ML20141N895

Boston Edison Co 1985 Centennial Annual Rept

ML20141N895
Person / Time
Site:	Pilgrim
Issue date:	12/31/1985
From:	Sweeney S BOSTON EDISON CO.
To:
References
NUDOCS 8603180259
Download: ML20141N895 (60)

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C Boston Edison is an operating public utility engaged principally in the generation, purchase, transmission, distribution and sale of electric 1 energy. It was incorporated in 1886.The com- .g pany supplies electricity at retail to an area of approximately 590 square miles within 30 miles of Boston, encompassing the City of Boston and i surrounding cities and towns.The population of the territory served at retail is appn)ximately 1,500,000. I I Boston Edison also supplies electricity to i i I other utilities and municipal electric departments j at wholesale for resale, and provides steam q to approximately 280 customers in the City l of Boston. / 1 About 84 percent of the Company a revenues a 1 are derived from retail electric sales,10 percent from wholesale electric sales,4 percent from k steam sales and 2 percent from other sources. i l I-1 1 l i l Tame of Contents 2 Financial ihehhnhts 3 Letter to Shareholden T_

Corporate Pnsress Report 29 th rorical Review l

l 31 Fmancial Section ] l 53 Statistical Review .l ) l 56 Directon anJ (%en j i 57 Shareholder Information i l t i l l. ~,,, - - -, -

" The Eason Electricilluminating . ConapenyofAnton l886 "The Company was organi:cd December 26, 1885...There were then four or 6ve are light companies otTering for sale various inferior in- - candescent lamps...Notwithstanding this com-petition, w hid. to those not familiar with the business, uvuld have appeared somewhat dis- . couraging, the Edison light at once acquired a Boston Edison Company 1986 6rm foothold within the territory opera ced... the 6nancial outcome of the business has been "...The accomplishments of 1985 build on a very gratifying and the prospecu for its future are century of increasing strength and provide solid even more so (from the 6nt annual neport to footing for the second century. Earnings and shareholders) returns reached record levels.. History has tested the Company's ability to adapt and to intmare. An impressive growth pattern testi-l 6es to our success... (We have developed) a r.cw business plan to take advantage of the Company's strengths and to prepare us to pros-per in a nwre competitive future." (from the l l 1985 annual report to shareholders) l l u 1 7 0 8 to 1 ) I p:

FinancialHighlights 14M 19 9 _ '4 Clunge ym ended Ekccmhv 31 Operating revenues (0CO) $1,203.972 $1,316,668 -8.6'b Balance for common stock (000) $80,350 $74,811 +7.4% Common shares outstanJing-weighted average (000) 15,982 15,436 +3.5% Common stock data: Earnings per share $5.03 $4.85 +3.7'% Dividends declared per share $3.34 $3.12 + 7.1% 65 % 63% +3.2% Payour ratio Book value per share $ 35.H $ 33.61 +5.1 % 14.54 % 14.69 % -1.0% Return on average common equity 3.01 x 3.02x -0. 3% f Fixed charge coverage (SEC) ~ 45 0 6 2 O ~ ~ 31.5 5 4 30.0 t. q g -._ -. n -- _ - 15 0 sa 2 M 81 82 83 M 85 M 81 82 83 84 85 [omings pd share ($)-famings inoemed 4 ponent to a record Total retwn (%)-Fw 1985, stod appreciation and dvidend $$.03 per shore. growth cominned to generate a total shareholder return of over 44 percent, wel above enruket overages. 2

m DearShareho!Jen Very few chief executive atficers have the opn>rtunity to send to shareholden an annual report that chdes out one century of accomplishment and introduces another. I am fortunate to be one of them. He Company's centennial is a time for proud retlection and healthy optimism. Out of the 6rst century evolved a tradition of engineering innovation, marketing leadership,6nancial strength and emphiyee commit-ment.Le qualities that made us strong are just as important and abundant today. We are in excellent 6nancial shape. Our operations are senmg. Under the guidance of an experienced executive team, a skilled and dedicated work force is applymg innovation and creativity to today's challenging environment. The accomrlishments of 1985 build on a century of increasing strength and pn> vide sohd footing for the second century. Earnings and returns reached record levels. Outstandmg operating results were paced by records in employee safety and nuclear plant performance. History has tested the Company's abihty to adapt anJ to innovate. An impressive growth partern testi6es to our success.Re Company began m February of1886, w hen it signed its 6rst customer. At the begm-ning of the second century, over 600,000 customers use our services. From an mitial investment of $1(X),000, assets have grown to $23 billion, and revenues to over $1.2 bilhon. We began in an environment marked by 6erce comper tion.The streng h nd commitment that brought the Company through trying days serve us again today as the regulatory and economic environment returns us to a competitive climate. Trends towards diversi6 cation and consolidation wahin the electnc unfit y industry are hicly to continue and, as in the early days, competitive forces u ill nutenally slupe the way we operate. We recogni:e trends as opportunities to create, search out and participate in new endeavors. Supplymg electric energy reliably and economically will continue to be the major focus of activities; however, the expertise we have developed as an electnc campany has potential arplications outside traduional unhty boundaries. In 19S61 exrect that a number of regulatory uncertainties reported on last year will be clarined. Speci-6cally, rules will hkely be estabhshu : hat will allow us to undertake energy supply and demand planning with a greater degree ofcon6dence in the relative investment potennal of availaNe ortions.This will allow us to con-tinue aggressive efforts to seek investment opportunities that be r meet both the needs of ctatomen and you, our shareholders.These efforts will, of course, continue to be undertaken in the open pnicess wiuch we began sever;d years ago to involve representatives of interested parties in the decision malmg process. Last year I reported on the development of a new business plan to take advantage of the Company's strengths and to prepare us to prover m a more compennve future.%at plan was completed in 1985, and we are proceeding with its carefully timed implementanon.The business plan adJresses ihe uncertainties that exist 3

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f From left to right. Executtve Vke Preudentlonph P fyrrel Semor Vke Preudent Waam 6 Hamngton Eserutive Vke Preudent bornes k lydon and Preudent and QuelExecutive 0ffker Stephen J Sweeney 4

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W Mnemedallbrioemance 18 OnJanuary 8,1886, the Company uns incorp>- 5 3 - 15 a E E rated uish a capital base of $100,000. One of the ? E M E E g 3 g 12 l Company's first major insessors uns the promment a m 3_ fmancier,J. P. Morgan. Retenues in that frrst year of IIII I __.,_ _ _c $x580 uu, co, m.,, ^ $3,577 Sales grew rapidly, hourser. and in 1899, only 13 years later, resenues first exceeded $l mil-80 ~ 81 82 83 84 85 lion. By the end ofa century ofoperations, resennes Resum en equity (%)-Rohan en equiry was 14.5% in 1985; are now wellin excess of$1 bdlion.'- endudse el ARIOC, this seewn teneinues le eased induary ' In 1985, the Company achieved record earn-evenges. ings of $94 million, or $5.03 per share.The re-In April. $75 million of Series V,12%%, Fint turn on shareholders' equity remained semng at Mortgage Bonds were issued.The proceeds were 14.54 percent, close to the 15.25 percent alloud used to reduce borrowings incurred during the

.by the Massachusetts Department of Public Uti!-

1984 extended refuelmg and maintenance out-ities (DPU).The high quality of the Company's age at P Igrim Station.The Company began earnings improved in 1985, as the allowance for issuing commercial paper in October under the funds used during construction (AFUDC) repre-Boston Edison name and credit for the 6nt time sented only 10 percent ofincome.nis strength in 12 yean.The program has received enthusias-was further evidenced by the fact that the return tic investor surport, and has both reduced bor-on equity, exclusive of AFUDC, was 12.6 percent, rowing costs and enhanced the Company's or almost twice the industry average. Interest short-term 6nancing flexibiliry. t coverage and capitah:ation ratios remain strong, In January 1986, the Company 61ed an eppli-reflecting the fundamental 6nancial progress cation with the DPU for approval of the issuance reali:ed by the Company over the last three yean. of an additional two million shares of common The Company's favorable cash fknv per share stock.This 6nancing constitutes the Company's position continues to rank among the industry's 6rst major public 06enng of common stock in highest. Construction expenditures totalled more than six yean and will funher strengthen $219 million in 1985, of which $40 million repre. its capital structure. sented a non-recurring payment for spent nu-In January Boston Edison's Board of Direcron clear fuel disposal costs. Over $171 mii; ion, or 78 voted to request the arrroval of its stockholden percent of these requi ements, were met with internally generated funds. 5 ..u. a.

.. ~ _ _ _... - - - _ - to srht the Gimpany's common stock 2 for 1 Regulation I with a change in par value from $10 to $5 per As a result of numerom unbry cong ALuions m ehe i i share after increasma the Company's authori:ed early PAVs, many cicctnc comtunies, meludmg common stock from 21.5 million to 25 milhon Boston Edison, exomded therr scrtice terntories. shares.These matters w di be submitted to the This grou th uns accinnpuucd by cm:en concern 1 i j stockholders at meetings to be held on April 15, ah na pernuttny a pidk senice of such significance i l 1986.The stock spht requires arproval of the to be perf wmed by a prisure company. Charles Edsur, I t DPU. After regulatory approval, the Ibard of Cmnpany prestlent fnnn 19N to 19.U, took a l l l Directors wdl proceed with the stock sphe based nats.rullcalcrslup tmirs m m adsucarma gon ernment I i i on market conditions. regularmm of 4tihrics as th, aptm.piutr,3ol:4t*nt I Sixh efforts u cre mccessfid and f wmed she lusis of state and federal regulath m as they cust talay. + f. m l 5 For Boston Edison, significant regulatory ac- + I r, .i nvity occurred in 1985. In December, the Com-1 i t .\\ ~ rany nled with the DPU a request for an annual I,,.' t l l increase in retail rates of $ 35.7 mdhon.This / i t represented the Company's nrst retail rate re-I [ ) l "Issus Edm(s posise tasadel esagt is des is part to es quest in two years. If approved, this wuidd result I i ) [ lett est us me est isseised is a muist mesmdies param " in a three-and-a-half percent increase in retad I Simpienp C. Tlempion, Finc~s and Ausewing revenues, the smallest in over a decade.The ( ~ fding is based up sn estabhshed DPU gualehnes - ' ~ ~ i and ron>ses compterion of the Company's Retlecting Boston Ednon's record 6nancial P progress and commitment to its shareholden, transition to equah:cd rates of return for all I the common stock dividend was increawd 6.1 customer clasws. percent, or $0.20 per share.The dividend action Eaiher in that same month, the Company repre ented the sixth increase in the put seven nled a Prop mal to offer ornonal interruptible yean. Boston Edison's stock rice hit a 16-year ratn on a rest basis to its largest customers.Thn P high in December, and closed the 3 ear at 454, 6hng aho mcluded propisett odot conwrvation up 3 3 percent over the beginning of the year. and load management Programs that, in con-This g;un, w hen combined with dividends, re-juncnon with the propr ed rates, would offer sulted in a total return to investors for the 3 ear m incentisn and measures to manage elecenciry excess of 44 percent. use Junng penah of reak deraand. A DPU deci-sion on the two December nhngs is expected by July 1,1956. 6

i He DPU issued an interim order in Septem- _.4 50 ber reganhng the purcha3e and sale of electri- ~ I 315 w j city from cogeneration and small pmer produc. 3_ _$_LE___ " _ tion facilities.%e onfer outlined the DPU's l 2.25 i goals and objectives in this area and discussed l l.50 key issues including pricing methodologies, con-l l 25 r i tract terminohn, transmission w heeling require-ments, and reliabdity. %e DPU also requested 80 81 82 83 84 85 j additional comments on these issues from inter. Dividends dalarmi pu sim ($)-N common evidal was i ested parties and is expected to issue Proposed increasmi 6.2% in 1985, tlw sixtli increase in its last seven years. i i regulations in 1986. Boston Edison is surportive Company's dependence on foreign od.Wlute I of the DPU's efforts to Provide guidelines in this Boston EJnon had obtained necewry arrrovals i j area and believes that these and other alterna-fn>m environ ental. legislative and community tive energy sources will lay an expandmg role in consntuencies, the decision to suspend unver-P future capacity rianning. During the year, the sion plans folh>wed a DPU order w huh con-l Company received arproval for a number of chded that they could not find ihar ihe rronwed l 1 energy purchase contracts from such facilities. coal conversion Project offered a " substantial l rrobabdity of net fuel savings" to emtomers over f a l the hfe ofihe project.%e onler also under-f scored the continumg uncertainty surrounding l i t hing term od and coal prices uhich influenced i the DPU's conclusions. A few dap earher, the DPU allowed Ibston j ( Edison recovery of arrroximately 377 of 387 i l l "Agnedes met senaul papenilmse conseveed to the days of replacernent pmer used during ihe 1981-V (empus(sneed Anmulelpodenuous" 84 outage at Pdgrim Station.Whde dnarpointed l ' 5esen 1 Alem, Finente and Acceeming that recovery of replacement emer for any part l + l J d the our. ige was disallowed, the Company was l i l In July, the Company suspended plans for ricased wich the DPU's recognition of the mac. l converting its New Boston generating P ant to nitude of Boston Eibson's accomrinhments dur-l t i I l coal.Re project originated in response to direc-mg the outage. i tives in previous DPU orders to reduce the 7

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percent,less than half the national average. Reprewnnne over 50 percent of terntory sales, the commercial sector contmues to race I

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t ofIkwron's service inJustries, w hich mchde 4 eJucation, representeJ by the areis many col-leges and omversuies; world renow ned medical i i MWhle posent mWalen has dessinped some onertainty let institutions; financial services, w nh Ikwton \\ tapsilly plumpinl, it has alie ceased a pseettable and sensissent second only io New YorL as a tmar.;ial (enter; l cast slanin pens." government; and the arts.Whea coupled w ith l insodore 5. C nvissw. Legal. t the area's high technology industnes, ik wton's i l service-onented economy forms the founda-l r t Afar!cer Review non of a strong. Progressis e anJ Jn ersitied l The electric stat e u as first intnduccd to the puble terntory base. ( Jurmg the " roaring tu ennes". It uas nor, hou ci er, in hne w ith contmumg economic expansion, ( receised unh the inst.mr enthususm accorJc3 the the builJmg boom of the past few 3 cars contm-i I dance race af the era. the Charicston. lbston EJnon, ucJ m 1985. ArProximarcly 15 million square ( .l realgmg the tremendous oppirranay for sales feet et new mdu tnal and commercial pace were j expansion present<J by thn men ductu en, resp aded added to the real estate base. Boston filnon's I by irut:armg a scues of codmg sih. iols at ILston's market penetranon remamed high as developers j HortictJrural Hall. Ahita che same emic, the Cim-selected electnc hear tier 72 pertent of thn new { pany opencJ as first shoucase all<learic house. space. Major Jts elopments completed Junne l Thmugh cfkru sich as these, customers u ere sucu ss-oa=_ l 100 fully miroduced to the many uses ard aritantages a f - %d 80 lewiswd electncuy in the modern home ard udes grew rapdly. l 60 In recent years, there has been a resurgence of .40 the sales expansion exrerienced in that carher .20 l .i t period of the Company's history. The Comrany's retail kilowarthour sales mcreawd 1.9% in 1985, 80 81 82 83 84 85 4 but when aJ;usted for weather, grew 4.8 percent Territory total revenue breakdown (%)- A strong tornmerdal sector a contmumg three years of sohJ growth.Tlus continues to provide econornic stability and pace Cornpany growth. gnmth was fueleJ by the Ikwton arcis emnomic l vitahty, reflected in an unemployment rate of 3.1 j 10

the year included the Ibur Seasons llotel, with Company initiated Energy And Savings for You 500,000 square feet of luxury condominiums (EASY), an innovative energy atxht program and hotel accommodations; the Lafayette Place des eloped and implemented in cooperation with Hotel, complementing the retail space com-representatives of consumer gn>ups. pleted in 1984; and htarket ? lace Center, the Another 1985 project w hich received con-latest expansion in the well-known Faneuil liall sderable attention was the Syniphony Ibad, 1 Market Place complex. Ikamn housing rehabilitation project. Ibston In 1986, numerous other projects are scheduled Edison helped convert a 16-unit building ;,to I i for completion. Among them are BOSCOht, ationlable energy-etficient housing for low and i { a 900,000 square-fmc computer market center on moderate-income fanubes.The Company re-l l i i Commonwealth Pier; the 240.000 square-foot ceived state and federal energy awards for its role l 1 1 hiassachusettsTechnokw Center near Logan in demonstrating the integration of currently l Airport; a 950,000 square-foot downtown office available energy efficiency techniques into urban complex on Federal Street; and the 350,000 revitah:ation erforts.1985 was the second con-i square-foot Atrium htallin Newton. secutive year m which the Company reved l r i Other major developments include the 1.4 these awards for its hud management and mn-million square-foot New England Life Complex servation etTorts. I l j in Boston's Back Bay; the 1.1 million square-foot 1 International Place in Boston's fmancial district i l t ,c I and Rowes Wharf hotel, office and condominium i j complex on the city's waterfront. In addition, 3 f i b r F l comtruction on the new Hynes Auditorium j ve continues which, when opened in 1988, will I 'l ? l l transform Ibston into one of the nation's pri-l l mary convention cities. 4e whom denen emessy' ad endashg haddag beam t i l While sales growth inteady and has contrih-pende e smens lessismen ist isneery miss possh." I 1 ured to the Company's (mancial pnwperity, the Jame M. teid, Commmiel l efficient use of electricity is a major marketing ~ ~ ~ ~ ~ ~ ~ " ~ ~ ~ ~ ~~~~~~- i t focus today. New marketing programs promote l and encourage load management and conwrva. s tion, thus minimi:ing peak demand w hile sur-l pcrting economic development. In 1985, the j 1 i 11 l 1

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i System CapabilityanJ Planning whether they haJ been prud ntly planned, sig-l Nton's first etcctric,ter.nu ms rehcd up m sma", nificant aJJitionalinvestment nsk ha,been l isolned hghnngP mts uhkh suppucd electriaty to placed up>n companies and their shareholJen. L I speape hathngs. In contrast, Thnrus Edson had Such a pohcy Promotu construenon of mu'nple 1 l the resuluthnury susm o[dstrihaing clccinary to small units as oppml to larger more economical l many Ndhngs from a central p m er stare,n By generanng units, thus increasing the uncertamty i l impicmentmg the imentor's dream. Beton Edson of a rehable power.surrly. l Jutmedshed usclffnnn its many competuurs and gradually acqmred t&m to form a smale consollued i \\ clectric surply unhty. The Canomy's Ileal Ptace i i Statum uas called the first true p >uer stanon m the e. i l uurLI. By the turn of the century. thuentralp uer i k i j concept lud resolutu>ni:cJ the uay clectuaty t:us to

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h ,/ f j be generated- [ + t While the Company's tirst gtnerating station "Ieden E&en is amanuely seudung fer nem end innevesse ( I l consisted of two dynamos which provided only ' cepedty soones, induang noemenel as well as eherneuve j enough nmer for two modern. Jay homes, Ibs-ensigy splianc i ton Edison's 1955 net capabihry arrroached Philip DiDomeno, Ewgy Sup;Jy and Corporee Relarens I i 3000 megawatts (MW), sufficient capiary to I wrve over 15 nullion homes.The Jemand for ibston Ednon is well pinoned to assess l t electricity continues to reach new all-time hiehs. numerous viable a!ternatives for future carabihty l i in August 1935, a new record peak Jemand of in a time trame adequate to develop the most l l 2,416 MW was set,1.2 percent above the 1984 arrn'rnate and cosr.ttfecrise strarecies. Optiens i i i I l summer peak.The Comrany is forecasting reak include e m er pun hases, consen anon, loaJ { l i load through the year 2000 to grow appnni-management, hfe extension rn, grams and, if l mately two percent annually. required, new corntruenon. f Capacuy rianmng to meet future load gnmth A maior p mer rurchase w dl wme f rom the l I I I remains uncertain due to the current regulatory New Eneland Power Ib.!(NEPOOL) wiuth will j envminment censernmg a unhty's p >rennat for begm receivmg up to 3 3 milhon megawatthoun f cost recovery of future plant investment Snce of Canalan hydroelectric energy over an 11 car 3 ( i electnc utihnes must now prove new plants or penal, starong in mid-lW6.The receipt of thn l 1 l pmer contncts to be "used and useful" upon complenon, r.uher than the carher stanJard of e i l I I 16 i l i ,, - ~ -

=_.. power was negotiated under a Phee I agreement with the Canadian Province of Quebec. In Octo-f { ber NEPOOL and HydroQuebec signed an ) energy contract to expand the 690 htW inter-k. i. connection of Phase I to 2000 htW in Phase 11. His Phase 11 contract uill piovide New England I P.. utihties with up to seven bilhon kilowatthours of. &/ i I I 1 hydroelectric energy annually at a rrice below "11b me poed d the fort shot she pedersume d the Campesy's 1 the average price of New England fossil cnergy. genesung main maks emens the money's best." ~ t The new contract is scheduled to commence in Frank li, RomA 5:som one Elects Opersions i i I i 1990 and extends 10 yeirs. In a related proceed-i r ing,6nal agreements were signed in late 1985 by power from that umt via an agreement with the t i .i participanng New England utihties to construct New Brunsw wk Electnc Power Commmion, the necessary facthries to transtmt the additional which runs unni 1958 with ortions to extend to l Hydro-Quebec Phaw 11 pm er to the regi, - 1991.The riant achieved a capacity factor of f i Boston Edison's level of particir ation in the 97.4 percent in 1985. i Hydro-Quebec agreements is arproximately Throughout 1985, the Comrany ale ex-11 percent and the agreements are subject to randed its activities wich cogenerators and small I regulatory approval power pnducers as part of ongtung efiorts to l Another signi6 cant Canadian pow er pur. haw secure alternative future energy wurces. Exam-s involves the Point Lepreau Nuclear Power Plant. pies include a 25 year contracr with Diamond j The Company continues to receive 100 MWof Emt Energy Corporation for 80 h1W fnim a tiuidt:eJ bed, coal 6 red urut, a 20-> car contract l <* 4 -c. 6_ with Peat Products of Amenca for 10 MW trom _c. 5 t pear-6 red generation, a 30-year contract with l i 3 TDEnerg3, Inc. involving 10 MW from w mJ l m ~ r farm generation, and a 20 car contras t with Ocean State Power for approximately 110 Mhf I 2 __ E ___ ___ _ __ _. gas 6 red c iracity. 80 81 82 83 84 85 The Company also took hignihcant sic [w in l Sales growth (%)-Territory ades increased l.6% in 1985. 1945 to assure that short-term capacity require-l Continued strong econoni. growth was partiaHy olhet by mild ments neeJed during peak demand situanons are weather tordtions. [ l t 17 i

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met, Plans were developed and licensing ini-tiated during the year to install a new 85 htW i i. combustion turbine generator in Walrole. j hiassachusetts. In aJdition, the O>mpany is ne-j gotiating a long-term contract for a capacity 1 a j purchase from the hiassachusetts BayTranspor-i A A - tation Authonty's combustion turbine unit. 4 System planning with direct customer partici- "0w Nyts itedser heer 5 enes led h less epsenig year is I pation includes a series of conservation and load ils l3-year liistory, whidt mise leidad it oise al lite wedd's *.ast." 4 management programs w hich have the n>tential . tidallt. hanson, F.d.or of effecting a 300 h1W reduction in demand by the year 2000.%ese programs are being ana-Operations ly:cd in context with other supply alternatives to Boston Eduon's FJear Station became the focus of i j determine their cost effecoveness. mrernarkinal mdictry arrenten during the md-1 l As a means o(adJressing long term load re-1920s. The starron's rurNnes uere che first to pnduce l quirements, the Company continues to evaluate one falou arth mr of clectncity from less rhm a pmrd l the potential to extend the hves of its existing ofcoal, an aconnphshment u hih made Edgar the i fossil generatmg plants. Prehminary expectanons most efficumt generator m the uurLL At the same l indicate that unit lives may be extended by up time, an ervrimental h ulcr ar the staron h came the to 20 years. first m the uintf to gmcrate steam pressure at 1200 Substantial capital commitments were made punds per sii4are mch. alrnost three times grearcr ( in 19f 3 to assure ongoing transmission and distri-th,m exanng h aler pressures. Thu fear firmly estal>- bution system rehabdity. Due to the expanding hshed the Company at the forefront of the emergmg interconnection of generation sources krated era of hzgh-pressure, high-efficiency electne pourr l north of Boston, major projects were approved to generation u luch omtmues calay. enhance tr.msmission capabihties into the &>s-In 1985, Boston Edison continued its tr.whtion l con Edison service terntory. Al,o, plans for a of operating exce!!cnce. Pilgnm Station reah:ed new downtown substation were approved to the beso perating year m its 13-year history. The meet the energy demands of the many new high 670 htW nuclear generating plant set all-time j rise complexes in downtown Boston. Comple. records: it operated at 84.4 percent of its capacity i' tion of both these projects is scheduled for 1989. on average and was available 91.5 percent of the time.Rew achievements pl 2ced the unit's per-4 formance among the industry's highest world-i wide. Idgrim Stahon pniductJ over 40 percent 20 1 l

of the Company's total 1985 generation, and Early in the ye.ir, ihe Company successfully saved customers $171 million in fuel costs. completed a gu convenion pniject at two fossil During the year, the Nuclear Organi:ation fuel generanng units in South Ibron, comple-re pinded to one of the industry's most challeng-menting a previous gas convenion at another ing engineering efforts to date. In compliance fos 3il unit in Even tt.The three units now have l with the Nuclear Regulatory Commiwion's rega-the dual capabihty to burn either gas or od, ena-l l lation covering the environmental quahfications bhng ihe Company to take aJvantage of favor l l l of safety related electrical equipment, Ibron able rncing trends in either market. Gas w di be i j Edtson was required to identify and quahfy all of burned on an mterrupuble a3-avadable basis, l l Pdgrim Station's safety estem electrical compw { nents. Failure to meet all quah6 cation require-l I / i ments could have resulted in a shurJown of the i j i l unit pending implementation of corrective mta-g e sures. Over 700 comp >nents were successfully analy ed and ec3ted by the apphcable deadhne. i J Signi6 cant operational achievements were almccomphshed by el.e Con,pmy's fossd fueled "Ellerts to ble extend tusent gensionne fedMes esempdy generanng stations. Elecmc laght ard lher mag-Depen tenen's consnues technkelisadenhip peninen in the ( ) i a:ine again recogni:ed the New thron Stanon induery." l as among ihe 20 most erficient fowil generating Sandro J. Lt+. Steam achtnt 0,,aarons l stations in the country, based on its heat rate { performance.The station was one of only three usually trom Arni thrmgh November. The use [ r oil 6 red facihties to receive tha recogtunon; the of gas in 1%5 saved customen $16 nu!! on m fuel others are coal nred. costs.To ac hieve aJJinonal fuel savmes, Ibton r EJnon n Prewntly evahiating the pirennal for 100 si si a_ a.. a s 5,w __ _ [ _ I _ k! ____ long term non interruptiHe g n $urrhes. l __80 m y yj p g O 5 E O Fuel Jneniticanon remains a Lenomp>nent 8 3 60 W u a n 6m L ro n =* 4 t

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~. _ - -. - -._} His dramatically improved fuel mix, accompanied Continmna its traJition ofinhnological lead. i by kiwer oil rices, resultal in some of the Com-ership, m 1985, the G,mpany comrlered ihe P 1 j pany's lowest fuel adjustment factors since 1979 . resting rhme of an economic fewhhty snaly to e l In other crerating are ts, the DPU arpnrved assess extendmg ihe epciatmg N es of fossil gen-j the Company's P an to retire the remainder of crating units.The pnynt. the first of its kind in l the original Direct Current (DC) sprem. Retire- %e United States, was undertalen m conjunc-I ^ ment of the DC system, w hich is scheduled to be tion with the Elestric Power Researth in oruie l l phased out over a three year perini, will imrrove Ito develop generic etonomic gidehnes for in-1 l the ethciency of the ahernanng current distnbu-cdustry use in evaluannu hic extenuon oryrrum-f i j tion system in the downtown Boston area. - tin.The stuJy was performed at the Companyi An aggressive emrloyee commitment resulted

ht> soc Unn 6 during its 1985 nuintenance os er-v in another year of achyement in the area of haul. Ibton Elson rneised Im'ER nuga-safety. % rough multiple programs, emp'oyees

ine's 1985 Energy Gn crvation Award for the established an all time safety record dunng pn 9ect.The Company also esrabhshed a 1.ife i

1985, reducing hot work days by 37 percene Extension anJ Paformance Impnnement Group i over 1984 levels. to contmue analpmg further specthe serem [ 7' chnologicallanocation arphcations at orher htystic umts and at the i j e t j fitstoricdly, Siston E1/n lus been recogm:cJ as a Gmpann New Geren Stanon. Generanne i techmi>gicallatla m the electnc mJustry An unly station hfe ex+cnsion proja es are egeted to l + example of this leadership role u as the Jccna m to i play a Lc3 n,le in mes a mg the Cornpanyi future i ~ halJ a large undagrowsl1stnhan m nettunk m energy supply commitments. Biston, started soon afta the Compmy's hmtime ( 1,: in 1886. As telephone, electnc and tc!cgraph ann-parues muluplicJ in the late IMOs, tk skies oter the i cay u ere begmnmg to lv dnkened in a tres In ad-l ?* l dressirtg this grou mg cnt ironmental concern, legt.la-I' P,j j non uas enactcJ in tk lpe to set crcly restrict the g M use ofm erheal systems Bnton Edson.5 competaors ./ J M i f i fomd cluu su aclung to md rground Jntn/wton "Provieng safe. ratelle slettric servite is ow top rierity, as was t 1 fr<nn thir custmg merhead sytems uas a drastic -{ demonstrosed by aw seipesis to Hwritene Glosis this post yeci i g n i and costly step. As a resiJt, R >ston fLimni muler-Janis G. Blanthette, Steam and fledrit Operations 4 a. - ~, ground &stuhamn system immeJuacIy provuled a

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major c<nnpetuite aJn ant ige.13y l902, the Compmy 1 } had beoane the sole pwnder of eLctncity m naton. I i 26

Technokigical innovation is also apparent at the Companyi Pdgrim Nuclear Ibwer Starion where hie extension efforts are noiv underwa<. Boston Edisoni Nuclear Organi:ation is instad- ? 4 "'s t I ( g. l ing one of the industry's first permanent hydro-gen water chemistry systems at the unit. Employment of this system will substantially s t reduce the possibihty of intergraaidar stress cor- "0ysing cupener communkenen is important le w; sw t rosion cracking in the planti piping system, a peyam of span community lenans povides an aselent vehkis l g geticric proMem in bothng water reactors. for Ilmely cupemerlesseth." j i o_ james A. Webster (nergy Supply and CorporWe Relations 18 ~ ,. 5pk. 15 l That same LmJ of JeJicanon and commit-

2 1

ment to servie is evidenced throughout the 100-i I o l p year history ofIWon Edmn Comt iny. The 6 m I m general peNie be-t sc ?s it in times oidisaster, _ _ _ _I__ 3 .such as the 1938 hurricane, which cost the hves i 80 81 82 83 84 85 of nearly 700 New Englanders and knmked out t (WIP/ net plegit (%)-The obsence ci rnojor construction activity 66 hrtent of all cu.stomer services, and ihe 1954 continues to pace financial strengthening. anJ !%0 hurticanes, which inthcted simdar [ Commitment to Senice sprem devetation. 1 i Afk c-ly tuo years of operaten. the Ednan system Nature's most recent challenge to the Com-f successfully met its fint tcst m Jcalmg turh a natural pany was prtwented by Hurricane Glona, w hish i j disaster. In 16s8, an early moming fire JcstnrscJ ull nir the srtem in Serrember of 1985 w reh maxi-l 1 { 14 Jynamas at the Gnnomy's He ul1%ict sentral miim w inds of IN eniles per hour. In just.i few { i staru >n, u heh then suppled more (Am 70 percent of hours d.e storm interrurtcJ crvice to 250,000 l i die Onvipmyi totalgeneratient. The meritni sieperari-cirroiners 40 percent of ahe Companyiiot.J i etrulant, u nh a handf J of helpers. l.JurtJ fheri hly cu1romer forulation. and destroyed or Jamaged l rd TCst.fTe $(Tlice. k At7ncne yrklMos %4 (41 oT CTO. I*. car 1y 200 pt)les. Weli9Iver100 00O cdlh or l immediaccly and, u ich the cmperatu nmf radu as assistance wcre rtceived.Wah the heir of 260 l officials, u cre dela cred h onscnger rad, contrary to linc and tree crews from a wide geograr hic area l I tegidati.ms then rn pl.rc. A5 a reside of thcwicep-inchiJina the mid-atl inric anJ eetern central i rion4J ark.} t'%rTaurtlmary (ff0T!s, O rrnhmy cm[df)ces i i .iN((((4. I Idtd 8 hlN cr u I sfn & lid '$. 27 i i

states, Company personnel worked around the New Directions . clock to restore power to 94 percent of downed As thron Edison enters its second century, a customer services within four days. More than 75 spirit of renewed competition is impacting the i ] miles of overhead cable and over 130 distribution Company's future direction and development. transformers u ere replaced. Hurricane Gloria's cost Current regulatory trends create a more comperi-exceeded $10 million, a total which made it the tive arena for Boston Edison's core business as most damaging storm in the Company's history. power producer entrepreneurs vic (or an energy While not so dramatically displayed, this same surrly foothold in the Company's market. Ih-employee dedication to customer service is para-ton Edison reu>gnizes new opportunities in this mount each and every day in ongoing ctotomer arena, both in the area of traditional utility oper-relation 3 hips.The Customer Information Divi-ations and beyond. sion's Call Management System, upgraded and in 1985, the Company devekred a new bial-J' expanded in 1985, can resp >nd to more than 100 ness plan to address a more challenging future customer calls simultaneously. The Community and the sigri6 cant opportunities it wdl bring. Relations Division conducts open forums and Traditional utility operations have develond cemmunity meetings to solicit custoruer inrur, consideraHe expertise and strengths within the discuss current issues of mutual importance and Comomy that can be applied to nwre diveni6ed resg>nd to customer concerns.With the same areas.While surplying electricity wdl continue goals in mind, Company officials regularly meet to constitute the major (ocus of thron Edison's with a Qinsumer Adviwry Panel comptbed of activities, speci6c orportunities have been iden-consumer and puHic interest gn>up representa-ti6cd for further review and ev;duanon.These rives.The Gxd Neighbor Energy Program, a inchde laboratory chemical testing, engineering two year pilot Program through w hich customers operations and real estate devek ment. In the t can voluntarily help piy electric bills for those imp >rtant energy services se cre, implementa-needy customers within the Company's service tion of the Company's multi-fa eted conserva-territory w ho are not eligible for other forms of tion and load management rnsrams, as well as energy assistance, is alw an unquah6ed success. particiration in cogeneration and small pmer pnduction pn>jects, coidd holJ great Promise in a diversi6ed future.The Company plans to seek regulatory approval to create a new subsidiary in orJer to capitali:e on these i,pp>rtumties. LV b 28 a

.l$ l BOSTONEDISONCOMPANY )j g ~ .+ 3 " ' ~ ~ ' ~ * * ~ " " " ^ 5 A HUNDRED YEARSOFACCOMPLISHMENT . ~.: ,m w y ? 5l:l,. 'f? ' l, ?1l!

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& 'WM ;JE4 Grtwth and Cwpetithm in Boston,1886-190I 1886-Company incorp> rated on Felwuary 20, 5 with capital of $100,000 f 1886-Bijou Heatre is G>mpany's fint customer j 8 1887-Fint dividend (1%) is paxi to stockholden t;bjC:d i1 f Y -[ > Ii10 s 1888-Fire destroys 14 dynamim at Fint

wmer Ma, j l4h h 4

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.i i l - p ^ v r g 1894-Fint ikuton Street hghting contract b u l k) (- 3 ,k is signed J il I i '] [ [ g,. 1894-First succesdul electric storage battery in h U.S. is installed at Atlantic Ave. Station I y: 1901-Stockholden vote to merge with bO I Ikuton Electric Light Co. 1901/02-Gwnpany becomes only cer tr;d .;n Q station electricity suppher in Ekston E

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-3.- The Era of Territorial Expansion,1902-1929 ~ j 1903/09-Elecenc companies acquired m nine .g y .e. major sunuundmg towns ,[ . g. . g.. - s. .s 1904-L St. Station on line with largest steam 7 / generatue m U.S. sa '~ .k;;. g g. 1909-First "hton Electric Show" g3 y g - i

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,q 1911-25-car electric garage opens, Atlantic A.e. Stathm p. (;. k Y ,gg W* h h-[. 1913-Huntington Ave. " White Wa," is lighted t? M '.c, 1918-blindale substation is first in U.S. ~ + .r-p .a- , 2.g e. operatnl by women p1 .t

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.c-f, I 3 '. f f h.'g. 1922-bron mayor vetoes act for public purchase s.',, [ - .I l of L St. Statum .-/"..* .b 1923/24-Ibrtable stathm WTAT goes m the air; +' WEEl on the air [.[ N '. - i-4 ' l. j A.,,. g 4.g e . r* ":\\u' .; -(.y

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'*4 ,.; }.fpp,,, 1923/24 " Electric Home" opens in Newton; 4 '.; J " y.,.q Electnc Cooking School, Horticultural Hall D% v1:7-g 1925/26-Edgar Statkm on hne; turhme is most D ~ efhcient m worki 1925/29-Edgar Station wts high pressure world record;its Unit # 3 sets world record for I krad/hwr f l J s / %y. d; J l ~ h r, h % y

( l ' il. 4 A The ht-War ihm,194 %I971 N N 1947 - Ent oil hiini untlergn >und iransmission x N-t able is mstalled 1951 -Girnpany pn. gram,"Elettra 1 sving", premieres on WBZ-TV 1954-Edgar-Mystit transmission nng :.uimpbel 1954-Hurt n ane Gm d, 10 5,000 utsromer ,a servites out 1959-brst hdtv-automatit substanon on kne, Wnt Roxbun gN 1960-tal exteeds one million kW tot hrst nme Wa 'd 19th Iiurrit ane I bona, 160,000 t ustomer e. serviu s out 196 L " Live Better Eletent ally"(ampuen begins 1%5 - New Ibston I lmt i on kne, largest m New England ma 1965-Northeast Bl dout 1970- NEPEX begins operanon Lililluy mqg zg Ky. gIEqr r j The Constraints of Deprenion and War,19 W-1944 19 30- Kneeland St stcam stanon on hne l-1 19 % hnt lbston trath< signal.Tremone wt w;,, 1917 - ( umpans name i hangni to 16ston hhson \\', Rf\\ k' 19 W - t iurr a anc. 292.000 ( ustorner sen n es our 7% htf ' " I *, vm wtu murocBs .. I' -[ ,o

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d~ The Age of Conservation, 1972-1986 ,,.p .u-- E 1972-Pilgrim Station on line ,']i W' 1974-Lut of 25 Edison..ppliance stores ckiscs ,,3-fw("',7 g r, {,f,

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s* ^ 'g" !{d] 1975-Mystic Unit #7 on line i ,2 lW '.," y+, C.:,2.. - y;g4 J, ff 1977-Last DC station chses, Chauncy St. m, 9 sm. s 1981-Pilgrim Unit 2 cancelled P'.. q,, '" (, e .c - ~ s 4'1, f ; '. i 1982-lMPACT 2000 Plan is announced - i i'" 1984-lMPACT 2000 House opens; House wins I National Energy innovation Award 1983-100 MW received from New Brunswick, Canada-Pt. Lepreau; NEPOOL contract '? I signed to import Canalian power l from Hydro Quebec gy: 1984-Change in DPU phikwophy on cost I recovery to used and useful versus old V' -"r pnalency test 1985-Hurricane Gloria, worst storm in Company history y y__ %, b-:4 ,[ 4.2n,.7

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I %i ,p4 f . FianacselSectionl ' 34 Management's Discussion and Analysis 37 Statements in income 38 Balance Sheets 40 Statements of Changes in Financial Ibsition 40 Statements of Retained Earnings 41 Schedules of Capital Stock 42 Schedules ofIndebtedness 43 Notes to Schedules of Capital Stock and Indebtedness 45 Notes to Financial Statements 49 Auditor's Report 50 Surplementary information 31 m Management's Discussion and Analysis ( ,, ResultsofOperations Earnings per share of common stock for the years of approximately $ 35,700,000; a decision from ended December 31,1985,1984 and 1983 were the Commonweahh of Massachuwtis Depart- $5.03, $4.85 and $3.60, respectively. The Gim-ment of Public Unhties (DPU)is expected on 1 pany received annuali:ed retail rate increases or before June 30,1986. (w hich include allowances for inftation) of Fct a decaded discussion ofihe etfects of in- $34,100,000 and $31,100,000 in June,1984 and flation and changing pnces, see supplementary May,1983, respectively. In December,1985, the information provided on pages 51 and 52. Company 61ed for an annual retail rate increase ( _1985 Versus 1984 Earnings per share of common stock for the year ally all of 1984 for refuehng, maintenance, modi-ended December 31,1985 increased $0.18 over 6 cations and replacement of recirculanon 1984 results. riping.The avadability of Pdgrim Nuclear Power Total operating revenues amounted to Station in 1985 alkmed the Gimpany to replace $1,203,972,000, a decrease of $112,696,000, higher cost fossd genera: ion w uh nuclear genera-which wa Primarily caused by a signi6 cant de-tion, thereby sigm6cantly reducmg exrenditures cline in fuel and rurchased power adjustment for rurchawd pmer. Such decreases are ale clause revenues, as dtscussed below. Parnally due to the conversion of cerrain gener-Due rnncipally to mdder weather, the 1985 ating units to dual 6 red oillnatural gas burning increase in retail kWh sales of 1.9% was less than canibihty, whic h alhmed the Company to burn the corre pondmg 1984 increase. Base electric natural gas when it was avadable at a hmer cost revenues incrtased as follows: than fuel od. Fuel and purchased nuer adnist. ment revenues were funher decreased due to the Rate increase $ 17,776,0N transfer of certain fuel rei red costs to base rates; f Retad kWh s. des increase 10,610,000 prior to July 15,1984, such cost, were recm cred Subroral 28,386,000 via the fuel and rurchased puer adnistment Transfer of certain costs clauses. previously recovered as fuel The increase in sales for rnale n pnmarily due revenues to base rates _47,93,4 000 to increased sales of pmer from Pdgrim Nuclear 1 Retail revent.e in:rease 76,320,000 lbwer Station. Other nvenues decreased Sales for resale _ 5,344,000 $6,980,000; 1984 activiry inchxled certam meer-Total increase in bi,e est revenun awoci.ned wah various nmnicipal C"""- electric revenues 1HI#4,000 - - ~ ~ Operanng expenws, exchahng fuel and net The Company recoven the maiority of its fuel purc hawd p m er expenws, increased $24,116,000 and purchased n>wer costs through fuel and pur. principally due to increasn in labor and related chased power adjustment clauses; the balance of employee Ivnents, nuclear p m er expenw, orher such costs are recovered through base rates. Fuel operaring expenses, and deprecianon expen3e and purchased nmer adjustment clause revenues which increased $7,924,000 rnmarily due o new decreased $187,431,000 and fuel and net pur-riant adihrions made dunng ihe 1984 outage at chased nmer expenses decreased $151,992,000. Pdgnm Nuclear Pimer Starion. Maintenance The primary reason for these decreases is hat expense dec reawd $5,042,000 fn>m ihe 1984 the Comrany's Pdgrim Nuclear Power Stanon operated at approximately 84bJeapacity m 1985, whereas it was on outage status for vntu-34 level, which included the outage at Pdgrim Nu-increased $616,000, primanly due to an increase clear Ibwer Station.The Company's effective in average short. term bornmings, partially utiset income tax rates for 1985 and 1984 were 47.2% by a decrease in the average borrowing rate. and 46.4%, respectively. Total Allowances for Funds Used During G>n-Interest on long4erm debt increased struction ( AFULE) decreased $ 3,953,000 $6,355,000 princirally due to the issuance of primarily due to a decrease in the average level of $75,0N,000 Series V Bonds,12 %%, dunng the construction work in progress. second quarter of 1985. Other interest charges f*' 196f Verwi1963 Eamings per share of common stock for the year Fuel and purchawd pmer adjustment reve-ended December 31,1934 increased $1.25 over nues and fuel and purchued power expenses 1983 results. increased $153,519,000 and $160,045,000 The major event affecting 1984 operations was respectively from 1983. Purstunt to a retail ra - the shutdown of the Company's Pdgrim Nuclear order received in June,1984, $78,627,000 of Ibwer Station for refueling, maintenance, modi-anmub:ed fuel and purchased p>wer related fications and replacement of recirculation pip-u*ts were transferred from the fuel clame to bue ing.The station was on outage status for virtually rates. Othc r operating revenues mcreawd all of 1984 whereas in 1983 it operated at 80% of $10,511,000 rrimardy because of interest reve-capacity. The decreued availability of Pdgrim r:ues assocated with certain municind accounts. Nuclear ibwer Station caused an increase in 0:her operating expenses incn ased system fuel and purchased pmer costs with simi- $65,641,000 primanly due to increaws m labor lar increases in fuel and purchased power adjust-costs, nuintenance and depreciatic 4 expenses. ment revenues. Similarly, the decrease in sales AFUDC was up $6,317,000 over 19 3, for resale is primarily attnbutable to a durp de-pnmarily due to an increase in the iverage level chne in sales of power from Pdgrim Nuclear of constnanon wurk in pn gress. Ibwer Station. Other interest expense increa, d $6,162,000 Increases in maintenance and depreciation due to an increase in the average >utstanding expenses, and AFUDC are, to a large extent, loan balance and an increase in the Compmy's 3 attnbutable to the refueling, maintenance, mo-average hirrowing rate. See Notes 6 and 7 difications, and replat ement of recirculation of Notes to Sc hedules of Capital StotL and piping outage at Pdgrim Nuclear Power Station indebtedness on page 44.The ctfective income in 1984. tax rate for 1983 was 46.4% Total operating revenues increased $247,333,000. Bue electric revenues increased $82,571,000 due to the following: Rate increases $ 36,7 I 5,000 6.6% growth in retad kWh s. des _22,797,000 Subrotal 59,512,000 Trarnfer o(certain costs previou. ly s recovered as fuel revenues to base rates _40,1810N Retail revenue increase 99,699,000 Sales for resale El26000) Total increue $32,571,000 35 [ Expected Pfant Expenditures and Reined Fmancmg He G>mpany is continually studying various debt and equity securities.%e G>mpany antici-energy supply alternatives in onter to reduce ml pares 6nancmg its nuclear fuel require,nents consumption and either defer or narpone the under its exisung nuclear fuel financing agree-construction of costly new generanon facilities; ments or sinubr arrangements. such alternatives include potential purchases of Ee G>mpany's 1985 year-end capirah:ation power from cogeneration facilities and/or private ratios,50 lebt,11% preferred stak and 39% power prabicers, the installation of combustion common equity, were unchanged from ihe 1984 turbines, and potential long term purchased year <nd level.The Company continues to meet energy options (both hydro-electric and nuclear) working capital requirements, anell as the in-from Canadian facilities. See al3o Note D.4. of tenm 6nancing necewary for its current program Notes to Financial Statements on page 46. of plant expenditures, primarJy through bank He Company's estimate of plant expendi-borrowings, and (commencing in late 1985) the tures for the periid 1986 to 1990, which is sub-issuance of short term commercial paper. In ject to continuing review and adjustments, is early 1986, the G>mpany intends to 6te a shelf currently estimated to be arrrmimately registration statement for the sale of rwo milhon $1,045,000,000 (including nuclear fuel, but ex-additional dures of common stoc L. See alm cluding AFUDC). Funds generated internally are Notes 6 and 7 of Notes to Schedules of Capital a major source of funing and rerresented 78%, Stock and Indebtedness on page 44. 69%, and 107 4 plant expenditures in 1985, He Company's First Mortgage Bonds are 1984, and 1983, respettively. It is expected that a rated Al by Maidy's investors Services. A + by signi6 cant percentage of future P ant exten&- Standard & Poor's, and A + by Fitch investon l tures will be funded internally, rnwided that the Service.He Company's preferred and prefer-Company's rate structure, which is cost-based, ente stocks are rated A and A, respecnvely, by remains adequate to cover increasing ctwts. It is Standani & Poor's and are both rated BBB-by anticipated that the balance of the Company's Fitch Investon Service.%e Comrany'uommer. plant expenditures and its long-term debt matu-cial paper obligations are rated At by Standard rities and smking fund requirements (the latter & Ibr's.nese ranngs are unchanged from their two items aggregating $47,675,000 in the next 1934 leveh. 6ve years) will be 6nanced by the issuance of f Revenues Sourtes Uws 31.1% Fuel and purkd power 40.1% FuelandpurkApowet 29.5 Commeraal 13.3 loes ill Residential 9.9 Ohpen.es 10 6 Other ofJites 96 Payrol and benef.ts 1.5 Indus...> 6.9 Depreucten 1.5 Steam 64 Maintencro 1.4 Muellaceous 60 Inte<est and other thorges 1.3 Street lightmg 56 Omdends dedored 100 0 % 22 fetomed m buunen 100 0 % 36 e - -_,w, ,' % on,,,, - -

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,_.;_,a

• ~ ~

u. m thmunds, exate enma per share years esled Dacenber 31 1%5 IW4 t#1 Operatmg resenues: Electric $ 793,992 $ 712,328 $ 629,757 Steam 17,791 17,740 16,958 Fuel atwl purchased power ad ustment 374,131 561,562 408,04) l Other 18,058 25,038 14,527 Total operating revenues 1,201,972 1,316,668 1,069,285 Operating expenses: Operation: Fuel 385,625 381,075 397,322 Net purchased power 96,986 25),529 77,237 482,611 634,604 474,559 Other 209,800 _194,561 18),674 Total operation expenses 692,411 829,165 658,231 Maintenance 77,580 82,622 62,085 Depreciation (Note G) 82,745 74,821 63,592 Arnerti:ation of deferred cost of cancelled nuclear unit (Note B) 24,381 24,181 21,142 Taxer-pn'rerty and orher 75,657 76,981 73,05) Provision for income taxes (Note E): Current 67,614 10,816 10,135 Deferred 7,726 44,785 26,938 Investment tax credit-net 9,069 21,289 21,996 Total provision for income taxes 84,409 76,890 59,069 Total operating expenses 1,017,183 1,164,860 919,174 Operatmg mcome 166,789 151,808 130,111 Other income: Allc,*ance for other funds used dunng construction (Note C) 6,110 8,401 4,756 Other-net 1,710 1,544 3,231 Operating and other income 174,609 161,755 138,100 Interest charges: long-term debt 69,949 63,594 62,851 Nuclear fuel and related fmancing obhgations 4,569 5,729 7,307 Other 10,284 9,668 1,506 Allowance for borrowed funth um! during construction-credit (Note C) (4,425) (6,085) (3,415) Total interest c harges 80,377 72,006 70,249 Net income 94.232 88,849 67,851 Preferred and preference diviJends pnivided i1,882 14,018 14.276 Balance avadable for common stoc k 5 80,150 $ 74,811 53,575 Common shares outstandmg (weighted average) 15,982 15,436 14,902 Earnings per share of common stock $5.0) $4.85 $110 -.. ~ - - The notes and wbedules on r iges 41 hn> ugh 52 are an integral part of ahe hnancial statements. Managen.cnt'. Dncuscon and Analysis of Operations and F nancul Con htion is on pages 14 :hniugh 36. 37 Balance Slures Assets hmirr 31 19M NM Property, plant and equipment, at original cost (Notes A,C, G and H): Utility plant in service: Electric plant $2,263,750 $ 2,137,877 Steam heating service clart 39,685 39,389 2,303,435 2,177,266 Less: accumulated depreciation 685,805 $ 1,617,630 626,109 $ 1,551,157 Nuclear fuel 208,972 1%,514 Less: accumulated amorti:ation 114,925 94,047 128,I30 68,384 Nonutdity property 1,108 1,108 Construction work in progress 85,933 _ 61,559 1,798,718 1,682,208 investments in nuclear electric companies, at equity 10,909 10,809 Nuclear decommissioning fund (Note G) 6.317 2,831 Current aswts: Cash 1,795 3,832 Accounts receivaNe-net: Customers 167,112 169,148 Other 1,879 17,530 Materials and supphes, at average cost 74,643 66,938 Prepaid expenses and other 7,696 253,125 5,050 262,498 Deferred & bits: Deferred cost of cancelled nuclear unit (Note II) 192,716 217,098 Other(Notes D and G) 26,708 219,424 71,020 288,118 $ 2,28M.9] $2,246,464 The notes and schedults on pages 41 thn> ugh 52 are an meegral pare of the (manualitatements. Management's Disomion and Analysis o((krations anJ Financial Condition is on pages 14 hningh 36. 38 1 Capitalization and Liabilities DecrmNy Jl 19M 1984 (see accompanying schedules of capital stock and indebtedness) Common stock equity $ 574,145 $ 530,602 Cumulative preferred stock 83,000 83,0tV Cumulative preference stock: Non-mandatory redeemable series 38,287 38,287 Redeemable series 35,188 35,264 Long-term debt 744,875 674,125 Nuclear fuel and related fmancing obligations 50,000 50,000 Current liabilities (Note D): Long term debt due within one year 4,250 15,770 Notes payable i19,0tV I81AY0 Accounts payable 60,884 84,202 Prtyerty and other taxes accrued (Note E) 19,400 2,806 Interest accrued i1,639 10,568 Dividends payable 15,315 14,132 Other 6.059 236,547 13,153 321,631 Deferred credits: Accumulated deferred income taxes (Note E) 392,991 387,118 Accumulated deferred investment tax credits (Note E) 101,185 90,984 Nuclear decommissioning reserve (Note G) 9,714 5,663 Other (Note G) 22,561 526,451 29,790 513,555 $ 2,288,493 [2,246,464 The notes and whedules on pages 41 hniugh 52 are an integral part of the nnandal carements. Management's Di3cimk>n and Analysi,of Operations and Financial Condition is on pages 34 thniugh 36. b U, [, [ m Ammis yet calalDrormlw 31 - IWS IW4 IW3 - Sot 4fce o((unds: . Operations: Net income $ 94,232 $ 88,849 $ 67,851 Aki-amounts charged (credited) not requiring funds currently: Depreciation and other amorti:ation (Note G) 81,514 73,532 63,852 Amorti:ation of deferred cost of cancelled nuclear unit (Note B) 24,381 24,381 23,142 Defe_ red income taxes and investment tax credit-net (Note E) 16,795 66,074 48,934 Amortization of nuclear fuel 32,523 5,760 23,503 Allowance for funds used during construction (Note C) - (10,535) (14,488) (8,17I) Total from operations 238,910 244,108 219,11I Funds obtained (mm outside and ather smarces: Sale ofcommon stock 16,751 16,405 12,695 - Issuance oflong-term debt 75,000 15,000 80,622 increase in notes payable 4 144,000 4 Total $130k61 $g9,5t } $312d28 Appiswthm offunds: Plant expenditures $163,742 $247,662 - $123,343 Nuclear fuelakhtions (Note G) 54,743 16,586 27,941 Dividends declared 67,440 62,451 57,66) Debt retirements 15,770 37,230 79,015 Decrease in notes payable 62,000 14,000 Decrease in nuclear fuel and related 6nancing obligarka 4 4 35,C00 Orher(unds (pnwided) umh Deferred fuel costs (26,996) 10,946 3,789 increase (decrease) in working capital and other (6,038) _ 44,61_8 (28 521) Total $130,661 $. 419,511 _$ 312,428

amnsumea(animisedaunty 2, f l"

, f ' b Td . A m f. yart eminithemlw 31 l#5 Iw4 1981 Italance at beginning of year $188,870 $162,472 $152,484 - Net income 94,232 88,849 67p11 _211,102 251,121 220315 1 Cash dividends declared: Preferred 5,512 5,512 5,512 Preference 8,370 8,526 8,804 Common $1,558 48,41] _41147 67,440 62,451 _57f_6} . Italance at end of year $215,6g $18gg7_g {1,6 f72 1J The nNes and xbedules on pages 41 :hniugh 52 are an integral part of the 6nancial statements. Management's Ducuwion and Analysis of Orcrations and Financial Conditkin is on pages 34 hniugh 36. 40 ! Schedules ofCapitalSuwk m hnu nis, exceps per hat anwsmn Decemive 31 1%5 1984 Common stock equity: Common stock Par value $10 per share (Note 1): Authori:ed 21,534,500 shares; issued and outst nding 16,207,568 and 15,747,689 shares $162,076 $ 157,477 Premium on common stock 196,002 183,850 Retained earnings 215,662 188,870 Surplus invested in plant 405 405 Total common stock equity $574145 $530,602 1 Cumulatise prefesred stock: Par value $ 100 per share, authori:ed, issued and outstanding (Note 2): December 31,1985 Der Share Senes Redemrtke Price Shares 4.25 % $103.625 180,000 $ 18,000 $ 18,000 4.78 % $102.80 250,000 25,000 25,000 8.88 % $104.00 400,000 40,000 40.000 Total cumulative preferred stock $ 83,000 $ 83,000 Cumulatise preference stock: Par value $1 per share,8,000,tX0 authori:ed; issued and outstanding: Non-mandatory redeemable series (Note 3): $1.46 Series-2,675,000 sha,es 5 2,675 $ 2,675 Premium on $1.46 Series 35,6_12 35,612 Total non-mandatory redeemable preference stock $_38,287 $_ 38,28_7 Redeemable series (Note 4): $1.175 Series-3,800,000 and 3,807,500 shares $ 3,800 $ 3,808 Premium on $1.175 Series 31,388 31,456 Total redeemable preference stock $ 35,188 $ 35,2_64 The notes on pages 43 and 44 are an integral part of this whedule. 41 YschaMr< ofIndrkke '~ .Q m almamis Long-term debt (Note 5): Fint mortgage h>nds: Interew N*U Serm Rue (%) Marsity 19M 1984 F 4% June 1,1987 $ 25,000 $ 25,000 H 4% June 1,1992 15,000 15,000 1 4% Nov.1,1995 25,000 25,000 J 6% June 1,1997 40,000 40,000 K 6% Nov,1,1998 50,000 50,0N L 9 Dec.1,1999 50,000 50,000 hl 9% July 1,2000 60,000 60,000 N 8% hiay 15,2001 75,000 75,000 S %riable Jan.15,2002 25,000 25,000 Q 9% Dec.15,200) 87,875 90,250 R 10.95 Oct. 31,2N4 71,250 71,125 P 9% Apr.15,2007 60,000 60,000 T 12 % Apr.15,2013 75,000 75,000 U 10 % Arr. I,2014 15,000 15,000 V 12 % Apr.1,2015 75,000 0-Total 6nt mort, rage bonds 749,125 678J75 Secured notes, i1 %%, due Novemler 15,1985 11,520 Total long-term debt 749,125 689,895 Less: long term debt due within one year 4,250 15,770 tong term debe-net $74pp $674,125 Otherdebt: Nuclear fuel and related 6nancing obhgations (Note 6) $_ 50,000 $ 50,000 Notes payable fNotes 6.md 7): Bank loans $ 19,000 $ 146,000 Commercial oper 100,000 15,000 t Total notes rayable $1130y\\1 $ 181,00g .. -. ~.. The notes on pages 41 and 44 are an enregral pare of this whedule. 42 ( /Noen SckJules of Capital Stock 'and in,LWinen h' I. ~ Common Stock Since December 31,1982, the Company ha, issued shares o(Common Stock, $10 par value, as follows: 1 <a1 Prenuum Numkr Par ,o Gwmnim (4 Shares %Lw Se,x L Balance December 31,1982 14,665,213 $146,652,130 $165,708,720 Dividend Reinvestment Plan 439,620 4,396,200 7,016,199 Employee Stock Ownership Plan 41,451 414,510 711,476 Balance December 31,1981 15,146,284 151,462,840 173,458,395 Dividend Reinvestment Plan 511,984 5,119,890 8,714,133 Employee Stock Ownership Plan 89,416 894,160 1,677,6 _68 Balance December 31,1984 15,747,689 I57,476,890 183,850,196 Dividend Reinvestment Plan

• 422,705 4,227,050 11,054,291 Employee Stock Ownership Plan
• 17,174 171 140 1,097,562

-. 2.07.,.568 $ 162,07. 5.,.680.. $ 196.,002.,0. 49 16, Balance December 31,1985

• The remaming aialw eccJ anunun shares reserve &r finure twance are: lblerwl Reinsestment Man 1,274,Ill dures, Empknee stmk (Mer&p Man 52.821. hares.

f ' 2. Cumularise Pn'ferrcJStock Here w ere no changes during 1983,1984, or uneary hiluidation of ahe Company, holders are 1985 in cumulative Preferred stock. Upon invol-entitled to $100 rer share. f 3.' Cumulative Nonstarulatory Redeemable Preference Stock There wcre no changes during 1983,1984, or shares may be redeemed as a w hole or in part; 1985 in the $1.46 Series of reference stock. the tcJempnon rrice at Ikccmber 31,1985 is P Upon resolution of the Board of Directors, the $15.876 per share. See Note 4-b, f

4. Cumularise RcJecmable Prelerence S*ock T.,r al Premiten,n Seewe Nurnke Par l'roneme

$t 175 (mued Man h 19,1975)(a)a ) L1 .4giurcs _ _ _ %hn Sent h Balance December 31,1982 4,206,800 $4,206AT $ 35,086,277 Redemrnons _206 M _ 206 9 _lf24,471 Balance Dec-mber 31,1983 4,000,000 4,000,000 13,161,806 Redemptions 192,500 192,500 1,705M96 Balance December 31,1984 1,807,500 1,807,500 11,455,910 Redempemns _ 7_,500 7,500 67,291 Balance December 31,1985 1,8N),000 $1/00,ay $ 11,188,617 (a) N Genn,n, nu, under (neain marker condin, es k re,,,, red in msir, iceskes,4 a. ! pm ha, w3W J,un ann.Jt,4 a rr= e r= * 'a esceed $10 ger dure pha Jmler h aunal, alicenarively, the G ennen, eruv pa ha.,e in h i,harn in the own ma Lee. (H Subesi to the pma referennal rwhes i4 rhe Ownulative Prefored % r k hollers, up,n mvoluntav 1.calaea n,4 he G sur *n,. l. 4krs,4 the 11.17 % and $1.46 Senes are enneini to res enve $10 anJ $15 ge share, respro nely (< ) Upm rewinen e it the Ibard i 4 Dires tori, the shares may k redeemal as a whi,le,e in pire, the reJrmpion piie ae [k emke 11, l*1 n I 3*' E""' f

5. ' Long-Ti em ikbt Substannally all property, plant and c4mrment Indenture of Trust and i:irst Mortgageilated and materiah and *nrrhe$ ou ned by the Com-Ib emtwr 1,1940, an,I *npplementi thereto.

pany are sub ect to ben under the terms of the ~1 he aggregate pnnopal amounts of long term l 41 debt including sinking fund requiremento due in 2015.ne bonds were sold in a public orfering the 6ve yean 1986 through 1990 are $4,250,000, and have an effective annual interest cost to the $29,250,000, $4,250,000,54,250,000 and Company of 12.822%.The proceeds of he inue $5,675,000, respectively. were used to reduce hirrowings incurred in con-He Company's Series S Nnds bore interest junction with additions and improvements to at 14.6% per annum for the period January 15, the Company's plant and pmperty. He bonds 1985 to January 15,1986 and the rate wdl be are redeemable at Prices dechning from 112% of adjusted each year thereafter subject to certain par value at April,1985 to 100% o(par value in hmits to 127% of the average yields to maturity the year Prior to maturity. ne Series V Bonds for ten year U.S. Treasury 6xed interert securi-may not be redeemed rior to Arn! I,1990 P ties.The interest rate for the Period January 15, through refundmg by tuuance of mdehedness 1986 to January 15,1987 will be 11.8%, having an interet rate or interest cost to the in Arnl,1985, the Company issued $75,000,000 Comrany o(less than 12.822% per annum. o(First htortgage Bonds, Series V,12%% Due V

6. ] Nuc! car Fueland RelatcJ13nancing O6 ligation, notice of termination, are currently scheduled The Company has credit agreements with two to espire on June 30,1989 ($ 35,000,000), and major banks pursuant to which a wh. Ily-owned November 30,1989 ($50,000,000). In December, 6nancing subsidiary of the Company may issue 1984, the Company h>rnmed $ 35,000,0N not in excess of $85,0N,000 principal amount of under such arrangements, which were re6nanced commercial paper surported by irrevocable let-wich the proceeds from the issuance of ters of credit issued by the banks.nc proceeds of

$75,000,000 Series V First htortgage Donsh in such issues are loaned to the Company or arrlied Arni,1985.The effective rate of interest on the to repay maturing commercial paper. He agree-commercial paper outstandmg at December 31, ments also permit the Company to make revolv-1985 was 9.08% inchidmg commitment and ing credit h>rrowings from the banks rmvided surport fees.The Company's obligations under that the amount of such h>rnmings and the ihne 6nancing agreements are collateralued by a commercial paper outstandmg do not exceed secunty mterest in certain nuclear fuel.Rese $85,000.000 in the aggregire.%c agreements, secunty internes are suhmhnate to the lien of w hich are subject to automatic one year exten-the indenture securing the Company's Fint sions unless the arrhcable bank gives three years htortgage Nnsh. Y, 7. Notes Ikable To trovide 6nancing flexibhty, at December 31, Commitment (ces for the yean ended December 1985 the Company had credit arrangements 31,1985, IN4, and 1981 total:nl $279,000, aggregating arproximately $143,000,000.%cse $195,000 and $463,000, ropectively. arrangements Provide for h>rrowings at or below information regardmg short term bornmings, the Prime interest rate and require commitment which is compriwd of bank h>ans and short term fees to be paid on the unused lines of credit. commercial paper, is ar folk rws: dwmandW.idm LMS tM4 PM) hiaximum short-term h>rrowings $158,000 $146,000 $75,000 Daily weighted average amount outstandmg 89,656 73,884 12,6 % Weighted average internt rates, excluthng commitment fees, on balance: Outstandmg at year end 8.38 % 9.52 % 10.65 % During the year (dady) 6.65 % 10.93% 9.73% 44 Noeen to FinancialStatements ~ f ' No'.e A.? Summary of Signi6 cant Accounting Iblicles %e Company is subject to regulation by various hiaintenance expense is chargni for the agencies. Because of the effect in rtxulated busi-co3t of current repaurs, replacement ofitems not nesses of the rate-makmg process, ditierences accounted for as units of property, an i mirwr may arise in the application o(generally accepted betterments of plants and properties as they are accounting principles between regulated and incurred. nonregulated businesses. Such ditierences are ne cost of nuct,r fuel is amorti:al to fuel related principally to the time at w hich various expense based on the quantity of energy on" items enter into the determination of net income duced for the generation of electncity. Nuclear in accordance with the principle of matching fuel expense alu inchxies a provision for the costs and revenues. (Accounting policies are alw costs associated w tih the uhimate deposal of desenbed in Notes C, E and F.) spent nuclear fuel; such estimated dispisal costs am subjecno review and are amorei:ed to fuel

1. Prmciples of Gmsolitarum ne (mancial statements include the accounts expense, where ihey are king recovered timiugh of the Company and its wholly owned fin. ncing the G>mpany's fuel and purcia,al pmer adjust-ment clam.e. (See Note G.)

subsidiary, BECO Fuel Company, Inc.. In the process of conschdation, all intercompany bal-

3. Forecasted Fuel Clame ances and transactions have been ehmmated.

He Company's retad fuel and purchal pm er adjmement s lau<e permits all fuel cmts

2. Depreciatum and Amurtearim Physical property is depreciated on a straight.

and the fuel p>rtu>n of purchased p mer cosn to line basis at approximately 3.64% annually. At be bdled to customen monthly utib:mg a fore-casted rate.%e dirierence between actual and the time of retirement of property units, their estimated cost is inchakd in deferred debts on cost and the cost of removal are charged to and salvage is credited to accumulated deprecianon. the accompanying balance sheets pendmg.al-In 1983, the Company changed from the whole justments of subsequent rates.%e non fuel pir-hfe to the remaming hfe methat of computing tion o(ccrrain purchased pmer costs are recovered tbrough base rates.uc DPU has ihe depreciation; such change was approved by the right to rnfuce subsequent fuel clame billmgs if Commonweahh of Mauachusetts Department of Pubhc Unheies ( DPU) in the G>mpany's May, it fmds that the Company has been unreasonable 1983 retail rate order. %e effect of the change or impnxient m ihe operation ohis generanng uniti or in the procurement of fuct, the G>m-on the accompanying financial statements is not

matenal, smy does not anticipate any bilhng rcJuctuirn.

l Note B. Cancelled Nuclear Unit he Company commenced amortmng the cost cmn that will be reviewed and may be incremi of the cancelled Pdgnm 2 nuclear unit in May or decreasal from time to time by the DI'U. 1982 over approximately eleven and one.hal( Ec after tax wst rem.umng to be amorn:n! at gears pursuant to retail rate oiden of ihe DPU. Decernber 31, IW5 is appn niimately $124.000,001 Such cmts mchale certain (mancial carrymg 45 NM@$M] A&mance/orNands UsedDurireConstruction - In acconlanca with regulatory accounting, the Tks cost is not an item d current cash income, Company capitali:es as part of constructbn costs but is recovered over the service life of pt:nt in certain general and administrative costs and an the form ot' increased revenue collected as a J . allowance for funds uml during construction. result of higher depreciaritm expense. AIUDC s . (AFUDC). AFUDC represents the' estimated rates for the yean 1985,1984, and 1983 were cost dborrowed and equity funds used to 11.5%,11.3% and 11.3%, respectively. fmance the Company's construction program. H [s iNsaiRj Commitments and continsencies i I. Capntal Comnurments

3. NuclearImurance At December 31,1985, estimated contractual The Company is a member d Nuclear Elec-obligations for plant, nuclear fuel, and equip-tric Insurance Limited; the Gimpany may be ment were approximately $166,300,000.

acessed additional premiums under its nuclear 2, L.ase Commitments facility decontamination liability and exceu

At December 31,1985 and 1984, the Com, propeny insurance, and exua expeme imurance p, nr 'ai leases covering certain facilities and if the insurer's kwes exceed fmancial resources j

equipment. Some J these leases are " capital other than the retnapective premiums. As of ' leases", as defmed by the Financial Accounting December 31,1985 the highest amount which I Standants Board ( FASB). Commencing in could be asseved for kmses during the current '1984, the FASP required that regulated utilities policy year was $15,030,000,Whde auemments j commence the capitali:ation deertain material InJy aIso be made for Lases in certain prior pol. leases. Ilad allleases which meet such criteria icy yean, the Gimpany is not aware dany lenes - l been capitali:ed, the amount d the asset and the in such years which it believes are hLely to result ~ [ liability that wuuld have been included in ihe i n "" ***"*'"'- balance sheets as of December 31,1985 and 1984 Under certain circumstances, in the event and the effect on expenses for each of the three of nuclear incklents at facilities covered urder years in the perkd ended Deterabei 'l,1985 the Price.Andenon hability provisions d the would not have been material. Atomic Energy Act of 1954, as amended (due to Estimated minimum rental commitmenes expue Augmt 1,198D,ihe Gimpany could be under noncancellable leases (or years sutmequent ""eued up to $5,0N,0@ per incident but not to 1985 are as folk >ws: enore than $10,0@,mn a cale@ cat

4. GulGinmuon Gnts in Anuana TMal 1986

$ 22,084 The Company has uppersled plans for con-i g9g7 24,g39 version of one of its generating stations since t he 1988 24,852 DPU dal not arpnwe an oil comervation adime- ? 1989 24,498 ment charge that would have assured rec wery of 1990 24,558 all cints of such convenkin. In accordance w ith Yean thereafter 214,950 the instructiom d the DPU, the Compsmy has A portion dthe aforementioned rentals will deferred approximately $14,4N,000, which rep, j ' L be capitali:cd as part of nmstructkm cents in the resents cents asociated with the Company's coal l ' future, Information with respect to rentals capi-convenion program.The G>mpany exrects eo talized from 1985 throegh 1983 is as follo**: recover these cines hrough increased rates in its C+ ahadarara current rare fihng. mA=una Rene bren* - G eenara c Gari 1985 $13,700 $3,600 1984 13,351 3,600 1983 12,300 3,400 1 46 m j

None E.} Income Taxes

~ The Compan/s income before income tax ment tan crnlits are retlectal in income over the expense results solely (mm domestic operations. estimated uscful hvn of the related pn.perty. Drierred income tax expense results (nin timing Comninents of deferred income tax expense are differences in the recognition of certain expenses as folk >ws: for tax and fmancial statement rurposes. Invest-m h una tes ic4 iwi Cancelled nuclear unit (Note B) $ (8.997) $ (8.997) $ (S 540) Excess tax depreciation over Iwk derreciation 16,231 24,527 15,335 l Deferred fuel expertse (11,610) 4,708 1,629 Debt p>rtion of allowance for funds used dunne construction 1,903 2,617 547 Other indirect construction costs 1,870 1,727 1/>01 Massachusetts corporate franchise tax 1,627 6.494 4,116 Pre-April 7,1981 spent nuclear fuel dispisal costs (2,112) (2,469) 15,22.) Deferred nuclear outage expense (1.2 14) 8,438 (2,027) Extraordinary storm hases 4,005 1,742 4 Gial conversion costs 6,212 4 4 Nuclear safety evahution costs 4 1,688 o Other 2,0 31 4,110 _ 948) ( $ 7,726 $44,785 $26,918 The effective income tax rates reticcted in the ditierencn fnim the statutory th!cral mcome ax fmancial statements and the reasons for their rate are exrlained twlow: 1+4 l#4 IWI Statutory rate 46.0'h 46.0'b 46.0*t Alkiw ance for other funds used dunng construction (1.6) (2.1) (2.5) Massachusetts corporate franchise tax 4.0 40 4.1 _1.2)_ Other (1.2)_ A1)_ ( Effective rate 47.2 % 46 4'N 46.41, in connection with its examinaron of the matter and behevn that it will prevad. Inwmc Company's 1980 thniugh 1982 mmme tax returns, taxo in the amount of $49,000,000, the pni-the Internal Revenue Service (IRS) has Jn-p ned tax dehaenc y, exc hihng meernt, has Iven allowed the deduction of the uwes of ahe nuclear enn.Jnl for in accumulatnl deferrni inwme riant abandoned in 1981.The IRS roenn that taxes in ihe atmmpanung balante sheets. Ibl. P the deducnon be amorti:nl over arrroximately eral inwmc tax returns rhniuch 1979 lute been eleven yean.The Gimpany has arreated this examinal and closed. . Note F. ' 1% nion< The Compmy has a nonconenbutory funJed l'ension actnuls and the p rnon addcJ to con. plan (whh certain voluntary conenbutory strus non o nts were as followi: features) covering substantially all emphiyen. Total accrued $7,908 > 7,126 $6.811 AJJed to construction cost. I,795 1,618 1,571 47 f' The Company's policy b to fund pension costa benefits at the annual actuarial valuation dates accrued using the aggregate cost methtd A were as followv actuarial preent value o(accumulated plan in rh iuanh January I, IW5 Januarv 1.1W4 Actuarial present value of accumulated plan benehts: Veste.1 $15),200 $142,700 Nonvested 12,700 7,900 Total $165,%?0 $150,600 mm

= v

A nine percent annual rate of retum was as-the pension plan had net auets avadable for sumed in determining ihe actuarial prnent value plan benc6ri of $214,000,000 and $194 AV,000, o(accumulated plan benents for both 1985 and 1984. respectively, w hah reproent full fundmg of The Company's basis for determining pension ihe actuarial prnent vahic of accurnulated plan expeme and funding of the plan considers the benc6ts and partial fundmg of ahe benenis to be actuarial preent value of accumulated plan camed m ihe future (whis h at January 1,1985 benc6ts camed to date, as well as benc6ts to be were einmatal to be $156AV,000). earned in the future. At January 1,1985 and 1984, f Noer G. EstimatalFuture Costs Relatalto Ultimate Di<posalof Spent Nuclear Fueland throughArnl7,l985. Nuclear Generating (Lnts The Gimpany n tuovering through Jcpre. The Company is expandmg its spent nuclear fuct ciation ihe otimated unes to duomrniwion storage facihty at Ngnm Nuclear Ibwer Station I'dgren Nuclear ibwer Seatiori; sinti furnis to include sufficient capacity for pent nuclear colluted are entratal m their me. fuel through approximately the Scar 1992; how-He Company aim parnapaces as an im otor ner, pursuant to the Nuclear Waste Ibbcy Act in two orher domntic nintear units. lioth of o(1982, the United States Department of Energy thne units are reunenng as part of aheir whole-(DOE) wdl be resp > ruble for the ultimate sale rates a rn >vnion for neimated charen for donnal of spent nuclear fuel. In 1985, the Com-spent niwicar fuel donnat owts and plant de-pany paid arpmximately $40,58) AV to the commmk ning ones (Sec ale Note A1) DOE for dnp nal of nixlear fuel depleted l. Note H. Information ReganlingJointly4hsnnl Electric lbntandleng Term Ibit/med share (5.88n)of plant m serviteof $12,058AV lbwer Contracts and $12,054 AV for 1985 and 1984 regninely, l.Jomdy-owud Elaenc Plant and.acu:nulataldeprniatk n of $2,975 AV The Company h a joint owner of W. E Wyman and $2,545 AV for 1985 and 19M4 rnen eively. Umt #4, whkh was constna ted by Central The Company inchales its share ofihrn: Mame Ibwer Gimpany and cornmenced opera, espen n of W. E Wyman Urne #4 m the cor. ek>ns in 1979; inc hakd in the auempany mg re ninJmg operatmg n penws on iti ino,me balance sheets is the Gimpauv's prop >rtionate statement. 48

2. long Term Omtraas for tk Purcime of Elcuriaty a return on capital) tbrough the contract expira-The Comomy has c:rtain long term contracts tion Jare,The total annual. p. taJer these con-for the purcha3e of electric rower, The Company tracts are indeJed woh p.rc hased ower expense is obhgated to pay its Proportionate share of in ihe Compan,'s Statements ut income.The the operatmg costs (indtalmg Jctreciation and contracts are as follow 5:

__.m.._. Mm m hanh iW firen *stre ib' Gvnrany i 'nin. 4 intorw shue.54 Ikh G ene ra t

Gerait, Mnumum the n c il (bruarshng bprara n Purshamt lis h Misumum W.ug i Gut.

8 ' Cuneranng Una Date 't MW Nnse IW Servue br. Der Canal Unit #1 200l(a) 25.0 142 $ 644 141 $ 2,797 Connecticut Yankee Atomic 1998 9.5 55 1,247 851 5,612(b) Yankee Atomic l'N I 9.5 17 542 271 2,946k) Point l.epreau 1983(J) 15.625 100 26,919 21.364 lo,724(c) Bear Swamp 1990(t) 17.1 100 0- -0 0- $29,172 $22,8(8 $28,079 T..eA fned uwl vartaMe o=.n t < rbcw anerav. toe ihe gr r c JaiIkrmt er 11, twi, l'e**4 erd l N1 were $11.7'ti AV,lhY.tsli1W, arsl 5*4.0% A10 re irstneh W suuHe n<nn ewne nreewnn turl o. e..hu h ue na hdeJ.wh net run hecJ r. n m ihr Nermenn in tnsome. N aaregee rriew ind anu mr.t 4 thew fut ure ur.o vsht a nal pm haw dhg inon. Ar in ifw hve ye.ui l9'96 thrs ewh tW0 4re $62.071 A10, 161))e N0,161,57 t A10, $ 11,4NW ard $ 12.%9 AU re grs tnely N agreg.ee prwne v.Ln.4 un h i4 Lgain ci a llWJJ2 A10. (a) Renewnti 4 4Yb ot the G*nrann n'rallal swr urahin v. the rema nmg urun Lwril ah +e amergate M ilt (H Ot thu anmiunt the G eir.any ha rearantcol $4.144 AV (d in *Lhtx,n, the Genrany hm guanntecJ $1 AY AY for two rew lunn ord.t lirw. (Ji h Ihne Lrpeau untra e ena, hr ciirrrwint by etw C.<nran,6 < <hree,mhlie m es.1 ewel e arm mvh ri ri' al*- (c) N uoira t diri rsw euced h e rhe hte id ebe urut. however, the am =me rrrerwnn the nomeni dd< rm nen thn aigh ibe o ctr u t crprarain Jaee. (0 % u.nrrx Ain n.< cucnd for the hfe i4 ehe urni,l n re. rhe Gin,p.n, a reigiurcJ ea ra, airvonmee I, $2JNA10 annuJly tie uraity s hugn 4 *hn paunsl atorage tAihry thri=wh the o cera t empt ne e Jee. Tb G.mpinv al.o ha wstral tr. nemi c o ear n e..ha b erler vo ihrw pas h l p. r o vo r* r. t= =n er. ehe rties t,4 h iontra n on the awmp nung tuurn ul starrmino a r= 4 marrul -. ~. Report ofImleperulent Certkl1%Iic Acwsmrants } Th th Stot Udden and Dirca",s of lioston EJoon Gantuny We base exarmneil the balant e sherruit I6 ton In out opunon, the t:nanual itatem<nts 1:Jnon Gienrany at Ikemlwr 11,19M and 1984 reterrnt to aime crewn e.urly the hnanual o ne and the rei ncJ sratrmentiof mt ome and rttamnl non of lLeon tain Gimpmy at ikemtwr 11, earnmg, and chaners m hnandal e ninon 19M atal 19M4 arul ehe resohn of its operanoen for each of the three 3can m the penal enJed an h hanecun hoanual p nmon for cat h of the Ikcrnier 31,lW5 Our exannnanoin were three year,in the n nod endnliktmher 11, en.xle ni acu >rJarwe wirli generally au tperil 1985 in oird,,rrnity wieli vi-vierally isirpent aixheing standarJ, and, atu,rihnely, mt hx!cd au ount mg pnnaple, apphol on a a in orror soth test.ofihe aanonnng rouird, and sot h

bun, other aialie nig on.t rilore, a, we o,ennit.rcJ necessary m the ur unniant.ct l'

turon, M n. huwn, ) o, nary ll, IM 49

• 3' I

.) ^ e= ww -T ~ SelectcJ Financial Statistics (UnauditcJ) y Iblars e Lirning Ovrating Ovr.rmg Not Availabic h,r Ikr 51ure i4 I A=wsb of Mm. stan carmrqAne Rrverun Inow Inow G,runwin Se. L C.,ennw ei dri= L' Io Qturrtctly Frrummi Dat.: 1985 First Quarter $328,052 $43,587 $25.111 $21/>40 $1.37 SeconJ Quarter 279,910 34,006 19,668 12,198 0.77 ThirJ Quarter 310,626 53,262 34,972 il,501 1.97 i l livurth Quarter 285,184 15,914 18,481 15.011 0.92 1984 Fint Q urter $112,925 $16,475 $20,848 $ 17,177 $1.14 SeconJ Quarter KV,416 31,744 15,til 5 12.089 0.79 ThirJ Quarter 369,916 52,038 15,940 12,448 2N li>urth Quarter 313.391 11.551 16,1% 12,697 0 82

• Bawd usw qu.irterly wghted aver. ige nurnier i4 oannwin Jure, siur rand.ng Quarterly Stxk Data (Unaudited) liillowing are the reported high and low sales Jared Tape for cas h of the qiiarten o(1985 anil prices o(Ikwton EJ wm G>mrany's cominon 1984 and the divtJcinh deilarol per share Juring irmk on the New York Stock Exchance Ginsoh-cat h of ilme quarters:

im -~~---~ja High im thvidermi. Ihuh im t h. m krs k Fint Quarter 19 33% .81 28 % 24 4 .75 SeconJ Quarter 43h 17 % .31 27 4 25 .75 Tiunl Quarter 44 % lo .86 10 % 26 .81 liturth Quarter 46 % 36 % .86 35 % 29 % .81 50

Supplementary information to Disclose the Ellects of Changing Prices (Unaudital) The folkm ing surplementary information is Derreciation i$ determined by arrl)mg the supplied m accordance with the requirements of Company's compmte depreciation rare to the the Statement o(l'inancial Accounnng Stan-inJcxed plant amounn. dards No. D, as amended, for the purpwe of Since only historical cmts are deducuble for providing certain information about the effect income tax purpwes, the income tax exrenw m e(changing trices. It should be viewn! as an the histoncal cost fmancial statements is not estimate it the arrroximate etfect o(inflation, nJjusted. rather than as a precise measure.The Comrany Under rate-making prescr bed by the regula-suggests that this information be viewed wich tory commiuions to w hich the Compan, is caution as, in the Company *urniion, the subject, only the hntorical cent of plant is retov-informanon presented does not Properly deckt crable in revenues as depreciation.Therefore, the effect5 of intlarion. the ditierence between he cost of riant itarniin Constant Jollar amounts rertrsent hntoncal terms o(constant dollan or current cmt and the cmts stated in terms of dollan of equal rurchas-historical cost of riant is not Prewntly remver-ing pmer, as measured by the Consumen Price able in rates as derreciat son, and a refletted as Index for all Urban Ginsumen. Current cost an adjmtment to net recmcrabic cost.While the amounts reflect the changes in specific ratemak mg pniceu gives no remgronon to tur-prices of plant from the date the plant was rent cost of replacing pnyctty, plant, and equip-acquired to the pre $cnt, and ditfer from constant ment, bawd on past tracekes, the Gimpany dollar amot.nts to the extent that specific beheses it will be athmed to earn on the m-prices base increased more or less rapJly than creased cmt ofits net investment when replace-the general rate of mtlation.The current cme ment of facihtles actually occun. of plant is determmed primardy by mdexing sur-The G >momy, by holJmg aswn ua h as viving plant by the Handy Whitman Index of receivables, prepas ment, and im entory, suffen Pubhc Unhty Construcnon Gnn. Smce the a low of purc haung s mer dunng rettals of unhty plant is not exgw tal to be replac al pre-intiation becauw the amount of cash recen ed m caely in Lind, current cme Joes not netewanly the future for ihese ircem w ill purc h.ne lew. Core reprewne the replacement cmt of the Comomy's venely, by hol kng monetary liabihties, primarily rniductive upauty. long-term acht, the Company brnetin iname Fuel inventories and the oat of f.md fuct u ni the raiment m the future will be made with in generation have not been restated (n m their nommal dollars having lew port haung p mer. hatorical cmt in nominal dollars. Regul. tion Tim Jitierente n refleord as an ad mtment to i hmits the remvery of fuel thniugh the op ration purchaung p mer o(net amounn owed. o(aJnntment c:auws and/or adjmemenn m base rate *(hedules to atnut unts. her thn reaw,, (uct inventories are effetuvely monetary au -et 51

Statement ofincome from Continuing Operations Adjusted for Clunging n ices (UnauJitcJ) nevent ml current c.t pn the year ersid themler 31,1985 ei rJu =wds litworic C=t Averaer 1985 [Ulm Revenues $1,20),972 $ 1,20),972 Expenses: Operation and maintenance exchaling nuclear fuel anvrti:ation 717,468 717,468 Nuclear fuel amorti:ation .32,523 40,581 Depreciation 82,745 165,194 Anorti:ation of deferred cmt o(cancelled nuclear unit 24,381 24,181 Taxes-property and other 75,657 75,657 income taxes 84,409 84,409 Interest charges 80,177 80,177 Other income (7,820) _ {7 820) 2 Total expenses J109,740 1,200,247 Income from operations excluding adjustments to net recoveraNe amount $ 94J12 $_),7 5 2 Increase in specinc prices (current cost) of plant held during the gear * $ 46,554 AJ ustment to net recoveraNe amount 100,971 3 Effect of increase in general rice level _ {l18,217) P Net 29,108 Aljustment to purchasing power oNet amounts owed _Q7,179) $m p,g71) Total ' At [hemkr11,1935, current nor <4 reperty pl.ine alMarrnene net W aannut.ned depreoasuin was $ 1,lM6,0M.hde hneurit al n=e (< net cm recover 4 le duous;h Jnrennu vs wm $1.751,277 exclimling reavvery 4 + gene runlear hnt diapi d u,.ri ed $11.441, whittiis civi.ui-cred to be a rnoner.wy acm. Fis e-l' ear Compariwn ofSelecteJ Supplemen tary Financial Da ta AJjus teJ for Edecte of Clunginst !' rices (UnaudircJ) ei AesanJa enas pn Ant ammenn and Gemme Prae lede (CPI). 4aine IW3 Mm mm,naa lw, min.it ins sw tw te tel. Operanng revenues $1,20),972 $ 1,16),208 $1,154,181 $ 1,176,188 $ 1,215,977 Cunent cmt mfonnatkm income (km)(rum continuing operatiims (exc hiding adjustment to net rewveraNe cmt) 1,725 5 10,146 $ (14,612) $ (7,500) $ 8,112 las pet comtr=>n share (after dividend requirements on treferred snick) $(0.64) $(0.2M) $(2.02) $(1.64) $(0.66) Exceu (Je6etency)o(inucaw in current ant o(electric plant held Junng the year over changes in the general tKe level 5 (71,661) $ 82,504 5 65,018 $ 22,146 $ (140,644) t AJ;ustment to net recover.ste unt $ 100,971 $ (65,845) $ (28,208) $ (11,141) $ 64,698 Net mets at Scar end at net recourable cmt $ 630,952 $ 66),890 $ 645,140 $ 641,706 5 658,742 General mformation AJnntment to purchaung pmer of net amountumed 5 (17,179) $ 19,266 $ 29,849 5 68,468 $ 91,454 C.nh divklends declared per common share $114 $1.21 $1.14 $ 1,14 $1,10 Market price per mmmon share at year-end $45.875 $ 15.85 $10 6) $28.95 $26.02 Average (estimated) CPI 122,2 111.2 291.5 2H9.1 272.4 %eed io.vne l es o,n.iane tut n 52

' SelecealOperatingStaen:Wsj ~ im im im m. iwi im Capabihty (NEPEX net claimed winter maximum-htW): New Boston Station 760 760 760 760 760 760 Pilgrim Station 670 670 670 670 670 670 hlystic Station 1,034 1,030 1,016 1.025, 1,046 1,046 L Street Station 23 23 2.1 M 23 48 W.F. Wyman unit #4 16 36 16 36 36 36 Jet turbines 257 264 264 237 267 257 Total 2,780 2.78) 2,769 2,751 2.802 2,827 Contract purchases 414 412 416 32) 539 309 Contract males (268) (261) (122) (182) f90) (117) Net carabihty at: Year-end-htW 2p26 6952 2,88) 2,692 2,751 2,799 Peak-htW 2,949 2,861 2,844 2,60) 2,75) 2,888 Car 2bihty responsibihty to b EPOOL at peak-htW 2,777 2,684 2,468 2,416 2,480 2,460 EJ,on territory: Hourly peak-htW 2,416 2,187 2,2 )) 2,181 2,077 2,100 load factor $8.6% 57.6 % 59.0 % 56.8 % 58.5 % $7.8% Generating station economy BTU per net kWh generated 10,409 10,214 10,217 10,112 10,170 10,095 Average cost of fuel (Gimrany)- cents per milhon BTU: IWd 182.46 447.61 426.02 442.12 501,52 417,37 Nuclear 63.7) 48.27 47.18 40.77 38.93 Compaite 255.75 285.10 125.71 )$8 (6 321.34 Capabihty (net kW)- lim! 77 % 77 % 77 % 79 % 79 % 80 % Nuclear 21% 23% 23% 21% 21 % 20 % Generation (system kWhh limit 60 % 88 % 61% 73% 70 % 78 % Nuclear 40 % 12 b 19 % 27 % 30 % 22 % Utihty plant investment (000): Additions (snm) $ 166,670 $ 250,569 $ 111,26) $ 140,2cn $ 14),116 $ 150,454 Retirements 16,440 17,916 16,262 21,110 11,!!9 9,609 Accumulated derreciation (65,805 626,109 581,951 51),762 49),087 451,578 Depreciable plant 2,252,088 2,110,619 1,87),270 1,762,317 1,669,411 1,615,846 Utility plant investment 2,190,476 2,239,93) 2,007,226 1,892,775 1,781,060 1,909,018 l'et average customer $1,979 $ 1,769 $1.432 $1,282 $1,127 $ 1,400 Per average emrloYee $55),864 $531,924 $498,938 $492,197 $451,111 $488,119 Per $ 1 hae revenue $2.88 $2.97 $ 1.04 $ 1.15 51.11 $1.77 Electric riant in service per EJien territory hourly peak (dollan per kW) 937 896 841 806 800 768 Year end emrkwee* 4,164 4,252 4,113 1,874 1,876 1,954 Al

be!ectedSalec Statistics E IM l#4 1*O 1*C twl i+$0 Electric energy T (kWh in thousands): Sources: Net sprem output: Generated 12,333,007 7,777,441 12,774,656 11,344,914 11,124,788 12,157,687 l'urchased 2,262,337 2,999,560 1,793,484 1,562,751 1,294,664 1,535,889 Interchange (286,229) I,946,469 (584,985) 44,263 482,123 (1,091,794) g E Total 14,109,115 12,721,470 11,981,155 12,951,910 12,901,775 12,801,782

==.

== :- = =.= : - - -.

--=

Disposition: Sales Commercial 5,991,734 5,724,941 5,280,961 4,911,918 4,798,108 4,654,964 o Residential 2,896,678 2,890,242 2,777,653 2,647,217 2,594,708 2,651,979 Industnal 1,82.1,580 1,868,664 1,737,999 1,650,791 1,694,869 1,771,784 y Street lighting 132,997 134,905 137,136 136,762 136,541 110,809 Railroads 4-27,524 55,729 79,444 60,562 55,197 Total retail 10,844,989 10,646,276 9,969,430 9,446,114 9,284,788 9,264,913 SdI'* f"' 'I'- 6' L: totai requirements 421,816 447,686 508,151 494,182 482,154 471,44) EJison terntory total 11,268,805 11,09),962 10,497,613 9,940,316 9,766,942 9,736,376 Sales for resale-partial requirements 1,404,798 644,873 2,411,191 2,089,918 2,257,000 2,132,152 g Total-Edun sprem 13,173,603 11,718,835 12,928,810 12,030,254 12,023,942 11,868,728 Aliscellanceus usage: e-Company 107,087 124,173 100,262 112.206 108,930 121,236 Transmission 361,576 287,010 314.53) 264,290 255,609 113,156 Datnbution 666.849 573,432 619,4 9 545,180 51),294 498,462 E. Total 14,309,115 12,721,470 l),981,155 12,951,910 12,901,775 12,801,782 Kilowarthours-annual gnm th percent: Commercial 4.7% 8.4 L 7.1% 2.8% 1.1%

2. h.

Residential 0.2 4.1 4.9 2.0 (2.2) 2.1 Industnal (2.4) 7.5 5.1 (2.6) (4.1) 0.8 L Streer hghnng (1.4) (1.6) 0.) 0.2 4.4 4.5 Railroads (100.0) (50 6) (29.9) 31.1 9.1 65;4_ Totalretait 1.9% 6.6% 58% 1.7% 0.2% 2.2% Sales for resale-g tor it requirements j53)_ (11.9)_ ._2.8 _

2. 5.,

_2. )_ _2 j_ Ednon terntory rotal 1.6 5.7 5.6 1.8 0.1 2.2 E Sales for resale-partial requirements 195 4 _ (734)

16. )_

J7.4) _ 5.9_ (19.0) u_ Total-EJnon sprem 12.2 % . (9.2)% 7.5'% 0.1%

1. h, (2.4)%

i Territory total revenues r-by claw Commercial 52 % 51% 50 % 50 % 50'% 49'b Residential 29 % 29% 29 % 29 % 28 % 29 % InJustrial 14 % 15 % 15 % 15 % 16 % 16 % Other 5% 5% 6% 6% 6% 6% F Electric sales statatics: Residennal averages: m T Annual LWh ow 5,512 5,551 5,407 5,224 5,190 5,17 8 Revenue rer LWh 10.404 11.4 % 9.194 9.6 t( 9 544 8 05< Annual hli $57 ).12 $636.96 $ 507.75 550).59 $405.12 $412.76 Customer: hieters ar year end 616,187 629,177 62),020 615,142 610,764 602,616 Average numtwr r 00,761 591,14) 5x 4,771 576,754 569,511 562,076 54 l 4 4 g, g b l_ he

NOM 5W??~,5:1??~. ,,,:.l11 ? 1985 19 4 1981 1982 1981 1980 Operating revenues (000) $1,203,972 $1,316,668 $1,069,285 $1,056,267 $1,044,941 $885,634 Balance for common (0N) $80,350 $74,811 $53,575 $45,882 $58,462 $4n,879 P. r common share: Earnings per share $ 5.03 $ 4.85 5 3.60 $ 3.18 $ 4.15 $ 3.55 Dividends declared $ 3.34 $ 3.12 $ 2.91 $ 2.82 $ 2.80 $ 2.74 Dividends paid $ 3.29 $ 3.06 $ 2.88 $ 2.80 $ 2.80 $ 2.72 Book value $35.34 $33.61 532.21 $31.71 $31.68 $30.52 Cash tiow $15.76 $14.17 $13.90 $10.80 $10.42 $ 8.54 Payout ratio 65 % 63% S0% 88 % 67 % 77 % Return on average cquity 14.54 % 14.69 % 11.24 % 10.02 % 13.35 % 11.73 % Year-end dividend yiel.1 7.50 % 9.36 % 10.57 % 11.08 % 12.72 % 13.02 % Fixed charge coverage (SEC) 3.0lx 3.02x 2.67x 2.28x 2.25x 2.28x Capinti:ation: ~51 % 53 % 54 % 51 % Long term debt 50 % 50 % Prefctred and preference equity ,11% 11 % 12 % 12 % 12 % 14 % Common equity ' 19% 39 % 37 % 35 % 34 % 35 % long-term debt (000) 5744,875 $674.125 5674,895 $706,503 $704,833 $619,440 Cumulative preference stock, redeemable (000) $35,188 $35,264 $37,162 $39,235 $40,965 $44,511 Total assets (000) $2,288,491 $2,246,464 $1.995,425 $1.929,940 $1,918,013 $1,782,909 Funds generated internally (after dividends-000) $171,470 $181,657 $161,248 $115,013 $107,170 $79,6% Plant e <penditures (000) $218,485 $264,248 $151,284 $136,463 $136,735 $134,249 Internal generation 78 % 69 % 107 % 84 % 78 % 59 % Stockholders at yearend 50,550 53,570 56,950 58,853 59,478 61,533 Shares-outstanding: Weighted average 15,981,923 15,435,659 14,902,418 14,434,415 14,073,823 13,761,062 Year-end 16,207,568 15,747,689 15,146,284 14,665,213 14,218,986 13,927,582 Stock price High 46 % 35% 29h 26 % 24h 24 % Jow 33 % 24% 25 20 19h 18 % Year end 45h 34 % 28 % 26 22 21% Yearend market value (ON) $743,522 5545.264 $429,776 $381,296 $312,618 $299,443 Tradmg volume 7,579,200 8,175,3N 4,344,6N 3,750,400 2,738,900 2,643,000 Market / book (year <nd) 1.30 1.03 .88 .82 .69 .70 Price / earnings ratio (year-end) 9.1 7.1 7.9 8.2 5.3 6.1 55 1

( t OMcees Directors hmas J. Galligan, Jr., Chairman of the brJ

• tHelene R. Cahners (Mrs. Norman L Cahners),

Tm3ru Stephen J. Sweeney, President and Chief Execurin Odicer

• • tGary L. Countryman, President and Chief OpnarN O@n, Libeny MutuaHnmance Joseph P.Tyrrell, Execurin Vke Presilent i

C)mpany I James M. ladon, Execuriw Vice Presiknr

• Ahmas G. Dignan, Jr., Arrorney-at-L2w, Partna, William D. Harrington, Senkn Vice President Ropes & Gray EleanorT. Daly, Vice President and Assistant to the O A hmas J. Galligan, Jr., Chamnan of the Nrd.

Chief Execurite Odicer bron Edison Company J. Edward Howard, Vice President-Nuclear

• AKennerh I.Guscott Presifens, Ken Guscott Engineermgand Qualay Assurance Associates (m.magement consultanM David J. O'Connor, Jr., Vice President-Cusunna O A Nelson S. Girford, Charrman*
• and Chief and Corpware infonnarion Snsias Execuriw O#icer, Dennison Mar,ufacturing C. Bruce Damrell, Vice President-Enoncenng Company (manufacturers of raper products and Distr 6aion and system 3)

Craig D. Petter, Vice Pre 3ifent-Commercul O

• Richard D. Hill, Former Chanman of the brd Exaunn %n. Bad of Rston John R. Stevens, Vice President-Energy Supply Corporaton (bank holding company) d Gwporarc Rh James M. laan. Excuriw We Presar, haron Cameron H. Daley, Vice President-Steam and Ediwn Gnnpany gg,c,,,, 9p,,,,5,,

t AWilli m D. Manly, Execurite Vice President. Richard J. Coughlin, Vice Presifent-Cakt Corpixation (enern engineered pnducts Procurement, Stores and Sersice and performance chemicals) hmas J. May, Vice Presilent and Treasurer 4 A O Bemard J. O'Keefe, Former Civurman of the Marc S. Alpert, Vice President-Rares brJ, EG&G, Inc. (technoksical services) A. Lee Oxsen, Vice President-Nuckar Operations O t Herbert Roth, Jr., Former Chamnan and Chwf Warren F. Roche, Vice President-Human Execuene O#icer. LFE Corporation (manufacturer Resources and law Refarions of equipment and systems for tratric and "*"'"'I"*"' """" John J. Desmond Ill, Vice President and General Gmnsel OSterhen J. Sweeney, President and Chief Execuriw ""I""Y Diane M. Kinch, Clerk of the Gnporatsm Joserh P. Tyrrell, Execiain We President, bron a Timothy J. Heffernan, Assistant Treasurer 4 Edimn Company Walter E. Skowronski, Assistant Treasurer

• tPaul E.Tsongas, Arrorney-at-brw, Partner, ibley, Barbara M. Donahue, Assistant Clerk of the Hoag and Elliot Onporatkm Robert J.Weafer, Jr., Omeroller OMember of Executise Gnnmittee
• Member of Audir Gunnuttee tMember of Execurne Personnel Gimmittee A Member of Nuclear Operathms Resiew Gnnnunce
• Drrector as of Febn ary l,1986 "As ofJanuary 2,1986

(- 56

Dividend Reinvestment Plan important SharehoIJer In/ormation The Dividend Remvestment and Common AnnualMeeting Stock Purchase Plan is available to common, ne Annual hiceting of Stockholden of the preferred and preference shareholders. Under Company will be held on Apnl 15,1986, at the plan, common, preferred and preference 11:00 a.m. A copy of the PresiJent's Remarks shareholden may have their dividends reinve.ted will be sent on request. in common stock at current market prices. All Company Contact participants may mvest optional cash contnbu-Diane ht. k. inch, Clerk of the Corporation tions, up to a maximum ot $5,000 per quarter, w hich will be invested at the current market General OtNces price. Participants do not pay fees or 800 Bo31ston Stater, Rwron, hiassachusetts 02199(617)424 20C0 commissions. The Economic RecoveryTax Act of 1981 made Stock Listings f certain tax benefits available-which began New York and Ihton stock exchanges January 1,1982, and u hich ended December 31. Stock Symbol 1985-to individual steckholders w ho reinvest BSE their dividends under the Plan. Each individual stockholder may elect to exch>Je from income Dividend Payment Dates for federal income tax purposes up to $750 each Common and Preferred t year ($1,500 on a joint return) of dividends rein. Ist of February, hiay, August, November i vested under the Plan.This election is taade on Preference the stockho!Jen' federal income tax return for ht of h! arch, June, September, December the taxable year in which the dividends would Tax Status o/1985 Disidends otherwise be includable in income. DiviJend3 paid on thron Ede,on common, Reinvested dividends for w hich an election is preferred and preference stock in 1985 are 100 not, or cannot, be made by a participant will be percent taxable as dividend income for federal treated for federal income tax purposes in the income tax purroses. Particip mts in the rein-same way as dividends payable to non-partidpar-vestment plan should aho refer to the " Dividend ing shareholden. Plea 3e note that any dividend Reinvestment Plan"section of this report for tas investment occurnng after December 31,1985 treatment of reinvested diviJend3. k cannot be tax deferred. Dividend Reinvestment Plan Agent All hc lders of record of shares of Common, The First National Bank of Baron Preferred or Preference Stock are eligible to par-ticipate directly in the Plan. Benefcial ounen of Stock Trans/er Agent and Registrar o/ Stock the Company's stock whose shares are regtstered The Fint National Bank of Boston i in names other than heir own (e.g., a broker or SEC Form 10-K i bank nominee) must arrange participation with Stockholden may obtain a copy of Boston Edi-the record holJer. If for any reason a benc6cial son Company's annual report to the Securities [ owner is unable to arrange participanon with his and Exchange Commission, on Ibrm 10 K, m-2 broker or bank nominee, he must become a ciudme the f,nancial statements and schedules = [ record holder by having the shares transferred to thereto, by making a w*itten request to the Clerk his own name. of the Corporation. All inquiries conterning ihe plan shouki be 1' Ingm..nes Concerning Stock directed to the Plan Agent: The First National If you have quesnons concerrung your dividend g Bank of Boston, Dividend Remvestment Plan, payments, taxpaict identihcation number, E P.O. Box 1681, Boston, hiassachusetts 0210_.) n change of adJress, consohdation of accounts, stak cernf cares, transfer of ownership and orher m stoc k account marten, please contact the Stock Transfer Agent at the followmg address: Curoms Ikee her photo (pue 11) counuy of f The ihmman say-ou be Ik.use. The Fint Nanonal Bank of Er. on P.O. Ikx 644 7 Boston, hiassachusetts 02102 57 i

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