ML20012E904
| ML20012E904 | |
| Person / Time | |
|---|---|
| Site: | Yankee Rowe |
| Issue date: | 03/30/1990 |
| From: | Papanic G YANKEE ATOMIC ELECTRIC CO. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| BYR-90-037, BYR-90-37, NUDOCS 9004090056 | |
| Download: ML20012E904 (21) | |
Text
.
L V
k YANKEEATOMICELECTRICCOMPANY T;lephon2(508) 779 6711 rwx 710.sBO-m19 h,
p 580 Main Street, Bolton, Massachusetts 017401s98 l
I r
i March 30, 1990 BYR 90-037 United States Nuclear Regulatory Commission Document Control Desk Washington, DC 20555
Reference:
License No. DPR'-3 (Docket No. 50-29)
Subjects 1989 Certified Financial Statements Gentlemen:
'In accordance with Yankee Atomic Electric Company's facility Operating License No. DPR-3, we enclosed a copy of our annual certified financial statements for the threo-year period ending December 31, 1989, pursuant to the requirements of 10CFR Section 140.15 and Section 50.71.
Very truly yours.
YANKEE ATOMIC ELECTRIC COMPANY G. Pa anic Jr.
Senior Project Engineer Licensing GP/bil/WPP77/32 Enclosures cci USNRC Region I USNRC Resident Inspector, YNPS r
f, i
I
- ng i
I
'e (Atk)
Yankee Atomic Electric Company AnnualReport 1989
J p.
. L*
a, 3;
o, g
r n
si L i Contents P, #e
. g
.g
- J l'33!
i I
Description' of Bu sine ss..................... ~....................................................................
1 p.
.Jq I..
Com mon Stock Ownership ;....................................................................................-
1
+
f a..
J
,e
.2-
. E x ecu t i ves' I et t e r......... s..................................................................................
(:
If '
' Y' s
4' )',
Selected Fi n ancial Dat a........................................................................................... 3
~
my o
- o. n o
>l
?.
-- Report of Independent Certified Public Accountants'...............................................
3 i
(..
i im
.r f N,.
Fi n a n ci al R evie w...................................................................................................
4 m
i
[:
1~
I, Statements of Ineome and Retained Earnin8s..........................................................
S r
p a
> lI -
Bala nee S h ee t s ;........................................................................................................
6' State men t s of Cash Flow s.........................................................................................
^7 h.
4 B's
. Notes to Fi n a ncial S t a t em en t s..................................................................,............ -
8' t.+ -.,.
j' il p
. Office rs of th e Com pa ny..........................................................................................
18:
p..
)'-
'}! 'l j (
i P'
. g.
U Hoa rd of Di rec t o r s.................................................................................................. -
18
,m f
7 b.
h J.,,
. f'?.
,:sL
'?
J ' E i I,
.'4, ky. \\
g,.
'l
. p a
,f e
r a
,(
r.
I m...: c -'
I t-e
L
'x I'
a r
[,'
L
. YANKEE ATOMIC ELECTRIC COMPANY 580 MAIN STREET BOLTON, MASSACHUSETTS 01740 Yankee Atomic Electric Company (the Company), an electric utility mmpany, was inwrporated
~
in Massachusetts in 1954 under the provisions of the hiassachusetts utility law which permit two or p
more eketric companies tojoin in the construction and operation of a generating plant to serve their i,
common needs, t
The organization of the Company was sponsored by New England utilities for the purpose of constructing and operating New England's first nuclear power plant.. In additioa to its lia nse to C
l' generate, buy, transmit and sell electricity, the Company is authorized to conduct research and assist others engaged in a similar business. The ten sponsoring utilities own the entire common capital-g l
. stock of the Company and are entitled to and obligated to purchase the output of the plant at a cost equal to total operating expenses plus a return on investment.
The Yankee plant is k>cated on the Deerfield River in the Incrkshire Ilills in the Town of Rowe, hiassachusetts. The plant was placed in commercial operation in 1961 and has been in full operation since that time except for maintenance and refueling shutdowns. The unit is rated at 185 megawatts (gross) and has generated over 32 billion kwh of electricity since inception.
In '1968, the Securities and Exchange Commission authorized the Company to organize a Nuclear Services Division under the Company's corporate structure. The Nuclear Services Division has a staff of approximately 400 engineers who provide engineering services in all aspects of nuclear power plant ccmstruction and operation including Nuclear Engineering, Environmental Engineering, Operations, Quality Assurance, Plant Engineering and fuel hianagement. Services are performed on a cost basis for the Yankee plant and other power plants of the sponsoring companies. A limited amount of work is performed at a profit for other companies in the United States and abroad.
Common Stock Ownmlll>
Ownenhlp.
shares Percentag owned New E ngland Powe r Com pa ny....................................................................
30.0%
46,020 The Connecticut I.ight and Power Company...........................................
24.5 37,583 110s ton Ed i son Co m pany....................................................................9.5 14,573 Central M aine Power Company....................................................
9.5 14,573 Public Service Company of New Ilampshire.........................................
7.0 10,738 Western M assachusetts Electric Company...............................................
7.0 10,738 Montaup Electric Company...............................
4.5 6,903 j
Central Vermont Public Service Corporation......................................
3.5 5,369
{
1 Commonwealth Electric Company..........................
2.5 3,835 Cambridge Electric 1 ight Company.........................
2.0 3,068 l
100.0%
153,400 l
c._._
L f.
1 I
o February 15,1990 Executives' letter Yankee ended 1989 with its fourth highest electricity production year in its 29-year history. In 1989, Yankee's capacity factor was 89% w hich is the fifth consecutive year the Yankee plant exceeded its lifetime capacity factor of 75%. The plant continues to be a reliable, cost efTective producer of electricity, llesides high power production, the Yankee plant also received an excellent evaluation from the Nuclear Regulatory Commission in its Systematic Assessment of Licensee Performance. Yankee received the highest rating in six of the categories evaluated and almost attained a top rating in the seventh category. Likewise, the Institute of Nuclear Power Operations (INPO) rated both the Yankee plant and the Nuclear Services Division as exemplary during its evaluation in 1989. Also, Yankee's Operator Training Programs were reaccredited by INPO's Accrediting Bostd. Yankee's commitment to excellence in operations training was further emphasired with the order of a plant specific simulator, in 1989, Yankee's long-term future was secured by the approval of Power Contracts with Yankee's utility customers. The Power Contracts were extended to the end of Yankee's operating license which presently explies on July 9,2000. Yankee's financial future was also secured in 1989 with the successful negotiation of a $40 million credit agreement which is suflicient to support Yankee to the turn of the century. A major rate case incorporating the new Power Contracts has been resolved through the submission of a settlement to the Federal Energy Regulatory Commission (FERC) on February 6,1990. The settlement allows Yankee a continued 12% return on equity.
Yankee's earnings in 1989 were $2,446,853 which translates into an 11.4% return on equity.
Yankee's cost of power in 1989 was 5.2e per kwh.
Significant progress was made in 1989 on the Electric Power Research Institute and Department of Energy sponsored evaluation of the feasibility of extending Yankee's operating license by 20 years.
The technical work, up to this point, indicates that, due to the effective maintenance and refurbishment programs that are in place at Yankee, continued operation beyond the year 2000 is feasible. We have also worked actively with the Nuclear Regulatory Commission to establish a license renewal process that is effective.
Yankee's Nuclear Services Division continues to provide essential and dependable support to Vermont Yankee, Maine Yankee and New llampshire Yankee. Yankee services to these plants amounted to $35.5 million during 1989. Yankee Nuclear Services Division support to these plants has been evaluated by their respective managements as very good to excellent.
The Yankee plants cont nue to set the standard for nuclear power worldwide. Maine Yankee i
had its highest power production year in its 17-year history at almost seven billion kilowatt hours at a cost of 2.3e per kwh. Vermont Yankee, despite a refueling outage, had a capacity factor of 92.9%;
the highest for any boiling water reactor that had a refueling. As 1989 drew to a close, and after years of determined efforts, it appeared that Seabrook was on the verge of obtaining its full power license.
As Yankee enters the next decade, the vision for the future will be shaped by the experience, technical expertise and safety culture of the past, b.eu) $.
/ cfL/
l ANnRi w C. KroAK EDW ARo A. IIROWN President & ChiefOperating Oficer Chairman & ChiefEvecutive Oficer 2
t Selected Financial Data (in thout. ands, except where noted)
Year Ended December 31, 1989 1988 1987 1986 1985 Operating revenue:
F. lect ric sales........................... $ 6 8,4 3 3
$ 64,688
$ 59,020
$55,031
$62,398 Engineering services...............,
35,521 31,904 31,365 30,977 29,977 Total............................... $ 10 3,9 5 s
$ 96,592
$ 90,385
$86,008
$92,375 Operatin g in come........................... $ 5,387
$ 3,687
$ 5,377
$ 6,082
$ 6,390 Net income (10ss)............................. $ 2,447 (476) $ 3,004
$ 2,951
$ 3,612 Common dividends......................... $ 2,424
$ 2,761
$ 3,068
$ 3,605 Tot al a s se t s................................... $107,138
$108,927
$100,102
$91,302
$94,838 t on g-term debt............................., $ 8,000
$ 18,000
$ 26,328
$31,813
$29,213 Short-ter m debt.............................. $ 17,390
$ 16,683
$ 9,985
$ 3,400
$ 7,700 Earnings per share ($ per 6 hare)...... $ 15.95 (3.10) $ 19.58
$ 19.24
$ 23.55 Return on Equity (percent).............,
11.4 %
(2.2%)
13.8%
13.5%
16.3%
Net generation (millions of kwh)....
1,307 1,117 1,136 1,393 1,182 Power cost (t per kwh)...................
5.2(
5.8t 5.2e 4.0c 5.3t Coortns & I,NilRAND Report ofIndependent Certi5cd Public Accountants YANKrr ATouic Eu cTnic COMPANY Holton, hiassachusetts We have audited the accompanying balance sheets of Yankee Atomic Electric Company as of December 31,1989 and 1988, and the related statements ofincome and retained earnings and cash flows for each of the three years in the period ended December 31,1989. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Yankee Atomic Electric Company as of December 31,1989 and 1988, and the resultr ofits operations and its cash flows for each of the three years in the period ended December 31,1989, in conformity with generally accepted accounting principles.
Boston, hiassachusetts February 2,1990 l
3 l
l
.-_m_
r L
(
Financial Review The Company has power contracts with its stockholder utilities through July 9,2000, which require these utilities to purchase all of the electrical output of the plant, at a cost equal to total operating expenses plus a return on investment, whether or not the plant operates. The Company also operates a Nuclear Services Division which furnishes engineering services to the Yankee plant and to other New F.ngland power projects on a cost basis. Limited engineering work is also performed for others at a profit.
During 1989, the Yankee plant operated with an availability of 89.4% and provided electricity to stockholder utilities at a cost of 5.2t per kilowatt hour. There was no refueling in 1989. The next refueling is scheduled for June 1990.
Fuct expense increased $710,000 during 1989 from 1988, due to increased generation partially offset by lower purchased fuel costs.
Operations and maintenance expenses decreased $1,980,000 during 1989 from 1988, primarily because the plant operated without a refueling and without any significant unplanned shutdowns in 1989.
Engineering expense increased $4,122,000 during 1989 from 1988, due primarily to increased engineering services to others and general price incicases.
During 1986, the Company prevailed in a federal income tax court case against the United States government regarding the exclusion ofits decommissioning revenues from taxable income for fiscal years 1981 through 1983, and a portion of 1984. As a result, the Company recorded federal and state tax benefits of $6,791,000 in 1987. In addition, $1,800,000 and $656,000 of related interest income was recorded in other income in 1988 and 1987, Federal income tax expense increased during 1989 from 1988, due primarily to decreases in the recognition of deferred investment tax credit benefits. (See Note F of" Notes to Financial Statements" for additional information regarding federal income taxes.)
In May 1988, the FERC reduced the Company's allowed rate of return on equity, on a prospective basis, from 14%% to 12%. (See Note I of" Notes to Financial Statements" for additional information regarding rate proceedings.)
The increase in earnings from a loss of $476,000 in 1988 to income of $2,447,000 in 1989 was due primarily to costs incurred in 1988 to defeat a Massachusetts referendum to shutdown operating nuclear power plants. The referendum was defeated in 1988 by voters by a margin of more than two to one.,The Company incurred costs of $2,931,000 in 1988 to defeat the referendum and these costs were not recovered from customers.
The Company paid dividends of $2,424,000 in 1989.
Construction expenditures for 1990 are estimated to be $10,419,000.
At December 31,1989, the Company had unused credit lines of $17,610,000.
l 4
Statements ofincome and Retained Earnings t
Year Ended December 31, 1989 1988 1987 Operating revenues (Note A):
E lect ric sal e s...................................................... $ 68,433,000 $64,688,221 $59,020,654 Engineering services to others.............................
35,520,750 31,903,644 31,364,660 Total operating revenues..........................., 103,953,750 96,591,865 90,385,314 Operating expenses (Note A):
Fuel (Not e B)....................................................
I2,183,718 11,474,087 11,352,513 21,110,702 21,319,731 20,304,820 O pe ra tio n s........................................
En ginee ri ng.........................................................
47,102,368 42,979,924 40,967,748 M a m t e n a n ce........................................................ 2,465,570 4,236,669 4,956,007 Decommissioning (Note G)...............................
5,741,004 5,741,004 5,741,004 Dep reci atio n......................................................
5,520,153 4,466,209 5,262,122 Taxes, other than federal income.........................
3,239,497 3,007,882 2,174,999 Federal income taxes (Note F)............................
1,203,892 (321,085), (5,750,532)
Total operating expenses............................
98,566,904 92,904,421 85,008,681 Ope rat in g inco m e....................................................
5,386,846 3,687,444 5,376,633 Other income:
Allowance for equity (tmds used during construction (Note A.....................................
60 46,442 115,073 Interest on tax refunds..)...............
1,800,000 655,940 R e fe re n d o m......................................................
(9,431)
(2,931,151)
(83,723)
O th e r, n e t.....................................................
(8,897)
(l8,427) 154,767 Total other income (expence)...................
(18,268)
(1,103,136) 842,057 Operating and other income...................................
5,368,578 2,584,308 6,218,690 Interest:
Interest on long-term debt..............................
2,349,018 2,799,138 3,082,114 Interest on short-term debt..............................
699,267 322,402 264,310 O th e r in te rest, n et............................................
29,377 166,245 49,601 Allowance for borrowed funds used during construction (Note A)........................
(155,937)
(227,178)
(181,308)
Total in terest................................
2,921,725 3,060,607 3,214,717 Net i n co m e (los s).................................................. $ 2,446,853 $ (476,299) $ 3,003,973 Retained earnings:
5,658,099 $ 6,134,398 $ 5,891,625 Retained earning)s at beginning of year..
Net income (loss.........................
2,446,853 (476,299) _ 3,003,973 8,104,952 5,658,099 8,895,598 Dividends paid.......................
2,423,720 2,761,200 Retained earnings at end of year (Note C)...
5,681,232 $ 5,658,099 $ 6,134,398 Per share data:
Earnings (loss) per share..
$15.95
$(3.10)
$ 19.58 Dividends per share..
$15.80
$18.00 The accompanying notes are an integral part of these financial statements.
5 i
i, e, y;,u.'
s s,
w u
i m.
I.
m Balance Sheets l
w<p.
e 4l i
W ASSETS r
h; December 31, a
p rp>,
1989-
'1988 e
{[' -
' Utility plant, at original cost (Note A)................................................. $. 90,2 5 3,64 6 $ 87,086,4 4 3 :
~
Less accumulated provisions for depreciation............................... _]9,43,601.
74,256,551 10,775,045 12,829,892
[.
- Con st ruction work in progress.............................................................
.,4,741,862
- 916,810 M-0
. Nuclear fuel, at amortized cost (Note 11)............................................ - 19,019,828 26,519,749' p,
N e t u t il i ty pla n t...........................................................................
34,536,6,7_5, 40,266,451 5
Decom missioning tru st (Note G),.......................................................
42,562,450 34,117,953 y
Nunutility property, less accumulated provisions for depreciation of '
$ 6 4 6,3 6 8 and $ 5 7 2,000..................................................................
802,227 876,595
. O t he r i n ve s t m e n t s..............................................................................
1,! 55,502 J 822,917-c Current assets:
L Cash and temporary cash investments..........................................
I10,572 120,930
- e t.
L Accounts receivable:
Elect ri c s ale s........................................................................
8,489,6481 9,595,220 I
Engineering services to others (Note A)...............................
4,770,281-5,134,585 g
Other..................................................................................
66,337 4,840,502-W
- Materials and supplies, at average cost.........................................
1,074,336
' 917,544 P repaym en t s a nd o t h e r................................................................
670,459' 1,116,974 Tot al cu rre n t a s set s..................................................... 15,181,633- '21,725,755 p
h.
Deferred federal and state income taxes (Note F)...............................-
12,899,356 ~ l1,117,536 t,
$107,137,843 $108,927,207 CAPITALIZATION AND LIAlllLITIES
[
Capitalization:
N Capital stock, par value $100 per share; I 53,400 shares authorized an d ou t standing....................................................................... $15,340,000 $ 15,340,000 5
Ret ained earnings (Not e C)......................................................
-5,681,232 5,658,099 p
- lo n g-t erm d eb t (Not e D)........................................................
8,000,000 18,000,000 Total capi talization...............................................
29,021,232 38,998,099 E/
Current liabilities:
' long-term debt due within one year (Note D)..........
10,000,000 8,328,000
' Short-term debt (Note E).................................................. 7,390,000 8,355,000 A ecou n t s payable.......................................................................
9,198,963 10,561,461
- A ccr ued i n t ere st...................................................................... 206,188 151,790 Total current liabilities...........................
26,795,151 27,396,251 Decommissioning reserve (Note G)............................................
50,632,037 41,321,617
/.>-
Unamortized investment tax credits (Note F)....................
689,423 1,211,240 Commitments and contingencies (Notes 11, G, and J)..................
4
$107,137,843 $108,927,207 The accompanying notes are an integral part of these financial statements.
i 6
i
.I L
F'
gg
=
e o
L C
8
' e
{ ;y f,
'L Sutements of Cash Flows-
~y W
Year Ended December 31, i
1989 1988 1987 p
', Cash flows fromloperat.ing activities: '
1 F
Net in com e (loss)................................................. $ 2,446,853 $ - (476,299). $ 3,003,973 Non-cash charges (credits) to net inmme:
~
u
[
Depreciation, including nonutility propeny.
5,594,521 4,535,727 5,311,066 i
Amortization of nuclear fuel........................
10,876,616 10,357,198 10,216,895 6
increase in decommissioning reserve...........
9,310,420 7,494,558 7,097,731 o
H Allowance for other funds used during
[4 con s t ruet ion............................................
. (60)
(46,442)
.(115,073)
[
Deferred federal and state income taxes.......
(1,781,820)
(420,293)
(7,241,832)
O' Investment tax credits, net...........................
(521,817)
(1,095,578)
(1,321,665) l F
Net changes im A ccou n t s receivable.....................................
6,244,041 (4,158,943)
(2,078,905)
M aterials and supplies.................................
(156,792)
(69,427)
(27,425) y Prepayments and other................................
446,515 (571,689)
(45,231) f Accou nts payable.........................................
(1,362,498) 4,736,424 1,698,425 4
l Accrued in teres t...-.....................................
54,398 (203,925)
(17,517)
[
.Other...,..............................................................
(215,469)
(26,120)
(50,763)
.(
Net cash flows from (4perating activities...............
30,934,908 20,055,191 16,429,679
. Cash flows from investing activities:
F Construction expenditures.................................
(7,074,829)
(2,994,523)
(2,65l'187)
Nuclear fuel purch ases.........................................
(3,376,695)
(9,209,812)
(6,004,262) increase in decommissioning trust.......................
(8,444,497)
(7,791,550)
(4,678,583)
Allowance for other funds used during
_ 115,073
?
i co n s t ruetion....................................................
60 46,442 K
O t h e r i n ve st m en t s...............................................(332,585) 422,609 (334,317)
/
Net cash flows from investing activities.............. (19,228,546) (19,526,834) -(13,553,276)
.[
Cash flows from financing activities:
i S h o rt -t er m d ebt, n et..........................................
(965,000)- 3,355,000 5,000,000 Repayment of long-term debt............................
(8,328,000)
(4,984,500)
(3,900,000)f 4
Dividends on common stock.............................
(2,423,720)
(2,761,200)
Net cash flows from financing activities............. (11,716,720)
(1,629,500)
(1,661,200)
Net increase (decrease) in cash...........................
(10,358)
(1,101,143) 1,215,203 Cash at beginning of year..................
120,930 1,222,073 6,870 i
Ca s h at end of yca r-.............................................. $
110,572 $
120,930 $ 1,222,073 Cash paid during the period for:
Interest (net of amounts capitalized)................. $ 2,867,327 $ 3,264,532 $ 3,232,234 i n com e t axes........................................$
1,476,446 $ 1,082,796 $
1,261,374 t
L The accompanying notes are an integral part of the fmancial statements.
l,'
7 I;
,k
< s
p' p
[
j p
b Notes to Financial Statements i
o L
i
(
Note A-Summary of Significant Accounting Policies:-
L 1
g'
- l. System of Accounts:
1
[
The accounts of the Company are maintained in accordance with. the Uniform System of Accounts prescribed by regulatory bodies havingjurisdiction. The accounts of the Yankee Decommissi-l
[
oning Trust (the Trust) are presented on a consolidated basis.
r
- 2. Nuclear Services Division:
s j
The Company operates a Nuclear Services Division, under the applicable rules and regulations 1
of the Public Utility Holding Company Act of1935, fer the purpose of furnishing nuclear engineering services to the Company and its sponsoring utilities. Such services are provided on a full cost basis, including a return on working capital. The cost of services provided to the Yankee plant amounted to $14,103,200 in 1989, $13,425,783 in 1988, and $11,724,666 in 1987, and is included as engineering costs in the Statements ofIncome and Retained Earnings.
- 3. Utility Plant:
Utility plant is stated at the original cost of construction, which includes an allowance for the l
cost of funds used during construction. Costs of current repairs and minor replacements of plant and properties, which do not extend the current life of the plant, are charged to maintenance expense accounts as incurred. Plant retired or otherwise disposed of, together with costs of removal less salvage, is charged to accumulated provisions for depreciation.
- 4. Depreciation:
For fmancial statement purposes, depreciation is provided over the estima ed service lives of the various classes of property on a straight-line basis. The estimated average remaining service life at December 31,1989 is approximately two years. (See Note 1.)
- 5. Allowance for Funds Used During Construction (AFUDC):
The Company capitalizes, as a part of construction and fuel costs, an item called allowance for (f
borrowed funds used during construction, which represents the approximate pretax cost of short-term
.l debt and an item called allowance for equity funds used during construction, which represents the cost ofother funds. AFUDC is recognized as a cost of" Utility plant" and " Nuclear fuel." Accordingly, L
AFUDC is capitalized in the same manner as construction labor and material costs with offsetting s
credits to " Interest" and "Other income." This is in accordance with an established regulatory approved rate-making practice under which a utility is permitted a return on, and the recovery of,
^
these capital costs through their ultimate inclusion in the rate base and in the provisions for depreciation and amortization.
o The combined rate used in calculating AFUDC was 9.4% in 1989,9.5% in 1988, and 9.8% in 1987. In accordance with regulatory directives, these rates included the before-income-tax c%ct of borrowed funds.
8
V,.
c e
Notes to Financial Statements (continued) h f'
Note A-Summary of Significant Accounting Policies: (continued)
- 6. Nuclear Decommi.sioning:
(p In a.1984 decommissioning study, the Company estimated the cost of decommissioning the Yankee plant, utilizing the immediate dismantlement and temoval method, at approximately $68 million in 1984 dollars, The Company records and bills decommissioning on a remaining life basis
[
in accordance with regulatory approval. (See Notes G ari 1.)
- 7. Income Taxes:
[
The tax effect of the timing differences (differences between the periods in which transactions l ~
affect income in the fmancial statements and the periods in which they affect the determination of y
income subject to tax)is accounted for in accordance with regulatory approval, p
investment tax credits are deferred and amortized over the estimated service lives of the property _
p giving rise to the credits, b,
- 8. Statement of Cash Flows:
For the purposes of the Statement of Cash Flows, short-term investments with a maturity of 90 days or less are considered cash equivalents.
Note B-Nuclear Fuel:
The cost of nuclear fuel in the reactor is amortized to fuel expense on a unit of production method at rates based on estimated kilowatt hours to be produced from each core. Fuel expense also g
includes a charge for the permanent disposal of spent fuel.
The following table lists nuclear fuel components.
December 31, 1989 1988 l:
[
.Instock....................................................................................$
190,443 $ 3,738,769
'Inprocess...................................................................................
6,907,807
. A s sem bl ica in react or.................................................................... 29,232,817 29,215,603 G ros s n uciea r fiel..................................................................... 36,331,067 32,954,372 Less accumulated amortization.................................................. 17,311,239 6,434,623 Net n u ctca r fu e l....................................................................... $19,019,828 $26,519,749
[
Components of fuel expense are set forth in the following table.
n Year Ended December 31, 1989 1988 1987 h
Amortization of nuclear fuch
[
Enriched uranium..................................... $ 8,708,148 $ 8,348,087 $ 8,369,330 Fab rica t io n.................................................
1,850,854 1,681,740 1,598,340 AFUDC.......................................................
317,614 327,371 249,225 10,876,616 10,357,198 10,216,895 Frovision for current core spent fuel disposal.,...
1,307,102 1,116,889 1,135,618 f
Fuel e x pen se................................................... $12,183,718 $11,474,087 $11,352.513 l
l Under the Nuclear Waste Folicy Act of 1982, the Company entered into a contract with the l
l United States Department of Energy (DOE), under which it is required to pay a fee of 1.0 mill per 1.
9 i
p.
L i
L L
Notes to Financial Statements (continued)
N l
Note B-Nuclear Fuel: (continued) l kilowatt hour for net electricity generated after April 6,1983, in exchange for DOE services in disposing of the spent nuclear fuel used to generate that electricity, in 1985, the Company elected to pay a lump-sum amount to the DOE to satisfy its contractual liability for disposal of nuclear fuel used prior to April 7,1983.
l I.,
Note C-Restrictions on Retained Earnings Available for Dividends on Common Stock:
Pursuant to restrictions contained in the loan Agreements, $4,660,000 of the Company's r
[
retained earnings at December 31,1989, were restricted as to dividends on common stock.
L Note' D-Long-Term Debt:
i December 31, 1989 1988 1987 E
Term loans:
Due through March 31,1991, at varied inter-i e s t ra t e s........................................................ $ 9,000,000 $14,000,000 $18,000,000 Due throughJune 30,1991, at varied interest rates..............................................................
9,000,000 12,328,000 13,312,500 l
Total....................................................................
I8,000,000 26,328,000 31,312,500 Iess long-term debt due within one year.............. 10,000,000 8,328,000 4,984,500 Lo n g-t erm d cbt, n e t............................................ $ 8,000,000 $18,000,000 $26,328,000 Interest rates on the term loans are variable and are set, at the Company's election, at either the l
banks' prime rates or the London Interbank OfTered Rate, plus a fraction thereof.
The weighted average interest rates on year-end long-term borrowings were 9.8%,9.7%, and 9.4% for 1989,1988, and 1987, respectively. The weighted average interest rates during 1989,1988, and 1987, based on average month-end balances, were 10.3%,9.6%, and 9.3%, respectively.
The term loan agreements are secured by the collateral assignment of all the Company's rights under the customer power contracts. There are no compensating balance or monthly commitment
[
fee requirements.
4 The aggregate principal amounts oflong-term debt scheduled for repayment in each of the two years following December 31,1989 are $10,000,000 and $8,000,000, respectively.
On January 4,1990, the Company fmalized negotiations with The llank of New York (BNY) for a $40 million Long-Term Debt Agreement. The initial term of the revolving credit portion of the facility will be January 1,1990 through January 1,1995. At the end of 1991, and on subsequent anniversary dates, the Company will have the option, subject to the consent of BNY, to extend the revolving credit period for no more than three additional one-year periods. At the end of the revolving credit period (which shall not be later than January 1,1998), the revolving credit will convert to a 30-month, amortizing term loan terminatingJune 30,2000.
10 s
wq 1
1 e O
-Notes to Financial Statements (continued)
Note E-Short-Term Debt:
~
Interest on borrowings f
. The Company has lines of credit with banks aggregating $25,000,000. -
is set at the banks' prime rates or the london Interbank Offered Rate, plus a fraction thereof at the '
l time of the advance. In lieu of compensating balance requirements, the Company is obligated to pay
.j a comm ment fee.
it
. The Company has been authorized by the Securities and Exchange Commission to issue and sell up to $25,000,000 of short term notes and/or commercial paper through December 31,~1990. The Company generally vtilizes commercial paper, supported by its lines of credit, to finance construction projects or meet general working capital requirements.
Information regarding short-term borrowings is summarized in the following table.
1989 1988 1987 Ilank notes payable at year end............................ $
$_5,000,000 5
Commercial paper outstanding at year end........... $ 7,390,000
$ 8,355,000_, $
Maximum amount ofborrowings at any month end $11,670,000
$8,355,000
$7,355,000
.j Weighted monthly average borrowings outstanding $
d u ri n g th e year................................................
7,610,000
$4,080,769
$3,209,000 The weighted average interest rates on year-end short-term borrowings were 9.0%,9.9%, and 9.6% for 1989,1988, and 1987, respectively. The weighted average interest rates during 1989,1988, and 1987, based on average month-end balances, were 9.0%,8.1%, and 8.2%, respectively.
,I
- Note F-Federal Income Taxes:
t Federal income taxes consist of the following components.
J!
1989 1988 1987 Current income t axes......................................... $ 3,310,486
$ 871,511
$ 4,865,638 Deferred income taxes...................................... '(1,624,694)
(156,222)
(9',377,358)
(
Investment tax credits, net.................................
(521,817)
(1,095,578)
(1,321,665)
$ 1.163,975
$ (380,289) $15,833,385)
J i
investment tax credits, net reflect increases or decreases in federal income taxes attributable to such investment tax credits which have been deferred and amortized.
l i
b>'
s L
h p.
y 3
g fe u (f p.
Notes to Financial Statements (continued)
N r
[L '
. Note, F-Federal incorne Taxes: (continued)
[
i p
- The Company has adopted comprehensive interperiod tax allocation (normalization)' consistent with regulatory accounting.. The following table details the components of deferred federal income
1
_.IQ taxes.
1989 1988-1987' 4
s I'
l' Provision for plant decommissioning.................... $ (865,923)
$ 296,992
. $(2,296,402)
L
. Provision for decommissioning refunds.................
(5,894,262)
Allowance for funds used during construction.......
35,654
,-72,220 67,809 1
(;
Interest capitalized for tax purposes......................
260,314' (602,750)
{
q Excess book depreciation and fuel amortization....
(720,163)
(65,406).
..(918,613)
]
[; -
Provision for employee benefits.............................
(396,135)
Other....................................................................
61,559 142,722, (335,890)
$(1,624,694) - $(156,222)
$(9,377,358)
The tax effect of the cumulative amount of timing differences at December 31,1989, for which deferred income taxes have not been provided, is not material. Total federal income taxes differ from' l
the amounts computed by applying the statutory tax rate to income before taxes. The seasons for the :
differences are as follows:
1989 1988-1987 i
Computed tax at statutory rate..............................
$1,212,796
$ (291,240) $(1,131,765)
[
increase (reduction)in tax resulting from:
l Amortization ofinvestment tax credits.........
(521,817)
(1,129,267)
(1,374,172) i,
~ Referendum expenditures..............................
-[
996,591 Decommissioning refu nds.............................
-(3,536,557) j Post-retirement health benefits.....................
142,098 120,885 132,680 E
A ll ot h e r......................................................
330,898 (77,258) 76,429 j
Federal income tax provision (including $39,917,
$59,204,and $82,853 credited to other income) $1,163,975
$ (380,289) $(5,833,385) 4 o
Effective federal income tax rate..........................
32.6%
- (4p%)
(206.2%)
r The Company records deferred federal income tax benefits on that portion of decommissioning expense which is not currently deductible for federal tax purposes. Deferred taxes related to decommissioning amounted to $8,069,587 at December 31,1989. In July 1988, the IRS ruled that j
from 1984 through 1991, an annual amount of $4,437,000 of decommissioning expense is deductible
)
for federal income tax purposes. The Company filed amended tax returns to claim its ruling amount for the years 1984 through 1986. As a result, the Company expects to receive refunds which will reduce deferred tares by $4,400,000. This amount will be deposited in the Decommissioning Trust.
[
In January 1986, the United States Court of Appeals for the Federal Circuit reaffirmed a lower l
P court decision that decommissioning revenues collected from January 1981 through June 1984 were not taxable to the Company. The IRS did not appeal this decision; and, as a result, the Company i
i 12 i
Y Ij m
Notes to Financial Statements (continued)
Note F-Federal Income Taxes: (continued) recorded a federal tax benefit of $5,894,000 in 1987. In addition, the Company recorded related interest income of $1,800,000 and $409,500 in 1988 and 1987, respectively. The federal tax benefit and related interest have been refunded to customers in accordance with regulatory requirements.
Federal income tax returns for the Company have been examined and reported on by the IRS through 1983. The years ending December 31,1984,1985, and 1986 are being examined and are pending final resolution.
Note G-Decommissioning:
In April 1985, the FERC approved a revised decommissioning rate schedule filed by the Company. The revised schedule allows the Company to collect $5,741,000 annually during the period from April 1,1985 through November 4,1997. This will allow the Company to collect $68,000,000 from customers (in 1984 dollars) te provide for decommissioning of the Yankee plant. (See Note 1.)
Funds collected are being deposited in an irrevocable trust, maintained by a commercial bank, with principal and interest to be used exclusively to discharge future decommissioning obligations as incurred. Components of the Decommissioning Trust are set forth in the following table.
December 31, 1989
_198__8 Cash.............................................................................................$
2,534 5 98,020 Accou n t s recei vable......................................................................
1,918,214 1,564,494 Investments..................................................................................
40,662,663 32,495,428 A ecou n t a payable.........................................................................
(20,961)
(39,989)
Decommissioning Trust assets, net.............................................., $4 2,5 6 2,4 5 0 $34,117,953 Decommissioning Trust investments are invested in federal and state municipal securities, valued at cost which approximates market. At December 31,1989, deferred federal income taxes included
$8,069,587, which represented federal income taxes paid on decommissioning collections which will be recovered when the Yankee plant is decommissioned and the decommissioning expenses become deductible. The Trust received $2,751,538 in interest income, net, during 1989, which has been included in the balance sheet as an increase to both the Decommissioning Trust asset and the Decommissioning Reserve.
Note H-Retirement Plans:
The Company has noncontributory defined benefit pension plans covering substantially all employees. The Company's funding policy is to fund the net periodic pension cost, but never less than the minimum required contribution under ERISA not more than the maximum deductible comribution as determined under the Internal Revenue Code.
13
I I
E Notes to Financial Statetaents (continued)
Note H-Retirement Plans: (continued)
The Company participates in the plans with subsidiaries of New England Electric Sy6 tem (the System). Plan assets are composed primarily of guaranteed insurance contracts and corporate equity and debt securities.
The following table sets forth the System plans' funded status.
December 31, 1989 1988 1987 Ilenefits earned Actuarial present value of accumulated benefit obligation:
Ves t ed po rtio n.............................................. $393,413,000 $354,864,000 $334,636,000 Nonvested portion.......................................
I9,554,000 14,609,000 13,667,000 Total................................................ $ 412,967,000 $ 3 69,4 7 3,000 $ 3 4 8,303,000 Reconciliation of funded status Actuarial present value of projected benefit l i ab ili ty............................................................. $478,268,000 $442,960,000 $411,753,000 Unrecognized prior service costs..........................
(9,389,000)
(556,000)
Net gain (loss) not yet amortized........................
1,394,000 (13,260,000)
(7,638,000) 470,273,000 429,144,000 404,115,000 Pension fund assets at fair value........................... 487,716,000 447,318,000 424,922,000 FAS No. 87 transition asset not yet amortized......
(18,918,000)
(20,360,000)
(21,801,000) 468,798,000 426,958,000 403,121,000 Net accrued pension liability................................ $ 1,475,000 $ 2,186,000 $
994,000 The Company's allocated share of the net accrued pension liability at December 31,1989,1988, and 1987 is $732,043, $489,295 and $289,295, respectively.
Total pension cost, charged principally to operating expenses of both the Yankee plant and the Nuclear Services Division, was $2,187,000 in 1989, $1,759,000 in 1988, and $789,000 in 1987.
The components of the cost are as follows:
1989 1988 1987 Service cost benefits earned during the period.......
$1,493,6'i 6
$1,349,539
$ 1,157,363 Plus (less):
Interest cost on projected benefit obligation.......
2,144,876 1,941,234 1,701,362 Actual return on plan assets............................... (4,019,714)
(1,914,784)
(1,311,130)
Amortization and deferral...............................
2,372,442 (51,161)
(469,300)
Deferred pen sion cost.............................
195,720 (200,000)
(289,295) less on curtailment of supplemental pension plan 634,172 Net periodic pension cost......
$2,187,000
$1,759,000
$ 789,000 Assumptions used to determine pension costs were:
Discount rate.....
8.5%
8.5%
8.5%
Average rate ofincrease in future compensa-t ion levels..............................
6.7%
6.7%
7.7%
Expected long-term rate of return on assets.,
9.0%
9.0%
9.0%
i 14
y v
./,
I f
h Notes to Financial Stateinents (continued)
L.
T Note H-R'etirement Plans: (continued) f In addition to providing pension benefits, the Company provides certain health care and life
..msurance benefits for retired employees. Substantially all of the Company'6 employees may become 3,
cligible for these benefits if they reach retirement age, or if they reach age 55 with 30 years of service,-
D while working for the Company. The Company accrues these benefits over the remaining work.
lifetime of those employees expected to qualify for such benefits. Accrued costs, which were $975,000 i
'in 1989, $772,000.in 1988, and $757,000 in 1987, are deposited in a trust, with principal and i
interest used exclusively to provide for post-retirement health care and life insurance benefits. Prior i
to 1987, the costs of these benefits wcre recognized as claims were paid, in addition, the Company made payments to certain key employees who are not eligible to participate in the benefits trust, thereby releasing the Company from future obligations relating to post-retirement health care and life '
c insurance benefits. These costs were $267,000, $584,000, and $396,000 in 1989,1988, and 1987,.
(
' respectively.
i
- Note I-Rate Proceedings:
i On September 30,1987, the FERC ordered the Company to reduce its rate of return on equity E
from 14.5% to 12% and to include a retrospective equity reopener clause in the Company's Power Contracts. The Company filed a request for rehearing which was denied by the FERC on May 6, 1988. Accordingly, the Company reduced its rate of return on equity to 12%, effective May 6,1988, and included the equity reopener clause in the Power Contracts.
On October 31, 1989, the Company filed with the FERC to extend the term of the Power Contracts from June 30,1991 to July 9,2000, and to reduce its rates. By order issued December 29,1989, the FERC accepted the proposed rates for filing to become effectiveJanuary 1,1990. The
't FERC's order found that the extension of the Power Contracts was just and reasonable and set for hearing issues affecting the rates charged by the Company.
The FERC assigned the filing to an Administrative Law judge. On February 6,1990, the k
Company submitted a settlement resolving all remaining issues in 'the proceeding. The settlement
' includes an extension of the depreciation life through the end of the extended Power Contracts, a revised decommissioning collection schedule, the amortization of unrecovered final core and materials and supplies costs, an increase in the working capital allowance, and a continued rate of return on equity of 12%. The settlement is subject to the approval of the FERC.
NoteJ-Commitments and Contingencies:
- 1. Nuclear Liability Insurance:
A federal statute, the Price Anderson Act (the Act), mandates an industry-wide program of 1
L nuclear liability insurance for nuclear facilities. In 1988, the Act was extended to the year 2002.
l The Act limits public liability from a single incident at a nuclear facility to about $7.4 billion. The j
l Company maintains a primary layer ofinsurance in the amount of $200 million with private commercial l
l companies. Secondary coverage up to approximately $7.2 billion is provided by a retrospective l
k l
15 I
a
\\.
y<
1
(
L I.
[,.
Notes to Financial Statements (continued) i)
")
Note J-Commitments and Contingencies: (continued)
{
[
premium assessment on each nuclear facility. Under the Act, each nuclear facility may be assessed, o
L.
at a rate not to exceed $10 million per year, for each nuclear incident within the United States. Under l-
' the billing provisions of the Power Contracts, the retrospective insurance premiums would be includable
(
in the cost of power.
- 2. leases:
h At December 31,1989 and 1988, the Company had leases covering its office facilities, certain i
p equipment and vehicles. Such rentals are included in and recovered through the billings of the Nuclear Services Division and, therefore, have no effect on net income, in the normal course of business, the d
s.
[
Company expects that as leases expire they will be renewed or replaced by other leases.
Estimated future annual lease payments, exclusive of taxes and insurance, are as follows:
1 9 9 0................................................................................... $ 2,9 8 3,0 0 0 I991...................................................................................
2,495,000 1992...................................................................................
1,890,000 1993...................................................................................
1,758,000 1994.................................................................................
1,617,000 Lateryears...........................................................................
3,087,000 t
Tot al......................................................................... $ 1 3,8 3 0,0 0 0 f
Rental payments charged to operating expense amounted to $3,610,676 in 1989, $2,657,898 in 1988, and $2,980,628 in 1987.
- 3. Nuclear Services Divisiom The Nuclear Services Division of the Company has provided technical services to thejoint owners l
of the Seabrook nuclear plant in support of design, construction, and licensing of that facility. This facility has been subject to substantita delays in its scheduled completion, and to significant increases in costs. Thejoint owners have applied to the Nuclear Regulatory Commission for, and have obtained, a fuel loading and low power license for operation of Seabrook Unit 1. (Seabrook Unit 2 has been cancelled.) Full power licensing has been delayed primarily due to the refusal of certain towns and the Commonwealth of Massachusetts to participate in developing emergency response plans for the 3
six Massachusetts towns which are within a ten-mile radius of the Seabrook facility.
l On January 28,1988, Public Service Company of New 1-lampshire (PSNil) filed for protection under Chapter 11 of the !!ankruptcy Code. The bankruptcy has not had, and is not expected to have, any material impact on the Company's ability to continue to receive payment for services rendered to J
the Seabrook project.
On January 13,1989, the Company and altnost all of the joint owners of the Seabrook facility entered into a settlement agreement with one another respecting potential claims relating to the Seabrov.acility. The joint owners that were not parties to the settlement agreement collectively possess 2.66% of the ownership interest in the Seabrook facility. All contingencies necessary to give
[
l6 m
m.-
.m a
6 i
. Notes to Financial Statements (continued)
[,
Note,J-Commitments and Contingencies: (continued)
[(
effect to the settlement agreement were satisfied on August 1,1989. Under the settlement agreement, the parties covenant not to commenct any legal action against one another relating to past activities associated with the Seabrook project.' The settlement agreement also provides certain indemnities to
. the Company in connection with any litigation that may be initiated by the joint owners against certain other suppliers of services or ecluipment to the Seabrook project.
The Company believes that claims potentially could be asserted against certain other contractors by one or more of the joint owners, including those that were parties to tt.e settlement agreement and those that were not, and that such contractors could potentially assert third-party claims against L
the Company, in addition, thejoint owners that were not parties to the settlement agreement could potentially assert claims directly against the Company, in neither case is management able to predict the outcome of any such unasserted claims, it is possible that resolution of any such unasserted claims could have a significant effect on the financial position and operations of the Company. Ilowever, based in part dn consultations with legal counscl, management is not aware of any legitimate basis for such unasserted claims against the Company. Management believes that the Company's position is strong, that any such claims will be vigorously contested by the Company, and that the Company may further be protected from loss, at least in part, by certain indemnities.
- 4. Other:
The Company,in common with other utilities,is subject to current and future regulations relative -
to nuclear power plant licensing.
1 l
l 17
f,,
^
N L
. Officers of the Company p
t
' EnwARn A brown, DRT ANDREW C. KADAK, i
Chairman and ChiefExecutive Ofcer Ptradent and ChiefOpemting Ofrer
{:
s p
h H ARviv T. TRAcy,j n.,
jolIN DIVINct:NTIS, i
I' ice Persident, Trrasurrr, and ChiefFinancial l' ice IWsident Ofcer 7:
DR. STI:I' lit:N P. SGilVLTZ, BRuci: L DRAWiiRIDGE,
/" ice /Wsident
\\/,
l' ice JWsident i
KIRK L RAMSAUI'R,-
'l J AMESj. FLANAG AN, Clerd l' ice Prrident Bf Board of Directors py_
y Euw Ann A. Brown, Chairman and JossN F ors'KA, Executive l' ice President, ChiefF.recutive Ofcer ofthe Company Engineering and Operations, i
Northeast utilities Service Company Ji jollN C. DUITETT,lbsidrat and
. ChiefErecutive Ofcer, DasAu> G. PARnDs, President and
]
Public Service Company ofNew flampshire ChiefExecutive Ofcer, v
Eastern Utilities Associates Bi:RNARn M. Fox, President and Chief Oprating and Financial Ofcer, jon\\N n. RANurzir, Retirrd, L
J>
hortheast Utilities '
CentralMaine %wer Company L'
' FRi:n0Ric E. GRITNM AN, l' ice /' resident J 0ITREY D. TRANI.N, l' ice [ resident, and General Counsel, New England Power Company r
(
New England Power Company TrioM As C. Wi.iiii, President and DR. ANuRn:W C. KAvAK, President and ChiefIhrcutive Ofcer, i
Chief Operating Ofcer of the Company Centrall'ermont Public Service Corporation TtsoM Asj M Ay, Senior l' ice President, RUssi:u D. WRsGsuT,Financiall' ice President, i
Boston Edison Company Commonwealth Energy System V
i 1-f i
L
,~
l>
18
),
n.
-