ML20072E553
| ML20072E553 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/31/1993 |
| From: | Bok J, Rowe J NEW ENGLAND ELECTRIC SYSTEM |
| To: | |
| Shared Package | |
| ML20072E546 | List: |
| References | |
| NUDOCS 9408220293 | |
| Download: ML20072E553 (44) | |
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F 1 N A N C I A L H I G H L I G H T S 1993 1992 Earnings per average share $ 2.93 $ 2.85 Dividends declared per shore $ 2.22 j $ 2.14
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Book value per share-year end $23.55 ' S22.88 Market price per shore-year end $39W $38Y2 Growth in kilowatthour (KWH) sales billed to ultimate customers 1.4% 0.4%
Cost per KWH to ultimate customers (cents) 9.50 9.43 New England Electric System is a public utility holding company headquartered in Westborough, Massachusetts. Subsidiaries include three retail electric companies-Massachusetts Electric Company, which serves 930,000 customers in 149 Massachusetts communities; The Norragonsett Electric Company, which serves 323,000 customers in 27 Rhode Island communities; and Granite State Electric Company, which serves 35,000 customers in 21 New Hampshire com-munities. Other subsidiaries include two wholesale electric generating compa-nies: New England Power Company, which operates 20 generating stations, and Norragansett Energy Resources Company, which owns 20 percent of the Ocean State Power generating station; on oil and gas exploration and development company, New England Energy incorporated; three electric transmission com-ponies: New England Electric Transmission Corporatior., New England Hydro.
Transmission Corporation, and New England Hydro-Transmission Electric Company, Inc.; an international operations and management consulting ser-vices company, New England Electric Resources, Inc.; and a service company, New England Power Service Company.
Contents 2 Letter to Shareholders 39 Report of Management 12 Financial Review 39 Report of Independent Accountants 21 i F,inancial Statements 40 Shoreholder Information 26 Notes to Financial Statements Back System Directors and Officers cover System Subsidiories l
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Among our accomplishments:
. Earnings for 1993 increased to $2.93 per share compared with $2.85 in 1992;
. Return on equity was 12.6 percent, which pj ac,,
us in the top third of major electric utilities in the ,
Northeast for the fifth consecutive year; l
j In May, the NEES board of directors raised your i annual dividend by 3.7 percent to $2.24 per shore;
. In addition to meeting return on equity and dividend 3 growth goals, we achieved our three other key financial goals as shown on the report cc,rd on page 3.
. As part of 1993 cost-cutting efforts, we renegotiated )
Jocn T. Bok. chairman of the board, purchased power contracts and sold capacity, and John W Rowe. president and ~
which will provide long-term savings of more than chef execube ofhce'
$150 million. We also refinanced debt, which will provide approximately $10 million in savings annually.
- Since 1991, we have reduced the average interest !
1 rate on our debt from 8 percent to less than 6 percent. :
To Our Fellow Shareholders- i Among other 1993 achievements, we obtained 1993 was a year marked by continued strong financial approval of an important rate agreement, completed performance and new signs that the lingering recession a corporate reorganization, and developed our latest is easing in the Northeast. It was a year in which our and most far-reacning resource plan, NEESPLAN 4.
company made important progress in its efforts to Here are details on these accomplishments.
stay a step ahead of the competition that is emerging in our industry. And it was a year of further actions We reduced rates in Massachusetts while to enhance your investment in New England Electric resolving responsibility for gas wastes System (NEES) and to shape on even stronger During the fourth quarter, a rate agreement enterprise. - among our retail subsidiary Massachusetts Electric,
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U the Massachusetts Attorney General, and two groups We reorganized and downsized of large commercial and industrial customers was to meet Competition approved by the state's Department of Public Utilities. A more competitive business environment is taking This important agreement resolves the question of how shape for energy suppliers. Independent producers environmental remediation costs for Massachusetts challenge the economics of utility power plants, and sites contaminated by manufactured gas wastes will widely available natural gas supp!;es provide energy be funded and recovered in rates. alternatives for many customers. For an electric utility
'As part of the settlement, NEES made a to succeed and prosper, it must understand that this
$30 million contribution to a fund for remediation new marketplace is customer-driven and that customer costs at locations operated by gas utilities that expectations for price, reliability, and service must NEES once owned. This contribution is well within be met. To better meet these demands, NEES undertook the reserves we had already set aside. Each year, a major review of its entire organization. In spring
$3 million will be added to the fund and is recover- 1993, we realigned into two strategic business units able in Massachusetts Electric's rates. (supported by on administrative and legal group).
The agreement also provides our Massachusetts r)
This structure will help us to focus simultaneously on t Electric customers with a one-time rate reduction of the needs of our industrial, commercial, and residential v
$26 million and offers discounts to large industrial customers at the retail level and on the needs of our and commercial customers who make a commitment own retail affiliates and other electric utilities at the to long-term service. wholesale level.
Richard P. Sergel, who has served as a NEES vice president since 1992 and was NEES treasurer from 1990 until 1992, was selected to lead the System's retail business unit. Jeffrey D. Tranen, who has served as NEE 5' Key Financial Goals- NEES vice president since 1991 and was vice president 1993 Results of our wholesale generating subsidiary from 1984 to l
1991, was selected to head the wholesale business unit.
Total Return in top one-third of major Our strategic objectives for these two business electric utilities on rolling 5 year overage units reflect the different customer expectations and j Dividend Growth exceeds overage of competitive forces that prevail in each market. But our electric utilities on rolling 5 year overage overall goals are the same: to sharpen our competitive
/ Return on Equity in top one-third of
. edge and remain the electricity supplier of choice.
' major New York and New England utilities l In 1993, through a voluntary early retirement j Cash Flow coverage of dividend . program and a special severance program for in top one-third of major elecinc utilities b
V / Investment Quality Auditors' reports
- not qualified and bond ratings A+
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Peter Greenberg (leh), national accounts manager for the NEES retail componies.
l dis:usses energy efhciency improvements with Wilham Cord, manager
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- of financial analysis for Popo Gmo's restaurants. Our cornpany is working ,
I closely with the restauront chain to piloHest electrotechnoiogies for bcking.
grilling frying and other restauront support purpeses. ,
We added more value l.
to our retail service The first prerequisites of good customer service
' - are reliability and cost control. During 1993, our reliability index continued to improve and our average i cost per kilowatthour rose by less than 1 percent.
Massachusetts Electric customers received a smal! rate reduction in December 1993, and that company began to offer large commercial and industrial customers a -
discount if they sign agreements for long-term service.
The early response to this offer has been most I encouraging.
A Energy conservation programs have become a r mainstay of the relationship between New England g -.
Electric and its customers. For the past six years, the j C NEES companies have developed and implemented j one of the nation's largest and most comprehensive f. ,
energy conservation, or demand-side management ,. l (DSM), programs. We have become leaders in evoluoting actual customer experience to measure E
the effectiveness of DSM technologies. We have -
non union employees, we reduced layers of management encouraged and helped thousands of our customers and created a smaller, more responsive organization. to increase operating efficiency and reduce costs. 4,-
a We estimate savings to be approximately $20 million Through incentives approved by regulatom in each ,
of the three states we serve, DSM programs have ;.
per year. Many functions and job assignments were 3 redesigned to give our employees more opportunities to also benefitted our shareholders, adding seven cents 4 be creative and effective. The downsizing created real anguish within our organization, but our employees, as to earnings per average common share in 1993.
As our customers look for new ways to reduce
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costs and make their operations more efficient and always, have risen to the challenge. For example, during }
this difficult transition period, they continued to stress competitive, the quality of electric service is becoming }.
safety and set a record low of 30 lost-time accidents. more important. During 1993, NEES' retail business .
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i'$ % power quality of the I;h E Allegro Microsystems, Inc.
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AbrahrTi Glodstone deft) Massachusetts Electric occount manager.
e confers wilb ezecutives Marc VWo and Neil Dowson of Hardwick " ' ' ~
Kdns, inc. o company that dries hardwood lumber for export Hardwick Kilns. Inc. is the hrst participant in Project impact. o _ ,,
- progrom that targets DSM for econornic developtrent and is jointly >
I funded by the state government and Mcssochusetts Electric. c[ d Unit responded by developing on expanded menu of transmission facilities, we are conducting workshops customer services that we call EnergyNT, which will and providing advanced training for customers be introduced with of least 20 large commercial and and our field service staff to help them meet power industrial customers in 1994. quality requirements.
EnergyFIT includes, but goes well beyond, With residential customers, we are exploring opportunities for conservation of electricity. It addresses promising technologies such as ground-source heat the customer's usage of all forms of energy and offers pumps and cordless electric lawn mowers, and are integrated solutions to help the customer remain continuing our successful DSM efforts in such creas competitive. Customized services include assisting in os residential lighting and space heating. We are compliance with environmental regulations, advising also establishing a team of customer representatives on the best use of new electrotechnologies, and helping trained to analyze bills, offer savings advice, and L'
the customer decide whether or not to generate its recommend oppropriate rates and services, j own electricity.
i EnergyFIT includes on expanded power quality We began to use portfolio management j program, to address the growing needs of our larger techniques to provide greater commercial and industrial customers for steady, flexibility in resource selection j undistorted electric energy to power their computers Our rates continue to be among the lowest in and other electronic equipment. In addition to making New England. However, as the marketplace changes l ongoing improvements to our generation and for electric utilities, we are ccnstantly reminded that the best way to prepare for increased competition
,. _ . _ _ _ _ _ _ _ is not only to keep rates low, but also improve service j . e) l ;
- For nearly 27 years, Molden Catholic and odd value. We are committed to maintaining real
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High School had operated this Price stability for the long term while also achieving Public policy goals for continuous environmental
. .q , cogeneration equipment to meet its l
- gE . electrici'y needs. In 1993, the school improvement.
ogreed to instead purchase its electric Meeting both price and environmental goals will 7 service from Mossochuset+s Electric require the development of more creative planning on a long-term basis for cost, power OPProoches. Forecasting future loads has been o A
- 4 qualsy, and environmental advantages. source of significont uncertainty for utilities. Commit-Pictured with Brother Richard Cook ments for new generating capacity often must be
< kenter), chookheadmoster, are mode well before the forecasted lood occurs.
if D s Massachusetts Electric's Jack Meeker, p account manager, and Thomas e
Donohue, account representative.
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g'lg p- At Brcyton Point and $clem Harbor sta'.ons esh produced g., by the burning of coolis stored in si!cs pr,or to d:spes:!
<; N or recychng We have set a goa! of recychng 100 percent
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- w balance of cost and flexibility. In essence, we intend
.i to manage our resources as a portfolio of options, k h -
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- 3 .- and bonds to provide flexibility and minimize risk.
' As part of this portfolio approach to resource
,. planning, we are continuing to relicense our hydro-electric facilities os the current federal licenses g y a g;3;E d .. ;, expire. These facilities generated nearly 6 percent M1 'y
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of our energy needs in 1993. In another ongoing initiative, we are on schedu!e and under budget in repowering our Manchester Street Station in Providence, R.I. Scheduled for completion in late 1995, the 489-megawatt facility will be fueled by in our new opprooch to planning, we are basing natural gas and will offer high efficiency. The result our commitments on a process designed to more will be a beder balance of fuels in our energy mix l closely match supply to demand. We will make long- and substantially lower emissions.
term commitments only to match forecasted customer We are also making long-term plans for the most I cost effective and timely phaseout of our existing oil.
- loads that are highly certain to occur, and these commitments will employ a wide range of fuel sources. fired and coal-fired generating units, recognizing We will meet needs that are less certain by developing that new technologies will eventually make them I resources or purchasing options on resources that con obsolete. A gradual rather than premature phaseout be mode available quickly, without long construction of these units will avoid significant rote shock for f i lead times. The short lead time options may include customers while enabling us to take advantage of 1 DSM programs, efficiency improvements at our newer technologies os they become available.
in 1993, the state regulatory commissions of a generating stations and on our power delivery system, and power purchases from renewable energy projects Mossochusetts, Rhode Island, and New Hampshire I as well as more conventional gas turbines. opproved a first-of-its-kind resource planning k As market conditions and customer needs change, agreement in which our demand forecosts and . ji we will adjust our resource mix to achieve the best resource plans will be filed and reviewed in all three {
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states at the same time. This will exped;te approvals insure consistency, and reduce the need for addbional g .
federal oversight.
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,- to environmental improvement. Our commitment to reducing emissions and wastes from our operations is
] reinforced and enhanced as part of NEESPLAN 4. As John Powe. NEES president one example, the NEES companies will take c leadin9 role in the development of renewable energy sources c and chief execubve ofhcer. . . .
, j that minimize greenhouse gas emissions. In 1993, I i was one of three pubhc we contracted w. hit seven projects using energy sources i representohves invited to such as wind power, methane gas extracted from speol at ori 0ctober 19,1993 landfills, municipal solid waste, and waste heat to
., Wh1te House ceremony in wh;ch the Chnton Admirustration announced its Globot Chmate Achon Plan -.. ; -. , .
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d,scusses techdogv that has .
dromot. coly redJced the p Iont s
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. Bruce Dyos, research enginee ith our R&D deportment, and j .g[ Lina Morales, director of process engineering for Separotion
,f -[ Technologies, Inc., inspect a sample of cool ash from our Salem Harbor Stat;on. We are working with this I:rm to, solve i
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t the prcblem cd unburned carbon in cool ash-on iraportant barrier to recychng cool ash as o cement substitute.
generate 36 megawatts of electricity. We are also generating facilities. NEESPl.AN 4 has set a gml seeking to develop a biomass gasification project. of recycling 100 percent of our coal ash into row NEESPLAN 4 expands our commitment to reducing material or higher-value products by the year 2000.
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- emissons that contribute to summer smog and acid in line with this goal, our subsidiary New England rain. It does this by setting ambitious goals for nitrogen Power Company is working with a Massachusetts j oxides and sulfur dioxide emissions-a 60 percent firm on commercial development of a new process reduction of each by the year 2000 compared with to remove carbon from cool ash so the ash can be 1990 levels. used more readily for processes such as making The plan continues our program of demonstrating cement. The extracted carbon con then be recycled l j new technologies to reduce emissions at our facilities. as a boiler fuel.
f it also includes efforts to " offset" our greenhouse gas emissions through measures at other locations that Our positive results in 1993 and preparations achieve emission reductions at less cost than equivalent for the future owe a great deal to the perseverance reductions at our plants. For example, we are working and creativity of our employees, who are striving to i with a timber firm in Malaysia to improve harvesting do more with fewer resources As the electric utility j practices in the rain forest so that more unharvested industry continues to change and tougher competition l trees survive to absorb carbon dioxide. Harvesting continues to challenge us to improve our products and I in test areas began in 1993 and early results are our services, we con count on our people to respond.
encouraging. This effort is estimated to economically We greatly appreciate your continued interest l offset a total of 300,000 to 600,000 tons of carbon and investment in NEES.
i dioxide emissions from our power plants.
We have begun a program to occount for all types of wastes associated with producing electricity " I and delivering it to our customers. This will include (Joan T. Bok measurement of solid wastes, liquid effluents, air Chairman of the Board emissions, and waste heat released to the environ-
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ment. The data will be used to establish new targets for r, educing, reusing, or recycling the wastes.
John W. Rowe Ash from burning coal and oil represents the President and Chief Executive Officer ,
largest volume of solid wastes produced by our FEBRUARY 26, I994 O
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f Earnings in 1993 were $2.93 per overage shore compared with $2,85, and $2.77 per shore in 1992.
and 1991, respectively.,The return on common equity was 12.64 percent. ,
The increasein 1993 e~ornings was primarily the result of onincrease in kilowatthour ( WH) sales - J billed to ultimate customers,the effects of on October 1992 rate increase and on Octoke 1993 rate W
-ogreement involving Mossochusetts Electric Company (Mcissachusetts Electric), reduced iriterest costs; ochieved through debt refinancings, and lower costs of scheduled overhauls of thermal generating units,}
These increases were partially offset by a first quarter charge of S.27 per shore associated with on early$
retirement offer and a special severance program undertaken by New England E subsidiaries as part of an organizational review (see 1993 Early retirement and special severance i programs section), as well as a second quarter charge of S.21 per shore related to potential
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! costs for wastes associated with a number of manufactured gas locations operated by Massachusetts l
gas utilities once owned by N EES (see Hazardous waste section). The increase in earnings in 1992 over2 1991 primarily reflects wholescle and retail rote changes as well as incentives recorded on the retail .$ ,
companies' demand-side management (DSM) programs. In addition, New England Power Company ' ] l (N E P) rote adjustment mechanisms reduced earnings in 1991. U l KWH soles billed to ultimate customers in 1993 increased by 1.4 percent over 1992. A return to mora h
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normo! weather conditionsin 1993 was forgely offset by the fact that 1992 included on extra day for 1 leap year. KWH sales billed to ultimate customers increased 0.4 percent in 1992. N E E S' retail su ories currently forecast on increase in KWH sales of 1 percent in 1994 4 ,
The annual dividend rate was raised by 3.7 percent or S.08 per shore in May 1993 and is new $2.24i '
on on annual basis. In 1992, the annual dividend rote was increased by 3.8 percent or S.08 per shore. [
The market price of NEES common shores at year end 1993 was $39 W per shore, compared with . Tf '
l ;
p S38 W per share and $32 % per shore at the end of 1992 and 1991, respectively.
i In November 1993, the Mossochusetts Department of Public Utilities (MDPU) opproved a rate agree. 4 ;
ment filed by Mossochusetts Electric, the Mossochusetts Attorney Generat, and two groups of large M_ i commerciol and industrial co stomers. ]'
Under the agreement, Mossochusetts Electric began implementing on 11 month generot rote decrease;p I effective Decamber 1,1993 of $26 million (annual basis), from the level of rates then in effect. This rote . m reduction will continue in effect until October 31,1994, ofter which rates willincrease to the previously }
j i opproved levels. The ogreement also provided for rate discounts of up to S4 million available for thel X l period ending October 31,1994 for large commercial and industrial customers who agree to give o j five year notice to Mossochusetts Electric before they purchase power from another supplier or generate y any additional power themselves. These discounts will increase ofter October 31,1994 to a level of a
$ 11 million per year if all eligible customers porticipate. Massachusetts Electric otso agreed not to i increase its base rates before October 1,1995. The decrease in revenues will be offset by the recognitions for accounting purposes of revenues for electricity delivered but not yet billed. At December 31,1993, , [
Massachusetts Electric recorded on its bolonce sheet opproximately $43 million of unbilled revenues,of]
which $ 11 million was recognized as 1993 revenues with the bolonce deferred for recognition monthlyp through December 1994, pursuant to the rote ogreement. The net effect of these revenue provisions A increased fourth quarter earnings by S.09 per shore. g The ogreement also resolved allissues associated with providing funds and securing rate recoveryf l environmental cleanup costs of Massachusetts manufactured gas waste sites formerly owned by . g Massachusetts Electric and its offiliates, as well as certain other Mossochusetts Electric environmental 0
j cleanup costs (see Horordous waste section). The rate agreement allows for these costs to be met by establishing a specialinterest bearing fund on Massachusetts Electric's books. The fund's initial bolo of $30 million comes from previously recorded environmental reserves and is not recoverable from .
customers. Annual contributions of $3 million, adjusted for inflation, will be added to the fund by T,,
Mossochusetts Electric and will be recoverable in rates. In addition, any shortfalls in the fund will be po l
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by Massachus:tts Electric and be recovered through rats: over seven years, without intsrest. Since the
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'~ gy . ~ previously established reserves ogoinst earnings exceeded the initial $30 million balance in the fund,'
t resolution of the issue of rote recovery resulted in o one-time increase in fourth quarter earnings of S.11 per shore.
Lastly, the agreement provided for the rate recovery of $8 millich of certain storm restoration and other costs previously charged to expense which added S.08 per shore to fourth qu'arterjearnings.
\
Effective October 1992, the MDPU authorized o $45.6 million annualincrease in rates for Massachusetts Electric. This general roteincrease included $2.5 million representing the first step of a four year phase-in of Massachusetts Electric's tax deductible costs associated with postretirement benefits other than pensions (PBOPs). A second $2.5 million increase took effect October 1,1993.
Effective May 1992, the Rhode Island Public Utilities Commission (RIPUC) authorized a $3.5 million '
, onnual increase in rates for The Narrogansett Electric Company (Norrogonsett). In addition, effective Jonvary 1993, the RIPUC opproved a $ 1.5 million increase in rates for Narrogansett, representing the first step of a three year phase-in of Norragonsett's recovery of costs associated with PBOPs. A second u fr $ 1.5 million increase took effect in January 1994.
Effective March 1993, the New Hampshire Public Utilities Commission (N H PUC) outhorized a
$2.0 mi!! ion rate increase for Granite State Electric Company (Granite), with a retroactive adjustment to September 15,1992 to reflect the difference between the authorized amount and the $ 1.4 million Granite had been collecting on an interim basis since September 15,1992. Effective July 1,1993, the N H PUC approved a $0.8 million increase in rates for Granite to recover costs associated with PBOPs.
In May 1992, the Federal Energy Regulatory Commission (FE RC) approved a settlement of N E P's W-92 rate case under which base rates were increased by $39.7 million, effective March 1992. The entire increase was attributable to costs associated with the commercial operation of Unit 2 of the Ocean s State Power (OSP) generating facility. These costs had been collected through N EP's fuel clause since I
the unit entered service in late 1991. The settlement also incorporated new depreciation rates proposed in N E P's filing, which reduced N EP's overall revenue requirement by $ 18,million.
No general wholesale rate cases were filed with the FERC during 1993.
In Febcum,1993, N E E S subsidiary companies offered a voluntary early retirement progrom to non-union employees who were at least 55 years old with 10 years of service. This program was part of on organizational review with the goal of streamlining operations and reducing the work force. The early
- retirement offer was accepted by 344 employees. A special severance program was also announced for j employees offected by the organizational review, but who were not eligible for, or did not accept, the 1
l Earnings Per Average Share ($) Dividends Declared Per Shore l - Annual Rote ($)
2.B s 2.24 2M 2.04 2.04 248 3 2.36 2.318
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earnings of opproximately $ 18 million, offer tax ($28 million, before tax), to reflect the c retirement and special severance programs, which consisted principally of pension benefits onnual sovings of $20 million, before tax, are anticipated as a result of the work force reduction: i[
New England Energy incorporo:ed (N E El) participates in a rote-regulated domestic oil 9 nd gas expl@
ration, development, and production program consisting of prospects acquired prior to Dgcember 31,%
1983. NEElis not ocquiring any new prospects. Due to precipitate declines in oil and gas prices, NEEl% .
has incurred operating losses since 1986, and expects to incur substantial additional losses in the futsrd These losses are being possed on to N EP under anintercompany pricing policy approved by the M Securities and Exchange Commission. NEP is allowed to recover theselosses from its cust l
N EP's 1988 FERC rate settlement, which covered all costs incurred by or resulting from commitments mode by N eel through March 1,1988. Other subsequent costs incurred by N E El are subject to ll regulatory review.
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~l The retail componies file their conservation and load management programs, also referred to in the industry as demand-side monogement (DSM) programs, regularly with their respective regulatory l , (-
agencies and have received approval to recover in rates estimated DSM egenditures on a current b The rates provide for reconciling estimated expenditures to actual DSM expenditures, with interest. $
Expenditures subject to the reconciliation mechanism were $62 million, $58 million, and $77 million in 1993,1992, and 1991, respectively. Since 1990, the retoil companies have been allowed to earn g incentives based on the results of their DSM programs. The retail companies must be able to demonstnM the electricity savings produced by their DSM programs to their respective state regulatory agenc l beforeincentives are recorded.The retail companies recorded before-tax incentives of $7.3 million,; @
$ 10.5 million, and $7.3 million in 1993,1992, and 1991, respectively. The retail companies havij ~
received regulatory approvols that will give them the opportunity to continue to earn incentives bosed on 1994 DSM program results. Q JW l
Operating revenue increased by $52 million in 1993 primarily due to KWH sales growth, re increases, and beginning in the fourth quarter of 1993, the recognition by Massachusetts E!ectric of{.( '
i revenues from electric energy delivered to customers but not yet billed (i.e. unbilled revenues). KWH ' %
sales billed to ultimate customers in 1993 increased 1.4 percent over 1992. A return to more normal weather conditions in 1993 was largely offset by the fact that 1992 included on extra day for leap yior.
{ Rote increases, principolly Mossochusetts Electric's $45.6 million increase in late 1992, contributed [
opproximately $36 million to the overallincrease in operating revenue. In addition, in conne its 1993 rate agreement, Massachusetts Electric commenced the recognition, for accounting purposes; of revenues from electricity delivered but not billed. At December 31,1993, Mossochusetts Electric recorded on its bc.lonce sheet opproximately $43 million of unbilled revenues, of which $11 million was
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recognized as 1993 revenues with the balance to be deferred for recognition monthly through December 1994, pursuant to the rate agreement. .,[ .
in 1992, operating revenue increased by $ 87 million principally due to rate changes for NEP and ' '
the retail subsidiaries. In addition, N EP recorded decreases in revenue during 1991 in connectiE l
vanous rate adjustment mechanisms then in effect. j l
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l C Total operating expenses increased by $55 million in 1993 primarily reflecting a $28 million on'e@
! charge in connection with early retirement and special severance programs, $ 10 million associatedf with the adoptian of two new accounting standards for postemployment benefits, increased computer, ,
systems development costs, and generalincreases in other oreos. (See 1993 Early retirement special severance programs and New accounting standards sections.) These increase offset by o $ 10 million decrease in generating plant maintenance costs and reduced winter sto'rni ,
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2 D;preciation and amortization decreased $6'million in 1993 primarily r flacting r:ductd amor. %
t- tization of oil and gas properties as the result of a reduced Iwel of oil and gas production. N EP's l
depreciation expense also dedined as a result of neW lower depreciation rates established in N E P's lost l 9I- '
rate cose, which went into effect in March 1992. These decreases were partially offset by increased omortization of Seabrook 1 as part of N EP's 1988 rate settlement and increased depreciotion on new l, plant expenditures.
Taxes charged to operations in 1993 increased by approximately S 17 million primor reflecting ' _
increased municipal property taxes and increased income taxes. The increase in income taxes includes ,
the effects of the increase in the federalincome tax rate in 1993 from 34 percent to 35 percent. '
In 1992, total operating expenses increased by $73 million. Expenditures for purchased energy excluding fuelincreased by $30 million, reflecting increased purchases in connection with the commer. j[l ciot operation of OSP Unit 2 beginning in October 1991 as well as increased costs billed to N E P 4:
associated with scheduled refueling and maintenance shutdowns by nuclear power suppliers. Other 1 operation and maintenance expenses increased by $9 million during 1992, reflecting increased mainten- Q
) ance costs ossociated with scheduled overhauls at thermal generating units, the costs ossociated with a j severe winter storm, and generat increases in other oreos. These increases were partially offset by a '%
decrease in DSM costs.
a.
Depreciation and amortization expense increased by $24 million during 1992, principolly reflecting ;
increased amortization of oil and gas properties, increased amortization of Seabrook I as port of the z 1988 rate settlement, increased cool conversion amortization, and increased depreciation resulting l from new construction. The increase in oil and gas amortization resulted from on increase in the level of j oil and gas production. These increases were portially offset by a decrease in N E P's depreciation as M v3 <
result of new depreciation rates established in the W-92 rate cose.
Taxes charged to operations increased opproximately S 16 million in 1992, primarily reflecting M!
,Q increased taxes on increased income and increased municipal p roperty taxes.
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in 1992, the decrease in "Other income (expense)-net" principolly reflects decreased interest income j' in 1992 and the 1991 gain on the sole of NEEl's unregulated oil and gas, operations. q d.
- interest expense decreased $9 million in 1993 primarily due to significant refinancings of corporate j debt at lower interest rates during 1993 and 1992 (see Liquidity and capitol resources section). T The Federal Comprehensive Environmental Response, Compensation and Liability Act, more commonly 1 known as the "Superfund" low, imposes strict, joint and several liability, regardless of fault, for j remediation of property contaminated with hozordous substances. Parties liable include post and [
present site owners and operators, transporters that brought wastes to the site, and entities that generated . 3 or arranged for disposal or treatment of wastes ultimately disposed of of the site. A number of states, ;I including Massachusetts, have enacted similar laws. 2 The electric utility industry typically utilizes and/or generates in its operations a range of potentially hozordous products and by-products. These products or by-products may not have previously been <
considered hozordous, and may not currently be considered hozordous, but may be identified as such by federo!, state, or local authorities in the future. N E ES subsidiaries currently have in place on
~
environmental audit program intended to enhance compliance with existing federal, state, and local requirements regarding the handling of potentially hozordous products and by-products.
Federal and state environmental agencies, os well as private parties, have contacted or initiated I legal proceedings against N E ES and certain subsidiaries regarding liability for cleanup of sites i
alleged to contoin hozordous waste or substances. N E ES and/or its subsidiaries have been named as a potentially responsible party (PRP) by either the U.S. Environmental Protection Agency (EPA) or the Mossochusetts Department of Environmental Protection (DEP) for 18 sites at which hozordc>us waste is alleged to have been disposed. N E ES and its subsidiaries are also owore of other sites which thIey may be held responsible for remedicting and it is likely that, in the future, N E E S and its subsidiaries 15
5P* o.
will become involved in additional procesdings dsmanding contribution for the cost of remsdioting odditionalhozordous waste sites.
f The most prevalent types of hozordous waste sites that NEES and its subsidiaries have been con-l nected with are former manufactured gas locations. Until the early 1970s, N EES was a combined electric and gas holding company syriem. Gas was manufactured from cool and oil until the early k A
1970s to supply areas in which novol gas was not yet available or for peaking purposesg mong Q the ai waste by-products of that process were cool or.d oil tors. NEES is currently aware of apprciximate 40 locations (including one of the 18 locations for which NEES is o PRP) of which gas may have ( bee manufactured and/or stored. Of the manufactured gas locations,17 have been listed forinvestigation i by the DE P. Two manufactured gas plant locations that have been the subject of extensive '} litiga
, s i discussed in more detail below: the Pine Street Conal Superfund site in Burlington, Vermont and a q <
site located in 1ynn, Massachusetts.
J i
- Approximately 18 porties,induding N E ES, have been notified by the E PA that they are PRPs fo l
' cleanup of the Pine Street Canal site, at which cool for and other materials were deposited. Between
} 1931 and 1951, NEES and its predecessor owned allof the common stock of Green Mountain Power [
l 3 Corporation. Prior to, during, and offer that time, gas was manufactured of the Pine Street Canal "
The EPA had brought a lawsuit against NEES and other porties to recover all of the EPA's post and future response costs at this site. In 1990, the litigation ended with the f the court. Under the terms of the settlement, to which 14 entities were party, the EPA recovered its post response costs. N EE S recorded its share of these costsin 1989. NEES remains o PRP for ongoing future response costs. In November 1992, the EPA proposed a cleanup plan estimated by the ( EPA l l
cost $50 million. In June 1993, the EPA withdrew this cleanup plan in response to public concern about j the plan and the cost. It is not known at this time what the ultimate cleanup plan will be, how much it w cost, or what portion N EES will have to pay.
g$
On May 26,1993, the United States Court of Appeals for the First Circuit offirmed on appeal on -
earlier adverse decision against N EES and two of its subsidiaries, Mossochusetts Electric and New s
' England Power Service Company, with respect to the Lynn, Massachusetts site which was once o .
o gas utility formerly owned by NEES. The decision held NEES and these subsidiories liable for c l of the propertiesinvolvedin the case. Although the circumstances differ from location to lo Court of Appeals opinion has adverse implications for the potentialliability of N EES and its subsidiarie
~l with respect to other gas manufacturing locations operated by gas utilities once owned by NEES.
! in N ovember 1993, the MDPU opproved a rate agreement filed by Massachusetts Electric (see y
/'
Mossochusetts Electric 1993 rate agreement section) that resolved all rote recoveryissues related to Massachusetts manufactured gas sites as well as certoin other Massachusetts hozordous agreement allows Mossochusetts Electric to establish a fund on its books of $30 million Il "y,
4 i Customers Served Per Employee Where Each Dollar of 1993 Revenue Went (%) ,
E Fuel n
' 4
' W Purchased Power 22s 222 I'"'I I"'I) h a Wages and Benefits i & '!
l ser m other o a m h[
u Depreciation and Amortization 6
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B Interest and Preferred Dividends P ~ ,"
a Earnings-Common shores e,. l 81 184 187 190 93 g
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j record:d environm:ntal rmrves. N E ES had previously ertoblishrd opproximotsly $40 million of reserves related to Massachusetts manufactured gas locations earlier in 1993 and in prior years. The
- . ogreement also provides that contributions of $3 million, adjusted for inflation, be added to the fund (O each year and be recoverable in rates. Under the agreement, any shortfallsin the fund will be paid by
(. Massachusetts Electric and be recovered through rates over seven yeors, without interest.
Predicting the potential costs to investigate and remediate hozordous waste sites contiisues to be ,
' difficult. Factors such as the evolving nature of remediation technology and regulatory rec}uirements 4- and the particular chorocteristics of each site, including, for example, the size of the site, the nature and l amount of waste disposed of the site, and the surrounding geography and land use, make precise estimates difficult. There are also significant uncertainties as to the portion,if any, of the investigation and 1 i remediofion costs of any particular hozordous waste site that may ultimately be borne by N EES or its subsidiories. At year end 1993, N E E S had totoi reserves for environmentai response costs of $56 million and a related regulatory asset of $ 19 million.
N E ES believes that hozordous waste liabilities for all sites of which it is aware, and which are not covered by a rote agreement, will not be material (10 percent of common equity) to its financial position.
+
Where oppropriate, the N E ES companies intend to seek recovery from their insurers and from other PRPs, l
but it is uncertain whether, and to what extent, such efforts would be successful.
i in recent yeors, concerns have been raised about whether EMF, which occur near transmission and distribution lines as well os near household wiring and appliances, cause or contribute to adverse health effects. Numerous studies on the effects of these fields, some of them sponsored by electric utilities (including N EES companies), have been conducted and are continuing. Some of the studies have ,
suggested associations between certain EMF and various types of concer, while other studies have not substantiated such associations. In February 1993, the EPA coiled for significant additional research on .i EMF. It is impossible to predict the ultimate impact on N EES subsidiaries and the electric utility industry if further investigations were to demonstrate that the present electricity delivery system is contributing to ]
( increased risk of concer or other health problems. N Several state courts have recognized a cause of oction for domoge to property values in transmission
- line condemnation cases based on the foor that power lir.es cause concer.lt is difficult to predict what impact there would be on the N E ES companies if this cause of action is recognized in the states in which N E ES companies operate and in contexts other than condemnation cases.
Bills have been introduced in the Rhode Island legislature to require that transmission lines be placed underground. In July 1993, two bills possed by the legislature restricting the castruction of overhead transmission lines were vetoed by the governor. EMF-related legislation has also been introduced in -
Mossochusetts.
} '
N EP produces approximately 50 percent of its electricity of eight older thermal generating units. The 1990 amendments to the federal Clean Air Act require a significant reduction in the nation's sulfur dioxide (SO )2 and nitrogen oxide (NO,) emissions by the year 2000. Under the amendments, N E P is not subject to Phase 1 of the acid rain provisions of the federallow that will become effective in 1995.
However, N EP is subject to the Massachusetts SO 2 ocid rain low that will become effective in 1995. 1 Phase 2 of the federal acid rain requirements, effective in 2000, will apply to N E P and its units.
Under the federal Clean Air Act, stote environmental agencies in ozone non-attainment creas were l I
required to develop regulations (also known as Reasono bly Available Control Technology requirements,
" )
or RACT) that will become effective in 1995 to address the first phase of ozone air quality attainment.
- These regulations were adopted in Massachusetts in September 1993. The RACT regulations require 1 ,
control technologies (such as low NO, burners) to reduce NO, emissions, on ozone precursor. Addi- , f tional control measures may be necessary to ensure ottoinment of the ozone standard. These measures l would have to beheloped by the states in 1994 and fully implemented no later than 1999. The extent ,
of these additional control measures is unknown at this time, but could range from minor additionsio the RACT requirements to extensive emission reduction requirements, such as costly add-on controls or fuel 17 .
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- 4 3l switching. Should the 1999 ozona ottainmInt requirements be extInsive cr additirnal Cleon Air Act or other environmental requirements be imposed, continued operation of certain existing generating units beyond 1999 could be uneconomical. N EP believes that premature retirement of s older thermal generating units would cause substantial rate increases. 4 To date, N E P has expended $6.5 million of one-time operation and maintenance costs and }
$50 million of capitol costs in connection with Massachusetts and federal Clean Air Act complipnce "y requirements. N EP expects to incur additional one-time operation and maintenance costs of opproxi, q motely $ 18 million and capital costs of approximately $70 million in 1994 and 1995 to comply with t federal and state dean air requirements that will become effective in 1995. In addition, as a result i of federal and state clean air requirements, N EP will begin incurring increased fuel costs which are [
estimated to reach on annuollevel of $13 million by 1995. $
The generation of electricity from fossil fuels may emit trace amounts of hoz defined in the Clean Air Act Amendments of 1990. The Act mandates a study of the potential dangers of ,
hazardous air pollutant emissions from electric utility plants. Such research is currently under way ond i .
I- expected to be complete in 1995. The study conclusions could result in new emission standards and the ,
need for additional costly controls on N EP plants. At this time, N E ES and its subsidiaries connot esti.
3 i mate the impact that findings of this research might have on operations. d%
.2 in M93,the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting y Standards (SFAS) No.106," Employer's Accounting for Postretirement Bel (PBOPs) went into effect. The N EES subsidiaries provide health core and life insurance ccrveroge to ; '
eligible retired employees. Eligibility is based on certain age and l some cases retirees must contribute to the cost of their coverage. This new accounting standard requires employers to establish a liability during the working years of employees for the expected cost of provid-M U4 ing PBOPsinsteod
$40 million, ofwasrecording approximately $ 10 million of which suchoverhead.
capitalized as a construction costs when Each of the N EES subsidiaries has received regulatory approvalto recover PBOP costs on a current and/or deferred basis, which are expected to at least equal the amounts calculated in accordance with M the new standard. In a stotement of policy applicable to N E P and all other utilities subject toits r making jurisdiction, the FERC stated that the increased costs resulting from this new standard c deferred, pending the next rote filing so long as such filings the NEES
$25 million of PBOPsubsidiaries recovered costs as of December 31,1993. Thus, there$5 million was no significant in rates impact in 1993 and on net incon p
as a result of cdopting this standard. M The FASB issued SFAS No.109," Accounting for income Taxes", which became effective in 199 j The new standard requires all deferred tax reserve balances to be restated at the currently rates and requires the establishment of certain new deferred tax reserves. The ne
[ balonces have resulted in the establishment of regulatory assets or liabilities representing amounts ulti-9 i
mately expected to be recognized in rates. Therefore, the application of this new stan a significant impact on net income. The increase in deferred tax reserve balances
- 1993, at the current statutory rates, and the corresponding net regulatory asse: each amounted to ' f b
opproximately $74 million. 1 $
On January 1,1994, SFAS No.112, " Employer's Accounting for Postemployment Benefi ,
effective. The statement requires recognition of the postemployment benefit obligation when earne ;
i J employees. The most significant types of postemployment benefits offered by N E ES s
} l income continuance while on long-term disability, workers' compensation, and continuation of h and lifeinsurance coverage during disability. The N EES subsidiaries adopted this standard in 199 recorded a charge to ectrnings in the fourth quarter of $5 million representing the cumulative ,
QQh odopting the new standard. th -
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,$ Thulictric utility busin:ss is b:ing subject:d to incr:asing comp:titive przssur:s, stamming from o tp combinotion of increasing electric rates, improved technologies, and new regulations and legislation
'(h V4 intended to foster competition. Recently, this competition has been most prominent in the bulk power market in which non-utility generating sources have noticeably increased their market shore. For example, in 1984, less than 1 percent of N EP's capacity was supplied by non-utility generation sources. By the end of 1993, non-utility power purchases accounted for 380 megawatts (MW) or 7 perhnt of N E P's total copocity. In addition to competition from non-utility generators, the presence of excess generating
,. capacity in New England has resulted in the sole of bulk power by utilities at prices less than the total U costs of owning and operating such generating capacity.
f 1
Electric utilities are also facing increased competition in the retail market. Currently, retail competition comes from alternative fuel suppliers (principolly natural gas companies) for heating and cooling, customer-owned generation to displace purchases from electric utilities, and direct competition among electric utilities to attract major new manufacturing facilities to their service territories. In the future, the potential exists for electric utilities and non-utility generators to sell electricity to retail customers of other electric utilities.
The N E ES companies are responding to current and anticipated competitive pressures in a variety of ways including cost control and a corporate reorganization into separate retail and wholesole business units. The wholesale business unit is positioning itself for increased competition through such means os terminating certain purchased power contracts, post and future shutdowns of uneconomic generating stations, and rapid omortization of certain plant assets. N EP's rates currently include approximately
$100 million per year associated with the recovery of certain Seabrook 1 costs under a 1988 rate settlement and coal conversion expenditures at N EP's Solom Harbor Station. The recovery of these costs will be completed prior to the end of 1995. The retail business unit's response to compe+ition includes the development of value-added services for customers and the offering of economic develop-ment rates to encourage businesses to locate in our service territory. In its recent rate settlement, p Massachusetts Electric was able to change the standard terms under which it offers service to commercial
( and industriol customers to extend the notice period a customer must give before purchasing electricity I from others or generating any odditional electricity for the customer's own,use from one year to two.
In addition, Mossochusetts Electric began offering a discount from base rates in return for a contract requiring the customer to provide five years written notice before purchasing electricity from others or generating any additional electricity for the customer's own use. The discount is available to customers with overage monthly peak de:nonds over 500 kilowatts.
i Electric utility rates are generally based on a utility's costs. Therefore, electric utilities are subject to !
certain accounting standards that are not opplicable to other business enterprises in generol. These l
accounting rules allow regulated entities, in oppropriate circumstances, to establish regulatory assets
)
and to defer the income statement impact of certain costs that are expected to be recovered in future I rates. The effects of competition could ultimately cause the operations of the NEES companies, or a portion thereof, to cease meeting the criterio for application of these accounting rules. While the N E ES companies do not expect to cease meeting these criteria in the near future,if this were to occur, occounting standards of enterprises in general would apply and immediate recognition of any previously deferred costs would be necessary in the year in which these criteria were no longer opplicable. j; Capital requirements for 1993 and projections for 1994 ore shown below:
Year ended December 31 (millions of dollars)
Cash expenditures for utility plant:
1993 1994 )
Manchester Street repowering project $104 $200 All other ' , 201 225 O
V Oil and gas exploration and development 19 20 Totol copitalexpenditures $324 $445 Cash from operations excluding dividends $367 $360 19
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.a Tha funds necissary for utility plant cxp;nditures in 1993 w;rs primarily provid:d by net cash frorn 1.#
operating activities offer the payment of dividends. Funds for Narrogonsett utility plant expenditures ,
were also provided from the proceeds of long-term debt and preferred stock issues that were not use refinance long-term debt or redeem preferred stock.
The financing activities of the N EES subsidiaries for 1993 ore summarized as follows:
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! Long-term debt -
! ' Preferred stock ' I (millions of dollars) Issues Retirements
- issues Retirement [
4 NEP
$224 $224 .
825 5
, Mossochusetts Electric 116 117 $35 35 2-Norrogansett 28 15 20 10 U[
Granite 5 1 %
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Hydro-Transmission Companies 12 4 NEEl 27 ..
j
$373 $396 $55 $7o;g' m
interest rates on the new long-term debt issues shown above (excluding $ 134 million of N EP variable .3 rate mortgage bonds) range from 5.06 percent to 8.15 percent. Dividend rates on the new cumulative k preferred stock issues shown above range from 6.84 percent to 6.99 percent.
.f internally generated funds are expected to meet opproximately 65 percent of the 1994 capital ']i expenditure requirements for utility plant. N EP and the retail subsidiories plan to issue $ 140 million of M long-term debtin 1994.
7 Net cash from operating activities provided all of the funds necessary for oil and gas expend N E El's 1993 oil and gas exploration and development costs include $9 million of capitalized interest costs, Q
i li Since April 1991, NEES has been meeting all of the requirements of its dividend reinvestment on j common share purchase plan and employee shore plans through open market purchases. .y I
The N E ES subsidiaries' mojor construction project is the repowering of Manchester Street Station, oN 140 MW electric generating station in Providence, Rhode Island. Repowering will more than triple the 8 power generation capacity of Manchester Street Station and substantially increase the plant's thermal I
efficiency. N EP owns a 90 percent interest and Narrogansett owns a 10 percent interest in ManchesteI?
j Street Station. The total cost for the generating station, scheduled for completion in late 1995,is estimated to be approximately $525 million, including allowanc (AFDC). In addition, related transmission work, which is the sole responsibility of Narrogansett,is esti- 7 moted to cost opproximately $75 million and is scheduled for completion in late 1994. At Dec 1993, $ 161 million, including AFDC, had been spent on the project which includes the related / @_-
I transmission work. Substantialcommitments have been made relative to future planned expenditure for this project. g3 At December 31,1993, N E ES and its consolidated subsidiaries had $72 million of short-term debt $f l
outstanding in the form of commercial paper borrowings. At December 31,1993, these companies h'od7
{ lines of credit with banks totaling $446 million which are available to provide liquidity support for c$r*D n
- mercial paper borrowings and for $252 million of N EP's outstanding variable rote mortgage bondsiAj i
commercial paper mode and for other corporate purposes. There were no borrowings under these I,ines q of credit at December 31,1993. There are no compensating balance arrangements. Fees are paidin) l lieu of compensating balances on most lines of credit. Cash at December 31,1993 was approxirnatelf
$3 million.
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~
Wiim F; ' Now England Electric System and Subsidiaries ;
Lt Selected Financial Data l Year ended December 31 (millions of dollars, except per shore dato) ;
\ 1993 1992 1991 1990 1989 j Operating revenue: I
~
Electric sales (excluding . ;
,; 4 fuel cost recovery) . $1,488 S1,424 $ 1,358 $ 1,282 S1,084.
1 Fuel cost recovery 582 597 585 523- 520 Other utility revenue 117 118 114 65 42 Oil and gas sales 47 43 37 39 59-
. [
Total operating i revenue $2,234 S2,182 $2,094 $ 1,909 S1,705
Net income $ 190 $ 185 S 180 S 262* S 139 ;
J') Average comme n shores *
- 1 outstanding 64,969,652 64,969,652 64,916,599 63,818,386 58,836,246 :
?
Per shore dato:
Net income $ 2.93 S 2.85 S 2.77 S 4.11* $ 2.36 ,
Dividends declared $ 2.22 S 2.14 S 2.07 $ 2.04 S 2.04 i Return on overage common equity 12.64 % 12.58 % 12.64 % 20.52 % 12.62 % f Totol assets $4,796 $4,585 $4,450 54,408 $4,116 -
Capitalization:
Common shore equity $1,530 S1;487 $ 1,441 $ 1,380 $ 1,212 l O-Minority interests 56 61 63 62 54 >
Cumulative preferred stock 147 162 162 162 162 j Long-term debt 1,512 1,533 1,54'8 1,680 '1,639' Total copitalization 53,245 $3,243 S3 M S3,284 - $3,067 Total electric soles billed (millions of KWH) 22,790 22,679 23,502 22,561 23,069'-
Sales billed to ultimate customers (millions of KWH) 20,832 20,554 20,470 20,727 20,665 1 Cost per KWH to ultimate customers (cents) 9.50 9.43 ,8.99 8.27 7.28 System moximum demand (MW) 4,081 3,964 4,250 4,059 4,225 Electric copobility (MW net)-year end 5,362 5,479 5,645 5,627- 5,480 Number of employees 4,969 5,415- 5,533 5,666 5,580 l Number of customers 1,288,184 1,277,281 1,257,213 1,256,656 1,253,425 i j
- 1990 includes 51.80 per shore, resulting from o rote settlement related to Seabrook 1.
- i i
an.
~
O . 1 21
n:
p( t Ncw England Elactric System and Subsidiaries Statements of Consolidated Income Year ended December 31 (thousands of dollers, except per shore dato) 1993 1992 1991 I' $2,233,978 S2,181,676 $2,094,378 Operating revenue -
{ -
Operating expenses: 268,022 l 227,182 237,161 ,
Fuel for generation 471,273 527,307 525,655 l Purchased electric energy l
492,079 423,330 428,652 Other operation 148,266 !
146,219 162,974 Maintenance 278,126 l 296,631 302,217 Depreciation and omertization 105,332 120,493 114,027 i' l Taxes, other than inceme taxes 121,124 110,761 103,702 Inccme taxes 1,931,035 1,876,125 1,803,373 ;
Totol operating expenses '
302,943 305,551 291,005
, Operatingincome Other income: 2,732 1,961 Allowance for equity funds used during construction 3,795 l 11,016 13,052 10,370 Equity in inceme of generating companies l (1,154) 936 16,020 ,
Other income (expense)-net 316,600 322,271 319,356 Operating and cther income Interest: 118,846 j 100,777 114,182 Iraerest en long-term debt 9,809 5,420 3,308 l Other interest Allowonce for berrowed funds used during construction (2,816) (2,204) (2,330) ; j 107,770 117,398 119,824 ! l Tctolinterest 208,830 204,873 199,53 Irceme efter interest 10,572 9 10,585 10,572 i Freferred dividends of subsidiaries 9,150 8,022 . 9,264 !
Minority interests Netincome
$ 190,223 $ 185,037 S 179,810 j g ? ?
Average common shores outstonding 64,969,652 64,969,652 64,916,599 l
Per shore dato:
2.85 S y l Net income S 2.93 $ 2.77 Dividends declared S 2.22 S 2.14 S 2.07 {
- i I
t r ,
e j
.1 Statements of Consolidated Retained Earnings Year ended December 31 (thousands of doilors) *
! 1993 1992 1991 S 684,132 $ 638,130 $ 592,807 j Retained earnings at beginning cf year 190,223 185,037 179,810 Net income (144,233) (139,035) (134,487) <
Dividends declorcd e en common shores Premium on redemption of preferred
' stock of subsidiories (2,047)
S 728,075 $ 684,132 5 638,13- j Retained earnings of end of yect TFe ecccreponying nctes cre on irtegralpert of these fincccielsectements.
E
l l
l l '
New England Electric System and Subsidiaries Consolidated Balance Sheets l At December 31 (thousands of dollars) l 1993 1992 j Assets Utility plant, at original cost $4,661,612 $4,518,475 l Less occumulated provisions for depreciation and amortization 1,5117271 .1,415,204 3,150,341 3,103,271 Net investment in Seabrook 1 under rate settlement (Note C) 103,344 161,781 Construction work in progress 228,816 110,219 Net utility plant 3,482,501 3,375,271 Oil and gas properties, at full cost 1,220,110' 1,201,145 Less occumulated provision for amortization 884,837 794,438 Net oil and gas properties ' 335,273 406,707 I Investments:
Nuclear power companies, at equity (Note D) 46,342 45,799 Other subsidiaries, at equity 44,676 47,266 Other investments, ot cost 28,836 25,813 Totalinvestments 119,854 118,878 Current assets:
Cash 2,876. 2,768 Accounts receivable,less reserves of $ 14,551 and S 12,052 275,020 290,917' Unbilled revenues (Note A) 43,400 Fuel, materials, and supplies, at overage cost 74,314 88,100 Prepaid and other current assets (Note F) 69,004 74,908 :
Total current assets '464,614 456,693 Accrued Yankee Atomic costs (Note D) 103,501 120,685 Deferred charges and other assets (Note A) 290,135 106,562 ;
$4,795,878 $4,584,796 Capitaliration Capitalization (see accompanying statements): i ondliabilities Common shore equity $ 1,529,868 $ 1,486,423 ;
Minority interests in consolidated subsidiaries 55,855 60,626 Cumulative preferred stock of subsidiaries 147,528 162,528 Long-term debt 1,511,589 1,533,165 Total copitalization 3,244,840 3,242,742 'l Current liabilities: l Long-term debt due within one year 12,920 12,9.20 Snort-term debt 71,775 42,250 :
Accounts payable :128,342 171,309 3 Accrued toxes 10,332 12,207 ;
. Accruedinterest 23,278 20,575 !
Dividends payable 36,950 32,829 :
Other currentliabilities (Note A) 153,812 66,060 ,
Total current tiabilities ' 437,409 358,150-Deferred federal and state income taxes 705,026 623,5091
, Unomortized investment tax credits 99,355 103,007 i Accrued Yankee Atomic costs (Note D) 103,501 120,685 J 'f Other reserves cmd deferred credits 205,747 136,703 -!
Commitments and contingencies (Note E) l
$4,795,878 ' S4,58,4,796 ;
The accompanying notes are onintegral part of these financial statements.
23 1
1 i
j New England El ctric Syst::m and Subsidiaries !
1
! Consolidated Statements of Cash Flows Year ended December 31 (thousands of dollars) ,
1993 1992 1991
$ 190,223 $ 185,037 , S 179,810 Operating Net income s
cetivities Adjustments to reconcile net income to net cash provided by operating activities:
' 300,444 305,046 278,047 Depreciation and amortization 4,105 11,163 8,868 Deferred income taxes and investment ta x credits-net Allowance for funds used during construction (6,611) (4,936) (4,291) 8,022 9,264 9,150 Minority interests Early retirement program 23,922 Goin on sole of oil and gas properties (7,099)
Decrease (increase) in accounts receivable, net (27,503) (27,157) (24,612) and unbilled revenues 13,786 (8,590) 12,508 Decrease (increase) in fuel, materiots, and supplies Decrease (increase) in prepaid and other current assets 5,904 (64,858) (1,554)
(42,967) 34,623 (9,647) increase (decrease) in accounts payable 64,658 (2,447) 25,412 Increase (decrease) in other current liabilities 8,070 l'
Other, net (35,332) (2,146) i S 498,651 S 434,999 $ 474,662 Net cash provided by operating activities j
i investing Plant expenditures, excluding allowance for funds used during construction $(304,659) $(241,872) S(209,674)
[ octivities (21,262) (32,96 Oil and gas exploration and development (18,965)
[ 22,95
" Proceeds from sole of oil and gas properties (107) 2,388 (18,731) e i Otherinvesting activities ~
Net cash provided by (used in) investing activities $(323,731) $(260,746) $(238,420)
- i y[ S 15,349 Financing Proceeds from N EE S common shores issued p[ Dividends paid to minority interests $ (10,622) $ (15,939) (4,332) l octivities (140,174) (134,594)
Dividends paid on N E ES common shores (142,352) i !
29,525 42,250 Short-term debt
, , 372,500 477,500 335,000 l [
Long-term debt-issues (395,820) (585,120) (400,280)
Long-term debt-retirements !
55,000 Preferred stock-issues Preferred stock-retirements (70,000)
(10,996) (16,135) (4,460)
Premium on reocquisition of long-term debt Premium on redemption of preferred stock (2,047)
S(174,812) S(237,618) S(193,317)
Net cash provided by (used in) financing activities ;
$ 108 $ (63,365) $ 42,925 ?
i :
Net increase (decrease) in cash and cash equivalents 2,768 66,133 23,208 I ' Cash and cash equivalents at beginning of year
$ 2,876 $ 2,768 $ 66,133 Cosh and cash equivalents at end of year
! S 125,78
$ 97.518 $ 119,146 Supplementary Interest paid less amo'unts capitalized
$ 124,853 $ 99,935 S 99,9 I"I ""O'I " Federal and state income taxes paid
$ 14,404 S 18,405 $ l'2,434 ;
Dividends received from investments at equity a
The accompanying notes are on integral port of these financial statements.
a 2s
4 N w England Elsctric System and Subsidiaries Consolidated Statements of Capitalization
~ At December 31 (thousands of dollars)
Common shore equity 1993 1992 Common shares, por value $1 per share t ,
Authorized-150,000,000 shares -
Outstanding-64,969,652 shares S 64,970 $ 64,970 Paid-in capitoi 736,823 737,321 Retoined earnings 728,075 684,132 Total common share equity $1,529,868 $ 1,486,423 i'
Shores outstanding Cvmulative preferred stock of subsidiaries 1993 1992 1993 1992 S 100 Por value-4.44 % :o4.76 % 430,140 430,140 $ 43,014 S 43,014 6.00% to 7.24% 530,140 330,140 53,014 33,014 7.80% to 8.68% 600,000 60,000 ;
$50 Par value-4.50% to 6.95% 730,000 330,000 36,500 16,500 8.00% 200,000 10,000 S25 Por value-6.84 % 600,000 15,000 Total cumulative preferred stock of subsidiaries (annual p
. %, _ )
dividend requirement of $8,720 for 1993 and $ 10,572 2,290,280 for 1992) 1,890,280 $147,528 S162,528 Long-term debt (Note I) Maturity Rote 1993 1992 Mortgage bonds
- 1994 through 1996 4.625 6.375 % $ 45,000 $ 49,600 1997 through 1998 5.700% -7.375 % 122,500 127,500 1999 through 2002 6.310 & 7.830 % 95,000 142,500 2003 hrough2008 6.110 7.090 % 112,500 2013 9.875 %-10.625 % 112,000 2015 through 2016 7.250 7.800% 68,350 68,350 2018 through 2019 9.750 9.875 % 97,000 ,
2021 through 2022 8.000W9.125% 252,200 255,000 2023 7.050 8.150 % 56,000 '
2018 through 2022 Variable 342,000 230,000 Notes Granite State Electric Company 1996 through 2023 7.370 % -12.550 % 15,800 12,200 New England Energy incorporated 1998 Variable 238,000 265,000 ,
Hydro-Transmission Companies 2001 through 2015 8.820 9.410 % 182,570 194,090 Unamortized discounts and premiums, net (5,411) (7,155)
Totallong-term debt 1,524,509 1,546,085 Long-term debt due within year -
(12,920) . (12,920) p $ 1,511,589 $ 1,533,165
- Includes $410,350 issued to secure pollution control and solid waste disposof revenue bonds issued by state agencies on behalf of
- l New England Power Company.
l l The accompanying notes are on integral port of these financial statements.
t -
j 25-
New England Electric System and Subsidiarias l
Notes to Financial Statements 1
l I Note A .
Significant accounting policies ,
The consolidated financial statements include the accounts of New England Electric System (NEES) ,
- 1. Basis of I consolidation and all subsidiaries except New England Electric Transmission Corporation, which is recorded at equity.
and systern Presentation of this subsidiary on the equity basis is not material to the consolidoted financial statements.
of accounts New England Power Company (N EP) has o minority interest in four regionoi nuclear generating companies (Yankees). Narrogansett Energy Resources Company (Resources) has a 20 percent general partnershipinterest in the Ocean State Power generating facihty NEP and Resources account for these ownership interests on the equity method.
N EES owns 50.4 percent of the outstanding common stock of both New England Hydro-Transmission Electric Company, Inc. and New England H ydro-Transmission Corporation (Hydro-Transmission com-ponies). The consolidated financial statements include 100 percent of the assets, liabilities, and earnin of the Hydro-Transmission companies. Since N E ES is the majority stockholder in these companies, the ownership interests of the other stockholders are called minority interests and have been separately disclosed on the N EES consolidated income statements and balance sheets. The " Minority interests"
.l line on the statements of consolidated income includes the minority interests' portion of the net earnings j
t of the Hydro-Transmission componies.
I N E P is also a 12 percent and 10 percent joint owner, respectively, of the Millstone 3 and Seabrook i
! nuclear generating units, each 1,150 megowatts. N EP's net investment in Millstone 3, included in net I utility plant, is approximately $400 million (see Note C for o discussion of Seabrook 1). NEP's share of the related ex penses for these units is included in " Operating expenses" ll ?
The accounts of NEES and its utility subsidiaries are maintained in accordance with the Uniform System of Accounts prescribed by regulatory bodies having jurisdiction. A,ll significant intercompany transactions between consolidated subsidiories have been eliminated.
- 2. Revenue Under a rate agreement $pproved in November 1993, Massachusetts Electric l l j Electric) began recognizing, for accounting purposes, revenues for electricity delivered but not yet billed. At December 31,1993, Mossochusetts Electric recorded on its balonce sheet approximately
$43 million of unbilled revenues, of which S 11 million was recognized in income in the fourth quarter of 1993, with the balance to be deferred for recognition menthly through December 1994, pursuant to l
this rate agreement. All other N E E S subsidiaries record revenue os billed on a cycle billing basis, an revenueis recorded for electricity that has been delivered but not yet b;lled. Accrued revenues are recor ded in accordance with rate odiustment mechanisms.
- 3. Allowance The utility subs diories capitalize AFDC as part of construction costs. AFDC represents the composite for funds interest and equity costs of capital funds used to hnance that portion of construction costs not eligib used during inclusion in rate base. In 1993, on overage of $30 million of construction work in progress was included construction in rate base, all of which was attributable to the Manchester Street Station repowering project. AFDCis (AFDC) capitalized in " Utility plant" with offsetting noncash credits to "Other income" and " Interest". This method is in accordance with on established rate-making proctice under which a utility is permitted a return on, and the recovery of, prudently incurred capital costs through their ultimate inclusion in rate base and in theprovision for depreciation. The composite AFDC rates were 7.4 percent,8.6 percent, and 8.9 percent,in l'993,1992, and 1991, respectively.
.O 1 f - i
~
f*' g
/ 3 --
(/ 4. Depreciation The depreciation and amortization expense included in the statements of consolidated income is and amortization composed of the following: i Year ended December 31 (thousands of dollars) 1993 1992 1991 Depreciation $129,379 $ 132,545 $ 136,443 Amortization:
Oil and gas properties (Note A-6) 90,399 99,687 79,320 investment in Seabrook 1 nuclear unit under rate settlement (Note C) 58,437 52,443 47,017 OilConservation Adjustment 12,137 11,263 9,067 Property losses 6,279 6,279 6,270 Total depreciation and amortization expense $296,631 S302,217 $278,126 Depreciation is provided annually on a straight-line basis. The provision for depreciation as a percentage of weighted average deprecioble property was 3.0 percent in 1993,3.2 percent in 1992, and 3.4 percent in 1991.
The Oil Conservation Adjustment is designed to recover expenditures for cool conversion facilities at NEP's Solem Harbor Station by 1995. At December 31,1993, such unamortized coolconversion costs included in utility plant were S 16,321,000.
- 5. Nuclear plant N E P is recovering its share of estimated decommissioning costs for Millstone 3 and Seabrook 1 through decommissioning depreciation expense. N E P records decommissioning cost expense on its books consistent with its rate
(,~) and nuclear recovery. In addition, N E P is paying its portion of projected decommissioning costs for all of the Yankees fueldisposal through purchased power expense. Such costs reflect estimates of total decommissioning costs approved
~
by the Federal Energy Regulatory Commission (FE RC).
Each of the operating nuclear units in which N E P has an ownership interest has established decommis-
- sioning trust funds or escrow funds into which payments are being made to meet the projected costs of decommissioning its plant. If any of the units were shut down prior to the end of i>s operating license, the funds collected for decommissioning to that point would be insufficient. Listed below is N EP's ownership share of each nuclear plant, its shore of the estimated decommissioning costs, current fund balances, and the expiration date of the operating license for each plant. (See Note D for o discussion of Yankee Atomic Nuclear Power Station decommissioning.)
N E P's share of (millions of dollars)
Estimated
- Ownership Total Cost Fund License l Unit Interest (in 1993 $) Bolonces* Expiration Connecticut Yankee 15 % 49 18 2007 Maine Yankee" 20% 63 19 2008 Vermont Yankee 20 % 57 20 2012 Millstone 3 12 % 50 10 2025 Seabrook 1 10 % 36 3 2026 l
- Certain additional amounts are anticipated to be available through tax deductions.
" A Maine statuTa provides that if both Maine Yankee and its decommissioning trust fund have (3 insufficient assets to pay for the plant decommissioning, the owners of Maine Yankee are jointly and
() !
severally liable for the shortfall.
- 27
1 There is no assurance that decommissioning costs actually incurred by the Yankees, Millstone 3, or Seabrook 1 will not substantially exceed these amounts. For example, current decommissioning cost i
estimates assume the availability of permanent repositories for both low-level and high-levei nudeor waste which do not currently exist. A 1988 Nuclear Regulatory Commission (N RC) rule sets forth Iormulos for determining the minimum funding levels that licensees must satisfy. To meet this requirement, licensees must provide reasonable assurance that funds will be available for decommissioning equolto the minimum funding level. Each of the nuclear units in which N EP has on ownership intereTt ,
hcis the required assurance certification. (See Note D for o discussion of Yankee Atomic Nuclear Power Station decommissioning.)
I The Nuclear Waste Policy Act of 1982 establishes that the federal government is responsible for the 1
disposal of spent nuclear f uel. The federal government requires N EP to pay a fee based on its the net generation from the Millstone 3 and Seabrook 1 nuclear units. N EP is recovering this fee thro its f uel clause. Similar cc ts are incurred by Connecticut Yonkee, Maine Yonkee, and Vermont Yankee.
These costs are billed to NEP and recovered from customers through NEP's fuel clause.
The Energy Policy Ac+ of 1992 assesses the domestic nuclear powerindustry for o portion of costs associated with tha decontamination and decommissioning of the Department of Energy's (DOE) uranium enrichment facilities. An annual assessment of S 150 million (escolated for li inflati domestic nuclear power industry will be allocated to each plant based upon the amount of DOE uranium enrichment services utilized in the post. The total DOE assessment, which began in October 1992, will remain in place for up to 15 years and will amount to $2.25 billion (escolated). The Yankees, Millstone .
and Seabrook have been assessed and initial billings indicate NEP's obligation for such costs over the next 14 years will be opprox.imately $29 million. In accordance with the provisions of the Energy Policy Act, these costs are being recovered through N EP's fuel clause.
- 6. Oil and gas New England Energy incorporated (N eel) participatesin a rote-regulated domestic oil and gas operations exploration, development, and production program through a partnership with a non-offiliated oil company.This program consists of prospects acquired prior to December 31,1983. No new prospects j
will be acquired under this program. However, N E El continues to incur costsjn connection with existing prospects. Savings and losses f rom this program are being passed on to N EP and ultimatelyj to ret j
customers, under on intercompany pricing policy (Pricing Policy) opproved by the Securities and Exchange Commission (SEC). N E El has incurred operating losses since 1986 due to precipitate dedin in oil and gas prices, and expects to incur substantial additional losses in the future. NEP's ability to p such losses on toits customers was favorably resolved in N EP's 1988 FERC rate settlement. This settlement covered all costs incurred by or resulting f rom commitments made by NEEI through March 1, 1988. Other subsequent costs incurred by N E El are subject to normoi regulatory review. NEEl follows the full cost method of accounting for its oil and gas operations, under which capitalized costs (induding interest paid to banks) relating to wells and leases determined to be either commercial or non-comm cre amortized using the unit of production method. The Pricing Policy has allowed NEEl to capitalize oil costs incurred in connection with fuel exploration activitias of its rote-regulated program, induding l interest paid to banks of which 59 million, $14 million, and $22 million was capitalized in 1993,1992 and 1991, respectively. in the obsence of the Pricing Policy, the SEC's full cost " ceiling test" rule requi j non-rote regulated companies to write down capitalized costs to a level which approximates the pres volvo of their proved oil and gas reserves. Based on N E El's 1993 overage oil and gas setting prices and NEEl's proved reserves at December 31,1993,if this test were opplied,it would have resulted i
write-down of approximately $138 million offer tax.
i
! (
! -]
)
t i -
f 6
q
, A summary of NEEl's operating revenue, results of operations and assets is os follows:
i
! Year ended December 31 (thousands of dollars) 1993 1992 1991 !
Operating revenue $ 46,938 S 43,374 S 37,580
- Pre-tox loss possed on to customers $ (46,355) S (54,607} $ (39,303)
( Total assets $335,226 $407,015 $485,508 l Capital expenditures $ 18,965 S 21,262 $ 32,969
! [ Cosh N EES and its subsidiaries classify short-term investments with a maturity of 90 days or less as cash.
Current banking arrangements do not require outstanding checks to be funded until actually presented for payment. Outstanding checks are therefore recorded in accounts payable until such time os the banks present them for payment.
'1
- 8. Deferred The components of deferred charges and other assets are detailed below. These amounts primarily charges and represent costs which have been deferred for later recovery from customers in accordance with either d other ossets rate making policies of regulatory jurisdictions or specific rate agreements entered into by NEES l subsidiaries.
Year ended December 31 1993 1992 Unamortized losses on reacquired debt S 60,333 $ 49,154 Deferred SFAS No.106 costs (see Note F-2) 24,563 Deferred SFAS No.109 costs (see Note B) 73,760 Purchased power termination costs (see Note E-5) 28,400 4,000 Deferred gas pipeline charges (see Note E-2) 13,187 3,556 Environmentalresponse costs (see Note E 3) 18,752 i Deferred storm costs 14,774 10,619 Unamortized property losses -
12,745 18,233 Intangible asset-pensions (see Note F-1) 15,103 Other 28,518 21,000 l S290,135 $ 106,562 -
- 9. Other current The components of other current liabilities are os follows:
liabilities Year ended December 31 1993 1992 Accrued wages and benefits $ 39,756 $ 15,239 Deferred unbilled revenues 32,300 Rote adjustment mechanisms 31,237 26,944
, Accrued purchased power termination costs 21,900 ;
Customer deposits 12,336 12,243 Other 16,283 11,634
$153,812 $66,060
- i l
m.
iO 1
29 .)
l c ,
. Note B !
Income taxes l
Totalincome taxes in the statements of consolidated income are as follows:
1993 1992 i 1991 Year ended December 31 (thousands of dollars)
$121,124 $110,76T S103,702 Income taxes charged to operations 3,147 3,192 2,971 Income taxes charged to "Other income"
$124,271 S113,953 $ 106,673 Totalincome taxes Totalincome taxes, as shown above, consist of the following components:
1993 1992 1991 Year ended December 31 (thousands of dollars)
$120,167 S102,790 $ 97,806
! Current income taxes 7,756 13,475 17,451 i Deferred income taxes (3,652) (2,312) (8,584) investment tax credits-net
$124,271 S113,953 $106,673 Totalincome taxes Totolincome taxes, os shown above, consist of federal and state components as follows:
1993 1992 1991 Year ended December 31 (thousands of dollars)
$ 98,529 $ 92,647 $ 86,032 Federalincome toxes 25,742 21,306 20,641 State income taxes
$124,271 S113,953 S106,673 Totalincome taxes investment tax credits of subsidiaries are deferred and amortized over the estimated lives of the property c
giving rise to the credits. Since the Tax Reform Act of 1986 generally eliminated investment tax I
the amounts shown above principally reflect the amortization of investment tax credits generated in prior years.
With regulatory approval, the subsidiaries have adopted comprehensive interperiod tax allocation I (normolization) for temporary book /tox differences.
The following table details the components of the deferred income taxes of these subsidiaries:
1993 1992 1991 Year ended December 31 (thousands of dollars)
Cost associated with utility plant retirements S 9,684 S 8,115 S 5,750 deducted for tax purposes 18,351 21,168 24,380 Excess tax depreciation r
Early retirement program (Note F)
(9,005) 7,762 17,430 Other postretirement benefits (Note F 2)
(1,857) (6,322) 4,867 Rote adjustments (2,853) (5,349) 908 Operating reserves 4,460 6,889 1,710 Loss on reacquired debt (27,117) (30,807) (19,942)
Oil and gas progrom 8,331 2,351 (222) 1 Other
$ 7,756 $ 13,475 S 17,451 Total deferredincome taxes
. O
)
30 i
_ . . . . .. . ~. . ___m _ ._. . _ . . .- - , _ _ _ . _ _ . .
.j*
, Totalincome taxes diffar from the amounts computed by applying the statutory tax rotas to incoma before taxes. The reasons for the differences are as follows:
l Year ended December 31 (thousands of dollars) 1993 1992 1991 Computed tax at statutory rate - $113,778 $ 105,251, $ 100,999 Increases (reductions) in tax resulting from: ;
Reversal of deferred taxes recorded at a higher rate (5,099) (7,175) (6,339) ;
Amortization of investment tax credits (4,697) (5,384) (7,015) I State income tax, net of federalincome tax benefit 16,732 14,062 13,623 j Allother differences 3,557 7,199 5,405 ;
Totalincome taxes $124,271 $ 113,953 $ 106,673 1
The Financial Accounting Standards Board established Statement of Financial Accounting Standards '
(SFAS) No.109, " Accounting for income Taxes" which became effective in 1993. In conjunction with '
the new standard, NEES has recorded additional deferred taxes and a corresponding net regulatory ;
asset of approximately $74 million at December 31,1993. This amount primarily reflects additional l deferred taxes related to the equity component of AFDC and other book versus tax plant items not previously normalized, offset by deferred taxes on unamortized investment tax credits and reduced -
deferred income tax reserves resulting from the reduction in the federalincome tax rate from 46 percent in 1986 to the currently enacted rate of 35 percent. The application of this new standard did not have a significant impact on 1993 net ncome. '
The following table identifies the major components of total deferred income taxes at December 31,1993:
O Deferred tax asset:
Plant related investment tax credits (millions of dollars)
$ 99
. 40 Allother 129 268 '
Deferred tax liability:
Plant related (758) '
Equity AFDC l (57)
Allother (158)
(973)
Net deferred tax liability $(705) -
l There were no valuation allowances for deferred tax assets deemed necessary.
Federalincome tax returns for NEES and its subsidiaries have been examined and reported on by the Internal Revenue Service (IRS) through 1989. The IRS is currently auditing the returns for 1990 and 1991. j Note C Seabrook Nuclear Unit 1 (Seabrook 1)
N E P owns approximately 10 percent of Seabrook 1, a 1,150 megawatt (MW) nuclear generating unit that entered commercial service on June 30,1990. N E:P's rate recovery of its investment in Seabrook 1 O was resolved through t'wo separate rate settlement agreements. The pre-1988 portion of NEP's .
investment is being recovered over a period of seven years and five months ending in July 1995. Thie investment, net of amortization,is shown on a separate line on the consolidated balance sheets. NEP's 31
- - . . - . . . .- ~ . - . -- -
f investment in Seabrook 1 sines January 1,1988, which amounts to approximately S50 million at ,
December 31,1993,is included under the caption " Utility plant" on the consolidated balance sheets and is being recovered over its usefullife.
-O Note D '
Yankee Atomic Nuclear Power Station NEP has a 30 percent ownership interest in Yankee Atomic Electric Company (Yankee Atomic), which owns a 185 MW nuclear generating station in Rowe, Massachusetts. The station began commercial j
service in 1960. At December 31,1993, N EP's investment in Yankee Atomic was approximately
$7 million. In February 1992, the Yankee Atomic board of directors decided to permanently ceose l '
I power operation of, and in time decommission, the facility.
in March 1993, the FERC approved a settlement agreement that allows Yankee Atomic to recover all but $3 million of its approximately $50 million remaining investment in the plant over the period
! extending to July 2000, when the plant's N RC operating license would have expired. Yankee Atomic recorded the $3 million before-tax write-down in 1992. The settlement agreement also allows Yankee Atomic to earn a return on the unrecovered balance during the recovery period and to recover other costs, including an increased level of decommin%ning costs, over this same period. Decommissioning cost recovery increased from $6 million per year to $27 million per year for the period 1993 to 1995.
This level of recovery is subject to review in 1996.
N E P has recorded an estimate of its entire future payment obligations to Yankee Atomic as a liability
- 4 on its balance sheet and an offsetting regulatory asset reflecting its expected future rate recovery of such costs. This liability and related regulatory asset amounted to approximately $ 104 million each at ,
December 31,1993, and are included on separate lines in the consolidated balance sheet.
Note E O
Commitments and contingencies l 1. Plant The subsidiaries' utility plant expenditures are estimated to be $425 million in 1994. At December 31, ,
expenditures 1993, substantial commitments had been made relative to future planned expenditures.
in connection with N E P's efforts to reduce sulfur dioxide emissions and repower generating units, NEP i
- 2. Natural gas pipeline capacity has signed several contracts for natural gas pipeline capacity and gas supply. These agreements require minimum fixed payments. N E P's minimum net payments are currently estimated to be approximately j
S45 million in 1994, $65 million in 1995, and $70 million each in 1996,1997, and 1998, j As port of its W-12 rate settlement, N E P is recovering 50 percent of the fixed pipeline capacity pay-ments through its current fuel clause and deferring the recovery of the remaining 50 percent until the ~
j Manchester Street repowering projectis completed. NEP has deferred payments of approximately S 13 million as of December 31,1993 (see Note A-8). >
1
- l I
- 3. Harordous The Federal Comprehensive Environmental Response, Compensation and liability Act, more commonly j l waste known as the "Superfund" law, imposes strict, joint and severalliability, regardless of fault, for 5
remediction of property contominated with hozordous substances. Parties liable include post and present site owners and operators, transporters that brought wastes to the site, and entities that generated
- or arranged for d,isposal or treatment of wastes ultimately disposed of at the site. A number of states, )
including Massachusetts, have enacted similar laws.
The electric utility industry typically utilizes and/or generates in its operations a range of potentially hazardous products and by-products. These products or by-products may not have previously beeg j I
considered hornrdous, and may not currently be considered hozordous, but may be identified as {
such by federal, state, or local authorities in the future. N E E S subsidiaries currently have in place on j environmental audit program intended to enhance compliance with existing federal, state, and local j l
requirements regarding the handling of potentially hazardous products and by-products.
y
Fed:rol and state environmen+ol ogancias, as wsil as private parties, have contacted or initiated legal proceedings against N EES and certain subsidiaries regarding liability for cleanup of sites alleged to contain hazardous waste or substances. N EE S and/or its subsidiaries have been named as
(^'N o potentially responsible party (PRP) by either the U.S. Environmental Protection Agency (EPA) or the
.() Mossochusetts Department of Environmental Protection (DEP) for 18 sites at which hazardous waste is alleged to have been disposed. NEES and its subsidiories are also aware of other sites which they may be held responsible for remediating and it is likely that, in the future, N E E S and its ' subsidiaries will become involved in additional proceedings demanding contribution for the cost of remedicting additional hazardous waste sites.
The most prevalent types of hazardous waste sites that N EES and its subsidiaries have been con-nected with are former manufactured gas locations. Until the early 1970s, N EES was o combined elec-tric and gas holding company system. Gas was manufactured from cool and oil until the early 1970s to supply areas in which natural gas was not yet available or for peaking purposes. Among the waste by-products of that process were coal and oil tors. N EES is currently aware of opproximately 40 locations (including one of the 18 locations for which N EES is o PRP) of which gas may have been manufactured and/or stored. Of the manufactured gas locations,17 have been listed for investigation by the DE P. Two manufactured gas plant locations that have been the subject of extensive litigation are discussed in more detail below: the Pine Street Canal Superfund site in Burlington, Vermont and a site located in Lynn, Massachusetts.
Approximately 18 parties, including N EES, have been notified by the EPA that they are PRPs for cleanup of the Pine Street Canal site, at which cool tar and other materials were deposited. Between 1931 and 1951, N EES and its predeccssor owned all of the common stock of Green Mountain Power Corporation. Prior to, during, and offer that time, gas was manufactured at the Pine Street Canal site.
The EPA had t.rought a lawsuit against NEES and other parties to recover all of the EPA's past and future response . osts of thi< sh. In 1990, the litigation ended with the filing of a final consent decree with p)
(
the court. Under the ter ms of the settlement, to which 14 entities were party, the EPA recovered its post response costs. NEES recorded its shore of these costs in 1989. NEES remains a PRP for ongoing and future response costs. In November 1992, the EPA proposed a cleanup plan estimated by the EPA to cost $50 million. In June 1993, the EPA withdrew this cleanup plan in response to public concern about the plan and the cost. It is not known at this time what the ultimate cleanup plan will be, how much it will cost, or what portion N EE S will have to pay.
On May 26,1993, the United States Court of Appeals for the First Circuit offirmed on oppeal on earlier adverse decision against N EES and two of its subsidiaries, Massachusetts Electric and New England Power Service Company, with respect to the Lynn, Massachusetts site which was once owned by a gas utility formerly owned by N EES. The decision held N EES and these subsidiaries liable for cleanup of the properties involved in the cc.se. Although the circumstances differ from location to location, the Court of Appeals opinion has adverse implications for the potentialliability of NE ES and its subsidiaries with respect to other gas manufacturing locations operated by gas utilities once owned by NE E S.
In November 1993, the Massachusetts Department of Public Utilities opproved a rate agreement filed by Mossochusetts Electric that resolved all rate recovery issues related to Massachusetts manufactured gas sites as well as certain other Massachusetts hazardous waste sites. The rate ogreement allows for environmental cleanup costs for such sites to be met by establishing a special interest bearing fund on Massachusetts Electric's books. The fund's initial balance of $30 million has come from previously recorded reserves and is not recoverable from customers. NE ES had previously established approxi-motely S40 million of reserves related to Massachusetts manufactured gas locations earlier in 1993 and in prior years. The resolution of the issue of rate recovery resulted in c, one-time increase to fourth n quarter earnings of.S i l million. Annual contributions of $3 million, adjusted for inflation, will be added to the fund by Massachusetts Electric and be recoverable in rates. Under the agreement, any shortfalls in the fund will be paid by Massachusetts Electric and be recovered through rates over seven yeofs, without interest.
Predicting the potential costs to investigate and remediate hozordous waste sites continues to be 33
, 7 i h i
difficult. Factors such as tha evolving natura of r:msdiction t:chnology and ragulatory r:quir:m:nts i and the porticular chorocteristics of each site, including, for example, the size of the site, the nature f and omount of waste disposed at the site, and the surrounding geography and land use, make precise j
estimates difficult. There are also significant uncertainties os to the portion,if any, of theinvestigation j
! and remediation costs of any porticular hozordous waste site that may ultimately be borne by NEES i
orits subsidiaries. At year end 1993, NEES had total reserves for environmental response costs of i SS6 million (included in other reserves and deferred credits) and a related regulatory asset of S 19 milli N E E S believes that hozordous waste liabilities for all sites of which it is aware, and which are not !
covered by a rate agreement, will not be material (10 percent of common equity) to its financial positio l Where oppropriate, the NEES companies intend to seek recovery from their insurers but it is uncertain whether, and to what extent, such efforts would be successful. ,
- 3 The Price- Anderson Act limits the amount of liability claims that would have to be paid in the event of 1
- 4. Price- f Anderson Act a single incident at a nuclear plant to $9.2 billion (based upon 114 licensed reactors). The maximum omount of commercially available insurance coverage to pay such claims is only $200 million. The remaining $9.0 billion would be provided by on ossessment of up to $79.3 million per incident levied on each of the nuclear units in the United States, subject to o maximum assessment of $ 10 million per incident per nuclear unit in any year. The maximum assessment, which was most recently calcubted in 1993, is to be adjusted at least every five years to reflect inflationary changes. N E P's current interest in the Yankees, Millstone 3, and Seabrook 1 would subject NEP to on $81.8 million maximum ossessment per incident. N EP's payment of any such assessment would be limited to o maximum of $ 10.3 million per incident per year. As a result of the permanent cessation of power operation of the Yankee Atomic Plant, l Yankee Atomic has petitioned the N RC for on exemption from obligations under the Price-Anderson Act.
- 5. Long-term N E P purchases a portion of its electricity requirements pursuant to long-term contracts with owners of f' contracts for various generating units. These contracts expire in various years from 1995 to 2029.
the purchase of Certain of these contracts require N EP to make minimum fixed payments, even when the supplier is j
electricity unable to deliver power, to cover N E P's proportionate shore of the capitol and fixed operating costs of these generating units. The majority of the payments under these contracts are to the Yankees (excluding Yonkee Atomic-See Note D) and Ocean State Power, entities in which NEES subsidiaries hold owner. .
I ship interests. These contracts have minimum fixed payment requirements of $210 million in 1994 and 1995, S195 million in 1996, ond $185 million in 1997 ond 1998.
N E P's other contracts, principolly with non-utility generators, require N E P to make payments only a
if power supply capacity and energy are deliverable from such suppliers. NEP's payments under these controcts amounted to $210 million, $200 million, and S190 million in 1993,1992, and 1991 h I
respectively.
N EP has also incurred certain purchased power contract termination costs which it expects to recover in future rates pursuont to o rate settlement agreement. (See Note A.8).
1 Note F i
Employee benefits
- 1. Pension plans The System's retirement plans are noncontributory defined-benefit plans covering substantially all employees. The plans provide pension benefits based on the employee's compensation during th years before retirement. The System's funding policy is to contribute each year, the net periodic pe cost for that yeon However, the contribution for any year will not be less than the minimum require contribution under federol low or greater then the maxirnum tax deductible amount.
q ,
p l
34 3
ai !
j Total psnsion cost for 1993,1992, and 1991 included the following componsnts:
Year ended December 31 (thousands of dollars) 1993 1992 1991 i Service cost-benefits earned during the period $ 11,160 $ 10,084 - $ 10,319 '
'. Plus (less): I Interest cost on projected benefit obligation 49,346 46,171;. 43,602 }
Return on plan assets of expected long-term rate (45,032) (43,977) (41,265) l Amortization 1,364 1,239 780 l Totol pension cost $ 16,838 $ 14,517 S 13,436 [
Assumptions used to determine pension cost were: l Discount rate 8.3% 8.5% 8.5%
Average rate of increase in future compensation levels 5.4% 6.7% 6.7%
Expected long-term rate of return on assets 8.8% 9.0% 9.0%
Actual return on plan assets $ 69,208 $ 38,489 S 72,668 l Service cost does not reflect costs incurred in connection with on early retirement program offered by ;
the NEES subsidiaries in 1993 (see Note F-4). i The following table sets forth the plans' funded status: !
Retirement Plans (millions of dollars) ;
December 31,1993 December 31,1992 )
Union Non-Union Supple. Union Non-Union Supple-Employee Employee mental Employee Employee mental !
Plans Plans Plans Plans Plans Plans l
Benefits earned l Actuarial present value of i O, occumulated benefit liability:
Vested l
$251 S333 S40 $217 S267 $36
- Non-vested 20 6 -
17 7 -
Total $271 S339 Sid $234 S274 $36 '
=
Reconciliation of funded status !
Actuarial present value of l projected benefitliability $310 $383 S44 S268 $309 $40 Unrecognized prior service costs (8) (6) (4) (11) (6) (5) ;
SFAS No. 87 transition liability not yet recognized (amortized) -
(1) (5) . -
(2) (6) :
Net gain (loss) not yet recognized !
(amortized) (11) (45) (2) 6 (9) (1)- i Additional minimum liability recognized -
8 7 - -- -
j 291 339 40 263 292 28 Pension fund assets at fair value 302 318 -
280 295 - ;
SFAS No. 87 transition osset not j yet recognized (amortized) (14) -- -
(16) - -
- 288 318 -
264 295 -
l Accrued pension /(prepaid) !
payments recorded on books S 3 $ 21 $40 $ (1) $ (3) $28. j The assumptionIused to calculate pension cost changed effective January 1,1994 to 7.3 percent, 4.4 percent, and 8.8 percent for the discount rate, the overage rate of increase in future compensation ;
levels, and the expected long-term rate of return on ossets, respectively. These rates were used to calculate the plans' funded status at December 31,1993.
g Plan assets are composed primarily of corporate equity, guaranteed investment contracts, debt securities, and cash equivalents.
35 :
.p i
2 Postr:tirsmsnt in 1093, SFAS No.106," Employ:r's Accounting for Postretirem:nt Ben fits Oth r than Pensions" wsnt
- benefit plans into effect. The N E E S subsidiaries provide health core and life insurance ccuerage to eligible retired ctherthan employees. Eligibility is based on certain age and length of service requirements and in some cases l
retirees must contribute to the cost of their coverage. This new standard requires employers to establish o pensions liability during the working years of employees for the expected cost of providing postretirement ben 1
other than pensions (PBOPs)instead of recording such costs when poid.
8 The totoi cost of PBOPs for 1993 includes the following components:
(thousands of dollars)
S 8,160 {
Service cost-benefits earned during the period j
Plus (less): 30,457 Interest cost on the occumulated benefit obligation l' (5,089) ,
Return on plan assets at expected long-term rate 18,418 Amortization S 51,946 Total postretirement benefit cost 1 I
Assumptions used to determine postretirement benefit cost were:
8.25 % !
Discount rate 12.00 % l Health core cost rote-near-term 7.25 %
Health core cost rate-long-term 8.50%
Expected long-term rate of return on assets S 5,249 l Actual return on plan assets The following table sets forth benefits earned and the pl'on's funded status:
December 31,,1993 January 1,1993 ,
Accumulated postretirement benefit obligation:
$249 $196 Retirees 23 47 I Fully eligible active plan participants 130 125 Other active plan participants 402 368 Total benefits earned U nrecognized transition obligotion (350) (368)
Netloss not yet recognized (7) 45 -
86 48 Plan ossets at fair value Prepaid postretirement benefit costs recorded on books S 41 S 48 f The assumptions used to celculate postretirement benefit cost changed effective January 1,1994 to 7.25 percent,11 percent, and 6.25 percent for the discount rate, the health core cost rate for 1994, a the health core cost rote for years 2005 and beyond, respectively. These rates were used to calculate the plon's funded status at December 31,1993.The prepaid postretirement benefit cost shown in the fu ,
status at January 1,1993 consists of contributions made in 1992 in advance of adoption of the new standard. ,
O 36
_- J c1 The health core cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed rates by 1 percent in each year would increase the occumulated postretirement benefit i obligation as of December 31,1993 by approximately S60 million and the net periodic cost for the year j A 1993 by approximately $7 million. i V The N E E S subsidiaries fund the annual tax deductible contributions. These plan assets are invested in equity and debt securities and cash equivalents. i l Prior to 1993, N E ES subsidiaries recorded the cost of PBOPs when paid. These cows amounted to j opproximately $ 13 million in 1992 and S 12 million in 1991. Each of the N EE S subsidiaries has been permitted to recover amounts on either o current and/or deferred basis, which are expected to of least equal the amounts calculated in accordance with this new accounting standard. In a statement of policy applicable to N E P and all other utilities subject to its rote-making jurisdiction, the FE RC stated that the l increased costs resulting from this new standard could be deferred pending the next rate filing so long as such filings occur before the end of 1995. This new standard increased total 1993 costs by S40 million, approximately $ 10 million of which was capitalized as a construction overhead. Of the remaining
'{
l $30 million, $5 million was recovered in rates in 1993 and $25 million was deferred for later recovery.
l Therefore, adoption of this new standard did not have o significant impact on net income.
[,hshmployment On January 1,1994, SFAS No.112, " Employer's Accounting for Postemployment Benefits" become benefits effective. The statement requires recognition of the postemploymer.t benefit obligation when earned by i
employees. The most significant types of postemployment benefits offered by N E ES subsidiaries include income continuance while on long-term disability, workers' compensation, and continuation of health
, and life insurance coverage during disability. The N EES subsidiaries adopted this standard in 1993 and recorded a charge to earnings in the fourth quarter of $5 million representing the cumulative effect of adopting the new standard.
[1h3 Early in February 1993, N E ES subsidiary companies offered a voluntary early retirement program to V retirement and non-union employees who were at least 55 years old with 10 years of service. This program was part of special severance on organizational review with the goal of streamlining operations and reducing the work force. The
{ programs early retirement offer was accepted by 344 employees. A special severance program was also announced in February 1993 for employees offected by the organizational review, but who were not eligible for, or did not accept, the early retirement offer. N E ES subsidiaries recorded in the first quarter o [
one-time charge to 1993 earnings of opproximately $ 18 million, after tax ($28 million, before tox), to reflect the cost of the early retirement and special severance programs which consisted principally of pension benefits.
Noto G Short-term borrowings At December 31,1993, NEES and its consolidated subsidiaries had $72 million of short-term debt outstanding in the form of commercial paper borrowings. At December 31,1993, these companies had lines of credit with banks totaling S446 million which are available to provide liquidity support for
' commercial paper borrowings and for $252 million of NEP's outstanding variable rote mortgage bonds in commercial paper mode (see Note 1) and for other corporate purposes. There were no borrowings under these lines of credit of December 31,1993. There are no compensating balance arrangements.
, Fees are paid in lieu of compensating balances on most lines of credit.
~
0 V .
37
p u .
N:t3H '
Shore capital of New England Electric System d
N E ES did not issue new shares of its common stock in 1993 or 1992. N E ES issued additional common d shores, $ 1 por value,in 1991 as follows:
i 38 Paid-in (thousands of dollars) Por capital
~
)I 1 Dividend reinvestment and (! f common shore purchase plan S212 S 5,080 $$
Employee share plans 386 9,671 7 S598 S14,751
~---
Note l I.ong-term debt @ f
-~ j' ,
Substantially oli the properties of N EP, Massachusetts Electric, and The Narrogansett Electric Company @
(Norrogansett) are subject to the lien of mortgage indentures under which mortgage bonds have been issued.
h g
The aggregate payments to retire maturing long-term debt are as follows: ,
\
(thousands of dollars) 1994 1995 1996 1997 1998 1l Maturing long-term debt S35,000 $10,000 S 62,500 S 60,000 Mondatory prepayments:
Hydro-Transmission Companies $11,520 11,520 11,520 11,520 11,5 Granite State Electric Company 1,400 1,400 1,400 400 400 NEEl 38,000 75,000 75,000 50,000
(
Total $ 12,920 S85,920 $97,920 $149,420 $121,920 e fii. '
The terms of $342 million of variable rate pollution control revenue bonds collateralized by NEP mortgage bonds require NE P to reocquire the bonds under certain limited circumstances. At December
- 31,1993, interest rates on NEP's variable rote bonds ranged from 2.20 percent to 3.40 percent. Also, }
j at December 31,1993, interest rates on N eel's debt ranged from 3.5625 to 3.875 percent.
j At December 31,1993, N EES subsidiaries'long-term debt had a carrying value of $1,524,509,000 i and had a fair value of approximately $ 1,625,000,000. To estimate fair value, the carrying amount !
was mcd tc,r debt that reprices frequently of market rates because the carrying amount is a reasonable- J rstice of bir value. For all other debt, the fair market value of the N EES subsidiaries'iong-term debt was estimated based on the quoted prices for similar issues or on the current rates offered to the System i for debt of the some remaining maturity. The fair value of the N EES subsidiaries'short-term debt opproximates carrying value.
l Note J
, Redemption of preferred stock
! During 1993, alTof NEP's 8.68 percent Series and 8.40 percent Series of cumulative preferred stock, I all of Massachusetts Electric's 7.80 percent Series and 7.84 percent Series of cumulative preferred stoc ond all of Narragansett's 8.00 percent Series of cumulative preferred stock were redeemed. Total, l
{
premiums of S2 million in connection with these redemptions were charged to retained earnings in 1993.
l 38
A s $$9b W a WMM96 e s
~l tf Thi monog: mint of N sw England Electric Syst:m is responsibla for tha intrgrity of tha consolidatid
- anagernent financial statements included in this annual report. The financial statements were prepored in accord-once with generally accepted accounting principles using management's informed best estimates and q judgments where oppropriate to fairly present the financiol condition of the System and its results of
) operations. The information included elsewhere in this report is consistent with the financial statements.
The System maintains on accounting system and system of internal controls which are designed to provide reasonable assurance as to the reliability of the financial records, the protection olossets, and the prevention of any material misstatement of the financial statements.The System's accounting controls have been designed to provide reasonable assurance that errors or irregularities, which could be material to the financial statements, ore prevented or detected by employees within a timely period as they perform their assigned functions. The System's internal auditing staff independently assesses the effectiveness of internal controls and recommends improvements when oppropriate.
Coopers & Lybrand, the System's independent accountants, are engaged to audit and express their opinion on our financial statements. Their audit includes a owiew of internal controls to the extent required by generally accepted auditing standards.
The Audit Committee, composed solely of outside directors, meets periodically with management, the internoi auditor, and the independent accountants to ensure that each is carrying out its responsibilities l
and to discuss auditing, internal accounting control, and financial reporting matters. Both the internal auditor and the independent accountants have free access to the Audit Committee, without management present, to discuss the results of their audit work.
MR~ du \
John W. Rowe Alfred D. Houston President and Executive Vice President Chief ExecutiveOfficer and Chief FinancialOfficer 1
Report of To the Board of Directors and Shoreholders of New England Electric Systers:
Independent Accountants We have audited the accompanying consolidated balonce sheets and consolidated statements of capitalization of New England Electric System and subsidiaries (the Company) as of December 31, 1993 and 1992 and the related consolidated statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31,1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express on 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 indudes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by management, as well as evoluoting the overall financial statement presentation. We believe that our audits provide o reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31,1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31,1993, in conformity with generally accepted accounting principles.
O Boston, Mossochu tts February 25,1994 .
. 39 s
)
W%%%g .a y, 4
- p 17.
1993 1992m Price range Price range ; Dividen!
Dividend High Low declared High Low declared' First quarter $42% $36% S.54 $32% S,94 2 S.52 E Second quarter $42% $39% S.56 S33 S29 % S.54Y Third quarter $43% $40% S.56 $37% . $32% S.54 1 Fourth quarter $42 $37 S.56 $39 $34 i ' S.54 { .
- gn . - f The rotoi number of shareholders at December 31,1993 was 57,667. / # 1 Y
First Second Third FourNi quarter quarter quarter quartog (thousands of dollars) 1993 M-A Operating revenue $579,490 $518,136 $576,644 $559,708 i Operating income S 80,711 S 46,046 $ 82,498 $ 93,6887 Not income S 53,586 S 19,146 S 55,531 S 61,960?,.
Net income per overage shore S .82 S .30 $ .85 S .96 #
1992
$574,664 $499,306 $540,929 SS66,777h Operating revenue Operating income S 91,865 $ 58,168 $ 79,776 S 75,742 5 Netincome S 64,388 $ 30,173 $ 48,447 S 42,029C Net income per overage share S .99 $ .47 $ .74 S 165 1
_3 l
- See Notes A-2 and E 3 for discussion of items that increased fourth quarter earnings. I-Shoreholders may direct questions or acquire New England Electric System i l
odditionalinformation about shareholder records, Shoreholder Services Department %
quarterly dividend payments, or address changes by . Fost Office Box 770 contacting a shareholder services representative. Westborough, Mossochusetts 01581-0770 m The following services are available to shareholders Toll-Free No:1800 466-7215 ;
who have shores registered in their own name: direct local No: 508-389.-2699 *F-deposit of dividends, automaticinvestments, dividend yw reinvestment, and sofekeeping of certificated shores. Q
%J Dividends are generally payable on the first business day of January, April, July, and October. $
Ouestions about the transfer of certificate shores Bank of Boston, Transfer Processing .
should be directed to: Post Office Box 644, Mail Stop 45-01-05 %
Boston, Mossochusetts 02102-0644 jd (617)575-2900 , . . ag mg I New York Stock Exchange @ M Boston Stock Exchange
- q
.c NES %
The annual n eeting of New England Electric System will be held at Mechanics Hall, _i Worcester, Mossochusetts, on April 26,1994, at 10:30 a.m. Q'q:
Copies of the annuol report on Form 10K to the Securities and Exchange Commission and a Statistical New England Electric System Investor Relations sj'(
Report for 1993 con be obtained, free of charge, by 25 Research Drive .-'*
=
writing to: Westborough, Massachusetts 01582
~
Y The nome "New England Electric System" means the trustee or trustees for the time being (as trustee or trustees but not personally) ond Dedoration of Trust dated January 2,1926, as omended, which is hereby referred to, and a copy of which, as amended, has been filed with the Secretory of The Commonwealth of Massachusetts. Any agreement, obligation, or liability mode, entered into, or incurred by or o Eleoric System binds only its trust estate, and no shareholder, director, trustee, off;cer, or agent thereof ossumes or shall be This report is not to be considered as on offer to sell or buy or solicitation of on offer to sell or buy any security. ;-fg c
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