ML20108F405
| ML20108F405 | |
| Person / Time | |
|---|---|
| Site: | Seabrook, 05000000 |
| Issue date: | 12/31/1983 |
| From: | Harrison R, Tallman W PUBLIC SERVICE CO. OF NEW HAMPSHIRE |
| To: | |
| Shared Package | |
| ML17054D536 | List: |
| References | |
| NUDOCS 8412200452 | |
| Download: ML20108F405 (80) | |
Text
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PBH
, PublicService of New Hampshire 1983 Annual Reportto Shareowners t
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DEAR SHAREOWNERS:
- Recent events surrounding the Company's financial position
- are indeed the most serious challenges ever faced by PSNH.
in that light, the Company has elected to forego the more tra-ditional Annual Report to Shareowners. In its place we are provid-p
, ing to each shareowner a copy of the Company's Annual Report on Form 10_-K,' filed with the Securities and Exchange Commission on April 2 and amended on April 27,1984.
t -We urge shareowners to carefully read this document and the accompanying proxy statement for the Annual Meeting to be held on June 7,1984, as they depict, in detail, the current status of the Company.
, In the Annual Report on Form 10-K the Company stated that, o if additional financial support could not be obtained and its com-L mercial banks declined to advance funds under the existing re-volving credit agreementithe Company would within three weeks l
be forced to seek protection from its creditors under the Bank-( ruptcy Code.
Since that time, the Company and its Board of Directors have made a number of difficult decisions, including: the omission of the May 15,1984 dividends on shares of the Company's common
!- and preferred stock: reduction of workforce and management sal-l ary levels at the Company; a temporary halt of construction at L Seabrook Station: a suspension of the Company's Seabrook Sta-l tion construction payments pending resolution of the Company's l financial problems; and a determination to cease construction I
work on the oil-to-coal conversion at our Schiller Station.
Each of these decisions was made in an attempt to maintain '
the viability of the Company and its shareowners' investment. It must be understood that, while the Company has continued, and will continue, to work to avoid seeking the protection of the bank-ruptcy court, and while the earlier projected filing date has e- passed, the possibility still exists that the Company could seek this protection.
I h
e On a positive note, the Company on April 18,1984 released revised completion cost and schedule estimates for Seabrook Sta-tion. These new estimates indicate that Seabrook Unit I will cost S4.1 billion and will begin operating in February,1986, about one-half billion dollars less and five months sooner than the March 1,1984 estimates.
Throughout this period of crisis the directors, management and all employees of the Company have worked together in an exemplary fashion to meet unprecedented challenges. Many more challenges will arise which must be overcome in the weeks and months ahead. We will continue to put forth our best efforts to meet those challenges and to protect the interests of the Com-pany, its shareowners and customers.
R.J. Ilarrison alb W.C. Tallrnan President and Chairman Chief Executive Officer -
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K As Amended by Form 8 dated April 27,1984 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCIIANGE ACT OF 1934 For the fiscal year ended Commission File Number December 31,1983 1-6392 Public Service Company of New Hampshire (Exact name of reghtrant as specified in charter)
NEW IIAMPSilIRE 02-0181050 (State or Other Jurisdiction of Incorporation or Organization) (1.R.S. Emplo3er Identification No.)
1000 ELM STREET, MANCIIESTER, NEW IIAMPSIIIRE 03105 (Address of P incipal Executive Offices) (Zip Codel Registrant's telephone number, including area code: 603-669-4000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class which Reghtered Common Stock, $5 Par Value New York Stock Exchange Preferred Stock, $25 Par Value,11% Dividend Series New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,11.24% Dividend Series New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,17% Dividend Series New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,15% Dividend Series New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,15.44% Disidend Series New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,13% Dividend Seiies New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,13.80% Dividend Series New York Stock Exchange General and Refunding htortgage Bonds, Senes B 12% due 1999 New York Stock Exchange General and Refunding htortgage Bonds Series C 14%% due 2000 New York Stock Exchange General and Refunding htortgage Bonds, Series E 18% due 1989 New York Stock Exchange 15%% Debentures due 1988 New York Stock Exchange 14%% Debentures due 1991 New York Stock Exchange 15% Debentures due 2003 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act:
Title of Class Preferred Stock, $100 Par Value,3.35% Dividend Series Preferred Stock, $100 Par Value,4.50% Dividend Series Convertible Preferred Stock, $100 Par Value,5.50% Dividend Series Preferred Stock, $100 Par Value,7.92% Dividend Series Sinking Fund Preferred Stock, $100 Par Value,7.64% Dividend Series Sinking Fund Preferred Stock, $100 Par Value,9.00% Dividend Series Indicate by check mark w hether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes / . No The aggregate market value of the shaies of Common Stock, $5 par value, of the Company held by non-affiliates of the Company was $325,305,776 on hfarch 29,1984.
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the close of the period covered by this report.
Class Outstanding at December 31,1983 Common Stock, $5 Par Value 36,996,327 Shares Documents Incorporated by Reference Ibrtions of the definitive proxy statement to be dated April 27,1984 for the Company's Annual hiceting of Stockholders to be held June 7,1984, (Part 111)
y PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE 1983 FORM 10-K ' ANNUAL REPORT Table of Contents W
PART I Item I B u s i ne s s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2 Properties . . . . . . . . . . . . . . . . . . ... .. . .. .. .. . .......... 14 Item 3 ' legal Proceedi ngs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 14 Item 4 Submission of hiatters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . 16 Item 4A Executive Officers of the Registrant . . . ... . . ... .... .... .... .... 16 PART II Item 5 hlarket for the Registrant's Common Stock and Related Security lloider hiatters .. 19 Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... ........... 19 Item 7 hianagement's Discussion and Analysis of Financial Condition and Results of Ope rat i o ns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Item 8 Financial Statements and Supplementary Data . .. ... . . .. . .. 23 Item 9 . Disagreements on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 41 PART 111 Item 10 Directors and Executive Officers of the Registrant . . . ........ .......... .... 41 Item 11 Executive Compensation . . . . . . . . . . . . . . . . . .. .. . ... ...... ... .. 43 Item 12 Security Ownership of Certain Beneficial Owners and hianagement . . . . . . . . . . . .. 44 Item 13 Certain Relationships and Related Transactions . ............................ 45 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Ibrm 8 K ........ .. . 46 t
PART I Item 1. BUSINESS Introduction Public Service Company of New flampshire (the " Company") is the largest electric utility in New ilampshire, operating a single integrated system which supplies electricity to approximately three quarters of the State's population. It distributes and sells electricity at retail in approximately 200 cities and towns.
including Manchester, Nashua, Portsmouth, Berlin, Keene, Laconia and Rochester, in the State of New llampshire. It also sells electricity at wholesale to seven other utilities. The Company was incorporated in 1926 under the laws of the State of New llampshire.
The area served by the Company experienced relatively rapid population and economic growth during the 1970's and continues to experience one of the lowest unemployment rates in the nation. As a result, the Company's kilowatt-hour sales increased substantially during the 1970's, but, as in the case of most other utilities, sales have flattened in recent years. liowever, the Company has experienced increased sales grow th during 1983 and in the first quarter of 1984.
Prior to the developments noted below under Seabrook Nuclear Plant the Company had planned to meet a major portion of the needs ofits customers after 1986 through its share of the Seabrook Plant. The Company's share (35.56942%) of the two units of the Seabrook Plant would have entitled the Company to 409 MW of the capacity of each unit. With the Scabmok Plant, the Company believed that its goals of emphasizing conservation and load management would obviate the need for construction by it of any further base load generating plants for a considerable period.
At the present time, the Company is facing serious financial problems. Of immediate concern is the Company's need for short-term credit within three weeks and the uncertainty that funds will be available to the Company under its revolving credit facility if the Company is unable to obtain additional back-up sources of credit as requested by its commercial banks. See Financing -IlanA Financing below. There also exists the possibility that the Company will ultimately be unable to recover its investment in Unit 2 of the Scabnmk Plant, which the participants have voted to cancel as of December I,1984 subject to the condition described below under Seabrook Nuclear Plant - Seabrool Unit 2.
Industry Problems 1:lectrie utilities throughout the United States which are constructing nuclear generating plants have been the subject of extensive adverse publicity and criticism. Some nuclear projects have been discovered to have unanticipated construction defects and quality assurance deficiencies w hich have led to substantial cost over-runs and significant construction delays, resuhing in some cases in project abandonments and, in at least one instance, the denial of an operating license by the Nuclear Regulatory Commission ("NRC"). Several electric utilities has e announced licensing problems with and canceliations of unfinished nuclear plants, w hich, absent recosery of costs from ratepayers, could result in substantial write-offs and dividend reductions. In the case of one utility, delay in obtaining an operating license from the NRC as a result of, among other things, difficulties in completing emergency procedures has forced the utility to omit its common stock dividend and is threatening the utility's financial viability. In addition, various state regulatory agencies are reviewing alternatives for the moderation of the effect on rates of placing major generating facilities in service t'ptm commencement of commercial operation by, for example, phasing the cost of such facilities into rate base over a period of years rather than recognizing the full cost immediately. All of these events have adversely affected the price of securities of utilities with nuclear investments, including the Company, and all of these problems may affect the Company in the future.
Ibr a further discussion of certain of these problems as they affect the Company, see SeabronA Nue/ car Plant below, item 2 Properties and item 3 f.cgal Proceedings.
Seabrook Nuclear Plant The Company is the lead owner of a nuclear. fueled steam electrie generating plant under construction at a site located in Scabnmk, New flampshire (the "Seahnmk Plant"), which was planned to have two Westinghouse pressurized water reactors (each with a rated capacity of 1,150 megawatts), utili/ing ocean I
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4 water for condenser cooling purposes. Various other New England utilities are participating in the ownership of the Seabrook Plant under a Joint Ownership Agreement. The ownership interests in the Seabrook Plant l are as follows:
Public Service Company of New Hampshire . . . . . . . . . ...................... .. .. 35.56942 %
The United Illuminating Company . . . . . . ........ ..... ... ......... .. . . . . . . . 17.50000 ;
Massachusetts Municipal Wholesale Electric Company .... . ...... ... ............ I1.59340 ;
New England Power Company . . . . . . . . . . . . . . . . . . . . . ................ .... ... . 9.95766 ,
Central Maine Power Company . . . . . . . . . . . . . . . . . .- . . . . . . . . . . ........... .... 6.04178 i
'Ihe Connecticut Light and Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05985 Canal Electric Company . . . . . . . . . . . . . . . . . . . . . .................... ......... 3.52317 1 Montaup Electric Company . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............. 2.89989 Bangor Hydro-El#c Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.17391 New Hampshire bu.mc Cooperative, Inc. . .. ..... . .. .... .... . .... . . 2.17391 ;
Central Vermont Public Service Corporation . . . . . . . . . . . . . ...... ... ... . .. 1.59096 '
Maine Public Service Company . . . . . . . . . . . . . . . . . ............. ... . ......... 1.46056 ,
Fitchburg Gas and Electric Light Company . . . . . . . . . . . . . .. ... . . ........ 0.86519 Vermont Electric Generation and Transmission Cooperative, Inc. . . . . . . . . . . . ... .... 0.41259 Taunton Municipal Lighting Plant .. . ........ .... ........... ...... ..... ... 0.10034 Hudson Light and Power Department . . . . . . . . . . . . . ..... ..... ... .... .......... 0.07737 100.00000 %
The Seabrook Plant has experienced persistent and substantial cost increases. The increased costs have been due, among other reasons, to design changes, revisions of regulations of the NRC and other regulatory bodies, extraordinarily high interest rates, inflation and construction delays, all of which have resulted in total costs (including carrying costs and taxes) far higher than planned and far higher than for nuclear plants currently operating, although comparable to certain other nuclear plants currently under construction. The cost estimate for both Units of the Seabrook Plant issued on March I.1984 is approsimately $9 billion with an estimated July 1986 in. service date for Unit I and a December 1990 in-service date for Unit 2. These latest estimates of cost and completion dates are about 75% greater and 18 months later, respectively, than those made by the Plant's architect / engineer in November,1982, which were in turn 43% greater and 10 months later, respectively, than previous estimates. Management Analysis Company ("MAC"), an inde.
pendent consulting firm retained in early 1983 by the Seabnmk participants to analyze the November,1982 estimate, reviewed the latest estimates and recommended that they be further reviewed and analyzed by the Company. These estimates were analyicd by MAC as being within the optimistic area of probability as to schedule and the middle range of probability as to cost, provided that the construction methods uptm which the analysis is based remain unchanged. The Company believes that substantial efficiencies in the construction !
methods can be achieved resulting in the earlier completion of Unit I and significant cost savings; however, there can be no assurance that the efficiencies will be achieved or that the Unit will be completed within the cost and schedule estimates. Certain Seabnmk participants have estimated that the total emt of constructing both Units of the Seabrook Plant could exceed $10 billion and that the completion dates could be later than those reficcted in the above estimates.
On March 30,1984, the Seahnmk Plant participants voted to cancel construction of Unit 2 at December I,1984, subject to the successful implementation of the NEITX)L Shared Savings Plan describ:d below under Seahremk Unit 2. Cancellation of Unit 2 (assuming no other arrangements are made for continuation of comtruction as described under Scabr<mk Unit 2 below) and failure of the Company to recover a significant portion of its investment in the Unit either from ratepayers or through the NEITX)L Shared Savings Plan could prevent the Compar.y from financing its share of the remaining cmt of comtructing Unit 1. At February 29,1984 the Company's investment in Unit I and common facilities was $1,051,300,000, including the allowance for funds used during comtruction ("AFUDC"), described in Note I of Notes to Financial State.
ments, and uranium fuel. Cancellation of Unit I would threaten the financial viability of the Company.
! Even if reasonable arrangements can be made either to recover the Company's investment in Unit 2 l after its cancellation or to complete comtruction without further financing from the Company and thme 2
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I participants which seek to cancel Unit 2, financing of Unit I will be a major undertaking for the Company, particularly if it is not included in rate base promptly upon its completion but phased in as suggested by New Hampshire authorities. See Financing below.
As a result of the substantial increase in the estimated cost of Unit I reflected in the latest cost estimates, the commercial banks which have provided the Company with its revolving credit facility (under which no amounts are currently outstanding) have requested the Company to obtain additional back-up sources of credit. It is not clear that the banks will make funds available under the existing revolving credit facility without the additional credit. This additional credit would provide the Company with increased financial support in the event that the Company is unable to access the public securities markets for any significant period and the Company has exhausted its bank lines of credit. The Company is seeking this additional support, including specifically support from the other Seabrook participants. If such support cannot be ob-tained in the next three weeks and the commercial banks decline to advance funds to the Company under the revolving credit facility, the Company would be forced to seek protection from its creditors under the Ilankruptcy Code. The Company has temporarily instituted stringent cash comervation as well as other expenditure curtailment measures.
Seahrook Unit 2. The March 1,1984 estimate of the cost and completion date of Unit 2 were $4.4 billion and December 1990, respectively. Iludgeted expenditures for construction of Unit 2 since September 1983 have been at the " lowest feasible level" and during 1984 are anticipated to be minimal.
Even before the latest cost estimates, certain Seabnmk participants, either on their own volition or in response to suggestions or orders from their regulators, had been attempting unsuccessfully to sell some or all of their interest in the Seabrook Plant or had been seeking mothballing or cancellation of Unit 2 because i of concern by the participants or their regulators as to increases in the projected emts, delays in scheduled completion and their own need for its power. At a meeting of the participants held on March I,1984, six participants holding a total of about 40% of the ownership interests in the Plant voted in favor of cancellation of Unit 2, four participants holding about 18% abstained on that vote, and the mmaining five participants, l including the Company, voted against cancellation.
i Under the Joint Ownership Agreement, cancellation of Unit 2 can only be effected by the vote of at l least 80% of the ownership interests, so that cancellation required the Company's concurrence in such a vote.
llowever, in view of the determination of a numb:r of the participants and the state regalatory agencies having jurisdiction over them to cancel Unit 2, it became apparent that it was no longer possible to complete construction of Unit 2 under the Joint Ownership Agreement.
Consequently, on March 30,1984, the Company joined with the other SeabnmL participants and voted to cancel Unit 2 on December I,1984 on the condition that there have been obtained all necessary regulatory approvals of arrangements for sharing with the Company the savings on Canadian power under a propmed NEPOOL Shared Savings Plan; at that same meetirg, participants holding about $9% of the ownership interests had voted to cancel Unit 2 immediately without any such condition. (See Nrw Englamt l'ower I'vol below for a description of NEP(X)L.) The NEINX)L Shared Savings Plan was approved in concept by a unanimous vote of the NEPOOL Executive Committee on March 23, 1984. Under the Plan, savings from the purchase of Canadian power would be channeled by the NEI4X)L members to the Company over a period of years commencing in 1987 in order to compensate in part for the Company's lost investment in Unit 2.
'Ihe amount of such savings which would be so channeled has not yet been agreed upon.
The Company is also seeking to make other arrangements for the completion of Unit 2. These arrange-ments could include the financing of construction of Unit 2 under a fixed price contract by a major comtruction company, but would not involve financing of such emts by the Company. Participants desiring to cancel Unit 2 would in any event be relieved of any further obligatiom for construction cmts of Unit 2, but would remain obligated for Unit I cmts. There can be no awurance that the NEINX)L Shared Savings Plan will receive the requisite regulatory approvals or will channel sufficient savings to the Company, or that the Company l will be able to make arrangements to complete corntruction of Unit 2. Comequently, the Company may be in the difficult guition of attempting to continue comtruction of Unit 2 in the face of the nearly unanimous determination of the other SeahnmL participants and regulatory authorities that Unit 2 should be cancelled.
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r The Company cannot predict whether it would be possible to continue construction of Unit 2 in such cir-cumstances.
Cancellation of Unit 2 could in certain circumstances also jeopardize the Company's financing of its !
share of Unit I and its financial viability if the Company were not granted some recovery on its investment in Unit 2 in addition to the NEPOOL Shared Savings Plan. This recovery could take the form of direct rate ,
. recovery if the New Hampshire anti-CWIP statute is not construed to prevent recovery through rates of a l utility's investment in a cancelled plant. There is currently pending before the New llampshire Public Utilities Commission ("NIIPUC") the Company's request for recovery with respect to the Company's share of the l cancelled Pilgrim Unit 2 nuclear generating plant. The NilPUC has ce tified to the New llampshire Supreme Coun the question of whether the New Itampshire anti-CWIP statute prevents such recovery. The Court has ordered an accelerated briefing schedule with oral argument tentatively scheduled for htay 1984.
The Company cannot prediet what action the NilPUC would take reganling the Company's Seabrook Unit 2 investment. If the NilPUC denied recovery the Company would be required to charge the unrecovered cost of Unit 2 against earnings in the period in which such denial became final; the Company does not believe that a final determination of the question will be made before the second half of 1985. At February 29,1984, the Company's investment in Unit 2 was $316,(XX),(XX) including AFUDC and uranium fuel. While the Company believes that in the event of cancellation it would be entitled to allocate some part of this investment to the cost of Unit I, the amount charged against earnings in the event it is denied recovery could, depending upon the amount not recovered, eliminate the Company's retained earnings, thereby effectively precluding the Company from paying dividends on its Common and Preferred Stocks. In these circumstances, the Company would in all probability be unable to access the public securities markets.
Effective htarch I,1984, the Company ceased capitalization of all costs, including AFUDC, related to Unit 2. The accrual of AFUIX' on Unit 2 had been appmximately $3,(XX),(XX) per month. The effect of this decision will be to reduce 1984 net income by approximately $33,(XX),(XX).
Scabrook Unit 1. At hlarch I,1984 Unit I of the Seabrook Plant was estimated to be approximately 73% complete based upon the latest cost estimate. The principal concems of the Company with respect to Unit I are its cost, commercial operation date, licensing and inclusion in rate base.
Cost. At Itbruary 29,1984, the Company had invested in Unit I and common facilities approximately
$1,051,3(X),(XX)(including AFUDC and uranium fuel). The htarch I,1984 estimate of the total cost ugun completion of Unit I and common facilitics was $4.6 billion, including a management contingency allowance of $2(X),(XX),(XX) and AFUDC estimated at $1.5 billion but excluding the initial cores of uranium fuel. The Company's share of this cost would be $1,954,(XX),(XX). This estimate anumed the eventual completion of Unit 2, and this estimate of the cost of Unit I will be appnnimately $4(v),(XX),(XX) higher if Unit 2 is not completed. As indicated above, AfAC recommended that this cmt estimate be further analyzed and refined by the Company. The Company expects to complete this review by June 1984.
The Company cannot predict what effect further delays in completion of comtruction, licensing or inclusion of Unit I in rate base, the cancellation of Unit 2, adverse regulatory or legislative action, financing problems of the Company or other Seabrook Plant participents, work stoppages, labor or material shortages or further administrative or court decisions relat:ng to actions of regulatory agencies, may have on the completion of Unit I or on its cmt or on the Company.
CommercialOperation Date. A principal factor affecting the c& t of Unit I is its commercial operation date. Substantial revisions to all prior estimates of commercial operath., of Unit I have been made from time to time. The Alarch I,1984 estimate of the commercial operation daA of Unit 1 is July 1986 and is eighteen months later than previou ly estimated. Various other completion dates Mr Unit I have been estimated by other participants, comtruction consultants and regulatory bodies.
de rnsing. Timely receipt from the NRC of an operating licen e is necenary m order to commence commercial operation of Unit 1. Ibrmal hearings were held in the summer of 1983 and abrther hearings are expected to be held in the spring of 1984. The Company's request for the operating licen e u being opgmed by active intervenors, including the Attorney Generals of the State of New llampshire and The Commonwealth of hianachusetts, in the course of the pniecedings for the inuance of the operating license, it is anticipated 4
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that the New Hampshire Civil Defense Agency, the blassachusetts Civil Defense Agency and the Federal Emergency hianagement Agency will develop emergency response and evacuation plans in conjunction with 17 municipalities in New llampshire and 7 municipalities in hlassachusetts in proximity to the Plant. hiost of the responsible governmental entities appear to be proceeding with the development of emergency pro-cedures and evacuation plans, although several h1assachusetts and New flampshire municipalities and the blassachusetts Attorney General are opposing such development or the adequacy of the proposed procedures and plans. The Company cannot predict whether such opposition, or that of other intervenors, might delay completion or acceptance of the plans, and the Governor of N1assachusetts has indicated that he will not certify the hlassachusetts plan to the Itderal Emergency hianagement Agency unless all affected hlassa-chusetts municipalities have approved their respective plans. State and loca opposition has delayed licensing of another nuclear generating plant located on Long Island. New York for such an extended period that the inability of the constructing utility to earn a cash return on its investment in the plant threatens that utility's financial viability.
Inclusion in Rate llase. Under a so-called anti-CWIP statute enacted into New llampshire law in 1979 prohibiting the inclusion in rate base of construction work in progress, Unit I of the Seabrook Plant may not be included in rate base until completion of its construction and commencement of commercial operation.
At that time, the Company expects that a retail rate increase currently estimated to be about 65% would be required in order to place the entire cost of Unit I in rate base. The Company's estimates of future revenues have attempted to reflect the dampening effects of the expected rate increases on power sales. The Company cannot predict what rate increases will be granted, including the extent to which the Unit might be phased into rate base as suggested by New flampshire authorities, or whether the dampening effect will be more substantial than anticipated. The NilPUC has instituted a proceeding to explore whether an agreement can be negotiated as to the cost of Unit I of the Seabnxik Plant, with incentives and penalties for variations from agreed upon cost. The Company intends to reopen discuwions with the Commiwion in this proceeding immediately after the conclusion of the Company's review of the latest estimates, now expected to be ac-complished by June 1984. The timing and extent of recovery by the Company of the cost of the Seabnmk Plant from ratepayers has become a major political iwue in New llampshire.
' Die Company's cash flow should be substantially improved and its permanent financing requirements reduced after Seabnmk Unit I is included in rate base. Delays in commercial operation of Unit I or in rate base treatment of the costs of the Unit would require the Company to maintain high levels of linancing. See financing below. The Company's financing requirements would also remain high if the NilPUC should decide not to permit inclusion in rate base of substantially all of the costs of Unit 1. Even after inclusion of Unit I in rate base, any outage of the Unit of such a nature or duration as to result in its removal from rate base would impose significant burdens on the Company because Unit I and common facilitics will comtitute more than half of the Company's total awets and will be the source of a significant portion of its electric generating capacity.
Regulatory Approvals. The Seabnuk Plant has required numerous approvals and permits from various state and federal regulatory lxxlies, consisting primarily of a certificate authorizing construction of the plant (which incorporates related state permits) issued in 1974 by the NilPUC under New llampshire's power plant siting law; approval of the once through cooling system for the plant by the Environmental Protection Agency first granted in 1975 reaffinned in 1978 and affirmed upon court appeal in 1979; and comtruction permits from the NRC iwued in 1976 and ultimately aftirmed by the NRC and the courts, although there were temporary suspensions of construction in 1977 and 1978 as a result of administratise proceedings and court appeals. The process of obtaining these approvals and permits has been long and complex. has lven con.
sistently opposed by a number of intervening groups, has witnewed demonstrations at the Seahnmk Plant site, and has been plagued by lengthy delays w hich have resulted in greatly increased emts for the Seahnmk Plant. All of the approvals and permits required for construction hase been obtained and, except as described below, there are no appeals or proceedings related thereto currently being actively prosecuted, llowever, continued opposition at the regulatory level and through court appeals is likely.
Ily their terms the NRC construction permits in the case of Unit i espired on June 30,1983 and in the case of Unit 2 will expire on October 31,1984. Timely applicatiom to the NRC hase been made for extension of the con truction permits which, pursuant to NRC regulatiom, cstended the permits until the NRC acts on the applicatium.
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In addition to the issues relating to emergency procedures mentioned above under Seabrook Unit / -
Licensing, on February 10,1984 one intervenor moved to reinstate a contention challenging the financial qualifications of the Company and certain other unnamedjoint owners in light of the Ibbruary 7,1984 decision of the United States Court of Appeals for the District of Columbia Circuit in New England Coalition of Nuclear Pollution v. NRC (No. 82-1581). That decision remanded to the NRC a regulation promulgated in 1982 which eliminated a prior requirement for demonstrating that an electric utility applicant possessed reasonable assurance of obtaininFfunds to cover estimated operation costs and costs of permanently shutting the facility down. The NRC has since issued a Statement of Policy indicating that an expedited rulemaking will be held to address the problems perceived by the court and directing NRC licensing boards to treat the remanded regulation as valid until the court's mandate issues. The Company cannot predict what effect this decision will have on the licensing proceeding.
An addition to the 345 KV transmission grid in Massachusetts is needed in connection with the operation of the Seabrook Plant. The addition had been approved by Massachusetts regulatory authorities, but there are court appeals opposing it, and additional regulatory proceedings are pending.
Other Participtmts. On Ibbmary 27,1984, the Massachusetts Department of Public Utilities ("MDPU")
denied permission to Eastern Utilities Associates ("EUA") to advance up to $16,(XX),(XX) from the proceeds of an EUA financing to its subsidiary, Montaup Electric Company. A portion of these funds would have been used by Montaup to pay for its share of Seabmok construction costs. The MDPU ruled that EUA would be requin d to establish that the Seabrook Plant is a reasonable investment before financing pmceeds could be used for construction. The Company is unable to predict the effect this decision or subsequent decisions by the MDPU will have on the ability of the participants subject to MDPU jurisdiction to finance incir share of construction costs of the Seabrook Plant.
Regulatory authorities in other jurisdictions have taken other actions concerning the Seabmok Plant. On August 22,1983, the Connecticut Department of Public Utility Control ("CDPUC") ordered The United illuminating Company and The Connecticut Light and Power Company to "make every effort to disengage" from Unit 2, including taking active steps to effect cancellation of the Unit; this pmeceding is continuing before the CDPUC. In late 1982, the Maine Public Utilities Con mission ordered Maine Public Service Company to sell a portion of its interest in Units I and 2 on the basis that it did not need the power. 't he Vennont Public Service lloard ("VPSil"), w hich has been investigating the Vermont participants' continued participation in the Seahnmk Plant as part of an overall study of power supply, iwued an order on Ibbruary 2,1984, approving continuation and expeditious completion of Umt I and directing the Vermont participants to take all reasonable action to ensure such completion; as to Unit 2, the VPSil concluded that delay but not cancellation was appropriate until uncertainties of power supply were resolved. More recently, in light of the March 1,1984 estimates, the Chairman of the VPSil has stated that she expects the VPSil to support car.cellation of Unit 2.
If one or more of the other Seabnmk Plant participants should be unable to obtain sufficient or timely rates and financing and comcquently are unable to fulfill their contractual commitments to pay their share of Seabnok Plant comtruction costs when due, or if by reason of action by a regulatory agency such par-ticipants fail to fulfill such commitments, completion of Unit I would be jeopardized and the continuation of the Compaay's bminess operatiom threatened.
Inwrnnce. The Ibderal Price Anderson Act provides, among other things, that the masimum liability for damages resulting from a nuclear incident wouk! be the greater of the masimum amornt of financial protection required by the NRC to be carried by licemees or $$N),1NN),1NX), to be provided by pnvate imurance and governmental sources. As required by NRC regulatiom, prior to operation of the Seahnmk Plant, the owners of the Seabrook Plant wdi imure agaimt this expmure by purchasing the masimum available private imurance (presently $1N),(MN),(MN)), the balance to be covered by retrospectise premium imurance and by an indemnity agreement with the NRC, Under amendments to that Act, owners of operating nuclear facilitics may be awewed a retrmpective premium of up to $5,1NN),(XN) for each reactor owned in the event of any one nuclear incident occurring at any reactor in the United States, with a maximum awcument oI 510,1NNUMMI per year per reactor owned. As a part owner of other operating New England facihties oce loint Projnts below), the Company would be obligated to pay its proportionate share of any such awewments, which presently amounts to a masimum of $1,0$0,(MN) per incident. While no final evaluation of the claims being
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asserted as a result of the incident at Three Mile Island is yet possible, the Company does not anticipate any assessments being levied under these provisions as a result of that incident.
Construction Program The Company's aggregate construction progiam for the five-year period 1984 through 1988, w hich will be subject to continuing review and adjustment throughout the period, is currently estimated to be about
$888,100,(XX)(excluding AFUDC) assuming that the Company has no obligation for construction costs of Unit 2 of the Seabrook Plant after December 1984. The following table sets forth the Company's estimated construction expenditures for the period 1984-1988 and is based on current construction schedules and cost projections (excluding AFUDC of approximately $492,5(X),(XXI):
Estimated Comtruction Espenditum 19f44191418 tMiHiom or DuHaro 19tl4 19tl519 tut Generating Facilities Company's Share of the Seabrook Plant Plant .. ... .. .... ...... ... .... .. . . .. $226.5 $346.3 Nuclear Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 11.6 47.4 To ta l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......... ..... 23>.1 393.7 Other Generation . . . ............. . ... ............ . 49.7 59.6 Total Generating Facilities ....... . .. . . ..... . 287.8 453.3 Transmission Facilities ...... ... .... . ........ . . . 2.0 20.8 Distribution and General Facilities . . .. . .. ... . ...... . . 25.0 99.2 To t al . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... .
531_4J $$73.3 The following table shows the aggregate amount for each of the years 1984-1988 of the Company's estimated construction program and is based on the same assumptions as in the immediately preceding table:
1984 .............. . . .... . .... .5314,8(X),(XM) 1985 ... .................... . . . . . . . . 254.8(X),(XN) 1986 ....... ... .. . . .. ... 16X,6(W),(MM) 1987 ................ . .... ....... . . 81,800.(MX) 1988 ............ . ........... . .... 68. l(M),(X M)
Total . . . . . . . . .. . .. .. .. . 5HMM.l(N).tMM)
Actual construction espenditures have esceeded past estimates and could esceed these estimates because of changes in the Company's plans and load forecasts, cost increases, delays resulting from, among other things, regulatory and licensing proceedings, espiration and renerotiation of labor contracts, and other factors.
It is also powible that additional expenditures may be required to meet regulatory and environmental re-quirements at the Seabnok Plant and the Company's other generating facilities.
Financing The Company's 19841988 construction program is estimated at $NHM,1(x),(xx) escluding Al UDC of approximately $492.5(M),(XX). Financing of this construction program, refinancing at maturity of certain long-term debt and meeting required sinking fund payments (together aggregating $360,(MN),tNN)), and financing working capi'al and other uses (apprmimately $123.(xxi.(MN) awuming phase.in rate ba c treatment of Unit
- l), represent a major undertaking for the Company.
The table below sets forth the Company's estimated requirements for esternal financing (including short.
term credit) during the 1984198N period awuming that the entire cost of Unit I is placed in rate base ulwm l commencement of commercial operation (estimated to be July 31,1986) und awuming that the rate increase 7
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associated with the Seabrook Plant will be no greater than 107c per year (and in addition that the Company's rates are increased 5% per year to reflect inflation):
immediate Rate Haw I'hase.In Rate Haw Treatment l' nit i Treatment Unit i 1984.......... ... ...... ...... $ 477.900,000 $ 477,900.mK) 1985.. . ........ .... ....... 451,5m),00() 451,5m),(XX) i 1986...... .... .... . . .. 302,600,(XX) 433.100,00()
1987... ....... .... ........ - 243,400,000 l 1988.... ... ..... ....... .... . - 257,50) 000 ;
Totals ........ ... .... . . $1,232.u)o.000 $ 1.863,400.ax) j In view of the present political environment in New llampshire, the Company considers some phase-in rate l base treatment to be likely, but is unable to predict the extent of such phase-in.
in 1983, the Company raised an aggregate of approximately $562.000,000 through the sale of an ag-gregate of 10,(XX),000 shares of Common Stock by public offerings in .lanuary and June and thrm.gh operation of the Company's Dividend Reinvestment and Common Stock Purchase Plan, the sale of $200.000.000 of Debentures in Itbruary and November, the sale of an aggregate of 3,800,000 shares of Preferred Stock in April and October, the extension of the Company's $25,000,000 term loan, the completion of a $50,0m),000 nuclear fuel financing and the sale of $20,000,000 of Pollution Control Revenue Ilonds.
The Company's 1984 financing plan calls for approsimately $477,900,000 of external financing to be obtained through the issuance of preferred and common stock, bonds, debentures, pollution control revenue tends and other financings. Accomplishing these planned financings depends in the first instance uptm the successful implementation of the back-up credit facilities referred to below under ihmA Financing and the availability to the Company within three weeks of funds under its revolving credit facility with commercial banks. If the Company is able to obtain these additional sources of credit and borrow from its resolving credit banks, the success of the balance of the Company's financing plan and the nature, site and timing of future securities inues will depend on securities market factors, the favorable resolution of uncertainties regarding Unit 2, the amount and timing of needed rate increases, satisfaction of carnings coverage tests, the level of comtruction costs at the Seabnmk Plant, the commercial operation date of Unit I, economic conditions, the Company's level of sales and other factors. Adequate and timely rate increases, successful financings in the capital markets and continued availability of short term credit facilities are cuential to enable the Company to maintain its comtruction program and continue its businen operations.
Mortgage 11onds. Due to certain restrictiom in the Company's l'irst Stortgage Indenture, no significant amount of l'irst Afortgage llonds may be iwued thereunder until an operating liceme is obtained for Unit I of the Seabrook Plant, llecause of the restrictiom in the Company's Iirst Mortgage Indenture, the Company entered into the General and Refunding Mortgage indenture dated as of August 15,1978 (the "G&R Indenture"), con tituting a second mortgage on the Company's properties to secure General and Refunding Mortgage llonds, pursuant to which the Company has iwued and sold an aggregate of $223,0X),000 of such lionds. The G&R Indenture requires that, in order to luue additional General and Refunding Mortgage lionds, the carnings coverage of interest on the l'irst Mortgage lionds and General and Refunding Mortgage lionds be at least 2.0. At lie bruary 29,1984, approximately $142,000,000 of G&R llonds can be iwued under the carnings emerage test (179 annual interest rate awumed).
Debentures. The Company has outstanding $275,000,000 principal amount of Debentures. The De-bentures are unsecured long. term obligatium of the Company and do not requite the Company to maintain any awet ratio or cash reserves. Under limitations contained in Preferred Stock provisions in the Company *n Articles of Agreement, the Company could iwuc at libruary 29, 1984 apprmimately $293,000,000 of Debentures and other long term unsecured indebtednew.
l BanA Financing. The Company has a $160,000,000 revolving credit facility with a group of nine commercial banks under which no amounts are currently outstandmg. As a result of the substantial increase in the estimated cmt of Unit I reflected in the latest emt estimates, the commercial banks w hich have provided l.
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the Company with its revolving credit facility have requested the Company to obtain additional back-up sources of credit. It is not clear that the banks will make funds available under the existing revolving credit facility without the additional credit. His additional credit would provide the Company with increased financial support in the event that the Company is unable to access the public securities markets for any significant period and the Company has exhausted its e m lines of credit. The Company is seeking this additional support, including specifically support from the t..ner Seabrook participants. If such support cannot
- be obtained in the next three weeks and the commercial banks decline to advance funds to the Company
! under the revolving credit facility, the Company would be forced to seek pmtection from its creditors under the Bankruptcy Code. The Company has temporarily instituted stringent cash conservation as well as other expenditure curtailment measures.
The Company also has lines of credit aggregating approximately $3,(XX),(XX) with other banks and a term loan of $25,(XX),(XX) maturing on June 24.1984 with most of the banks party to the revolving credit agreement. Under the Company's Articles of Agreement, the Company is currently pennitted to incur about
$304,000,00() of short-tenn unsecured indebtedness; the NHPUC has approved up to $190 (XX),(XX) of such short-tenn borrowings.
Preferred StocA. Under the Company's Articles of Agreement, additional shares of Preferred Stock may be issued without the affirmative vote of the holders of a majority of the ou%tanding shares of either class of the Preferred Stock provided that the ratio of carnings to fixed charges and preferred dividends, including dividends on shares of Preferred Stock to be issued, is at least 1.50. At February 29,1984, the Company could issue, without such vote of the holders of shares of Prefem d Stock, apprmimately $286.(xx),(xx) of Preferred Stock (IMk annual dividend rate assumed).
New England Power Pool A New England Ibwer Pool ("NEPOOL") Agreement, to which the major investor owned utilities in l
New England, including the Company, and certain municipal and cooperative utilities are parties, has been in effect since 1971. The NEPOOI. Agreement provides forjoint planning and operation of generating and transmission facilities and also incorporates generating capacity reserve obligations and provisions regarding the use of major transmission lines and payment for such use.
Substantially all planning, operation and dispatching of electrie generating capacity for New England I
is done on a regional basis under the NEP(X)L Agreement. At the time of the 19831984 NEPOOI, winter peak, the New England utilities had about 21,158 hlW of installed capacity and purchases to meet the New England peak load of about 15,838 MW.
The Company's capability responsibihty under the NEPOOL Agreement involves carrying an alkicated share of a New England capacity requirement w hich is determined for each period based on certain regional reliability criteria. It is expected that the Company's capacity will be sufficient, through its own generating facilities, through its participation in certain jointly-ow ned generating facilities, and ihmugh purchases of capacity and energy from other utilities, to meet its NEPOOL Agreement obligations at least until the 1990's.
Canadian Power. NEPOOL, on behalf of its members including the Company, has entered into an Interconnection Agreement with Ilydro-Quebec, a Canadian utility operating in the Province of Quebec, which provides for comtruction of an interconnection between the electrical 9 stems of New lingland and Quebec. Those parties have also entered into an linergy Contract and an linergy llanking Agreement; the former obligates llydro-Quebee to offer NI! POOL participanh up to 33 million MWil of surplus energy dut;ng an cleven-> car term commencing September 1,1986, and the latter provides for energy tramfers between the two systenn. Negotiations are continuing with ilydro-Quebec for additional power arrangementt In March 1984 Ilydro-Quebec and the Vermont 1)epartment of Public Senice signed a letter of intent to negotiate a contract for the sale by Ilydn>Quebee to Vermont for a ten year period beginning September 1,1985 of 150 MW of firm power.
Joint Projech The Company is a part owner with other New England electrie utilities of four nuclear generating companiet The Company owns a 7% interest in Yankee Atomic Electric Company, a 54 interest in Con-necticut Yankee Atomie Ibwer Company, a 59 interest in Maine Yankee Atomic hmer Company and a 49 9
I interest in Vermont Yankee Nuclear Power Corporation, each of which owns an operating nuclear generating plant with present net capabilities of 176 MW,582 MW,846 MW and $28 MW, respectively. The stockholders of each of the four nuclear generating companies are entitled to the entire output of the plant in proportion to their respective ownerships, subject to certain sales agreements with other utilities, and are obligated to pay for such output their proportionate shares of the generating company's operating expenses and returns on invested capital. They are also obligated to pay, when called upon by the individual generating company, their proportionate shares of such generating company's capital requirements not provided from outside financing.
The Company is participating on a tenancy-in-common basis with other New England utilities in the ownership of two nuclear generating units under construction (assuming no further construction expenditures by the Company for Seabrook Unit 2n -
Conipeny Sliare bilmated Schduled Comtruction Cont (2Wh Completion Capacity Capacit, Total Wr g Dateel)._ MW Wrcentf2) Mw(2Hh IMilliano KW l Seabrook Unit i . . ...... Nuclear 7/31/86 1,150 35.56942 409.05 $1,954.0 $4,777 (New Hampshire)
Millstonc Unit 3 . . . . . . . . . . Nucicar $/1/86 1,150 2.8475 32.7 $ 115.6 $3,535 (Connecticut)
(1) These completion dates have been deferred from time to time in the past, and additional deferrals may occur due to licensing and regulatory delays, economic conditions and other factors.
Due to the time required for the construction of generating facilities and the completion oflicensing and regulatory proceedings relating thereto, substantial investments in the above units have been and will be required prior to the completion of licensing and regulatory pmceedings. There is no assurance that all i necessary approvals, permits or licenses will be obtained or, if obtained, will not be modified or revoked.
(2) See Seabrook Nuclear Plant and Construction Program above and item 3, isgal Proceedings - Other New Hampshire Proceedings.
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(3) Pursuant to arrangements with two Seabrook participants, the Company is obligated to purchase from such participants, if so requested, up to a total of 75 megawatts of capacity and related energy from Unit
, I for the first three years of commercial operation and 54 megawatts of capacity and related energy from l Unit i for the next seven years.
l (4) Including the cost of the initial nuclear fuel and AFUDC on the estimated costs of unfinished construction.
1 FuelSupply For the year ended December 31,1983, the Company's firm net output was derived 49.6% from oil, l 34.0% from coal,10.3% from nuclear,5.9% from hydro and 0.2% from other sources.
Oil. The New England electric utilities, including the Company, make greater use of fuel oil for generation of power than utilities in any other region of the country. Most fuel oil supplies of the New England utilities are derived from foreign sources and are subject to price fluctuations and interference by foreign governments. Fuel oil for the Company's two large oil burning plants is supplied under arrangements with two suppliers which will expire on January 31,1986. The storage capacity for these two plants is approxi-mately 30 days operating at full load, and inventory varies substantially depending upim oil shipments. During the 52-week period ending December 31,1983, the average inventory was appmximately 15 days operating at full load.
Coal. Coal for the Company's only plant which currently burns coal, the two unit Merrimack Station, is presently being furnished from West Virginia sources under a contract which expires in April,1988. The contract generally provides that a 60-90 day supply of coal is to be maintained for the Company, that the base price of the coal may be changed by the seller annually but that the Company's disagreement with the 10 l'
cliange will result in termination of the contract at the end of the contract year, and that the price of the coal
! is subject to certain adjustments for changes in the seller's costs. The Company's policy is to maintain a 60-90 day supply of coal on hand for the Merrimack Station depending on time of year and potential mine labor work stoppages. At December 31,11983, an 89-day supply was on hand. The Merrimack Station presently i- requires a total of approximately 1,000,000 tons of coal per year. During 1984, three oil-burning units at the 4 Company's Schiller Station are scheduled for conversion to coal burning. After conversion it is estimated i that Schiller Station will require 360.000 tons of coal per year, making the Company's total annual tonnage i l requirements approximately 1,360.000 tons of coal for 1985 and thereafter.
The Company's approximate average costs of oil and coal for 1979 through 1983 were as follows:
i (M1Wr (MiPer Coat Wr Coal Per Rarrei Million RTU Ton Million RTU
! 1979 ........... . ...... .. ... .. .. $15.62 $2.51 $41.39 $1.53 1980 ... ... .. . ... . .. .... . .. 22.86 3.67 43.57 1.60
- 1981 .. .. .... . ... . ........... 30.58 4.92 47.14 1.71 1982 ......... ... ............. ... 26.49 4.24 51.79 1.89 1983 ... . ............ . .... 26.55 4.52 53.17 1.99 Nuclear. The nuclear fuel cycle consists of (1) the mining and milling of uranium ore into uranium ,
l concentrates, (2) the conversion of uranium concentrates to uranium hexatluoride, (3) the enrichment of
' uranium hesafluoride, (4) the fabrication of nuclear fuel assemblics and (5) the repmcessing, storage, or ;
- disposal of spent nuclear fuel.
i The Company has contracted for all of the uramum concentrates reymred to commence operation of both Units at the Seabmok Plant and to meet all of its requirements through 1990. Options under some 1
contracts permit the Company to increase quantities and extend deliveries until 1995.
1 j With respect to the Seabrook Plant, the Company has contracts for conversion services, for enrichment ,
and for the fabrication of the initial cores and six reload regions (each region consisting of one-third of j
complete core). These contracts are expected to meet the Company's requirements for nuclear fuel cycle j
services as follows: conversion through 1987, enrichment through 2008, and fabrication through 1986.
As pmvided by the Nuclear Waste Policy Act of 1982, the Company plans to enter into a contract with .
t the United States Department of Energy ("IX)E"), prior to plant operation, for the transport and disposal of Seabmok spent fuel at a national nuclear waste repository. Under the Act a national repository will be in l 2 operation by 1998. The Seabrook Plant will have enough on-site storage to accommodate all spent fuel >
accumulated through the year 200().
The Company has been advised by the companies operating or constructing the other nuclear generating i stations in which the Company has an interest that they have contracted for certain segments of the nuclear fuel cycle through various dates. The Company has further been advised that these four operating nuclear j generating stations have or will have storage capacity to meet the spent fuel storage needs of the units through .
! various dates ranging from 1985 to the late 1990s. Contracts for other segments of the nuclear fuel cycle !
- will be required in the future, and their availability, prices and terms cannot be predicted.
i
! Conversionfrom Oilto Coal Pursuant to orders of the NilPUC and the Economic Regulatory Administration of IX)E, the Company l is in the process of converting three units at its Schiller Station from burning oil to burning coal as their primary fuel source. The Company estimates that the conversion efforts will require the expenditure of approximately $55,000,000, of w hich the Company has expended approximately $25,000,000 as of I'ebruary l 29,1984. ,
t Regulation The Company, as to retail rates, security issues, and various other matters, is subject to the regulatory c 4
authority of the NilPUC. The Connecticut Department of Public Utility Control has limited jurisdiction onr i
- the Company based on the Company's ownerthip as a tenant.in-common of a portion of Milhtone Unit 3. i See loint Projects above. Based upon the Corrpany's ownership of generating and transmission f acilities in l
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Vermont and Maine, the Company is subject to limited regulatory jurisdiction in those states. The Company is also subject, as to some phases of its business, including accounts, certain rates, and licensing of its hydroelectric generating plants, to the jurisdiction of the Federal Energy Regulatory Commission ("FERC")
under the ftderal Power Act. The various nuclear generating units in which the Company has an ownership interest are subject in their construction and operation to the broad regulatory jurisdiction of the NRC under the Atomic Energy Act of 1954, particularly in regard to public health, safety, environmental and antitrust matters. See also Environmental blatters below.
NationalEnergy Policy The Itderal Public Utility Regulatory Policies Act of 1978 ("PURPA") requires state utility regulatory commissions to make determinations with respect to certain issues of utility regulation. The NHPUC has accepted the recommendations of parties to a consultative pmcess to adopt the PURPA Section 111 rate-making standards and the additional rate-making objectives of rate continuity, revenue stability and practicality of rates in principle and to the design of the lifeline rate for residential customers ordered by the NHPUC.
Implementation of certain of the PURPA rate-making standards has begun in accordance with the results of the consultative process. Further decisions with respect to implementation were made in the Company's most recent retail rate case including the appmval of a settlement agreement regarding rate structure, conservation and load management. Lifeline rate issues were also addressed in the proceeding. See Item 3, legal Pro-ceedings - New Hampshire - Retail Rate Proceedings.
The NilPUC has also initiated a proceeding to revise existing short-term rates and to establish long.
term avoided cost rates to be paid for energy sold to the Company by small power producers and cogenerators.
The parties to the proceeding have entered into settlement negotiations. Until a final NilPUC order is issued in the case, the existing short-term avoided cost rates and interim long-term avoided cost rates ordered by the NilPUC are expceted to remain in effect.
Environmental Statters The Company is subject to regulation with regard to air and water quality and other covironmental considerations, by various federal, state and h> cal authorities. The Company cannot forecast the effect of all such regulations upon its generating, transmission and other facilities, or its operations.
The application of federal, state and kwal standards to protect the environment, including but not limited to those hereinafter described, involves or may involve review, certification or issuance of pennits by various federal, state and h> cal authorities. Such standards, particularly in regard to emissions into the air and water, thermal mixing zones and water temperature variations, may halt, limit or prevent operations, or prevent or substantially increase the cost of construction and operation of installations and may require substantial investments in new equipment at existing installations. They may also require substantial investments above the figures stated under Construct.on Program abose.
Air Quality Control. Pursuant to the ftderal Clean Air Act of 1970, as amended, the State of New ilampshire acting through the New llampshire Air Resources Agency (" ARA") has adopted regulations containing standards limiting emissions of particulates, sulphur oxides and nitrogen oxides, which are gen-erally designed to achieve and maintain federal primary ambient air quality standards. The Company believes that its fossil fuel generating units are being operated in compliance with ARA's regulations.
Pursuant to the 1977 amendments to the Clean Air Act, ARA has proposed lists showing those areas of New flampshire which have attained or failed to attain national ambient air quality standards, and revised the State implementation plan, which the EPA has accepted. It does not appear that the revised State imple-mentation plan will require the Company either to modify operations at any of its fossil fuel generating plants or to expend funds for additional air pollution control equipment.
While coal now available and expected to be available in the future for the Company's Merrimack Station presently meets all applicable requirements, if more stringent requirements become effective which could not be met by such coal, the Company might have to install sulfur remmal equipment at substantial capital cost or take such other actions as may be required by regulatory authorities. The installation of such equipment wouhlincrease operating costs and reduce the net capability of the units.
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The permits for Unit 2 of the Company's hierrimack Station were amended in early 1984 to further limit the opacity of the smokestack discharge of the Unit. While the Unit's operation to date has been unable to meet this limitation, the Company will make the necessary repairs expected to meet the limitation during the annual maintenance outage of the Unit in 1984.
The e mversion of Schiller Station from oil to coal discussed under Conversionfrom Oil to Coal above will require the Company to make expenditures for air quality control equipment.
Water Quality Control. The Company has received from EPA, or from the N1aine Department of Environmental Protection in the case of one generating station located in the State of hiaine in which the Company has an ownership interest, all permits required under the Ibderal Water Pollution Control Act, as araended, for discharges of thermal and other effluents from its generating stations. Such permits have varying expiration dates and the Company has made and expects to make timely applications for renewal. The EPA issued effluent limitations guidelines for steam electric power plants based on application of the best prac-ticable control technology (to be met by July 1,1977) and of the best available technology economically achievable (to be met by July 1,1984), and alternate effluent standards with respect to thermal discharges from steam electric power plants. The guidelines and standards impose rigorous limitations upon the industry.
An industry group filed an appeal in a Federal Court of Appeals challenging the guidelines and standards, and the Court of Appeals remanded the guidelines and standards to the EPA for reconsideration of certain of them. The Company is in compliance with the July 1,1977 guidelines.
The Company has an ongoing requirement in the discharge pennit for its hierrimack Station to monitor the effect of the plant's operation on the hierrimack River. The Company has thus far been able to show as required by the permit that the plant's present once-through cooling system does not interfere with resident fish in the affected portion of the hierrimack River. The permit requires that additional biological studies be perfonned by the Company at such time as significant numbers of migratory fish are restored to the hierrimack River for the purpose of showing as rtquired by the permit that the present cooling system does not interfere wi;h migratory fish.
The Company's construction and operation of the Seabnmk Plant, including environmental consider-ations, is subject to regulation by the NRC and the EPA. See Scabrook Nuc/ car Plant above.
Resource Conservation and Recorcry Act. Pursuant to the Resource Conservation and Recovery Act of 1976, the EPA has issued regulations relative to the generation, transportation and disposal of certain wastes. In addition, the New ilampshire llureau of flazardous Waste 51anagement has similar regulations which are currently at the interim stage in the EPA approval process. The Company has reviewed the ap-plication of these regulations to its operations and has complied with the applicable EPA and New llampshire Bureau of flazardous Waste hianagement regulations.
Other Environmental E.tpenditures. At December 31,1983, the Company's share of expenditures for environmental protection facilities at the Seabrook Plant amounted to approximately $79,300,(XX), the major portion of w hich was for facilities to reduce the thermal effect of the discharge of the Seahnmk Plant condenser cooling systems, in 1984 there will be approximately $14,000,(XX) of expenditures for other pollution contml facilities, and relatively minor amounts in 1985. The foregoing amounts are included in the construction expenditures set forth above under Construction Program.
Employees, Salaries and Wages The Company has approximately 2,400 employees of whom 26% are represented by unions with which the Company has contracts expiring on hlay 31,1985. These contracts provided for salary increases of 5.0%
for the first year of the contract and an additional 5.0% effective June I,1984. Salary increases are granted from time to time on a comparable basis to nonrepresented employees.
Stunicipalities and Cooperatives New llampshire law permits municipalities to engage in the production and sale of electricity, including the power to condemn the plant and property of any existing public utility which is k>cated ja the municipality, 13
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and to finance through the issuance of revenue bonds the ownership of new generating units of at least 25 MW and new transmission facilities of at least 69 KV.
The New Hampshire Electric Cooperative, Inc. ("NilCoop"), a cooperative association financeo by the Rural Electrification Administration, as well as five small municipal electric utilities, operate in areas adjacent to areas served by the Company. The NHCoop, which has a 2.17391'1 ownership interest in the Seabrook Plant, currently purchases, as a wholesale customer, most of its electricity from the Company and is subject to regulation by the NHPUC as a public utility.
SeasonalNature of Business Although the number of kilowatt-hours of electricity sold by the Company in its territory has historically been somewhat less in the summer and fall than during the winter and spring, the Company's electric revenues and operating income are dependent on a variety of other factors w hich are not necessarily seasonal, including contract sales of system and unit power to other electric companics, changes in the Company's rates and charges, the extent and nature of transactions involving the New England Power Pool and general economic conditions.
Item 2. PROPERTIES The electric properties of the Company form a single integrated system including transmission facilities which are part of the New England-wide transmission grid. On December 20,1983, the Company experienced its maximum one-hour prime peak load of 1,220 net MW, w hich includes 10 MW of interruptible load, and the Company had available to meet such load 1,174 MW of its own generating capacity,98 MW from its participations in the four Yankee nuclear generating companies described underloint Projects in item I above and 124 MW of purchased capacity. The generation and transmission systems of the major New England utilities, including the Company, are operated as if they were a single system. See New England Power Pool under Item 1.
The Company has one coal-fired 465 MW ciectric generating station (Merrimack Station), from which the Company has agreed to sell to another utility 100 MW on a single unit basis from unit 2 through April, 1998, and two oil-fired electric generating stations with an aggregate effective capability of 611 MW, con-sisting of the Newington plant (428 MW) and the Schiller plant (183 MW). See item 1. Contcrsionfrom Oil to Coal and Environmental Matters, with respect to the Schiller plant. The Company also has other generating units with an aggregate effective capability of 203 MW as follows: hydro-electric (65.5 MW),
combustion turbine (I15 MW), dicsci (3 MW) and its share (19.5 MW) of Wyman Unit 4, a 620 MW oil-fired generating plant jointly-owned with other utilities and located in the State of Maine.
The Company is also participating with other New England utilities in the design and construction of two additional nuclear-fueled generating units, including the Seabrook plant. See Item I, /ntroduction, Sea-brook Nuclear Plant, und Joint Projects.
On December 31,1983, the Company had about 1,714 pole-miles of overhead transmission lines,9,231 pole-miles of overhead distribution lines, minor underground distribution and transmission facilities, and 230 transmission and distribution substations having an aggregate capacity of 5,356,707 KVA.
The Company owns office buildings in Manchester, Portsmouth and Keene. It rents space in an office building in Manchester for its principal offices under a 30-year lease expiring in 2002. Annual base rentals under this lease are approximately $1,330,000 subject to annual escalation. In 1983 the Company paid approximately $2,050JXX). The Company also owns other structures used as service buildings, storehouses and garages and leases space for offices and other purposes at various h> cations in its service area.
Item 3. LEGAL PROCLEDINGS New flampshire - Retail Rate Proceedings On January 30,1984, the New flampshire Public Utilities Commiwion ("NilPUC")in a 2 to I decision authorized a $24,700,000 permanent annual increase in the Company's retail rates (which amounts to 74%
of the $33,400JXX) increase originally requested). llecause rates had been collected under bond at the $33,400,(MX) l4
level since August I,1983, the Company refunded approximately $5,000,000 in l'ebruary 1984 representing the difference between the amounts collected under the bonded rates and the amount that would have been collected had the permanent rates then been in effect. Certain intervenors have appealed the decision to the New flampshire Supreme Court.
The NilPUC allowed the Company a 16.1% return on common equity. While the Company's requested attrition allowance of 1.25% was not accepted, the decision provided for a step increase in revenues, as of July 1,1984, for certain rate base additions and increased expenses.
The majority decision stated that the NilPUC was entitled to review the Company's management of construction at the Seabrook Project and that, should the circumstances warrant, a pmeceding would be opened to investigate the management of the Seabrook construction program. In a dissenting opinion, one commissioner stated that she would lower the allowed return on common equity to 14.54% (which would reduce the rate increase to $19,500,000) to reflect a judgment that management of the Company has been deficient in that, among other things, it failed to develop more current and definitive cost and schedule estimates than those contained in the November 1982 estimates developed by United Engineers & Constructors Inc., the Seabrook Plant's architect / engineer.
Other New Hampshire Proceedings The NilPUC has instituted a proceeding to explore whether an agreement could be negotiated as to the cost and completion date for Unit I of the Seabrook Plant, with incentives and penalties for variations from agreed upon cost. This proceeding was suspended pending completion of cost and schedule estimates for the Seabrook Plant. The Company intends to reopen discussions with the Commission in the proceeding im-mediately after the conclusion of the Company's review of the March 1,1984 estimates, now expected to be accomplished by June 1984.
The Company's request for recovery through its rates of its share of the cancelled Pilgrim 2 nuclear plant is currently pending before the NilPUC. The NilPUC certified to the New flampshire Supreme Court the question of whether the New flampshire anti-CWIP statute prevents such recovery. (The so-called anti-CWIP statute, which was enacted into New ilampshire law in 1979, prohibits inclusion in rate base of construction work in progress.) See item I, SeabmoA Nuclear Plant.
In September 1983, the NilPUC initiated an audit of the construction costs for the Seabrook Plant for the purposes of verification that the reported costs of the Plant are includable and appropriate as part of the Company's rate base and that proper compliance with the applicable NilPUC accounting rules and regulations has in the past been and will hereafter be achieved. The Company is in a continual process of supplying data in response to numerous data requests of the NilPUC Audit Staff.
On April 29, 1983, the NilPUC issued Report and Sixteenth Supplemental Order No.16,374 in its Docket DH 81-312 Investigation into the Supply and Demand for Electricity. In this Report and Order, the NilPUC concluded, among other things, that the most likely completion dates for Seabrook Unit I and Seabrook Unit 2 were March,1986 and March,1990, respectively, and that a cost estimate of at least $M billion for the Seabrook Project was probable based on the NilPUC's findings as to completion dates. The NilPUC has since indicated that it would open investigatory dockets to consider: (i) methods to reduce or spread out the impact of the " rate shock" due to the pending inclusion of Seabrook in rate base; and (ii) long term conservation and load management programs. The Company presently cannot predict when these investigations will be commenced or what effect their outcome will have on the Company.
Other The Company has received letters on behalf of a purported stockholder demanding that the lloard of Directors of the Company commence a lawsuit against a number of the present and former directors and officers of the Company and United Engineers & Constructors Inc. to recoser damages in an unspecified amount for their actions in connection with the construction and financing of the Seabrook Plant. If the requested action is not taken promptly, the letters threaten that a stockholderi derivative law suit will be filed.
The lloard has declined to take such action against the officers and directors.
15
Late in hlarch 1984, two suits denominated as class actions on behalf of persons who purchased shares of the Company's Common Stock through the Company's Dividend Reinvestment and Common Stock Pur-chase Plan during the period from February 15,1983 through November 15,1983 were filed by purported stockholders of the Company in the United States District Court for the District of New Hampshire against the Company, certain officers and directors of the Company, and Peat, hlarwick, hiitchell & Co., the Com-pany's independent certified public accountants. The complaints allege that the named defendants violated the Securities Act of 1933 by not divulging information allegedly known by them and by making allegedly untrue statements in the Company's registration statements and prospectuses concerning the estimated cost and completion dates for the Seabrook Plant. The plaintiffs are seeking damages in an unspecified amount.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There was no matter submitted to a vote of the Company's security holders during the fourth quarter of fiscal 1983.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT Information is set foith below as to the names and ages of the executive officers of the Company, including certain executive officers who are also directors of the Company, their positions as officers of the Company both current and for the past five years, their length of service with the Company, and in the case of hiessrs.
Bayless, Cameron, Derrickson, llamerlinck, Johnson, Thomas and Ilranscombe, a brief explanation of their respective prior five years' business positions and responsibilities.
Age and Wears of Name 1%ition Senice)
William C. Tallman Chairman since March,1983; Chairman and Chief Executive 63 (37)
Officer (1980-1983); President and Chief Executive Officer (1969-1980)
Robert J. Ilarrison . President and Chicf Executive Officer since h1 arch,1983; Pres- 52 (27) ident and Chief 0perating Officer ( 1981 1983); President and Chief Financial Officer (1980-1981); Financial Vice Presi-dent (1978-1980)
Charles E. Ilayless Financial Vice President since hlarch,1981; Director of Special 41 (3)
Corporate Projects, Consumers Ibwer Company, Jackson, 51ichigan (1978-1981); Director of Nuclear Fuel Supply, Consumers ibwer Company (1976-1978)(2)
D. Pierre G. Cameron, Jr. Vice President and General Counsel since September,1980; 49 (3)
Treasurer and Assistant Secretary Haltimore Gas and Elec-tric Company, llaltimore, hlaryland (1979 1980); Associate General Counsel-Corporate, llattimore Gas and Electric Company (1971-1979)(3)
William B. Derrickson Senior Vice President - Nuclear Energy since N1 arch 1984; 43 Director of Pmjects Morida Ibwer & Light Company, htiami, Florida (1982-1983); Project General blanager, Florida Ibwer
& Light Company (19771982)(4) l Dallas K. llamerlinck Vice President for Public Af fairs since August,1982; Assistant 41 (2)
Vice President-Communications, Iowa Ibwer and Light Company, Des Aloines, Iowa (1978-1982)(5) l John C. Duffett Senior Vice President since December,1982; Vice President $6 (30)
- (1978-1982) llenry J. Ellis Senior Viec President since December,1982; Vice President 63 (37) l (1976-1982) i 16 l
l i
I L
i y
Aar and tweer .r L
. Namu Pamielse Nervice)
Roy G. Barbour Vice President since December,1982: Director-General En- 56 (20) .
gineering Division (1981 1982); Director-System Planning
' ' ^
, , . (1977-1981)
' Raymond E. Closson Vice President since November,1978(1) '64 (37)
~
t William T. Frain, Jr. .Vice Pre'sident since December,1982; Comptroller (1979-1982); 42 (19) ;
- Assistant Comptroller (1971-1979) -
~
Wanen A. Harvey Vice President since December,1976(1) 57 (36) '
Wendell P. Johnson" Vice President since July,1983; Vice President Yankee Atomie 61 (1)
Electric Company, Framingham, Massachusetts (1974.
1983)(6)
James L; Nevins Vice President since November,1978(l) 49 (15)
Robert A. Parks Vice President since December,1982; Director of Management 38 (15)
Information Systems (1979-1982); Systems and Pmgram-ming Manager (1976-1979) ,
George S. Thomas Vice President -- Nuclear ' Production since May,1982; 41 (3)
Nuclear Production Superintendent (19801982); Manager, ,
Startup Test Group, Yankee Atomic Ele ^tric Company, Fra-mingham, Massachusetts (19.78-1980)(h
, John J. Lampron Assistant Vice President since December,1982; Treasurer (1978- 39 (12) 1982)
George Branscombe Treasurer since December,1982; intemal Audit Manager (1980- ' 36 (4) '
1982); Senior Auditor (1979-1980); Auditor (1979); Senior Accountant, Smith, Hatchelder & Rugg, CPA's, Manchester, N. H. (19751979)(8)
Robert G. Ouellette Comptroller since December,1982; Assistant Comptroller (1979- $2 (32) 1982); Accounting Manager (1979). Property Accounting Manager (1973-1979)
Russell A. Winslow Secretary (l) 49 (22)
~ (1) Has held same position for at least 5 years.
(2) As Director of Special Corporate Projects for Consumers Power Company, Mr. Hayless was responsible
' for specialized financing projects, including nuclear fuel leases, leveraged and single investor leases, pollution control financing and acceptance facility agreements. As Director of Nuclear Fuel Supply Mr.
' Bayless was responsible for the procurement of nuclear fuel and related services for Consumers Ibwer Company. .
-(3) As Treasurer and Assistant Secretary of flattimore Gas and Electric Company, Mr. Cameron had su-pervisory responsibility for the Finance Department of flaitimore Gas and Electric Company, including i all financial planning, cash management, stockholder records, insurance, employee benefit plan admin-
'istration,and financialdocuments(statisticalreports)activitles. As AssocialeGeneralCounsel-Corp > rate of Baltimore Gas and Electric Company, Mr. Cameron had both supervisory and primary responsibility for all legal aspects of equity and debt financings (including pollution control financings), proxy solic-itation/ annual meeting preparation, negotiation and preparation of major construction and equipment procurement contracts and federal government agency liaison.
.(4) As Director of Projects for Florida Ibwer & Light Company, Mr. Derrickson was respmsible for all major power plant capital projects and project services, including cost and schedule control and esti-17
r .
s v L
. mating. Mr. Derrickson, in his position as Project General Manager for Unit 2 of the St. Lucie Plant of Florida Power & Light Company (an 800 megawatt pressurized water nuclear power plant) had the ,
responsibility for the n;anagement of all phases of that project, which encompassed planning and sched- ~
uling, engineering, proc:irement of material, construction, licensing and startup.
(5) As Assistant Vice President-Communications of Iowa Power and Light Company, Mr. Hamerlinck had supervisory responsibility for all internal and external financial, employee, news media, consumer, ed-ucational and governmental cunmunications activities. In addition, Mr. Hamerlinck was the principal direct media contact and spokesperson for Iowa Pbwer and Light Company on the' entire spectrum of individual company, as well as general electric utility industry, issues.
(6)'As Vice President of Yankee Atomic Electric Company, Mr. Johnson had overall responsibilities for project engineering, construction, project management and quality assurance. Mr. Johnson has also been .
in charge of the nuclear construction and quality assurance activities being performed by Yankee Atomic Electric Company for the Seabmok Project. ,
. (7) As Manager, Startup Test Group of Yankee Atomic Electric Company, Mr. Thomas was stationed at the .
Seabrook Plant with the responsibility for development of programs for all post construction testing activities, including startup testing. During 1978 and 1979 Mr. Thomas also participated in the startup
- activities at the North Anna Nuclear Power Station of Virginia Electric and Power Company, in activities associated with the Three Mile Island Recovery Operation and in the evaluation by the Electric Power Research Institute of the Three Mile Island incident.
- (8) As a senior accountant at Smith, Batchelder & Rugg CPA's, Mr. Branscombe's duties consisted of the
. ;. : preparation and review of financial statements and corporate tax returns, the conduct and administration
~
of financial audits and other duties, primarily in the area of federal government accounting and employee benefit plans.
4 I'
18 I
L._ ____ _ _ _ _ _ _.. _ _ _ _. _ __ _ __ _ __ _ _ _ __ _ .___ _ _ _ _ _ _ _ .- _ _ _ _ _ _ _ _ _ _ __
PART 11 Item 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's shares of Common Stock are traded on the New York Stock Exchange, where the high and low sales prices during 1983 and 1982 were as follows:
High imw Iligh low 1983 1982 First Quarter . . . . . . . . . 19 % 17 % First Quarter . . . . .. 15 % 12 %
Second Quaiter . ..... 20 _ 16 % Second Quarter . . . . . 16 % 14 %
Third Quarter ........ 17 % 16 Third Quarter . ... . 16 % 14 Fourth Quarter . . . . . . . 18 % 10 % Fourth Quarter . . . . 18 % 16 %
The Company has paid regular quatterly dividends on shares of its Common Stock since 1946 when shares of its Common Stock first became i ublicly held. Quarterly dividends of 53c per share were paid during 1983 and 1982.
Subject to the prior rights of shares of the Preferred Stock, $100 par value, and shares of Preferred Stock, $25 par value, to dividends and to the limitations set forth in the next succeeding paragraph of this item 5, shares of Common Stock are entitled to dividends when and as declared by the Board of Directors out of any remaining funds legally available therefor. See Item 1, Seabrook Nuclear Plant for a description of circumstances which could adversely affect the ability of the Company to declare dividends on its capital stock. Future dividends will be dependent on the Company's future earnings, its cash position, financial condition and other factors.
The Articles of Agreement contain certain limitations, applicable so long as any shares of the Preferred Stock are outstanding, on the Company's right to declare dividends on shares of Common Stock out of net income (similar limitations are contained in certain indentures supplemental to the First Mortgage, applicable so long as any bonds of Series H through V are outstanding), or in the event Common Stock Equity (as defined) is less than 25% of Total Capitalization (as defined). Pursuant to terms of the Company's General and Refunding Mortgage Indenture, dividends may not be paid on shares of Common Stock in excess of the Company's Net income accumulated after January 1,1978 less the aggregate amount of all dividends paid or declared on the Preferred Stock of the Company during such period plus $32,000,000. At February 29, 1984, $142,000,000 of Retained Earnings was not subject to dividend restriction.
At March 29,1984, there were 73,633 record owners of shares of the Company's Common Stock.
Item 6. SELECTED FINANCIAL DATA 1983 1982 1981 19M0 1979 (Thousands except IYr Share Amounts and Ratio 4 Operating Revenues . . $ 463,484 5 423,290 $ 440,884 $ 351,247 $ 292,814 Fueland Purchased Power Expenses 234,971 224,830 255,247 187,248 147,502 Operating income . ... . 68,150 43,469 47,051 47,307 44,428 Total AFUDC . . . . .. 137,347 97,672 78,619 71,729 36,954 Net income . .. . .. 151,658 ' 91,623 77,187 59,847 40,719 Earnings Per Share of Common Stock . . . 3.49 2.73 2.65 2.77 2.56 Dividends Per Share of Common Stock .. . . . 2.12 2.12 2.12 2.12 2.12 Unfinished Construction . 1,398,134 1,027,608 772,526 724,150 518,880 Total Assets . . .. .. ... .. 2,085,783 1,615,523 1,328.349 1,254,228 1,010,787 Long-Term Debt 726,777 637,808 . 449,071 398,856 344,829 Preferred Stock with Mandatory Redemption Requirements 271,280 177,840 120,000 120,000 60,000 Total Capitalization . . . 1,811,408 1,465,102 1,090,535 957,604 770,103 Notes Payable - Banks . - - 125,600 108,350 114,100 Shares of Common Stock Outstanding (Average) . ... 34,026 25,458 21,883 16,539 12,643 Ratio of Earnings to Fixed Charges 2.96 2.47 2.36 2.32 2.29 19
. Item 7. -M'ANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OltRATIONS t ,
~
CONSTRUCTION PROCRAM i
['the Company is engaged in a large constmetion program, the major component of which is its 35.56942%
share of the Scabrook Nuclear Pbwer Plant located at Seabrook, New Hampshire (the "Seabrook Plant").
. Unit'l is estimated to commence commercial operation in July,1986.'(See Note 7 of Notes to Financial '
. Statements).-
- In March 1984, a review of the Seabrook Plant construction sc'hedule and cost estimate was completed.
As a tesult of this review,-the total cost of the plant upon completion was increased to $9,000,000,000, an ~
increase of approximately 75% over the previous estimate completed in November 1982. Approximately one-half of the increase was due to increased AFUDC on the project. the result of construction delays experienced on Unit I and the decision by the Seabrook participants to reduce the level of expenditures on Unit 2 to the lowest feasible level until fuel loading for Unit 1. The remainder of the increase is primarily 3ttributable to later completion dates. Thus 81% of the increase in the estimate is a factor of time delay. The i
Company believes that recent changes in management structure and technique can reduce the time to com-pletion and thus reduce the largest component of the increase. Pursuant to the recommendation of the con-struction consultant hired to oversee construction of the Plant this estimate is being further reviewed and analyzed by the Company.
I
^The Company's~ current estimated construction expenditures, excluding AFUDC. and assuming the
. Company has no obligation for construction costs of Unit 2 of the Seabrook Plant after December 1984 (as described below), for 1984 through 1988 (approximately 71% of which are for the Seabrook Plant and the remainder for other projects) are as follows:
4 1984. ..... ... ... . . .. . $314,800,000 4
1985.. ... ... .. ... .. .. .. 254,800.000 1986. .. . ... . .... ... . 168,600,000 I <
1987.. . . .... . . .. 81,800,000
- 1988.... . .... .. .. .. .. 68.100.000 Total - . ' . . . . . . . ... .
$888.100.000 g ' Actual construction expenditures have substantially exceeded past estimates and could exceed present -
. estimates because of changes in the Company's plans, cost increases, delays resulting from regulatory and -
. licensing proceedings, expiration and renegotiation of labor contracts, and other factors. It is also possible that additional expenditures may be required to meet regulatory and environmental requirements at the Sea-brook Plant and at the Company's other generating facilities.
,. . . On March 30,19843 the Company and the other Seabrook participants voted to cancel Unit 2 on De-
. cember 1,1984 on the condition that there have been obtained all necessary regulatory approvals of arrange-
/ 1ments for sharing with the Companj the savings on Canadian power under a proposed NE_ POOL' Shared
. Savings Plan. This Plan was~ approved in concept by a unanimous vote of the NEPOOL Executive Committee on March 23,1984; Under the Plan, savings from the purchase of Canadian power would be channeled by the NEPOOL members to the Company over a period of years commencing in 1987 in order to compensate in part for the Company's lost investment in Unit 2. The amount of such savings which would be so channeled has not yet been' agreed upon.
,' . 'Even if reasonable arrangements can be made either to recover the Company's investment in Unit 2 after its cancellation or to complete construction without further financing from the Company and those participants which seek to cancel Unit 2, financing of Unit I will be a major undertaking for the Company, particularly if it is not included in rate base promptly upon its completion but phased in as suggested by New Hampshire authorities.
m ,,
, . . In order for the Company to be able to complete construction of the Seabrook Plant, it is necessary for the Company to be assured of the availability of funds under its revolving credit facility with commercial
. banks, which tnay require that the Company obtain the back-up credit facilities referred to below under Financing Requirements. Throughout the period of construction of the Seabroek Plant, the Company must 20 1
.-=.w,e-
continue its permanent and long-term financing program in order to repay short-term bank borrowings incurred largely to finance such construction. Adequate and timely rate increases, continued availability of short-term bank credit and external fmancing are essential to enable the Company to continue its construction program and its business operations.
The Company's earnings will, until completion of Unit I of the Seabrook Plant and its inclusion in rate base, consist primarily of AFUDC. AFUDC is the current cost of funds invested in a construction project expected to be recovered from customers over the service life of the project through revenues w hen the project is completed and included in rate base. Since AFUDC does not represent cash earnings, cash for the payment of interest and dividends will need to be provi& f !a large part by external financing until Unit I is included in rate base.
The Company's cash flow should be substantially improved and its permanent financing requirements reduced after Seabrook Unit I is included in rate base. Delays in the commercial operation of Unit I or in rate base treatment of the costs of the Unit would require the Company to maintain high levels of financing.
The Company's financing requirements would also remain high if the NHPUC should decide not to permit inclusion in rate base of substantially all of the costs of Unit 1. Even after inclusion of Unit 1 in rate base, any outage of the Unit of such a nature or duration as to result in its removal from rate base would impose significant financial burdens on the Company because Unit I and commen facil .ics will constitute more than half of the Company's total assets and will be the source of a significant portion of its electric generating capacity.
FINANCING REQUIRE 31ENTS The Company's 1984-1988 constmetion program is estimated, as indicated above, at $888,100,0m) excluding AFUDC of approximately $492,500,000. Financing of this construction program, refinancing at maturity of certain long-term debt and meeting required sinking fund payments (together aggregating
$360,000,000), and financing working capital and other uses (approximately $123,000,000 assuming phase-in rate base treatment of Unit 1), represent a major undertaking for the Company.
In 1983, the Company raised an aggregate of approximately $562.000,000 through the sale of an ag-gregate of 10,000,000 shares of Common Stock by public offerings in January and June and through operation of the Company a Dividend Reinvestment and Common Stock Purchase Plan, the sale of $200,000,000 of Debentures in Itbruary and November, the sale of an aggregate of 3,800,000 shares of Preferred Stock in April and October, the extension of the Company's $25,000,000 term loan, the completion of a $50,000,000 nuclear fuel financing and the sale of $20,000,000 of Pollution Control Revenue Bonds. In 1982 the Company raised an aggregate of approximately $248,000,000.
During 1984 through 1988 the Company currently plans to raise approximately $1.863,400,000 through the issuance of preferred and common stock, bonds, debentures, pollution control revenue bonds and other financings approximately as follows:
1984. $ 477,900,000 1985 451,500,000 1986. 433,100,000 1987.. . . 243,400,000 1988. , , 257,500,000 Total . 51,863,400,000 As a result oithe substantial increase in the estimated cost of Unit I reflected in the latest cost estimates, the commercial banks which have provided the Company with its $160,000,000 revolving credit facility (under which no amounts are currently outstanding) have requested the Company to obtain additional back-up sources of credit. It is not clear that the banks will make funds available under the existing revolving credit facility without the aduitional credit. This additional credit would pmvide the Company with increased financial support in the event that the Company is unabic to access the public securities market for any significant period and the Company has exhausted its bank lines of credit. The Company is seeking this additional support, including specifically support from the other Seabrook participants. If such support cannot be obtained within three weeks and the commercial banks decline to advance funds to the Company under 21
. .- . . . ~ . _ - _ , . - - - - -
~
the revolving credit facility, the Company would be forced to seek protection from its creditors under the Bankruptcy Code. The Company has temporarily instituted stringent cash conservation as well as other
, expenditure curtailment measures. (See Note 4 of Notes to Financial Statements for a discussion of restrictions to borrowings under this agreement).
As indicated above, a delay in the completion of Unit I and its inclusion in rate base can adversely I 4 affect the Company's cash flow and its financing requirements. The Company cannot predict the extent to l
} which prolonged delays resulting in further substantial cost increases might affect the availability to the l I
. Company of financing sources; including short-term credit facilities.
RESULTS OF OPERATIONS Revenues increased 9% in 1983 reflecting the general economic recovery in the area served by the Company. This increase followed the 4% decline in revenues of 1982 and the 26% increase of 1981. The increase in 1983 revenues was primarily the result of a 3.6% growth in megawatt-hour sales and the rate l
. changes which are discussed in Note 2 of Notes to Financial Statements. The revenue changes of 1982 and ;
. 1981 were primarily the result of rate changes as megawatt-hour sales declined slightly in those years.
Fuel and purchased power expenses, on which energy cost recovery revenues are based, are the major
- component of operating expenses comprising 59% of total operating expenses for 1983 and 1982 and 65%
for 1981.~ While the effect of variations in energy costs can have, and has had, a significant effect on the Company's revenues, the relative stability of energy prices in recent years has produced small energy related changes in revenues and expenses.
Operating expenses other than energy costs increased 3% for 1983; significantly smaller than the 12%
, and 19% increases of 1982 and 1981. This declining rate ofincrease reflects the lessened impact of inflation j and the continuing development of strict cost control and efficiency measures in all areas of the Company's operations.
The increase in operating revenues exceeded operating expense increases, producing a significant im-provement in operating income. AFUDC increased in all years due to the increase in unfinished construction
- at the Seabrook Plant.
. Effective March 1,1984, the Company ceased capitalization of all costs, including AFUDC, related to Unit 2 of the Seabrook Plant. The accrual of AFUDC on Unit 2 had been approximately $3,000,000 per month. The effect of this decision will be to reduce 1984 net income by approximately $33,000,000.
Interest expense has increased each year as the balance of debt outstanding has increased due to the
, capital requirements of the construction program. Other interest expense declined in 1983 as the use of short-term borrowings was reduced.
Net income increased in all three years, but in 1983 the improvement was more pronounced primarily due to increased AFUDC and increased megawatt-hour sales. The capital requirements of a large construction program have resulted in increases in preferred dividend requirements and the average number of common shares outstanding.
Inflation continued to affect Company operations, since under current regulatory practice the investment in utility plant is recovered at historical cost but replaced, as necessary, at current cost. See Note 9 of Notes .
to Financial Statements, which reflects the approximate effects of inflation on Company operations. The data provided in Note 9 have been prepared and presented in conformity with guidelines established by.the Financial Accounting Standards Board and should be viewed as experimental and only approximations of certain effects of inflation on operations of the Company.
The results of operations discussed above are not r.ecessarily indicative of future earnings. It is expected
. that higher operating costs and carrying charges on incieased investment in plant, if not offset by a similar increase in operating revenues (produced either by peiodic rate relief or increases in megawatt-hour sales),
- will adversely affect future carnings. Continued growth in megawatt-hour sales will be dependent on the rate
' of economic growth in New Hampshire, weather and the use of alternate energy sources.
22
_~ . _ _ . - . , . -.-., , . . -. , ,.._.--.-,.__--.___.m.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PUBLIC SERVICE COMPANY OF NEW HARIPElllRE STATEMENTS OF EARNINGS par the Year Ended thember 31.
It!83 19N2 1981 (Thousands of Ikitars)
Operating Revenues (Note 2) .
Residential . . ...... ...... .... ..... . . $166,058 $153,184 $155,145 Industrial . . . ... ... .. .. . . . . 119,958 114,380 128,262 Ot her . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,468 155,726 157,477 Total Operating Revenues . .. . .. 463,484 423,290 440,884 Operating Expenses Operation Fuel . .. . .. . ... .. ... .. .... 127,504 113,091 176,665 Purchased and Interchanged Power . ... . 107,467 II1,739 78,582 Other Operating Expenses . . . . .... . .. 56,608 57,890 47,199 Maintenance . . . . . . . . . . . . . . . . . .. . . 27,000 29,M2 27,162
' Depreciation . ... . .... .. .. . 21,016 19.558 18,663 Federal and State Taxes on income (Note 3) . .. 34,968 29,425 28,215 Other Taxes, Principally Property Taxes . . 20,771 18,476 17,347 Total Operating Expenses . .. .. 395.334 379,821 393,833 Operating Income .. . ... .. .... . ... ........ 68,150 43,469 47,051 Other Income and Deductions Allowance for Equity Funds Used During Construction (Note 1) .... .. . . .... ... . 104,146 67,624 50,053 Taxes on Income (Note 3) . . . . .. .. 30,185 24,661 23,527 Equity in Earnings of Affiliated Companies . . 2.856 3,099 1,536 Other - Net . .. .. . 4.891 2,906 2,672 Total Other Income and Deductions . . . .. 142,078 98,290 77.788 Income Before Interest Charges .. . .. .. .. ... . - 210,223 141,759 124,839 Interest Charges Interest on Long-Term Debt ..... . . ..... . 85,M9 61,169 50,229 Other Interest . ..... . ........ ..... . .. . 6,122 19,015 25,989
- Allowance for Borrowed Funds Used During Construction (Note 1) . . ... .. . . .... (33,201) (30,048) (28,566)
Net interest Charges . . . . . . . .. . .. 58.570 50,136 47,652 Net Income . . . .. .. .. ... ... .. . . .. ..'. 151,658 91,623 77,187 Preferred Dividend Requirements . . ..... .. . .. .. 32.996 22,153 19,169 Earnings Available for Common Stock . . . . . . . . .. .. $118,662 $ 69,470 $ 58,018
. Weighted Average Shares Outstanding (000's) . . .. . .. 34,026 25,458 21,883 Earnings Per Share of Common Stock .. . .. .. $3.49 $2.73 $2.65 Dividends Per Share of Common Stock . . . . . . ... . . $2.12 $2.12 $2.12 See accompanying Notes to Financial Statements.
23
,,- r_
m PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
' BALANCE SHEETS Decesatwr 31, 1983 1982 (Thousansis of Indlars)
ASSETS
, Utility Plant at Original Cost Electric Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... .......... $ 639,688 '$ 593,455 12ss: Accumulated Provision for Depreciation . . . . . . . . . . 201,044 - 188.697 438,644 404,758 Unfinished Construction (Principally the Seabrook Plant) . . . . . . . 1,398,134 1,027,608 Net Utility Plant . . . . . . . ............... . ....... 1,836.778 1,432,366 Investments Nuclear Generating Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . I1,544 10.695 Finance Subsidiary . ........... .. ........... ........ 13,258 12,358 Real Estate Subsidiary . . . . . . . . . . . . . . . .................. 8,227 7,042 Other, at Cost . . . . . . .............. .......... .. ...... .. 185 185 Total Investments . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. 33.214 30,280 Current Assets .
Cash and Temporary Investments .. . . . . . . . . . . . . . . . . . .. ..., 82,487 1,760 Accounts R ceivable (Net of Allowance of $875 and $510 in 1983 and 1982, respectively) .. .. ..... ... .... .... ....... 50,277 1 43,711 Unbilled Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . 9,220 7,527 Fuel, Materials and Supplies, at Cost (Note 4) . . . . . . . . . . . . . . . . 45,840 46,162 Other.................................... ... ....... 5,093 9,077-Total Current Assets . . . . . . . . . . . ... ......... .. 192,917 108,237 Other Assets Funds Deposited with Trustee . . . . . . . . . . . . . ...... .. . ..... 205 18,133 Cost of Cancelled Pilgrim Unit 2 Project (Note 7) . . . ...... 15,931 15,924
~
Other . . . . . . . . . .. ............... ... ....... ... . 6,738 10,5F3 Total Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . 22.874 44,640
$2,085.783 $1.615,523 See accompanying Notes to Financial Statements.
~
3 24
r:
3 ..
I PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE BALANCE SHEETS December 31, 1983 1982 (Thousands of Dollars)
CAPITALIZATION AND LIABILITIES Capitalization (See separate statements)
Common Stock Equity . . . . . . ......... . .. . . $ - 764,368 $ 535,625 Preferred Stock With Mandatory Redemption Requirements .. . ........ 271,280 177,840 F Without Mandatory Redemption Requirements . . . . . .... 48,983 49,229 Long-Term Debt ..................... . .......... ........ 726,777 637,808 Notes Payable Refinanced by Common Stock Issue ... ...... . -
64.600 Total Capitalization .... ............... .. . . .. 1.811.408 _l,465.102 Current Liabilities Long-Term Debt to be Retired Within One Year . . . . . . . . . %,439 6,087 ,
Preferred Stock Redemption Due Within One Year . . .. ..... 1,560 1,080 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . 75,910 59,915 Accrued Taxes . . . . . . ... . .... . . . .... ... 8,113 1,953-Accrued Interest . . . . . . . . . . . . . ... . .... . .... . .. 23,194 18,167 Other .......... ...... ... .... . ......... ... . . .. 8.953 1,666 Total Current Liabilities . . . . . . . . . . . .. . ...... 214.169 88.868 Deferred Credits Accumulated Deferred Investment Tax Credits . . . . . . . ... . . 18,562 19,060 Accumulated Deferred Taxes on Income . . . . . . . . . . . . . . . . . . . . . . 38,722 26,446 Other . . . . . . . . . . . . . . . . . . . . . . .. .. . ... .. 2.922 16.047 Total Deferred Credits . . . . . . .. ... .. ... ... 60.206 61.553 Commitments and Contingencies (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . .
_$2.085,783 $1,615.523 See accompanying Notes to Financial Statements.
25
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE STATEMENTS OF CAPITALIZATION ~
December 31, 1983 1982 (Thousands of Dollars)
Common Stock Equity i Common Stock-$5 Par Value Authorized - 60,000,000 Shares Outstanding- 36,996,327 Shares in 1983 and 26.523,683 in 1982 $184,982 $132,618
- Other Paid-In Capital .............. .... ..... ... .......... 428,753 295,583
' Capital Stock Expense . . . . . . . ..... ....... ., .. ... .... (15,478) (10,901)
- Retained Earnings (a) . . . . . . . . . . . . . . . . . . . .. .. . . . 166,111 118,325
-Total Common Stock Equity . . .... . ........ . ... -764.368 535,625 Cumulative Preferred Stock Par Value $100 Per Share - Authorized 1,350,000 Shares Outstanding 618,228 Shares Par Value $25 Per Share - Authorized 14,000,000 Shares Outstanding 10,400,000 Shares Shares Call Ibidend Par Value Outstanding Price With Mandatory Redemption Requirements (b) '
' 7.64% $100 120,000 $105.10 .. .. ... . .. 12,000 12,000 9.00 100 158,400 106.75 . . . . . . . . 15,840 16,920 =
11.24 25 1,200,000 27.81 .. . . .... 30,000 30,000 17.00 25 1,200,000 29.25 . .. ... 30,000 30,000 1,200.000 . ,28.75 .. .... ....
~
15.00 25 30,000 30,000
- 15.44 25 2,400,000 28. 8 6 . . . . . . . . . . 60,000 60,000 13.00 25 1,400,000 28.25 . . . . . . . ... 35,000 -
13.80 25 2,400,000 28.45 . 60.000 -
272,840 - 178,920 I ess: Preferred Stock Redemption Due Within One Year . . . . ...... (1,560) - (1,080) 271.280 177,840 Without Mandatory Redemption Requirements 3.35 % $100 102,000 $100.00 . . . . . ..... 10,200 10,200 4.50 100 75,000 102.00 . . . . . . . . . . . . 7,500 7,500 5.50(Convertible) 100 12,828 100.00 . . . . . . . .. 1,283 1,529 7.92 100 150,000 103.96 . . . . . . . . 15,000 15,000 i L.00 25 600,000 27.00 . . . . . 15,000 15,000 48,983 49,229 Total Cumulative Preferred Stock - Net . .. .. ... . .. .. . 320,263 227,069 Notes Payable Refinanced'by Common Stock Issue ...... .. .. .
64.600 See accompanying Notes to Financial Statements and to Statements of Capitalization.
26 s
PUBLIC SERVICE COMPANY OF NEW. HAMPSHIRE STATEMENTS OF CAPITALIZATION December 3I, Long-Term Debt (c) -
iw3 in2 First Mortgage Bonds (d) rrhousands of iMiars)
Series Rate Maturity H 3%% 1984........ ....... .... . ... .... $ 10,080 $ 10,080 1 3% 1986. ........ .. ... . ..... ... . 6,710 6,866
~M 4% 1992. ....... ... .. . . . . . 21,259 21,468 N 6% 1996....... ........ ... . . . .. 15,345 15,423 O 6% 1997.......... .. .. .. . . . . 13,624 13,642 P 7% 1998..... . ... .. . .. . .... 13,705 13,815 Q _9 2000....... .. . .... ....... . 18,490 18,569 R 7% 2002............... ... . . ... 18,705 18,996 S 9 2004. . ... . . .. . . . .. 18,957 19,070 U 10 % 1985.... .. . ... ... . ..... 14,128 '14,421 V 9% 2006..... .... .. ... .. ... ..... 14,478 14,557 W 10 % 1993..... ... . . . . . ... . 9,864
- 10,000
- X 12 1999. ............ . ... . . . . 9,302
- 9,302
- Y 18 1989..... .. . .. .. 24.135
- 24,135
- tess: First Mortgage Bonds (*) Pledged as Security for General and Refunding Mortgage Bonds .. .. ... ..... .. . (43.301) (43.437)
Total First Mortgage Bonds . .. .. . . .. 165,481 166,907 General and Refunding Mortgage Bonds A 10%% 1993. . .... ...... . .. 54,540 60,000 B 12 1999. . . . .. . ... ..... 60,000 60,000 C 14 % 2000. . ..... ... .. . . 30,000 30,000 D 17 1990. ... . . .... . . 23,000 23,000 E 18 1989... . .. . .... . .... 50,000 50,000 Promissory Note; interest at i16% of a Specific Bank's Prime Rate Plus 0.25%; Due 1984 .... . .. . ..... . . 25,000 -
Eurodollar Term Loan; Interest at the Rate of %% over the London Inter-bank Offered Rate for Three or Six Month Eurodollar Deposits; Due 1984 ...... ... ... .... . ... . . ... .. . 50,000 50,000 Promissory Notes,17%, Due 1986 . . . . .. ... . ..... 30,000. 30,000 Pollution Control Revenue Bonds 9% 1984. . ...... . .. .. .. .... .. 5,800 5,800 12 % 1988.. .. ... .. . . .... 3,250 -
13 % 1993... . .......... .. 7,250 -
, 13 % 2003... ... . . . .. .. . . 8,000 -
12 % 2003. . . . .... . . . ... . 1,500 -
Debentures 15%% 1988. . ... . . . . 75,000 75,000 14 % 1991 .. .. . . .. .. 100,000 -
15 2003.. .... ... .. . .. .. 100,000 -
Nuclear Fuel Obligation (e) . . . .. ...... ... .. . 50,000 -
Notes Payabla Refinanced by Debenture Sale . . .. . . . ......
100.000 Total Long-Term Debt . . .. .... . 838,821 650,707 less: Long-Term Debt to be Retired Within One Year . . . (96,439) (6,087)
Unamortized Premium and Discount . . . . . ..... (15,605) (6,812)
Long-Term Debt - Net . ... . .. . 726,777 637.808 Total Capitalization .. . .. . . ... .. . $1,811,408 $1.465,102 See accompanying Notes to Financial Statements and to Statements of Capitalization.
27
L 2*
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES TO STATEMENTS OF CAPITALIZATION (a) Pursuant to t,erms of the General and Refunding Mortgage Indenture, dividends may not be paid on the Common Stock in excess of net income accumulated after January 1,1978 less the aggregate amount of
- all dividends paid or declared on the preferred stock of the Company during such period plus $32,000,000.
At December 31,1983, retained eamings of $139,400,000 were not subject to dividend restriction.
(b) The annual Sinking Fund requirements for Preferred Stock with mandatory redemption requirements are Las follows: 1984 - $1,560,000,1985 - $6,060,000,1986 - $6,060,000,1987 - $9,060,000 and 1988
- $10,810,000.
(c) The long-Term Debt Maturities and annual Sinking Fund requirements are as follows: 1984 - $%,439,000, 1985 - $21,220,000,1986 - $43,725,000,1987 - $7,058,000 and 1988 - $85,308.000. Under the terms of the First Mortgage Indenture and the General and Refunding Mortgage Indenture, substantially all utility property of the Company is subject to the liens thereof.
(d) Due to certain restrictions in the Company's First Mortgage Indenture, no significant amount of First Mortgage Bonds may be issued until an operating license is obtained for Seabrook Unit 1 not anticipated before 1986.
(e) The Company has entered into a leasing agreement which provides for the financing of the cost of up to
$50,000,000 of nuclear fuel to be used in the Seabrock Plant. Borrowings under the agreement are secured by a lien on designated nuclear fuel. Interest on the borrowings is assessed at 2%% above the 30-day commercial paper rate on commercial paper issued by an affiliate of the lessor. In 1983, the Company capitalized related interest costs of $1,466,000 based on an average interest rate of 12%. Amortization of principal coincides with the burn-up of the nuclear fuel.
28
- PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE STATEMENTS OF CHANGES IN FINANCIAL POSITION For the Year Ended December 31.
Source of Funds l#3 IM2 l#1 From Operations Ghends of Donard Net I ncome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $151,658 $ 91,623 $ 77,187 Principal Non-Cash Charges (Credits) to income Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 21,016 19,558 18,663
' Allowance for Equity Funds Used During Construction (104,146) (67,624) (50,053)
Deferred Taxes and Investment Credit Adjustments . I1,778 (192) 4.205 Total from Operations . .. .. ... . . .. 80.306 43,365 50.002 From Outside Scurces Sale of Long-Term Debt . . . . . . . . . . . . . . ... .... ..... 235,413 141,050 57,000 Sale of Preferred Stock . ....... . . ... ... . 95,000 60,000 -
Sale of Common Stock . . .... . ....... . .. 185,288 49,886 70,214 Nuclear Fuel Obligation . . . .. ........ ... ..... 50,000 - -
Funds Deposited with Trustee . . . . . . .. . ... 18,133 - -
Change in Short-Term Borrowings . . . . . . . ..
- (164,600) 17,250 Sale of Portion of Millstone Unit 3 . . . . . . . . . . .. - 15,353 -
Subsequent Financings Used to Reduce Notes Payable - Banks (164,600) 1M.600 -
Total from Outside Sources . . . . . . . . . . ... .. 419,234 266,289 144,4M Dt.rease in Working Capital ..... . ... ..... . .. 40,621 23,720 -
To tal . . . . . . . . . . . . . . . . . . . . . . . . . . .. . $540,161 $333.374 $194.466 Application of Funds Property Additions . ... ..... ..... .... .. . ... . $425,909 $304,968 - $124,816 Allowance for Equity Funds Used During Construction . .. (1G4,146) (67,624) (50,053)
Dividends . . ... .. .. . ... . . . 103,865 75,200 M,ll2 Reduction of Long-Term Debt . . .. . . .. . ..... . 97,238 13,930 5,986 Reduction of Preferred Stock . . . . . . .... . ..... .. 1,560 2,160 -
Repayment of Advances from Joint Project Participants .
4.595 Increase in Working Capital . . . . . . . . . . . . ... ... ... - - 36,414 Funds Deposited with Trustee ....... .. . .. .. .. ... 205 15,092 3,041 Deferred Collection of Fuel Costs . ... ... . ..... . . - (2,875) (6,901)
Increase in Investments . . . . . . . . . . . . . . . . . ...... .. 2,934 3.074 12,427 Other Applications - Net . . . . . . .... . ......... .... 12.5 % (10,551) 29 Total . . . . . . . . ... . ..... ..... ....... $540.161 $333,374 $194.466 Increase (Decrease) in Working Capital Other than Notes Payable --
' Banks and Advances from Participants
- Cash and Temporary Investments ... ........... ....... $ 80,727 $ (3,359) $ 1,390 Receivables ....... . .. . ....... .. ...... .. 6,566 (291) 1,617 Inventories . . . . . .. ... ......... .... ..... . . .. (322) 16.125 (7,085)
Long-Temi Debt to be Retired Within One Year . . . . . . . . (90,352) (1,087) 19,467 Preferred Stock Redemption Due Within One Year . . . . . (480) (1,080) -
Accounts !*ayable ...... ...... . ..... ........... ... (15,995) (28,307) 25,644 Accrued Taxes . . . ....... ........... ....... . . (6,160) 4,456 (228)
Other .... ...... .... ....... ....... . ....... . . . _[14,605) (10,177) (4.391)
Total . .............. . ...... ........ $(40.621) $(23,720) $ 36.414 Compositicn of Property Additions Jointly. Owned Nuclear Facilities . . . . . . . . . . ... . .. $365,752 $255,988 $ 91,600 Nuclear Fuel . . . . . . . . . . . . . . . .. ...... . ... .. 12,305 10,843 6,669
' Other . .... . ... ...... . ........... ............ . 47.852 38,137 26.547 Total . . . . . . . . . . . . . . . . . . . . . . . ... . $425,909 $304.968 $124.816 4
See accompanying Notes to Financial Statements.
29
PUBLIC SERVICl: COMPANY OF NEW HAMPSHIRE
. STATEMENTS OF CHANGES IN COMMON STOCK EQUITY For the Three Years Ended December 31,1983 (Thousands of Dollars)
Other Capital Annount at Paid.In Stock Retained Shares Par Value Capital Expense Earnings Total Balance - December 31,1980 . . . . . 18,203,922 $ 91,020 $214,994 $ (7,416) $ 88,834 $387,432 Add (Deduct)
Net income . . . . . ..... . 77,187 77,187 Cash Dividends -
. Common Stock . . . . . . . . . . (44,933) (44,933)
Preferred Stock . . . . . .. (19,179) (19,179)
Issuance of Common Stock ... 4,991,717 24,958 46,930 (453) 71,435 Issuance Cost of Preferred Stock (121) (121)
Balance - December 31,1981 .... 23,195,639 $115,978 $261,924 $ (7.990) $101,909 $471,821 Add (Deduct)
Net Income . . . .. . .. 91,623 91,623 Cash Dividends -
Common Stock . . .... (54,202) (54,202)
Preferred Stock ... . . . (20,998) (20,998)
Issuance of Common Stock . . 3,328,044 16,M0 33,659 (380) 49,919 Issuance Cost of Preferred Stock (2,538) (2,538)
Amortization of Redeemed Pre-ferred Stock Issuance Cost 7 (7) -
Balance - December 31,1982 . 26,523,683 $132,618 $295,583 $(10,901) 5118,325 $535,625 Add (Deduct)
Net Income . . . . . . . . . . . 151,658 151,658 Cash Dividends -
Common Stock . .... (72,458) (72,458)
Preferred Stock . . . ... . (31,407) (31,407)
Issuance of Common Stock .
. 10,472,M4 52,3M 133,170 (499) 185,035 issuance Cost of Preferred Stock (4,085) (4.085)
Amortization of Redeemed Pre-ferred Stock issuance Cost .. 7 (7) -
Balance - December 31,1983 . . 36.996.327 $184,982 $428,753 $(15,478) $166,111 $764.368 See accompanying Notes to Financial Statements.
30
PUBI,1C SERVICE COMPANY OF NEW liAMPSHIRE NOTES TO FINANCIAL STATEMENTS
- 1. Summary of Accounting 1%1icies Regulations and Operations The Company is subject, as to rates, accounting and other matters, to the regulatory authority of the New Hampshire Public Utilities Commission (NHPUC), the Federal Energy Regulatory Commission (FERC) and, to a lesser extent, the public utilities commissions in other New England states where the Company does business.
Investments The Company follows the equity method of accounting for its investments in nuclear generating com-panies, a wholly-owned overseas finance subsidiary and a wholly-owned real estate subsidiary. The Company owns four to seven percent of each of four New England nuc! car generating companies and, pursuant to purchased power contracts, is entitled to its ownership percent of total plant output and is obligated to pay a similar share of operating expenses and returns on invested capital. Approximately 9.5%,9.9% and 9.7%
of the Company's total energy requirements were furnished by these companies in 1983,1982 and 1981, respectively.
Utility Plant Provision for depreciation of utility plant is computed on a straight-line method at rates based on estimated service lives and salvage values of the several classes of property. The depreciation provisions were equivalent to overall effective rates of 3.70%,3.65% and 3.61% of depreciable property for 1983,-1982 and 1981, respectively.
Maintenance and repairs of property are charged to maintenance expense. Replacements and betterments are charged to utility plant. At the time properties are retired, the cost of property retired plus costs of removal less salvage are charged to the accumulated provision for depreciation.
Operating Revenues Revenues are based on billing rates, authorized by applicable regulatory commissions, w hich are applied to customers' consumption of electricity. These rates include estimates of the cost of energy incurred by the Company in the generation or purchase of electricity. To the extent that energy cost estimates differ from actual costs incurred, the differences are deferred and refunded or charged to customers through periodic rate adjustments. The Company records an estimate of revenue for service rendered but not billed.
Allowancefor Funds Used During Construction (AFUDC)
AFUDC is the estimated cost, during the period of construction, of funds invested in the construction program which is not recovered from customers through current revenues. Such allowance is not realized in cash currently but under the rate-making process the amount of the allowance is expected to be recovered in cash over the service life of the plant in the form of increased revenue collected as a result of higher plant costs.
The Company capitaliz ed AFUDC at average net-of-tax annual rates of 12.0%, i1.6% and i1.0% for 1983,1982 and 1981, respectively.
Ratio of Earnings to Fixed Charges Earnings represent the aggregate of net income, less undistributed income of unconsolidated companies, plus provisions for federal and state taxes on income and fixed charges. Fixed charges represent interest, related amortization and the interest component of annual rentals.
- 2. Rate-Making Matters On January 30,1984 the NHPUC issued a rate order designed to increase annual non-energy revenues by approximately $24,700,0(X). The order was issued in response to the Company's request, filed December 31
T F
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES TO FINANCIAL STATEMENTS - Continued i 2. Rate-Making Matters - Continued 30, 1982, to increase annual revenues by $33,400,000. The requested rates were placed into effect under f bond effective August I,1983. In 1983, the Company recognized a provision for estimated refunds based i on the difference between temporary rates billed and the permanent rates. 'Ihe amount billed in excess of permanent rates was refunded to customers in Rbruary,1984.
During 1982, the NHPUC issued rate orders designed to increase annual non-energy revenues by ap-proximately $9,500,000 effective July,1982 and $28,900,000 effective May,1981.
In 1983 and 1982 New Hampshire retail customers were billed a levelized energy cost rate based on six-month projected data for fuel and purchased power expenses. In 1981 energy costs were billed based on estimates adjusted quarterly. Wholesale customers are billed under fuel adjustment clauses. The proportion of revenues from prime sales associated with energy costs was 46.0% in 1983,47.8% in 1982 and 54.2%
in 1981. The differences primarily retlect changes in the cost of energy.
- 3. Income Taxes The components of income tax expense are as follows:
IM3 IM2 IMI l
tThousands of thilars)
Included in Operating Expenses l- Current - ftderal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,536 $ 24,630 $ 22,153 State ....... ....... ........ . ... ... (5,674) 3.082 3.834 25,862 27,712 25,987 l Deferred - I'sderal . ..... . .. ..... . ........ . 9,605 3,109 5,533 I Investment Tax Credit Adjustments ... . .... .. (499) (1,3%) (3.305)
$ 34,968 $ 29.425 $ 28,215 Included in Other income and Deductions Current - Federal . . . . . . . . . . . '. . . . . . . . . . . . . . . . . . . . $(28.672) $(24,706) $(23,733)
Current - State . . . . . . . . . . . . . . . . . . . . . .. .. .. (5,056) - -
Deferred - Federal . . . . . . . . . . . . . . . . . . . . . ... 3.543 45 206-
$(30.I85) $(24,661) $(23.527)
Total Income Tax Expense - Rderal . . . . . . . . . . . . . . . . . . . . $ 15.513 $ 1,682 .$ 854 State .......... . ........... (10,730) 3.082 3.834
$ 4.783 $ 4.764 $ 4,688 State tax expense for 1982 and 1981 is primarily New Hampshire franchise tax. In October 1982, the New Hampshire Supreme Court rescinded the basis for determining this tax. At that time the Company ceased accrual of the tax and classified its liability for the tax of $13,200,000 as a deferred credit.
In 1983 the Company eliminated this deferred credit by reducing state tax expense $6,900,000 (cor-responding to a refund to retail customers ordered by the NHPUC), reducing state tax expense an additional
$4,000,000 (corresponding to the accrual of the tax in excess of the amount collected in rates) and recording a liability of $2,300,000 for potential w holesale refunds, which have not been determined. Effective July 1, 1983, the State of New Hampshire replaced the previous franchise tax with a 1% franchise tax on gross operating receipts which the Company has recognized in other taxes - operating.
! Beginning in 1983, the Company has alh>cated to operating income taxes approximately $5,100,000 of New Hampshire business profits tax. An offsetting state tax benefit was alh>cated to other income and de-ductions, based upon the reduction in such tax attributable to the excess, on a tax basis, of other deductions over other income.
32 1
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES TO FINANCIAL STATEMENTS - Continued
- 3. Income Taxes - Continued Investment tax credits utilized are deferred and amortized to income over the lives of the related prop-erties. At December 31,1983 the Company had investment tax credits available to carry forward of ap-proximately $77,500,000 which expire between 1994 and 1998.
The tax effect of differences between pretax income in the financial statements and income subject to tax, which are the result of timing differences, are accounted for as prescribed by and in accordance with the rate-making policies of the NHPUC. Accordingly, provisions for deferred income taxes are recognized for all specified timing differences. Taxes attributable to other timing differences are flowed through to net income as adjustments to income tax expense. Provisions for deferred income taxes are recognized for the following timing differences:
IM3 IM2 IMI
' (Thousands of Dollars)
Normalized Timing Differences. Relating to Plant .......... . $ 8,488 $ 7,910 $ 4,554 Accrued and Unbilled Fuel Adjustment Charges . . . . . . . . . . . (188) (301) (298)
Deferred Fuel Costs . . . . . . . . . . . . . . . . . . . . . . . ......... (479) 2,104 (5,443)
Costs Associated with the Cancellation of Pilgrim Unit 2 (Note 7) 3 124 5,326 Recoupment Revenue Recoverable . . . . . . . . ........ .... - (3,302) 3,302 Accrued State Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.618 (1,419) (1,772)
Used (Unused) Tax Net Operating Loss Carry Forward . . . . . . . . 3,480 (1,642) -
Other.............................................. (774) (320) 70
$ 13.148 $ 3,154 $ 5.739 The principal reasons for the differences between total income tax expense and the amount calculated by applying the federal income tax rate (46%) to income before income tax are as follows:
-143 IM2 IMI (Thousands of Douars)
Income Before income Tax . . . . . . . . . . . . . . . . . . . . . . . ... $156.441 $ %.387 $ 81,875 Ex pected Tax Ex pense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,%3 $ 44,338 5 37,663 Increases (Reductions) in Taxes Resulting from Overheads Charged to Construction and Expensed for Tax Purposes ... ..... ........................ ...... (47,907) (31,107) (23,025)
Net-of-Tax Method of Recording AFUDC .. . ....... . (15,273) (13,822) (13,140)
Difference between Book ar.3 Tax Depreciation - Not Nor-malized . . . . . . . ............. . .... ...... .. 1,829 1,505 1,343 I
State income Taxes Nt of Federal Income Tax . . . . . . . . . . (5,794) I,665 2,070 Other Deductions . . . . .................. ... , .. (35) 2,185 (223)
Total Income Tax Es: pense . . . . . . . . . . . . . . . . . . . $ 4.783 $ 4.764 5 4,688
- 4. Short Term Borrowings From time to time the Company uses borrowings from banks as an interim method of financing con-struction and working capital needs. At Itbruary 29,1984, the Company had line of credit agreements with New Hampshire banks aggregating approximately $3,000,000 and a revolving credit agreement with a group of nine commercial banks. The Company's revolving credit agreement, under which each advance is currently subject to review by the banks, specifies that if at the time an advance is requested, the Company's cash flow, cumulative financings, total expenditures or construction expenditures for 1984 vary by certain specified amounts or percentages from projections set forth in schedules furnished to the banks, waivers of such variations by banks holding two-thirds in principal amount of the credit are a prerequisite to such advance.
There must also not be any material adverse change in the Company's business or financial condition. These 7
i 33
PUBLIC SERVICE C051PANY OF NEW IIAhlPSIllRE NOTES TO FINANCIAL STATE 51ENTS - Continued 4, Short-Term Borrowings - Continued schedules call for advances outstanding at any one time under the revolving credit to be substantially less than the $160,000,000 maximum specified in the credit. Amounts outstanding under the agreement mature on December 7,1984. The Company pays commitment fees on the revolving credit agreement and maintains compensating balances for certain line of credit agreements. The effective cost of borrowing under the revolving credit agreement, including fees and assuming the available credit is fully utilized, is 116% of the prime interest rate of a specified bank. See Note 7 for a discussion of subsequent events affecting the avail-ability of short-term credit.
The Company has a financing arrangement with a group of banks, expiring June,1984, which enables the Company to borrow up to $20,000,000 by collateralizing its fossil fuel inventories, subject to there not being a material adverse change in the Company's business or financial condition. Rates of the loans are based upon the current bankers' receptance discount rate plus an acceptance commission and facility and agency fees.
Information regarding short-term borrowings is as follows:
1983 1982 1981 (TI,auunds of Dollar 9 hlaximum Short-Term Borrowings .. . $142,100 $141,600 $145,600 Average Amount Outstanding (Based on 51onth-End Balances) $ 10,147 $104,683 $I10.475 Average Interest Rate (Including Fees)
At Year End . ... . . . .
13.72 % 18.59 %
During the Year . ... .. .... .. . . 24.409(1) 18.66 % 22.57 %
(1) The rate including fees is significantly higher than i 16% of the prime rate (12.52%) due to low borrowing levels relative to fees which are calculated as a percentage of the available credit line.
5, Pension Plan The Company has a non-contributory pension plan covering substantially all employees. The Company's policy is to fund current pension costs accrued. Costs were $5,386,000, $5,242,000, and $4,229.000, in 1983,1982, and 1981, respectively, and include amortization of past service costs over 25 years. Accumulated plan benefits and plan n t assets for the Company's defined benefit plan as of January I of each year is as follows:
19N3 1982 (Thousands of Dollaro Actuarial Present Value of Accumulated Plan Benefits:
Vested . . . . . . . . . . . ... . . . . $34,339 $34,242 Nonvested . . . . . . .. . . 1.578 1.771
$35.917 $36.013 Net Assets Available for Benefits .. .. . .. . . $52.057 $38,460 The weighted average assumed rate of return used in determining the actuarial present value of accu-mulated plan benefits was 9% in 1983 and 1982.
34
PUBLIC SERVh E CONIPANY OF NEW llANIPSillRE NOTES TO FIN ANCI AL STATE 31ENTS - Continued
- 6. Leases He Company has certain financing leases for property and equipment which are accounted for as operating leases. The capitalization of such leases would not have a material effect on the financial statements.
Costs associated with leased equipment utilized in construction are capitalized as a cost of construction.
Rentals charged to expense in 1983,1982 and 1981 were $4,344,000, $4,463,000 and $3,545,000, respectively. The Company rents properties from a wholly-owned real estate subsidiary at current annual rentals of $1,337,000. At December 31,1983, estimated future minimum lease payments for noncancellable leases were as follows:
1984 .. ... . .. .. . $ 4,975,000 1985 . . . . .
4,089,000 1986 . . ... 3,461,000 1987 .. . . . 3,337,000 1988 .... . ... 2,684,000 Rereafter . . .
27.729,000
$46.275 (XX)
- 7. Commitments and Contingencies The Company's shares of total expenditures included in Unfinished Construction for the jointly-owned nuclear facilities in wbich it is participating are as follows:
December 31.
1983 19N2 (Thousands of Dollars)
Seabrook Unit I and Common Facilities .
$1,011,900 $ 745,600 Seabrook Unit 2 . . ... . . 303.100 223,1(X) hiillstone Unit 3 .. . . . . 65.600 48.400
$1,380.600 $1.017,100 he Company's constmetion program expenditures (excluding AFUDC) are estimated to be $314,800,0(X) for 1984, $254,800,000 for 1985 and $318,500.000 for 1986 though 1988. See "htanagement's Discussion and Analysis of Financial Condition and Results of Operations - Construction Program and Financing Requirements" for a discussion of the Company's projected financing plan and problems concerning the Seabrook Plant.
He Seabrook Plant has experienced persistent and substantial cost increases. The increased costs have been due, among other reasons, to design changes, revisions of regulations of the Nuclear Regulatory Com-mission and other regulatory txxiics, extraordinarily high interest rates, inflation and construction delays, all of which have resulted in total costs (including carrying costs and taxes) far higher than planned and far higher than for nuclear plants cunently operating, although comparable to other nuclear plants currently under construction. The cost estimate for both Units of the Seabrook Plant issued on h1 arch 1,1984 is approximately
$9 billion with an estimated July 1986 in-service date for Unit I and a December 1990 in-service date for Unit 2. These latest estimates of cost and completion dates are about 75% greater and 18 months later, respectively, than those made by the Plant's architect / engineer in November,1982. hianagement Analysis Company, an independent consulting firm retained in early 1983 by the Seabrook participants to analyze the November,1982 estimate, reviewed the latest estimates and recommended that they be funher reviewed and analyzed by the Company. Financing of Unit I will be a major undenaking for the Company, particularly if it is not included in rate base promptly upon its completion but phased in as suggested by New llampshire authorities.
As a result of the substantial increase in the estimated cost of Unit I reflected in the latest cost estimates, the commercial banks which have provided the Company with its revolving credit facility (under which no 35
PUHLIC SERVICE COSIPANY OF NEW IIASIPSIIIRE NOTES TO FINANCIAL STATEAIENTS - Continued
- 7. Commitments and Contingencies - Continued amounts are currently outstanding) have requested the Company to obtain additional back-up sources of credit. It is not clear that the banks will make funds available under the existing revolving credit facility without th additional credit. This additional credit would provide the Company with increased financial support in the event that the Company is unable to access the public securities markets for any significant period and the Company has exhausted its bank lines of credit. The Company is seeking this additional suppon, including specifically support from the other Seabrook participants. If such support cannot be ob-tained in the next three weeks and the commercial banks decline to advance funds to the Company under the revolving credit facility, the Company would be forced to seek protection from its creditors under the Bankruptcy Code. The Company has temporarily instituted stringent cash conservation as well as other expenditure curtailment measures.
If the Company is able to obtain these additional sources of credit and borrow from its revolving credit banks, the success of the balance of the Company's financing plan and the nature, size and timing of future securities issues will depend on securities market factors, the favorable resolution of uncertainties regarding Unit 2 described below, the amount and timing of needed rate increases, satisfaction of earnings coverage tests, the level of construction costs at the Seabrook Plant, the commercial operation date of Unit 1, economic conditions, the Company's level of sales and other factors. Adequate and timely rate increases, successful financings in the capital markets and continued availability of short-term credit facilities are essential to enable the Company to maintain its construction program and continue its business operations.
On h1 arch 30,1984 the Company and the other Seabrook participants voted to cancel Unit 2 on December 1,1984 on the condition that there have been obtained all necessary n:gulatory approvals of arrangements for sharing with the Company the savings on Canadian power under a proposed NEPOOL Shared Savings Plan. This Plan was approved in concept by a unanimous vote of the NEPOOL Executive Committee on htarch 23,1984. Under the Plan, savings from the purchase of Canadian power would be channeled by the NEPOOL members to the Company over a period of years commencing in 1987 in order to compensate in part for the Company's lost investment in Unit 2. The amount of such savings which would be so channeled has not yet been agreed upon.
The Company is also seeking to make other arrangements for the completion of Unit 2. These arrange-ments could incluJe the financing of construction of Unit 2 under a fixed price contract by a major construction company, but would not involve financing of such costs by the Company. Participants desiring to cancel Unit 2 would in any event be relieved of any further obligations for construction costs of Unit 2, but would remain obligated for Unit I costs. There can be no assurance that the NEPOOL Shared Savings Plan will receive the requisite regulatory approvals or will channel sufficient savings to the Company, or that the Company will be able to make arrangements to complete construction of Unit 2. Consequently, the Company may be in the difficult position of attempting to continue construction of Unit 2 in the face of the nearly unanimous determination of the other Seabrook participants and regulatory authorities that Unit 2 should be cancelled.
The Company cannot predict whether it would be possible to continue construction of Unit 2 in such cir-cumstances.
Effective hiarch I,1984, the Company ceased capitalization of all costs, including AFUDC, related to Unit 2 of 'he Seabrook Plant. The accrual of AFUDC on Unit 2 has been approximately $3,000,000 per month. The effect of this decision will be to reduce 1984 net income by approximately $33,000,000.
As indicated above, cancellation of Unit 2 could in certain circumstances alsojeopardize the Company's financing of its share of Unit I and its financial viability if the Company were not granted some recovery on its insestment in Unit 2 in addition to the amounts presently being discussed as being made available to the Company under the proposed NEPOOL Shared Savings Plan. This recovery could take the form of direct rate recovery if the New llampshire anti-CWIP statute is not construed to prevent recovery through rates of a utility's investment in a cancelled plant. There is currently pending before the NilPUC the Company's request for recovery with respect to the Company's share of the cancelled Pilgrim Unit 2 nuclear generating 36
F o
PUllLIC SERVICE COMPANY OF NEW HANIPSHIRE NOTES TO FINANCIAL STATEMENTS - Continued 7, Commitments and Contingencies - Continued plant, as discussed below. The NHPUC has certified to the New Hampshire Supreme Court the question of whether the New Hampshire anti-CWIP statute prevents such recovery.
The Company cannot predict what action the NHPUC would take regarding the Company's Unit 2 -
investment. If the NHPUC denied recovery the Company would be required to charge the unrecovered cost of Unit 2 against earnings in the period in which such denial became final; the Company does not believe that a final determination of the question will be made before the second half of 1985. At February 29,1984, "
the Company's in,estment in Unit 2 was $316,000,000 including AFUDC and uranium fuel. While the Company believes that in the event of cancellation it would be entitled to alkicate some part of this investment to the cost of Unit I, the amount charged against earnings in the event it is denied recovery could, depending upon the amount not recovered, eliminate the Company's retained earnings, thereby effectively precluding the Company from paying dividends on its Common and Preferred Stocks. In these circumstances, the Company would in all probability be unable to access the public securities markets. 4 Under the anti-CWIP statute prohibiting the inclusion in rate base of construction work in progress, Unit I of the Seabrook Plant may not be included in rate base until completion of its construction and commencement of commercial operation. At that time, the Company expects that a substantial retail rate increase would be required in order to place the entire cost of Unit I in rate base. The Company's estimates of future revenues have attempted to reflect the dampening effects of the expected rate increases on power sales. The Company cannot predict what rate increases will be granted, including the extent to which the Unit might be phased into rate base as suggested by New Hampshire authorities, or whether the dampening effect will be more substantial than anticipated.
The Company's cash flow should be substantially improved and its permanent financing requirements reduced after Seabrook Unit 1 is included in rate base. Delays in commercial operation of Unit I or in rate base treatment of the costs of the Unit would require the Company to maintain high levels of financing. The Company's financing requirements would also remain high if the NHPUC should decide not to permit in-clusion in rate base of substantially all of the costs of Unit 1.
If one or more of the other Seabrook Plant participants should be unable to obtain sufficient or timely rates and financing and consequently are unable to fulfill their contractual commitments to pay their share of Seabrook Plant construction costs when due, or if by reason of action by a regulatory agency such par-ticipants fail to fulfill such commitments, completion of the Plant would be jeopardized and the continuation of the Company's business operations threatened.
Timely receipt from the NRC of an operating license is necessary in order to commence commercial operation of Unit 1. Formal hearings were held in the summer of 1983 and further hearings are expected to be held in the spring of 1984. The Company's request for the operating license is being opposed by active intervenors, including the Attorney Generals of the State of New flampshire and The Commonwealth of Massachusetts.
In October,1981, the lead owner of the Pilgrim Unit 2 jointly-owned nuclear generating plant cancelled construction of this facility. The Company has a 3.479 interest in the plant and at December 31,1983, had expended approximately $15,900,000 as its share of the costs. The Company filed a petition with the NHPUC on December 30,1983, seeking recovery of the investment. Concurrent with this filing, the Company sub-mitted a request to the NHPUC to certify to the New Hampshire Supreme Court the question of whether the anti-CWIP statute precludes recovering through rates the costs of abandoned plants. On March 9,1984, the NHPUC certified and transferred to the New Hampshire Supreme Court the question of law concerning the anti-CWIP statute; the Court has ordered an accelerated briefing schedule with oral argument tentatively scheduled for May 1984. The Company cannot predict whether and to what extent regulatory authorities would permit such recovery; the Company does not believe that a final determination of the question will be '
made before the second half of 1985. Any emounts not so recoverable would be charged against earnings in the period in which such determination or denial becomes final.
37 mm- ---
^
PUBLIC SERVICE COSIPANY OF NEW IIA 51PSillRE NOTES TO FINANCIAL STATE 51ENTS - Continued
- 8. Unaudited Quarterly Information The following quarterly information is unaudited, and, in the opinion of management, is a fair summary of results of operations for such periods. Variations between quarters reflect the seasonal nature of the Com-pany's business.
Three Months Ended December 31. September 30 June 30, March 31, 1983 1982 1983 1982 1983 1982 1983 1982 (Thousands except Per Share Amounts)
Operating Revenues $126,773 $102,510 $117,247 $101,800 $98.829 $95,736 $120.635 $123,244 Operating income , 19,545 9,902 17,674 10,158 15,091 6,8N 15,840 16,605 Net income . 43.701 24,281 40,628 23,020 33,682 17,985 33,M7 26.337 Preferred Dividend Requirements . 9,701 7.103 8.2N 5,488 8,022 4.780 7.069 4,782 Earnings Available for Common Stock 34,000 17,178 32,424 17.532 25,660 13.205 26.578 21,555 Average Shares of Common Stock Outstanding . 36,926 26,482 36,788 26,394 31,777 25,682 30,510 23,228 Earnings Per Average Share of Common Stock , $ 0.92 5 0.65 $ 0.88 $ 0 66 $ 0 81 5 0.51 5 0.87 $ 0.93
- 9. Unaudited Information on the Effects of Changing Prices The following supplementary information is supplied in accordance with the requirements of the State-ment of Financial Accounting Standards No. 33, Financial Reporting and Changing Prices. These data are act intended as substitutes for earnings reported on a historical basis; they do, however, offer some perspective of the approximate effects of inflation rather than a precise measurement of the effects.
Constant Current Conventional Dollar Cost IIistorical Aserage Average Cast 1983 Dollars 1983 Dollars IThousands of Dollars)
Operating revenues .. . . $463,484 $463,484 $463,484 Operation and maintenance expense . 318,579 318,579 318,579 Depreciation expense 21,016 50,135 54,793 lideral and state taxes on income 34,968 34,968 34,968 Other taxes . . . . . . 20,771 20,771 20,771 Interest expense - net . . . 58,570 58,570 58,570 Other income and deductions - net (142,078) (142,078) (142,078) 311,826 340,945 345,603 Income from continuing operations (excluding reduction to net recoverable cost) . . .. . $151,658 $122,539* $117,881
- Reduction to net recoverable cost . .
$(31.102) $(26,444)
Gain from decline in purchasing power of net amounts owed 35,831 35,831 Net . . . . .. . . ... . . . . $ 4,729 $ 9,387 Increase in specific prices (current cost) of property, plant, and equipment held during the year . . $120,961 Effect of increase in general price level . .. . 94,049 Excess of increase in specific prices over increase in general price level . .. . .. . . . $ 26,912
- Including the reduction to net recoverable cost, the income from continuing operations on a constant dollar and a current cost basis would have been $91,437.
Constant dollar amounts represent historical cost stated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The current cost of plant was determined by indexing each major class of plant using the Handy-Whitman Index of Public Utility Con-struction Costs. Current cost does not necessarily represent the replacement cost of existing productive ca-pacity since utility plant is not expected to be replaced precisely in kind. The current year's provisions for 38
PUBLIC SERVICE COMPANY OF NEW IIAMPSillRE NOTES TO FINANCIAL STATEMENTS - Continued
- 9. Unaudited Information on the Effects of Changing Prices - Continued depreciation on the constant dollar and current cost amounts of utility plant were determined by applying the L Company's depreciation rates to the indexed plant amounts. Current cost amounts reflect changes in specific prices of plant from the date the plant was acquired to the present. They differ from constant dollar amounts - ,
to the extent that specific prices have increased more rapidly than the general rate of intiation ($26,912,000).
At December 31,1983, current cost of property, plant and equipment, net of accumulated depreciation, was
$2,791,609,000 while historical net cost was $1,836,778,000.
Fuel inventories, the cost of fuel used in generation, and the energy component of purchased power costs have not been restated from their historical cost in nominal dollars. Regulation limits the recovery of .;
fuel and purchased power costs to actual cost incurred during the period. Ibr this reason fuel inventories are effectively monetary assets. p Under cuirent rate-making policies prescribed by the regulatory commissions to which the Company is subject, only the historical cost of utility property is included in the rate base upon which the Company is allowed to earn a return. Therefore, the cost of plant stated in terms of constant dollars or current cost that exceeds the historical cost of plant is not presently recoverable in rates, and is reflected as a reduction to net recoverable costs.
Five-Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices ,
~
STATED IN AVERAGE 1983 D01.LARS '$
Year Ended December 31, 1979 1983 1982 1981 19M0 (Thousands escept IYr Share Amounts)
Operating revenues . .
$463,484 $436,920 $482,944 $424,693 $401,916 Historical cost information adjusted for generalinflation Income from continuing operations (cx-cluding reduction to net recoverable cost) 122,539 66,948 59,217 49,530 36,979 Income per average common share t.after dividend requirements on preferred stock and excluding reduction to net recover-able cost) .. . 2.63 1.73 1.74 1.97 2.02 Net assets at year-end at net recoverable cost 798,724 595,762 554,3M 506,671 474,734
^
Current cost information Income from continuing operations (ex-ciuding reduction to net recoverable cost) 117,881 62,424 54,599 42,864 28,612 Income per average common share (after dividend requirements on preferred stock and excluding reduction to net recover-able cost) .. 2.49 1.56 1.53 1.57 1.36 Increase in general price level over (under) .
increase in specific prices . (26,912) (64,019) 19,882 96,977 86,348 Net assets at year-end at net recoverable cost 798,724 595,762 554,3M 506,671 474,734 Generalinformation Gain from decline in purchasing power of net amounts owed .. 35,831 28,902 62,498 86,6N 84,062 Cash dividends declared per common share $ 2.12 $ 2.19 $ 2.32 $ 2.56 $ 2.91 4 Market price per common share at year-end $ 11.31 $ 17.86 $ 15.77 $ 16.60 $ 20.44 - '
Average consumer price index . . 298.4 289.1 272.4 246.8 217.4 39
Y RF. PORT OF INDEPENDENT CERTIFIED PUllLIC ACCOUNTANTS k The Board of Directors $
PUBLIc SERVICE COMPANY OF NEw HAursillRE Q We have examined the balance sheets and statements of capitalization of Public Service Company of New Hampshire as of December 31,1983 and 1982 and tne related statements of earnings, changes in financial 7
position and changes in common stock equity for each of the years in the three-year period ended Deumber 31, 1983. Our examinations were made in accordance with generally accepted auditing standards, and ac- E
}
cordingly, included such tests of the accounting records and such othe'r auditing procedures as we considered necessary in the circumstances. In connection with our examinations of the financial statements, we also Y
E examined the supporting schedules as listed in the index under item 14. y As more fully discussed in Note 7, the Company has approximately $1.3 billion invested in the two units of the Seabrook Plant, an amount which represents approximately 60% of its total assets. On h1 arch 4 1,1984, the Company released new completion dates for the Seabrook Plant and a new cost estimate which .5 is 75% higher than the November 1,1982 estimate. On N1 arch 30,1984 the Company and the other participants g in the Seabrook Plant voted to cancel Unit 2 of the Plant (a $303 million investment for the Company at y December 31,1983), subject to cenain conditions. The Company intends to seek recovery of all its costs C associated with Unit 2 from its customers and other sources, but there is no assurance that the recovery of ;
substantially all costs of Unit 2 will be achieved. g
-r Financing Unit I will be a major undertaking for the Company because the new schedule and cost g estimate for Unit I have increased the required level of external financings. The commercial banks in the g Company's revolving credit agreement have requested that the Company obtcin additional back-up sources =
of credit to increase the Company's financial flexibility during periods when the Company is unable to access the public securities markets. It is not clear that the banks will make funds available under the existing 5
resolving credit facility without the additional credit. If such additional sources cannot be obtained within i three weeks and the commercial banks decline to advance funds to the Company under the revolving credit agreement, the Company would be forced to seek protection from its creditors under the Bankruptcy Code I and may be unable to continue in existence. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and ?
classification of liabilities that might be necessary shouki the Company be unable to continue in existence. Y r_
In our opinion, subject to the effec:s on the 1983 financial statements of such adjustments, if any, as .;-
might have been required had the outcome of (1) the uncertainty about the recoverability and classification T of recorded asset amounts and the amounts and classification of liabilities, referred to in the preceding f~
paragraph, and (2) the uncertainty about the recovery of Unit 2 costs, referred to in the second preceding paragraph, been known, the aforementioned financial statements present fairly the financial position of Public v _
Service Comliany of New Hampshire at December 31,1983 and 1982 and the results of its operations and ?
changes in its financial position foi cach of the years in the three-year period ended December 31,1983, in confonaity with generally accepted accounting principles applied on a consistent basis. Also in our opinion, subject to the effects on the 1983 schedules of such adjustments, if any, as might have been required had the E outcome of the uncertainties described above been known, the related supporting schedules, when considered _"
in relation to the basic financial statements taken as a whole, present fairly in all material respects the -;
information set forth therein. i PEAT, h1 ARwlCK, hitTCllELL & CO.
k "
Boston, hlassachusetts h1 arch 12,1984, except as to -;
Note 7 which is as of ,'[
h1 arch 31,1984 %
2_
i 40 sA I
E 4 -'
Item 9. DISAGREEh1ENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable.
] -
='
-=
PART III L Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF TIIE REGISTRANT _,_
Listed below are the names of each director of the Registrant, the principal occupation, busmess ex-perience and other directorships, if any, of each, the positions of each with the Registrant if other than <
director, the age of each, the year in which each became a director and the number of shares of stock "a beneficially owned by each:
Name. age amt the year first became a Director Commam Shares 11eneficially On ned Mart h 30. I9MtIbl2) filLARY P. CLEVELAND (56 years) 1984 100 Shares C Ixeturer in the Department of Social Sciences, Colby-Sawyer College, New London, N.11. since September, N
1981. Associate Professor of History and Political Science, Colby-Sawyer College, for more than five years 7 prior to that date. Also a Director of Center for New Hampshire's Future, Concord, N. H., an incorporator W=
of New Hampshire Charitable Fund, Concord, N. H., and a Commissioner of the New llampshire Com- _-
mission on the Arts, Concord, N.H. T_
"~
GEORGE A. DORR, JR. (67 years) 1954 625 Shares President and a Director of Dorr Fabrics, Inc., a textile factory outlet, Newport, N. H. President and a 3 Director of Dorr Woolen Company, Newport, N.H. and Pinnacle hianufacturing Co., Newport, N.H. for -f more than five years prior to July 1983. Also a Tmstee of Sugar River Savings Bank, Newport, N. H., and a Director of International Packings Corporation, Bristol, N. H. and Roymal Coatings and Chemical Com- 'C pany, Inc., Newport, N. H. p JOHN C. DUFFETF (56 years) 1984 1,4N Shares _[~
Senior Vice President of the Company since December I,1982. A Vice President of the Company from 1978 to 1982.(3) 3 PHILIP S. DUNLAP (65 years) 1932 318 Shares %
Vice President and a Director of h1orrill and Everett, Inc., a real estate and insurance firm, Concord, N.11. I Also Vice President and a Director of Union Realty, Inc., Concord, N. H., and Northern Railroad, Concord, -1 N. H., President and a Director of Concord Builders, Inc., Concord, N. H., Treast.rer and a Director of __
N. H. Automatic Equipment Corp., Concord, N. H., a Director of Concord National Bank, Concord, :
N. H. and Aerotronic Associates Inc., Contoocook, N. H. and aTrustee of Downtown Concord Revitalization Corporation, Concord, N. H.(3) =
PRISCILLA K. FRECHETTE (63 years) 1977 150 Shares A Director of Kingsbury hiachine Tool Corp., a manufacturer of machine tools, Keene, N. H. Also a Director 5 of Ashuelot National Bank, Keene, N. H., and of Center for New Hampshire's Future, Concord, N. II., 2; and a Trustee of Dartmouth College, Hanover, N. H., and New England College, Henniker, N. H.
ROBEET J. HARRISON (52 years) 1979 1,879 Shares President and Chief Executive Officer of the Company since Starch 1,1983. President and Chief Operating Officer from 1981 to 1983. President and Chief Financial Officer from 1980 to 1981. Financial Vice President from 1978 to 1980. Also a Director of hierchants Savings Bank, Alanchester, N. H., hiaine Yankee Atomic Pbwer Company, Augusta, hie., Vermont Yankee Nuclear Power Corporation, Rutland, Vt., Edison Electric %
Institute, Washington, D. C., Atomic Industrial Forum, Washington, D. C., Business & Industry Association of New Hampshire, Concord, N. H., Governor's hianagement Review, Inc., Concord, N. H., and Amoskeag _
Industries, Inc., hianchester, N. H. 7 ANN R. h100DY (67 years) 1975 385 Shares A Director of Edgeomb Steel of New England, Inc., a distributor of metal products, Nashua, N. H. since 'S October,1983. Vice President and a Director of Edgcomb Steel of New England, Inc. for more than five t years prior to that date. Also a Director of Souhegan National Bank, hiilford, N. H., and a Trustee of Wells College, Auroia, N. Y. and White Pines College, Chester, N. H. -
41 w
Name, axe and the year Common Shares Beneficially first became a Director owned March 30.19 Mil)(2)
JOHN J. REILLY, JR. (55 years) 1980 700 Shares President and Treasurer and a Director of John J. Reilly, Inc., an electrical contracting firm, hianchester, N. H. Also Chairman of the Board of Directors of hierchants Savings Bank, Atanchester, N. H., and Chairman of the Board of Trustees of St. Anselm College, hianchester, N. H.
PHILIP B. RYAN (41 years) 1983 115 Shares Vice President of The Bigelow Company, Inc., a management consulting firm, hianchester, N. H. since July,1982. Partner in Bigelow & Company for more than five years prior to that date. Also Chairman of the Board of Trustees of Elliot Hospital, hianches:er, N. H. and a Director of Amoskeag National Bank and Trust Company, hianchester, N. H.
JOHN T. SCHIFFh1AN (43 years) 1983 No Shares Partner of Smith, Batchelder & Rugg, a firm of certified public accountants, Hanover, N. H., a Director of Business & Industry Association of New Hampshire, Concord, N. H., an incorporator of h1ary Hitchcock Hospital, Hanover, N. H., and a Director of Ford Sayre Ski Council, Hanover, N. H.
WILLIAh! hl. SCRANTON (63 years) 1971 324 Shares hianagement Consultant since October,1982. President and a Director of Beede Electrical Instrument Co.,
Inc., a manufacturer of electrical indicating instruments, Penacook, N. H., from February,1977 to October, 1982. President of h1PB Corporation, Keene, N. H., for more than five years prior to that date. Also a Director of Indian Head National Bank of Keene, International Packings Corporation, Bristol, N. H., O.K.
Tool Company, Inc., hiilford, N. H., and Summa Four, Inc.,51anchester, N. H.
EDWARD hl. SHAPIRO (50 years) 1983 1,991 Shares President of New Hampshire College, hianchester, N. H. Also President of N. H. College and University Council, member of New Hampshire Post-Secondary Education Commission, and a Trustee of Elliot Hospital, hianchester, N. H.
WILLIAh! C. TALLh1AN (63 years) 1965 4.593 Shares Chairman of the Company since h1 arch 1,1983. Chairman and Chief Executive Officer from 1980 to 1983.
President and Chief Executive Officer from 1969 to 1980. President from 1965 to 1969. Also Chairman and a Director of Yankee Atomic Electric Company, Westborcugh, N1 ass., and a Director of Amoskeag National Bank and Trust Company, hianchester, N. H., Amoskeag Industries, Inc., hianchester, N. H. and Federated Arts of hianchester, Inc., hianchester, N. H., and a Trustee of Young hien's Christian Association, hian-chester, N. H.
HUGH C. TUTTLE (63 years) 197/ 400 Shares Treasurer and a Director of Tuttle Alarket Gardens, Inc., a farm operator, Dover, N. H. Also a Trustee of Southeast Bank for Savings, Dover, N. H.
(1) No nominee's ownership constitutes as much as 5/100ths of IC4 of the outstanding shares of the Common Stock. No nominees, except 51r. Dorr, h1r. Scranton and hir. Shapiro, own any shares of any series of the Preferred Stock of the Company. hir. Scranton owns 10 shares of Preferred Stock, $100 par value, hir. Dorr owns 400 shares of Preferred Stock, $25 par value, and Mr. Shapiro is the beneficial owner of 100 shares of Preferred Stock, $25 par value.
(2) Includes full (but not partial) shares of Common Stock held for the account of a nominee if a participant in the Company's Dividend Reinvestment and Common Stock Purchase Plan or its Employee Stock Ownership Plan.
(3) Philip S. Dunlap, a Director of the Company, and John C. Duffett, a Senior Vice President and Director of the Company, are brothers-in-law. .
References should be made toItem JA. Executive Officers ofthe Registrant on Pages 16-18 of the Annual Report on Form 10-K for information as to the names and ages of the executive officers of the Company, including certain officers who are also directors of the Company, their positions with the Company both current and for the past five years as applicable, their length of service with the Company and in the case of 42
l l
certain officers who have been employed by the Company less than live years, a brief explanation of the respective prior five years' business positions and responsibilities.
Item 11. EXECUTIVE CONIPENSATION Cash Compensation All remuneration of each of the five most highly compensated executive officers of the Company for services in all capacities to the Company and its subsidiaries for the fiscal year ended December 31,1983, whose remuneration exceeded $60,000 and of all executive officers of the Company as a group is as follows:
CASil COSIPENSATION TABLE w m (C Name of Indisidual Capacities in Cash and cash-equis lent or number in group which sersed forms of remuneratior 3 Robert J. Harrison President and Chief Executive Officer $ 157,624 William C. Tallman Chairman 147,352 David N. hierrill Executive Vice President 117,086(4)
Charles E. Bayless . Financial Vice President 93,683(5)
D. Pierre G. Cameron, Jr. Vice President and General Counsel 88,851 All Executive Officers as a Group (20 Persons) 1,586.378 (1) Except for hir. Bayless as set forth in (5) below, no Executive Officer received cash or cash-equivalent remuneration other than salaries and the cost of certain insurance premiums under group plans available generally to all employees.
(2) The Company has an Employee Stock Ownership Plan to which it contributes in years in which the additional 1% investment tax credit can be utilized as a Federal income tax reduction No Company contributions were made in 1983.
(3) No amounts were deferred pursuant to the Deferred Compensation Plan for Directors and Officers by any of the five most highly compensated officers. The total amount deferred by all Officers in 1983 was
$16,200.
(4) hir. hierrill retired as Executive Vice President of the Company effective Itbruary 29,1984. Supple-mental compensation at the rate of $7,000 per year will be paid to hir. hierrill beginning in 1984.
(5) Includes the third of three annual payments under the Company's hjortgage Rate Interest Assistance Plan for relocating employees.
Pension Plan The Pension Plan of Public Service Company of New Hampshire (Ibnsion Plan) is a trusteed, non-contributory service annuity plan which was established by the Company to provide pension benefits to its employees and is applicable to all employees meetmg a minimum period of service requirement, including officers. The Company makes annual contributions ($5,385,883 in 1983) to the Pension Plan. Annuities are paid from the trust fund under the Pension Plan and are determined under formulas applicable to all employees regardless of position, the amounts depending on length of service and earnings prior to retirement. hir.
Tallman is one of the five members of the Retirement Board of the Pension Plan.
The Pension Plan provides pension benefits which are currently accrued pursuant to the following for-mula: 60% of the annual average January I base salary in the highest paid five consecutive years out of the last ten years preceding retirement (exclusive of salary amounts elected to be deferred under the Company's Deferred Compensation Plan for Directors and Officers), offset by 50% of the estimated Primary Social Security Benefits, prorated for those employees who have not attained age 62 and completed 30 years of service.
The following table illustrates the amount of annual pension benefit under the Pension Plan to an em-ployee in specified average salary and years-of-service classifications. Such benefit amounts have been cal-43
'_.._.~~..
culated as though each employev selected a straight life annuity and retired on December 31,1983, at age 65.
Annual Average January 1
[' aid Estimated Maximum Annual Retirement Benerits C ui i Sersice ) ears Years Out of Last Ten Years Preceding Retirement 1,5 20 25 30 35
$ 75,000 $20,760 $27,332 $33,980 $40,770 $40,770 100,000 28,260 37,332 46,480 55,770 55,770 125,000 35,760 47,332 58,980 70,770 70,770 150,000 43,260 57,332 71,480 8~ 770 85,770 200,000 58,260 77,332 90,000 90,000 90,000 The estimated credited years of service for the individuals named in the Cash Compensation Table, assuming retirement as at March 30,1984, are as follows: R. J. Harrison: 27 years; W. C. Tallman: 37 years; D. N. Merrill: 34 years; C. E. Bayless: 3 years; D. P. G. Cameron, Jr.: 3 years.
Employee Stock Ownership Plan The Company has an Employee Stock Ownership Plan ("ESOP"). Pursuant to the ESOP, the Company contributes for the benefit of all participating employees an amount up to an additional 1% investment tax credit for each calendar year the ESOP is in effect. Company contributions to its ESOP reduce the Company's federal income tax liability by the amount so contributed. Contributions by the Company for any year may be deferred until the Company can so utilize these federal income tax reductions. In general, shares of Common Stock accumulated under the ESOP may not be distributed to participants until termination of employment with the Company. No Company contributions were made in 1983.
Deferred Compensation Plan for Directors and Officers The Company has a Deferred Compensation Plan for Directors and Officers (" Deferred Compensation Plan"). Under the Deferred Compensation Plan, Directors and Officers of the Company may elect to defer portions of their fees or salaries until in the case of an officer retirement from such position or in the case of a Director ceasing to be a member of the Board of Directors. Portions of salaries deferred by Officers are not included in their base salaries for purposes of determining the amounts of their annual retirement benefits under the Pension Plan. Deferred payments accrue interest at the rate of %2 of 90% of the floating prime rate at The First National Bank of Boston as of the beginning of each month, compounded semiannually. There is no matching or contribution by the Company for the portions of salaries deferred. Under the Deferred Compensation Plan, participants may elect an amount to be deferred annually and indicate preferences as to the method of payment and names of beneficiaries. Payments begin for Directors when they cease to be Directors of the Company and for Officers upon or after their retirement under the Pension Plan of the Company or upon leaving employment with the Company.
Remuneration of Directors Prior to the action described below. Directors w ho are not employees of the Company received an annual retainer of $5,000, as well as a fee of $300 for each Board and Committee meeting attended, except that they received a fee of $150 for a Committee meeting attended on the same day as a Board meeting. Directors who are full-time employees a the Company receive no fees for service on the Board of Directors. Committee Chairmen received an ad.ntional annual retainer of $500. Effective May 1,1984, the annual retainer and fees for attendance at Board and Committee meetings were reduced by 15% by vote of the Board.
Item 12. SECURITY OWNERSIIIP OF CERTAIN llENEFICIAI, OWNERS AND MANAGEMENT Reference should be made to the information furnished in the tabular listing of Directors of the Company under item /0. Directors and Officers of the Registrant for information as to the shares of stock owned by the Directors of the Company.
The Company is unaware that any person owns beneficially as much as 57c of the outstanding shares of either Common Stock or Preferred Stock, $25 par value. The following table sets forth information with 44
respect to shares of Preferred Stock, $100 par value, owned beneficially as of March 30,1984, by all persons who are known by the Compsny to own beneficially more than 5% of the outstanding shares of that class.
Name and Address Amount and Nature hrtent Title of Class of Reneficial Owner of Benencial Ownership of Class Preferred, The Prudential Insurance Company 90,000 Record and 14.61 %
$100 par value of America Beneticial Box 7119 Church Street Station New York, New York 10249 Preferred, The Mutual Benefit Life 56,400 Record and 9.16%
$100 par value Insurance Company Beneficial 520 Broad Street Newark, New Jersey 17101 The following table sets forth information as of March 30,1984, with respect to the number of shares of Common Stock owned beneficially by all Directors and Officers as a group:
Wrcent of Number of Shares Outstanding Shares ~
18,873 0.05 %
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable.
45
PART IV Item 14. EXIllBITS, FINANCIAL STATEAIENT SCIIEDULES, AND REPORTS ON FORhl 8-K The following documents are filed as a part of this report:
Financial Statements (see Item 8):
Statements of Earnings, Years ended December 31,1983,1982 and 1981 Balance Sheets, December 31,1983 and 1982 Statements of Capitalization, December 31,1983 and 1982 Notes.to Statements of Capitalization Statements of Changes in Financial Position, Years ended December 31,1983,1982 and 1981 Statements of Changes in Common Stock Equity, Years ended December 31,1983,1982 and 1981 Notes to Financial Statements Report of Independent Certified Public Accountants Financial Statement Schedules Schedule V - Utility Plant, Years ended December 31,1983,1982 and 1981 Schedule VI- Accumulated Provision for Depreciation. Years ended December 31,1983,1982 and- 1981 Schedule Vill- Valuation and Qualifying Accounts, Years ended December 31,1983,1982 and 1981 All other schedules are omitted as the required information is not applicab!c or is included in the financial statements or related notes.
Exhibits ne exhibits which are filed with this Form 10-K or which are incorporated herein by reference are set forth in the Exhibit Index which appears in Part IV of this report at pages through Reports on Form 8-K Current Reports on Form 8-K were filed during the fourth quarter of 1983 as follows:
Date of Report item Reported December 9,1983 Item 5. Other Materially important Events 46
l 1
l PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE SCHEDULE V- UTILITY PLANT Years Ended December 31,' 1983,1982 and 1981 Other Balance at Changes - Balance Beginning Additions Retire. Add at End Classification of IVriod at Cast ments (Deduct) of I4riod (Thousands of Dollars)
YEAR ENDED DECEMBER 31,1983 Intangibles .. ... ...... ..... .. .$ 45 $ - $- $ - ~$ 45 Generating Plant - Steam . . . . . . . 197,414 7,039 3,338 (793) 200,322 Generating Plant - Hydro .. .. . 23,544 6,753 45 5 30,257 Generating Plant - Other . . . . . .. 8,408 3 - -
8,411 Transmission . . . . . . . . . . .. ..... 133,496 18,268 257 100 151,607 Distribution . . . . . . . . . . . . .. .. 201,484 15,776 2,332 (651) 214,277 General . . . . . . . .... ..... ,27,119 7,545 1,790 -
32,874 Plant Held for Future Use . ... . 1,944 - -
(49) 1,895 Unfinished Construction . . ... .. '961,350 358,220 - -
1,319,570 Nuclear Fuel . . . . ... 66.259 12.305 - - 78,564 TOTAL. .. .
. $l.621,06J $415,909 $7,762 $ (l.388) $2.037,822 YE R ENDED DECEMBER 31,1982 Intangibles . . . . . . . . ... .... . $ 45 $ - $- $ - $ 45 Generating Plant - Steam . .. . I89,077 9,301 964 -
197,414 Generating Plant . Hydro . . . 22,861 837 154 -
23,544 Generating Plant -- Other . . . . .. 8,409 -
1 - 8,408 Transmission . . '. ... . . 125.008 9,035 230 (317) 133,496 Distribution . . . . . .... . . 192,426 11,134 2,171 95 201,484 General . . . . . . . . 23,561 4,252 694 -
27,119 Plant Held for Future Use . . 1,684 (57) -
317 1,944
. Unfinished Consuuction . . . . .. 716,531 259.623 -
(14,804) 961,350 Nucicar Fuel . . ... . 55.995 10,843 _- (579) 66.259 TOTAI. ~. . .. . $l .335.597 $304.968 $4,214 $(15.288) $1,621.063 YEAR ENDED DECEMBER 31,1981 Intangibles .. . ... .. .... $ 45 $ - $- $ - $ 45 Generating Plant . Steam . . . . .. 190,198 1,538 2,336 (323) 189,077 Generating Plant - Hydro . .. . 15,740 7,177 56 - 22,861 Generating Plant-Other .. . . . 8,393 16 - -
8,409 Transmission .
. ... . ... .124,482 1,035 3% (203) 125,008 Distribution . .. ..... ... 186,288 12,280 2,361 (3,781) 192,426 General . . . . . . . .g . . .. 21,425 3,094 958 -
23,561 Plant Heid for Future Use ' . . .. 1,830 (1) -
(145) 1,684 Unfinished Construction . . . 671,951 95,881 -
(51,301) 716,531
, Nuclear Fuel . .. ... . . . 52.199 3,706 - - 55,995 TOTAL. . .. . .. . Si,272,551 $124.816 $6,017 $(55,753) $1.335,597 i
s e
47 o
4 p
PUBI,IC SERVICE COMPANY OF NEW HAMPSHIRE SCHEDULE VI- ACCUMULATED PROVISION FOR DEPRECIATION Years Ended December 31,1983,1982 and 1981
~
Additions Other Balance at Charged to Changes - Balance Beginning Costs and Retire. Add atEnd Description of Period Espenses ments (Deducts of Period (Thousands of Ibilars)
Accumulated Provision for Deprecia-tion of Electric Plant:
1983. ... . .. .. $188,697 $21,016 $7,734 $(935)(A) $201.044 1982.... .. . 173,695 19,558 4,201 (355)(A) 188,697 1981 .. .. . . 161,703 18,663 5,836 (835)(A) 173,695 1983 1982 1981 (A) Represents:
Depreciation charged to automotive clearing . $ 1,006 $ 906 $ 825 Depreciation on plant units acquired .. 2 3 -
Depreciation charged to construction 163 Si 10 Net salvage . . .. . .. .. (1,135) (1,352) (240)
Non-operating reserve transfer . . (754) --
(409)
Plant sold . . (217) 37 (1.021)
$ (92) $ (355) $ (835) 48
PUBLIC SERVICE CONIPANY OF NEW IIANIPSHIRE SCHEDULE Vill-VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31,1983,1982 and 1981 Additions Balance at Charged to Charged Balance Beginning Costs and to Other atEnd Description of Period Espenses Accounts Deductions of Period
- (Thousands of Dollars)
- Reserves Deducted From Related Assets:
Provision for Uncollectible Accounts 1983 . .. . ... $510 $1,400 $- $1,035(A) $ 875 1982 .. . .. .. . . .. 330 1,695 - 1,515(A) 510 1981 . .. .. .. .. 320 1,284 - 1,274( A) 330 Accumulated Provision for Depre-ciation of Non-Operating Property 1983 ...... ... .. .. $944 $ 26 $754(B) $ 355(E) $1,369 1982 .. . . . . 947 22 -
25(E) 944 1981 ... .. . . 533 5 409(B) -
947
- Reserve included Under " Deferred Credits - Other":
Reserve for Injuries and Damages 1983 . . . ... $616 $ 480 $- $ 466(D) $ 630 1982 . .. 441 680 178(C) 683(D) 616 1981 . . . .. 399 250 108(C) 316(D) 441 (A) Accounts written off, net of rcoveries.
(B) Non-operating reserve transferred to operating.
(C) Charged principally to construction and retirement accounts.
(D) Losses charged to reserve.
(E) Sale of non-operating property.
l 49 s
i SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE By R. J. HARRISON R.1. HARRIS 0N, President Date: March 31,1984 -
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the, following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date W. C. TALLMAN Chairman; Director - March 31,1984 W. C. TALLM.AN President and Chief R. J. HARRISON Executive Officer; Director March 31,1984 R. J. HARRISON (Principal Executive Officer)
C. E. B AYLESS Financial Vice President March 31,1984 C. E. BAYLESs (Principal Financial Othcer)
W. T. FRAIN, JR. Vice President March 31,1984 W. T. FRAIN, JR.
(Principal Accounting Onice-)
t Director March ,1984 HILARY P. CLEVELAND GEORGE A. DORR, JR. Director March 31,1984 GEORGE A. DoRR, JR.
PHILIP S. DUNLAP Director March 31,1984 PillLIP S. DUNLAP Director March ,1984 PRISCILLA K. FRECllETTE ANN R. MOODY Director March 31,1984 ANN R. MOODY JOHN J. REILLY, JR. Director March 31,1984 JOllN J. REILLY, JR.
PHILIP B. RYAN Director March 31,1984 PitiLir B. RYAN 50
4 R
I
.'e *
. Sinnesere 7 3 ,,
v JOHN T. SCHIFFMAN WILLIAM M. SCRANTON Director March 31,1984 WILLIAM M. SCRANTON EowARD M. SHAPIRO Director March 31,1984 EnwAno M. SHAPiRo Hucu C. TUTTLE ,
Director March *1984 RALPH P. WHITE d
4 1
4-4 4
J f
51
EXHIBIT INDEX The following designated exhibits are, as indicated below, either filed herewith or have heretofore been filed with the Securities and Exchange Commission under the Securities Act of 1933, the Securities Exchange Act of 1934 or the Public Utility Holding Company Act of 1935 and are referred to and incorporated herein by reference to such filings.
SEC Form 10.K Eshibit Ihwket Page Nos.
Exhibit 3. Articles ofincorporation and by-laws incorporated herein by reference:
3.1. Articles of Agreement, as amended. 4.1 2-86798 3.2. By-laws, as amended. 4.2 2-786 %
Exhibit 4. Instruments depning the rights of security holders, including indentures incorporated herein by reference:
4.1. General and Refunding hiongage Indenture dated as of August 15,1978 between the Company and New England hierchants National Bank, Trustee. 2.32 2-62856 4.1.1. First Supplemental Indenture to the General and Refunding Mortgage Indenture dated as of Sep-tember 15, 1979. 2.32 2-65427 4.1.2. Second Supplemental Indenture to the General and Refunding Afortgage Indenture dated as of January 15, 1980. 2.5 2-66334 4.1.3. Third Supplemental Indenture to the General and Refunding Afortgage Indenture dated as of De-cember 1,1980. 2.3.3 2-69947 4.1.4. Fourth Supplemental Indenture to the General and Refunding Afortgage Indenture dated as of June 1,1982. 4.1.4 2-77577 4.2. First hfortgage dated as of January 1,1943 be-tween the Company and Old Colony Trust Com-
- pany, Trustee. 4.4 2 81165 4.2.1. First Supplemental Indenture to the Company's First hfortgage dated as of December I,1943. A-la 70-684 4.2.2. Second Supplemental Indenture to the Compa-ny's First hfortgage dated as of June 1,1947 7.3 2-7066 4.2.3 Third Supplemental Indenture dated as of Janu-ary 1,1948. 7.4 2-7324 4.2.4. Fourth Supplemental Indenture dated as of Oc-tober I,1948. 7.5 2-7658 4.2.5. Fifth Supplemental Indenture dated as of June 1, 1949. 7.6 2-7985 4.2.6. Sixth Supplemental Indenture dated as of June 1.
1951. 7.7 2-8969 4.2.7. Seventh Supplemental lndenture dated as of Sep-tember 1,1953. 4.9 2-IN26 52
SEC Form 10.K ExhHdt Docket Page Nos.
4.2.8. Eighth l Supplemental Indenture dated as of No-vember 1,1954.- 4.4.8 2-81165
- 4.2.9. Ninth Supplemental Indenture dated as of June 1,1956. 4.4.9 2-81165
'4.2.10. Tenth Supplemental Indenture dated as of Oc-tober 1,1957. 2.12 2-15260 4.2.11. Eleventh Supplemental Indenture dated as of July
'1,1959. ~
2.13 2-17162 4.2.12. Twelfth Supplemental Indenture dated as of No-vember 1,1960. 2.14 2-20451 4.2.13. .. Thirteenth Supplemental Indenture dated as of July 1,1%2. 4.4.13 2-81165
' 4.2.14.
Iburteenth Supplemental Indenture dated as of .
January 1,1966. 4.4.14 2-81165 4.2.15. Fifteenth Supplemental Indenture dated as of Oc-tober1,1966.~ 4.4.15 2-81165 4.2.16. Sixteenth Supplemental Indenture dated as of June 1,1%7. 4.4.16 2-81165 4.2.17. Seventeenth Supplemental Indenture dated as of November 1,1%8. 2.19 2-30554 4
^
4.2.18. Eighteenth Supplemental Indenture dated as of November 1,1970. L 4.20 2-38646 4.2.19. Nineteenth Supplemental Indenture dated as of June 15,1972. 2.22 2-50198
- 4.2.20. Twentieth Supplemental Indenture dated as of 4 March 1,1974. 2.23 2-50198 4.2.21. ' Twenty-First Supplemental Indenture dated as of October 15, 1974. 2.24 2-51999 4.2.22. Twenty-Second Supplemental Indenture dated as of December 1,1974. 2.25 2-54646 4.2.23. Twenty-Third Supplemental Indenture dated as of March 1,1975. 2.26 2-54646 4.2.24. Twenty-Fourth Supplemental Indenture dated as of October 15,1975. 2.27 2-57289 4.2.25. - Twenty-Fifth Supplemental Indenture dated as of October 15,1976. 2.28 2-59516
- 4.2.26. Twenty-Sixth Supplemental Indenture dated as of November 1,1976. 2.29 2-59516 4.2.27. Twenty-Seventh Supplemental Indenture dated as of May 1,1978. 2.30 2 61924 4.2.28. Twenty-Eighth Supplemental Indenture dated as of August 15,1978. 2.31 2-62856
. v.
53 f
e e . . . . ,_, -- . - . . _ , , . ~ . _
- ,. _ ...v.... , , - - . .e ...-e.,
= .
7-SEC Foran 10 K i c t ExMMt Docket Page Nos.
4.2.29. Twenty-Ninth Supplemental Indenture dated as
. of September 15, 1979. ,
2.33 2-65427 b 4.2.30. 'Ihirtieth Supplemental Indenture dated as of Jan-
" ; uary 15,1980. 2.4.30 2-66492 4.2.31. Thirty-First Supplemental Indenture dated as of December 1,1980. 2.4.31 2-69947 4.2.32. . Thirty-Second Supplemental Indenture dated as of June 1,1982. 4.2.32 2-77577 4.3. Indenture dated as of August 15,1981 among PSNH International Finance N.V. and PSNH In-ternational Finance B.V., as issuers; the Com- 4.3 Annual CPod 1-6392 for 1981 -
pany, as Guarantor; and Morgan Guaranty Trust
~ Company of New York, as Trustee.
4.4.' Promissory Note dated August 15,1981, from 4,4 fAnnual Report the Company to PSNH Intemational Finance N.V. 11-6392 for 1981 4.5. Promissory Note dated August 15,1981, from fAnnual Repon 4.5 the Company to PSNH International Finance B.V. (1-6392 for 1981 4.6. Indenture dated as of October I,1982 between the Company and Manufacturers Hanover Trust Company, Trustee, relating to the 15%% Deben-tures due 1988. 4.3 2 79411 4.7.- Indenture dated as of itbruary 1,1983 between the Company and Manufacturers Hanover Trust Company, Trustee, relating to the 14%% Deben-tures due 1991. -4.6 2-81367 4.8. Indenture dated as of November I,1983 between ' Registration the Company and Manufacturers Hanover Trust Statement on
! Company, Trustee, relating to the 15% Deben- Ibrm 8-A tures due 2003. < relating to 15% Debentures due2003 Filed herewith:
-4.9. Trust Indenture dated as of December 1,1983 between the New Hampshire Industrial Devel-opment Authority and State Street Bank and Trust i Company, Trustee, relating to the Pollution Con-
_ trol Revenue Bonds,1983 Series A (Public Ser-vice Company of New Hampshire Project).
4.9.1. Loan Agreement dated as of December I,1983 between the Company and the New Hampshire Industrial Development Authority relating to loans to the Company of the proceeds of the bonds is- ,
sued under Exhibit 4.9.
I' 54
SEC Form 10-K Exhibit Docket Page Nos.
Enkibit 10. MaterialContracts incorporated herein by reference:.
10.1. Acceptance and Stand-by Revolving Credit Pa' (Annual Report cility Agreement dated as of June 18,1982 among 10.20 1-6392 for 1982 the Company and four banks.
Filed herewith:
10.1.1. Amendment No. I to Exhibit 10.1 dated as of March 7,1983.
10.2. Nuclear Material Lease and Security Agreement dated as of June 15,1983 between the Company and Prulease, Inc.
10.3. Ibrm of New England Power Ibol Agreement dated as of September I,1971 as amended to November 15, 1983. .
Incorporated herein by reference:
10.4. - Agreement dated October 13, 1972 for Joint Ownership, Construction and Operation of Pil-grim Unit No. 2 among Boston Edison Company and other utilities including the Company. 5.3(d) 2-45990 10.4.1. Amendments Nos. I and 2 to Exhibit 10.4 dated
- l. September 20,1973, and September 15, 1974 respectively. 5.14 2-51999 10.4.2. Amendment No. 3 to Exhibit 10.4 dated Decem-ber1,1974. 13-45 2-54449 10.4.3. Amendments Nos. 4 and 5 to Exhibit 10.4 dated Itbruary 15, 1975 and April 30, 1975, respec- 13-52-A tively. 13-52-B 2-53819 10.4.4. Amendment No. 6 to Exhibit 10.4 dated June 30, 1975. 13-45(a) 2-54449 10.4.5. Amendment No. 7 to Exhibit 10.4 dated Novem-ber 30,1975. 5.9(f) 2-55748 10.4.6. Addendum to Exhibit 10.4 dated as of October ' nu IRepon I,1976. 10'1 l-2301-2 for 1976 10.5. Agreement for Sharing Costs Associated with i Pilgrim Unit No. 2 Transmission dated October 13, 1972 among Boston Edison Company and other utilities including the Company. 5.3(c) 2-45990 10.5.1. Addendum to Exhibit 10.5 dated as of January Annual Repon l 17, 1975. I*5*I I l-2301-2 for 1975 '
10.5.2. Addendum to Exhibit 10.5 dated as of October Annual Repon
! I,1976. 10'2 11-2301-2 for 1976 l
! 55 1
. _ _ _ _ - - ~ _ _ _ _ - _ . - _ _ _ _ _ _ _ _ _ - - _ _ _ _ _ - _
7 ._
-N.
l i
SEC - Feren 10 K 1 Exhibit Decket Page Nes.
10.6. Agreement' dated as of May 1,1973 for Joint Ownership, Construction and Operation of New
. Hampshire Nuclear Units among the Company
- and other utilities. 13-57 2-48966 10.6.1. 7 Amendments to Exhibit 10.6 dated May 24,1974, .
' June 21,1974 and September 25,1974. 5.15 2-51999 10.6.2. Amendments to Exhibit 10.6 dated October 25, 1974 and January 31,1975. 5.23 2-54646 10.6.3. ' Sixth Amendment to Exhibit 10.6 dated as of April 18, 1979. 5.4.3 2-M294
~
10.6.4. Seventh Amendment to Exhibit 10.6 dated as of April 18,1979. 5.4.4 2-M294 10.6.5.. Eighth Amendment to Exhibit 10.6 dated as of
- April 25,1979. 5.4.5 2-64815 10.6.6. Ninth Amendment to Exhibit 10.6 dated as of June 8,1979. 5.4.6 2-M815 10.6.7. Tenth Amendment to Exhibit 10.6 dated as of October 10, 1979. 5.4.2 2-66334 10.6.8. Eleventh Amendment to Exhibit 10.6 dated as of December 15, 1979. 5.4.8 2-6M92 10.6.9. Twelfth Amendment to Exhibit 10.6 dated as of June 16,1980. 5.4.9 ' 2-68168 10.6.10. 'Ihirteenth Amendment to Exhibit 10.6 dated as of December 31,1980, 10.6.10 2-70579 10.6.11. R>urteenth Amendment to Exhibit 10.6 dated as Annual Regwn 10'6'I I of June I,1982. l-6392 for 1982 10.7. ' Transmission Support Agreement dated as of May 1.1973 among the Company and other utilities with respect to New Hampshire nuclear units.. 13-58 2-48966 10.8. Sharing Agreement - 1979 Connecticut Nuclear Unit dated September 1,1973 to which the Com-pany is a party. 6.43 2-50142 ;
10.8.1. Amendment to Exhibit 10.8 dated August I,1974. 5.45 2-52392 10.8.2. Amendment to Exhibit 10.8 dated December 15, 1975. 7.47 .2-60806 10.9. Agreement executed on January 23,1973 for the design and furnishing of the nuclear steam supply systems for the Company's Seabrook plant be. C ,"6312 )72 tween the Company and Westinghouse Electric ~
Corporation.
10.10. Agreement dated November I,1974 for Joint Ownership, Construction and Operation of Wil-liam F. Wyman Unit No. 4 anmng Central Maine
- Power Company and other utilities including the ,
Company. 5.16 2 52900
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p SEC Fermite.K Exhibit Dechst Phge Nes.
10.10.1. Amendment to Exhibit 10.10 dated June 30,1975. 5.48 2-55458
- 10.10.2. Amendment to Exhibit 10.10 dated as of August '
'16, 1976 5.19 2-58251 10.10.J. Amendment to Exhibit 10.10 dated as of Decem-ber 31,1978.
10.11. Transmission Supnort Agreement dated Novem-ber I,1974 among Central Maine Power Com-pany and other utilities including the Company. 13 57 2-54449
.10.12. Transmission Support Agreemect dated August -
9,1974 between the Connecticut Light and 15cr Company and other utilities including the Com-pany. 5.24 2-54646 l 10.13. Pension Plan of Public Service Company of New Hampshire, amended effective as of January 1, 10.14 ,"6392 f 81
! 1981.
t 10.14. Amended and Restated Revolving Credit Agree-ment dated as of November 30,1982, among the 10.15.13 ,"6392 f 2 Company and nine Banks.
Filed herewith:
( 10.14.1. Amendment No. I to Exhibit 10.14 dated as of
- April 25,1983.
I 10.14.2. Amendment No. 2 to Exhibit 10.14 dated as of i
! November 16,1983.
l 10.14.3. Amendment No. 3 to Exhibit 10.14 dated as of December 13. 1983.
incorporated herein by reference:
10.15. Term Loan Agreement dated as of December 28, p fAnnual Report 1977, among the Company and seven Banks. 116392 for 1977 10.15.1. Amendment No. I to Exhibit 10.15 dated as of December 26,1978. 5.16.I 2 62856 ;
10.15.2. Amendment No. 2 to Exhibit 10.15 dated as of December 28,1979. 5.15.2 2 66334 10.15.3. Amendment No. 3 to Exhibit 10.15 Jated as of
! December 1,1980. 10.17.3 2 70579 10.15.4. Amendment No. 4 to Exhibit 10.15 dated as of A""""I
- to* 16*4 December 30,1981. 16392 for 1981 10.15.5. Amendment No. 5 to Exhibit 10.15 dated as of 10'16'5
^"""*I N'N January 7,1983. l-6392 for 1982 10.15.6. Amendment No. 6 to Exhibit 10.15 dated as of fAnnual Report 10.16.6 l
l'ebruary 4,1983. 116392 for 1982 10.15.7. Amendment No. 7 to Exhibit 10.15 dated as of fAnnual Report 10*16*4
- March 7,1983. 116392 for 1982 57
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SEC Form 10.K bhibit Ihwket l' age Nos.
Filed herewith:
10.15.8. Amendment No. 8 to Exhibit 10.15 dated as of April i1,1983.
10.15.9. Amendment No. 9 to Exhibit 10.15 dated as of April 25,1983.
Incorporated herein by reference:
10.16. Eurmlollar Loan Agreement dated August 25, 1980. 5.16 2-69370 10.16.1. Amendment and Restatement to Exhibit 10.16 fAnnual Report dated as of December 8,1981. 10.17.1 116392 for 1981 10.16.2. Amendment No. I to Exhibit 10.16.1 dated as 10 17" ^ " " " ' #F" of August 23,1982. l-6392 for 1982 10.17. Employee Stock Ownership Plan and Trust. 10.19 2-70579 Exhibit i2. Statement re computation of ratios Filed herewith:
12.1. Calculation of Ratios of Eamings to I ixed Charges.
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EXHIBIT 12.1 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE CALCULATION OF RATIOS OF EARNINGS TO FIXED CHARGES Year Fnded Ileceanher 31.
E E .
E E E (Thousands of thdlers)
Ne t income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $151,658 $ 91,623 $ 77,187 $ 59,847 $40,719 I Add: Provision for Taxes Based on income 4,783 4,764 4,688- 5,526 5,410 Taxes Applicable to AFUDC . . . . . . . . 28,282 25.5 % 24.333 17,093 9,987 Fixed Charges . . . . . . . . . . . . . . . . . . . . 93,209 81,667 77,459 62,681 43,614 277,932 203,650 183,667 145,147 99,730 Deduct: Undistributed Earnings of Affiliated Companies .................. 2,096 2,313 790 (48) (92)
Earnings Available for Fixed Charges . . . . . . . $275.836. $201,337 $182,877 $145.195 $99,822 Fixed Charges Interest on Long-Term Debt . . ........ $ 85,649 $ 61,169 $ 50,229 5 39,711 $28,247 Other Interest . . . . . . . . . . . . . . . . . . . . . . . 6,122 19,015 25,989 21,847 14,465 Interest Component of Rental Charges . . 1,438 1,483 1,241 1,123 902 Total Fixed Charges . . . . . . . . . . . . . . . . . . . . . $ 93,269 $ 81,667 $ 77,459 $ 62,681 $43.614
, Ratios .. ., .... ............ ..... . 2.96 2.47 2.36 2.32 2.29 l.
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GeneralInformation also available. If you would like a copy, or Annual Meeting of Shareowners have questions about the Annual Iteport or All shareowners are urged to attend the the Company, please write to Itussell A.
Annual Meeting to be held on Thursday. Winslow. Secretary. Public Service of New i June 7.1984, at 9.30 a.m.. Eastern llampshire. P.O. Box 330. Manchester. Nil l' Daylight Saving Time, at the Sheraton-Tara 03105.
liotel Ballroom. Nashua Nil (Route 3- Stock Exchange Listing Everett Turnpike. Exit I to Tara Boulevard). Shares of 85 par value common stock and I During the meeting there will be an 825 par value preferred stock are listed on I opportunity to discuss matters of interest the New York Stock Exchange. The pertaining to the Company. Company's symbol on the exchange is PNil.
Description of Business Common Stock Ownership Public Service of New Ilampshire is the As of December 31.1983, there were 75.396 '
largest electric utility in New Ilampshire, record owners of the Company's common supplying electricity to approximately three- stock
- quarters of the state's population. The Company distributes and sells electricity at Shareowner Information retail in approximately 200 cities and towns ' Shareowner inquiries regarding change of in the state. The Company also sells address, dividends, stock transfer electricity at wholesale to seven other requirements, k>st or stolen certificates. or utilities. other account information should be directed to the Transfer Agent and dividend Annual Report and disbursing agent as follows:
Statistical Supplement
. This 1983 Annual Report has been approved The First National Bank of Hoston by the Board of Directers. The 1983 Shareholder Services Division Statistical Supplement, containing P.O. Box 644 corporate statistics for the last 10 years, is Boston, MA 02102 t
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Bulk Rata U.S. Postage Public Service of New Hampshire 1000 Elm Street, Manchester, New Hampshire 03105 Permit No. &
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i NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC.
FINANCIAL STATENENTS PLYMOUTH, NEW HAMPSHIRE
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DECEMBER 31, 1983 k
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m COMENTS AUDITED FINANCIAL STATEMENTS ACCOUNTANTS' REPORT . . . . . . . . . . . . . . . . . ........ PAGE 1 BALANCE SHEET . . . . . . . . .................... 2 STATEMENT OF REVENUES AND EXPENSES. . . . . . . . . . . . . . . . . . 3 STATEMENT OF CHANGES IN FINANCIAL POSITION. . . . . . . . . . . . . . 4 NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 5-9 OTHER FINANCIAL INFORMATION ACCOUNTANTS' REPORT ON OTHER FINANCIAL INFORMATION. . . . ...... 10 SUPPORTING SCHEDULES TO STATEMENT OF REVENUES AND EXPENSES ELECTRIC ENERGY REVENUE . . . . . . . . . . . . . . . . . . . . . . 11 DISTRIBUTION EXPENSE - OPERATION. . . . . . . . . . . . . . . . . . 11 DISTRIBUTION AND TRANSMISSION EXPENSE - MAINTENANCE . . . . . . . . 11 CONSUMER ACCOUlfr EXPENSE. . . . . . . . . . . . . . . . . . . . . . 11 AN!INISTRATIVE AND GENERAL. . . . . . . . . . . . . . . . . . . . . 12 NONOPERATING SALES AND EXPENSES . . . . . . . . . . . . . . . . . . 12 RElffAL OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 12 I
(0o3)434 854o K, f y E scWw huj4c .CdconM
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% ff TMd BL/pr & Wluaws. T@d Em 03053 The Board of Directors New Hampshire Electric Cooperative, Inc.
Plymouth, New Hampshire l We have examined the accompanying balance sheet of New Hampshire Electric Cooperative, Inc. as of December 31,1983 and 1982 and the related statements of revenues and expenses and changes in financial position for the years then ended.
Our examination was made in accordance with generally accepted auditing standards, and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the aforementioned financial statements present fairly the financial position of New Hampshire Electric Cooperative, Inc. at December 31, 1983 and 1982, and the results of its operations and changes in financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis with that of the preceding year, except for accounting changes in 1982 (in which we concur) described in Note A to the financial statements.
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. February 24, 1984 i
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NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC.
- BALANCE SHEET DECEMBER 31, 1983 AND 1982 4
ASSETS .
Current Prior Increase m Year Year (Decrease)
UTILITY PLANT (Notes A, B and F)
Electric plant in service $ 60,476,645 $ 56,125,336 $ 4,351,309 ,
Construction work in process 70,625,436 50,710,870 19,914,566 4
131,102,081 106,836,206 24,265,875 Accumulated depreciation .( 14,469,536) ( 13,508,486) ( 961,050) i 116,632,545 93,327,720 23,304,825 OTHER PROPERTY AND INVESTMENT I (Note C)
Non-utility property, net of accumulated i depreciation (1983 - $108,742 and i 1982 - $91,129) 195,876 202,284 ( 6,408)
Investments in associated organizations 1,499,880 1,246,722 253,158 3 Other investments 2,000 2,000 l 1,697,756 1,451,006 246,750 :
CURRENT ASSETS Cash general funds 532,799 425,144 107,655 I Cash - loan funds 385,779 12,818 372,961 1 Temporary investment 4,445,001 1,217,549 3,227,452 Accounts receivable, less allowance for doubtful accounts l t
(1983 - $126,055 and 1982 - $107,926) 2,954,662 2,827,377 127,285 Material and supplies (at average cost) 1,086,799 888,524 198,275 Prepaid expenses 386,689 320,225 66,464 Other current and accrued assets 60,241 14,270 45,971 9,851,970 5,705,907 4,146,063 o
DEFERRED CHARGES (Note A) 609,307 2,035,787 ( 1,426,480)
TOTAL ASSETS $ 128,791,578 $ 102,520,420 $ 26,271,158 2
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i LIABILITIES i
Current Prior Increase Year Year (Decrease)
- PATRONAGE CAPITAL (Note D)
. Patronage capital assignable $ 5,424,168 $ 3,105,687 $ 2,318,481 LONG TERM DEBTS (Note E)
Rural Electrification Administration 47,981,362 45,343,317 2,638,045 Due on Seabrook, NH nuclear project 69,613,991 49,330,864 20,283,127 Associated o'rganization 1,935,821 324,485 1,611,336 Bank mortgage note payable 185,645 199,428 ( 13,783) 119,716,819 95,198,094 24,518,725 CURRENT LIABILITIES Accounts payable 2,593,089 3,360,836 ( 767,747)
Customer deposits 146,795 121,974 24,821 Interest on long term debt 338,982 312,714 26,268 Accrued taxes 158,426 131,414 27,012 Other current liabilities 252,294 226,705 ,
25,589 3,489,586 4,153,643 ( 664,057)
DEFERRED CREDITS 161,005 62,996 98,009 i
CONNITMENTS (Notes A, C, F and G)
TOTAL LIABILITIES $128,791,578 $102,520,420 $ 26,271,158 t
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The accompanying notes are an integral part of the financial statements.
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NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC.
STATEMENT OF REVENUES AND EXPENSES
, FOR THE YEARS ENDED DECEMBER 31, 1983 AND 1982 1
Current Prior Increase Year Year (Decrease)
[
t Operating revenues Electric energy revenue $ 32,026,335 $ 29,810,264 $ 2,216,071 Rent from electric property 378,439 363,585 14,854 Other electric revenue 267,592 210,428 57,164 32,672,366 30,384,277 2,288,089 l
Operating expenses (Note A)
Cost of purchased power 21,505,187 21,634,095 ( 128,908)
Distribution expense -
Operation 682,096 668,322 13,774 Maintenance 927,236 842,118 85,118 ,
Consumer account expense 927,010 840,468 86,542 Administrative and general expense 1,777,049 1,667,242 109,807 Provision for depreciation and amortization 1,983,215 1,833,399 149,816 Taxes 925,368 573,913 351,455 i Interest 8,874,902 7,453,622 1,421,280 6
Allowance for borrowed funds used during construction ( 6,851,765) ( 5,670,714) (1,181,051) 30,750,298 29,842,465 907,833 Operating margin 1,922,068 541,812 1,380,256 Nonoperating revenues i Interest income 399,331 354,890 44,441 Net income (loss) on nonoperating sales 532 ( 2,450) 2,982 Net gain on rental operations 7,981 8,243 ( 262)
Net loss on prog erty disposition ( 981)
Nonoperating margin 406,863 360,683 46,180 I. Net margin for year S 2,328,931 $ 902,495 $ 1,426,436 The accompanying notes are an integral part of the financial statements.
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. .NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC.
- STATEMENT OF CHANGES IN FINANCIAL POSITION FOR THE YEARS ENDED DECEMBER 31, 1983 AND 1982 Current Prior Year Year
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- !- SOURCE OF FUNDS From operations .
Operating margin _ $ 1,922,068 $ 433,216 Nonoperating margin- .
406,863 360,683
_ Expenses not requiring use of funds -
'j Depreciation and amortization 1,991,972- 1,842,156 Items not providing funds Patronage certificates ( 1,272) 4,319,631 2,636,055 Depreciation capLtalized ,
91,757 130,086 Long term debt incurred due to Seabrook nuclear project- 20,283,127 40,479,625 Advances from Rural Electrification-Administration 3,789,000 4,593,000 L- Cooperative Finance Corporation advances 1,617,000 Material returned to stock from retirement 182,783 163,240
! Net. increase (decrease) to deferred credits 98,009 ( 81,749)
- !- Payment on prior year patronage certificate 1,684 2,891 Decrease to:
Deferred charges 1,426,480 44,767 S 31,809,471 $ 47,967,915 APPLICATION OF FUNDS Extension and replacement of plant $ 25,561,386 $ 46,010,940 l
[ Payments on long term debt REA notes payable and deferred interest 1,150,955 1,101,451 CFC notes payable 5,663 13,142 Bank mortgage note 13,784 15,761 Plant removal costs net of sale proceeds 3,543 177,619 3
Investments in associated organizations 253,570 157,153 i Redemption of capital credits 10,450 Increase in:
Working capital 4,810,120 491,849
$ 31,809,471 $ 47,967,915 The accompanying notes are an integral part of the financial statements.
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.NEW HAMPSHIRE ELECTRIC COOPERATIVE,.INC.
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1983 i
NOTE A - SIGNIFICANT ACCOUNTING POLICIES p The financial accounts of the Cooperative are maintained in accordance with a the system of' accounts as prescribed by the Rural Electrification Administration and the Federal Energy Regulatory Commission.
-f 1. Revenue:
Customers are billed monthly on a cycle basis and the
-f Cooperative records revenue at date of billing. No estimated revenue is recorded for electicity delivered, however not billed.
-l In the year ended December 31, 1982, the Cooperative's accounting procedures were changed on the following category resulting in additional income being recorded for the respective year.
All New Hampshire real estate tax bills are for the fiscal year
[ from April 1 through March 31. Starting in 1982, the Cooperative's management charged 75% of the real estate bills to operating expenses and classified the remaining 25% as prepaid expense. This amount or
$130,532 is to be amortized over the three month period ending March 31, 1983. The net effect to the financial statements was a decrease to 1982 tax expense of $130,532 resulting in an increase to operating margins by the same amount.
In 1983, the cooperative discovered that the 1982 cost for
. purchased power was overstated in error by $108,596 and deferred fuel
'l charges at December 31, 1982 was understated by the same amount. As I a result of this discrepancy, the financial statement for 1982 has been restated to reflect this correction.
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- 2. Joint participation in Seabrook, NH nuclear plant:
In 1981, The Cooperative and Public Service Company of New Hampshire signed an agreement for joint ownership, construction and operation of Seabrook, NH nuclear plant. The Cooperative is limited to 2.17391' percent ownership, the cost of which was estimated to be approximately $186,750,000 in 1983. This amount also included interest charges on borrowed funds. There are fif teen other utilities partici-pacing in the joint ownership. Each participant provides its own financing. The first unit of the Seabrook plant is estimated to be completed by 1986 and the second final unit in approximately three years. The Cooperative is obligated for the proportionate share of the carrying and progress costs in the nuclear projects. Due to the pro-ject cost increases and construction delays, there is considerable debate as to the feasibility to complete unit two, however the majority of the participants have recently voted to continue construction at the
- i. lowest possible level.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED) ;
The financing on this project will be by a Rural Electrification
. Administration (REA) guaranteed $186,250,000 loan with the Federal Financing Bank (FFB). The interest rate of the loan will be based upon FFB's established rate at the time of each advance. The maturity of each advance shall not be less than two years nor more than thirty .
four years, such period to be designated by the Cooperative at time of advance. The Rural Electrification AJainistration has also approved a 5 '
a percent $500,000 loan for transmission support payments during the construction period.
- 3. Depreciation:
Depreciation is provided annually on a straight line basis using the composite method. Gains or Josses on the disposition i of utility plant are processed through the accumulated depreciation I accounts. The composite rates are as follows:
Transmission plant 2.75% ,
l Distribution plant 3.48 :
General plant ,
Structures and improvements 3.00 i~
Transportation equipment 20.00 Communication equipment 5.00 !
Data processing equipment 12.50 All other' general plant 6.00
- Non-utility plant 3.00 !
- 4. Deferred charges:
This category represents payments for various items that will be ;
charged or amortised to operation in the future plus items that will t eventually be capitalized after all the respective charges are accumu-lated. The major component of this category is - l
- Deferred Fuel costs of $458,079 - In prior years, accelerating I fuel costs,~together with the lag in billing current costs to customers caused a mismatching of costs with related revenues. The deferral of ,
these costs until the month of billing achieves a better matchin g of costs and revenues. The monthly amortisation of these costs is closely regulated by the Public Utilities Commission.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- 5. Allowance for borrowed funds used during construction:
Interest paid for funds borrowed to finance the construction on the Cooperative's Seabrook NH nuclear plant participation is charged to construction work in process. The total interest trans-ferred in 1983 and 1982 was $6,851,765 and $5,670,714 respectively.
- 6. Federal Income Tax Status:
Since 1969 the Cooperative's operating margins has been exempt from Federal Income tax under Section 501(c)(12) of the Internal Revenue Code.
NOTE B - UTILITY PLANT All existing properties, except non-utility property, are pledged as security for long-term debt to the Rural Electrification Administration and the National Rural Utilities Cooperative Finance Corporation. The major classes of utility plant at December 31, 1983 and 1982 are as follows:
1983 1982 Transmission plant $ 1,058,795 $ 911,980 Distribution plant 55,206,772 51,112,004 Ceneral plant 4,211,078 4,101,352 60,476,645 56,125,336 Construction work in process Seabrook nuclear plant participation 69,715,606 49,480,606 Jobs in process 909,830 1,230,264 70,625,436 50,710,870
$131,102,081 $106,836,206 NOTE C - INVESTMENTS IN ASSOCIATED ORGANIZATIONS Investments in associated organizations at December 31, 1983 includes I certificates on the National Rural Utilities Cooperativo Finance Corporation as follows - capital term $1,489,029, patronage capital $9.851 and membership fen to the same organization for $1,000. The Cooperative is obligated to purchase additional certificates each year based on estimates of revenues for those years, also 5% of borrowings from CFC is issued as a certificate. The total capital term certificates acquired in 1983 amounted to $254,842. In 1983 there was a refund of 50% of the 1978 certificate totaling $1,684, 7
.F NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE D - PATRONAGE CAPITAL AND OTHER MARGINS The reconciliation of these accounts are as follows:
, Patronage Capital Balances, December 31, 1982 -
$3,105,687 1983 Transactions -
Operating margin 1,922,068 Nonoperating margin 406,863 j Capital credits redeemed due to i sale of Vermont distribution line ( 10,450)
Balances, December 31, 1983 $5,424,168 f
Capital is credited to the amount of each patron and may not be retired unless it comes under one of the stipulations of the bylaws of the cooperative.
NOTE E - LONG TERM DEBT The long term debt to the Rural Electrification Administration is represented by 2% and 5% e artgage notes payable to the United States of America.
The notes are for 35 years periods each, and principal and interest installments are due quarterly in amounts of approximately $810,000. It is estimated that installments of $3,245,000 which are payable within the next twelve months will include $1,194,351 in principal repayment. The notes are scheduled to be fully repaid at various times from May 1984 to November 2017. Unadvanced loan funds of
$8,739,000 were available to the Cooperative at December 31, 1983 on loan commitments from REA. ' All existing cooperative utility property is pledged as security for long term debt to REA.
The Cooperative has incurred debt totaling $69,613,991 at December 31, 1983 on the Seabrook, NH nuclear project. This amount 1o comprised of the following payables -
The total approved Seabrook financing with the Federal Financing Bank, as explained in Note A, of $186,250,000 has been drawn down by advances totaling $68,583,000 leaving unadvanced loan funds of $117,667,000.
The interest rate on each advance is based upon the Treasury borrowing rate, which range from a low 9.121% to a high of 14.685%. Principal payments are not to begin until 7 years from the date of advance.
The remaining balance due on Seabrook is $1,030,991 construction i requisition payable to the Public Service Company of NH. This amount was paid in January of 1984 by additional funds borrowed through the Federal Financing Bank.
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NOTES TO FINANCIAL STATEMENTS'(CONTINUED)
The associated organization debt is to the National Rural Utilities 4
Cooperative Finance Corporation. There are two 35 year notes totaling $1,935,821 at 7% and 10.12%. Quarterly payments totaling $196,600 for the next twelve months will include $4,725 approximately in principal. The National Rural Utilities Cooperative Finance Corporation has approved an additional loan of
$3,576,000. .These funds are unadvanced as of December 31, 1983.
The bank mortgage note payable is to the Plymouth NH Guaranty Savings Bank totaling $185,645. It is a 8 1/2% 20 year note on the non-utility property noted in the other property asset category; monthly installment payments totaling
$30,200 for.the next twelve months will include approximately $15,000 in principal.
- . NOTE F - PENSION PLAN i.
The Cooperative has in effect a non contributory pension plan covering all employees who have completed one year of continuous service and who have attained.
the age of 25 years. Total pension costs charged to operations and utility plant for the years 1983 and 1982 were $370,017 and $363,414 respectively. The National Rural Electrical Cooperative Association (NRECA) is administering this plan and prior service costs are being amortized over 30 years.
NOTE G - DEFERRED COMPENSATION The Cooperative has in effect a deferred compensation agreement with the manager that will commence upon this retirement in 1988. The total deferred compensation amounts to approximately $180,000 plus cash values of currently existing life insurance policies. The Cooperative began in 1981 to accrue this future expense. The total amount charged to construction and operations in 1983 and 1982 was $25,714 for each year.
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ACCOUNTANTS' REPORT ON OTHER FINANCIAL INFORMATION New Hampshire Electric Cooperative, Inc.-
Plymouth, New Hampshire' The audited financial statereents of the Cooperative and our report thereon are presented in the preceding section. The financial information presented hereinafter was derived from the accounting records tested by us as part of the auditing procedures followed in'our examination of the aforementioned financial statements, and in our opinion it is fairly presented in all material respects in relation to the financial statements taken as a whole; however, this information is not necessary for a fair presentatien of the financial position, results of operations and changes in financial position of the Cooperative.
!: m ' 0 w_:Y *l February 24, 1984 W
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NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC.
"' SUPPORTING SCHEDULES TO STATEMENT OF REVENUES AND EXPENSES FOR THE YEARS ENDED' DECEMBER 31, 1983 AND 1982 Current Prior Increase Year Year (Decrease)
ELECTRIC ENERGY REVENUE (Note A)
Residential sales $20,900,451 S19,843,282 S 1,057,169 Industrial sales 10,505,932 9,391,131 1,114,781 26,167 l Area lighting sales Street and highway sales 364,317 255,635 338,150 237,681 17,954 S32,026,335 S29,810,264 S 2,216,071 I .......... .......... .........
DISTRIBUTION EXPENSE - OPERATION Supervision and engineering S 33,932 $ 32,559 $ 1,373 Overhead line expense 231,992 231,405 587 Meter expense 190,902 162,993 27,909 21,699 21,623 76 Station expense Underground lines 8,406 9,325 ( 919)
Street lighting and signal systems 12,157 9,826 2,331 Consumer installation expense 21,091 18,955 2,136 Rent 67,087 52,196 4,379 Miscellaneous distribution expense 94,830 129,440 ( 34,610)
S 682,096 S 668,322 S 3,262 l DISTRIBUTION AND TRANSMISSION EXPENSE - MAINTENANCE Overhead line expense S 858,122 S 787,515 S 5,907 70,607 2,246 Supervision and engineering 8,153 Station equipment 11,849 7,695 4,154 i, Underground line 11,677 11,826 ( 149)
Line transformers 2,555 1,311 1,244 Street lighting and signal systems 4,735 3,808 927
,i -
Meters Miscellaneous distribution - plant 25,877 4,268 22,225 1,831 3,652 2,437
$ 927,236 $ 842,118 $ 85,118 CONSUMER ACCOUNT EXPENSE Billing and accounting S 423,075 S 381,098 $ 41,977 Meter reading 311,292 310,352 940 Consumer collection 40,926 39,588 1,338 Uncollectible accounts 130,042 89,377 40,665 --
Supervision 21,675 20,053 If622
$ 927,010 $ 840,468 S 86,542 11
=
NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC.
- SUPPORTING SCHEDULES TO STATEMENT OF REVENUES AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 1983 AND 1982
'l Current Prior Increase Year Year (Decrease)
ADMINISTRATIVE AND GENERAL EXPENSE Administrative salaries $ 468,616 $ 472,898 $( 4,282)
Office salaries 212,833 182,750 30,083 Office supplies 138,572 123,944 14,628 Professional services 44,598 51,326 ( 6,728)
Injuries, damages and property ,
insurance 178,410 168,970 9,440 Employee pension 213,372 237,614 ( 24,242)
Employee benefits 606,623 518,101 88,522 Regulatory commission expenses 66,388 28,116 38,272 Miscellaneous general expense 101,798 74,403 27,395 Customer service and informational expense 30,642 32,833 ( 2,191)
Maintenance of general plant 53,365 49,124 . 4,241 Administrative expenses transferred ( 338,168) ( 272,837) ( 65,331)
$ 1,777,049 $ 1,667,242 $ 109,807 TAXES Property $ 595,520 $ 419,390 $ 176,130 Payroll taxes 171,015 156,749 14,266 State franchise and other 158,833 ( 2,226) 161,059
$ 925,368 $ 573,913 $ 351,455 NONOPERATING SALES AND EXPENSES Revenue $ 52,217 $ 19,141 $ 33,076 Cost of sales and expenses 51,685 21,591 30,094
$ 532 $( 2,450) $ 2,982 RENTAL OPERATIONS f Revenue $ 33,742 $ 33,742 None Interest 16,423 16,040 383 Depreciation 8,757 8,757 Insurance and maintenance 581 702 ( 121) 25,761 25,499 262
$ 7,981 $ 8,243 $ 262 12