ML20044F215
| ML20044F215 | |
| Person / Time | |
|---|---|
| Site: | Yankee Rowe |
| Issue date: | 12/31/1992 |
| From: | Jeffery Grant, Kadak A YANKEE ATOMIC ELECTRIC CO. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| BYR-93-042, BYR-93-42, NUDOCS 9305270212 | |
| Download: ML20044F215 (23) | |
Text
L YANKEE ATOMICELECTRIC COMPANY
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580 Main Street. Bohan, Massachusetts 01740-1398 May 20,1993 BYR 93442 U. S. Nuclear Regulatory Commission Document Control Desk Washington, DC 20555
Reference:
License No. DPR-3 (Docket No. 50-29)
Subject:
1992 CERTIFIED FINANCIAL STATEMENTS To Whom It May Concern:
In accordance with 10 CFR Section 140.15 and Section 50.71, enclosed is a copy of Yankee Atomic Electric Company's Annual Report for 1992. This report contains the annual certified financial statements for the three-year period ending December 31,1992.
Sincerely, YANKEE ATOMIC ELECTRIC COMPANY d
- rulN, I7a'1l fa e M. Grant Sey or Licensing Engineer i
Enclosure c:
M. Fairtile, USNRC, NRR USNRC Region I F500.'1:3
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Yankee Atomic Electric Company AnnualReport 1992
______________________-____________________-_M
Contents Psge a
Description of Business...
1 Common Stock Ownership....
1 President's Letter.
2 Report of Independent Certified Public Accountants..
4 Selected Financial Data.
5 Financial Review.
5 Statements of Income and Retained Earnings.
6 Balance Sheets.
7 Statements of Cash Flows.
8 Notes to Financial Statements..
9 21 OfEccrs of the Company.
Board of Directors.
21 is 9
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YANKEE ATO31IC ELECTRIC CO31PANY 580 31AIN STREET IlOLTON,31ASSACIIUSETFS 01740 Yankee Atomic Electric Company (the Company), an electric utility company, was incorporated in 31assachusetts in 1954 under the provisions of the 31assachusetts utility law which permit two or more cIcctric companies to join in the construction and operation of a generating plant to serve their common needs.
The organiention of the Company wa< sponsmed by New England utilities for the purpose of constructing and operating New England's first nuclear power plant. The plant is located on the Deer 6 eld River in the Berk hire flills in the town of Rmve, 31assachusetts. During its 32 years of operation, the plant generated over 34 billion hours of electricity. On February 26,1992, the Board of Directors of the Company decided to permanently discontinue power operation of the plant, and in time, decommission the facility. The decision to permanently retire the plant was based on continuine regulatory uncertainty and economics. The ten sponsoring utilities who own the entire common capital stock of the Company are oblicated to par the Company an amount equal to the total operating expenses plus a return on invest ment.
In 19M, the Securities and Exchange Commission authorized the Company to organize a Nuclear Ser ices Division under the Company's corporate structure. The N uclear Services Division has a staff of approximately 400 engineers who provide engineering services in all aspects of nuclear power plant d
construction and operation including Nuclear Engineering, Em ironmental Engineering, Operations, Quality Awurance, Plant Engineering and Fuel 31anagement. Services are performed on a cost basis for the Yankee plant and other power plant of the sponsorine companies. A limited amount of work is performed at a pro 6: for other companies in the United States and abroad.
y Comman Stoc k Ownership Ownership 5 hares Perceritage Ow ned New England Power Company 30.05 46,020 The Connecticut Light and Power Company 24.5 37,583 llo ton Edison Compan>
9.5 14,573 Central 31aine Power Compan3 9.5 14,573 Public Service Company of New llampshire..
7.0 10,738 Western 31assachusetts Electric Company 7.0 10,738 31ontaup Electric Company 4.5 6,903 Central Vermont Public Service Corporation 3.5 5,369 Commonwealth Electric Company 2.5 3,835 Cambridge Electric Light Company.
2.0 3,068 100.05 153,400
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l February 12; 1993 President's Letter e
Since the February 26,1492 decision of the Company's Board of Directors to permanently cease pmser operations of the Yankee Nuclear Power Station, Yankee's primarv focus has been the orderly transition from an operating company to an engineering sen ices company. The first step in the process was to seek necessary regulatory approvals to convert the Yankee plant's operating license to a possession only license This was accompli-hed on August 5,1992 with the receipt of the Porerion Only License.
Yankee was then able to seek additional regulatory relief imm Nuclear Regulatory Commission requnemento that permitted the Company to plan for an orderly reduction of staE, thereby reducing the cost of maintaining the Yankee phnt in a safe shutdown condition. As a result of the Company's aggressive eHorts, the Yankee plant stafI was reduceJ from 220 to 59 as of January 1,1993 while still meeting all applicable regulatory requirements. Thh has resulted in the Company reducing costs a sociated with the Yankee plant.
These eHorts bas e allowed tae Company to ove over $14 million relative to the econcmic projections d-veloped from the shutdown decision.
The Company i-now preparing a decommirioning plan which will lead to the ultimate dismantlement of the Yankee plant. This plan will be submitted to the Nuclear Regidatory Commission in the fall of 1993.
On June 1,1992, the Company made 1 rate filing with the Federal Energy Regulatory Commission.
On December 17,1942, the Company filed a settlement agreement resolving all issues asociated with this Proceeding The sett!cment permits the Company to increa-e decormnirioning trust collections, continues reture on equity, and allows the &cm ery of nearly all of Yankee's asset,lue as well as the cost of maintaining the facility until actual decommissioning begins. As of this due, all parties except one, represcuting les than 0.55 of the Yankee plam's res ence, bas e agreed to the settlernent agreement.
The transition to an engineerinc service company also proceeded exceedingly well with the signing of master sen ices acreements with Northeast Utilities and Boston Edison. With the signing of these agreements, Yanker becomes a regional nuclear engineering senices company providing on call support to all New England nuclear plants.
Yanker has also expanded its engineenne surport services to non-afiiliates. Yankee has won con tract s with the Electric Pou c-Research Ir:stitute. Texas Utilitin, Tahvan Power Corporation, General Electric, the Depart ment of Energy. Tennessee Valley Authority, Iowa Electric and Westinghouse, a* examples.
In 1992, Yankee's Nuclear Services Dividon continued to yroule strong, reliab!c technical support to Vermont Yankee, Maine Yankee and Seabrook.These plants continue to be the core of Yankee's engineering services budness. In 1992, Yankee's Nuclear Senices Division generated $55.] million in revenues, $1.6 million of that figure was from non-atiliates.
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Despite the fact that the Yankee plant did not operate in 1992, financial performance was still good.
Yankee's earnings in 1992, prior to recording the adjustments related to the settlement acreement, were
$2.67 million which transl.ites into a 125 return on equity. As part of the settlement agreement, Yankee was required to write oH S3 million of assets reducing net ir.come to approximately $1 million (net of taxes and adjustments). In 1992, Yankee successfully renecotiated its leng. term debt, allowing for an orderly pa3down, wlule providing financial resources for continued operation of the Company. Part of the agreement was to apply dividends, normally paid out to st ueholders, to reduce the outstanding debt.
Yankte expects the debt to 1,e retired by 1997.
1992 was an exceedingly dificult year for the Company due to the shutdown of the Yankee plant.
The first phase of the transition to an engineering services company has been successfully completed. In 1993, Yankee will continue to seek ways to reduce costs and improve competitiveness so that the Company can continue to ; rovide high value services to Ne. England utilities and other clients.
hz u k 0 Andrew C. Kadak Praident & Chir.i Executive Oficer m
4 3
W
COOPERS & LYBRAND Report al Inde;cndent Certified Pi.blic.kcuniants um t ATome Eu cTruc Cowasy llolton, Massachusetts We have audited the accompanying balance sheets of Yankee Atomic Electric Company as of December 31,1992 and 1991, and the related statements of income and retained tarnings and cash flows for each of the three 3 ears in the period ended December 31, 1942. These finaricial statements are the re pon6ibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examinine, on a test basis, evidence supporting the amounts and disclosuies in the 6nancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management. as well a< evaluating the overall financial statement presentation. We believe that our audits proside a reasonah!c basis for our opinion.
In our opinion, the 6nancial statements referred to above present fairly, in all mnterial respects, the 6nancial po<ition of Yankee Atomic Electric Company as of December 31,1992 and 1991, and the results of its operations and its cash flows for each of the three years in the period ended December 31,1992, in conformity vith gencrally accepted accounting principles.
lloston, Tlas-achu'etts i
l February 12,1993
- _ - +,
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Sele'cted Financial Data (in thou< ands, except where noted)
Year Ended December 31, 1992 1991 1940 1989 1988 Operating revenue:
Electric saic.
$ 74,414 $ 73,493 5 70,118 $ 68,433 $ 64,688 Encineering services.
40,351 37,545 39,092 35,521 31,904 Total.
3114,765 $111,038 $109,210 $103,954 5 96,592 Operating income.
$ 5,929 5 5,380 $ 5,430 $ 5,387 $ 3,657 Net income (low).
468 $ 2,791 $ 2,853 $ 2,447 $
(476)
Common dividends..
$ 2,838 $ 2,838 $ 2,424 $
Total a n ts.
3506,075 $142,335 $129,996 $107,138 $108,927 1,ong-term debt.
$ 30 000 $ 30,000 $ 30,000 $ 8,000 $ 18,000 Short-ter n debt.
$ 6,250 $ 6,265 5 17,390 $ 16,683 Earnings (h.-s) per share ($ per share).
6.31 $ 18.20 $ 18.60 $ 15.95 $ (3.10)
Return on Equity (penent).
4.45 12.95 13.2Tc 11.4 %
(2.2%)
Net generation (millions of kwh;.
N/A 992 826 1,307 1,117 Power cost (e per kwh)..
N/A 7.4e 8.5 e 5.2e 5.8e Financial Review On February 26,1992, Yankee's Board of Directors decided to permanently cease power operation l
of the Yankee plant and, in time, decommission the facility. The Company has power contracts with its stockholder utilities, which require these utilities to pay the Company an amount eoual to the total operating expenses, plus a return on investment. The Company also operates a Nuclear Services Division which furnishes engineering services to the Yankee plant and to other New England power projects on a co.t basis.1,imited engineering work is also performed for others at a profit.
The Compan) 61ed with the Federal Energy Regulatory Commission to recover any unrecovered assets and au costs incurred afte: the shutdown decision until the plant is decommissioned. These financial statements have been prepared con <istent with the proposed settlement agreement to the filing. See Note H of " Notes to Financial Statements" fer additional information regarding rate proceedings.
Although there was no neneration in 1992, fuel expense included provisions for amortization of the last core and estimated Department of Energy aserments. See Note C of " Notes to Financial Statements" for Jmtional information regarding nuclear fuel.
Net income decreased $1,800,000 from 1991 to 1992 due primarily to the $1,700,000 after tax write-ofi and adjuctment to umecos cred awets per the settlement agreement. This also accounted for decreases in earnings per share and return on equity. The earnings per share and return on equity before these items were $17.40 and 12.07, respectively.
During 1992, the Company's lann-term debt arrangements were amended and short term lines were terminated. As a result, no disidends a ere paid in 1992 and, a of December 31,1992, the Company had no additional available credit. The Company is pursuing additional caedit lines. See Notes D, E, and F of " Notes to Financial Statements" for additional information regardine long. term debt, short-term debt, and retained earnings.
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Statements of Income and Retained Earnings Year Ended December 31, 1992 1991 1991 Operating revenues (Note A):
Electric sales.
$ 74,414,340 $ 73,492.876 $ 70,117,548 Engineering senices to others...
40,351,095 37,545,223 39,092,385 Total operating revenues..
114,765,435 111,038,099 109,209,933 Operating expenses (Note Ah Fuel (Note C).
1,086,693 9,148,343 7,710,687 Operations 33,589,461 24,849,018 26,473,262 Engineering..
55,145,524 56,081,343 31,520,538 31aint enance.
2,374,875 2,662,946 5,580,786 Decommissioning (Note H).
5,650,000 5,650,000 5,650,000 Depreciation..
3,073,707 2,928,544 1,359,291 Taxes, other than federal income.
5,138.851 3,573,678 3,890,551 Federal income taxe, (Note G).
2,777,18,
,64,579 1,594,630 Total operating expenses 108,836,298 105,658,453 103,779,745 Operating income.
5,929,137 5.379,646 5,430,188
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Other income (expense):
Allowance for equity funds used during construction (Note A)..
155,720 Interest on tax refunds..
(18,360) 589,461 Asset write. ort, net (Note BL (1,701,525)
Other, net.
236,142 25 53,095 Total other income (expense).
(),328,023) 589,486 53,095 Operating and other income.
4,601,114 5,969,132 5,483,283 Interest:
Interest on long-term debt.
3,532,475 2,765,752 1,914,906 Interest on short. term debt..
38,760 485,963 1,137,286 Other inte2e t, net.
287.563 64,830 65,264 Allowance for borrowed funds used during construction (Note A)..
(225,542)
(138,900)
(486,820)
Total inter est.
3,633,196 3,177,645 2,630,636 Net income.
967,918
$_ 2,791,487 $ 2,852,647 Retained earnings.
Retained earnings at begmmng et year..
> 3,o49,566 5 5,695,979 $ 5,681,232 Net income.
967,918 2,791,487 2,852,647 6,617,484 8.487,466 8,533,879 Dividends paid..
2,837,900 2,837,900 Retained earnings at end of year (Note F).
$ 6,617,484 $ 5,649,566 $ 5,695,979 Per share data:
Earnines per share.
56.31
$18.20
$18.50 Dividends pet share..
$18.50
$18.50 The accompanving notes are an integral part of these financial statements.
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Balance Sheets Decembrr 31, 1992 1991 ASSETS Utility plant, at original cost.
5 136,960 $108,868,918 Less accumulated provisions for depreciation.
83,143,095 136,960 25,725,823 Construction wmk in progress.
4,355,690 Nuclear fuel, at amortized cost 15,128,853 Net utility plant (Notes A, B and C).
136.960 45,210,366 Decommissioning trust (Note H)..
73,103,505 63,781,054 Nonutility property, less accumulated provisions for depreciation of
$869,469 and $795,102.
579,126 653,493 Other investments.
1,671,286 1,607,229 Current arets:
Cash 6,399,832 54,9S6 Accounts receivable (Note A):
Engineering services to others 7,663,949 6,640,663 Electric sales 7,500,998 12,760,600 Other..
106,381 105,026 Materials and supplies, at amortized average cost (Notes A and B).
672,492 Prepayments and other..
3,617,463 335,529 Total current assets.
25,288,623 20,569,296 Deferred federal 2nd state income taxes (Note G)..
3,012,293 10,513,365 Net umecovered assets (Notes A & B).
45,600,000 Regulatory as et (Notes A & B)..
356,683,000
$506.074,793 $142,334.803 CAPITALIZATION AND LIABILITIES Capitalization:
Capital stock, par value $100 per share; 153,400 shares authorized 4 15,340,000 s 15,340,000 and outstanding..
Retained earnings (Note F).
6.617,484 5,649,566
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Long-term debt (Note D).
24,000,000 30,000,000 Total capitalization..
45,957,484 50,989,566 Current liabilities:
Long term debt due within one year (Note D)..
6,000,000 Short-term debt (Note E).-
6,250,000 Accounts pay able.
8,108,117 11,233,645 Accrued interest.
205,232 272,246 Total current liabilities..
14,313,349 17,755,891 Decommissiomng reserve (Note H).
83,037,369 72,118,419 Accrued pension liability (Note 1)..
5,706,969 993,064 Unamortized investment tax credits (Note G).
376,622 477,863 Regulatorv liability (Notes A & B)..
356,683,000 s
Commitments and contingencies (Notes B, C, H and J)...
5506.074,743 $142,334,803 The accompanying notes are an integral part of these financial statements.
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Statements of Cash Flows Year Ended December 31, 1992 1991 1990 Cash flows from operating activities.
Net income..
967,918 5 2,791,487 $ 2,852,647 Non. cash charges (credits) to net income Depreciation, including nonutility property.
3,148,074 3,002,911 1,433,538 Amortization of nuclear fuel.
1,036,713 8,156,269 6,884,289 Increase in decommissic.ning reserve.
10,918,950 12,289,369 9,197,013 Allowance for other funds used during const ru ction.
(155,720)
Deferred federal and state meome taxes.
,, 01,072 3,538,4.78 (1,152.167)
Investment tax credits, net.
(101,241)
(56,220)
(155,340)
Write-off of plant assets.
2,609,099 Net chances in:
Accounts receivable..
4,234,961 (3,351,449)
(2,828,574)
M.cerials and supplies..
56,647 129,588 272,256 Prepa3 ments and other.
(3,281,434) 161,174 173,756 Accounts payable..
1,588,377 596,646 2,431,100 Accrued interest.
(67,014)
(430,014) 496,072 Other.
26,644 (609)
(56,709)
Net cash flows from operat ng activities.
28,476,546 26,827,610 19,547,581 i
Cash flows from investing activities:
Construction expenditures.
(7,540,924)
(5,147,755) (13,647,308)
Nuclear fuel purcha es..
(3.378,282)
(4,740,913)
(6,408,670)
Sale of salvaged nuclear fuel.
4,268,294 l
Increase in decommissioning trust.
(9.322.451) (14,045,387)
(7,173,217) l Allowance for other funds used during construction.
155,720 Other investments..
(64,057)
(95,321)
(356,4(16)
Net cash flows from investing activities..
(15,881,700) (24,029,376) (27,585.601) l Cash flows from financing activities 4
Short-term debt, net.
(6,250,000)
(15,000)
(1,125,000)
Proceeds of long term debt.
10,000,000 30,000,000 Repayment of long-term debt..
(10,000,000)
(18,000.000)
Dividends on common stock.
(2,837,900)
(2,837,900)
Net cash flows from financing activities..
(6,250,000)
(2,852,900) 8,037,100 Net increase (decrease) in cash.
6,344,846 (54,666)
(920)
Cash at beginning of year.
54.086 109,652 110,572 Cash at end of year.
$ 6,399,832 $
54,9S6 $
109,652 Cash paid during the period for:
Interest (nct of amounts capitalized)..
$ 3,700,210 $ 3,607,659 $ 2,134,564 Income taxes..
650 $ 2,370,000 $ 3,408,167 The accompanying notes are an integral part of these financial statements.
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. Notes to Financial Statements Note A-Summary of Significant Accounting Policies:
- 1. 5ntem of Accounn:
The accounts of the Company are maintained in accordance with the Uniform System of Accounts prescribed b regulatorv bodies having jurisdiction. As a result of the decision to permanently discontinue 3
power eperation and to continue with the operation of decommiwioning the plant, the Company made a rate fding with the Federal Energy Rerulatory Commission (FERC) in 1992. The resulting settlement agreement requires the establishment of regulator) asset and liabilities as of December 31,1992. In order to record the emnponents of una em cred arets and liabilities that will be recos ered through rates in future periods, certain existing amets u ere recla-ified and consolidated into one asset, Net Umecovered Assets.
Additionally, future coe vociated with the discontinuing of operations and decommissioning of the plant bas e been recorded on the balance sheet as Regulatory Asets and Regulatory Liabilities. The accountinn chances are noted in the aficcted accounts below. The accounts of the Yankee Deconmiirioning Trust (the Tru-t) arc included on a consolidated basis
- 2. Nuclear Services Divism:
The Company operate a Nuclear Services Division, under the applicable rules and regulations of the Public Utilit', llolding Company Act of 1935, for the purpose of furnishing nuclear engineering
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se rvices to the Company and its sponsoring utilities Such services are provided on a full cost basis, including a return on workinc capita!. The cost of services provided to the Yankee plant amounted to
$!H,181,tM in 1942, $21,444,500 in 1991 and $15,336.200 in 1990, and is included as engineering costs in the Statements of Inconn and Retained Earnings.
- 3. Net Unrecm cred Awets The remaining net im esonent in uti!ity plant, fuel, and mater;als and suprlies, at December 31, 1992, was reclaued to Net Unrecovered Assets. Any salvage of unrecovered assets, less cost of removal, is credited to this account. Effectis e January 1,1943, for financial statement purposes, amortization of the Net Unrecovered Asets is calculated over the remaining period ending July 9,2000 and credited to the account, in accordance with the settlement arteement.
- 4. Utility Plant:
At December 31,1942, utility plant, except for 5136,960 relating to the Rowe land, was reclassed to Net Unreem ered Assets. Prior to December 31,1992, utility plant was stated at the original cost of construction, which included an allowance for the cost of funds used during construction. Costs of current re;, airs and minor replacements ef plant anJ properties, w hich do not extend the current life of the plant, were cha:ced to mainten mee expense accounts as incurred. Plant retired or otherwise disposed nf, together u ith costs of remm al le's salvage, was charred to accumulated provisions for depreciation.
E Depreciation:
For financial statemcnt purposes, depreciation is provided over the estimated service lives of the o
various classes of properi3 on a straicht.line basis. For post December 31,1992 accounting, see Net I'mecovered Asset-9 g
Notes to Financial Statements (continued)
Note A-Summary of Significant Accounting Policies: (continued)
E Allmvance for Funds Used During Construction f AFUDCh Through December 31,1992, the Company capitalized, as a part of construction and fuel costs, an allowance for borrowed funds used during construction, which repre+ents the approximate pretax cost of short-term debt, and an allowance for equity funds used during construction, which represents the cost of other funds. AFUDC was recognized as a cost of Utility Plant and Nuclear Fuel Accordingly, AFUDC wa* ca;'italized in the same manner as construction labor and material costs with offsetting credits to Interest and Other Income. This is in accordance with an established regulatory approved rate-making practice under which a utility is permitted a return on, and the recovery of, these capital costs throuch their ultimate inclusion in :he rate base and in the provisions for depreciation and amortization.
The combined rate used in calculating AFUDC was 9.19 in 1992,7.47 in 1991 and S.97c in 1990.
In accordance with regulatory directives, these rates included the before-income-tax effect of borrowed fund 3 7 Nuclear Decommissioning:
In a 1492 decommissioning study, the Company estimated the cost of decommissioning the Yankee k
plant, utilizing the immediate dismantlement and removal method, at approximately $247 million in January 1,1G92 dollars. The Company filed with the Federal Energy Regulatory Commission for full recovery of this amount. The settlement agreement permits the Company to base its collections on auumed decommissioning costs of $235 million in January 1,1992 dollars. It also requires the Company to submit anothtr decommissioning cost estimate, no later than December 31,1995. The Company will record and bill decommissioning thmugh July 9, 2000 in accordanr with the settlement agreement.
Contributicms to the fund are $26.5 million annually during the renod Januarv 1,1993 through Decembe-31,1995, with escalated annual collections thereafter, through July 9,2000.
S. Alaterials and Supplies:
At December 31,1992, materials and supplies were reclassed to Net Unrecovered Assets. Prior to December 31,1492, materials and supplies were valued at average cost, net of amortization. In 1990, the Compan3 beran amortizing to expense an amount designed to fully amortize the cost of materials and l
supplies inventory w hich was expected to be on hand at the expiration of the plant's operating license in 2000. For po t December 31,1992 accounting, see Net Unrecovered Assets.
- 9. Income Taxes:
The tax effect of the timing differences (difierences between the periods in which transactions affect income in the fmancial statements and the periods in which they affect the determination of income subject to tax) is accounted for in accordance with regulatory approval.
Investment tax credits are deferred and amortized over the estimated book amortization lives of the property ci.mg rise to the credits.
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. Notes to Financial Statements (continued)
Note A-Summary of Significant Accounting Policies: (continued)
- 10. Interest Rate Swap Agreements:
The differential to be paid or received is accrued as interest rates change and is reco;mized over the life of the agreements.
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- 11. Statement of Cash Flows For the purpo<es of the Statement of Cash Flows, short-term investments with a maturity of 90 days or less are considered cash equivalents.
Note B-Rate Proceedings On June 1,1992, the Company fded with the FERC to recover any unrecovered assets and all future costs to be incurred after the shutdown decision until the plant is decommissioned. As of December 17, 1992, all but one of the parties to the rate filing have agreed to a settlement. The one party, which did not agree, represents 0.413% of the Rowe plant revenue and did not oppose the resolution of the FERC proceedin;:. in accordance with the settlement for all other parties.
On December 30,1992, he FERC authori7ed collec1 ion of the present setticmcr.t rates on an interim basis, subject to refund, eHective January 1,1993. On January 22,1993, the administrative law judge assigned to the FERC proceeding certified the settlement to the FERC with respect to all parties except the single dissenting party noted above. These financial statements and accompanying notes have been prepared consistent with the settlement agreement which, under the FERC interim rate order, determines the Company's current charges with respect to the Rowe plant. The settlement includes:
establishing an unrecovered asset balance of $45.f> million, which is net of a write-oH of unrecovered assets of $3.0 million; a recovery of all future costs, including an increased decommissioning schedule (see Note 11); and a reduction in the authorized rate-of return on common equity from 12G to 95 The components of the net unrecovered auets are as follows:
December 31,1992 P1 ant.
$23,715,000 Construction work ir, prceress..
10,807,000 Nuclear fuel.
13,209,000 31aterials and supplies.
615,000 Orher.
254,000
$48,600,000 Write-oH per settlement.
(3,000,000)
Ne t unrecovered asset.
$45,600,000 The estimated future costs to be incurred by the Company are recorded as a Regulatory Liability.
An equal amount has been recorded as a Regulatory Asset.
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Notes to Financial Statements (continued)
Note Il-Rate Proceedings (continued)
The components of the Regulatory As:-ets and Regulatory Liabilities at December 31,1992 are as follows:
Reculatorv Asset Liability Projected Costs to be Incurred:
Fuel related (Note C)..
$ 21,090,000 s 21,090,000 Decommissioning fund contributions.
226,398,000 226,398,000 Ot he r..
109,195,000 109,195,000 Total.
. $356,683,000 $356,683,000 The $45,600,000 of net unrecovered assets plus the $356,683,000 of projected costs to be incurred equals the $402,283,000 estimated total costs of discontinuing operations and of funding decommissioning of the plant as of December 31,1992.
Note C----Nuclear Fuel:
Prior to the 1992 settlement agreement, the cost of nuclear fuel in the reactor was amortized to fuel expense on a unit of production method at rates based on estimated kilowatt hours to be produced from each core. Fuel expense also included a chargc for the permanent disposal of spent fuel, as well as amortization of the estimated amount of fuel remaining in the reactor at the end of the plant's license life.
The following table lists nuclear fuel components at December 31,1991:
In stock..
. $ 434,799 In process..
5,336,859 Assemblies in reactor.
26,094,456 Gross nuclear fuel.
31,866,114 Less accumulated amortization..
16,737,261 Net nuclear fuel.
$15,128,853 Components of fuel expense are >ct forth in the following table:
Year Ended December 31, 1992 1991 1990 Amortization of nuclear fuel:
Enriched uranium.
$ (14,069) $5,530,667 $4,676,491 Fabrication.
(89,345) 1,495,336 1,061,276 AFUDC.
142,834 159,090 Final core..
987,432 987,432 987,432 884,018 8,156,269 6,884,289 Provision for current core spent fuel disposal..
(47,325) 992,074 826,398 Provision for DOE decommissioning & decontamination.
250,000 Fuel expense.
$1,086,693 $9,148,343 $7,710,687 12 W
Notes to Financial Statements (continued)
Note C-Nuclear Fuel: (continued)
Under the Nuclear Waste Policy Act of 1082, the Company entered into a contract with the United States Department of Energy (DOE), under which it is required to pay a fee of LO mill per kilowatt hour for net electricity generated after April 6,1983, in exchange for DOE services in disposing of the spent nuclear fuel used to generate that electricity. In 1985, the Company elected to pay a lump-sum amount to the DOE to satisfy its contractual liability for disposal of nuclear fuel used prior to April 7, 1983.
The Encrev Policy Act of 1992, enacted October 24,1992, established the Uranium Enrichment Decontamination and Decommissioning Fund and authorized the collection of a special assessment for domestic utilities over a 15-year period. DOE is expected to issue a related rulemaking in 1993. In the meantime, the Company's liability is uncertain. The Company has projected costs of $21,090,000, which hne been recorded as a component of Regulatory Assets and Regulatory Liabilities. The Company accrued $250.000 of anticipated co ts for the fourth quarter of 1992.
Note D-Long-Term Debt:
December 31, 1992 1991 Res olving credit loans.
$30,000,000 Term loans..
30,000,000 Tot al..
30,000,000 30,000,000 Lew long-term debt due within one year.
6,000,000 Long-term debt, net.
$24,000,000 $30,000,000 On Januarv 4,1990, tha Company entered into a $40 mi!! ion Long-Term Debt Agreement with The Bank of New York (BNY). As a result of the February 26, 1992 decision to permanently dbcontinue power operation of the plant, the Company and BNY entered into a Waiter Agreement dated April 15,1972. The aaeement converted the $40 million revolving credit to an amortizing term loan terminating January 31,1997.
Intaest rates on the term loans are variable and are set, at the Company's election, at the bank's prime rates or the London Interbank Ofiered Rate, plus a fraction thereof. Alternatively, the Company has the option to fix rates by entering into interest rate swaps.
The Company has entered into interest rate swap acreements to reduce the impact of changes in interest rates on its floating rate lonc-term debt. At December 31,1992, the Company had outstanding two interest rate swap agreements with the BNY, having a total notional principal amount of $20 million.
'lh fair s alue of the liability of the outstar. ding swaps at December 31,1992 is $1,469,169. Those agieements effectively chance the Company's interest rate expo-ure on its $10 million floating rate debt due in 31 arch 1995 to a fixed 8.9~. and its $10 million floating rate debt due in December 1995 to a fixed 9.361. The Company is exposed to credit loss in the event of nonperformance by the other party to the interest rate swap arteements. Ilowes er, the Company does not anticipate nonperformance by the counterparty.
13 i
J Notes to Financial Statements (continued)
Note D-Long-Term Debt: (continued)
The weighted averace interest rates on year-end long term borrowings were 8.0'i,8.5'i, and 8.8";
for 1992,1991, and 1990, respectively. The weighted average interest rates during 1992,1991, and 1990, based on averare month-end balances, were 9.8'.7, 9.3'1, and 9.3G, respectively.
The loans are secured by the collateral awignments of all the Company's rights under the customer power contracts There are no compensating balance requirements.
Note E-Short-Term Debt:
Due to the decision to permanently discontinue power operation of the plant, the Company's lines of credit agcrecatinc $25 million were terminated. The Company paid $0 $35,000, and $75,000 in fees for 1492,1991, and IWu, respectively.
Information recarding short. term horrowine is summarized in the following table:
1992 1991 Commercial paper outstanding at ycar end..
5 6,250,000 31aximum amount of borrowings at any month end.
$10,750,000 $11,400,000 Weighted monthly average bormwings outstandinc durinc the year.
$ 1.;38.461 < R.??6 423 The weighted average interest ratte on yeanend short. term borrowings were 09, 5.95, and 8.7G-for 1992,1991, and 1940, respectively. The weighted average interest rates during 1992,1991, and 1990, based on as erage month-end balances, were 3.15, 5.8G, and 9.4'i, respectively.
Note F--Restrictions on Retained Earnings Available for Dividends on Common Stock:
Pursuant to the Waiver Agreement dated April 15, 1992 with respect to long-term debt, no dividends on common stock may be di3tributed to shareholders until the long term debt is retired.
Note G-Federal Income Taxes:
Federal income taxes consist of the following components:
1992 1991 1990 Current income taxes.
$(3,S92,235) $(2,472.298) $ 2,998,4 1 Deferred income taxes.
5,972,954 3,245,726 (1,290,532)
Investment tax credits, net.
(76,463)
(56,220)
(155,340)
$ 2,004,256 $ 717,208 $ 1,552,569 investment tax credits, net, reflect increases or decreates in federal income taxes attributable to such investment tax credits which have been deferred and amortized.
14 m
w
.____________________-_____--________-___-___-__-_--______________.______1
. Notes to Financial Statements (continued)
Note G-Federal Income Taxes: (continued)
The Company has adorted comprehensive interperiod tax allocation (normalization) consistent with regulatory accounting. The following table details the components of deferred federal income taxes:
1992 1991 1990 Provision for plant decommissioning.
$(1,596,499) $1,756,018 $(2,023,796)
A!!owance for fund, used during construction.
71,700 44,156 168,678 Interest capitalized for tax purposes._
(238,303)
(74,267)
(240,017)
Excess tax depreciation and fuel amortization.
8,979,392 1,962,621 314,949 Prodsion for employee benefits.
(1,531,324)
(370,370) 512.776 O t her..
287,988 (72,432)
(23,122)
$5,972,954 $3,245,726 $(1,290,532)
The tax cHect of the cumulative amount of timing differences at December 31,1992, for which deferred income taxes have not been provided,is not material. Total federal income taxes differ from the amounts computed by applying the statutory tax rate to income before taxes. The reasons for the differences are at follows:
1992 1991 1990 m
Computed tax at statutor; rate.
$1,010.539 $1,192,956 $1,497,773 lucrease (reduction) in tax icsulting from:
Amortization of investment tax credits..
(76,463)
(56,219)
(155,340)
Prior year decommissioning refunds.
(642,616)
Postretirement health benefits..
698.360 225,519 249,431 l
Rate settlement adjustment.
378,294 50,160 50,160 All other..
(6,474)
(52,592)
(89,455)
Federal income tax provision (including $772,931,
$47,371 and $42,061 credited to other income).
$2,004,256 $ 717,208 $1.552,569 EHective federal income tax rate..
67.40 20.4G 35.2%
The Company neers deferred federal income tax benefits on that portion of decommissioning expense w hich is not currently deductible for federal tax pu rposes. Deferred taxes related to decommissioning amounted to $9,933,864 at December 31, 1992. In July 1988, the IRS ruled that beginning in 1984, an annual anount of $4,437.000 of decommissioning expense is deductible for federal income tax purposes The Company filed amended tax returns to claim its ruling amount for the years 1984 through 1986. As a result, the Company received refunds in 1991 which reduced deferred taxes by
$4,400,000 This amount was deposited in the Decommissioning Trust.
In January 1991, the IRS issued a revised ruling reducing the Company's deductib!e decommissioning expense to $1,431,000 annually, effective January 1,1990, due to the extension of the power contracts to July 9,2000. The Company plans to file for an amended rtding in 1993 to reBect the revised decommissioning collections commencing in 1993.
15
.__f-'-
Notes to Financial Statements (continued)
Note G-Federal Income Taxes: ' continued)
Federal income tax returns for the Company have been examined and reported on by the IRS throuch 1986.
In February 1992, the Financial Accounting Standards Board released Statement of Financial Accounting Standards No.109, Accounting for Income Taxes. The Statement is eficctive for fiscal years beginning after December 15,1992. The Company does not expect the impact on its financial statements to be material.
Note II-Decommissioning:
In June 1992, Yankee filed with the FERC a revi<ed decommisioning rate schedule based on an estimated decommisioning cost of $247 million in Januarv 1,1992 dollars. The FERC has ordered interim rates into effect on January 1,1993 based on a proposed settlement agreement which includes assumed decommissioning costs of $235 million in January 1,1992 dollars. The settlement agreement requires the Company to submit a revised decommi%ioning stimate no later than December 31,1995. In addition, the settlement schedule allows the Company to collect $26.5 million annually during the period January 1,1993 through December 31,1995, with escalated annual collections thereafter, through July 9, 2000. This will allow the Company to fund $235 million (in January 1,1902 dollars) for decommissioning of the Yankee plant.
Funds collected are being deposited in an irrevocable trust, maintained by a commercial bank, with principal and interest to be used exclusively to discharge future decommisioninc obligations as incurred.
Components of the Decommissionine Trust are set forth in the following table:
December 31, 1992 1991 Cash..
7,332 $
157,975 Accounts receivable.
732,640 508,499 Investments..
72,452,849 63,269,273 Trust fees and taxes payable.
(89,316)
(154.693)
Decommissioning Trust assets, net..
$73,103,505 $63,781,054 The 1991 amounts have been restated to reflect the reclass of $990,698 of accrued interest receivable fmm Accounts receivable to Incestments.
Decommissioning Trust funds are invested in federal and state municipal securities, valued at cost which approximates market. At December 31, 1992, deferred federal income taxes included $9,933,864, which represented federal income taxes paid on decommissioning collections which will be recovered over the period during which the Yankee plant is decommisioned and the decommisioning expenses become deductible. The Trust had net earnings of $5,268,954 during 1992, which has been included in the balance sheet as an increase to both the Decommissioning Trust assets and the Decommissioning Reserve.
The Company has established a separate revocable trust for the purpose of decommissioning its Environmental Laboratory. This fund does not qt.alify as a Nuclear Decommissioning Reserve Fund under Internal Revenue Code Section 468A. The estimated cost to decommission the laboratory is approximately $56,000 in December 31,1992 dollars. The trust is funded annually by the Company in order that the trust assets are at least equal to the cost estimate.
16
_______m__
Notes to Financial Statements (continued)
Note I-Retirement Plans:
The Company has noncontributnry denned benefit pension plans covering substantially all ernploye es. The Companv's funding policy is to fund the net periodic pension cost, but never less than the minimum requiicd contnbution under ERISA nor rnare than the maximum deductible contribution as determined under the Internal Revenue Code.
The Company rarticirates in the plans with subsidiaries of New England Electric System (the System). Plan awets.uc composed primarily of corporate equity and debt securities and guaranteed insurance contract,.
The foll.nving table sets forth the Sptem plans' funded <tatus:
December 31, 1992 1991 1990 Ilenefits earned Actuarial present value of accumulated benefit oh}igation:
hted portion.
$483,632,000
$443,349,000
$416,922,000 Nons es ted portion..
23,499,000 23,781,000 21,258,000 Tot al.
$507,131.000
$467,130,000
$438,180,000 Reconciliation of funded status Actuarial pre-ent value of projected bene 6t liah,lity.
$577483,000
$544,900,000
$510,282,000 Umecoenized prior service costs.
(17,741,000)
(14,581,000)
(11,526,000)
Net :ain (losa not yet amortized.
(3,189,000) 2,263,000 (27,291,000) 556,753,000 532,582,000 471,465,000 Pen ion fund asscts at fair s alue.
575,111,000 552h28,000 488,723,000 l
FAS No. 87 transition a+et not y< t amortized.
(14,542,000)
(16,034,000)
(17,476,000) o 560,514,000 536,594,000 471,247,000 Net accrued (prepaiJ) ;,ension liability.
$ (3,766,000) $ (4,012,000) $
218,000 1
1 The Company's allocated share of the net accrued (prepaid) pension liability at December 31,1992, 1991, and 1990 was $5,707,000, $443,000 and $937,000, respectively.
17
Notes to Financial Statements (continued)
~
l Note I-Retirement Plans: (continued)
Total pension cost, charged principally to operating expenses of both the Yankee plant and the Nuclear Senices Division, was $4,769,000 in 1992, $1,850,000 in 1991, and 81,951,000 in 1990. The components of the cost are as follows:
1992 1991 1990 Service cost benefits earned during the period.
. $ 1,674,436 $ 1,701,727 $ 1,641,229 Plus (lessh Interest cost on projected bene 6t obligation.
3,200,637 2,741,534 2,435,676 Actual return on plan assets.
(2,956,802) (5,429,208) (3,791,340)
Amortization and deferral.
(101,645) 2,738,091 1,469,715 Deferred pension cost.
97,856 195,720 Effect of special termination be,efits.
2,952,374 Net periodic pen < ion cost.
$ 4,769,000 $ 1,850,000 $ 1,951,000 Assun.ptions used to determine pension costs were:
Diswunt rate.
8.50 8.5%
8.5%
Average rate of increase in future compensation level.
6.75 6.7%
6.7%
Expected long. term rate of return on assets..
9.0'~
9.0E 9.0'~c In addition to providing pension benents, the Company provides certain health care and life insurance benefits for retired employees. Substantially all of the Company's employees may become eligible for these benefits if they reach retirement age, or if they reach age 55 with 30 years of service, while workinc for the Company. The Company accrues these benefits over the remaining work lifetime of those employees expected to qualify for such benefits. Accrued costs, wh;ch were $2,472,000 in 1992,
$1,046,000 in 1991, and $1,343,000 in 1990, are deposited in a trust, with principal and interest used exclusively to provide for post. retirement health care and life insurance benefits. In addition, the Company made payments to certain key employ ees who are not eligible to participate in the benefits trust, thereby releasing the Company from future obligations relating to post-retirement health care and life insurance bene 6ts These costs were $0, $0, and $625,000 in 1992,1991, and 1990, respectively.
Statement of Financial Accounting Standards No.106, Employers' Accounting for Postretirement llenents Other Than Pensions is effective for fiscal 3 ears beginning after December 15,1992. The Company does not expect the impact on its financial statements to be material.
Note J-Commitments and Contingencies:
- 1. Nuclear Liability Insurance:
A federal statute, the Price. Anderson Act (the Act), mandates an industry-wide program of nuclear liabihty insurance for nuclear facilities. In 1988, the Act was extended to the year 2002. The Act limits public hability from a single incident at a nuclear facility. The Company maintains a primary layer of insurance in the amount of $200 million with private commercial companies. Secondary coverage is provided by a retroepective assessment of up to $63 million per incident levied on each of the units licensed to operate in the United States, subject to a maximum assessment of $10 mii' ion per reactor per incident 18
Not s to Financial Statements (continued) e Note J-Commitments and Contingencies: (continued) in any year. In addition to the nuclear liability retro pective a'sessments,if the sum of all public liability claim and lecal costs arising from any nuc! car accident exceeds the maximum amount of financial protection, each licensee can he assessed an additional 5 (53.2 million) of the maximum retrospective assessment. Under the billine providons of the power contracts, the retrospective insurance premiums would be includable in the co t of power.
On September 2S,1992 the Company submitted to the NRC a notice of withdrawal from the retm<pective ee sment procram and commensurate reduction in the primary insurance la3 er. The Company will maintain full primary coverage in force until this notice is aEirmed by the NRC.
- 2. Leers:
At December 31,1992,1991, and 1990, the Company had leases covering its ofiice facilities, certain equipment and vehicles. Such rentals are included in and recovered through the billincs of the Nuclear Services Division and, therefore, have no eficct on net income. In the normal course of business, the Company expects that, as leases expire, they will be renewed or replaced by other leases.
Estimated future annual lea <e payments, exclusive of tas es and inmrance, are as follows:
1993.
S2.775,000 1994.
2,403,000 1995.
1,674,000 1996.
29,000 1997.
10,000 Tot al..
S6,891,000 Rental pay ments charged to operating expense amounted to 53,026,000 in 1992, $3,215,000 in 1991, and $3,363,000 in 1990
- 3. Nuclear Services Divisi< >n:
The Nuclear Services Division of the Comran) has provided technical services to the joint owners of the Seabrook nuclear plant in support of design, con truction, and licensing of that facility. This facility had been subject to substantial delavs in its scheduled completion and to significant increases in costs.
The joint owners obtained from the NRC, on March 15. 1990, a full power license for operation of Seabrook Unit 1. (Seabrook Unit 2 has been cancelled.) Seabrook Unit 1 is pre ently in its third cycle of operation h:ning completed 1992 with a cumulative capacity factor of almost 74 percent.
On January 13,19SO, the Company and all but three of the joint owners of the Scabrook facility entered into a settlement agreement with one another respecting potential claims relatine to the Seabrook facility. The three joint owners that were not parties to the settlement agreement collectively possess 2.W. of the ownership interest in the Seabrook facility. Under the settlement agreement, which became rifective on August 1,1089, the parties covenant not to commence any legal action against one another relating to past actis ities associated with the Seabrook project. The settlement agreement also provides 19
____________]
Notes to Financial Statements (continued)
Note J-Commitments and Contingencies: (continued)
Certain indemnities to the Company in connection with any litiration that may be initiated by the joint owners against certain other suppliers of services or equipment to the Seabrook project.
On November 1,1991, the Company and all but two of th joint owners of the Seabrook facility entered into a settlement agreement with I'nited Engineers & Constructors, the principal contractor prmiding engineering, procurement, and construction senices for the Seabrook Project. Under the settlement agreement, which became effective.\\ larch 1i,1992, the Company and the signing joint owners released all claims again t United; and United released all claims against the Company and the signing ou ners had also not signed the January 13, 1989 joint owners. One of the two non-signing joint sett'ement agreement; this non-sienine joint owner po-sesses 0.077 percent of the Seabrook facility. The other non-sinner, who had sinneJ the January 13,1989 settlement agreement, has joined in the November
},1941 settlement acreement by signinR an amendment which will become effective when all parties have signeJ it.
The Company believes that claims pot (ntially could be a-crted against certain other contractors by one or more of the joint owners, including those that were parties to the January 13,1989 settlement agicenient anJ the three that were not, and that such contractors could potentially assert third-party claims against the Company. In _ddition, the three joint owners that w ere not parties to the January 13,1989 settlement agreement ceuld potentially assert claims ducetly acainst the Company. In neither case is management able to predict the outcome of an3 such unassened claims It is possible that resolution of any such unasserted claims could hn e a significant eficct on the fmancial potition of the Company.
Alanagement beheves that there is not a legitimate basis for such claim and that the Company would ha e cood defenses to such claims 2nd would sinorou'ly contest such claims. Furthermore, the Company may be protected from loss, at ! cast in part, by ecrtain indernnities.
- 4. Other:
The Company, in common u ith other uti!it;cs, is subject to current and future regulations relative to nuclear pou er plant licen<inc.
20
.m-
. Officers of the Company Dn. ANontw C. Kanax, H ARVtY T. Tnaev, JR.,
Praident and Chir! Execurite 0$cer l' ice President Trcosurcr, and Chirl Financial 05cer DR. STtrW N P. SCulMZ.
l' ice Praident
) Av K. Tn ArtR, l' ice Ernident Kinn L. RAsisarrn, Clerk Board of Directors Witzs Ass T. Ynasu, Jn.,
Jons F. OrtnA, Executive l' ice Presidcnt-Senior l' ice Pruident, Nuclea r, Public Service Company of Northcast Utilities Nac Hampshire DONALD G. PARDUS, Chairman and Yurntate E. GRTL%stAN, l' ice Prc$ident Chief Executive Officer, and General Counsci, Eastern Utilitics Associate!
Nr:c England Po:ccr Compans
~
GrRAto C. Pocux, l' ice Pruident Jostru llARRlNGTON, l'ict Prnident, of Engineering, Nnc England Po:cer Company Central Maine Po:cer Company Dx. Axontw C. KAnAK, Pruident and Jous B. RANDAZZA, Chairman Chic! Exuutive Oficcr of the Company N
Jons B. Nt Axt, l' ice President, of Energy Supply Planning Sccrctary and Genc.al and Engineering, Cou nsci. Corporate, Central l'<rmont Public Savice Corporation Northcast Utilitin Rcssur D. Wuncur, President ar.d Chief Tuossas J. M Ar, Exaurit e l' ice Pruident, Financial Oficer, Boston Edison Company Common:cralth Electric Company s
21
,