Text

Connecticut Light & Power Co,Subsidiary of Northeast Utilities 1992 Annual Rept
	ML20036A380
Person / Time
Site:	Millstone, Seabrook, Haddam Neck File:Connecticut Yankee Atomic Power Co icon.png
Issue date:	12/31/1992
From:	Ellis W, Fox B; CONNECTICUT LIGHT & POWER CO. (SUBS. OF NORTHEAST
To:	;
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ML20035G106	List: ML20035G105; ML20036A380; ML20036A385; ML20036A391; ML20036A395;
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	NUDOCS 9305110150
	Download: ML20036A380 (43)
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O The connecticut Li ht and Power Company 8

CL&P

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a subsidiary ofNortheast Utilities O

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1992 nnualRecor:

DR ADO O 00 13 I

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Directors o

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Robert G. Abair John B. Keane Vice President and Chief Al,iinistrative Ofhcer Viec Presdent and General Counsci-Corporate x

Western Massachusetts Elewic Company Robert E. Busch President and Chief Operating Officer Executive Vice President and Chief Public Service Company of New Hampshire Hugh C. MacKenzie Senior Vice President John E Cagnetta Senior Vice President John E Opeka William B. Ellis Executive Vice President Chairman and Chief Executive Ofhcer Bernard M. Fox President and Chief Operating Officer l

Officers William B. Ellis Cheryl W. Grise Roger C. Zaklukiewicz Chairman and Chief Vice President Vice President Executive Officer Barry liberman Richard R. Carella Bernard M. Fox Vice President RegionalVice President-Eastern President and Chief John B. Keane2 Lesley C. Gerould Operating Officer Vice President and General RegionalVice President Western l

k Robert E. Busch Counsel-Corporate Alfred R. Rogers i

Executive Vice President and Francis L. Kinney Regional Vice President-Central i

Chief Financial Ofhcer Vice President 305ePh E Deegan 1

John E Opeka Keith R. Marvin Assistant Controller Executive Vice Presiden Vice President Patricia R. McLaughlin John E Cagnetta John W. Noyes Assistant Controller Senior Vice President Vice President and Controller JohnJ. Roman Hugh C. MacKenzie Wayne D. Romberg Assistant Controller Senior Vice President Vice President Theresa H. Allsop C.Thayer Browne Frank E Sabatino Assistant Secretary Vice President and Treasurer Vice President Mark A.Joyse Ronald G. Chevalier C. Frederick Sears Assistant Secretary Vice President Vice President Robert C. Aronson Eric A. DeBarba Robert E Wax Assistant Treasurer Vice President Vice President, Secretary and Bruce E Garelick Tod O. Dixon General Counsel Assistant Treasurer Vice President 1.Mr. Browne has reugned as Vice Prendent and Treasurer eflecuve May 1,1993.st which ume he will serve as %ce Presidens-investment Manngement.

2.Mr. Keane has resigned as %ce Presdent and General Courocl-Corporate effecove May 1,1993.st which ume he will urve as

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%ce Prendent and Treasurer.

February 28,1993

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1992 Annual Report The Connecticut Ught and Power Cosnpany j

s index Contents PA22 Letter to Preferred Stockholders....................................

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Balance Sheets...........................

2-3 Statements of tncome 4

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Statements of Cash Flows.

Statements of Common Stockholder's Equity..............

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Notes to Financial Ststements......

7 26 Report of Independent Public Accountants.............................

27 ManaDement's Discussion and Anatysis of Financial Condition and Resutts of Operations...........

28 36 Q

Selected Financial Data................

37 37 Statements of Quarterly Financial Data Statistics.............................

38 Preferred Stockholder and Bondholder Information..

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THE CONNECTICUT LIGHT AND POWER COMPANY r

March, 1993 TO OUR PREFERRED STOCKHOLDERS:

The financial statements and statistical data contained in this report reflect the financial position, results of operations and statements of cash flow of The Connecticut Light and Power Company (CL&P) for 1992.

The 1992 Annual Report of Northeast Utilities, which provides information regarding the entire Northeast Utilities system, including CL&P, also has been mailed to all CL&P preferred stockholders.

In 1992 operating revenues increased to $2.32 billion from

$2.28 billion in 1991.

Net income before preferred dividends decreased to $206.7 million in 1992 from $240.8 million in 1991, primarily as a result of increased costs associated with nuclear operations and lower revenues from sales to other utilities.

These increases were partially offset by lower interest charges associated with refunding high-coupon debt and continued cost management in non-nuclear operating expenses.

On December 11, 1992, CL&P filed with the Department of O'

Public Utility Control (DPUC) a request for rate relief.

As an alternative to the traditional one-year increase, CL&P filed a multi-year rate plan which was subsequently updated on February 17, 1993.

CL&P's updated rate plan would increase customer bills by a total of approximately $343 million over a three-year period, resulting in average annual increases of approximately 5 percent.

Under the present DPUC schedule, new rates would become effective on July 1, 1993, with subsequent increases on July 1, 1994 and July 1, 1995.

The DPUC is expected to issue a final decision on the request in June 1993.

A more comprehensive discussion for each of these items,is contained within this report.

Sincerely, i

William B.

Ellis Bernard M.

Fox President and Chief Chairman and Chief Executive Officer Operating Officer

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The Connecticut Ught and Power Company BALANCE SHEETS p

At December 31, 1992 1991 (Thousands of Do!!ars)

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Assets Utility Plant, at original cost:

E lectric.......................................................

S5,822,783

$ 5,661,105 Less: Accumulated provision for depreciation........

1,827,024 1.724.673 3,995,759 3,936.432 Construction work in progress...............................

110,081 131,600 N uc le ar fuel, net..........................

167,816 193.564 Total net utility plant.............................

4.273,656 4,261,596 Other Propeny and Investments:

Nuclear decommissioning trusts, at cost,.

121,888 E9,707 investments in regional nuclear generating companies and subsidiary companies, at equity....

53,717 53.623 Other, at cost.................

14,198 14,236 189,803 157.566 Current Assets:

Cash and special deposits (Note 12)..................

11,208 4,691 Receivables, less accumulated provision for uncollectible accounts of $8,358,000 in 1992

/m and $9,560,000 in 1991................................

231,614 216/i77

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Receivables from a#iliated companies...

4,804 19,926 Accrued utility revenues...............

92,366 92,926 Fuel, materials, and supplies, at average cost..

72,199 73,495 Recoverable energy costs, net - current portion (Note 1)........

77,002 9,853 Prepayments and other.....~.......

32,771 30.367 521,964 447.435 Deferred Charges:

Defetred costs - nuclear plants (Note 1)..

~ 199,914 222.720 Unrecovered contract obligation - YAEC (Note 2)....

98.559 Deferred conservaion and load-managemert costs..

87,487 55.498 Recoverable energy costs, net (Note 1)...

82,423 127,164 Deferred DOE assessment (Note 1)............................,

41,730 Unamortized debt expense..

10,497 11,254 Amortzzable property investment............

8,720 11.211 Othe r 68,053 43,997 597,383 471,844 Total Asset s................................................

$ 5.582,806

$ 5,338.441 The accompanying notes are an integraf part of these financial staternents.

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The Connecticut Ught and Power Compmy BALANCE SHEETS

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-1991

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(Thousands of Dottars)

Capitalization and Liabilities Capitalization:

Common stock - $10 par value. Authorized 24,500,000 shares; outstanding 12,222,930 shares h 1992 and 1991.....

$ 122.229

$ 122,229 Capt.al surplus, paid in...-................

634,851 637,202 Retaine d e amings..............................

748.817 738.993 Total common stockholder's equity.....

1.505,897 1,498.424 Cumulative preferred stock -

$50 par value - authorized 9,000,000 shares; outstancfrng 5.123,925 shares in 1992 and 5.461,737 in 1991

$25 par value - authorized 8,000,000 sha'es; outstandng 7,000,000 shares in 1992 and 1991 Not subject to mandatory redemption (Note 5)....

231,196 306.195 Subject to mandatory redemption (Note 6).........

197,500 139.392 Long-term debt (Note 7)...............

1.930.832 1.967.360 3.865,425 3.911,371 Total capita'ization......

Obligations Under Capital Leases.........................

136,800 156,754 Current Uabilities:

N otes payable t o banks....................................

96.500 53,500 (O

137.000

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Notes payable to am!iated company.....................

V Commercla! paper..........................

109.240 Long-term debt and preferred stock - current portion......................................................

159,604 58.408 Obligations under caplial leases - current portion........

60,604 52.170 Accounts payable..

108,797 108,103 Accounts payable to amliated comparues..............

55.808 74,569 Accrue d taxes....................

118,132 102,788 Accrued hteres1.............

32,829 34,580 Other............................................

17,185 27,383 758.699 648.501 Deferred Credits:

Accumulaed deferred income taxes............

475,355 425.266 r

Accumulaed deferred hvestment tax credits...........

165,710 171,939 Deferred contra:t obligation - YAEC (Note 2).....

98,559 Deferred DOE obligation (Note 1)............

41,730 other 40,528 24,610 821,882 621,815 Commitments and ContinDencies (Note 10)

Total Capita!!zation and Liabilities..............

$ 5,582,806 Ha38.441 l

1 The accompanyng notes are an htegral part of these fnancial statements.

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The Connecticut Light and Power Company STATEMENTS OF INCOME m

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For the Years Enced December 31, 1992 1991 1990 (Thousands of Do!!ars)

O pe ratin g Re venu e s............................

S 2,316.451

$ 2,275,737

$ 2.170.087 Operating Expenses:

Operation -

Fuel, purchased and netinterchange 598,287 559.131 572.836 powe r..................

Other............................................

605,675 614,440 563.747 M ainten an c e................................

197,460 184,727 191,923 Depre ciation...................................

209,884 198,597 168,885.

Amortization of regutatory assets, net....

73,456 55,693 50,864 Federal and state income taxes (N ot e 8).........................

172,236 173,102 138.940 Taxes other than income taxes...

171,642 166.212 162.251 2,028.640 1,951.902 1.849.446 Total opersing expenses....

O pe rating inco me...............................

287,811 323.835 320.641 Other income:

Allowance for other funds used during construction......

1,718 1,807 3,431 p

Deferred nuclear plants retum -

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othe r funds..............................

35,396 36,714 33,646

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Equity in eamings of regional nuclear generaing companies.....

8,014 8,021 8,130 (19,388)

Write -off of plant costs....................

Othe r, net..................

5,246 7,419 10.509 income taxes - credit......

11,171 13.004 34,174 Other income, net...........................

61,545 66,965 70.502 income before interest charges....

349,356 390,800 391,143 Interest Charges:

Interest on long-term debt....................

151,314 166,256 180,188 Other inte rest................

9,338 6,997 9.207 Allowance for borrowed funds used during construction...

(5,133)

(5,455)

(5,729)

Deferred nuclear plants retum -

borrowed funds, net of income taxes.....

(12,877)

(17,816)

(17,306)

Interest charges, net..................

142,642 149,982 166,360 N et inc ome........................................

S 206.714

$ 240.818

$__224 783 The accompanying notes are an integraf part of these financial statements.

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The Connossaut Ught and pewer Company F

STATEMENTS OF CASH FLOWS 5

For me Yeare Ended December 31 1992 tesi 1990 (Thousandeof Doliere) l Ceeh Nws From Operatione:

Not inoome 8 206.714 8 240.818 8 224,783

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Adjusted for me following:

Deprecission and amortization ofleesed property...

270,102 230.845 257,138 Deferred hcome taxes and hvestment tax credite. not......

72,138 107,599 31,923 f

Dolerrod nuclear plante return,not of amortization......

10,071 (3,529)

(5.157)

Daterved energy costo.not of amoftttation.

(22.408)

(110,829) 15.034 Dolorved conservation andload-management.

not of amoretssalon...

(31,9e9)

(47,402)

(5.198)

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Not change h defened charges and other noneneh Roma.

~ (50.063) 13.327 -

21,684 Changes h worthg capitat:

Recobrabios and accrued ueIty revenue e.

245 (36,882) 21.107 1,296 24,735 (13,421) i Fuel, maiortale, and supplies Accounto payable _...

(18,067) 52.020 4,925 Accrued taxes.. _.

15,344 (42.228) 3.262 i

Otter workhg capitd (excludes cash)......

8 250 12,462 (16.945) l 450,642 440 D65 530.137 Not conh towe from operations..

Cash Nwe Used For Financing Activities:

Long -term debt..

401,000 Preferred stook 75,000 (310)

Finanohg expenses (9.825)

Increses b obilgssione under capetsi leasee.

30.944 25,212 88.864 I

Het hcrease h short-term debt...

15.240 100,385 57,865 Reacquiettione and retirements oflong-term debt...

(431,232)

(45,877)

(56,205) l a

i Reecquisitione and retiremente of preferred stock -

(91.001)

(5.000)

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liepayment of cephallesse obligations (41,220)

(50,065)

(85,700)

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Ceeh dMdende on preferred stock...

(31,977)

(34,541)

(35.358)

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Ceeh dMdende on common stock.. _

(184,277)

(172.587)

(179.921)

Not cash Sows used for Snenabg actMties....

(158,234)

(214,473)

(235,945)

Investment Aethrities:

investmente h plant (bcluding capite lease e):

sectric and ethor utiny piant..

(227,ste)

(1s0.s77)

(217.e45)

(27,000)

(14,144)

(71,825)

Nuclear fuel..

Lees: Al6owance toe emer funde used durhg eenstrudion.

(1.718)

(1,0C7)

(3.431)

Not seeh Sows used for hvoatmente h plant.

(263,710).

(207,314)

_(206.039)

Other hve etment acevhies. not.

(32.181)

(18.834)

(16,552) l Not seeh tows ueed forIreveetmenta..

(285.001)

(225.648)

(302.581) i Not inoroese in Cash for the Poded...

s.517 ese 301 l

Cash and speelaf depeate-beginning of period 4,001 S,827 3,226 Cash and apoolef deposte-end of period _ _

8 11.200 8

4.001 8

3.827 Supplemeestal Ceah Flow hetermselon:

i Ceeh paid during the year ter:

interest, not of emounto capitalked earbs j

eenstruellen 8 143 957 8 182.700 8 100.062 j

ineome tamos...._

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87.450 The accompanying notes are an htegrel part of mese Snenoisi atmements.

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The Ccnnecticut Light cnd Pow:r Company

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STATEMENTS OF COMMON STOCKHOLDER'S EQUITY Capital

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Surplus, Retained Stock Paid in Earnings (a)

Total (Thousands of Do!!ars)

Balance at Janaury 1,1990.................

$ 122,229

$ 635,151 5 695,799

$ 1,453,179 Net income f or 1990...........

224,783 224,783 Cash dividends on preferred stock.............................................

(35,358)

Cash dividends on common stock......

(179,921)

Capital stoek expenses, net..............

1,024 1,024 Balance at December 31, 19 9 0...........

122,229 636,175 705.303 1,463,707 Net income for 1991...............

240,81S 240,818 Cash dividends on preferred stock...........................................

(34,541)

(34.541)

Cash dividends on common stock.......

(172,587)

Capital stock expenses, net..........

1,027 1.027 Balance at December 31, 19 91...........

122,229 637.202 738,993 1,498,424 Net inco me for 1992...........

206,714 206,714 n\\

Cash dividends on preferred

[d stock..............................................

(31,977)

Cash dividends on common stock......

(164,277)

(164.277)

Loss on the retirement of preferred stock.................................................

(636)

Capital stock expenses, net...................

(2,351)

(2.351)

Balance at December 31, 1 9 9 2...........

$ 122,229

$ 634,851

} 748,817

$ 1,505,897 (a) The Company has dividend restrictions imposed by its long-term debt agreements.

At December 31,1992, these restrictions totaled approximately $540.0 million.

J The accompanying notes are an integral part of those financial statements.

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The Connecticut Ught and Power Company k,

NOTES TO FINANCIAL STATEMENTS 1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES General The Connecticut Light and Power Company (CL&P or the Company), Westem Massachusetts Electric Company (WMECO), Holyoke Water Power Company (HWP), and Public Service Company of New Hampshire (PSNH) are the operating subsidiaries comprising the Northeast Utilities system (the system) and are wholly owned by Northeast Utilities (NU).

Other wholly owned subsidiaries of NU provide substantial support services to the system. Northeast UtHities Service Company (NUSCO) supplies centralized accounting, administrative, data processing, engineering, financial, legal, operational, ptanning, purchasing, and other services to the system companies.

Northeast Nuclear Energy Company (NNECO) acts as agent for system companies in operating the Millstone nuclear generating facilities. Commencing June 29,1992, North Atlantic Energy Service Corporation (NAESCO) began acting as agent for CL&P and North Atlantic Energy Corporation in operating the Seabrook 1 nuclear facility.

All transactions among affiliated companies are on a recovery of cost basis which may include amounts representing a retum on equity, and are subject to approval by various federal and state regulatory agencies.

Accounting Reclassifications Certain amounts in the accompanying financial statements of CL&P for the year ended December 31,1991 p

and December 31,1990 have been reclassified to conform with the December 31,1992 presentation.

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Public Utility Regulation NU is registered with the Securities and Exchange Commission (SEC) as a holding company under the Public Utility Holding Compny Act of 1935 (1935 Act), and it and its subsidiaries, including the Company, are subject to the provisions of the 1935 Act. Arrangements among the system companies, outside agencies, and other utilities covering interconnections, interchange of electric power, and sales of utHity property are subject to regulation by the Federal Energy Regulatory Commission (FERC) and/or the SEC.

The Company is subject to further regulation for rates and other matters by the FERC and the Connecticut Department of Public Utility Control (DPUC), and follows the accounting policies prescribed by the commissions.

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Revenues Utility revenues are based on authorized rates applied to each customer's use of electricity. Rates can be increased only through a formal proceeding before the appropriate regulatory commission. At the end of each accounting period, CL&P accrues an estimate for the amount of energy delivered but unbEled.

Accounting Release 14 On November 25,1991, the FERC issued Accounting Release 14 (AR 14) limiting the application of the purchased power account to the cost of energy and capacity purchases and net settlements on barter transactions. CL&P adopted AR-14, on a prospective basis, January 1,1992.

Spent Nuclear Fuel Disposal Costs Under the Nuclear Waste Policy Act of 1982, CL&P must pay the United States Department of Energy (DOE) for the disposal of spent nuclear fuel and high-level radioactive waste.' Fees for nuclear fuel bumed

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The Connecticut Ught and Power Company Q NOTES TO FINANCIAL STATEMENTS on or after April 7,1983 are paid to the DDE on a quarter 1y basis. For nuclear fuel used to generate electricity prior to April 7,1983 (prior period fuel), payment may be made anytime prior to the first derrvery of spent fuel to the DOE. At December 31,1992, fees due to the DOE for the disposal of prior period fuel were approximately $132.0 million, including interest costs of $65.5 m!!! ion. As of December 31,1992, approximately $119.4 million had been collected through rates.

Under the Energy Policy Act of 1992 (Energy Act), CL&P will be assessed for its proportionate share of the costs of the decontamination and decommissioning of uranium enrichment plants operated by the DOE (D&D assessment). The Energy Act imposes an overall cap of $2.25 billion on the obligation of the commercial power industry and limits the annual special assessment to $150 mDlion each year over a 15-year period. The Energy Act also requires that regulators treat D&D assessments as a reasonabie and necessary cost of fuel, to be fully recovered in rates, like any other fuel cost. The cap and annual recovery amounts w!!! be adjusted annually for inflation. The D&D assessment will be atiocated among utillties based upon services purchase <J in prior years. At December 31,1992, CL&P's share of these estimated costs was approximately $41.7 million. Management expects that CL&P wHI be allowed to recover these costs.

Accordingly, the Company has recogn! Zed these costs as a regulatory asset, with a corresponding obligation, on its Balance Sheets.

Investments and Jointly Owned E!ectric Utility Plant Regiona/ Nuclear Generating Companies: CL&P owns common stcck of four regional nuclear generating companies (Yankee companies). The Yankee companies, with the Company's ownership interests are:

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Connecticut Yankee Atomic Povver Company (CY)..

34.5 %

Yankee Atomic Electric Company (YAEC).

24.5 Maine Yankee Atomic Power Company (MY).

12.0 Vermont Yankee Nuclear Power Corporation (VI)..........

9.5 CL&P's investments in the Yankee companies are accounted for on the equity basis. The efectricity produced by these faciHties is comm.'tted to the participants substantially on the basis of their ownership interests and is billed pursuant to contractual agreements.

The 173 meDawatt (MW) YAEC nuclear power plant was shut down permanently on February 26,1992.

For more information on the Yankee companies, see Note 2. Nuclear Decommissioning.

Millstone 1: CL&P has an 81 percent joint ownership interest in Millstone 1. a 660 MW nuclear generating unit. As of December 31,1992, plant.in-service and the accumulated provision for depreciation induded approximately $326.9 mHlion and $120.2 mBlion, respectively, for CL&P's share of MHistone 1. CLAP's share of Millstone 1 operating expenses is induded in the corresponding operating expenses on the accompanying Statements of income.

Millstone 2: CL&P has an 81 percent joint-ownership interest in Millstone 2, a 875 MW nudear generating unit. As of December 31,1992, plant.in. service ard the accumu!ated provision for depreciation included approximately $660.9 mD!lon and $135.9 mR! ion, resWeely, for CL&P's share of MRistone 2. CL&P's share of Millstone 2 operating expenses is included in the corresponding operating expenses on the accompanying Statements of Income.

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The Connecticut Light and Power Company g

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/ NOTES TO FINANCIAt. STATEMENTS Mi# stone 3: CMP has a 52.93 percent joint-ownership interest in Millstone 3, a 1.149 MW nuclear i

generating un!t. As of December 31,1992, plant-in-service and the accumulated provision for depreciation trelut ed approximately $1.9 blilion and $323.4 m!!! ion, respect!vely, for the Company's proportionate share t

of fMistone 3. CL&P's share of Millstone 3 expenses is included in the corresponding operating expenses on the accompanying Statements of Income.

Seabrook: CMP has a 4.06 percent joint-owne<

aerest in Seabrook 1, a 1,150 MW nudear generating untt. As of December 31,1992, plant-in-servb e ue accumulated provision for depreciation induded approximately $173.4 million and $12.0 million,.uspe:tively, for CMP's share of Seabrook 1. CMP's share of Seabrook 1 expenses is induded in the corresronding operating expenses on the accompanying Statements of Income.

Depreciation The provision for depreciation is calculated using the straight-line method based on estimated remaining lives of depreciable utility plant-in-service, adjusted for salvage value and removal costs as approved by

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the appropriate regu!atory agency. Except for major facilities, depreciation factors are applied to the l

average plant-in-service during the period. Major fael!!t.ies are depreciated from the time they'are placed in service. When plant is retired from service, the original cost of plant, induding costs of removal,less j

salvage, is charged to the accumulated provision for depreciation. For nudsar production plants, the costs of removal, less salvage, that have been funded through extemal decommissioning trusts w!!! be charged to those trusts. See Note 2, Nuclear Decomm/ssioning, for additional Information.

O The depreciation rates for the several dasses of electric plant-in-service are equivalent to a composite rate

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of 3.7 percent in 1992,3.5 percent in 1991, and 3.4 percent in 1990.

j income Taxes The tax effect of timing differences (differences between the periods in which transactions affect income in the financial statements and the periods in which they affect the determination of income subject to tax)

Is accounted for in accordance with the ratemaking treatment of the applicable regulatory commissions.

See Note 8 for the components of income tax expense.

CMP has not provided deferred income taxes for certain timing differences during periods when the DPUC did not permit the recovery of such income taxes through rates charged to customers. The cumulative net amount of income tax timing c'ifferences for which deferred taxes have not been provided was approximately $800 million at December 31.1992. As allowed under current regulatory practices, deferred taxes not previously provided are being collected in customers' rates as such taxes become payable.

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in February 1992, the Financial AccourfJng Standards Board (FASB) issued Statement of Financial Accounting Standards No.109, Accounting for income Taxes (SFAS 109). SFAS 109 supersedes previously issued income tax accounting standards and is effective beginning January 1,1993. When SFAS 109 is adopted, it will increase assets and liablities by approximately $1.1 bilion but will not have a material effect on net income Allowsnee for Funds Used During Construction (AFUDC)

AFUDC, a noncash cost calculated in accordance with FERC guidelines, represents the estimated cost of capital funds used to finance CMP's construction program. These costs, which are one component of the total cap!!altzed cost of construction, are not recogn! zed as part of the rate base for raternaking 1

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f'~N The Connecticut Light and Power Company

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NOTES TO FINANCIAL STATEMENTS purposes untR facDities are placed in service. The effective AFUDC rates under the gross-of-income tax method for 1992,1991, and 1990 were 5.5 percent,7.9 percent, and 9.8 percent, respectively.

Energy Adjustment Clauses Retan electric rates include a fuel adjustment clause (FAC) under which fossil-fuel prices above or below base-rate levels are charged or credited to customers. Administrath/e proceedings are required each month to approve the FAC charges or credits proposed for the following month. Monthly FAC rates are also subject to retroactive review and appropriate adjustment by the DPUC sach quarter after public hearings.

Beginning in 1979, the DPUC approved the use of a generation utillzation adjustment clause (GUAC), which levels the effect on fuel costs caused by variations from a specified compostte nudear generation capacity factor embedded in base rates. Generally, at the end of a 12-month period ending July 31 of each year, these net variations from the amounts included in base-rate cost levels are refunded to, or collected from, customers over the subsequent 11-month period beginning in September. Should the annual nuclear capacity factor fan below the 55 percent GUAC floor, CMP would have to apply to the DPUC for permission to recover the additional fuel expense associated with nuclear performance below 55 percent.

For additional information see Note 10, Commitments and Contingencies-Nuclear Performance.

Phase-in Plans As discusr,ed below, CMP is phasing into rates the recoverable parts of its investments in Millstone 3 and

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Seabrook 1. The plans are in compliance with Statement of Financial Accounting Standards No. 92, Q

Regulated Enterprises-Accounting for Phase-in Plans.

As allowed by the DPUC, CMP is phasing into rate base its allowed investment in Malstone 3. The DPUC has provided for full deferred eamings and carrying charges on the portion of CMP's allowed investment in Millstone 3 not included in rate base. Through December 31,1992, CMP had placed into rate base

$1.49 bHlion, or 85 percent, of its allowed investment in MH! stone 3. The remaining $263.5 mHlion, or 15 percent, is to be phased into rate base annually in three 5-percent steps beginning January 1,1993.

The amortization and recovery of deferrals through rates began January 1,1988 and wHi end no later than December 31,1995. As of December 31,1992, $278.6 mRiion of the deferred retum, including carrying charges, has been recovered, and $178.5 mlHion of the deferred retum recorded to date, plus' carrying charges, remains to be recovered.

As allowed by the DPUC, CMP is phasing into rate base its allowed investment in Seabrook 1. The DPUC has provided for full deferred eamings and carrying charges on the portion of CMP's allowed investment in Seabrook 1 not induded in rate base. Through December 31,1992, CMP had placed into rate base

$111.1 milion, or two-thirds of its allowed investment in Seabrook 1. The remaining $55.6 milion, or one-third, is to be phased into rate base in 1993. The amortization and reccuery of deferrals through rates began September 1,1991 and wil end no later than August 31,1996. As of December 31,1992, $51.8 milion of the deferred retum, induding carry!ng charDes, has been recovered, and $21.4 milion of the deferred retum recorded to date, plus canying charges, remains to be recovered.

2.

NUCEAR DECOMMISSIONING The Company's 1992 decommissioning study concluded that complete and immediate dismantiement at retirement continues to be the most viable and econornic method of decommissioning the three Millstone i( ;

The Connecticut Light and Power Company

-[V NOTES TO FINANCIA1. STATEMENTS units.

A 1991 Seabrook decommissioning study also confirmed that complete and immediate dismantlement at retirement is the most viable and economic method of decommissioning Seabrook 1.

Decommissioning studies are reviewed and updated periodically to reflect changes in decommissioning requirements, technology, and inf!ation.

The estimated cost of decommissioning CMP's ownership share of Mi!l stone 1 and 2, in year.end 1992 dollars, is $293.5 million and $235.7 mi!! ion, respectively. The estimated cost of decommissioning CMP's ownership share of Millstone 3 and Seabrook 1, in year-end 1992 dollars, is $209.4 mHlion and

$14.3 million, respectively. Nuclear decommissioning costs are included in depreciation expense on the Statements of income. Nuclear decommissioning, as a cost of removal, is included in the accumulated provision for depreciation on the Balance Sheets.

CMP has established independent decommissioning trusts for hs portion of the costs of decommissioning Millstone 1, 2, and 3.

CMP's portion of the cost of decommissioning Seabrook 1 is paid to an independent decommissioning financing fund managed by the state of New Hampshire.

As of December 31,1992 CMP has collected, through rates, $126.7 mUllon, toward the future decommissioning costs of hs share of the Millstone units, of which $98.5 million has been transferred to extemal decommissioning trusts. As of December 31,1992 CMP has paid approximately $559,000 into Seabrook 1's decommissioning financing fund. The decommissioning trusts and decommissioning financing fund are reported on the Balance Sheets, at cost, which approximates market.

CMP, along with other New Eng!and utilities, has equity investments in the four Yankee companies. Each C

Yankee company owns a single nuclear generating unit. The estimated costs, in year-end 1992 dollars, of decommicsloning CMP's ownership share of CY, MY, and VY, are $110.1 m!!! ion, $28.0 million, and

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$22.8 million, respectively. As discussed in the following paragmph, YAEC's owners voted to permanently shut down the YAEC unit on February 26,1992. The decomm!ssioning costs of the Yankee companies are recorded on their respective financial statements. Under the terms of their contracts with the Yankee companies, the shareholde s-sponsors are responsible for their proportionate share of the operating costs of each unk, induding decommissioning. The nudear decommissioning costs of the Yankee companies are induded as part of the cost of power.

YAEC has begun preparations for an orderly decommissioning of hs nuclear facility. On June 1,1992, YAEC filed a rate filing to obtain FERC authorization to collect the closing and decommissioning costs and to recover the remaining investment in the YAEC nuclear power plant, over the remaining period of the plant's Nudear Regutatory Commission (NRC) operating license. YAEC, the FERC staff, and intervenors to the FERC proceeding have approved a settlement agreement for approximately $402.3 mElion that would resolve all outstanding issues. The settlement agreement is awalting FERC approval. At December 31, 1992. CMP's share of these estimated costs was approximately $98.6 milion. Management expects that CMP wl!! continue to be allowed to recover such FERC-approved costs from its customers. Accordingly, CMP has recognized these costs as a regulatory asset, with a corresponding obligation, on hs Balance Sheets. CMP has a 24.5 percent equity investment, approximating $5.9 mEllon,in YAEC. CMP has relied on YAEC for less than 1 percent of hs system capacity.

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t The Connecticut Light and Power Company NOTES TO FINANCIAL STATEMENTS 3.

LEASES CL&P and WMECO have entered into the Niantic Bay Fuel Trust (NBFT) capitallease agreement to finance up to $530 million of nuclear fuel for Millstone 1 and 2 and their share of the nudear fuel for Millstone 3.

l CL&P and WMECO make quarterly lease payments for the cost of nuclear fuel consumed in the reactors (based on a units-of-production method at rates wt ;ch reflect estimated kBowatt-hours of energy provided) plus financing costs associated with the fuel in the reactors. Upon permanent discharge from the reactors, i

twvnership of the nudear fuel transfers to CL&P and WMECO.

CL&P has also entered into lease agreements, some of which are capital leases, for the use of substation equipmert, data processing and office equipment, vehicles, nuclear control room simulators, and office i

space. The provisions of these lease agreements generally prcwide for renewal options. The following rental payments have been charged to operating expense:

Capital Operating

'.uytt

_1,naggi_

1pases l

1992................

$ 61,795,000

$26,919,000 -

1991 50,998,000 26,320,000 1990.....

103,636,000 26,990,000

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Interest induded in capital lease rental payments was $14,782,000 in 1992, $16,974,000 in 1991, and

$18,450,000 in 1990.

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i Substantially aff of the capital lease rental payments were made pursuant to the nudear fuel lease agreement. Future minimum lease payments under the nuclear fuel capital lease cannot be reasonably l

estimated on an annual basis due to variations in the usage of nuclear fuel.

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The Connecticut Light and Power Company

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NOTES TO FINANCIAL STATEMENTS Future minimum rental payments excluding annual nuclear fuellease payments ard executory costs such as property taxes, state use taxes, insurance, and maintenance, under long-term noncancelable leases, as of December 31,1992, are approximate!y:

Capital Operating y33r leases Leases (Thousands of Dollars)

$ 2.800

$ 21,300 1993......................

2,800 19,200 1994..

2.800 17,700 1995.....

1996.

2,800 15.900 1997 2,800 11,700 After 1997....

_48 000 82.200 Future minimum lease payments 62,000

$168 000 Less amount representing interest 40.900 Present value of future minimum lease payments for other than nuclear fue!

21,100 D

Present value of future nuclear fuel lease payments.............

176.300 Total............

$197 400 4.

SHORT-TERM DEBT NU, CL&P, WMECO, HWP, NNECO, and The Rocky RNer Reatty Company (RRR) have established a revoMng cred!t facHtty with a group of 19 banks. Under this facEtty, the participating companies may borrow up to an aggregate of $360 mHlion. Indkidual borrowinglimits are $175 mR! ion for NU, $360 mi!! ion for CL&P, $75 ml!! ion for WMECO, $8 mElion for HWP, $60 mHilon for NNECO, and $15 mH!lon for RRR.

The system companies may borrow funds on a short-term revoMng basis using either ftxed-rate loans or standby loans. Fixed rates are set using competltke bidding. Standby 4oan rates are based upon several attematke variabte rates. The system companies are obilgated to pay a fael!!!y fee of.20 percent of each bank's total commitment under the three-year portion of the fact!ry, representing 75 percent of the total facatty, plus.135 percent of each bank's total commitment under the 364. day portion of the facElty, representing 25 percent of the total facEtty. At December 31,1992, there were no borrowings under the facIlty.

Certain subsidiaries of NU, including CL&P, are members of the Northeast Utirdes System Money Pool (Pool). The Pool provides a more efficient use of the cash resources of the system, and reduces outside short-term borrowings. NUSCO administers the Pool as agent for the member companies. Short. term borrowing needs of the rnember companies are first met with avaRable funds of other member companies, including funds borrowed by NU parent. NU parent may lend to the Pool but rnay not borrow investing and borrowing subsidiaries receNe or pay Ire.erest based on the average daRy Federal Funds rate. Funds

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The Connecticut Light and Power Company i

) NOTES TO FINANCIAL STATEMENTS may be withdrawn t om or repaid to the Pool at any time wfthout prior notice. However, borrowings based on loans from NU parent bear interest at NU parent's cost and must be repaid based upon the terms of NU parent's original borrowing.

The amount of short-term borrowings that may be incurred by the Company is subject to periodic approval by the SEC under the 1935 Act. In addition, the charter of CL&P contains provisions restricting the amount of short-term borrowings. Under the SEC and/or charter restrictions, as of January 1,1993, the Company was authorized to Incur shor1-term borrowings up to a maximum of $375 million.

5.

PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION Details of preferred stock not subject to mandatory redemption are:

December 31, Shares 1992 Outstanding Redemption December 31, December 31.

Descriotion Price 1992 1992 1991 1990 (Thousands of Dollars)

$52.50 163,912

$ 8,19S

$ 8,196

$1.90 Series of 1947.

$2.00 Series of 1947.

54.00 336,088 16,804 16,804 16,804 52.00 100,000 5.000 5,000 5,000

$2.04 Series of 1949...

e

$2.0S Series E of 195 6.......

51.00 200,000 10,000 10,000 10,000 f

$2.09 Series F of 19f 5..

51.00 100,000 5,000 5,000 5,000 L

$220 Series of 1949..

52.50 200,000 10,000 10,000 10,000

$3.24 Series G of 19C8,

51.84 300,000 15,000 15.000 15,000

$3.80 Series J of 197 !

52.10 400,000 20,000 20,000 20,000

$4.48 Series H of 1973 52.21 300,000 15,000 15,000 15,000

$4.48 Series I of 1970 52.32 400,000 20,000 20,000 20,000 50,000 50,000

$4.56 Series K of 1974 3.90% Series of 1949......

50.50 160,000 8,000 8,000 8.000 4.50% Series of 1956.......

50.75 104,000 5,200 5.200 5,200 4.50% Series of 196's.

50.50 160,000 8.000 8,000 8,000 4.96% Series of 1958........

50.50 100,000 5.000 5.000 5,000 5.28% Series of 1957..

51.43 200,000 10,000 10.000 10,000 6.56% Series of 1968......

51.44 200,000 10.000 10,000 10,000 7.60% Series of 197'1 51.61 199,925 9,996 9.996 9,996 10,000 10,000 9.36% Series of 1970.......

14,999 14,999 9.60% Series of 1974.........

1989 Adjustable Ra':e DARTS...............

25.00 2,000,000 50.000 50.000 50.000 Total preferred sto:k not subject to mandatory redemption.....

$231.196 g2gigg

$306195 All or any part of each outstanding series of preferred stock may be redeemed by the Company at any time et es:abtished redemption prices plus accrued dkidends to the date of redemption.

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i The Connecticut Light and Power Company NOTES TO FINANCIAL STATEMENTS 6.

PREFERRED STOCK SUBJECT TO MANDATORY REDEMPDON i

Details of preferred stock subject to rnandatory redemption are:

December 31, Shares 1992 Outstanding Redemption December 31, Decemtwr 31.

Descriotion Price

1992 1992 1991 1990 (Thousands of Dollars)

$ 1,926

$ 3,926

$5.52 Series L of 1975....

5-14,000 16,000 10.48 % Series of 1980 966 1,966 11.52 % Series of 1975 9.10%

Series of 1987 26.52 2,000,000 50,000 50,000 50,000 9.00 %

Series of 1989 26.80 3,000,000 75,000 75,000 75.000 52.41 1,500.000 75.000 7.23 %

Series of 1992.

200,000 141,892 146,892 Less preferred stock to be redeemed wthin one year 2.500 2.500 2.500 Total preferred stock sub>ct to mandatory redem(lion

$197.500

$139 392

$144.392

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Redemption prices reduce in future years.

The following table details redemption and sinking fund acithy for preferred stock subject to mandatory redemption:

Minimum Maximum Annual Annual Sinking-Fund Sinking-Fund Shares Reaccuired Series Recukement Recuirement 1992 1991 1990 (Thousands of Dollars)

$5.52 Series L of 1975

$1,000

$2,000 38,524 40,000 40,000 10.48% Series of 1980 1,000 2,000 280,000 40,000 40,000 11.52% Series of 1975 500 1,000 19,318 20,008 20,000 9.10% Series of 1987 (1) 2.500 5,000 9.00% Series of 1989 (2) 3.750 7,500 7.23% Series of 1992 (3) 3,750 7,500 (1) Sinking fund requirements commence June 1,1993.

(2) Sinking fund requirements commence October 1,1995.

(3) Sinking fund requiremerns commence September 1,1998.

The minimum sinking-fund prwistons of the series subject to mandatory redemption, for the years 1993 through 1997, aggregate approximately $2,500,000 in 1993 and 1994 and $6,250,000 in 1995 through

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The Connecticut Light and Power Company NOTES TO FINANCIAL STATEMENTS 1997. All sinking-fund requirements for the preferred stock subject to mandatory redemption have been met.

In case of default on sinking-fund payments or the payment of dMdends, no payments may be made on any junior stock by way of dMdends or otherwise (other than in shares of junior stock) so long as the default continues. If the Company is in arrears in the payment of dividends on any outstanding shares of preferred stock, the Company would be prohibt:ed from redemption or purchase of less than all of the preferred stock outstanding All or part of each of the series named above may be redeemed by the Company at any time at established redemption prices plus accrued dMdends to the date of redemption, subject to certain refunding limitations.

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The Connecticut IJght and Power Company

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NOTES TO FINANCIAL STATEMENTS

,d 7.

LONG-TERM DEBT Details of long-term debt outstanding are:

December 31.

1992 1991 (Thousands of Dollars)

First Mortgage Bonds:

41/4% Series, due 1993..

$ 15,000

$ 15.000 81/2% Series PP, due 1993......

125,000 125,000 95,000 9 3/4% Series 00 d ue 1994.................

41/2% Series, due 1994......

12,000 12,000 10%

Series NN, due 1995....

74,324 100.000 8 7/8% Series LL, due 1996..

5 5/8% Series, due 1997.....

20,000 20,000 75,000 t

91/8% Series MM, due 1997...

30,000 30,000 6%

Series S, due 1997...

6 7/8% Series U, due 1998.....

40,000 40,000 25,000 25,000 71/8% Series, due 1998.

20,000 20,000 61/2% Series T, due 1998......

61/2% Series, due 1998.

10,000 10.000 8 3/4% Series V, due 2000..........

40.000 40,000 8 7/8% Series W, due 2000....

40,000 40,000 20,000 91/4% Series, due 2000.

C 7 3/8% Series X.

due 2001 30.000 30,000 30,000 30,000

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7 5/8% Series, due 2001 71/2% Series, due 2002.

35,000 35,000 7 5/8% Series Y, due 2002.....

50,000 50.000 50,000 50,000 7 5/8% Series Z, due 2003.

40,000 40,000 71/2% Series.

due 2003...

8 3/4% Series AA, due 2004.....

65,000 65,000 t

91/4% Series, due 2004......

30,000 30,000 8 7/8% Series DD, due 2007.....................

45,000 45,000 91/4% Series EE, due 2006........

40,000 40,000 9 3/8% Series, due 2008......

40,000 40,000 9 3/4% Series 00, due 2018...........

75,000 75,000 91/2% Series RR, d ue 2019.....................

75,000 (5,000 9 3/8% Series SS. d ue 2019.....................

75,000 K.n00 7 3/8% Series TT, due 2019..

20,000 20,000 7 5/8% Series UU, due 1997.....................

200,000 71/4% Series W, d ue 1999....................

100.000 4 1/4% Series WW, due 1994.....................

170.000 Total First Mortgage Bonds.................

1,547.000 1,441,324 i J

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The Connecticut IJght and Power Company n

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NOTES TO FINANCIAL STATEMENTS December 31 1992 31 (Thousands of Dohars)

Intermediate Term Notes:

50.000 8.925%. due 1992 Pollution Control Notes:

6.197 6.845 5.90%, due 1998.....

16.000 16.000 6.50%, due 2007 350.100 340.100 Variable rate. due 2013-2022.

Fees and interest due for spent fuel disposai costs....

132.015 127,281 41 /.93 46,753 Other Less amounts due within one year 157,104 55.908 UnamortizeJ premium and discount, net....

(4 869)

(5 035)

$1930 832

$1967.360 Long. term debt. net Long. term debt maturtties and cash sinking-fund requirements on debt outstanding at December 31, 1992 for the years 1993 through 1997 are approximately: $147,100.000, $190.000.000, $9.100.000,

$10.400.000, and $261,900.000, respectNely. In add!! ion, there are annual 1 percent sinking. and improvement-fund requirements, currently amounting to $15.200.000 for the year 1993. $13.950.000 for 1994 and $12.250.000 for 1995,1996, and 1997. Such sinking-and improvement-fund requirements may te satisfied by the deposit of cash or bonds or by certification of property additions.

f'N All or any part of each outstanding series of first mortgage bonds may be redeemed by the Company at any time at established redemption prices plus accrued interest to the date of redemption, except certa'n series which are subject to certain refunding limitations during their respectNe in!tial fke. year redemption periods.

Essefatty all of the Company's utRy plant is subject to the liens of its first mortgage bond indentures.

As.4 December 31,1992, the Company has secured $293.7 ml!! ion of pollution control notes with second mortgage liens on Millstone 1, junior to the liens of its first mortgage bond indentures.

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The Connecticut Ught and Power Company T

NOTES TO FINANCIAL STATEMENTS 8.

INCOiAE TAX EXPENSE The components of the federal and state income tax provisions are:

For the Years Ended December 31.

1992 1991 1990 (Thousands of Dollars)

Current income taxes:

Federal....

$ 61,773

$ 33,717 -

$ 47,267 State...........

27.153 18.782 25 576 Total current.......

88 926 52.499 72.843 Deferred income taxes, net:

Federal............

60.788 88,554 44,774 11.833 26 430 5.661 State..............

Total deferred.......

72.621 114.984 50.435 (6 230)

(6 230)

R 44J investment tax credits. net....

Total income tax expense..............

$155 317

$161.253

$107.134 The components of total income tax expense are classified as follows:

Income taxes charDed to operating expenses..............................

$172,236

$173,102

$138,940 income taxes associated with the amortization of deferred nuclear plants retum - borrowed funds....................

(15,157)

(12,263)

(10,665)

Income taxes associated with AFUDC and deferred nuclear plants retum -

borrowed funds..........................

9,409.

13.418 13.033 Other income taxes - credit.

(11.171)

(13.004)

(34.174)

Total income tax expense..................

$155 317

$161253

$107.134 -

The Connecticut Light and Power Company NOTES TO FINANCIAL. STATEMENTS

(

Deterred income taxes are comprised of the tax effects of timing differences as follows:

For the Years Ended December 31.

1992 1991 19M Ghousands of Dollars)

Depreciation, excluding leased nuclear fue!

5 50.471

$ 51.399

$ 44,729 Conservation and load management.

13,506 22.594 4,803 (9.240)

Construction overheads..........

Depreciation on leased nuclear fuel, settlement credits. and disposal costs (6.756)

(1,763) 2,263 Energy adjustment clauses 12,627 47,483 1.570 AFUDC and de' erred nuclear plants retum, net (5.748) 1,155 2.369 Early retirew.*. program 3.988 (9,718) 885 (351) 4.498 Pension accrual.

Settlement. canceled independent power piants 7.251 Other............

f3.603) 4.185 (557)

Deferred income taxes net.

$ 72 621

$114.944

$ 50 435 The effectNe income tax rate is computed by dividing total income tax expense by the sum of such taxes and income from continuing operations. The differences between the effectNe. ate and the federal statutory income tax rate are; k

For the Years Ended December 31.

1992 1991 1990 Federal statutory income tax rate....

34.00 %

Tax effect of differences:

Depreciation differences.............

4.37 2.65 2.25 Deferred nuclear plants retum - other funds...

(3.32)

(3.10)

(J.45)

Amortization of nuclear plants retum -

other funds 4.01 3.21 3.45 (2.89)

Construction overheads investment tax cred!t amortization (1.72)

(1.55)

(4.86)

State income taxes, rset of federal benef!!.................

7.11 7.46 6.26 Adjustment for prior years taxes.................

(.97)

(1.74)

(1.93)

Other. net

. ( 58)

... f 82)

.. f 55) i Effectke income tax rate 42 90%

40 11 %

Egg %

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The Connecticut Ught and Power Company n

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NOTES TO FINANCIAL. STATEMENTS C

9.

POSTRETIREMENT BENEFITS The Company participates in a uniform noncontributory defined benefit retirement plan covering all regular system employees.

Benefits are based on years of service and employees' highest compensation during five consecutive years of employment. The Company's direct 4flocated portion of the system's pension cost, part of which was charged to util!!y plant, approximated ($1.7) million in 1992. $10.8 million in 1991, and $1.6 million in 1990.

Cunently, the Company funds annually an amount at least equal to that which will satisfy the requirements of the Employment Retirement income Security Act and the Intemal Revenue Code.

Pension costs are determined using market-related values of pension assets. Pension assets are invested primarily in equity securities. bonds and insurance contracts.

The components of net pension cost for the system (excluding PSNH and NAESCO) are:

For the Years Ended December 31.

1992 1991 1990 (Thousands of Dollars)

Service cost..................

$ 27,480

$ 48,738

$ 30,459 Interest cost..........................

69,746 71,041 64,352 Retum on plan assets...................

(77,232)

(196,437) 10,498 Net amortization......................

(16.266)

_108.175 (94.034)

Net pension cost

$ 3 728

$'N 517

$ 11.275

%.A For calculating pension cost, the following acsumptions were used:

For the Years Ended December 31.

1992 1991 1990 Discount rate.........................

8.5%

9.0%

Expected long-term rate of retum.......................

9.0 9.7 9.7 Compensation / progression rate...........

6.8 7.5 7.5 l

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, The Connecticut Light and Power Company n(

f NDTES TO FINANCIAL STATEMENTS

'The following table represents the plan's funded status reconciled to the NU Consolidated Balance l

Sheets:

i e

At December 31.

1992 1991 (Thousands of Dollars)

Accumulated benefit obligation, including $719.608,000 cf vested benefits at December 31,1992 and

$585,419,000 of vested benefits at December 31,1991...............

$ 764 432

$ 623.795 i

Projected benefit obligation........

$1,055.295

. $ 848,374 Less: Market value of plan assets..........

1.226.468 J.031.699 Market value in excess of projected benefit obligation............

171,173 183,325 Unrecognized transition amount (18,277)

(26,958)

. _8,658 7,323 Unrecognized prior service costs.......

Unrecognized net gain.............

(214.894)

(176.380)-

Accrued pension liability.................

$ (53 340)

$ (12.890)

The following actuarial assumptions were used in calculating the plan's year.end funded status:

At December 31.

1992 1991 I

Discount rate.........................

8.0%

8.5%

Compensation / progression rate..........

5.0 6.8 in addition to pension benefits, the Company currently has a practice of providing certain health care 3

and life insurance beneffts to retired employees. The direct cost of providing those benefits was

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1 approximately $8,791,000 in 1992, $7.525,000 in 1991, and $7,547,00 in 1990. The Company currently recognizes health care benefits primarRy as paid and provides for life insurance benefits through premiums paid to an insurance company.

j in December 1990, the FASB issued Statement of Financial Accounting Standards No.106, Employer's -

l Accounting for Postretirement Benefits Other Than Pensions (SFAS 106). This new standard requires that the expected cost of postratirement benefits, primarly health and life insurance benefts, must be charged to expense during the years that employees render service ~ This is a algnificant change from the Company's current policy of recognizing these costs as paid. - Effecthe January 1,1993, CL&P wil I

adopt SFAS 106 on a prospective basis. CL&P anticipates that k wIl amortire ks SFAS 106 prior service obligation of approximately $164 milion over a 20-year period. The adoption of SFAS 106 WR1 Increase the direct cost of postratirement benefits by approximately $13 mBlion in 1993. The accrual of -

- the not SFAS 106 obligation is not expected to have a material impact on the financial position or on l

results of operations.- CL&P has petitioned its regulators for recovery of these costs, including those related to prior service.

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NOTES TO FINANCIAL STATEMENTS 10.

COMMITMENTS AND CONTINGENCIES Construction Program The construction program is subject to periodic review and revision. Actual construction expenditures may vary from estimates due to factors such as revised load estimates, inflation, revised nuclear safety regulations, delays, difficulties in the licensing process, the availability and cost of caphal, ard the granting of timely and adequate rate relief by regulatory commissions, as well as actions by other regulatory bodies.

CMP currently forecasts construction expenditures (including AFUDC) of $853.3 million for the years 1993-1997, including $184.5 million for 19G in addition, the Company estimates that nuclear fuet requirements, including nuclear fuel financeu through the NBFT, will be $269.2 million for the years 1993-1997, including $46.1 million for 1993. See Note 3 Leases for additional information about the financing of nuclear fuel.

Nuclear Performance CL&P has incurred approximately $88 million in replacement power costs associated with Millstone outages that occurred between October 1990 and February 1992. Recovery of prudently incurred replacement power costs is permitted, with lim!tations, through the FAC and GUAC.

Management believes that some portion of the remaining replacement power costs may be disallowed or subject to refund pending completion of regulatory reviews. However, management believes that its actions with respect to these outages have been prudent and does not expect the outcome of these reviews to have a material adverse impact on the Company's future results of operations.

i See Note 1 Summary of Significant Accounting Policies-Energy Adjustment Clauses, and l

Management's Discussion and Analysis for additional information regarding nuclear performance and l

energy adjustment clauses.

Environmental Matters CMP is subject to regulation by federal, state, and local authorttles with respect to air and water quality, handling and the disposal of toxic substances and hazardous and solid wastes, and the handling and use of chemical products.

The cumulattve long-term economic cost impact of increasingly stringent environmental requirements cannot be estimated. However, CMP has an active environmental auditing program to detect and remedy noncompilance wth environmental laws and regu'ations. CMP may incur significant additional costs, greater than amounts included in cost of removal and other reserves, in connection with the generation, transmission, and distribution of electricity and the storage, transportation, and disposal of by-products and wastes. CMP may also encounter significantly increased costs to remedy the environmental effects of prior waste handling and disposal practices.

CMP has recorded a liability for what it believes is, based upon information currently avaHable, the estimated environmental remediation costs for waste disposal sites for which it expects to bear legal liabHiry. To date, these costs have not been material with respect to the eamings or financial position of the Company. In most cases, the extent of dttional future environmental cleanup costs is not estimable due to factors such as the unknown magnitude of possible corraimination, the possible effects of future legislation ard regulation, the possible effects of technological changes related to future cleanup, and the difficuny of determining future liab,1!ty, if any, for the cleanup of sites at which I

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The Connecticut Light and Power Company x

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NOTES TO FINANCIAL STATEMENTS CL&P has been informed that it may be determined to be lega!!y liable by the United States Environmental Protection Agency. or the Connecticut Department of Environmental Protection.

In addition, CL&P cannot estimate the potentialliability for future claims that may be brought against it by private parties.

However, considering known facts and existing laws and regutatory practices, management does not believe that such rnatters will have a material adverse effect on CL&P's financial poshion or future results of operations.

Changing environmental requirements could hinder the construction of new generating units, transmission and distribution lines, substations, and other facilities.

Changing environmental requirements could also require extensive and costly modifications to CL&P's existing hydro, nuclear, and fossil-fuel generating units, and transmission and distribution systems, and could raise operating costs significantly. CL&P may also face significantly increased capital and operating costs for work centers, substations, and other facilities as a result of environmental regu!ations. However, CL&P believes that h is in substantial compliance with current environmental laws and regu!ations.

Hydro-Quebec Along with other New England utsities, CL&P, PSNH, WMECO, and HWP entered into agreements to support transmission and terminal facil!!ies to imoort electricity from the Hydro-Quebec system in Canada. The Company is obligated to pay, over a 20-year period, its proportionate share of the annual operation, maintenance, ard capital costs of these facDities. CL&P's share of Hydro-Quebec costs are currently forecast to be $103.8 mH! ion for the years 1993-1997, including $22.1 m!!! ion for 1993.

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Nuclear insurance Contingencies

[V The Price-Anderson Act currently limits public liability from a single incioent at a nudear power plant to

$7.9 bi!! ion. The first $200 mUiion of liability would be provided by pur.:hasing the maximum amount of commercially available insurance. Additional coverage of up to a toto of $7.3 bl!! ion would be provided by an assessment of $63 mi!! ion per incident, levied on each of the,116 nuclear units that are currently subject to the Secondary Financial Protection Program in the United States, subject to a maximum assessment of $10 mH! ion per incident per nuclear unit in any year, in addition, if the sum of a!! public liability claims and legal costs arising from any nudear incident exceeds the maximum amount of financial protection, each reactor operator can be assessed an additional 5 percent, up to $3.2 mDiion, or $365.4 million in total, for all 116 nuclear units. The maximum assessment is to be adjusted at least every five years to reflect inflationary changes. Based on CL&P's ownership interests in Millstone 1,2, and 3, and Seabrook 1. CL&P's maximum liability would be $144.9 mlilion per incident. In addition, through CL&P's power purchase contracts with the four Yankee regional nudear Generating companies, CL&P would be responsible for up to an additiona! $53.3 milion per incident. Payments for CL&P's ownership interest in nuclear generating facDities would be limited to a maximum of

$29.9 mD; ion per incident per year.

Insurance has been purchased from Nudear Electric insurance Lim!!ed (NEIL) to cover: (1) certain axtra costs incurred in obtaining replacement power during prolonged accidental outages with respect to CL&P's ownership interests in MDistone 1,2 and 3. Seabrook 1, and CY; and (2) the cost of repair, 7

replacement, or decontamination or premature decommissioning of utDlty property resutting from occurrences with respect to CL&P's ownership ir terests in Millstone 1,2, and 3, Seabrook 1, CY, MY, and VY. All companies insured with NEIL are subject to retroactive assessments if losses exceed the accumulated funds available to NEIL The maximum potential assessments against CL&P, witti respect to losses arising during current policy years are approximately $8.5 mi!Iion under the replacement power policies and $19.0 mDlion under the property damage, decontamination, and decommissioning 24

The Connecticut Light and Power Company k

NOTES TO FINANCIAL STATEMENTS policies. Although CL&P has purchased the limits of coverage currently avaHable from the corwentional nuclear insurance pools, the cost of a nuclear incident could exceed aval!able insurance proceeds, insurance has been purchased from American Nuclear insurers / Mutual Atomic Energy Liabt!!ry Underwriters, aggregating $200 million on an industry basis for coverage of worker cialms. All companies insured under this coverage are subject to retrospective assessments of $3.2 mRlion per reactor. The maximum potential assessments against CL&P with respect to losses arising during the current policy period are approximately $9.6 m!!! ion.

Financing Arrangements for the Regional Nuclear Generating Companies CL&P believes that the regional nuclear generating companies wl!I require add!!!onal extemal financing in the next several years for construction expenditures, nuclear fuel, and other purposes. Although the ways in which each regional nuclear generating company w!!! attempt to finance these expenditures have not been determined, CL&P expects that it may be asked to provide direct or indirect financial support for one or more of there companies.

EUA Power Corporation (EUAP)

CL&P could be affected by the ability of other Seabrook joint owners to fund their share of Seabrook costs. On February 28,1991 EUAP filed a voluntary petnion for protection under Chapter 11 of the United States Bankruptcy Code. EUAP's principal asset is its 12.13 percent joint ownership interest in Seabrook 1.

On February 5,1993, wth SEC approval, EUAP redeemed all of its preferred and con mon stock from hs parent company, terminating EUAP's status as a subsidiary of a public ut!!!ty hole;ing company and SEC jurisdiction under the 1935 Act. In addttion, EUAP also formally changed hs

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na ne to Great Bay Power Corporation (EUAP/GBP). A confirmation hearing on an amended plan of reorganization has been scheduled for the beginning of March 1993. If the Bankruptcy Court confirms the plan, it will still need to be approved by the NRC, New Hampshire Public Utility Commission, and FJRC.

CL&P and The Untted Itluminating Company (UI, an unaffiliated company) previously agreed to make certain advances up to $22 million to cover shortfalls in the funding of EUAP/GBP's ownership interest in Seabrook 1.

These advances were made under an agreement (1992 Agreement), which is scheduled to expire on February 28.1994, that granted CL&P and Ul a high priority lien on EUAP/GBP's ownership interest in Seabrook 1.

As of February 28,1993, there were no borrowings outstanding under the 1992 Agreement.

Whae furding urder the 1992 Agreement remains avatable to EUAP/GBP on a month-to-month basis, in February 1993. CL&P and Ul agreed, subject to the approval of the Bankruptcy Court ard SEC, to enter into a substitute arrangement to make advances up to $20 mHlion to EUAP/GBP for a period that will not exceed 300 days fonowing the first advance. CL&Ps share of this new commtment is limbed to 60 percent of the advances, or $12 mElion.

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FAIR VALUE OF FINANCIAL INSTRUMENTS in December 1991, the FASB issued Statement of Financla! Accounting Standards No.107 Disclosures About fair Values of FinancialInstruments (SFAS 107). SFAS 107 requires companies to disclose the estimated fair value of their financial instruments for which it is practicable to estimate fair value.

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The Connecticut Light and Power Company i

C NOTES TO FINANCIAL STATEMENTS k

I The following methods and assumptions were used to estimate the fair value of each of the fotiowing l

financial instruments:

l Cash and specialdeposirs: The carrying amount approximates fair value.

Nuclear decommissioning trusts: The carrying amount approximates fair value.

Preferred stock: The fair value of CL&P's fixed rate preferred stock is based upon the quoted market price for those issues or similar issues. Adjustable rate securities are assumed to have a fair va!ue equal to their carrying value.

Long-te.7n debt: The fair value of CL&P's fixed-rate long-term debt is based upon the quoted market price for those issues, or similar issues. Adjustable rate securities are assumed to have a fair value equal to their carrying value.

The carrying amount of CL&P's financial instruments, and the estimated fair value at December 31, 1992, is as follows:

Carrying Fair Amount Value (Thousands of Dollars)

Preferred stock not subject to mandatory redemption......

$ 231.196

$ 184 910 l

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$ 208 750 Preferred stock subject to mandatory redemption.

Long-term debt-First Mortgage Bonds............................

$1547.000

$1.594 643 j

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$ 545 805 Other long-term debt The fair values shown above have been reported to meet the disclosure requirements of SFAS.107 and do not purport to represent the amounts that those obilgations would be settled at.

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CASH AND SPECIAL DEPOSITS Cash and special deposits at December 31,1992 include $10 mlltion in special deposits that will be used to redeem $10 m!!! ion of CL&P's Pollution Control Notes.

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i The Connecticut Light and Power Company j

Report of Indeoendent Public Accountants

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l To the Board of Directors of The Connecticut Light and Power Company:

We have audited the balance sheets of The Connecticut Light and Power Company (a Connecticut corporation and a who!!y owned subsidiary of Northeast Utilities) as of December 31,1992 and 1991, and the related statements of income, common stockholder's equity and cash flows for each of the three years in the period ended December 31,1992. These financial statements are the responsibility of the Company's

-i management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance wtth generally accepted auditing standards. Those standards require that we plan and perform the audh 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, t'he financial statements referred to above present fairly, in all material respects, the financial posttion of The Connecticut Light and Power Company as of December 31,1992 and 1991, and the -

resutts of its operations and cash flows for each of the three years in the period ended December 31,1992, in -

conform!!y with generally accepted accounting principles.

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ARTHUR ANDERSEN & CO.

Hartford, Connecticut February 19,1993 t

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The Connecticut Light and Power Company

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d MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCtAL CONDITION AND RESULTS OF OFERATIONS This section contains management's assessment of The Connecticut Ught and Power Company's (CL&P or the company) financial condition and the principal factors having an impact on the results of operations. The company is a wholly owned subsidiary of Northeast Util!!ies (NU). This discussion should be read in conjunction with the company's financial statements and footnotes.

FINANCIAL CONDITION Overview The company's net income decreased to $206.7 ml!! ion in 1992 from $240.8 mHlion in 1991. The decrease is primarily attributable to higher operating expenses and lower revenues from sales to other utHities, partially offset by the August 1991 retaH rate decision and lower interest charges resutting from lower interest rates. RetaH sales for 1992 remained essentially unchanged due to a weak New Eng!and economy and cooler summer weather.

The weakened New England economy continues to adversely affect the company's financla! health.

The current economic downtum has been fett more severely in the New Eng!and region served by the company than in rnany other parts of the United States. The recovery is expected to be later and considerably less robust in New England than for other regions of the Unhed States. The

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company's most recent projection is that retaH sales wl!I increase only at a slightly less than 1 percent annual grc%th rate over the next two years.

Since 1990, when the 1,150-megawatt Seabrook plant began commercial operation at a time when the economic downtum nad already begun, New Eng!and's electric generating capacity has substantially exceeded demand. The addition of new capacity in New Engtard from the Hydro-Quebec Phase 11 interconnection and from qualifying cogeneration and small power production facMities that had been committed during the 1980s has increased the surplus capacity avalable in the region. As a resuit of the regional capacity surplus, which is expected to persist through 1995, the company experienced severely reduced revenues from the sale d surplus capacity to other utittties. The reduction in revenues from capactry sales has increased the revenues required to be recovered from retall customers putting upward pressure on the company's price of electrictry.

The price d electricity in New England is high relative to electrictry in many other areas of the United States. Relatively high state and local taxes. labor costs, and other costs of doing business in New England contribute, along wth rotatkely high energy costs, to compettike disadvantages for many industnal and commercial customers ci the company. These disadvantages have aggravated the pressures on business customers in the current weakened regional and national economic errAronment. Management has recogn! zed that t needs to be responsive to ks business customers, in particular, in dealing wth the cost of electricity, and to recogntze that many business customers have a!!ematkes such as fuel swhching, relocations, and self. generation.

Working independently, ard in concert with the Connecticut Department of Economic Dweiopment, the company has taken aggressNe actions to retain existing business customers and to attract business expansion to ts service territories. These economic development activities frequently.

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involve negotiated reductions in rates for ftxed periods of times, as well as technical support and energy conservation services. Negotiated rates coupled with energy conservation services are designed to be flexible enough to attract and retaia business, while minimtzing lost contribution.

On June 5,1992, NU acquired Public Service Company of New Hampshire (PSNH), the largest electric utliity in New Hampshire. The acquisition of PSNH by NU provides an opportunity to achieve an overall reduction in costs for cunent and future ratepayers of the company. Specific areas for expected cost savings indade a reduction in the operation and maintenance costs for the Seabrook nuclear power plant (Seabrook), the improved avalabHfty of PSNH's fossH steam generating facilities, the joint operation of the combined NU and PSNH systems, capachy cost benefits resutting from the dkorstry of peak loads between PSNH and the NU system, ano a reduction in purchasing, administrative, and general costs. These cost reductions will better enable the company to maintain affordable electric service and also reduce the threat that Rs largest customers will seek attematNe sources of electricity.

The company continues to pursue cost-management efforts whee maintaining reliable service. Labor is the cornpany's largest nonfuel operation and maintenance expense resource. An aggressive target of limiting overall growth in labor expenditures for 1993 to below the rate of inf!ation has been established. This will be accomplished while increasing labor costs committed to improving the performance of the nuclear un!!s.

Because of the prevalling economic climate, the company's 1993 financial objectives continue to be very conservative. The principal focus in the short-term is to rnaintain financial ratios ard samings at their current levels. A favorable decision in the ongoing retal rate case and the company's continuing coGmanagement efforts should bolster the company's samings in the long-run and enable the company to improve key financial indicators.

The company expects to adopt a change in the method of accounting for property tax expenses in the first quarter of 1993. Most municipathies in which the company operates, assess property values g

as of October 1. The company currerdy accrues property tax expense over the period October 1 x

through September 30 based on the lien date method. The r;ompany expects to change hs method of accounting for municipal property taxes to recognize the txpense from July 1 through June 30, to better rnatch the payment ard recognttion of services provirJed by the municipa!aies. This one-time change is expected to increase eamings by approximately f45 mRiion in 1993.

Rate Matters There is an increasing amount of deferred charges reflecta d on the company's balance sheets. The unrecovered contract obligation for Yankee Atomic Electric Company and the Unhed States Department of Energy deferred assessment added approximately $140.3 mElion in 1992. These tems, when added to the balance of deferred costs of nuclear plants, recoverable energy costs, deferred conservation and load-management costs (C&UA), and amort!zable property irwestment result in a sign!!icant amount of assets to be recovered in the future. The company is currentfy recovering some amounts of these deferred charges from customers, and management expects that substantia!!y a!! of the deferred charges wEl be recovered in the future.

Other deferred charges includes $17.9 mElion the company paid in 1992 to the developers of the proposed Killingty Energy Umtted Partnership and the Bio-Gen Project wood-toenergy plants, in retum for the developers' agreements not to complete those projects and sail approximately 45 megawatts of high cost power from the two plants to the company. Based on legislation requiring the company to make these payments and the Department of Public Utitty Controt's

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(DPUC) order approving the payments, the company expects to recover those payments, plus any Interest charges, from customers as part of the company's current rate proceeding. This buy-out is O

expected to save customers approximately $150 mulion over the next twenty-five years.

'Y The amount of deferred charDes will increase when the company adopts Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for income Taxes, in 1993.

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SFAS No.109, the company will reflect as a regulatory asset and a deferred tax liabHity the cumulative amount of income taxes associated wth timing differences for which deferred taxes have not been provided. When SFAS No.109 is adopted it wl!! increase both assets and liabilities by approximately $1.1 billion but will not have a material effect on net income. The company wDI also adopt SFAS No.106, Accounting for Postretirement Benefits Other Than Pensions, in 1993, but it is not expected to have a material impact on financial condition or resutts of operations. The company has requested recovery of SFAS No.106 costs in the pending rate proceeding.

See the Notes to Financial Statements for further details on deferred charges and accounting standards not yet adopted.

On February 17,1993, President Clinton announced a proposed tax package that would include an increase in the corporate income tax rate from 34 percent to 36 percent and an energy tax. The company estimates that the increase in the corporate tax rate, which would be retroactke to January 1,1993, would require an annual increase in revenues to be recovered from customers of approximately $20 m!!! ion. The company estimates that the proposed energy tax would increase revenues to be recovered from customers by approximately $75 mHlion when it is fully implemented in 1997. The energy tax, as proposed, would be phased-in evenly over three years beginning on July 1,1994. Actual impacts on the company and on revenues to be recovered from customers could vary significantly depending on the final form any legislation would take and how rules for implementing and administering the tax would unfold.

On December 11,1992, the company fDed with the DPUC, a request for rate relief. As an attemative 4(,

to the trad!!ional one-year increase, the company filed a mu!rlyear rate plan. The plan provides for approximately equal increases in efectric bills over the next three years. To accomplish this, the muttiyear plan would forego some eamings in 1993 in exchange for somewhat higher eamings in 1994 and 1995. In the event the DPUC was not prepared to consider the preferred mu!tlyear rate plan, the company also fi!sd on December 11, 1992, a traditional application to support amended rate schedules designed to increase the company's annual revenues by approximately $250 m!!! ion, or 12.5 percent.

On March 12,1993, the company filed updates to its traditional application. As. updated, annua!

revenues would increase by approximately $279 m!!! ion or 13.9 percent on May 1,1993. On February 17,1993, the company feed updates to its December 1992 application which revised the t

muftiyear plan. As proposed by the updates and the revised plan, customer's bills would increase by 6.2 percent on May 1,1993,4.6 percent on May 1,1994, and 4.6 percent on May 1,1995. These increases would increase bEls in aggregate by $343 million over the period.

The DPUC has indicated that it would consider a muftiyear plan, but extended the date for new rates to be effective to July 1,1993. Any subsequent increases under the muttiyear plan would be effective annually thereafter. Hearings are scheduled in March and AprB 1993 wtai a JmA5on expected in June 1993.

On September 30,1992, the DPUC approved a new Conservation Adjustment Mechanism (CAM),

wtilch allows the company to recover C&!.M costs to the extent not recovered through current rates. (

The 1991 retall rate decision provided for recovery of C&UA costs over a ten-year period wth a retum on the unrecovered costs.

The unrecovered C&LM costs at December 31,1992 are

$87.5 million.

On December 29,1992, the company filed an application w!!h the DPUC for approval of budgeted C&UA expenditures for 1993 of $47.5 million and a proposed CAM for 1993. The company has proposed a lower rate than currently in effect, reduction in the amortization period from ten to six years, and higher incentives. The current CAM will remain in effect until a new charge is approved.

The company has incurred approximately $88 million in replacement power costs associated with Millstone outages that occurred over the period October 1990 through February 1992. These outages are the subject of th'e ongoing prudence reviews being conducted by the DPUC. On December 15,1992, the company notified the DPUC that it wi!! not request recovery of $6.5 million in replacement power costs associated with an October 1991 Millstone 1 outage, and the DPUC has terminated its review of this outage. The outage was necessary to permit extensive training of the unti's nuclear operators. On December 30,1992, the company received a decision in a second prudence review ordering a refund of $2.9 mi!! ion in replacement power costs. Decisions on the remaining reviews are expected in 1993. Recovery of prudently incurred replacement power costs is permitted, with limitations, through the fossil. fuel adjustment clause (FAC) and generation utihzation adjustment clause (GUAC).

Primarily as a resu!! of these outages, the GUAC-nuclear capacity factor for the year ended Jafy 31, 1992 was 46 percent resutting in a GUAC-deferral of $144 million. The company is currently recovering $96 million of this deferral over the 16-month period September 1992 through December 1993. This amount represents the replacement power costs, as calculated under the GUAC-deferral mechanism associated wth a GUAC-nuclear capacity factor of 55 percent. The company is seeking recovery of the GUAC-deferred costs resulting from the GUAC-nuclear capacity factor being below 55 percent in its request for rate relief ($41.5 million a'ter adjusting for the October 1991 Mi!Istone 1 l

outage).

The DPUC has also opened a docket to review the 1992 outage at Millstone 2 to replace the steam generators and perform scheduled refueling and maintenance activities at the unit. The outage commenced on May 29,1992, the steam generator replacement was completed in December 1992, and the unit retumed to service on January 13,1993.

Management believes some portion of the replacement power costs may be disa!! owed or subject to refund pending completion of the DPUC regulatory reviews. However, management believes that its actions with respect to these outages have been prudent and does not expect the outcome of the regulatory reviews to have a material adverse impact on the company's future eamings.

CL&P owns 34.5 percent of the common stock d Connecticut Yankee Atomic Power Company (CY), a regional nuclear generating company. During the 1987-1988 refueling outage, repairs were made to the CY un!!'s thermal shield. During an extended 1989-1990 refueling outage, the thermal shield was removed due to continued degradation. The DPUC authorized a revew d these outages.

On October 14,1992, the DPUC disallowed CL&P's recovery of $3 m!!! ion in replacement power costs and $230,000 of rotated operating and maintenance costs resu! ting from CY's 1989-199:)

extended outage. CL&P has appealed the DPUC's decision.

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Environmental Matters The company devotes substantial resources to identify and then to meet the muttitude of environmental requirements h faces. The company has active aud!!ing programs addressing a variety of different regulatory requirements, including an environmental auditing program to detect and remedy noncompliance with environmentallaws or regulations.

To date, the estimated environmental remediation costs for shes which the system companies expect to bear legal liability have not been material with respect to the earnings or financial position of the company. The extent of additional future environmental cleanup costs is not estimable due to factors such as the unknown magn!!ude of possible contamination, however, considering known facts and existing laws and practices, management does not expect these costs to have a material adverse impact on the company's financial position or future resutts of operations.

The company expects that the implementation of the 1990 Clean Air Act Amendments WHI require only modest emissions reductions because of the company's investment in nuclear energy in the 1970s and 1950s and a commitment to buming low sulfur fuels at its fossH-fired plants. This should i

serve as a competitive advantage, since many of the company's electric utiitty competttors wuI have significantly increased costs to meet this environmental standard.

For information regarding nuclear decommissioning, environmental matters, and other contingencies, see the Notes to Financial Statements.

Nuclear Performance l

CL&P owns 81 percent of MI!! stone Units 1 and 2 and 52.933 percent of Mi!! stone Unit 3.

The performance of the three Mi!! stone nuclear electric generating un!ts was less than satisfactory in 1992 despite some improvement over 1991. The three units' composite capacity factor was only 55.2 percent in 1992, compared with 38.4 percent in 1991 and a 1992 national average of 69.7 percent. The low 1992 capacity factor was the result of the 1992 Millstone 2 steam generator replacement project and some unexpected technical and operating difficulties.

In an effort to improve its nuclear performance, NU management in 1992, undertook a Performance Enhancement Program (PEP). The PEP was developed in response to an intens}ve self-assessment which indicated that aggressNe management actions were needed to address detailed action plans to improve performance. Forty-two action plans were devised to correct problems wth work procedures, operations, and employee relations. Several of these plans were completed in 1992 and are now being tested. Additional plans wi!! be implemented in 1993 and all wuI be in place by the end of 1997. The program was designed to ensure that the plants operate superbly with concem for safety, cost-effectiveness and efficiency.

As a resutt of PEP, NU has begun to add approximately 450 pos!! ions to its existing authorized nuclear staff and to increase its planned expenditures by about $35 mHlion to $40 mHlion annually over the next frve years. NU expended approximately $12 mHlion in 1992 for PEP. To offset this increase. NU has increased its cost-management efforts in other areas. NU management expects that total authorized personnellevels will continue to be reduced even wth the additional employees in nuclear.

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Liquidity and Capital Resources

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Cash provided from operations increased $9.7 mHlion in 1992, compared with the same period in i

1991, Cash used for financing actbties decreased $56.2 mulion in 1992, compared with the same period in 1991, primarDy due to somewt',at higher borrowings and lower common and preferred stock dividends. Cash used for investments increased $60.2 million in 1992 compared with the same period in 1991, primarDy due to increases in investments in utHity plant.

The only new money financing in 1992 was a sale of $100 mHlion of seven-year 7.25 percent First Mortgage Bonds which were used to repay short-term debt. To take advantage of favorable market conditions during 1992, the company refinanced $370 million of First Mortgage Bonds, $75 million of preferred stock, and $21 mHlion of po!!ution control bonds, in addition to restructuring of the company's various cred!! lines. An additional $12 million preferred stock redemption was done using short-term debt. It is estimated that the 1992 refinancings and restructuring wHI save the company approximately $15 mH! ion in 1993.

Under current forecasts, no new money financing is planned for 1993. This assumption is dependent in part on a favorable decision in the company's pending rate case. Required funding will be obtained from intema!!y generated funds and nuclear fuel trust financings. The company intends, if market conditions permit, to continue to refinance a portion of its outstanding long-term debt and preferred stock at a lower effective cost.

Short-term borrowing needs of the company are first met with available funds of the other NU subsidiaries, including funds borrowed by NU, through the NU Money Pool. Certain subsidiaries of NU established the Money Pool to provide a more effective use of the cash resouces of the NU system and to reduce outside short-term borrowings. Investing and borrowing subsidiaries receive or pay interest based on the average daily Federal Funds rate, except that borrowings based on

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loans from NU bear interest at NU's cost. Funds may be withdrawn or repaid to the Money Pool at any time without prior notice. At December 31,1992, the company had no borrowings outstanding

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under the Money Pool.

The company's 1992 construction expenditures were $227.6 mHlion. The company's most sign!ficant 1992 construction project was the replacement of the two Millstone 2 steam generators. The project cost approximately $198 million (including s!!owance for funds used during construction (AFUDC) but excluding the cost of replacement power).

The company's construction program expenditures, including AFUDC, for the period 1993 through 1997 are estimated to be approximately $853.3 million including $184.5 for 1993. The construction program's main focus is maintaining and upgrading the existing transmission and distribution system and nuclear and fossH-generating facilities. The company expects to spend 67 percent of its construction budget on transmission and distribution,29 percent on generating stations, and the i

remaining 4 percent on computers, telephones, and general office facDities. The company does not foresee the need for new major generating factitles unti the year 2007.

The company and Westem Massachusetts Electric Company continue to uttize a nuclear fuel trust j

to finance nuclear fuel requirements for their shares of Malstone Un!!s 1, 2, and 3.

As of December 31,1992, the company's portion of the trust's investment in nuclear fuel, net of the fourth quarter 1992 lease payment rnade on January 31,1993, was $164.3 mRiion.

Nuclear fuel requirements for CL&P's share of MElstone Units 1,2, and 3 of $262.0 mBlion for the years 1993 through 1997, including $44.3 mElion, for 1993 are expected to be financed by the trust.

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in addhion to construction and nuclear fuel requirements, the company is obligated to meet 5642.3 million of long-term debt and preferred stock maturities and cash sinking-fund requirements g

for the years 1993 through 1997 including $149.6 million for 1993.

In connection with NU's acquisition of PSNH, the DPUC imposed certain financial cond!! ions on the company. The principal conditions provide for a DPUC review if the company's common equ!ty falls to 36 percent or below, require DPUC approval for NU financings secured whh CL&P stock or assets, and obligate NU to use best efforts to sell CL&P preferred or common stock to the public if NU cannot provide CL&P's need for equity capitat. At December 31,1992, the company's common equity ratio is 38.4 percent.

RESULTS OF OPERATIDNS Operating Revenues Operating revenues increased $40.7 million from 1991 to 1992 and increased $105.7 million from 1990 to 1991. The components of the change in operating revenues for the past two years are provided in the table below.

Change in Operating Revenues increase /(Decrease) 1992 vs 1991 1991 vs 1990 (Milhons of Dollars)

Regulatory decisions

$72.7 5 34.5 Fuel and purchased power cost recoveries 20.0 28.8 Sates and other revenues (52 0) 42 4 Total revenue change

$40.7 E

Revenues related to regufatory decisions increased in 1992, as compared to 1991, primarEy because of the August 1991 DPUC retaB rate decision. Fuel and purchased power cost recoveries increased due to higher energy costs. Sales and other revenues decreased primarHy as a result of 1992 sales to other utilities that took place at lower prices per kilowatt-hour and the 1991 one-time reimbursement of costs.

Revenues related to regu!atory decisions increased in 1991, as compared to 1990, primarDy due to the August 1991 DPUC reta# rate decision. Fuel cost recoveries increased primar9y due to a higher level of outside energy purchases. Sales and other revenues increased primarDy because of a one-time reimbursement under a settlement agreement associated with the reactivation of various units at two fossH generating facHtties.

Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power increased $39.2 mDiion in 1992, as compared to 1991, primarily due to the timing in the recovery of fuel expenses under the provisions of the company's fuel adjustment clauses, and previously deferred replacement power costs that are not recoverable as a result of prudence reviews in Connecticut.

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Fuel, purchased and net interchange power decreased $13.7 m!!! ion in 1991, as compared to 1990,

['g primarily because of the matching of revenues and expenses under the provisions of the company's

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energy adjustment clauses, partia!!y offset by a higher level of higher priced outside energy purchases in 1991.

Other Operation and Maintenance Expenses Other operation and maintenance expenses increased $4.0 mH! ion in 1992, as compared to 1991, primarily due to higher 1992 costs associated with scheduled refueling and maintenance actMties at nuclear and fosst un!ts, pipe inspection actMties at the Millstone units, and PEP actMties, partiatly offset by 1991 costs associated with the voluntary early retirement programs and lower 1992 conservation expenses.

Other operation and maintenance expenses increased $43.5 mDlion in 1991, as compared to 1990, primarily due to higher costs associated w!!h voluntary early retirement programs ard the commercial operation of the Phase 11 Hydro-Quebec project.

Depreciation Expenses Depreciation expenses increased $11.3 mHiion in 1992, as compared to 1991, primarDy as a resu!t of higher 1992 decommissioning levels, higher 1992 depreciable plant balances, and higher rates.

Depreciation expenses increased $29.7 mlition in 1991, as compared to 1990, primarDy as a resu't of a regulatory decision that required the company to retum, in 1990, excess deferred taxes associated with net-of-tax AFUDC and higher depreciable plant balances in 1991.

Amortization / Deferrals of Regulatory Assets, Net

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Amortization / deferrals of regulatory assets, net increased $17.8 million in 1992, as compared to 1991, primarily because of higher amortization of Millstone 3 phase-in retum and Seabrook deferred expenses.

Federal and State income Taxes Federal and state income taxes increased $55.3 ml!! ion in 1991, as compared to 1990, primarily because of higher book net income before taxes ard lower investment tax credit amortization, partially offset by an adjustment for concluded revenue agent reviews.

Taxes Other than income Taxes Taxes other than income taxes increased $5.4 million in 1992, as compared to 1991, and $4.0 mRiion in 1991 as compared to 1990, primarily due to higher property taxes and higher Connect' cut gross eamings taxes due to higher revenues.

Deferred Nuclear Plants Retum Deferred nuclear plants retum decreased $6.3 mD! ion in 1992, as compared to 1991, primarRy because of a decrease in Millstone 3 deferred retum because additional MHistone 3 investment was phased into rates.

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rg Write-Off of Plant Costs N

Write-off of plant costs in 1990, which did not recur in 1991 or 1992, reflects the write-off of the company's investment in Seabrook as a result of a 1990 settlement agreement approved by the DPUC.

Interest Charges Interest on long-term debt and other interest decreased $12.6 m!!!!on in 1992, as compared to 1991, primarily because of lower average interest rates Interest on long-term debt and other Interest decreased $16.1 million in 1991, as compared to 1990, primarily because of lower interest rates and lower capital requirements.

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The Connecticut Light cnd Power Company SELECTED FINANCIAL DATA

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Years Ended December 31.

1992 1991 1990 1989 1988 (Thousands of Dollars)

Continuing Operations:

i Operating Revenues......

$2,316,451

$2,275,737

$2,170,087

$2,069,559

$1,896,813 Operating income.........

287,811 323.835 320,641 327,220 -

278,663 Net income.............

206,714 240,818 224,783 207,875 221,544 Discontinued Gas

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Operations:

124,229 200,243 l

Operating Revenues Operating income.......

12.563 21,790 Net income 6,630 10,979 Cash Dividends on Common Stock..

164,277 172,587 179,921 155,972 160,364 Total Assets........

5,582,806 5,338,441 5,176,784 5,148,120 5,423.862 Long-Term Debt *..........

2,087,936 2,023,268 2,101,334 2.147,892 2,323.274 Preferred Stock Not Subject to Mandatory Redemption..........

231,196 306,195 306.195 306,195 256,195 Preferred Stock Subject to Mandatory Redemption *...

200,000 141,892 146,892

-151,892 81,832 Obligations Under Capital Leases *...........

197,404 208,924 233,919 252,652 310,137

Includes portions due within one year.

STATEMENTS OF QUARTERLY FINANCIAL DATA (Unsudited)

Quarter Ended 1992 March 31 June 30 Sectember 30 December 31 Fhousands of Dollars)

Operating Revenues.......

M

$547.010 jgg4fgg gjgg,g7J Operating income.........

1,,,,gg,gg M

$ 75 438

$ 62.641 Net income..............

$ 68 042

$ 40 615

$ 55145

$ 42.912 1991 Operating Revenues........

$577.310 gggg,4,gg 1575.076 1124,,j22 Operating income..........

$ 89 419

$ 78 080 M

M Net income..............

$ 66 490

$ 57.380

$ 67.778

$ 49.170 s.

W The Connecticut Ught and Power Company STATISTICS Gross Electric Utility Plant

' Average December 31, Annual Electric (Thousands of kWh Safes Residential Customers Employees

'l Dottars)

(Millions) kWh Use (Averace)

(December 31.)

1992

$6,100,680 25,809 8,501 1,075,425 3.028

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1991 5,986,269 24,992 8,435 1,069,912 3,364 1990 5.881,499 25,039

.8,434 1,064,695 3,517.

1989 5,732,850 25,078 8,570 1,054,055 3,556 1988 5.624.464 24,138 8,525 1,036,593 4,022

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The Connecticut Ught cnd Power Company First and Refundino Mortance Bonds Trustee and Interest Paying Agent Bankers Trust Company, Corporate Trust and Agency Group

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P.O. Box 318 Church Street Station, New York, New York 10015

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The First National Bank of Boston, Corporate Trust Department P.O. Box 1897, Boston, Massachusetts 02105

- Shawmut Bank Connecticut, N.A. Bank, Corporate Trust Department 777 Main Street, Hartford, Connecticut 06115 Preferred Stock Transfer Agent, DMdend Disbursing Agent and Registrar Northeast Utilities Service Company Shareholder Services P.O. Box 5006, Hartford, CT 06102-5006 1993 DMderd Payment Dates 5.28 %, 9.00 %

$3.24, $4.48 H and $4.48 i Series -

January 1, April 1. Jufy 1, and October 1 4.50 % (1956), 4.96 %, 6.56 %

$1.90, $2.00, $2.04, $2.06. $2.09, and $2.20 Series -

February 1. May 1, August 1, and November 1 3.90 %, 4.50 % (1963), 7.60 %, 9.10 %

$3.80 and 7.23% Series -

March 1, June 1. September 1, and December 1 i

DARTS *"

'j February 2, March 23, May 11 June 29

's August 17, October 5, and November 23 Address General Correspondence in Care of:

Northeast Utilities Service Company investor Relations Department P.O. Box 270 Hartford, Connecticut 061410270 Tel. (203) 665-5000 General O'fice Selden Street, Berlin, Connecticut 060371616

Trustee and interest paying agent (except as noted below) for first mortgage bonds issued urder the indenture of The Hartford Electric Ught Company. Effective at the close of business on June 30,1982 The Hartford Electric Ught Company was merged into The Connecticut Ught and Power Company.

" Paying agent for the 41/4% 1963 Series and 41/2% 1964 Series.

"* Transfer and Paying Agent:

Bankers Trust Company, Corporate Trust ard Agency Group P.O. Box 318, Church Street Station, New York, New York 1001S

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The data contained in this Annual Report is submitted for the sole purpose of providing information to present stockholders about the Company. t

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