ML20082N528
| ML20082N528 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/31/1990 |
| From: | Bok J, Rowe J NEW ENGLAND ELECTRIC SYSTEM |
| To: | |
| Shared Package | |
| ML20082N499 | List: |
| References | |
| NUDOCS 9109090222 | |
| Download: ML20082N528 (44) | |
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L D'E A R' SHAREHOLDER: 1990 was a very good year for New England Electric System. The highlight ws our reversing a portion of the $179 miluon written off in 1988, which increased our 1990 earnings by
$115 million. This was made possible by the commercial operation of the Seabrook 1 nuclear unit.
This oddition to our earnings increased the base on which we are allowed to earnin the future and, when netted against the five
$7
-@ 1 '
cent per shore loss from the disposition of our energy management n: , yc subsidiary, increased our earnings per share by $1.75. For 1990, gj it helped the System ochieve record earnings of $4.11 per overage bi' share and a 20.5 percent return on overage common equity, ' h Our 1990 earnings, excluding the nonrecurring S1.75, were 0N $2.36 per overage shore compared with $2.20 per shore earned in 1989 before a 16 cent nonrecurring gain. We achieved this improvement despite a regional recession, essentially flat - kilowatthour sales and almost five million more shores outstanding. There viere other successes os well. We brought the Hydro. Quebec Phase 2 transmission interconnection into commercial operation,10 percent under budget. Our Thermal lnitiatives pro-gram improved the availability of our fossil-fired power plants to 80 percent, their best combined performance on record. Our
~
Joan T. Bok, chairmon, energy conservation programs, developed in conjunction with the ond John W. Rowe, president Conservation 1.ow Foundation, continueJ to lead the nation and and chief executive officer contributed more than S4 million to pre-tox cornings. Perhaps most important, we are positioning ourselves to cope with the regional recession. Our demand forecasts are less opti-mistic than many, with declining kilowatthour sales projected for 1991 and little or no recovery expected in 1992; our operating expense budgets are commensurately tight. We have deactivated one of our oldest and least efficient generating facilities, the 100 megawatt (MW) South Street Station. By planning carefully and working closely with labor organizations, we expect to realize substantial savings from deactivating this plant without putting the offected employees out of work. We ore continuing to pore away operations titt have reduced our earnings, through actions such
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% ,1990 1989-
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h,, m c Earnings per overage shore $ 4.114 S 2.36l W ^ ^
- Earnings per overage shore excluding .
-. $ 2,20
^
f.v : the effect: of the items discussed below * $ 2.36 f
' Dividendsdeclared per shore' - $ 2.04 - S 2,0L
'- ; Book value per shore-year end $21~ 43
. - $19.24 :
' ~
Market price per. shore-year end ' $24%f ' S28% = $$h- .Growthdecline) in iotol kilowotthour- ? m's
^
~
(KWH) sales (.1)%1 3.0% - [4 - Cost per KWH to ultimate customers (cents) . 4.27 7.28I h L '1990 eidudes the reversolof a portion of the 1988 write-down related to Seabrook 1 (see Note C) and the-:
- fois from the disposition of our energy monogement services subsidiary.1989 excludes the goin from the ;
setlement of on'orbitration cose and the related sole of our interest in a ual ship.; Y' s m f> lNew England Electnc System (NEES)is a public utility holding company hood.-. b - quohered-in WestborouD h,= Massachusetts. Subsidiaries include three retail i operating companies-Massochusetts Electric Company, which serves 906,000 '
- customers in 146 Mossochusetts communitiest The Norrogonsett Electric Com- y pony, which serves 317,000 customers in 27 Rhode Island communitiest and ir '
Granite State Electric Company, which servos 34,000 customers in 21 New p Hampshire sommunities. Other subsidiaries includi two wholesale generating g companies: New England Power Company, which operates 21 generating sto-p1 p tions,;ond Norrogansett Energy Resources Company, which owns 20 percent of
~ the Ocean State Power project; on oil cmd gas exploration on'd fuels company, m c, New England Energy s 1corporated; three transmission service companies: New'-
M >
.- England Electric Transmission Corporation, New England Hydro-Tranr. mission f g- ~
l$ Co~rporation, and New Engiand Hydro-Tronsmission Electric Company, Inc.; and - ?. . La service company, New England Power Service Company. { fC$ntents - 2 Letter to Shoreholders 37 Report of Management 6 Exponding Our Resources 37 Report ofindependent Accountants 1 8 Protecting the Environment 38 Supplementory Informatior- ; 10 E ihoncing Customer Satisfaction 40 Shorehold-rInformation 12 Financial Review Pock System Directors and Officers ,
** I# ** **
20 Financiol Statements 26 Notes to Financial Statements a: .. _ _ . . . _ . - _m._ U
on opportunity to earn incentives on our C&lM programs. In
~
M respons0 to this powerful regulatory mondole, we have budgeted ) )- ' opproximately $85 million for C&lM progroms in 1991 and expect to earn additionalincentive payments. During the next two decades, we hope to reduce by one third the increase in customer { demand for electricity through our C&LM programs.
' We also are improving the environmental performance of our power plants, which will be especioily important in light of the f
federal Cleon Air Act omendments signed into low in November 1990. The low requires that, by the year 2000, the nation's annual Rhode lslancI Hospital g g Trust N ational Bonk, where energy 4,fficiency levels and that nitrogen oxide (NO,) emissions be reduced by two imerwemenn he million tons per year. We were otready planning and implement-in9 Programs to reduce SO2 emissions by 1995 to comply with a mai e ig fhtures through one of Massachusetts low. Key elements of our compliance plans are the our catM prograrn5~ oddition of gas-burning capability at our Broyton Point 440 MW oil-fired unit 4 of on estimated cost of $16 million and the use of low sulfur coal and oil at certain other units. To meet federal' requirements, we also plan, as necessary, to install burners that emit less NO,, and to make greater use of low sulfur fuels. These activities should allow us to achieve our shore of federal and state emission reduction requirements, many of them ohead of schedule, In addition, we plan to repower our Manchester Street plant in Providence, Rhode Island, thereby replacing 140 MW of old and inefficient oil-fired capacity with 450 MW of clean, state of the ort, gas-fired combined cycle capacity. This $600 million project is our largest single capitol commitment. Quality process Of course, the new sources of power we have brought into service, the conservation programs and the environmental . improvemems all cost money. During 1990, our whol<esale generating subsidiary, New England Power Company, secured opproximately S82 million in rote increases and our retail subsid-iories on aggregate of opproximately $103 million. (See Finan-cial Review.) Maintaining customer satisfaction while recovering such cest increases, and doing so during on economic dowr, turn,is
- 4. '
[' as the disposition of our energy management subsidiary and the isole of certain of our oil and gas properties. Diversity of resources
. For many years, we have worked to provide o strong and highly diversified energy resource base. This policy paid off for the System and its customers in 1990 when oil prices rose sharply following Iraq's invasion of Kuwait. Our customers were protected
- because the System had converted about 1,400 MW, or about half of our fossil-fired capacity, from oil to cool ofter the oil price shocks of the 1970s. In 1990, our resources and fuel diversity were further strengthened by our shores of Seabrook 1, Hydro-Quebec
' Phase 2, Ocean State Power unit l'ond more than 170 MW of independent power production. We now have on-line or under
. contract adequate generating capacity to meet our customers' requirements for four to five years, o substantial improvement from L 1988 when demand threatened tc, exceed supply. In 1990, we
. derived 3 percent of our energy from natural gas,42 percent from Salem Harbor Station, cool,8 percent from bydroelectricity,6 percent from non-utility
"' he! ssaJii.d plants that contributed
- renewables (mostly trash-to energy facilities),19 percent from ,, ,,,,,g.s;gs o,,;i.
nuclear and 22 percent from oil, abuhy in 1990. Environmentel protection a The largest challenge facing electric utilities in the 1990s is to meet the demand for electric service in the face of evolving con-cerns about the environment and to do so at a reasonable cost. . We seek to meet this challenge by providing the most effective con- . servation and load management (C& LM) programs in the nation, ,,q while reducing emissions at our power plants and improving ""~ ' n efficiency throughout the System. In 1990, we invested $71 million in C&LM programs and sur-
. possed our goal of contracting for 105 MW of peakload savings.
Over the post four years, we have contracted for a total of 310 . MW of savings. During 1990, the New Hampshire and Mosso-chusetts regulators joined Rhode Island in permitting the System I 3
- _ = _ _ - - - _ - _ - _ _ _ _ _ _ _ _ _ - - _ _ _ - _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
p
- no small challenge. While customer satisfactinn remains a very high 90 percent in our surveys, we are committed to increasing the value of our service to every one of our customers. A total quality monogement process provides the framework for that effort. Our surveys tell us that cost of service, reliability of service, environ-mentolimprovement and courteous, responsive ottention are the - holimarks of value to our customers. We are enhancing efforts in all of these oreos. We are particuhrly proud that our customers' rates remain among the lowest in oil of New England and in each of the states we serve. We intend to retain this record.
While the goal of our quality improvement efforts is customer satisfaction, the tools must be initiative and teomwork from all sia,;ag 3;,, c,; a employees. Our employees are loyal, dedicated and talented, planned repov.ering pr ject that willincrease
' They know their work and understand its importance. By focuring our use of natural gas our collective efforts, we con do on even better job. To do this, we and reduce air pollution. - will build on team oriented opproaches we have olready demon.
strated at our fossil-fueled generating stations and borrow from _ the experiences of other companies with a record of extraordinary quality and value. We will benchmark our performance against
- the best of thosa companies,impr_ove communication and increase our recognition of individual and team performance.
We are committed to the electric utility business, to improving . service for our customers, to continuing our records o slid perfor-mance for c'ir shareholders and to building career opportunities for our employees. We consistently have attempted to be conser-votive in investir.g shareholder dollars but innovative in the ways we manage those investments. During 1990, these principles demonstrated their worth. We expect them to do so in the future
- as well.
4 ocm3 S o E (-) n. Joan T. Bok John W. Rowe Chairman President and Chief Executive Officer February 28,1991 ._ 5
EXPANDING OUR RESOURCES c m*Q:r g pyjygr?ce m v? m wY& m e m7 m ""'m e m W "i" N q ..
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Conodion hydro In November 1990, Phase 2 of thetransmissioninterconnection between New England and Hydro-Guebec entered commer. Independent power ciol ope.rotion (photo, below). Unit 1 of the Ocean State Power Theinterconnection has been natural-gas-fired power plantin in regular use under on interim Burrillville, Rhode Island, Peroting agreemSnt since
. November 1,1990 and will --entered commercial operat. ion in provide the System with up to December 1990(photo,left).
330 MW of capacity when the Our pr.incipalwholesale subs.d.i i. firm energy contract commences oryis currently purchosing 66 MW in 1991.The System provided of unit ;'s 255 MW capacity planning, engineering and and willpurchase o totalof construct. ion manogement
- 242 MW of the plant's 500 MW services for the U.S. port. ion of ; copocity when unit 2 goes on this facility.
- line, scheduledf orlate 1991.
. Another System subsidiary hos a
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f As part of our effort to minimize i air pollution, we are maximizing I the use of our 14 hydroelectric l
, stations on the Connecticut and Deerfield rivers (photo, right). :
Cur hydro stations constitute the largest utility-owned renewable Natural gas energy systemin New England and achieved their highest We plan to add the capability to production level ever in 1990. burn natural gas at our oil fired , Brayton Point unit 4 in Somerset, Massachusetts (photo, above). , Using natural gas as the primary fuel at this 440 MW unit willbe a key to our meeting state and fed-eral clean air requirements. Nat-ural 9asisthecleanest-burning Stad for hroyton Point of the fossilfuels, producing Stationi c3 fired unit 4'- . virtually no SO2 and particulate where burning nowrol gas wal redum embs;ons emissions and significantly less i corbon dioxide and NO, than other fossilfuels. l 8
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w = ww - ,. ENHANCING CUSTOMER S AT I S F A C T I O N 1 l e n omc q q g , m y m mem m ennym m nggg g y mn m m q 1 3 i i a>
~
1 it h l 4 1 a
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$ crew ieoder John J . Mdb 3 .e org em ies,ono,;em a of l-r.e redoser ,, whkh u ,
I;; reduce the efbcts of power ouroges Nsidsm32idGL;i$1tdidgicidCMgAddibidhaisiaRagsb' d0;sh[
d C&LM Customers benefit from o varied
, menu of energy conservation options. These allow customers a greater degree of controlover their energy expenditures andincrease the value of each kilowatthour they use. Our Design 2000 program encourages energy efficiency
, pg;g;;;g in the construction, renovotion and Reliable electric serviceis one of expansionof commercialand our customers' key expectofions,. industrialbuildings. Amongthe
. andin 1990 we achieved our Porticipants is The Mall at Rock-best reliability recordin eight . _ingham, now under construction in ,
l years. Among measures to make Solc.n, New Hampshire (photo, furtherimprovementsis the below). When completed,it will be
- e:xpandedinstallation ofline the largest shopping compIt. n .
that state. J '"reclosers" on power;ines . 1 System-wide (photo,left).These
' automatic switching devices p,gyy r
L ,
. 4:; O *~,(, ". g .i g 9,g .. . p. t,g L- - simit the number of customers - -
af o
- offected when a powerline '
-. y.- : vp,.s: ',,> ydjj)Rg
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outage occurs. g p sv;-fyk.. g,4-
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v r. Q. ]mn iy &,;-%i,,
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n 7 3 s ip .. s g-gn#W? i $ .f J ,
- Kenneth Alton Jr., senior .
( <d . f, ,.
' ' ~ '
. conservation and lood management [ 3 representutive, inspecting }f
{ { -- , energy ef%ient air conditioning i -
?. .
l' system of The Mall or Rockinghorn ?j1
. $ ? nk C.'
.c y
- 7 .
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11
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$&%[W ,m ' l [ f29 Q h. 2 W m6F flr A M Q , B,, y _ ; %, , M, . x ,a Q - n"r~ , J.y @, '[A gM +a [ i R@& ymg . ~ m~r ; g W,L W#j
+e ?, ,%w@ M ^ % ",>? - %
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7 4 i " E t,, "7 m ,; r qx s r n -- - w u , r ( W x v - MEernings were $4,11 pot avsrage shore 1n 1990 and the retuin on cormno:n oguitypos'20$percen0 s hy;h GyThe'1990 srnipgsydsincbessedbMIMSpershard freversihgaportidd ' + % _
- pfl, Q, 1
@hyggy @, , _ y(amounyingib$,1.80perihars)of ds iNovemberdispositionof ouienorgy'monoDementiervicesiubsidialry,NEES Energyllnc;ThC988r -
nd a five-cent per
; pf ' $Q Mrito;dswnresultedfr6m6rstisittl6mentinvoWingth$ Snob' rook 1 n6cIeorun sif p
~
h/ hk[y Jg%[Mm ohd wd rerversed a per@n of thy 1988 j ' Nriiiddwn 66umed Sfobro6Q w66ld be sincened,h 199 [SeAlirooliYentered sommeriiol bperof hsM * ' ~ 4 MN f M" - ' Q",E.$N%ss twpsdhstmihli[sarnings ' Y1 5 for 1990 weieA>! ' S2,36 peri% shore, and
- M.8brcenW TN f ' ,
4 . M ' D D E6EinM k19Nr6$236peeMrichd$duddn$l16NrshNfMlifr6mih6bl inant$f ori6 ' % 7 @,; %.. ['MneW . n M,oibitroti6ncosean,d%.rklatehole
. ~: ~ ..
a . a . of outinkrest.In'acohldiM.
.- c
-.gp Em a< w % d k.an y$u v : prenously
$2 20 perihore~.The System esporlen'c od dioss of $,94 por shape in 1988;which inWded theQ ?
zimmentione w .>d. wSeabm rook write-down w e of S3.D ers ans p: hore, Earn +mg:s pephere for.e1988 were w nn m we p VQ ., W@ Gt @n[KSp%s. FT dsgjhhifk6f he dividsridtWr%d@ rote in1990 - y f{j@jj%jf$([d$hg-[fhgy@j rdained ot'$2.;04 per sho. FQM r,eN d~ g ~- a ~ - ~ . -
; M ~4, , m.x$ QSp a
pg . dompor d,ialtW$28Fdtth ej Wf y@m zCy . ;dM n@WG 9 end.o[1989h'n P M:c O %{ni(NEES)56rnrn6hhsre(6t Pgapf %k W D M &u!M. ~' / ;' y.Q % Q W ~'
, w.
. ~
yed c < p W gc u,+ l$MMT$tMNdwatthELUSI$dede$d,f un growth fasyears.y$e S ilMkdektfli19'90Md sde $dhif'cosi i m" W ra nw m ; - 2 wa w a y n gau 3 n- a
- v%g%w 3.2 per, cent overageonn;vol rote 9 g the prewous MhdN,NIkkdde $$u$0dM61 s@dhMis ths nee Er@lAalstendmgedrME$NistideifoFa'O$ci!EIDNb D N@b!NIoOSitNdul551$f5ElNfond0titiordirbcover inkil$4dt$$rNidid166 9% N O[$
'M h($$n[@M N hpMonSeabiohdt XD0rir@is0Mrkne#6dr)roj$b S$Q etidn@thiM@Mhi$inDnsMdcoirMidi$U e Mk dEM 3MN6sdonMiddr$n$30,NavdMEISdineh$d17thpiedNAl NnadditiSn/wseNpMd or h> p4M %qw k U NDJ ff. SMkeffdridrEonssivotido oSd l$$d ino$5serMt (C&LMpir{1NONo$dt o'toi$iof Sf1 r$illihn oSC&GM 3MM e hMMMM'8NiMin 19913uY C6fid p'fogram$r'ovsid prohldble fo@$I f E@4pc6 41 wl m$F9%jMfholden c~., n. ikell.ax, osbstemeridn v +n 1990!aSiniksinchidedhpprakirriothl/+$lmillio a ..x.. , u u-gr . = ^n . wed regulators, We have re.cewed reg ~ulatory opprovals that will.g. , u awe.uskth s
/ of MP,@ ? % x;oppsttJnl@opdrntrcr incentivesallo w o 6y$ iddi ncentive'sfri1991; h '
[d y y -
+g gg9943yitem reco/ded on$her tedidss bi$'6'9 milNon ok$di perNore(rom NepE6 gland 2 * .
h^f" fly *k ' MihgfincorporotESMNEEI)ngn{afpsg01st4USilkridhsoperatids[In1989,thecdisrploss][ m , Twas $3Emillionj ond in 1988 the System recorded on oftehtox profit of $0;) milliondn 1990, N eel? g N * ,m % Mid a smott shore of its n6n;roies$gulated pfogram and ogpectitsMil most ofiti remaining $16 million?
- H' t-
~
", W ,% Af indon-rotyregstated pr'opertie;slri1991 Jor a furthMr discussion,'see. Oil snd Gas Operlations s6ctionc ' "
December 1989fofport of a settlement of on orbitration cosa, we sold oyr 51 percent intoest ini y
~
fqg . j Ethe jopt wnture'that oQned and sperate9 o cool-corrying ship (The ship continues to carry cool to our' : , generating stations under o long-term contract,The settlement ohd iole resdited in a nonrecurrin0 Doinf J'y %_ -
,fy& W
~
Jiri1989'corni,ngs
~ -
of S.16 per. shore; . (J"' ; ' Lid Januorp 1991me deactivoted our 100 MW Sosth Street Station in Providence, Rhode Island, This : M M , '" idecisi6n vos prompted by the slowdown in our region's ddmond for electricity, t% stonorfs age ond ) , gg y "
; ?its reladdinofficiency when corspored with other power sourcest Optionifoi the future of ths station .
Jinclude react,ivotion'inits present form, epowering as o modern basellood plant or conversion 16 a : . m (( U ~ C
, s
. modern peakirig power Mont, A
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approximatelf 10 perc6nfoi S' Mi %,D nl!,15 eobrook1;Q'P V mJ. >0 MWm:%" %ry s mom we -- se =n ~. um .- m-h89MM#%@Knudeor NkeXJ i enerating unit.On June 30H990 feddiyskN oi slMitE glorid ndtheke, P' the M$rideoinMEdiMsi$nM/ owet ' unit'was + Comp,ary'(Nreleowd6Db? to the New 46 E ]- ggg?MQ9MM6MM8MPioShttismentdilIAudohociatAilkitSNEPMnviStb 612M kh h%$ jpQMy6sgNAMSM:w .7Mresalved[Richeryof 1N8 . mn SeabionEddNur$dNnceMnsorMPM. mvn ~
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@ @wA 'wAMM+MM,A,ij6,ndifetiodofsb the unit Went intessrvice NEP could trstehe unit, y a- a - -u- .
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ms%@QM@@@w QWmmagewgeg M NditdTEsse$ + mm
-$a%q98Zm:mitOtMassdiet am vo costsmam.wmwt recorded Nonie hfS115]ndlibn amartu of+the aftiMi{$13 19 A t e ot yy MhMMhhg YAhfMI51AdsciA5ENddr yE80 per shore;The od vdments are recorded in thv~he agwg%mpsm,eag$dM$dt%lMehl$t$hCNSo%m d e , m c w g a he u RC e
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-wwwwmmbmdpidiaryiwasacquiredyg n service 6 e s
~<han q sy 1 94 o e' a p# dE p%e;MTIAirovnohion"es$4
%m ylwoushmerger%,sm byonunoWi ;'liassa' r wwa canponyhoode yAe dbes,.formerince ourenergy:
dM5MDt$$iMNIEN%pmidentof+NEE $aM MnM- n . wm m .o .. r~ E wd sMMpyn% ~yEre;m d W W M 41& W W W R M pmemmmms 72 x, 1n the fourthquartero n,.nf199@MM@pyWa%w %$Gh+f J ~M " W dngd; -
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sym@w@w CTm6R mmwwwswmdgasenh46ronon;di:fondpreidvetionlI NEElgiorticipapindomssekoilan mn~wmnm amenn + m a x e xwh a 4d&mmbd R and a n:oterate wn vn w pmp M ~ J4 a$ W%#pn.empd none o)programs regulated m m wproge;om. a n n# % w Het investmentiin <1 - m m ellimd pm $f g m , a an a %m4 ed+ s amounted to appronanotely $531 milbonndo.umWw a m wwma-m p' +S16maionge6pectiveyfaire=y-alp)990TAhhoughNEEl'wmcontinuewinc#es
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pviloiletyn . n n 1Th e yposeedontoNEP wwyne w n n ~p y on < " mr ix4w cr,wsa e ' - my ewsw% ' +dqwmv w g. eon onel wCommissions was e v - m acq wmmm e pesstuch. ents _ e
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. . m
$Nr%$n$#, %_ h, ie, l,dnd port 6f NE, P'iW 11 rote cose re 41960 rots sketlemsof) assocloidd with $eobrook _l ontering into $ ryke and to s etowr N E Pls inadmen p WA@h9@kWMs Mhk
' Neqv6st toincrease 6 e seo(EfJuli30 )%0jhsIntseMcdoviof SealkookNinLo q
rates by $ 16.0 million podeor for Dw yea etleJune(30,1990finoccordonceb MO%@%( ' y M EffectWonvorM)990,f'the f ERCc156 swith)hMMtOf the;1968ratisWf!ement(mNoteC).i y ollowe $$(%,
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< ~ + - - n a- n -~s ion mgMpuyb Ji Rhodekisn wnm F414Utilit1**Cc4 v n a {RIPUC)opprcedbNottogansenElectricCors w
. million ratenincreo6e 1mp Igh&Q[QQ(Norrogonsettl s'mIemerit ett of ajbl+y11990 ratefiling. A $'13 a w w wiit w un gdinto sf+iedQM$
$$$$NMilM M y ma M M9*b*RiPoCo O M OYM+ + @ dee 6f iM %q M@w@WMgde eas M
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l n , l by Narrogonsett, umpunting t6 opptoximotely $4.5 million annually, were discc.rainued on January 1, '
.1990. , *1
- in febroory 1989, Norrogonssit reduced its rates bh $3,3 million as port of a rote settle , ant ogree!
,4 meni negotiatedin 1980. As part of thisettle nent,1n Dscember 1988 NorroDonsett also wrote of0hk -
; occumulated deficit of $2.5 millionin'ils storm contbgenci funde in March 1990, Granite State Electric Company (Grom (filed o $2.2 nillion rateincreat,e requesi
- E with the New Hampshire Public Uti! hies Com' m ission (NH00C) In December 1990, the NHPUC '
,opproved a settlement agreement for a $ 1.7 million increo se efiedive June 1,1990, in Odober 1990,'Mossochusetts Electric, Norrogonsut"and Gronite hled the 1991 C&tM programs o '
with their respedive $1 ole regulatory comndulons to be ellittive jonvory 1,1991(The filings, which - have been opprwed by the respective r.omminionsfore d algned to eetwer estimated 1991 ChlM ..
" expense of opproximatelp $64 million, Th4 comminion c rdets also ollow the cornponios on opportus Ltdty to entninceulves based on the results of their 1991 programs. ,
i E och of these componibs had previ6usly recolved opprwal to re<over their estimated 1990 ColM L
- l. - E (prog'rlon, expenditVres, induding o reconcilh.11on methonism.for differ'ences betwean octuol dad esti.' '
f (motod e Apendiiuren Actual C&tM expenditures subbct to this mechonkm in 1990 amounted to,opproh Vi
,, , 2 imotely $50 million~. Each compony was also provided th e opporlimity to son.inc'entives bosed on the ;
/, y"y > l iesuit of their 1990 C&LM programs: Earningsin 1990indode oppioxin.oiely $4 million (before tax) of L L !!4contlves record d by Normg6ntett and Granite. These t.omponies are recovering incentives 1n their l 4 ', i curtsnipoteslMonochusett_: Elsetric must denionstro:a to the MDPU ths electricity Sovirigs produced by1 ~ 7t he 1990 C&lM programi before ony beentives will be recordedJhese incentives are estimated (o beg' 1 opproximately $6 million. it li expected that the MDPUvill opprove on evoluc1 ion and monitoring y
> j ,"
,g r 7g program by mid 1991 that demonstrates savings. ,
, '\
f$ , eat lthe ehd of 1900f the rotolliomp6 nip had addoed revenue re . y -
- costi ond lncintWatiot61ing opproximately $15 million. These omounts are being collected in 199 h j
. , c .~ .
.. N1
' f;' Two subsidioriss New England Hydro-Transminion Einciric Company,Inc. and Ndw E WW '
g ,
,, , , Tromndision Corporation (the (ly'drogronEission companies), were ior' m ed16 build [own and operate : Q f(: ' "
t [the Ll.SJortion of ths Phase 2 ' ronsmisslos interconnection between the Hydro-Quebeh system and ' ,j k} $ y , ' New Engtondconflov$mber 1,1990, the Hpdro-Quebec Phoie 21nterconnection entered cotsmercial ' ]
)
M
+
.yddeet : [ ,
8 [q ._ q ,
.Mf m, >- '
. : Although NEE $ owns only $0,4 percent of the outstonding common sto{k of the Hydo-Transmission}
9 lcomponies, they have been fully coniolidated in the financial hotements. Interest expense on 16ng-term l L 9 4 o J dsSt d these compariiss had noimpoci bn net income during the construction phase; since ollinierestj . 3 41 , , t expsndwoicopitatised as debt allowance fe;r funds used during construction (AFDC). The consolidated
~
Mp',, 4 l l'ncomo sotemsnt 1ndodei$I3.4 million and $12.'8mibiory of debi AFDC and $13:1 millsn and! m , o $ 10l5 million of_ equity AFDCirsspectively, for 1990 ond 1987 rsloted to th4 Hyso Transmission ; j m' WcomisonikThe "Minorityinteresth priticipolly AFDC'{line on the "$.toternenttof Consolidated income ' 1 $l yloss)'! ripresarits the minority inisrests' portion of the net'eorning5_of th'e Hydro-Tmnsmission companies
,4 m ,
[ "i "
. gs
~
? Operhting twenen Ibeieased by S'212 million 1ri 199d due principolly to rate Incre ases for N EP and oli Et hree retail corriponies, induding C&lM rate increases; Totol kilowatthour iales decreased byll percent n
E in 1990freflecting a slowdown in the New England economy and a milder winter. - q e 1 ' L in 1989l operating revenue increased by $ 124 mi.llion due to 3.0 percent growth in iotol kilowatthour
, soles and ths effects'of a May 1989 NEP rate increase.
Total operating ekpenses increased by $200 million in 1990. The non-fuel component of purchased electric energy increased by $38 million due to increoied purchases of capacity and increased costsj onociated with plant overhouh by nuchar power suppliers. Other opecotion+nd rnaintenonce expense .
' incrocned by $ 111 rnillion7 primarily dus to increased C&LM costs amounting to $65'million and ;
1 Q, '
+
?
t, O E, m N M a G M h a &y%' h
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, Lkincreobd costs onrdot;d with oerhouls at gentrating units amounting to $15 million. The remainder Q %q ' tsiff e3 increose reflects opero' ting cods suocl6ted with Seabrook 1 and Hydeo-Quebec Phase 2 h%F 3 J entering Inta service,incroossd bad debt expense and generallnueosos in other oreos. Total taxes lT"4 , : chsto'ed to operations increosed by $42 million, primarily eellecting increased federollncome taxes sfK, (ses Note B);
- g in 1989, total ope >roting expenses increosed by $ 103 million. The non fuel comporient of purchased
;cpx electric energy increased by $45 million due to increased capacity purchases. Other operoflon and maintenance expense increased by $11 million due loinct eosed t ransmlalon costs omlo'ed with W4, odditional purchases of power, ineteosefood debt expense, and generat increones In other orcos,
', ^ Partially offsstti.ng these lacreaseiwos a reduction in C&f.M eosts resulting from N E P capitalizing and ecovering 1989 C&LM costs over'a two-your period With a return, os port of a tote case settlement.
[gh?,, , " Depredation onld om6rtliction expense lnaeosed in 19896 o result ofincreased OCA'omortization,: y7> . ' ; inew construdion e'xpenditures and the omortization of a portion of Seabrook I costs
'4
- w 01988inte settlementi ?; ;
- 7, ~ . or .
.w .
i AfDC increossd in 1990 and 1989 due loincreased ionstrudion work in progren, principallp3 . , p(flf t - S T ocihd with the Hpdro.Quebie Phose 2 project. This prohet went into cammercial o~perati6n ini
^ Novembei 1990(ses Hydro Quebec Phose 2.'section), m x
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1 NENd 1%ilitj v4sidioiiedove been costocted, o@ ova hbd legal --proceedings iriitiated ogointsi 4 NC. /< @w m +Medor,oln_n,dstoletenvironmentaloge _ er - . . . 4 "pm 4 . % y. c . _ , - 4 ..
< , nciesor by. m privote porties,regarding the cleo.npp_of sits: M
-ik$. h~~ D b S toMidh hor $dous wohe. N E E5%inidiarles wEvid sesk io recod
% Q f W y [ (' k [ F d AsIg ~hhth d M. - ~ - - ..
t a i Ql etife'iidh}dmeihotNddohis Wohld be m6tirial tothe $yilsenO m . . d,manMf j j#vg@ - P~ ~ py[ cleanup
#3) N hvMnbef; 1Sil9902ameWdindnts to slie~ fderal Cleen Air Ait Wire signed into m n, % %n c,osts J1n? ~ tbeyjnCur.
' M M e yNgd O ' [@.89M $MM [MthuNs dMnilidtt$dUcifonishsnollsnionnbotnifu%id$$OdoAdnhfogeno WWF @yWamge@96,y;or20ooWW99N&,gg?
a dWW W ! T %
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@( g$c; g, g A? +hondlthe use ofNEES towir sulfurcomp:aleshove c6ntEnt fuelsd6 reduce SO, bseri
~
sminl6rsat pisniing gsnerating e6d,linplemehtingitotionsTo msit the 6ddiy y prog
; ff.4 % , (16nkt licistol tiqvl_remenis, N C E S komponles plohi oi nwessary, to install iosN.0, burners and bu'rd q
',$ .T_% f *Mk,5
,r
'm
;r 4
(cdditlerial_ l. -
.-m ow.ivlfur fuelst #
E 1 Ov- # [ -.m - - '. , j,, [,. jThs S ystem expectil'o lncur onet_ime o'perotisn, maintsnonce'ond sopliol co,st5 of opproxlenatolyg Q 1- " M M @' ' r t
? $65 mibn betwbon 1991,ond 1995 t'o cempl)Niih <
-W the Mosochuseitinguirernehiend $20 million !
?f __ , , ,f
'v p .
gg( Q~ ' yp * * , [jn odditlan, increased fuel sosts are espected to be lnhurred sto'rtirig in 1992 These bnhoing costs are f a
% - gjm <
qsstimatedforiochononnuslievel6f $30millionb/199$s GA MWWW
- W v
. ~ y. Nn recenhydhrh concern, S hbyh b. e_eri rOlhd Obout . bethh hlo,Nlb o d bgnhtl,kfleh.4ei (Eh) .,
h ,Whch q1 h u e,**, T O ;;o or neartransmlutononcl distribution!!nvios'wellasne.ar hs9sshold wiring and bpplioness/couis
@W@{ ^ V ha bi6visto odMss hehlthiffsdi; NdmeroudtJdin in thfiArio, scime of them sp'oeudsdlip elkirieIY
$s R w{N
_. cny, M +@w$;h uii$E(irkiddik,NE E5 co'mpo6ied
>~
u-, f W[M@l.,poswd,could u; d,versely offec. -t the construdiott ol rHrw power n g, ~~ . a v~ ~ ~ c
- ~ .
linesils pe,nding itihEve4ein
~
Mo,nothu+setts ou cun'd and b ~JM J. 4 6 h,$R~ %l gh . ncould alsoo gt 7bfMn$ hods f aland$heJAo,ssochusettsle + lotto 6 m[ hw a
* . , , ffectd op~mpholed ithenye6rme.~ -
exi~stin+g. -~ ~ ,- line,s/Ano,rdinonceplacIn to hha RlPUCTSimilar 6rdinan. ceshave beehniviivd~n bth$r ithode I i ha J WT pe m[ a -- n e rn - a+*'IM v ,- w ai .+ f M i >%R % D d;W[, ICOtNmk/nith j i in% w- %]gy[imWM%~ [!)3 >$ w pgks. g ' ' M . MMA6M_$hM. T w y$yM M NO)F;,n%n%%p R b l9f . W N%&Nk NM[$$%+Wbb . M w& WhNf%%$$$g$ydiWklw' Q M M 5 i 9 p H gg,,,,gg,;,g oiaccoun r tin &sleiluusa shefinanciaby$$$ ting ' ' iketopn&; $standoids ctedioM board,which . gp%63gyg, n w
,g g 5,11l m ;q,993 bol ._c di w$dN[hMW;M YM(er11y3dperCenI[m ~n x;- --
m ~iq,re$1daddefirfidtok loke
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ny. Ond+Wlh uIriony.ekceHlabetsc shd from'a defe~rredi wa w www~- ~ n +cmn . , aa ~ + c u m n NNUh M@m@MNhkh!Q e, sunp+ MdM dds waasewedtow,4s.4scomm
$aw$w;isda mv a+w bAE5 $10 w cuDmerjrelOte'd be pastid back Wo%enced
+- wm, n 9
v . .m. Ilobility ia i accountg un987,wi,hwe n s' i jdh, s h _f@g .rpornhin roteeQO 4,' '4@%. 9 %u> M/M 79p M-y P,;N . g61v%. y $n ss SQ .g ?, iSW /OMQ A,<p) [1 r x: mQ. hhdg~ yg [ n e m n . , w r th y sCUshn a d 5%%hde[see Me$ vhnn ,m on hqr.agt jhjhgh[h, 9->m wishNhhj,c3 a
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f gw&a%w MWE% g _ h & W ees %- d to: n MM6&st@soginormemWi@imi_s@n_ --- - W illbMssLi I of providing postero 61renient benefWs te lbocejmpI_yees{Whlley ess estdip6ss O ng m eMpecte hh[fhNh yeedoh(*$hoirMMIiimlhNihNobedMtN$xpededho"resulthsignifiAoEh
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~wump[$ WwQm f h kdh[ =
Cdsbl6 -?kbhb n N r h bb; hh%pMw.aeu.dwomben'uansm%g 6 x bhp bfNkNh bbM n e whhh w w n+$ W M h h hhh hhdIhk3 k hh ga m w e g gMbhh g gw$ Nh h h h$$4khhhhg w egepu[kwg~hEbtsdhioU(MiMokh$ w n nwn pw ems p kWwW ,r$#ead!'mRW@%@w@
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b& W$ h MNneseenery hkk g#31n 1990 for NEP and conserelen&f lQ16[ro,6all wereAe Osid b Mded W E4 e We saddsklMid*MNya='efiliddadelac=se 2 I $MM %!yhM @MEdNcomisWebsteMedforoMOldendteinveshneWrNcomnion k l khhkplsEMapleMoEhlidid$ Mt.990,NEPIssued$90million[oflongMmpollutisd 1 ghd th@POMa*WF*kA aswas dsmon l,mn M4C
'a s#'MM'M h ,.ierm ecus P
'****d*MN iswed Oyear.
earnerin the h'nM $$0 + m%n d 6g% ' q l .- s h k g$p b ~ _ < 4e9 isonneN4,w. i? funds me mpected to meet opproximatelj My & W; Me[kpenhvies . y agg,n,wi,,n in NEP and the re6all whetslior 1 t4MongOrsdhMowingpadw a revolving cree agewment financed all of tlw Hydro.Trommission I h{hg- "
' com$er$9edstruction @ 6tes in 1990, in Jonvory 1991, tb Hydro Tronomission componin J h["
J . s4eted $M 5 ininion of long ,serm no es to a group of IWstitutionalinvestors. N notes were oNefed in j 1 Ih < f(ffwds5tlis%bh TN yessedshiN ise usedmotveky dotes'runging .fromunder109o de m(seg25 peers of,f!o MM , pr_IncipoNy prepoy outdonding bSnowinds revolving , khh . ' cmdliegmement, Closing is whoduled to ocevt in April 1991) Port of tb proceeds from the long-krm f ,j
~
Ino4N and he6ernoely phaQ funds o're estimo ed to moit the 1991 capitol expenditvres for the ' M p d[y
% #yd W4% componies. The decreohe in pionned eenstruction empenevres in 1991 for tWw ~
j M, r M A
, s y$ba9 alNkh,,$,,a$,,$ Pha# 2 ia****'*dlM entering inE wrdu lh lo pp , ,,,7,% ,,,,3 % ,g ,,,,,i ,,,,,,,,,,,,,,,,, y
<k p w$$y$$tIf,s'Allondski$4plindisniislifemlepmedcessin g
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MEpN#f kgr%shinduledioFlityMWilpheshiiliE,96th d W esis W W h ek %@s,$@$vQF9m q#wEM I e 6 (theilystent sdividend.w%ay4,@m f%ye wn ma # w pla% d$#se&4#sho wn m. - _ , sliore LEES i n andwpewwpw W~f: DTandsometon'shose s J. a g$44kAWebMedshmMetWeyder4WiMGAkie_mac4WeG@en wM gy + - is4Nel rm a yJjddeMM, eNidi$ldend#wiM@v$$iMekcomnM,nmhnh,$$plMM genw a wn m -
;~ttsineen,gissecoetmoedngdm en yw wmmw + mmyfbppi o nst rou ~
vache nonesdNRES e g 94 wpmw 4 m - NM:Unt oneeeinew common.1.a. sot war M@M3S$$fMo4db;on o u h ,AWsmsaw-.$wC>nkthir%ethelsec hM%gshores M rin A4enh190 TQsysIsMnsh iGibspm 1 NfES.maytyverts Wws,eaameWM*dQ inGAe y e W LyW W M &MAdMtM M M Aerte@ M r.roddniis6:1gobithdidlHiefdWboilippk M M@7MMM$tnisjMbansMontimiserdeeinMJ967hisg S Mk $$(hhy%P gs f h' ' $$$MEiNe$prex1mmeifiripl$si;iWbkg
%bMShoNy$sdwplAt'sbemolefficiency; Cons'trNtionINsi$tly;enhkdisbiki (ohMhs completion of tlw licensing process and in scheduled to be thmpleed in 1995, N total sod for' bkg 5h the projectisintimand to be $600 million,1ncluding Al:DC and related transminion' wor k, of which f
, approximotely $50 m%n is spected to be incurred in 1991. d b
- J As of Decemba 31,1990, NEES ond its consolidated subsidiories did not how ony short.krm debt .
fio - oi +ndingbuthe'dlinaofcreditwithbank totoling $263 million. Approximably$86millionof these $f ' Qof credit was rnered to wpport NEP's Series R getwrol and refunding morigoge bonds. Cosh F ond cash equivalents at December 31,1990 were'approximately $23 million, s h-e d -; nM + w~ , . . Aa sh e e ; m, & rNw **
New England Electric System and Subsidiaries Selected Financial Data Year ended December 31 (nu!! ions of dollori, eu ept per share dato) , l 1990 1989 1988 1987 1986 Operating revenue: ; Elet trk sales {nduding fuel cou rec o',et y) $1,?r 2 S 1,UB 4 5 996 $ 942 $ 940 f vehmt recowry 469 450 478 437 407 Other utdity remnuo 65 42 37 20 29 Od and gomln 39 '49 59 46 56 l b:al oper ohng , te<enue 51,855 51,643 S1,520 51.448 S1,437 ; t Jei inc omo {km) * $262 $ 139 $ (S4) L 171 $ 175 A<eroge commun t.horm 63,018,386 '48,036,246 57,0/6,/39 55,377.96/ $ 3,794,3 2 3 Poe shore dato: Nei inc onw puss) * $ 4.11 5 736 ( ( 94)
, 3 09 $ 3 75 Dividends dodored $ 2.04 5 204 5 204 5 201 5 194 Rsurn on overogu ommon equity '
- 20.5% !? 6S 1UA 14.9 16 8%
Torol onch 54,408 $4.116 $ 3,718 53NO 53.788 Capitolnotion: Car mon sham eqhy $ 1,380 51./17 $1.0 % 51, W 1 5!090 Mmonty mtem 62 ';4 Cumulative preier red do.L 162 10'/ i62 16? I87 tona teradebt 1.600 1,639 1 A34 1,3 B7 1.401 To*ol cer a ohrot;w $3,204 ';3,067 57 6S? S2.740 ;? 678 To al elmoc sales (m#ce of kbo'th:.mo) 21,381 21.394 20,771 19,741 19,574 Cou per KWH to ubmate conomers pents) 8 27 1 28 6 92 7 04 7.10 bydern mumum demand (neg a wath) 4,059 4.225 4, M : 3 198 3,520 E!ectnc capohihty (MW ne) year end 5,627 5.400 5.76B 4,921 4,542 Number of employ.xs 5,666 5,500 5,478 e
- S 256 5.131 Number of cuuomen 1,256,656 1.253,425 1,233,519 1,204.189 1.175,307
$ , ,.3 h h E . e due to the na eHn! i;d reersing a porbon (owenu 3in $100 p < shme)of b 19tM wroe-dwn n;!o:cd to Seabtook l (f 4 tio C) ond u Iwe tents pet 1ha'e lou. but, the dTipo h oi fl(( 5 [ net g y, b ; 2) 1989 mdmb o S.16 por share go,n bom the senh , a of e orbmoien a e and the velded sole of a whiidun y 3 intereu m o int .en'ure ihat owned and operated a mal Jup (tJo64 DOJ; 3) 1988 :rdvdm o $3 la pa d.u.e !ms dee to the 1998 tote seniement m bdown relamd to 54 obrus 1 (tb;e C)
*
- RMarn on ove oge wrnmon equ if c= dodmg the ehtt me ' onc d obw was 11 H penent b 1990 od 1980 on d i1.2 per cent for 198 9 20
New England Electric System and Subsidiaries Statements of Consolidated Income (l.oss)
% ma,, % a,.,mcomo u u:a 1990 19H9 19!i" Operating reve nue 51,855,427 1161(199 I >l9 N /
Operating t u po nses:
! t , ! L a q= , ', 794,171 ,N ' ',1J< L':h-*
P n hawd s .heenta,
$4 ) ur! .l e ! 't! 20l.200 /( >' ) S: ' 15/ 13'/
t J e-t- m ei - . m 110,709 101,
- 109 W ON -
,i ., on a, 385,148 9 '.TJ 'l %U 137.117 1/ l ' 12 0 d', '
// @ no 759,115 / .h M 91 / ~> ,0 6 0 (y. p, . , .t, 4 42 ,
Im, M.r>U,,h.
. ali 111,369 '
'1/ v i 61:
63,147 '! ' f . '> l ', J,' s .t - T '-v 1 ; e e < , , 1,601,556 1, m ! < " IM Operating incona 253,071 + . 4 /1 V. Other in< onw m, 4 , , ,L 3 , 14,387 , i) i e>s
, 111h f 8,752) t=
' 6;U36 0 '4 i, oc 4 4 C t h, > r I
i, (),961) > $1
> % , ' e 133,590 4 i
711) J,* 1 o- , , {l8,503) ni ~i
,,pj r
)
378,968 ' C ;- :0 Interesh i ' i .!s r 1 16, $ 6 5 Ilt 7,267 '
'! th!
cov a>
. i it >
(1/,406) { . .1 15) i ' 106,346 !( * ' , 'o 1 1
- h. ,
' 272,622 !. M ;;-)
fe4
. 1. 10,572 i !!' ?
su , f Jet int c,nw (lon) p i .Li n 767,050 1 ./' F
- Wj e ,- h 63,011; 3 B6 9"9 -
N' 4 ') Per thnre dato: 4,11 e
- u. { v. )
!j,. . r (:. .i 5 S 2 04 ' jut D . : ,
e li 21
New England Electric System and Subsidiarios Consolidated Balance Sheets At December 31 (thousands of dallors) 1990 1989 Assets Utility plant, at originoI host $4,211,315 53,651 i30 less ouumutated providons f or depretiation and omodu ation 1,246,501 1,149.03? 2,964,814 2 502,398 Net ine.f ment in Seabrook I onder rote seHement (Nur C) 261,241 194,303 Const,voion wor k in progmss (Ne'e D) 75,454 376.426 Nei unt.ty piani 3,301,509 3,0/3,127 Od and gos properties, at Iv:lcost 1,217,761 1,157,848 tess oa umulated pio<inon fe! omone06n 670,494 591,309 Net oil and gas properte 547,267 566.539 investments: Nudeor power componin, at equay 45,959 46,O'/1 Cihei subsid4ories. of equay 32,690 18,3B7 Oihee invntments of wst 17,148 18,004 Total in vest me nt s 95,797 82.482 Current assets: Lash,induding temporory cosh ine.tments of 51V,100 o,d 58.700 23,208 11,990 Au ount s ret civable, less rewr ves 239,148 204,492 f uel, materials and sepphes, at ovevoge r ust 92,018 73.390 Othet current assets 8,496 6,628 Totnh ur rent osse t s 362,870 296,500 Unanwrtized property losses (Note f ) 28,529 32,874 Deferred r harges and ether assets 71,542 64,837
$4,407,514 $ 4,116,359 Capitaliration Capitalization See nuompanying statements),
andliabilities Comr,on thos e equit y $1,379,749 S1,211,638 Minorit y intes ests in < onsohdoted subudiaries 62,483 54,230 Cumulative prefen ed stoc k 162,528 162,528 Long. term debt 1,679,427 1.638,495 Totalmpitoh ction 3,284,187 3.066.891 Current liabilitie5: Long-term debt due within one year 37,890 Au cunts payable 146,333 135,992 Acuved tones 8,120 8,357 A a r ved intere st 35,454 29.224 Dividends dedored 35,167 33,364
- Other current noNhtnes 32,303 44,821 Total wrrent hobdoies 295,267 251,758 Defened fedeial and stato int ome to xn 592,583 558,456 Unamoitired invesunent to x credos 113,902 138,225 Other rewrves and defer red cred.ts (N ote D) 121,575 101.029 Commitnents and wntingemin (Note D)
S4,407,514 54.116,359
! . [ h I .
!3 r , hh k 22
New England Electric System and Subsidiaries Consolidated Statements of Cash Flows , e r enJ.sd De 'e'31(A_o - Jd L"', i 1990 19iW . - . _- 19P8 Operating t4 e' mt ar- (1, 3 ) 5 262,050 ,im -% . ! s 3. b 20) octivities AJgtn , nu o en - -1 , t 1
- l'. j' u. >
r r; , u h>l b, q a e
- o;. '.!-
D.,uof m m.1ons t- , 261,977 . 4- 130.357 In., - ent to , ( n J
- s n,' (24,314) (a.D ) (6 41 a)
Deh,n-d hui,- m onl e a me tu o 36,484 (1h0! /j PR438) Seubn d e coe v 4 + M 01. - -a (133,590) '.t0 213 Ahmt e f rakn:h m!d,e tu *
- r (31,873) tN AM ( . I 15)
M, ca e y ,mmeo s. p ,n; pM M !>C 7 8,252 1D1 Di(t i_ ' p
- f ! T oi f t O Si] 1D O C vf 9) f t'c 4 i v(i! <
len r eus ,e- (34,656) (17 ?!M (17.673) Dm n ar (;'.ucuse) m f H e m nds on:1 mp; L4 ' (18,628) (6635) (4. /12) In;n or (dm n : e) m no < an pa yolb 10,332 F. 0 0'> l ) 18.033 incu, e (dm reme) m vN r c um o hobh (6,525) 11,034 (36 058) O ier.rmt (11,665) p /,153) 11.192 IJet cmh pn. ,niod b7 ( e rutng s ou na $ 317,844 i < 77.10/ d 306,565 Investing Conena t on e= perdeet co jud+g s ame h." octivities f unds u od donmi umoru An: Hydmom het N,m.,2 pree o 5 (30,091) i(319.19;') Othm pauteos (18),249) p l2 /10) S(192,359) 0:1onj gm m pknw en and de 'opmers (59,913) (S4,092) (59,849) (13,515) 16 705 (2,200) (Inaease) dec nu w in caher ins a-r-u tJet cath proaded by (used m) mccumg as se, S(291,768) 5( % 9,294) S(254 408) Financing hoceeds h e.m t JE E S wn- an .Aarn nsved S 36,346 5 13 n.515 S 35,807 octivities Ctast ibunonuo subsid, anes by trurent y onercsn aH,739 DWidendt paid on i H E 5 (cmann sh:ne < (129,575) (118.660) (115.646) tc.ng term debt -- inom 130,000 586.100 B 2,900 Long aerm debt- r-menmna (51,429) (381.241) (50,400) Change . in shonact m debt (28,750) 14et tmh prondoJf b luu Im)6nanm ano a n $ (14,058) S 273.453 $ (76.089) tari m< n ote (draea e)in cosh ond c ash e qui,olent., $ 11,218 5 1.266 S 123,932) Cash and cash equnolents at beamnmg d ymn 11,990 10.724 34.656 Cash and cmh equwaten's at end of yem 5 23,208 5 11,970 S 10,724 Supplementary intmeo poid less am aunn t opaah red S 95,042 S 94,974 S 88.715 information hdmd and a-m inm> 'm paid $ 85,556 S 61,860 $ 86,667
- h. '_ Y ' _ k
- k' h I \ r \ ' 4 I %
23
New England Electric System and Subsidiaries Statements of Consolidated Retained Earnings 3,mm aid e o u p .on w w 1990 1/t / IWH m + ,m e m,, c 4 ,, , s 461.0a2 m a uu, t j, na o p s) 262,050 1 , >0 ('1 870) Dn r! . . h+ on d i < < < w . m J.ro t (130,285) it?! 0 'o Illo : W) Pe* 6ru d t u nh o cu end cl . e S 592,807 /.01. a J '
; : :3 ' < '
Consolidated Statements of Capitalization At Doo-nd er 31 W- n rm A ol l- Lo s) _ Common share equity _ _ . . _ _ . _ _ . . . 1990 1Y69 c c. n n ne n sio n, p m voa ',1 pe r A n e
/4 ut h m a od 150,000 000,10< es O m s t o n d ,n g -- 64,3 71.000 nod o? ,, - > 0 4o, <
$ 64,372 % 62,978 bd n < opon1 722,570 M 7,618 Petabd , an;nn 59',807 s 461,012 Total u mn.an sbme iv a,= $ 1. 379,74 9 $ 1,211 63 8 Cumulative prefer,ed stock of subsidiories 1990 19ff>
%nn oemon@
Company For vh 1990 19B? Mc uo huwns ileont Con 1pov 4 44% Sc nn 100 75,000 75.000 $ 7.500 b 7,500 4 76 , Senes 100 75,000 /1000 7,500 7,500 7 BO' Series 100 150,000 150.000 15,000 15,000 7 84' . Serin 100 200,000 200.000 20,000 20,000 T he Nmragansett f lecoi: Con,pany 4 '.1 5enes 50 180,000 180,000 9,000 9,000 46F: Series 50 150,000 150.000 7,500 7,500 8.004 Series 50 200,000 200 000 10,000 10 000 New England Power Company 6.00^ - 100 80,140 80 140 8,014 8,014 4 56% Series 100 100,000 100,000 10,000 10,000 (60% Series 100 80,140 80,140 8,014 8.014 4 6W Series 100 100,000 100,000 10,000 10.000 . 6 08% Series 100 100,000 100,000 10,000 10,000 7 24% Ser;es 100 150,000 150,000 15,000 15,000 B.40< > 5eries 100 150,000 150.000 15,000 15,000 8 68 3 Series 100 100,000 iOO 000 10,000 10,000 To+al c urn v! awe prefen ed cod Of SUbdd:Oriet (annual dnidend requiren,ent of 510,572 for 1990 and 19B'/) 1,890,280 1 800.2BD S162,528 S162,528 24
Long term debt (NM 1) 1990 IVW (, mp r, p s oi,a, Notes C o +n' S t e = l F = o " G " ; ; m t ' <' S 5,000 '
' 000 L te 5 t,, lie nnC n p- , l. !' , 4,000 4 0D0 N e ,. I r ,
miire m!- sp, o * , m 'e 1" > 318.000 i l m 'D n r ,, f , A n,y V ( op: % , a: <, 80,926 W4W . f h. , I r f.- i J 11 7m,h.s ir, l'mo C: ; u-# w, ' a lh o 124.014 4' ' 'o11 f irst mortgage %e> >
" - s' ' >I 17,490 I J =470 bonds !km >'""(, '
19<, 60,000 60JL3 g,.,,,, t,,osH , is _ 10.000 10 000 m 3! ' W 10.000 10 000
%, ,, I r, ; u 15,000 15.00D w .n > 19 iv 15,000 1i000
%o , ?L 20.000 70 000 5, nn o
- 7017 6?9 s., 1. r min 25,000 25.000 b r., 4 5 0 - /a14 50,000 6 0,0D0
$m n k 9 2019 50,000 '0 000 N 0 ,em k 8 4 IW2 20,000 N MO um, % g m (,o s f 1s Ji 4,600 i600
/.500 be,+,G - iW8 7,500
[.. ser no i '
!>s 7,500 1, ',0 0 r: 1 m p cq
%, n ,, J 9 ' 2M 9,700 9.700
' er -n a v>, 1014 25,000 ?S,000 5e,4e s P 10 ,016 40,000 40 00r u ,,,v ( :.qia na W rin i 4 iV91 20,000 ?O,000 p ., NonJ 4' 1N? 12,000 12.003 c . , ,, p ,. , Senest i' I */ 3 10,000 10.000
%,nt ,
e 19W 10,000 10.000 S nn M e 1W 15,000 15.000
% ss tj '
1908 20,000 M000 Senn o / lW6 20,000 20.000 vnes P s :,: h>s 15,000 15.000 Senn R ' 2007 25,000 ?h,000 Senn 5 tr , 2003 40,000 40.000
%nn1 0 2003 40,000 40,000 Generotond New I n( W 5enes u n, 1W3 40,000 40.000 esfonding Po- e t henn A 5 2n07 50,000 50.000 mortgaga bonds L mpom Sn.n B 0: 20M S0,000 f,0.000 90,000 5 e r ., D O' 7013 90,000 bone s G 9 /013 16,150 16.150
,,u,i 10i 7013 16,600 16.600
% ino J 10' 2013 79,750 /9,250
% n e ., t 7', 201d 38,500 38,500
(< st 7 1 2016 29,050 29.850 soon M 9i 2016 80,000 60,000 Se .n O uu oHe 201E 'O750 5,.no P in a t,4 cola 4,150 5en. s Q un We 2019 1/.100 9 sk s 20 0 05,050
%n s on A > 7ND 4,150 Unomortired disecunts and premiums (B,623) R 2 74) lotclicog term debt 1,717,317 !.6R N5 Long term debt due wnhin one year (37,890) longderm debt $ 1,6 7 9,4 2 7 ( 1. 9 H . 4 9 5 l '
I 'I + I O I I L. h 25
New England Electric System and Subsidiaries Notes to Financial Statements Note A Significont accounting policies
- 1. Bosis of h a.nsoldou d !monoul uaienu nis mh the o m en of f Jev. Iinyond ! h noc by uem (f 4[ t L) oral consolidotion oh subse bones r m pt i Jeu I r gh d i L 4 u lou m < u > 4 Cer porum m (f Jl iI). wlodi n is erded at and system nnoh hen , f oun of tM e!" dor y < n tho emoty t m o M monu! to the r : r sow'ed f u m ol ofouounts co't menk llew E ndrmd Pm wer i mpon, (f 4! P has J o nonority mtco .t in loor o7ponol em lear mom.!ing < omponies (funk a s) t J ou o;nemo [nuqy h t wo es Compon7 (Resovru s) hus a 20 micent J genes ul pun:u r ddp mh rest in the Oc con Sto'e Pow e r pr cyet t !JI P oral Pererc es att ovnt for th te nunc nh.p mteosts on ihn m aty n-ethod iil l 5 ours. 'M a pen ent of the outuondmg to nmon e i c,ilu th t Jw E r.9 ond ! H eb u-In.rnm n n f lectn-t C ompany. Int and iJew E nghmd Hydio
> 1mnuekpan Ct a pmuik-n (H ydro lronsmo uon c omp' < 4 h t w diduted hmou al uatemonu mdede 100 p. n ont el the uso h. !;olchin , and emnm9s d iho H y de o n ons nmion u n,pames Sinw i4t t S n the nqoney octkhohler m thew < n pone, the om nenhg iniennb el the other gocL hWen ote (u!k d num nty mien us and ham be en wpom'ely diu losed on the T4 L i 5 c ornohdo'ed ku_sne potenn ot und bo'ont o shes. Ail umnhmot mtcu empany transot hons i ef eeen c onu Admed sobsidior-
.es have 1,een ehnunated l be oC C Ln.Jnt s C f Id I[ b ohd it', Uti!ly !UkPl(l.tir if s (3r P ma nio trmd In !H.(tif d(!!t( e w t h the U nJo in 5ysvm of Anounk prev obed by regulatory bode ha Any andahon
- 2. Revenue h etihty subdd.arie s rewrd ie,ent e os bilh d on o : yc!e bilhng boos and, m oddihon, ocored ievenues ore eecerded ieloted to eo'e odgument mn homsms t40 remnne n iet orded int electouty that hm been deinered but not lAe i
- 3. Allowance lhe chl.ty subsidiones cophohre Al DC as part c f eonsnuctmo wus. which n presents the mmpobte for funds interen and equity c osh of c opool funds us"d to f;nonw that penion of mnuiuction wn not e I g4ble for used during im luuon in tote bote in 1990, on a,erage of $ 16 milhon of c onor enon wcok in progress (CWIP) was construction induded in rote base Af DC n mpitoheed in 'Uhhty ptont' w ch offsetong uediu to "Other mcome"
( Af'DC) and " Inh'reu" T hn methoJ n m ouerdona eith on estabhshed rute malmg practice under which a vi;hty :s per mened a renan on, and ihr seto er y of, prudently incoord ropitol wsts thmugh their vlhmate indodon in iote bme and in the prmidon for depredonon. The mmpm A Af DC eates, endudmg the H y ciro Tronenh den wrnpunies, were 9.1 penent,101 penent and 10 9 penem in 1990,1989 and 1988, repctuely Dunng the conona t;nn phme. the H ydro Irunsmits!co componiet cop;tobzed all intere9 r osh and a return on common equit y
- 4. Depiecintion h dyrestion and amonizatic.n e penw mduded in the Statemen's cf Consolidowd inwme (toss)"
and amor timtion is ccarposed of the fol!owmg Year ended Dewmber 31 Ohousands of duron) 1990 1989 1988 P Dcpreoohon $ 124,399 S109,488 5102,070 Amoi tiz ation. Oil and go , propenk s (t4om A 6) 79,185 03.699 93,813 Invemnent in Seabrook 1 under ro'e sen!cment {tlou C) 39,458 33 830 23,007 hopeny kmes (tlom F) 6,534 12,371 12,371 O !ue rvoun odr mni o 9,539 7).03 (2,201) 1mi depreou%n ond om nito%n e perm $ 2 59,115 52 % 881 5729,060 26
Depredationis pronded annually on a straight hnn bosh. The provaionI n depredation m o percentage of weighted overoge deprecioble property, enludmg the Hydro Trorumbsion mmponies I was 3.3 percent in 199n,1989 and 1988 T he 03 Conevotion Adjustment (OC A) was dougned to allow the oueleroved recover y of expendo tures for coolconveruon fuoht;es of the Solem Hotbor Station out of soungs f rom burning cool Doe to o , reduchon in the cool-oil pru e ddlerentiolin rcumt years, the OC A w us no longer producmg on oc &lero ted rewveiy of thew eapenditores. Thewlure,in iVD% N( P implemented a miromum ote imel dougned tu othieve ivil recover y by tho nmi 1990s At De&mbei 31,1990. vnnmu tu ed woh onver Sion c ous were $48,787.000 . t __r_~ __ _ -- .. _. . .- .-_
- 5. Nuclear fuel The Nudeor Woue Pohcy Act of 1902 avoblkheuhot thelederalgovernmen b wspondb e for the dhposalond dhposalof spent nudeur fuel The ledNol government requaes iJEP to poy a fee based on if s shore of ;
nuclear plant the net generation Itom the Mdhtone 3 ond Seobrool I nud"t units NL P n reunenng thh leo through demmmissioning its fueldouso. Similar costs are incurred by the Yanf ort T hew wm ove b&d to N L P and towered from customer s through N f P's fueh hww. Aho, NE Pis recovering its shote of euunoted dewmmbdoning eosts for Md!uone 3 and Seobtook I through deprodotion expenw N[P ret or A decomnunionmg co9 en penw on its bookuunmtent with its roto v e< over y in addition, Nt P is poying its pmnon of de<ommissioning cous for the four Yankees through purchowd power eapense Such tosts teffect eshmates of totaldowmmadoning wps opproved by the f ederol[norgy Regulatory Commbuon (FE RC) There is no assuranco that decommbsiornny wsts o(tuolly incurred by thn Yankeet Milktone 3 or Soobrook I will not wbpontially eneed thew amounts However, o 1988 Nudeor Regulatory Commbsion (N RC) rule wts forth formulos Ior determining the minimum f unding lovels that hcenwes must satisiy To meet this requitement, h&nsees must proWdo roosonable oswronce that f unds will bo available for decommbsinning equoi to the minimum f und ng level Eoch of the nudeor units in which N E P has on owne nhip intereu has ided the wquired oswronce cer tificanon.
- 6. Oil and gas - New England Energy Incorporated (NE EI) portkipotes in domeuk oil and gas emplototion, operations development and production through a portnership with a non offdcted oihompor:y. NE El copped acquiring new oil and gas prospects offer December 31,1986 due to moik et wnditions and the outlook f or the f uture, However, N E El will conhnve to incur c osts in connection with ooivities relating to existing prospect Until December 27,1989, NEI1 also owned a majonty intenev in a joint venture that owned and operated o wal carrying ship. chartered to N EP (see Notn D-2)
NE Ellollows the full co9 method of ocwunting for its oil and om operations under whic h mpitolind t cods (inciuding intewst paid io book s) relating to woth and leases determmed to be either wmmerool or non4ommerciot are omortimd udng the unit of procation mothad NE El operutes under on intercompany pricing pahey (Peicing Pohcy) opproved by the Securities and Enhange Commbdon (SEC) undet the Pubhc Unhiy Holdmg Company Ao of 1935 Purmont ta the Pricing Pohcy, N E El's oil und gas activitin are divided into a rato regulated poagrom and a non rate; eegulated program. T he roto-regulated program, w;th net oiland gas propertemf $531 milhon. b composed of prmpectmbton ed theough December 31,1983, and scenas and loues rentind from this progrom ore po ned on to N E P ond ulhmately to mtad evuomen lhe nonante regulated program, with net oil and gm properties of $ )o mdlion,is compmed of prospeus obtained nna January 1,1984 and opmotes independendy of NEP l The 1988 NEP rare wedement f avoroUy resolved uncertainty about the obiitty of NLP to recover post ond future rote.regulowd program losws from its costomers by oilowing N E P ro pou thnm through its fueldouse (see Note D-1). Due to predpitate ded nes in od onJ gas morLet prket beninning in 1986 l- the rote reguinted progtom has generated opevoting loues and b ex pm ted to wohnue geneioting wb. l dontial oddinonal fones in the f utv% which will be poned on to NEP On account of the Pridng Pohcy; L NEEl% wie-regulated program has not been wbpd to c ertoin SEC ouounting tv6, opp!icable to non. l rote regulated c.ompames whkhlimit the (mt5 of oil and gas property that wn be mpimb&d Under the settlement; N E El ratoregulated progs om cops inna red subwquent to Mou h 1,1988 c ould be subbct 27
e o o I[KC prudente rmeu d they iehoe su dec nn m, or unnn'n+<m mo J" ohm ' hot dote ow, w hk h N L [l has d:u rcia..n or c ca arel ce to w hn h ! Ji [ t m no , un ca tuolly obbm o ed m ol Monh 1,1980 t J E [ l inc voed and < epaahr e d the h-lio- om c c os in wnr et tion w dh d$ M o'ei 90' e'idonnen und dewk,pnq nt on dies h oi , : ded De u en.ber 31 It'a v uuis c d d ,Dr d
. 1990 1989 1988 temes 5 1 J10 t 1, ' ' l ', W/ '>
t .pivugon 20,900 ? D.M 6 1 036 o[ch.pn en. 5,316 (3 030) / 493 ( ap ioh t e> i mier e s i ,, 28,322 M 161 30MI/ (w, 3,657 7 :>51 2.228 tunt 559,913 % OY 2 5 'A M 9 I incloded m the o!"w uno t# s for iV C 1909ond1%"A 'e'p'<tioitu"'kme1 ^ of 57M 000-S 5 N _OOD ond $ 1 U /6,000, e = p!' m'ic ii . -a . ei E 'n011,MO. % 113,000 ond 5 0 81.001 d"*h'p-mera cous ot S9/6 000. 51,140 000 nnd %tn1,00D ond uhe outs of '_,200 000 R24 900 and S 10 000. A h rekor to the non mt- 'emlou d pmpmm
- 7. Cash NF f 5 ond a wb'dones de sd r hst teon enn'nu-nu w oh o ' *nt < Sm Jo y s or h u m co A s
Cun ent baniinq on onger+n'uh not rmn" Momhng < hM s 'u be 6:nded oned o;tuan y pomaed f or pa y n,en'. Outdor d og ( hm L s on- 'h"u!cfe.ter:oded.iu e mn's pa y OUP todd sm h 0">e us the borJ s pn tent them ha payment Note B Federolincome tomes luulf ederal me ome in e', m Ac "Sto'emen's cd Gm obdoted Irn onm (loss)" ore m io!!ow s Yem ended Dnember 31 (thomnds of dcAus) 1990 1989 1908 income iotes chargedin operoe os 5 63,147 5 34,728 5 30.945 In ome ta.e5 chor ged (nedoed) to Otherecona (647) 1,021 (2.519) Int ome tow on ente woiement odt ustmen o (Note C) 11,330 168,128) in'alledemlim ome ta. s $ 73,030 S 35,749 S(40,002) lu'ulleJuolim ome tom, m thown aiee, xdst cd the hdlow mg (ompom nn-1 eor ended Duember 31 phomonds c ( dcdiars) 1990 1909 1998 Cun era int ome tu,es $ 72,013 5 60,323 5 48,804 Deh.n ed income to ,es 26,131 (19,720) (82.392) In,eument tax aedm - net 1.606 (4 "54) (6,414) Inveemeu in neds- rate wolen+nt odpomenh (f loto C) (26,000) Totalfederot m ome tmes $ 73,830 $ 35,749 $(40,002) hwcomem tor nede of subdd;ones are defened and amortued me the esionated Ines of the(nuprity ga ng n:o to the n eda 5.m e the To Peh,r m /u t of 19B6 genmey ebm noted meun+nt to, oedt the amouob Onwn ob se for 19W ond 100R pon:vah o % 'IL anu rtcom n of i womnt W f trc y-ner an d ce pter yr m; IL ' 26 m i d in , s ' M *
'nem ( p ; e e'i > in n '" "1 I OU "i t
o- o, m.u t with o iO FR t
- se'Henu M a.y !4 IN
- o h". ' e! c e t ' fn e Seul d i : i 1 % *a "1 A
} h. M rvt
- dur mr; l% !;)
Wph im; ', ty<gq:ra f th( i < r h e
.d .Med t u M N der P ' 510 4 ob s oto n (noi rnohz oh anj h.e mr si t u 'd han im n i dN!cn'e' 20 . . . _ _
The following table de oJs the wn.ponenu of dm delened federoliru ome to e n of three subGdianes v 1990 1989 1980 Year ended December 31 ('housands of den s) Construt han was copchied for lek pur posn and dnivoed im f oi purposes S 2,036 $ 2,057 '
, 1533 C ost a ssod aicai woh utd y phant ne nran deduomil a to pw pnes 6,573 a.330 4,085 E uess tot depredonon 12,$72 2,i5/ /,012 Rote so tiement udpuments [tJr o C) 37,330 (60,428)
Property lou or mat.ron (2,703) pf 77) p 977) Rdunds 11,269 UnbWed revenun (5,104) (8.133) (3,330) Con nbuhons in aid of c onsoudion e (2,260) (2,952) (3,421) Consorvotion c oen opitou r ed (omo hied) (4,574) 7,24/ Cool ship wttlemc nt (tle'e D 2) (7,538) Oil and gas proyom (11,901) (/.434) (16 042) Acoued temnue for 14E El b ses 1,621 405 (3.470) Other (7,291) (S.270) (9 607) Deferred federat income to es $ 26,131 5(19,720) $(02,392)
! Jew ouounting iuln ineed by the Finomio! Anounhng $tondords Boord (fASB), whkh me eapmted to bec ome eHedi<e in 1973, weil requae ou deferred to n bohmtes tc be reonted at the current ton rate UGng the cunent 34 pment too rute, the Sprem would ho <e em a reservedor defer red federal income ta mes of opprodmately S4 7 nullion et December 31,1970. Approximately 534 mahon of this en ceu relates to i4E El It is e peoed tho' threugh the regulatory proccu, e>(en reservedor delened inwme tarm wdi be pound bod to ro'epayers with no ognif kont impot t on net income A u nt d mgl y.
any o .ceu wdl be reclouled f rom o dehared tom. habihty occount to o couomer-related habihty oa ount Such poss-bad commenced in 1987 wah the reducion of the corporo > federolincomo to, eate In oddaion, the nc* fASB rul,s w di require un';t+s to euobbsh now defened im reserves,indudsng deterred to m an the equa y wmponent of AF DC, t4E P's OCA omartirohon and unomm tired in.eu-ment to, , redas whkh ham not preocudy bec wnddered subiett to ddened to ouuun6na These odd tionalinx veserves will be off .et by the euobbshment of requintory oueu or hubihtb representing amounts uhimately rewgnited in rates T herefore, the opphco6on of this new rule is not s peded to ham Q sigmfic ant impact on not inc ome Total federo! m ome ton es d,f fer hom the om >unu computed by np; dying the Oututory to t tute to inc ome bdore ton er The renwns for the d<Hercra es are os foN* s. 1990 1989 1088 Year ended Dec ember 31 (thovmnds d doHun) Competed tan at o atue9 tote $ 117,794 5 62MO $(20,305) Innenses (reducnons)in to < rnuhmg (rom. AUowanc e ha equity funds med donng t onurvoH (4,092) 9.176) (670) Poto sett!cment od;uuna nu (than C) (5,652) 15.696 Feversol ot def ened to r n rma ded at o higher rote (6,414) (12 3.0) (14,481) OCA taa benebu 2,266 (2,190) (5418) book se, sus to. deprecia%n nu notmo0H 2,566 2,606 ?,638 Amortironon d mve oment to, neda (31,365) (8,510) (7,090) AU uher d Hemnres (473) (2,528) (2,172) 1mollederat u ome to os S 73,030 5 35.749 Spo 002) ( Heave feder ulinwme to, rote ' 21.3 % '736 pH 1)%
' T hn dfmhve feder alinwme to a rate c< r 'nre;i J Ell os 2 3 Y . 2 7 T : and (32 2)' a hr the years 1990,1989 and 1988, rnpm tidy.
29
f ederat income tax returns for N E E S and its subsidiaries have been emmined and reported on by the Inteinal Revenue Service (IRS) through 1985. See Note D 5 for ivrther inic emotion egording the enomino' ion of the 1984 and 1985 to < returns NstsC Snbrook Nuclear Unit 1 and related rate settlements NEP owns approximately 10 percent of the 1,150 MW Scobrook Nudeor Unit 1 (Seabroc41), located in Seabrook, New Hampshire. On June 30,1990, the unit was rebased'o the New lngland Power Pool for central dhpotch of electrkity and thereby entered commercial ser vke N E P's rate recovery of its investmeniin Seabrook I hos been resolved thiovgh two separate rate settlement agreements The fit st of these two settleinents was o 1988 ogreement. This agreement resolved allissues related to NE P's pre-1988 investment in the unit and settled a number of other rate issues outstonding at that time. The 1988 settlement initially limited N E P's recovery of its pre-1988 investment in Seabrook I to $61 mih lion per year for seven pars and five months, commencing in March 1988.1he settlement also provided that upon the unit entering c ommercial servke, N E P would be allowed to collect on additional 516.0 mdlion per year ior hve year 5, subject to eeductions if the N RC's operating ikense ior the unit contained any power output level restrictions. (T he opercting license does not centoin power outpot level restric-tions.) N E P was allowed by the F E RC to implement the 516.8 million rate increase on June 30,1990. The 1988 settlemen: olso provided that il Seabrook 1 uero cancelled, NE P would reduce the annual level of its rates by $ ? 2 million for o period of five years. In addition,if the unit had been concelled, ader the F E RC's policy applkoble to c ancelled plar ts, N E P would have been ollowed to collect only 50 percent of prodonilyiraureed pcst.1987 costs As a result of the 1988 settlement agreement N E P took o $ 179 mdlion offer tax ($200 mdlion before tox) write.down of its Seabrook 1 investment in 1988. The write down ossumed that the unit would be concelled and therefore assumed that the reduction in rates coHed for by the settlement agreement would occur. The write-dow n olsoindudad o reserve fo 50 percent of Seabroc41 cash tosts estimated no be incurred in 1988 and 1989. In addition, o reserve was rncorded for 50 percent of oli Seabrook i At DC recorded since 1988 on post-1987 expenditures. However, as o result of Seabrook i entering commer-cial serv ke, NE P recorded adjustments in the third quarter of 1990 (of ter completion of the worranty run) reversing a portion of the write down token in 1988. The odjustments increased 1990 income by S 115 million ofter-tox ($134 million before tox) or S1.80 per shore and reflect the increased revenuei resulting frorn achieving commercial operation,'he reversol of the reserves and the imrt ediate recognition s 'iavestment tax credits. The second settlement agreement, appeoved by the FE RC in January 1991, increases rates by
$25 7 miSion onnually. The eate incerose allows the recovery of costs (not induded in the 1988 tote settlement) associated with Seabrook 1 entering into service and NE P's investment in Seabrook i since Jonvary 1,1988, Thh rate increase become effective on June 30,1990 Appeals of certoin derkions rendered during the NRC Ikensing proceed ngs for Seabrook I remain pend,ng within the NRC. An oppealof the issvonce of the NRC operat ng bcense was denied by the U.S Court of Appeals or f the District of Columbio in Jonvory 1991, ohhough the Court remonded one hsue to the NRC Appeed Boord. The inspector general c4 the NRC has been conduct ng on investigation into Pm5'ble improprieties in the authorirotion of the Seebrook I operating license by the N RC's Atomic Safety ond Lkensing Board, in February 1991, the inspector general hsued a report recommending ertoin modifkations to the N RC's emergency planning regulations, it n not known of this time whether further investigations are c ontemplated.
Because of the highly controversioi no'ure of nudear ptwer in general, and the Seabreok plant in par-titutor, many challenges to the safety of the design, construction and operution of the plani have been robed in the post and are hkely to continue to be raised in the f uture. N E P does not beheve that cunently pending appeals will resuh in Seabrook i being permanently withdrawn f rom ser vice or concelled I
$0
However,if it were, either os o tesuh cl(vitently pendmg or uno idpoied f uhue events Ni P tould I.o eem ned io < ease c oHet ting s evenue i eirig < ohet ted ender Ae,1988 setdeii+iit ondlor cruik e iefunijs and lu ci rohn f or (i.e yeon, depend.ng on the orwmuorm A w nie-down wold be requimd at that time. T he pre.1980 mveument in 5.-ulaoc L 1 ne3 of omonaohon is show n on o seporate hne or,the bolma sheet lomiments m SeabmA 1 unto Jowory 1, %BB me indoded m the ' Uni 4 phmt" I;ov on the balonco sheet. Note D Commitments and contingencies p
- - g opu ntion, as poyrwnu to a olhbote, Nf L b for < t us i@ y hm , Ni[ti rute regutu4d tJ ond qm piogoen, lhe prudenc e of wrtom NLi I rote regelme d p%pom (osn int uned abwquent tu Mouh I,19R8 r ould be wbied to I[3C rem. f or o dm ndon, see Note A 6
/ g -
y . agreement Skppmg Co (Kemne) proo nmg o .> pnt venture tween N f I I omi Keyne Nl f I wm o S 1 perc ent owne! in the pot u nMe, w hd oved o < ml t or r > mg Ap that wm chancied to Nf.P throogh 2008-As o resub of this agreernent. Om tIJp was so!:1 tu cm cifidain of h ystoiie, l t 4f bnt anture win tet eunut9J and NL P enteied into o ne* tong ter m i honor of the sinp to cominue trompottotion of wol to two of Ni P's gence ohng n;'tions N ogpernent oho wwhed ortutrotmns that m ere pendmg r onr erf dng the oppropriWenen of the r hortrf hate ro!e that had in en paid by Id[P dolmg 1993
+1 0ough IW9. Implementon-s n of the ypeement rewhed m o normoning gain in N[l;51989 earnintp of oppion anotely S.16 per aum h -
g
, y ,
g outage due to a mojur (ool ulo fodore iM muemental wst rl rep o(ement l power for that outage, wha h omovnted to S 16 nulhon, wm im Imh d m N t Pi f uel dause inlhngs NE P sought to m:o.ei damages lui the ulo imiur ~ f rom Stone & Webster f ngmeer mg Cor porution (S&W) and othen m Monoduu its Supevior Coun in Nommber 1986, IJ(~ P eve ( uted on ogrenmen* wah the Rhode Idund ottorney general whereby the ouvincy general agreed not to minute onf f egulator y jiroceeding wnr.et nh!g the autoge untilll[ P's dispute wah MW is f esched in December 1989, the wort granted o enotion Ln wmmor v judgme nt in foca of S&W ond,in Apol 1940,it entered a judgment granug umilar mancns hied by the o'her deh ndants Ni P has eleued not to punve oppeals of these deddons
- 4. Construction The utihty wbddioom' wrohudion n pendauren ndudmg Af DC, om eshmoted to be 5285 mdhon expenditures in 1991,induding S ?S tr&on f or the Hy dro Tionsmisdon compone lho od and gos tubddiary%
expi ndaornior as e,p!nranon and dmelepment pnagioms in 1991 om eshmated to be S30 mdbon, w hkh om pt nuipedly s osts of robtol(see Note A 6) tu Denmbet 31,1990, sub9antio! wmmament s had been mode relative to f vtare planned e pendaurn 0 ,. k - g ossessmenn abandonn ent ei the Seabrook umt 2 took plot e n enher 1984 or 1985 Au.ordmgly, the IRS disoh lowed the abandonment lou and ndoted tom dedmbns <lommd m the 1984 and 1985 mturnt which hos rnuhedin whoontialpmpowd tax Ahomin h Systemis appeahng them d<sollowancet if the IRS' podhon is ubimately upheld, the Syswm would be r, quired to pa y the tax dehdendes (upp,os motely S 19.4 m!! hon, which induds irlated state dehdendes) pla inh rest As of Denmber 31, !?90, internt on the pmposed dehdencin wodd be oppmamately S 17 6 mJhon. NL P hos pronded opproa mately $8 2 m%n olinterest ou ruols miahng to this maner lhis intmed wm be tax deducth 31
NE P has recordvd the toi, benefit of the Seabrook 2 deductionin a defer red tax reserve and has been possing on such benefit to customers. Should the tax benef t of the abandonraent loss deduction ultimately realized be at o rote leu than the 46 percent rate applicable in 1984, NEP would seek to have its Seabrook 2 eate remver y :nodified Io rellect r,uchlower benefit.
- 6. Franchise tox in November 1987 and . lune 1989, NEP prsd osses.inents of additional Mossachusetts itanchne taxes assessments fotoling approximately 55 2 million (induding interest) for the years 1983 theough 1987. The oueu-ments relato to the method of cokulating the pot tion of NE P's inwme that is toxoblo in Monochusetts.
NEP disagrees with the Monochusetts Depottment of Revenue's position on the opportionment of NE P's tom oble income Accordingly, these omounts have not been charged to ex penso. NEP hos filed petitions withthe Mossochusetts Appellate lax Board meking refunds of the cuenments for 1983 and 1984. In March 1990, the board decided in f avor of N EP, The board's dedsion h subject to appeal. NE P has applied for obotement of the cuenments for 1985 through 1987, The exposure for the yent 5 1988 through 1990 h estimated to be opproximately $ 1 million.
- 7. No'utal gas in connection with N E P't, elforti to reduca sulfut dionide eminions and repower generating units, N E P pipeline copodty has signed conditional ogteenmnts that muld lead to ihm wntracts for natural gas pipeline capodty.
1hese agreements. whun all the conditions are approved oed accepted by N E P and the other porties, w 11 require minirnum fixed payments, expected to begin in late 1991. SucF minimum payments have not been fitmly established at this time but are expected to be signihcont af ter 1991.
- 8. Ocean State Unit 1 of the Oreon State Power project entered wmenerdaloperotion on December 31,1990. As Power prolect required by the partnersh;p agreemer t, Resources mode on equity contribution, with funds provided by N EE 5, of S2d million on December 31,1990 foi the fitit unit. Unit 2 h scheduled Ior commercial operation in late 1991, at which timo Resources will be required to mole another wpitol wnteibution estimated to be $22 million. This obligation is guarantend by NE ES.
T he output of each of the Ocean State Power units will be sold under 10 year unit power agreements to o groep of New England utihtles,induding NE P NEP is entitled to a 26 percent shote of the output of the first unit until commercial ciperation of the second un;t and a 48.5 porcent share of each unit thereafter Anoming the second unit gees into tervicc io lato 1991, NE P willbe required to make certain minimurn fixed payments to cover copital and fixed operating costs of these units in amounts estimated to be $40 malicn in 1991 and $70 milhon in each of the years 1992 through 1995.
- 9. Horardous lhe f edoral Comprehensive Environmental Response, Compensation and liabihty Act, more mmmonly w aste known as the "Superfund"la w, imposentrict, joint and severalliabihty on persons identified as having caused or wn9ibuted to the reloose or threat of a reloose of hoeordous wastes at a porticular site requirm0deonJp action. Partieriliab!c indVde poht and proient site owner 5 ond operators, troMporters thot brought wastes to the site and entities that generoted or arranged for disposal or treatmem of wastes uhimately dnposed of at the site. A number of states,induding Mossochusetts.have enoced sinnlor laws, Federal and store environmental agencies, as well as private parties, have cor.tocted or initiated legal ptc,ceedings again,t NE ES or its utility subsidiaries regatding liabihty for deonup of s;tes designated as containing horardous wt.ste.
One of these sites is the Pine Street Canal Superfund site in Burlington, Vermont, Approximately 16 potties, incluchng NEE 5, had been no6f n i bv the Environmental Protection Agency (E PA) that they wrne po'entially responsible porties (PRPs) for cleanup of the site, w hkh k metaminated by ccol tar - and other moieriah. On December $.1988, the U S. Department of Justice filed suitin federal distrio murt in Vermont against NE E S and tto other porties to reco-r o!! of the E PA's post and future responm wstt On December 28,1990, the government init;oted litigmion ended with the fi;ing of a final wnsent 32- -
decree woh the court Under the terms of the settlement, the E PA recovered as post remo
- e in pens m ( ost in 1990 and 1989 reHeds plan tmpt osem, ms os we os genero! escatation lbe increQve in ihbY o so rdec!i adddfOnoI c C Os rt cMnIr ed On t ertain for mo! ',Up}denmnial p!ans I
33
Totol pension cott for 1990,1989 and 1988 included the fol%ing components Year ended December 31 (thousands of dollars) 1990 1989 1988 Servic e c e;t- - benehts eor ned during the period $ 10,229 5 9,360 S 8,381 Plut (len).
In*erest c est on projected beneht ebbganon 40,806 38,479 34,769 Return on plan onets at e pectedlong teim eate (39,531) (37,408) (35,999)
Amortizabon 460 108 (202)
Totol pennon c on $ 11,964 $ 10,$39 5 6,949 Anumptions used to deter mme pension cost were:
Discount rate 8.5% 85% 85%
Amroge rate of increase in future c ompensation levels 6.7% 6 79i 6.7 %
E,pected long term rate of return on onets 9.0% 90% 9,0%
Actuol return on plan ossets S 13,060 $ $2,646 $ 39,328 The following tob!e sets f orth the plans' f unded sto+us December 31,1990 December 31,1989 Retirement Plans (In thousands)
Regular Supp;emental Regular Supplemental Plans Plans Plans Plans Benefits eorneri Ac tuosial present solve of occumulate d beneht liabihty:
Ve st ed 5416,922 $ 27,519 S393,413 S26,235 N on 4 e sted 21.258 209 19,554 157 Tc.t al 5438,180 S27,728 S412,967 526,392 Reconciliation of funded status Actuarial present <o!ue of projected beneht hobility S510,282 530,784 S478.268 529,244 Unrewgnized piior service costs (11,526) (4,386) (9,389) (4,272) f AS 87 trans:ticr habihty not yet rewgnized (amortiredj (7,155) (7,805)
N(t goi,(loss) net yet recogmrec; (on ortae d) (27,291) 2,806 1,394 1,815 471, a 65 22,049 470,273 18,982 Pe ns m f und amts at f air s olue 46R,723 487.716 FA5 8 7 trans: tion asset i:ot yet r ecogniz ed (omoniz ed) (17,476) (16,918) 471,24/ 468,798 --
Accrued pens , payn er!s recorded on bacd s S 2l8 522 049 b l , ',7 b S l 8,982 Pian ou ets om omp sed ponmi'y cJ gr:o mer d in e o,4 ,! an+r e t ts c c < p m
- e quity. d( bt securitie, cind c ash equn o!ents 34
- ah maturity dates eanging f rom 10 to 25 :, con at on overage inteico rate of 9 05 percent. The pro.
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