.43 1.235 2,573 7 41.28 (135.15) Federal itigtuay Use
- 25 41.28 69.92 (28.64) , (716)
State tinisnployment 9,023 214.16 4,497 7,684 21 41.28 (172.88) State Excise 15 41.28 (101.55) 142.83 2.142 i 5,530 (128,811) . State PUC Assessment 672,248 - 1,842 41.28 111.21 (69.93) Real Estate and Personal Property , Taxes Accrued and Tax Collection Payable: 41,28 30.02 11.26 13,996 453,584 1,243 (5,159) i State Sales and Use Tax
- 451 m 11.44 (11.44)
Social Security Withic1 ding 164,795 (11,763) i 1,0 54 ' - 11.16 (11.16) Federal Withholding 384.547 - 36.80 (36.80) (6.661) 66,395 181 State Withholding -
-- 41.28 Federal and State Income Tax , , ,
S 839,319 -- - --- * -e 839.319 Fuel Inventory '
-- -- -- 706.940
-- 706,94G -.
tuterlats and Supplies ta g-term Debt Interest 41.28 91.25 (49.97) (258,345)
-- 1.887,083 5,170 j - (Attorney General',s Brief Exh. B ,
Preferred Stock Dividends (4.35) (6,590)
-- '552,859 1,515 41.22 45.63 (Attorney General's Brief. Exh 8 !
112 6 E goL, l Worklig Capiral itequired , i . g. j 4 e
i f . p,- EXHIBIT 6 I[" . j MAINE PUBLIC SERVICE COMPANY WORKING CA? ITAL ALLOWANCE
SUMMARY
OF OTHER 0 & M ADJUSTMENTS
~
1 Adjustment .* Payroll
$135,589 NEDC0 Abandonment 40,653
. Rate Case Expenses 31,994 Pension 33,994 Medical Plan
~
42,726 l , ' Load Research Expenses 25,879
- m
!(j Postage 7,541 Regulatbry Commission Expense (58,632) i j (3,688); j .Seabrook Education. Center - - ! Total
$256,056 I .
i . 1~ . i . o e e O 9 0 f e
O- .
EXHIBIT 7
! [. ! MAINE PUBL'IC SERVICE COMPANY ~ -
~
WORKING CAPITAL ALLOWANCE . 1 PRO FORMA ADJUSTMENT FOR OTHER 0 & M , , 1 i
, Company's Adjusted Iest-Year Amount $ 3,286,185-Plus: Total of Exhibit 6 256,056 ;
i . i. i, Less: Total of Livingston's Adjustment . (4, 6-13) (374,0941 ( p- -- --Adjusted-Test-Year Other 0 & M ___.. _. _.
$3,~168,147 -
! ? I
\; I . l e l [ , e i
. - . . . , , - - , . . ~ . ~ . - . . . _-.,--..~,.__.--.$,_-___
o . O I s ' EXHIBIT 8 ( l l . bbine Public Service Company Test Year Rate Base Per Comoany Miustments Allowed
$ 47.139,729 - $ 47,139,729 Plant in Service 159,254 - 159,254 1
Utility Plant Acquisition Mjustment (16,959,246) less: Reserve fo; Depreciation & Amort. (16,959,246)_ - S 30,339,137 $ - 5 30,339,737 Net Plant in Service (90,010) Plan't Ibid fo; Future Use 90,010 Investment in Subsidiary 3,582,696 (537,404)1 3,045,292 3,369,170 Investment in Maine Yankee 3,369,170 . 91,618 - 91,618 Investment in MEPCO , 1,694,807 Working Capital Requirenent 2,257,909 (563,102)
/78.653) (28,653)
Less: Investment in Seabrook Ed. Ctr. (3,202) Wyman #4 Mjustment
- - s.3,202)
Less: Non-Investor Supplied Capital (19,078) Custoner Deposits (19,078) - (2,292,964) 274,9692 (2,017,995)
\[A) Acetmulated Deferred -3f Customer Mv,ances Income Tax(52,017) -
(52,017) 5 37,367,081 S (947,402). S_36,419,679
. - ~
Rath Base . Construction Work in Progress - Seabrook 5,005,185- 12,889,9633 17,895,148
,~
S 42,372,266 S11,942,561- $ 54,314,827_ l Mjusted Rate Base 1 - Elimination of 15% applicable to Canadian customers 2 . Elimination of Company adjustment for tax effect of AFUDC i 3 To adjust WIP to amount of investment at 12/31/80 less AFUDC added in test year ( LJ l
- = ,
EXHIBIT 9
, ?- ' Lg) .
MAINE PUBLIC SERVICE COMPAW DETERMINATION OF REVENUE REQUIREMEffr TEST YEAR ENDED DECEMBER 31, 1980 Net Operating Income for Rate Purposes $3,541,847 (Excluding AFUDC) J , Adjustments to Net Operating Income: ' $(26,667)
- l. NBEPC Sales
- 2. Ioring Firm Power Increase -
229,659 ,
- 3. Decomnissioning Costs - MY (45,263)
- 4. Wage Increases (68,147)
(20,432)
- 5. NEPOD Abandoment Acortization (16,080)
- 6. Rate Case Expense (16,643) -
- 7. Pension Increases (21,474)
- 8. Medical Plan Increases (13,007)
- 9. Ioad Research Expenses
- 10. Postage Increase (3,790)
- 11. Regulatory Camission Expense Adjustment 29,468 23,461
- 12. Depreciation (16,764)
- 13. Acquisition Acortization (10,822)
- 14. FICA Taxes 5,717 L/ \ 15. Construction Payroll Cost Increase i
(0:s,_/ 16. Accelerated Depreciation for S.I.T. 31,563
17. Accelerated Depreciation on Replacement parts 42,029 173,980 ~
- 18. Pro Forma Interest - . . _
(18,589)
~ ~
- 19. Adjustnent to Earnings of J.V.Co.
- 20. Hydro Normalization . 14,330 (17,995)
- 21. Elimination of Canadian Revenue 2,235,104
- 22. AFUDC 1,854
- 23. Seabrook Education Center
$2,491,492 Total Adjustments , .
Adjustment for rounding (441)
$6,032,898 _
Adjusted Net Operating Income for Rate Purposes
~
6,783,922 Required Net Operating Income (54,314,827 x 12.497.) 751,024 - Retuca Deficiency Revenue Deficiency (751,024 e .5026) 1,494,278 97,525 Portion Allocated to Resale Test Year Retail Revenue Deficiency 1,396,753 Attrition Allowance
@V Total Retail Revenue Requirement 1,396,753 l
l l
o o
,A
(_) EXHIBIT 10 (, : , MAINE PUBLIC SERVICE COMPANY
SUMMARY
OF TEST-YEAR ADJUSTMENTS Income No.' Adjustment Taxes REVENUE ADJUSTMENT $ (53,058) NBEPCo. Sales 1 Loring Rate H 2 456,942 PURCHASED POWER ADJUSTMENTS MY becommissioning 3 90,058 OTHER O & M ADJUSTMENTS 135,589 Payroll 4 NEPCO Abandonment 5 40,653 Rate Case Expense 6 31,994 . Pension 7 33,994 Medical Plan . 8 -42,726 . Load Research Expenses 9 25,879
- Postage - - 10 - 7,541 Regulatory Commission Expense 11 (58,632) 23 (3,688)'
Seabrook Education Center
.PRECIATION AND AMORTIZATION ADJUSTMENTS (23,461)
Depreciation Expense 12 l Amort. of Acquisition Adj. 13 16,764 , TAXES OTHER THAN INCOME TAX .~ 21',532 Employpent Taxes 14 l INCOME TAXES ~
$ (5,717)
Increased Costs Chg. to Const. 15 (31,563) l ~ Accel. Depr. for State Taxes 16 Accel. Depr. for Replacement (42,029) l Prop. (F.I.T.) 17 (173,980) Pro Forma Interest Adj. 18 t Adjustment in Earning of J.V.Co. 19 (18,589) i Adjustment in Earnings of Subsid. (14,330) Normal Hydro 20 j 21 (17,995) l Elimination Canadian Portion ADJUSTMENT TO NET INCOME (109,511)- AFUDC 22 i 1 l
,~,. ' ./
s Q ,,1 ~ 8 t _) ; Milno Ibbile Service Company EXillRIT 1(M
. Pro forma incore Statement Test Year Pro Fonna & Mjusted Pro Forma Ended ibrmalizing Mjustnents Test Mditional Year Inc'1 Credit Year Revenue Hevenue 12/31/80 Debit Operating Revenues: $12,627,412 Jurisitictional Sales - Base Rates $12,627.412 .
1,348,097 1,348,097 Sales for Resale - Base Rates 1,770,813 toring, Sales 1,313,871 456,942 (2) 569,871 $ 169,712 (1) 400,159 f4tLCC Sales 11,655,055 fuct Revenues 11,655,055 204u333 204 333 Other 0;wratity Revenues MG,c59 11,494.2/d 12'A ">< A),141 Tutal Op.*ratirg hevenue WIE.639 5 169,712 5 4 % ,942 Operating Expenses: $11,901,294 $11,901,29', ruel anl ibrchased Energy $12,017,948 $ 116,654 (1) 929,114 929,114 929.114 ikferrol Fuel 3,870,360 3,870,360 lbrei,as esi IA _ 2apacit) 3,780,302 90,058 (3) 256,056 (4-11, 23) 5,578,722 5.578,712 Other O &tl 5,322,666 1,630,118 1,636,815 6,697 (12, 13) 1,630,118 lbpreciation & Aroetiza:lon - 864,899 8'24,699 Taxes - Other 843,367 21,532 (14) 68,312 227,283 (2) 462,549 (1, 3-11, 14-18, 23) (166.954) $'743,254 576,300 laxes - Incore (3,666) (3,666) Provision for Deferred Incoue Taxes (3,666) 18,317_ 18 Investuent Tax Credit Mj, 18,317 5 2 5,900 524,622.204 5 /4 3,2 >4 E6M,117 Total Operating Expenses $24,613,l/5 5 394.929
$ 764,641 $1,042,842 $ 3,383,665 $ 751,024 5 4,134,689 operat try, Incore $ 3,105,464 Transfers f ran Other lione: (20, 21) 93,083. 93,083
- Equity Earnings of Subsidiary 96,748 3,665 339,635 18,589 (23) 321,r46 _ 321,0f,6 Equity Earnings of J.V. Carpanies
$ 3,541,847 $ 786,895 $1,042,842 5 3,797,794 $ 751,024 $ 4,;48,818 Total operating incone (109,571) 2,235,104 2,235,104 ALUDC - Seabrook 2,125,593 (22)
$ 5,667,440 $ 677,384 $1,042,842 $ 6,032,898 $ 751,024 56,78),9g Operating incoie for Rate Ibrposes e
e
O EXHIBIT 10B
.[p i
MAINZ PUBLIC SERVICE COMPANY
- INCOME TAX ADJUSTMENT FORM .
CALCULATED INTEREST DEDUCTION ADJUSTMENT Debt Interest Cos t i Long-Term Debt $24,631,000 x 8.38% = $2,064,077 Short-Term Debt' 8,100,000 x 17.9% = 1,449,900
$3,513,977 i .
Less-Test-Year Interest . .
.s Long-Term Debt $2,063,000 . // Notes Payable to Banks 1,101,199 $3,164,199 l ,.
Increase in Deductible Interest , 349,778
!- I
- Tax Rate
~
49.74%
$ 173,980
! Income Tax Reduction t 2
.A R
l O ; t_.-. ._,.. ... __ . .-,-._ ,~ _. _ .-.,_._..._.__.,_---~____.,_1_-. -m. ...-_.-._-- ,__._ _ -_ .
a.. -_o e .e f tuttC n*,1.!C S7VICI Cit'2Ntr ATTRITION N 4.YSIS ' (Dweter 31,1990 to May 31,1982) Test Year Cro4h FJte Am.nt (5) Aw Annual Ccr4cmd M usted
! Mjusted kate 1_ To /31/82 To (5) Fate 1
/
l < j .eratirg Feverues: 513,459,480 1.18 1.0168 513.635.599 12/31/80 2 (M1.498 l Nse Fevenues (Jarisdictional) . 12/31/80 2,032,M5 0.3 1.0044 1,770,832 base Twvenue (7: sale) 12/31/80 - 1,770,832 11,655,055 torirs 12/31/80 11,655,0 3 400,D9 Fuel Psvenues 400,159 tBEPC Sales 12/31/80
- 182.066_
12/31/80 182.066_ Ot.her 0;eratirg Peverues 529.735.209 12/3U80 529.500,147 Total 0;eratirg Fevenues
;ertting Expenses: 511,901,294 12/31/80 $11,901,294 929,114-Fuel Parenased Energy 929,114 i 12/31/80 3,870,360 Deferred Fuel 12/31/80 3,870,360 Purchased Pcwer capacity 2.63 1.0109 1,601,229 12/31/81 1,583,964 46,154 Depreciation 12/3U80 46,154 Acur tizat icn 2.410,575 7.5 1.0368 2.499.284 11/30/81 476,260 0 & tt %es 12/31/81 451,785 14.65 1.0596 0 & M Trarte Benef;ts 2,716,362 8.0 1.1152 3.029.287 Otter 0 & M 12/31/80 177.950 12/31/81 176,443 778,339 PayToll Taxes 703.107 7.44 1.1070 ,
Taxes Other Than Inare Taxes 12/31/80 433.514_ 12/31/80 576.300_ Incx:: Tames - Federal & State $25.744.785 525.365.458; Total Operating Ex;cnses
$ 3,990,424
$ 4,1% ,689 persting Inccre 93,083 ransfer Trcus Otner Irecx,e 93,083 Equity in tamirgs of Subsidiary 12/31/80 3212 (M6 12/31/80 321.0'+ 6 5 4.44. 55T Tzuity in Earnires of J.V. Cos. 5 4. W .818 a perstirg Inccre for Fate Purposes
.ata Bass: 1.U125 524,267,423 12/31/d3 323.h7,625 U.te 24,094.146 Prod. & Tracrz ission Plaat 12/31/80 23.171.904 2.79 1.0398 '
Dist. General & Ints:gible Plant - 12/31/80 - 137,247 '
.% N1d Ter Future IJze Plant Aequisitson Adjustment 12/31/80 159,254 (18.572, % 6)
,[ i 12/3U80 (16.801,652) 7.13 1.10 %
. Provision for Lepreciation (225,272)
' %')~ ' A:ctc. Provisicn for A:ortization 12/31/80 12/3U80 (157,594) (52.017)_ (52.017) I Cust. Asemces for Constructico ' $29.648,981
-- 12/3U80 530.287.720_ ~
tet tRility Plant
$6,U6',080 12/3U80 $ 6,506,030 Invest:aent in J.V. & Subsidiary ,- / -
l 12/31/80 - , f 1.890,049
- Invest: m t in Seanrook' 12/3U80 1,694.807 - 8.08 - 1.1152 Wertirs Capital 24.38 1.3622 (2,748,913) l 12/3U80 (2,017,995) 14ss: Acess. Deferred incooe Tax .
(19.078) Custcrer Deposits . 12/3U80 - (19.078)~ (28,653) 12/31/80 (28,653) . Invest:mt Seabrook Educational Center (3.202) 12/31/80 (3.202) Wyman thit #4 Mjustment 535.245.2t4 536.419.679_ Total Rate 8ase , 12.4971 ' l 12.4901 , Rata sf Peturn 01 Attrition i l l l l [D.
/\ j*
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o .. r l ' 0 ; i EXHIBIT 12 j l "'
- (
MAINE PUBLIC SERVICE COMPANY , ATIRITION ANALYSIS
. INCREASED REVENUE REQUIRDENT i
1 Sales For Total Retail Resale- . - t
$36,419,679 Rate Base -
! 12.49% 1 Rate of Return d 4',548,818 $3,952,013 $596,805 I Return Required * , ;
). .
i) 3,797,794 3,250,005 547,789 l 4 rest Year Return As Adjusted l 751,024 702,008 49,016 Deficiency 743,254 694,745 48,509 Incane Taxes , 97,525 - 1,396,753
~ .
Revenue Requirement 1,494,278
~
1 86.881 Retail 13.127. Resale I O
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l a .. O
. EXHIBIT .3 -
i ( f' s
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!%INE PUBLIC SERVICE COMPANY ATIRITION ANALYSIS
- INCOME TAX COMPlHATION 1
l i 1 Net Before Tax Operating Income - Attrition Year $4,838,067 - Net Before 'hax Operating Income - Test Year 5,125,118 - s Increase (Decrease) In Before Tax Operating Income (287,051) . Increase (Decrease) In Income Taxes: (19,893) State Income Tax @ 6.93% (122,893) Federal Income Tax'@ 46%.'~~ ' ' 4 . i . (142,786) Increase (Decrease) In Income Taxes e 9 6 e e P I
, , . , . .y ..,_.,-,..-.-,._-.% ,m_,e..,,_._w-,,,. ,,--_,m,,,..m,., ,,,,,..q-n,. . - _ ey . . m, . . . , _ .._,_,,._m, . . - . - _ .
o .. O . () , MAINE PUBLIC SERVICE Orl!PANY B0f0 COVERAGE OliPlITATION EXHIBIT 15 Pro Forma Test Year
. (Includes Attrition)-
Net Earnines Available for Interest Total Revenues $29,500,147 Deductions: Operation & Maintenance
~
22,279,490 Depreciatica & Anortization 1,630,118 Taxes Other 'Ihan Incme 864,899 Total Deductions $24,774,507
$ 4,725,640 Operating Incme Other Incme: '
AFUDC ~
$ 2,235,104 Interest and Dividend Incme , - '
. 133,800-Equity in Earnirgs of J.V. Cd. 's' 321,046 Other Incczne Deductions (Debit) (54,960)
~-
Net Other Incme $ 2,634,990 I. - 833,936 Other Incme Limit * $
~~
Net Earnings Available for Interest (BT) ~ ~ ' - " ~ - - -
$ 5,559,576 Earnings Required for 2.25 x Goverage <
on Outstanding Bond Debt $4,245,937
-- _ Earnings available to cover pro forma j bond debt ($5,559,576 - $4,245,937) $1,313,639 l Maximun principal amount of bond debt issuable @ 15-1/2% with 2.25 x interest coverage $3,766,707 i
Earnings BT, Required to cov2r $8 million bond debt
@ 15-1/2%, 2.25 x coverage. $2,790,000 Irss: Earnings available to cover pro forma debt 1,313,639 Earnirgs deficiency to cover pro forma debt $1,476,361
*Limitdd to 157. of' NET Earnirgs Available for Interest 9
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, _y O
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY Units No. I and No. 2 Seabrook Nuclear Power Station Seabrook, New Hampshire l i I I l Informa tun furnished pursuant to S 50.33 of Commission's Rules and Regulations with respect to the particular Applicant named above as part of Final Safety Analysis Report and Operating License Application for the above Units. July 1981 l l
i /e) I. ORGANIZATION AND CONTROL U (a) Name of Applicant Massachusetts Municipal Wholesale Electric Company (MMWEC) . (b) Address of Applicant Post Office Box 426 Ludlow,Massacjhusetts 01056 l (c) Description of Business of Applicant MMWEC was originally established as a coordinating and planning agency in 1969 and became a public corporation in 1976 with the power to acquire, construct and finance ownership interests in electric generating units to meet the power requirements of its members. MMWEC's level of operations has been increasing since its formation. Operations currently include the delivery of power from its share of W. F. Wyman Unit No. 4, the construction of its Stony Brook Units with 504 MW of intermediate and peaking capacity and the acquisition and financing of future electric generating capacity. MMWEC is also providing power supply i planning and load forecasting for its members and negotiating short term and interim power supply arrangements to meet their T power needs. MMWEC is a member of the New England Power Pool. j MMWEC's activities and operations are more fully described in its 1980 Annual Report and the Official Statement of Massachusetts Municipal Wholesale Electric Company relating to $100,000,000 Power Supply System Revenue Bonds, 1981 Series A. (d) forporate Organization MMWEC is a public corporation and political sub-division of the Commonwealth of Massachusetts formed under Chapter 775 of the Massachusetts Acts of 1975. As of June 1, 1981, 32 Massachusetts municipal electric systems are members of MMWEC. l ! (e) Corporate Officers and Directors l l MMWEC is governed by a nine member Board of Directors, seven of whom are elected by MMWEC's members and two of whom are appointed by the Governor of the Commonwealth. 1 , The names and residence pddresses of MMWEC's directors and ! principal officers are as follows: Directors l Residence Address L
) James E. Baker, Chairman 72 Holman Street L
(n Shrewsbury, MA 01545 l Richard L. Bailey 166 Jersey Street i Marblehead, MA 01945 l l
. .. - . _ _'~ ___ . __ _ _ _- ___ , .- - - -
r Directors T Residence Address Horst Huehmer 23 Plant Avenue Iludson, MA 01749 Francis H. King 38 Pleasant Street Holyoke, MA 01040 Curtis J. Lanciani 16 Seaver Brook Road Littleton, MA 01460 Neil E. Murray' Manning Street Jefferson, MA 02178 Bruce Patton 70 Birch Street Peabody, MA 01960 Nathan S. Paven 40 Wollaston Avenue Quincy, MA 02170 Norbert D. Rhinerson 87 Belmont Street Reading, MA 01867
~
Principal Officers James E. Baker, Chairman of the 72 Holden Street Board Shrewsbury, MA 01545 Francis H. King, President 38 Pleasant Street' Holyoke, MA 01040 George E. Leary, Treasurer 168 Madison Avenue Holyoke, MA 01040 Phillip C. Otness, General Manager 124 North Street and Secretary Granby, MA 01033 Walter Gaebler II, Assistant Treasurer 1892 Memorial Drive Chicopee, MA 01020 Maurice J. Ferriter, General Counsel and 31 Longfellow Road Assistant Secretary Holyoke, MA 01040 l All of the directors and principal officers of MMREC are citizens of the United States of America. MMWEC is not owned, controlled or dominated by an alien, foreign ec.rnoration or foreign government. O 2-
f II. FINANCIAL QUALIFICATIONS
\ Under the Joint Ownership Agreement, MMWEC is responsible for its Ownership Share of the operation and m . 'enance cost of the Units which, when the pending transactions described hetein have been con-summated prior to commercial operation, will be 11.59340% of those costs, and a similar percentage of the ultimate cost of decommissioning the Units.
Based upon the estimates set forth above under Part IV of the General Information, MMWEC's share of these costs should amount approximately to $17,390,000 and S17,390,000 for the first five years of operations of Units'l and 2, respectively; and approximately $4,869,000 to
$9,970,000 for the decommissioning of the two units. In addition, MMWEC's share of fuel expenses during the period would be S59,474,000.
As evidence of its financial qualifications to meet these costs, MMWEC submits herewith: (i) MMWEC 1980 Annual Report, including MMWEC 1981 First Quarter Repo? t (Exhibit M-1) . (11] Official Statement of Massachusetts Municipal Wholesale Electric Company relating to $100,000,000 Power Supply System Revenue Bonds, 1981 Series A (Exhibit M-2). III. REGULATORY AGENCIES AND PUBLICATIONS (a) Regulatory Agencies There are no regulatory agencies having specific jurisdiction over the rates and services of MMWEC. The Massachusetts Department of Public Utilities must approve MMWEC Financing except for obligatiens maturing within one year of issuance. MMWEC is required to file with the Massachusetts Energy Facilities Siting Council long-range forecasts of the electric power needs and actions planned to meet those needs over a ten-year period. These forecasts are to be filed every five years and supplemented annually. (b) Publications
- The following trade and news publications are used by MMNEC for official notifications, and/or are otherwise appropriate for notices regarding this unit:
i The Boston Globe Boston, MA Athol News 225 Exchange Street Athol, MA 01331 Hudson Daily Sun 16 Washington Street Hudson, MA U1749
,s. -
F e s Quincy Patriot Ledger 13 Temple Street Quincy, MA 02169 Gardner News 309 Central Streer Gardner, MA 01440 Worcester Evening Gazette ' 20 Franklin Street Worcester, MA 01613 , Boston Herald American 300 Harrison Avenue Boston, MA 02106 Salem Evening News 155 Washington Street Salem, MA 01970 Sun Chronicle 34 South Main Street Attleboro, MA 02703 Middleboro Gazette 45 wareham Street Middleborough, MA 02346 { O.- ! Ludlow Register
- 59 King Street Ludlow, MA 01056 i
Manchester Union Leader ! P. O. Box 780 Manchester, NH 03105 f Reading Chronicle 531 Main Street Reading, MA 01867 i i f f i
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